FORM DEF 14A
INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant þ |
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Filed by a Party other than the Registrant
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Check the appropriate box: |
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o Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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þ Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
The Scotts Miracle-Gro Company
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
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þ No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11. |
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1) Title of each class of securities to which transaction applies: |
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2) Aggregate number of securities to which transaction applies: |
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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o Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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1) Amount Previously Paid: |
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2) Form, Schedule or Registration Statement No.: |
The Scotts Miracle-Gro
Company
Proxy Statement for 2009
Annual Meeting of Shareholders
14111 Scottslawn Road
Marysville, Ohio 43041
December 19, 2008
Dear Fellow Shareholders:
The Annual Meeting of Shareholders of The Scotts Miracle-Gro
Company will be held at 8:30 a.m., Eastern Time, on
Thursday, January 22, 2009, at The Berger Learning Center,
14111 Scottslawn Road, Marysville, Ohio 43041. The formal Notice
of Annual Meeting of Shareholders and Proxy Statement contain
detailed information about the business to be conducted at the
Annual Meeting.
On behalf of the Board of Directors and management, I invite you
to attend the Annual Meeting.
The Board of Directors has nominated three directors for
election, each to serve for a term of three years expiring at
the 2012 Annual Meeting of Shareholders (Proposal Number
1). The Board of Directors recommends that you vote FOR
each of the nominees.
This year, you are also being asked to ratify the selection of
Deloitte & Touche LLP as the Companys
independent registered public accounting firm for the fiscal
year ending September 30, 2009 (Proposal Number 2).
The Board of Directors recommends that you vote FOR the
ratification of this selection.
Only shareholders of record at the close of business on
November 26, 2008, are entitled to receive notice of and to
vote at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, please
record your vote on the accompanying form of proxy and return it
promptly in the postage-paid envelope provided. Alternatively,
if you are a registered shareholder, you may transmit voting
instructions for your Common Shares electronically via the
Internet or telephonically by following the specific
instructions on your form of proxy.
Sincerely,
James
Hagedorn
Chief Executive
Officer
and Chairman of the
Board
14111 Scottslawn Road
Marysville, Ohio 43041
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
To Be Held Thursday, January 22, 2009
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders
(the Annual Meeting) of The Scotts Miracle-Gro
Company (the Company) will be held at The Berger
Learning Center, 14111 Scottslawn Road, Marysville, Ohio 43041,
on Thursday, January 22, 2009, at 8:30 a.m., Eastern
Time, for the following purposes:
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1.
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To elect three directors, each to serve for a term of three
years expiring at the 2012 Annual Meeting of Shareholders.
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2.
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To ratify the selection of Deloitte & Touche LLP as
the Companys independent registered public accounting firm
for the fiscal year ending September 30, 2009.
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3.
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To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
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Only shareholders of record at the close of business on
Wednesday, November 26, 2008, the date established by the
Companys Board of Directors as the record date, are
entitled to receive notice of and to vote at the Annual Meeting.
You are invited to attend the Annual Meeting. Whether or not you
plan to attend, you may vote by completing, signing, dating and
promptly returning the accompanying form of proxy. A return
envelope, which requires no postage if mailed in the United
States, has been provided for your use. Alternatively, if you
are a registered shareholder, you may vote your Common Shares at
the Annual Meeting by submitting your voting instructions
electronically via the Internet or telephonically by following
the specific instructions on your form of proxy. Voting your
Common Shares by returning the accompanying form of proxy,
electronically through the Internet or by telephone does not
affect your right to vote in person if you attend the Annual
Meeting and wish to revoke your previous vote.
By Order of the Board of Directors,
James Hagedorn
Chief Executive Officer
and Chairman of the Board
December 19, 2008
Proxy
Statement for the
Annual Meeting of Shareholders of
THE SCOTTS MIRACLE-GRO COMPANY
To Be Held on Thursday, January 22, 2009
TABLE OF
CONTENTS
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Outside Back Cover
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14111 Scottslawn Road
Marysville, Ohio 43041
PROXY STATEMENT
for
Annual Meeting of Shareholders
to be held on Thursday, January 22, 2009
This Proxy Statement, along with the accompanying form of proxy,
are being furnished in connection with the solicitation of
proxies, on behalf of the Board of Directors of The Scotts
Miracle-Gro Company (together with its corporate predecessors,
as appropriate, the Company), for use at the Annual
Meeting of Shareholders of the Company (the Annual
Meeting) to be held at The Berger Learning Center,
14111 Scottslawn Road, Marysville, Ohio 43041, on Thursday,
January 22, 2009, at 8:30 a.m., Eastern Time, and at
any adjournment or postponement thereof. This Proxy Statement
and the accompanying form of proxy are first being sent or given
to shareholders of the Company on or about December 22,
2008.
Only holders of record of the Companys Common Shares,
without par value (Common Shares), at the close of
business on Wednesday, November 26, 2008 (the Record
Date) are entitled to receive notice of and to vote at the
Annual Meeting. As of the Record Date, there were 65,373,940
Common Shares outstanding. Holders of Common Shares as of the
Record Date are entitled to one vote for each Common Share held.
There are no cumulative voting rights in the election of
directors.
Under the Companys Code of Regulations, the presence, in
person or by proxy, of the holders of a majority of the
outstanding Common Shares entitled to vote is necessary to
constitute a quorum for the transaction of business at the
Annual Meeting. Proxies reflecting abstentions and broker
non-votes are counted for purposes of determining the presence
or absence of a quorum. Broker non-votes are those where
broker/dealers, who hold their customers Common Shares in
street name, sign and submit proxies for such Common
Shares and fail to vote such Common Shares on some matters
because they cannot vote on those matters without instructions
from their customers.
A form of proxy for use at the Annual Meeting accompanies this
Proxy Statement. You may ensure your representation at the
Annual Meeting by completing, signing, dating and promptly
returning the accompanying form of proxy. A return envelope,
which requires no postage if mailed in the United States, has
been provided for your use. Alternatively, shareholders holding
Common Shares registered directly with the Companys
transfer agent, National City Bank, may transmit their voting
instructions electronically via the Internet or by using the
toll-free telephone number stated on the form of proxy. The
deadline for transmitting voting instructions electronically via
the Internet or telephonically is 11:59 p.m., Eastern Time,
on January 21, 2009. The Internet and telephone voting
procedures are designed to authenticate shareholders
identities, allow
shareholders to give their voting instructions and confirm that
such voting instructions have been properly recorded.
If you hold your Common Shares in street name with a
broker/dealer, financial institution or other nominee or holder
of record, you may be eligible to appoint your proxy
electronically via the Internet or telephonically. If you hold
your Common Shares in street name, you are urged to
carefully review the information provided to you by the holder
of record. This information will describe the procedures you
must follow in order to instruct the holder of record how to
vote the street name Common Shares and how to revoke
any previously-given voting instructions. If you hold your
Common Shares in street name and do not provide
voting instructions to your broker/dealer within the required
time frame before the Annual Meeting, your broker/dealer will
have the discretion to vote your Common Shares on routine
matters such as the uncontested election of directors and the
ratification of the selection of the Companys independent
registered public accounting firm.
If you are a registered shareholder, you may revoke your proxy
at any time before it is actually voted at the Annual Meeting by
giving written notice of revocation to the Corporate Secretary
of the Company, by revoking via the Internet site, by using the
toll-free telephone number stated on the form of proxy and
electing revocation as instructed or by attending the Annual
Meeting and giving notice of revocation in person. You may also
change your vote by choosing one of the following options:
(1) executing and returning to the Company a later-dated
form of proxy; (2) voting in person at the Annual Meeting;
(3) submitting a later-dated electronic vote through the
Internet site; or (4) voting by telephone at a later date
by using the toll-free telephone number stated on the form of
proxy. Attending the Annual Meeting will not, in and of
itself, constitute revocation of a previously-appointed
proxy.
Proxies will be solicited by mail and may be further solicited
by additional mailings, personal contact, telephone, facsimile
or electronic mail by directors, officers and regular employees
of the Company, none of whom will receive additional
compensation for such solicitation activities. The Company will
reimburse its transfer agent, National City Bank, as well as
broker/dealers, financial institutions and other custodians,
nominees and fiduciaries for their standard charges and expenses
incurred in connection with forwarding proxy materials to the
beneficial shareholders. The Company will bear the costs of
preparing, assembling, printing and mailing this Proxy
Statement, the accompanying form of proxy and any other related
materials, as well as all other costs incurred in connection
with the solicitation of proxies on behalf of the Board of
Directors. However, if you provide voting instructions through
the Internet, you may incur costs associated with electronic
access, such as usage charges from Internet access providers and
telephone companies, which the Company will not reimburse.
If you participate in The Scotts Company LLC Retirement Savings
Plan (the RSP) and Common Shares have been allocated
to your account in the RSP, you will be entitled to instruct the
trustee of the RSP how to vote such Common Shares. You may
receive your form of proxy with respect to your RSP Common
Shares separately. If you do not give the trustee of the RSP
voting instructions, the trustee will not vote such Common
Shares at the Annual Meeting.
If you participate in The Scotts Miracle-Gro Company Discounted
Stock Purchase Plan (the Discounted Stock Purchase
Plan), you will be entitled to vote the number of Common
Shares credited to your custodial account (including any
fractional Common Shares) on any matter submitted to the
Companys shareholders for consideration at the Annual
Meeting. If you do not vote or grant a valid proxy with respect
to the Common Shares credited to your custodial account, those
Common Shares will be voted by the custodian under the
Discounted Stock Purchase Plan in accordance with any stock
exchange or other rules governing the custodian in the voting of
Common Shares held for customer accounts.
The results of shareholder voting at the Annual Meeting will be
tabulated by or under the direction of the inspector of election
appointed by the Companys Board of Directors for the
Annual Meeting. Common Shares represented by properly executed
forms of proxy returned to the Company prior to the Annual
Meeting or represented by properly authenticated voting
instructions timely recorded through the Internet or by
telephone will be counted toward the establishment of a quorum
for the Annual Meeting even though they are marked For
All, Withhold All, For All Except,
For, Against or Abstain or
are not marked at all.
2
Those Common Shares represented by properly executed forms of
proxy, or properly authenticated voting instructions recorded
through the Internet or by telephone, which are timely received
prior to the Annual Meeting and not revoked, will be voted as
specified by the shareholder. The Common Shares represented by
valid proxies timely received prior to the Annual Meeting which
do not specify how the Common Shares should be voted will be
voted FOR the election as directors of the Company of
each of the three nominees of the Board of Directors listed
below under the caption PROPOSAL NUMBER 1
ELECTION OF DIRECTORS and FOR the ratification of
the selection of Deloitte & Touche LLP as the
Companys independent registered public accounting firm for
the fiscal year ending September 30, 2009 as described
below under the caption PROPOSAL NUMBER 2
RATIFICATION OF THE SELECTION OF THE INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM. No appraisal rights exist for any
action proposed to be taken at the Annual Meeting.
NOTICE
REGARDING AVAILABILITY OF PROXY MATERIALS
Important Notice Regarding the Availability of Proxy
Materials for the Annual Meeting of Shareholders of The Scotts
Miracle-Gro Company To Be Held on Thursday, January 22,
2009: This Proxy Statement, a sample of the form of proxy card
sent or given to shareholders by the Company and the
Companys 2008 Annual Report are available on the
Companys Internet website located at
http://investor.scotts.com.
Our telephone number is
(937) 644-0011
should you wish to obtain directions to our corporate offices in
order to attend the Annual Meeting and vote in person.
Directions to our corporate offices can also be found on the
outside back cover page of this Proxy Statement.
PROPOSAL NUMBER
1
ELECTION
OF DIRECTORS
There are currently 12 individuals serving on the Board of
Directors, which is divided into three staggered classes, with
each class serving three-year terms. The Class II directors
hold office for terms expiring at the Annual Meeting, the
Class III directors hold office for terms expiring in 2010
and the Class I directors hold office for terms expiring in
2011. On December 18, 2008, Arnold W. Donald, who currently
serves as a Class II director, notified the Company that he
had decided not to stand for re-election to the Board of
Directors. Mr. Donalds term as a director will expire
at the Annual Meeting.
Because the Governance and Nominating Committee has not yet
identified a qualified candidate to replace Mr. Donald, the
Board of Directors is only presenting three candidates for
election as Class II directors at the Annual
Meeting Thomas N. Kelly Jr., Carl F.
Kohrt, Ph.D. and John S. Shiely each of whom is
currently serving as a Class II director. The nomination of
each individual was recommended to the Board of Directors by the
Governance and Nominating Committee.
The individuals elected as Class II directors at the Annual
Meeting will hold office for a three-year term expiring at the
Annual Meeting of Shareholders of the Company to be held in 2012
and until their respective successors are duly elected and
qualified, or until their earlier death, resignation or removal.
The individuals named as proxies in the form of proxy solicited
by the Board of Directors intend to vote the Common Shares
represented by the proxies received under this solicitation for
the Board of Directors nominees, unless otherwise
instructed on the form of proxy. The Board of Directors has no
reason to believe that any of the nominees will be unable or
unwilling to serve as a director of the Company if elected. If
any nominee who would have otherwise received the required
number of votes becomes unable to serve or for good cause will
not serve as a candidate for election as a director, the
individuals designated as proxy holders reserve full discretion
to vote the Common Shares represented by the proxies they hold
for the election of the remaining nominees and for the election
of any substitute nominee designated by the Board of Directors
following recommendation by the Governance and Nominating
Committee. The individuals designated as proxy holders cannot
vote for more than three nominees for election as Class II
directors at the Annual Meeting.
3
The following information, as of November 26, 2008, with
respect to the age, principal occupation or employment, other
affiliations and business experience during the last five years
of each director or nominee for re-election as a director, has
been furnished to the Company by each director or nominee.
Except where indicated, each director or nominee has had the
same principal occupation for the last five years.
Nominees
Standing for Re-Election to the Board of Directors
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Class II Terms to Expire at the 2012 Annual
Meeting
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Thomas N. Kelly Jr., age 61, Director of the Company
since 2006
On August 11, 2006, the
Board of Directors of the Company, upon the recommendation of
the Governance and Nominating Committee, appointed
Mr. Kelly as a member of the Board of Directors of the
Company to fill a vacancy in Class II. Mr. Kelly was
recommended to the Governance and Nominating Committee by
Stephanie M. Shern, a director of the Company, who knew
Mr. Kelly from her service on the board of directors of
Nextel Communications, which became Sprint Nextel Corporation.
Mr. Kelly served as Executive Vice President, Transition
Integration of Sprint Nextel Corporation, a global
communications company, from December 2005 until April 2006. He
served as the Chief Strategy Officer of Sprint Nextel
Corporation from August 2005 until December 2005. He served as
the Executive Vice President and Chief Operating Officer of
Nextel Communications from February 2003 until August 2005, and
as Executive Vice President and Chief Marketing Officer of
Nextel Communications from 1996 until February 2003.
Mr. Kelly serves as a director of two privately-held
companies: ChaCha Search, Inc., located in Indianapolis,
Indiana, and CoverageCo., where he also serves as a
non-executive chairman, located in Boston, Massachusetts. He
also serves as a director of the Weston Playhouse Theatre
Company, a not-for-profit regional theater located in Weston,
Vermont. Mr. Kelly also volunteers for several school and
youth athletic organizations in Northern Virginia.
Committee Memberships: Audit;
Innovation & Technology
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Carl F. Kohrt, Ph.D., age 64, Director of the
Company since January 2008
On January 31, 2008, the
Board of Directors of the Company, upon the recommendation of
the Governance and Nominating Committee, appointed
Dr. Kohrt as member of the Board of Directors of the
Company to fill the vacancy in Class II created by the
retirement of Gordon F. Brunner. Dr. Kohrt was recommended
to the Companys Governance and Nominating Committee by
executive officers of the Company, who knew Dr. Kohrt from
his work at Battelle Memorial Institute (Battelle).
Dr. Kohrt has served as President and Chief Executive
Officer of Battelle, a non-profit charitable trust headquartered
in Columbus, Ohio, since October 15, 2001. Battelle is an
international science and technology enterprise that explores
emerging areas of science, develops and commercializes
technology and manages laboratories for customers.
Dr. Kohrt serves as a director of two privately-held
companies: Pharos, LLC and Levitronix, Inc. He also serves as
Chairman of the Columbus, Ohio science center COSI and Battelle
For Kids, a private, non-profit education company.
Committee Memberships: Governance
and Nominating; Innovation & Technology (Chair)
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John S. Shiely, age 56, Director of the Company since
January 2007
On January 25, 2007, the
Board of Directors of the Company, upon the recommendation of
the Governance and Nominating Committee, appointed
Mr. Shiely as a member of the Board of Directors of the
Company to fill the vacancy in Class II created by the
retirement of John M. Sullivan. Mr. Shiely was recommended
to the Companys Governance and Nominating Committee by
Mark R. Baker, a member of the Companys Board of
Directors, who knew Mr. Shiely from Mr. Shielys
work at Briggs & Stratton Corporation. Mr. Shiely
serves as Chairman of the Board and Chief Executive Officer of
Briggs & Stratton Corporation
(Briggs & Stratton), a manufacturer of
small, air-cooled engines for lawn and garden and other outdoor
power equipment and a producer of generators and pressure
washers in the United States. Mr. Shiely has served as
Chief Executive Officer of Briggs & Stratton since
July 1, 2001 and was appointed Chairman of the Board in
2003. Mr. Shiely serves as a director of one other public
company, Marshall & Ilsley Corporation, as well as a
director of four privately-held companies: Quad/Graphics, Inc.;
Cleveland Rock and Roll, Inc. (the corporate board of the Rock
and Roll Hall of Fame and Museum); the Outdoor Power Equipment
Institute, Inc.; and Childrens Hospital and Health System,
Inc.
Committee Memberships: Audit;
Finance
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Directors Continuing in Office
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Class III Terms to Expire at the 2010 Annual
Meeting
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Mark R. Baker, age 51, Director of the Company since
2004
Mr. Baker has served as
President and Chief Operating Officer of the Company since
October 2008. From September 2002 until October 2008,
Mr. Baker served as Chief Executive Officer of Gander
Mountain Company, an outdoor retailer specializing in hunting,
fishing and camping gear. He served as President of Gander
Mountain Company from February 2004 until October 2008 and as a
director of Gander Mountain Company from April 2004 until
October 2008.
Committee Memberships: None at
this time
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Joseph P. Flannery, age 76, Director of the Company
since 1987
Mr. Flannery has served
as President, Chief Executive Officer and Chairman of the Board
of Directors of Uniroyal Holding, Inc., an investment management
company, since 1986.
Committee Memberships:
Compensation and Organization; Governance and Nominating
(Interim Chair)
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Katherine Hagedorn Littlefield, age 53, Director of the
Company since 2000
Ms. Littlefield is the
Chair of Hagedorn Partnership, L.P. She also serves on the
boards for Hagedorn Family Foundation, Inc., a charitable
organization, Adelphi University and The Pennington School. She
is the sister of James Hagedorn, the Chief Executive Officer and
Chairman of the Board of Directors of the Company.
Committee Memberships: Finance;
Innovation & Technology
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5
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Patrick J. Norton, age 58, Director of the Company since
1998
Mr. Norton retired on
January 1, 2003, after having served as Executive Vice
President and Chief Financial Officer of The Scotts Company
since May 2000 and as interim Chief Financial Officer of The
Scotts Company from February 2000 to May 2000. From
January 1, 2003 until January 31, 2006,
Mr. Norton acted as an advisor for the Company, primarily
for the Scotts
LawnService®
business. Mr. Norton is a director of one other public
company, Greif, Inc. Mr. Norton serves as an independent
director for two privately-held companies: Svoboda Capital
Partners LLC and Optronics, Inc. He is also a director of Scotts
Miracle-Gro
Foundation.
Committee Membership: Finance
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Class I Terms to Expire at the 2011 Annual
Meeting
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James Hagedorn, age 53, Director of the Company since
1995 and Chairman of the Board of Directors since January
2003
Mr. Hagedorn has served
as Chief Executive Officer of the Company since May 2001. He
served as President of the Company from November 2006 until
October 2008, and from May 2001 until December 2005. He also
serves as a director for Farms For City Kids Foundation, Inc.,
Nurse-Family Partnership, The CDC Foundation, Embry-Riddle
Aeronautical University, North Shore University Hospital (New
York), Scotts Miracle-Gro Foundation and the Intrepid Sea,
Air & Space Museum, all charitable organizations.
Mr. Hagedorn is the brother of Katherine Hagedorn
Littlefield, a director of the Company.
Committee Membership: None at this
time
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Karen G. Mills, age 55, Director of the Company since
1994 and Lead Independent Director since 2006
Ms. Mills has served as
President of MMP Group, a private equity investor and advisor,
since 1999. She is currently a director of Arrow Electronics,
Inc., a public company. Ms. Mills is the Chair of the
Governors Council on Competitiveness and the Economy of
the state of Maine and serves on the Board of the Maine
Technology Institute. She is also a director of the Maine
chapter of the Nature Conservancy.
Committee Memberships: Audit;
Compensation and Organization (Interim Member)
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Nancy G. Mistretta, age 54, Director of the Company
since August 2007
Ms. Mistretta has been a
member of Russell Reynolds Associates, an executive search firm,
since February 2005. She is a member of Russell Reynolds
Associates Not-For-Profit Sector and is responsible for
managing executive officer searches for many large
philanthropies, with a special focus on educational searches for
presidents, deans and financial officers. Based in New York, New
York, she is also active in the CEO/Board Services Practice of
Russell Reynolds Associates. Prior to joining Russell Reynolds
Associates, Ms. Mistretta was with J.P. Morgan and its
heritage institutions for 29 years and served as a Managing
Director in Investment Banking from 1991 to 2005.
Committee Membership: Finance
(Chair)
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6
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Stephanie M. Shern, age 60, Director of the Company
since 2003
Mrs. Shern is the founder
of Shern Associates LLC, a retail consulting and business
advisory firm formed in February 2002. From May 2001 to February
2002, Mrs. Shern served as the Senior Vice President and
Global Managing Director of Retail and Consumer Products at Kurt
Salmon Associates, a management consulting firm specializing in
retail and consumer products. From 1995 to April 2001,
Mrs. Shern was the Vice Chairman and Global Director of
Retail and Consumer Products for Ernst & Young LLP.
Mrs. Shern is a CPA and a member of the American Institute
of CPAs and the New York State Society of CPAs. Mrs. Shern
is currently a director of three other public companies: Embarq
Corporation; Koninklijke Ahold N.V.; and GameStop Corp.
Committee Membership: Audit
(Chair)
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Arnold W. Donald, whose term expires at the Annual Meeting, has
decided not to stand for re-election. Mr. Donald,
age 54, is the former President and Chief Executive Officer
of the Juvenile Diabetes Research Foundation International, a
charitable funder and advocate of type 1 (juvenile) diabetes
research, a position he held from January 1, 2006 to
February 28, 2008. Before joining the Juvenile Diabetes
Research Foundation International in 2006, Mr. Donald
founded Merisant Company, whose products include the sweeteners
Equal®
and
Canderel®,
where he held the position of Chairman of the Board and Chief
Executive Officer from its inception in 2000 through June of
2003, and continued to serve as Chairman of the Board through
2005. He serves as a director of four other public companies:
Crown Holdings, Inc.; Oil-Dri Corporation of America; The
Laclede Group, Inc.; and Carnival Corporation. Mr. Donald
has served as a director of the Company since 2000.
Recommendation
and Vote
Under Ohio law and the Companys Code of Regulations, the
three nominees for election as Class II directors receiving
the greatest number of votes FOR election will be elected
as directors of the Company. Common Shares represented by
properly executed and returned forms of proxy or properly
authenticated voting instructions recorded through the Internet
or by telephone will be voted FOR the election of the
Board of Directors nominees unless authority to vote for
one or more of the nominees is withheld. Common Shares as to
which the authority to vote is withheld will not be counted
toward the election of directors or toward the election of the
individual nominees specified on the form of proxy. The
individuals designated as proxy holders cannot vote for more
than three nominees for election as Class II directors at
the Annual Meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE ELECTION OF ALL OF THE ABOVE-NAMED CLASS II
DIRECTOR NOMINEES.
CORPORATE
GOVERNANCE
Corporate
Governance Guidelines
In accordance with applicable sections of the New York Stock
Exchange (NYSE) Listed Company Manual (the
NYSE Rules), the Board of Directors has adopted
Corporate Governance Guidelines to promote the effective
functioning of the Board and its committees and to reflect the
Companys commitment to the highest standards of corporate
governance. The Board of Directors, with the assistance of the
Governance and Nominating Committee, periodically reviews the
Corporate Governance Guidelines to ensure they are in compliance
with all applicable requirements and address evolving corporate
governance issues. The Corporate Governance Guidelines are
posted under the Corporate Governance link on the
Companys Internet website located at
http://investor.scotts.com
and are available in print to any shareholder of the Company or
other interested person who requests them from the Corporate
Secretary of the Company.
7
Director
Independence
In consultation with the Governance and Nominating Committee,
the Board of Directors has reviewed, considered and discussed
each directors relationships, both direct and indirect,
with the Company and its subsidiaries, including those listed
under CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, and the compensation and other payments each
director has, both directly and indirectly, received from or
made to the Company and its subsidiaries in order to determine
whether such director satisfies the applicable independence
requirements set forth in the NYSE Rules and the rules and
regulations of the Securities and Exchange Commission (the
SEC Rules). Based upon the recommendation of the
Governance and Nominating Committee and its own review,
consideration and discussion, the Board of Directors has
determined that of the following members of the Board of
Directors satisfy such independence requirements and are
therefore independent directors:
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(1) Arnold W. Donald
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(6) Nancy G. Mistretta
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(2) Joseph P. Flannery
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(7) Stephanie M. Shern
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(3) Thomas N. Kelly Jr.
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(8) John S. Shiely
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(4) Carl F. Kohrt, Ph.D.
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(9) Gordon F. Brunner (retired as a director effective January
31, 2008)
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(5) Karen G. Mills
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In determining that Mr. Donald qualifies as an independent
director under the NYSE Rules and SEC Rules, the Board of
Directors considered his service as a director of Scotts
Miracle-Gro Foundation, an Ohio nonprofit corporation formed for
charitable and educational purposes within the meaning of
Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended (the IRC). The current primary activity of
Scotts Miracle-Gro Foundation is to fund the Miracle-Gro
Cap Kids at COSI, a program designed to provide academic
and other support services to a select group of economically and
socially disadvantaged students in the Columbus (Ohio) Public
School District.
The Board of Directors determined that: (a) James Hagedorn
is not independent because he is the Chief Executive Officer of
the Company and beneficially owns more than 5% of the
outstanding Common Shares; (b) Katherine Hagedorn
Littlefield is not independent because she beneficially owns
more than 5% of the outstanding Common Shares and is the sister
of James Hagedorn; (c) Patrick J. Norton is not independent
because, considering all the facts and circumstances, his
advisory relationship with the Company, which commenced
immediately following his retirement on January 1, 2003 and
which ended on January 31, 2006, was believed to be too
close in time to his employment to permit sufficient separation
of interests; and (d) Mark R. Baker qualified as an
independent director of the Company for the fiscal year ended
September 30, 2008 (the 2008 fiscal year), but
is no longer independent because he was named President and
Chief Operating Officer of the Company effective October 1,
2008.
Lead
Independent Director
The Board of Directors elected Karen G. Mills to serve as the
Lead Independent Director on January 26, 2006, upon the
recommendation of the Governance and Nominating Committee and
with the support of management. Ms. Mills serves in this
capacity at the pleasure of the Board of Directors and will
continue to so serve until her successor is elected and
qualified. As Lead Independent Director, Ms. Mills presides
at the executive sessions of the non-management directors of the
Company and of the independent directors of the Company.
Nominations
of Directors
As described below, the Company has a standing Governance and
Nominating Committee that has responsibility for, among other
things, providing oversight on the broad range of issues
surrounding the composition and operation of the Board of
Directors, including identifying candidates qualified to become
directors and recommending director nominees to the Board of
Directors.
The Board of Directors, taking into account the recommendations
of the Governance and Nominating Committee, selects nominees to
stand for election as directors. In considering Governance and
Nominating
8
Committee-recommended candidates for the Board of Directors, the
Governance and Nominating Committee evaluates the entirety of
each candidates credentials and does not have any specific
eligibility requirements or minimum qualifications that
candidates must meet. The Governance and Nominating Committee
may consider any factors it deems appropriate when considering
candidates for the Board of Directors, including a
candidates: judgment; skill; diversity; strength of
character; experience with businesses and organizations of
comparable size or scope; experience as an executive of, or
advisor to, a publicly-traded or private company; experience and
skill relative to other members of the Board of Directors;
specialized knowledge or experience; and desirability of the
candidates membership on the Board of Directors and any
committees of the Board of Directors.
While, under the Companys Corporate Governance Guidelines,
in general, a director is not eligible to stand for re-election
once he or she has reached the age of 72, the Governance and
Nominating Committee and the Board of Directors will review
individual circumstances and may from time to time choose to
renominate a director who is 72 or older. Although he was then
older than 72, the Board of Directors chose to nominate Joseph
P. Flannery for re-election to the Board at the Companys
2007 Annual Meeting of Shareholders because his expertise and
knowledge made him a valuable candidate.
The Governance and Nominating Committee considers candidates for
the Board of Directors from any reasonable source, including
current directors, management and shareholder recommendations,
and does not evaluate candidates differently based on the source
of the recommendation. Pursuant to its written charter, the
Governance and Nominating Committee has the authority to retain
consultants and search firms to assist in the process of
identifying and evaluating director candidates and to approve
the fees and other retention terms of any such consultant or
search firm.
Shareholders may recommend director candidates for consideration
by the Governance and Nominating Committee by giving written
notice of the recommendation to the Corporate Secretary of the
Company. The recommendation should include the candidates
name, age, business address and principal occupation or
employment, as well as a description of the candidates
qualifications, attributes and other skills. A written statement
from the candidate consenting to serve as a director, if so
elected, should accompany any such recommendation.
Communications
with the Board
The Board of Directors believes it is important for shareholders
of the Company and other interested persons to have a process
pursuant to which they can send communications to the Board and
its individual members, including the Lead Independent Director.
Accordingly, shareholders and other interested persons who wish
to communicate with the Board of Directors, the Lead Independent
Director, the non-management directors as a group or any
particular director may do so by addressing such correspondence
to the name(s) of the specific director(s), to the Lead
Independent Director, to the Non-Management
Directors as a group or to the Board of
Directors as a whole, and sending it in care of the
Company to the Companys principle corporate offices at
14111 Scottslawn Road, Marysville, Ohio 43041. All such
correspondence should identify the author as a shareholder or
other interested person, explain such persons interest and
clearly indicate to whom the correspondence is directed.
Correspondence marked personal and confidential will
be delivered to the intended recipient(s) without opening.
Copies of all correspondence will be circulated to the
appropriate director or directors. There is no screening process
in respect of communications from shareholders and other
interested persons.
Code of
Business Conduct and Ethics
In accordance with applicable NYSE Rules and SEC Rules, the
Board of Directors has adopted The Scotts Miracle-Gro Company
Code of Business Conduct and Ethics, which is available under
the Corporate Governance link on the Companys
Internet website located at
http://investor.scotts.com
and in print to any shareholder of the Company or other
interested person who requests it from the Corporate Secretary
of the Company.
9
All of the employees of the Company and its subsidiaries,
including executive officers, and all directors of the Company
are required to comply with the Companys Code of Business
Conduct and Ethics. The Sarbanes-Oxley Act of 2002 and the SEC
Rules promulgated thereunder require companies to have
procedures for the receipt, retention and treatment of
complaints regarding accounting, internal accounting controls or
auditing matters and to allow for the confidential, anonymous
submission by employees of concerns regarding questionable
accounting or auditing matters. The Companys procedures
for addressing these matters are set forth in the Code of
Business Conduct and Ethics.
MEETINGS
AND COMMITTEES OF THE BOARD
Meetings
of the Board and Board Member Attendance at Annual Meetings of
Shareholders
The Board of Directors held 19 regularly scheduled or special
meetings during the Companys 2008 fiscal year. Each
incumbent member of the Board of Directors attended at least 75%
of the aggregate of the total number of meetings of the Board of
Directors and the total number of meetings held by the
committee(s) of the Board of Directors on which he or she
served, in each case during the period of the 2008 fiscal year
that such individual served as a director.
Although the Company does not have a formal policy requiring
members of the Board of Directors to attend annual meetings of
the shareholders, the Company encourages all incumbent directors
and director nominees to attend each such annual meeting. All of
the 12 then incumbent directors and director nominees attended
the Companys last annual meeting of shareholders held on
January 31, 2008.
In accordance with the Companys Corporate Governance
Guidelines and applicable NYSE Rules, the non-management
directors of the Company met in executive session (without
management participation) in connection with each of the four
regularly scheduled meetings of the Board of Directors held
during the Companys 2008 fiscal year. In addition, the
independent directors of the Company meet in executive session
as matters appropriate for their consideration arise but, in any
event, at least once a year.
Committees
of the Board
The Board of Directors has five standing committees:
(1) the Audit Committee; (2) the Compensation and
Organization Committee; (3) the Finance Committee;
(4) the Governance and Nominating Committee; and
(5) the Innovation & Technology Committee.
Audit
Committee
The Audit Committee, which was established in accordance with
Section 3(a)(58)(A) of the Securities Exchange Act of 1934,
as amended (the Exchange Act), is organized and
conducts its business pursuant to a written charter adopted by
the Board of Directors. A copy of the Audit Committee charter is
posted under the Corporate Governance link on the
Companys Internet website at
http://investor.scotts.com
and is available in print to any shareholder of the Company or
other interested person who requests it from the Corporate
Secretary of the Company. At least annually, in consultation
with the Governance and Nominating Committee, the Audit
Committee evaluates its performance, reviews and assesses the
adequacy of its charter and recommends to the Board of Directors
any proposed changes thereto as may be necessary or desirable.
The Audit Committee is responsible for (1) overseeing the
accounting and financial reporting processes of the Company,
including the audits of the Companys financial statements,
(2) appointing, compensating and overseeing the work of the
independent registered public accounting firm employed by the
Company, (3) establishing procedures for the receipt,
retention and treatment of complaints received by the Company
regarding accounting, internal accounting controls, auditing
matters or other compliance matters, (4) assisting the
Board of Directors in its oversight of: (a) the integrity
of the Companys financial statements; (b) the
Companys compliance with applicable laws, rules and
regulations, including applicable NYSE Rules; (c) the
independent registered public accounting firms
qualifications and independence; and (d) the performance of
the Companys internal audit function and
(5) undertaking the other matters required by applicable
SEC Rules
10
and NYSE Rules. Pursuant to its charter, the Audit Committee has
the authority to engage and compensate such independent counsel
and other advisors as the Audit Committee deems necessary to
carry out its duties.
The Board of Directors has determined that each member of the
Audit Committee satisfies the applicable independence
requirements set forth in the NYSE Rules and under
Rule 10A-3
promulgated by the Securities and Exchange Commission (the
SEC) under the Exchange Act. The Board of Directors
believes each member of the Audit Committee is qualified to
discharge his or her duties on behalf of the Company and its
subsidiaries and satisfies the financial literacy requirement of
the NYSE Rules. The Board of Directors has determined that
Stephanie M. Shern qualifies as an audit committee
financial expert as that term is defined in the applicable
SEC Rules. None of the members of the Audit Committee serves on
the audit committee of more than two other public companies.
The Audit Committee met 13 times during the 2008 fiscal year.
The Audit Committee Report relating to the Companys 2008
fiscal year begins on page 73 of this Proxy Statement.
Compensation
and Organization Committee
The Compensation and Organization Committee is organized and
conducts its business pursuant to a written charter adopted by
the Board of Directors. A copy of the Compensation and
Organization Committee charter is posted under the
Corporate Governance link on the Companys
Internet website located at
http://investor.scotts.com
and is available in print to any shareholder of the Company or
other interested person who requests it from the Corporate
Secretary of the Company. At least annually, in consultation
with the Governance and Nominating Committee, the Compensation
and Organization Committee evaluates its performance, reviews
and assesses the adequacy of its charter and recommends to the
Board of Directors any proposed changes thereto as may be
necessary or desirable.
The Compensation and Organization Committee reviews, considers
and acts upon matters concerning salary and other compensation
and benefits of all executive officers and other key employees
of the Company and its subsidiaries, including the named
executive officers. As part of this process, the Compensation
and Organization Committee determines the general compensation
philosophy applicable to these individuals. In addition, the
Compensation and Organization Committee advises the Board of
Directors regarding executive officer organizational issues and
succession plans. The Compensation and Organization Committee
also acts upon all matters concerning, and exercises such
authority as is delegated to it under the provisions of, any
benefit, retirement or pension plan maintained by the Company,
and serves as the committee administering The Scotts Miracle-Gro
Company Amended and Restated 1996 Stock Option Plan (the
1996 Plan), The Scotts Miracle-Gro Company Amended
and Restated 2003 Stock Option and Incentive Equity Plan (the
2003 Plan), The Scotts Miracle-Gro Company Amended
and Restated 2006 Long-Term Incentive Plan (the 2006
Plan), The Scotts Company LLC Amended and Restated
Executive Incentive Plan (known throughout the 2008 fiscal year
as The Scotts Company LLC Amended and Restated
Executive/Management Incentive Plan) and the Discounted Stock
Purchase Plan.
Pursuant to its charter, the Compensation and Organization
Committee has the authority to retain special counsel,
compensation consultants and other experts or consultants as it
deems appropriate to carry out its functions and to approve the
fees and other retention terms of any such counsel, consultants
or experts. During the 2008 fiscal year, the Compensation and
Organization Committee engaged an independent consultant from
Frederic W. Cook & Co. to advise the Compensation and
Organization Committee with respect to best practices and
competitive trends in the area of executive compensation, as
well as ongoing legal and regulatory considerations. The
consultant provided guidance to assist the Compensation and
Organization Committee in its evaluation of the compensation
recommendations submitted by management with respect to the CEO,
the NEOs and other key management employees. Frederic W.
Cook & Co. was engaged as a consultant to the
Compensation and Organization Committee and did not provide
consulting services directly to management. The role of Frederic
W. Cook & Co. is further described in the section
captioned Our Compensation Practices Role
of Outside Consultants within the compensation
discussion and analysis regarding executive compensation for the
2008 fiscal year.
11
The Board of Directors has determined that each member of the
Compensation and Organization Committee satisfies the applicable
independence requirements set forth in the NYSE Rules and
qualifies as an outside director for purposes of IRC
§ 162(m) and a non-employee director for purposes of
Rule 16b-3
under the Exchange Act. In addition, Mark R. Baker satisfied
these independence requirements during the period he served as a
member of the Compensation and Organization Committee (from
October 1, 2007 to September 9, 2008).
The Compensation and Organization Committee met 10 times during
the 2008 fiscal year.
The Compensation Discussion and Analysis regarding executive
compensation for the 2008 fiscal year begins on page 19 of
this Proxy Statement. The Compensation and Organization
Committee Report relating to the Companys 2008 fiscal year
appears on page 37 of this Proxy Statement.
Finance
Committee
The Finance Committee is organized and conducts its business
pursuant to a written charter adopted by the Board of Directors.
A copy of the Finance Committee charter is posted under the
Corporate Governance link on the Companys
Internet website located at
http://investor.scotts.com
and is available in print to any shareholder of the Company or
other interested person who requests it from the Corporate
Secretary of the Company. At least annually, in consultation
with the Governance and Nominating Committee, the Finance
Committee evaluates its performance, reviews and assesses the
adequacy of its charter and recommends to the Board of Directors
any proposed changes thereto as may be necessary or desirable.
The Finance Committee oversees the financial strategies and
policies of the Company and its subsidiaries. In discharging its
duties, the Finance Committee: (1) reviews investments,
stock repurchase programs and dividend payments;
(2) oversees cash management and bank agreements; and
(3) oversees the Companys acquisition and divestiture
strategies and the financing strategies related thereto.
The Finance Committee met seven times during the 2008 fiscal
year.
Governance
and Nominating Committee
The Governance and Nominating Committee is organized and
conducts its business pursuant to a written charter adopted by
the Board of Directors. A copy of the Governance and Nominating
Committee charter is posted under the Corporate
Governance link on the Companys Internet website
located at
http://investor.scotts.com
and is available in print to any shareholder of the Company or
other interested person who requests it from the Corporate
Secretary of the Company. At least annually, the Governance and
Nominating Committee evaluates its performance, reviews and
assesses the adequacy of its charter and recommends to the Board
of Directors any proposed changes thereto as may be necessary or
desirable.
The Governance and Nominating Committee recommends nominees for
membership on the Board of Directors and policies regarding the
composition of the Board of Directors generally. The Governance
and Nominating Committee also makes recommendations to the Board
of Directors regarding committee selection, including committee
chairs and rotation practices, the overall effectiveness of the
Board of Directors and of management (in the areas of Board of
Directors relations and corporate governance), director
compensation and developments in corporate governance practices.
The Governance and Nominating Committee is responsible for
developing a policy with regard to the consideration of
candidates for election or appointment to the Board of Directors
recommended by shareholders of the Company and procedures to be
followed by shareholders in submitting such recommendations,
consistent with any shareholder nomination requirements which
may be set forth in the Companys Code of Regulations and
applicable laws, rules and regulations. In considering potential
nominees for election or appointment to the Board of Directors,
the Governance and Nominating Committee conducts its own search
for available, qualified nominees and will consider candidates
from any reasonable source, including shareholder
recommendations. The Governance and Nominating Committee is also
responsible for developing and recommending to the Board of
Directors corporate governance guidelines applicable to the
Company and overseeing the evaluation of the Board and
management.
12
The Board of Directors has determined that each member of the
Governance and Nominating Committee satisfies the applicable
independence requirements set forth in the NYSE Rules. In
addition, Mark R. Baker satisfied these independence
requirements during the period he served as a member of the
Governance and Nominating Committee (from October 1, 2007
to September 9, 2008).
The Governance and Nominating Committee met three times during
the 2008 fiscal year.
Innovation &
Technology Committee
The Innovation & Technology Committee is organized and
conducts its business pursuant to a written charter adopted by
the Board of Directors. A copy of the Innovation &
Technology Committee charter is posted under the Corporate
Governance link on the Companys Internet website
located at
http://investor.scotts.com
and is available in print to any shareholder of the Company or
other interested person who requests it from the Corporate
Secretary of the Company.
The Innovation & Technology Committee was formed in
May 2004 to assist the Board of Directors in providing counsel
to the Companys senior management regarding strategic
management of global science, technology and innovations issues
and to act as the Board of Directors liaison to the
Companys Innovation and Technology Advisory Board, a board
of experts which assists in carrying out the work of the
Innovation & Technology Committee.
The Innovation & Technology Committee met four times
during the 2008 fiscal year.
Compensation
and Organization Committee Interlocks and Insider
Participation
The Compensation and Organization Committee is currently
comprised of Arnold W. Donald, Joseph P. Flannery and Karen G.
Mills. Both Mr. Donald and Mr. Flannery served on the
Compensation and Organization Committee throughout the 2008
fiscal year. Ms. Mills served as an interim member of the
Compensation and Organization Committee from September 9,
2008 through the end of the 2008 fiscal year. In addition, Mark
R. Baker served on the Compensation and Organization Committee
from October 1, 2007 through September 9, 2008.
Mr. Baker was named the Companys President and Chief
Operating Officer, effective as of October 1, 2008. With
respect to the 2008 fiscal year and from October 1, 2008
through the date of this Proxy Statement, there were no
interlocking relationships between any executive officer of the
Company and any entity, one of whose executive officers served
on the Companys Compensation and Organization Committee or
Board of Directors, or any other relationship required to be
disclosed under the applicable SEC Rules.
13
NON-EMPLOYEE
DIRECTOR COMPENSATION
Benchmarking Board of Director
Compensation: The Board of Directors believes
that non-employee director compensation levels should be
competitive with similarly situated companies and should
encourage high levels of ownership of the Companys Common
Shares. Accordingly, before setting the compensation structure
for calendar year 2008, the Company engaged an independent
consultant from Towers Perrin to conduct a benchmark study of
the compensation structure for the Companys non-employee
directors. For purposes of the study, Towers Perrin compared
each element of non-employee directors compensation
against two groups of similarly situated companies:
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15 consumer products oriented companies with annual revenues
ranging from $1.3 billion to $6.5 billion
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100 S&P Mid Cap companies with annual revenues between
$2.0 billion to $4.0 billion
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The survey information was compiled from recent definitive proxy
statement filings for the respective companies. Consistent with
the Companys performance-based pay philosophy, the
compensation for the non-employee directors is more heavily
weighted to long-term equity-based compensation than that of the
comparison companies. Based on the benchmark study, the average
compensation level for the Companys non-employee directors
for the 2007 calendar year approximated the 75th percentile
when compared to the above-mentioned groups of companies;
however, the Board of Directors believes the higher level of
total pay is appropriate given the heavy weighting of long-term
equity-based compensation.
Structure of Non-Employee Director
Compensation: The compensation structure for
non-employee directors has historically been established on a
calendar year basis. Based on the findings of the market
compensation study discussed above, the Board of Directors
restructured the non-employee director compensation for the 2008
calendar year to reflect a combination of annual cash retainers
and equity-based compensation granted in the form of Deferred
Stock Units (DSUs), as follows:
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Annual Retainers
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Value of
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Paid in Cash
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DSUs Granted
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Board Membership
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$
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100,000
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$
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70,000
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Lead Independent Director
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$
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15,000
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$
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35,000
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Additional Compensation for Committee Chairs:
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|
|
|
|
Audit
|
|
$
|
0
|
|
|
$
|
25,000
|
|
Compensation and Organization
|
|
$
|
0
|
|
|
$
|
25,000
|
|
Finance
|
|
$
|
0
|
|
|
$
|
25,000
|
|
Governance and Nominating
|
|
$
|
0
|
|
|
$
|
25,000
|
|
Innovation & Technology
|
|
$
|
0
|
|
|
$
|
25,000
|
|
Additional Compensation for Committee Membership:
|
|
|
|
|
|
|
|
|
Audit
|
|
$
|
0
|
|
|
$
|
17,500
|
|
Compensation and Organization
|
|
$
|
0
|
|
|
$
|
12,500
|
|
Finance
|
|
$
|
0
|
|
|
$
|
12,500
|
|
Governance and Nominating
|
|
$
|
0
|
|
|
$
|
12,500
|
|
Innovation & Technology
|
|
$
|
0
|
|
|
$
|
12,500
|
|
Meeting Fees
|
|
|
N/A
|
|
|
|
N/A
|
|
In addition to the above compensation elements, non-employee
directors also receive reimbursement of all reasonable travel
and other expenses of attending Board meetings or other
Company-related travel.
Equity-Based Compensation: For the 2008
calendar year, the equity-based compensation for non-employee
directors was granted in the form of DSUs. Each whole DSU
represents a contingent right to receive one full Common Share.
14
Vesting and Settlement: DSU grants for
non-employee directors are typically approved by the Board of
Directors at a meeting held on the date of the annual meeting of
shareholders. The grant date is established as the first
business day after the Board of Directors approves the grant.
For calendar year 2008, DSUs were granted to the non-employee
directors on February 4, 2008. In general, the DSUs granted
to non-employee directors in calendar year 2008, including
dividend equivalents converted to DSUs, vest on the third
anniversary of the grant date, but are subject to earlier
vesting or forfeiture in accordance with the terms of the
applicable award agreement. Subject to the terms of the 2006
Plan, whole vested DSUs will be settled in Common Shares and
fractional DSUs will be settled in cash as soon as
administratively practicable, but in no event later than
90 days, following the earliest to occur of:
(i) cessation of service as a director; (ii) death;
(iii) the date of total disability; or (iv) the fifth
anniversary of the grant date. Upon a change in control of the
Company, each non-employee directors outstanding DSUs will
vest on the date of the change of control and settle as
described above. Until the DSUs are settled, a non-employee
director has none of the rights of a shareholder with respect to
the Common Shares underlying the DSUs other than with respect to
the dividend equivalents.
Dividend Equivalents: Each DSU
(including dividend equivalents converted to DSUs) comes with a
related dividend equivalent right, which represents the right to
receive additional DSUs in respect of dividends that are
declared and paid in cash during the period beginning on the
grant date and ending on the settlement date. Such cash
dividends are converted to DSUs based on the fair market value
of Common Shares on the date the dividend is paid. Dividends
declared and paid in the form of Common Shares are converted to
DSUs in proportion to the dividends paid per Common Share.
Deferral of Cash-Based Retainers: The
non-employee directors may elect, in advance, to receive up to
100% of their annual cash retainers in cash or stock units. If
stock units are elected, the non-employee director receives a
grant equal to the number determined by dividing the chosen
dollar amount by the closing price of the Common Shares on the
first trading day following the date of the annual meeting of
shareholders. Final distributions of stock units are to be made
in cash or Common Shares, as elected by the non-employee
director, upon the date that the non-employee director ceases to
be a member of the Board of Directors, or upon a change in
control (as defined in the 2006 Plan), whichever is
earlier. If stock units are to be settled in cash, the amount
distributed will be calculated by multiplying the number of
stock units to be settled in cash by the fair market value of
the Common Shares as of the settlement date. If stock units are
to be settled in Common Shares, the number of Common Shares
distributed will equal the whole number of stock units to be
settled in Common Shares, with the fair market value of any
fractional stock units distributed in cash. Distributions may be
made either in a lump sum or in installments over a period of up
to ten years, as elected by the non-employee director. However,
upon a change in control, each outstanding stock unit held by a
non-employee director will be settled for a lump sum cash
payment which is generally equal to the price per Common Share
paid in conjunction with any transaction resulting in such
change in control (the change in control price).
Other Benefits and Perquisites: Pursuant to
the terms of a letter agreement with the Company, dated
November 5, 2002, and amended on October 25, 2005,
Mr. Norton has continued to participate in the
Companys group medical and dental plans by personally
paying the full premium associated with these plans under the
prevailing annual COBRA rates. As such, Mr. Nortons
participation results in no incremental cost to the Company.
Pursuant to the terms of the agreement, Mr. Norton is
entitled to continue to do so until his
65th birthday
on November 19, 2015.
15
The following table sets forth the compensation awarded to, or
earned by, each of the non-employee directors of the Company for
the 2008 fiscal year. Mr. Hagedorn, the Companys
Chief Executive Officer and Chairman of the Board, did not
receive any additional compensation for his services as a
director. Accordingly, Mr. Hagedorns compensation is
reported in the section captioned EXECUTIVE
COMPENSATION and is not included in the table below.
Non-Employee
Director Compensation Table for 2008 Fiscal Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned or
|
|
|
Stock
|
|
|
Option
|
|
|
All Other
|
|
|
|
|
|
|
Paid in
|
|
|
Awards($)
|
|
|
Awards($)
|
|
|
Compensation
|
|
|
|
|
Name
|
|
Cash($)(1)
|
|
|
(8)(9)
|
|
|
(14)
|
|
|
($)(15)
|
|
|
Total($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
Mark R. Baker
|
|
|
85,000
|
(2)
|
|
|
39,400
|
(10)
|
|
|
0
|
|
|
|
1,162
|
|
|
|
125,562
|
|
Arnold W. Donald
|
|
|
85,000
|
(3)
|
|
|
70,799
|
(11)
|
|
|
0
|
|
|
|
1,041
|
|
|
|
156,840
|
|
Joseph P. Flannery
|
|
|
85,000
|
(3)
|
|
|
95,008
|
(12)
|
|
|
0
|
|
|
|
920
|
|
|
|
180,928
|
|
Thomas N. Kelly Jr.
|
|
|
86,250
|
(4)
|
|
|
21,832
|
(13)
|
|
|
0
|
|
|
|
968
|
|
|
|
109,050
|
|
Carl F. Kohrt, Ph.D.
|
|
|
66,667
|
(5)
|
|
|
26,195
|
(13)
|
|
|
0
|
|
|
|
1,162
|
|
|
|
94,024
|
|
Katherine Hagedorn Littlefield
|
|
|
85,000
|
(3)
|
|
|
95,008
|
(12)
|
|
|
0
|
|
|
|
920
|
|
|
|
180,928
|
|
Karen G. Mills
|
|
|
97,500
|
(6)
|
|
|
122,504
|
(12)
|
|
|
0
|
|
|
|
1,186
|
|
|
|
221,190
|
|
Nancy G. Mistretta
|
|
|
85,000
|
(3)
|
|
|
23,470
|
(13)
|
|
|
0
|
|
|
|
1,041
|
|
|
|
109,511
|
|
Patrick J. Norton
|
|
|
85,000
|
(3)
|
|
|
82,525
|
(12)
|
|
|
0
|
|
|
|
58,799
|
(16)
|
|
|
226,324
|
|
Stephanie M. Shern
|
|
|
86,250
|
(4)
|
|
|
24,602
|
(13)
|
|
|
0
|
|
|
|
1,089
|
|
|
|
111,941
|
|
John S. Shiely
|
|
|
86,250
|
(4)
|
|
|
21,832
|
(13)
|
|
|
0
|
|
|
|
968
|
|
|
|
109,050
|
|
Gordon F. Brunner (retired)
|
|
|
10,000
|
(7)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
10,000
|
|
|
|
|
(1) |
|
While none of the non-employee directors elected to defer their
annual retainers for the 2008 calendar year, the aggregate
number of Common Shares (rounded to the nearest whole Common
Share) corresponding to stock units held as of
September 30, 2008 by non-employee directors who had
elected to defer all or a portion of their annual retainers for
previous calendar years and receive stock units in lieu thereof
were as follows: Mr. Baker (1,451), Mr. Donald (1,658)
and Ms. Mills (3,373). |
|
(2) |
|
Reflects the annual cash-based retainer earned for services
rendered during the 2008 fiscal year. Mr. Baker received an
annual cash-based retainer of $75,000 to cover his services as a
non-employee director from January 1, 2008 through
September 30, 2008 and $40,000 for the 2007 calendar year.
The calendar year fees have been prorated to reflect
Mr. Bakers service during the 2008 fiscal year, and
the prorated amount is shown in this column. Effective
October 1, 2008, Mr. Baker was named the
Companys President and Chief Operating Officer and no
longer receives compensation as a non-employee director. |
|
(3) |
|
Reflects the annual cash-based retainer earned for services
rendered during the 2008 fiscal year. Mr. Donald,
Mr. Flannery, Ms. Littlefield, Ms. Mistretta and
Mr. Norton each received an annual cash-based retainer of
$100,000 to cover such individuals services as a
non-employee director for the 2008 calendar year and $40,000 for
the 2007 calendar year. The calendar year fees have been
prorated to reflect each individuals service during the
2008 fiscal year, and the prorated amount is shown in this
column. |
|
(4) |
|
Reflects the annual cash-based retainer earned for services
rendered during the 2008 fiscal year. Mr. Kelly,
Mrs. Shern and Mr. Shiely each received an annual
cash-based retainer of $100,000 to cover such individuals
services as a non-employee director for the 2008 calendar year
and $45,000 (which includes an additional $5,000 with respect to
such individuals service on the Audit Committee) for the
2007 calendar year. The calendar year fees have been prorated to
reflect each individuals service during the 2008 fiscal
year, and the prorated amount is shown in this column. |
16
|
|
|
(5) |
|
Reflects the annual cash-based retainer earned for services
rendered during the 2008 fiscal year. Dr. Kohrt was
appointed to the Board of Directors on February 1, 2008 and
received an annual cash-based retainer of $100,000 for the 2008
calendar year. The calendar year fees have been prorated to
reflect Dr. Kohrts service during the 2008 fiscal
year, and the prorated amount is shown in this column. |
|
(6) |
|
Reflects the annual cash-based retainer earned for services
rendered during the 2008 fiscal year. Ms. Mills, who serves
at the Companys Lead Independent Director, received annual
cash-based retainers in the aggregate amount of $115,000 to
cover her services as a non-employee director and Lead
Independent Director for the 2008 calendar year and $45,000
(which includes an additional $5,000 with respect to her service
on the Audit Committee) for the 2007 calendar year. The calendar
year fees have been prorated to reflect Ms. Mills
service during the 2008 fiscal year, and the prorated amount is
shown in this column. |
|
(7) |
|
Reflects the annual cash-based retainer earned for services
rendered during the 2008 fiscal year. Mr. Brunner, who
retired from the Board of Directors effective February 1,
2008, received an annual cash-based retainer of $40,000 for the
2007 calendar year. The annual retainer of $10,000 reported for
Mr. Brunner represents a pro-rated portion of the $40,000
annual cash-based retainer paid to him in January 2007. |
|
(8) |
|
The amounts in this column reflect the dollar amount recognized
for financial statement reporting purposes, for the 2008 fiscal
year, with respect to DSUs granted to the non-employee
directors. The amounts are calculated in accordance with
Statement of Financial Accounting Standards No. 123(R)
(SFAS 123(R)), without respect to any
forfeiture assumptions. Pursuant to applicable SEC Rules, the
amounts shown exclude the impact of estimated forfeitures
related to service-based vesting conditions. The value of each
DSU is determined using the fair market value of the underlying
Common Share on the date of the grant, and expensed ratably over
the applicable vesting period. |
|
(9) |
|
The number of Common Shares covered by the DSUs granted to each
non-employee director then serving on February 1, 2008 and
the grant date fair value of such DSUs, calculated in accordance
with SFAS 123(R), is summarized in the following table,
along with the aggregate number of Common Shares subject to DSUs
(including DSUs granted as a result of converting dividend
equivalents), outstanding as of September 30, 2008. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Number of
|
|
|
|
|
|
|
Common Shares
|
|
|
Number of Common
|
|
|
|
Subject to Stock
|
|
|
Shares Subject to
|
|
Fair Value on
|
|
Awards Outstanding
|
Name
|
|
DSUs Granted
|
|
Date of Grant
|
|
as of September 30, 2008*
|
|
Mark R. Baker
|
|
|
3,086
|
|
|
$
|
120,015
|
|
|
|
3,125
|
|
Arnold W. Donald
|
|
|
2,765
|
|
|
$
|
107,531
|
|
|
|
2,800
|
|
Joseph P. Flannery
|
|
|
2,443
|
|
|
$
|
95,008
|
|
|
|
2,474
|
|
Thomas N. Kelly Jr.
|
|
|
2,572
|
|
|
$
|
100,025
|
|
|
|
2,604
|
|
Carl F. Kohrt, Ph.D.
|
|
|
3,086
|
|
|
$
|
120,015
|
|
|
|
3,125
|
|
Katherine Hagedorn Littlefield
|
|
|
2,443
|
|
|
$
|
95,008
|
|
|
|
2,474
|
|
Karen G. Mills
|
|
|
3,150
|
|
|
$
|
122,504
|
|
|
|
3,189
|
|
Nancy G. Mistretta
|
|
|
2,765
|
|
|
$
|
107,531
|
|
|
|
2,800
|
|
Patrick J. Norton
|
|
|
2,122
|
|
|
$
|
82,525
|
|
|
|
2,149
|
|
Stephanie M. Shern
|
|
|
2,893
|
|
|
$
|
112,509
|
|
|
|
2,929
|
|
John S. Shiely
|
|
|
2,572
|
|
|
$
|
100,025
|
|
|
|
2,604
|
|
|
|
|
* |
|
All fractional Common Shares have been rounded to the nearest
whole Common Share. |
|
|
|
(10) |
|
Based on the terms of his award agreement, the DSUs granted to
Mr. Baker will no longer be subject to risk of forfeiture
as of January 21, 2010, the date on which the 2010 Annual
Meeting of Shareholders is scheduled to occur and thus the date
Mr. Baker, who is over age 50, will complete his
second full term of continuous service on the Board of Directors
and therefore be retirement eligible under his award agreement. |
17
|
|
|
(11) |
|
Based on the terms of his award agreement, the DSUs granted to
Mr. Donald will no longer be subject to risk of forfeiture
as of January 22, 2009, the date of the Annual Meeting and
thus the date Mr. Donald, who is over age 50, will
complete his second full term of continuous service on the Board
of Directors and therefore be retirement eligible under his
award agreement. |
|
(12) |
|
Based on the terms of their respective award agreements, the
DSUs granted to Mr. Flannery, Ms. Littlefield,
Ms. Mills and Mr. Norton are not subject to risk of
forfeiture (because they have each completed at least two full
terms of continuous service on the Board of Directors and have
reached age 50 and are therefore retirement eligible under their
respective award agreements) and were therefore expensed in full
on the date of grant. |
|
(13) |
|
Based on the terms of the applicable award agreement, the DSUs
granted to Mr. Kelly, Dr. Kohrt, Ms. Mistretta,
Mrs. Shern and Mr. Shiely will vest on
February 4, 2011 (the third anniversary of the grant date). |
|
(14) |
|
There was no expense recognized during the 2008 fiscal year for
financial statement reporting purposes for grants of stock
options made to non-employee directors in previous fiscal years.
While there were no stock options granted to non-employee
directors during the 2008 fiscal year, the aggregate number of
Common Shares subject to stock option awards outstanding as of
September 30, 2008 were as follows: |
|
|
|
|
|
|
|
Aggregate Number of
|
|
|
|
Common Shares Subject to
|
|
|
|
Option Awards Outstanding
|
|
Name
|
|
as of September 30, 2008
|
|
|
Mark R. Baker
|
|
|
33,342
|
|
Arnold W. Donald
|
|
|
109,480
|
|
Joseph P. Flannery
|
|
|
121,372
|
|
Thomas N. Kelly Jr.
|
|
|
21,442
|
|
Carl F. Kohrt, Ph.D.
|
|
|
0
|
|
Katherine Hagedorn Littlefield
|
|
|
98,769
|
|
Karen G. Mills
|
|
|
147,548
|
|
Nancy G. Mistretta
|
|
|
0
|
|
Patrick J. Norton
|
|
|
154,761
|
|
Stephanie M. Shern
|
|
|
72,599
|
|
John S. Shiely
|
|
|
14,300
|
|
Gordon F. Brunner (retired)
|
|
|
73,198
|
|
|
|
|
(15) |
|
Reflects the value of the cash dividends declared and paid by
the Company from the date of grant through the end of the 2008
fiscal year. |
|
(16) |
|
Reflects the payment to Mr. Norton of $58,000 for
consulting services rendered to the Company in the 2008 fiscal
year. |
18
EXECUTIVE
COMPENSATION
COMPENSATION
DISCUSSION AND ANALYSIS
The purpose of this Compensation Discussion and Analysis (the
CD&A) is to provide insight to our shareholders
about the compensation policies, practices, guiding principles
and philosophies that have been adopted by the Company to guide
our decision-making with respect to executive compensation. The
CD&A is broken down into the following topical areas:
|
|
|
|
|
Our Compensation Philosophy and Objectives
|
|
|
|
Elements of Executive Compensation
|
|
|
|
Our Compensation Practices
|
|
|
|
Other Executive Compensation Policies, Practices and Guidelines
|
|
|
|
Recent Developments
|
Our
Compensation Philosophy and Objectives
Simply stated, the culture of our Company is based on a strong
bias for action and delivering results. Consistent with our high
performance approach, our compensation programs are structured
to promote a pay-for-performance culture with an orientation
toward variable pay and an emphasis on long-term incentives.
Our compensation programs are designed to achieve the following
objectives:
|
|
|
|
|
Attracting and retaining the necessary leadership talent to
sustain and expand upon our unique competencies and capabilities;
|
|
|
|
Driving performance that generates long-term profitable growth;
|
|
|
|
Promoting behaviors that reinforce our business strategy and
desired culture;
|
|
|
|
Encouraging teamwork across business units and functional areas;
and
|
|
|
|
Strongly linking rewards to shareholder value creation.
|
Management believes that flexibility is a key cultural attribute
which enables the Company to maintain an edge in the competitive
marketplace. The Company has adopted guiding principles that
establish a framework for making compensation decisions
preserving the flexibility needed to respond to the competitive
market for executive talent. Our guiding principles for
compensation are as follows:
|
|
|
|
|
Structure total compensation levels around the
50th percentile
of the relevant compensation peer group for achieving target
levels of performance and above the
50th percentile
of the relevant compensation peer group for achieving higher
levels of performance;
|
|
|
|
Place greater emphasis on variable incentive compensation versus
fixed pay (i.e., base salary);
|
|
|
|
Emphasize pay-for-performance to motivate both short-term and
long-term performance for the benefit of shareholders; and
|
|
|
|
Provide the opportunity for meaningful wealth accumulation over
time, tied directly to shareholder value creation.
|
Elements
of Executive Compensation
To best promote the objectives of our executive compensation
program, the Company relies on a mix of five principal
short-term and long-term compensation elements. For the 2008
fiscal year, the elements of executive compensation were as
follows:
|
|
|
|
|
Base salary;
|
|
|
|
Annual cash incentive compensation plans;
|
19
|
|
|
|
|
Long-term equity-based incentive awards;
|
|
|
|
Executive perquisites and other benefits; and
|
|
|
|
Retirement plans and deferred compensation benefits.
|
The Compensation and Organization Committee (the
Compensation Committee) has oversight responsibility
for all elements of compensation granted to our Chief Executive
Officer (CEO) and other key management employees,
including the other Named Executive Officers (NEOs)
listed in the Summary Compensation Table for 2008 Fiscal Year on
page 38 of this Proxy Statement. For each such NEO, the
Compensation Committee typically reviews each element of
compensation, as well as the relative mix or weighting of
elements, on an annual basis.
Base
Salary (short-term compensation element)
Consistent with the Companys performance-based pay
philosophy, base salary is not intended to deliver the majority
of the total compensation to any of the NEOs or other key
management employees. However, base salary, which is the primary
fixed element of total compensation, serves as the foundation of
the total compensation structure since most of the variable
compensation elements are linked directly or indirectly to the
base salary level.
Base salaries of the NEOs are typically reviewed on an annual
basis and benchmarked against the median salaries of similar
positions within a relevant compensation peer group. Individual
base salaries may be higher or lower than the benchmark
depending on a number of organizational and individual qualities
and characteristics, including the strategic importance of the
individuals job function to the Company, an NEOs
experience, competency, skill level, overall contribution to the
success of our business and potential to make significant
contributions to the Company in the future.
Base salary changes, if any, take effect in October, as well as
on a facts and circumstances basis at the time of a promotion or
other material change in an individuals overall
responsibilities.
Annual
Cash Incentive Compensation Plans (short-term compensation
element)
For the 2008 fiscal year, the annual cash incentive compensation
plans in which our NEOs participated were The Scotts Company LLC
Amended and Restated Executive/Management Incentive Plan (the
EMIP), The Scotts Company LLC Supplemental Incentive
Plan (the SIP) and the Global Discretionary Pool,
each of which is discussed below.
EMIP
For the 2008 fiscal year, all NEOs and other key management
employees were eligible to participate in the EMIP, which is
designed to:
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Reinforce our performance-based culture by tying a significant
portion of the annual cash compensation opportunity to the
achievement of key financial performance drivers;
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Influence the direction of daily decision-making;
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Unify the interests of all plan participants across the Company;
and
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Recognize individual contribution toward the achievement of
team-oriented goals.
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The EMIP provides annual cash incentive compensation
opportunities based on various performance metrics related to
the financial performance of the Company and its business units.
An incentive target is established for each NEO as a percentage
of base salary which may vary by position but is generally
intended to approximate the market median of the relevant
compensation peer group. For the 2008 fiscal year, the incentive
target for all NEOs, other than the CEO, Mr. Hagedorn, was
established at 55% of base salary. The incentive target for
Mr. Hagedorn was set at 90% of base salary. The
Compensation Committee believes the
20
incentive targets for all NEOs and Mr. Hagedorn are
generally in line with those of our compensation peer groups.
The design and administration of the EMIP are generally intended
to qualify compensation payable under the EMIP as
performance-based compensation for purposes of IRC
§ 162(m) in order to maximize the tax deductibility of
such compensation for the Company. Accordingly, the Compensation
Committee oversees the operation of the EMIP, including
approving the plans design for each fiscal year as well as
approving the performance objectives and payout targets. At the
end of each fiscal year, the Compensation Committee determines
the extent to which the targets and objectives have been met and
approves corresponding cash incentive payments. For the 2008
fiscal year, 75% of the total weighted payout (the
non-discretionary portion) for the key management team that
reports to the CEO was to be determined based directly on
achievement of the performance metrics, with the remaining 25%
placed into a pool to be awarded at the discretion of the CEO,
subject to approval by the Compensation Committee, based on each
NEOs performance during the fiscal year. If the combined
discretionary and non-discretionary payment awarded to any
particular NEO was greater than what such NEO would have
received based solely on the performance metrics (i.e., without
respect to any discretionary adjustment), then the entire
payment made to such NEO would not qualify as performance-based
compensation for purposes of IRC § 162(m). The
Compensation Committee deemed the potential loss of tax
deductibility which could have resulted from such discretionary
adjustments to be an acceptable tradeoff given its desire to add
an individual level of accountability to the EMIP. As discussed
below, since the Enterprise funding trigger was not met for the
2008 fiscal year, no payments (discretionary or
non-discretionary) were made to the NEOs under the EMIP.
The Compensation Committee established an Enterprise
funding trigger for the 2008 fiscal year to ensure
that no incentive payouts (whether discretionary or
non-discretionary) would be permitted under the EMIP unless the
Company achieved a minimum Enterprise level (i.e., the
Company on a consolidated basis) adjusted net income, which was
set at $143.5 million for the 2008 fiscal year. If the
funding trigger was not met, no payments would be made under the
EMIP, even if the actual results for one or more of the
performance measures exceeded the applicable minimum performance
goal. If the funding trigger was met, each of the NEOs would be
eligible to receive a payout based on the actual financial
results achieved, subject to adjustment based on the NEOs
individual performance.
The EMIP Performance Metrics: The performance
metrics and relative weightings chosen for the EMIP in the 2008
fiscal year were designed to balance the entrepreneurial focus
on individual business unit results with the overall Enterprise
level financial performance. As discussed below, the performance
metrics and relative weightings for the NEOs under the EMIP for
the 2008 fiscal year differed based on each NEOs primary
span of control. For purposes of the EMIP, the performance
metrics are defined as follows:
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Adjusted Net Income Income from operations
less interest and taxes, excluding charges related to
impairment, restructuring and other non-recurring items (such as
charges related to product registration and recall matters).
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Modified Free Cash Flow Adjusted Net Income
with the following adjustments:
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Add: non-cash expenses (depreciation,
amortization and stock-based compensation)
Subtract: capital expenditures
Adjust for (add/subtract): change in working
capital, calculated using an average of 13 month-end
balances. The use of a 13 month average was designed to
focus management on continual management of working capital in
contrast to the external reporting methodology of using
beginning-of-year and end-of-year balances.
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EBTA A measure of earnings before taxes and
amortization and after a working capital charge-back to the
business unit.
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Net Sales Growth Calculated at the business
unit level. For purposes of the EMIP, net sales growth is the
year-to-year increase in net sales, which is calculated as
invoiced sales less returns, discounts and allowances.
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21
The Compensation Committee believed that the performance metrics
should not be influenced by currency fluctuations and,
therefore, where applicable, the EMIP metrics reflect currency
conversions based on budgeted exchange rates, which is in
contrast to actual exchange rates employed for currency
conversions used for external reporting. As a result, there
could be a slight deviation between the Companys reported
financial results and the amounts used for purposes of
calculating incentive payouts under the EMIP.
EMIP
Measures for Corporate Officers
Mr. Hagedorn,
Mr. Evans and Ms. Stump
For the 2008 fiscal year, the incentive awards for corporate
level NEOs were based on two annual performance
measures adjusted net income and modified free cash
flow both of which were calculated at the Enterprise
level. As reflected in the table below, for each performance
measure, achievement of pre-defined minimum, target and maximum
performance goals would result in compensation payouts of 50%,
100% and 250% of the NEOs target incentive opportunity for
the 2008 fiscal year, respectively. Actual payouts for
performance results between the pre-defined performance goals
would be calculated on a straight-line basis.
The target performance goals chosen for the Enterprise
level NEOs were based on the Companys budget for the
2008 fiscal year. The minimum performance goals were established
based on the prior year actual performance for each metric,
adjusted to reflect the pro forma impacts of our 2007
recapitalization, which returned in excess of $750 million
to shareholders via a $245 million share repurchase
completed in February 2007 and a special cash dividend of $8.00
per share approved by the Board of Directors on
February 16, 2007 and paid on March 5, 2007 (the
Special Dividend). The maximum performance goals
were set at a level thought to be aggressive, but attainable.
The Enterprise level performance goals and actual performance
results for the 2008 fiscal year were:
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Actual
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Results for
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EMIP
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Component
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Measure
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Weight
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Minimum
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Target
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Maximum
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Purposes
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$ in millions
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Enterprise
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Adjusted Net Income (funding trigger)
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50%
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$143.5
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$159.4
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$175.3
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$129.5
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Payout%
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50%
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100%
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250%
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0%
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Modified Free Cash Flow
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50%
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$126.9
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$142.8
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$158.7
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$121.2
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Payout%
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50%
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100%
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250%
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0%
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Total weighted payout % achieved for the 2008 fiscal year
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0%
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Because the Enterprise funding trigger was not met for the 2008
fiscal year, no payouts were made under the EMIP to the
corporate level NEOs.
EMIP
Measures for Business Unit Officers
Mr. Sanders
and Mr. Lopez
For the 2008 fiscal year, the incentive awards for NEOs with
business unit responsibility were based on a combination of
Enterprise level performance measures and business unit
performance measures. As reflected in the tables below, for each
performance measure, achievement of pre-defined minimum, target
and maximum performance goals would result in incentive
compensation payouts of 50%, 100% and 250% of the NEOs
target incentive opportunity for the 2008 fiscal year,
respectively. Actual payouts for performance results between the
pre-defined performance goals would be calculated on a
straight-line basis.
The target performance goals chosen for the North America Total
and International Total NEOs were based on each business
units budget for the 2008 fiscal year. The minimum
performance goals for the North America Total business unit were
established based on the prior year actual performance for each
metric, adjusted to reflect the impact of certain adjustments
for acquisitions and other non-recurring items. The minimum
performance goals for the International Total business unit were
established based on the prior year actual performance for each
metric, adjusted to reflect the impact of certain non-recurring
items and then increased to provide additional incentive to
improve on the prior year performance. The maximum performance
goals were set at levels thought to be aggressive, but
attainable. The minimum, target and maximum performance goals
for the Enterprise level components were the same as the
performance goals
22
established for the corporate level NEOs as described
above. The North America Total and International Total business
unit officer performance goals and actual performance results
for the 2008 fiscal year were:
North
America Total (Mr. Sanders)
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Actual
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Results for
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EMIP
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Component
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Measure
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Weight
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Minimum
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Target
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Maximum
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Purposes
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$ in millions
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Business Unit
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EBTA
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75%
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$317.2
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$346.1
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$383.1
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$274.1
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(60)%
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Payout%
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50%
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100%
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250%
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0%
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Net Sales Growth
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25%
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$2,248.2
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$2,351,4
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$2,480.0
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$2,189.5
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Payout%
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50%
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100%
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250%
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0%
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Enterprise
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Adjusted Net Income (funding trigger)
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50%
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$143.5
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$159.4
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$175.3
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$129.5
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(40)%
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Payout%
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50%
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100%
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250%
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0%
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Modified Free Cash Flow
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50%
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$126.9
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$142.8
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$158.7
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$121.2
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Payout%
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50%
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100%
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250%
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0%
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Total weighted payout % achieved for the 2008 fiscal year
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0%
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Because the Enterprise funding trigger was not met for the 2008
fiscal year, no payout was made under the EMIP to
Mr. Sanders.
International
Total (Mr. Lopez)
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Actual
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Results for
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EMIP
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Component
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Measure
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Weight
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Minimum
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Target
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Maximum
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Purposes
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$ in millions
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Business Unit
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EBTA
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75%
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$35.2
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$39.1
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$47.6
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$28.1
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(60)%
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Payout%
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50%
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100%
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250%
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0%
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Net Sales Growth
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25%
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$604.5
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$634.1
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$669.0
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$656.7
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Payout%
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50%
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100%
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250%
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29.6%
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Enterprise
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Adjusted Net Income (funding trigger)
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50%
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$143.5
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$159.4
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$175.3
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$129.5
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(40)%
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Payout%
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50%
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100%
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250%
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0%
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Modified Free Cash Flow
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50%
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$126.9
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$142.8
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$158.7
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$121.2
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Payout%
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50%
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100%
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250%
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0%
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Total weighted payout % achieved for the 2008 fiscal year
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0%
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Because the Enterprise funding trigger was not met for the 2008
fiscal year, no payout was made under the EMIP to Mr. Lopez.
SIP
On May 5, 2008, the Company announced that it had lowered
its earnings forecast for the 2008 fiscal year to a range that
would fall below the adjusted net income funding trigger amount
established for purposes of the EMIP. As a result, it was highly
likely no amounts would be payable under the EMIP for the 2008
fiscal year. Due to the on-going economic uncertainty, the
Compensation Committee concluded that the best interests of the
Company and its stakeholders would be served by ensuring that
meaningful incentives were nevertheless maintained for eligible
employees to deliver financial results within the revised range
of the Companys guidance. Therefore, on May 19, 2008,
it approved a SIP designed to provide a cash incentive
compensation opportunity for the NEOs and other key management
employees of the Company. To accomplish this objective, the
Compensation Committee used an Enterprise level adjusted
earnings per share funding trigger for the SIP, consistent with
the May 5, 2008 guidance.
The performance measures under the SIP for the 2008 fiscal year
consisted of adjusted earnings per share and modified free cash
flow, both of which were calculated at the Enterprise level. As
reflected in the table below, for each performance measure,
achievement of pre-defined minimum and target performance goals
would result in annual incentive compensation payouts of 50% and
100% of an NEOs target incentive
23
opportunity for the 2008 fiscal year, respectively. Actual
payouts for performance results between the pre-defined
performance goals would be calculated on a straight-line basis.
The Enterprise level performance goals and actual performance
results for the 2008 fiscal year were:
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Actual
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Results for
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SIP
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Component
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Measure
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Weight
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Minimum
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Target
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Purposes
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$ in millions
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Enterprise
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Adjusted Earnings Per Share (funding trigger)
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75%
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$1.95
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$2.39
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$1.98
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Payout%
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50%
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100%
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40%
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Modified Free Cash Flow
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25%
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$108.6
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$142.8
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$121.2
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Payout%
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50%
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100%
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17.1%
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Total weighted payout % achieved for the 2008 fiscal year
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57.1%
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Adjusted Earnings Per Share Adjusted Net
Income (calculated in the same manner as for the EMIP) divided
by the weighted-average number of Common Shares outstanding
during the 2008 fiscal year.
Modified Cash Flow Calculated in the same
manner as for the EMIP.
For each of the performance measures under the SIP, the
Compensation Committee set the minimum performance goal to
reflect the Companys May 5, 2008 guidance. Under the
SIP, the target performance goal was the same as the target
performance goal originally established under the EMIP
(i.e., without regard to the events described in the
May 5, 2008 guidance). Participants were not eligible to
receive incentive compensation under the SIP in an amount
greater than their respective target incentive opportunity
unless the Company achieved the performance goals originally
contemplated under the EMIP. In the event that the
Companys actual performance for the 2008 fiscal year moved
closer to the target performance goals originally established
under the EMIP, the payouts under the SIP would be more in line
with the original payouts contemplated under the EMIP. If the
incentive compensation determined under the terms of the EMIP
was greater than the incentive compensation payable under the
SIP (which did not occur for the 2008 fiscal year), participants
would have received the amount payable under the EMIP.
Since the performance goals were not approved by the
Compensation Committee within the first 90 days of the 2008
fiscal year, as required by IRC § 162(m), the payouts
made under the SIP did not qualify as performance-based
compensation for purposes of IRC § 162(m).
Global
Discretionary Pool
In December 2007, the Compensation Committee approved a Global
Discretionary Pool for the 2008 fiscal year which was designed
to provide a means to award incentive compensation to EMIP
eligible employees, on a discretionary basis, based upon their
individual
and/or
business unit achievement. The Global Discretionary Pool would
only be available in the event that the Enterprise funding
trigger was not met.
When the SIP was approved in May 2008, the Compensation
Committee retained the Global Discretionary Pool as a means to
award incentive compensation on a discretionary basis in the
event the Enterprise funding trigger under the SIP was not met.
The Global Discretionary Pool would have been funded in an
amount not to exceed 25% of the target incentive opportunity for
all participants under the EMIP in the aggregate. Pursuant to
its terms and subject to approval by the Compensation Committee,
the CEO would have had the discretion to grant awards to
eligible employees based upon his assessment of individual
performance.
No payouts were made under the Global Discretionary Pool for the
2008 fiscal year.
Long-Term
Equity-Based Incentive Awards (long-term compensation
element)
The Compensation Committee targets the economic value (equity
award value) of long-term equity-based incentive awards at the
50th percentile
of the relevant compensation peer group. The target level is
expressed as a multiple of base salary and may be delivered in
any combination of options, stock appreciation rights
24
(SARs), restricted stock
and/or
performance shares. Consistent with the Companys
performance-based pay philosophy, the targeted economic value of
individual equity-based incentive awards may be adjusted upward
or downward from the
50th percentile
based on such factors as the overall performance level of the
individual, years of service and the accumulated value of
previous equity-based incentive awards.
For the 2008 fiscal year, the Company granted approximately 60%
of the target equity award value in the form of non-qualified
stock options (NSOs), with the remaining 40% granted
in the form of restricted stock. The decision to use a
combination of NSOs and restricted stock reflected competitive
pay practices and allowed the Company to deliver the intended
equity award value with fewer Common Shares underlying the
awards granted. The specific numbers of Common Shares subject to
NSOs and restricted stock awarded were determined as follows:
Target Option Award value / Black-Scholes value per
option = number of Common Shares subject to NSOs awarded
Target Stock Award value / fair market value per
share = number of Common Shares underlying Restricted Stock
awarded
All NSOs and restricted stock awarded to the NEOs in the 2008
fiscal year were awarded subject to a three-year time-based
cliff vesting provision. The restricted stock grants did not
qualify as performance-based compensation for purposes of IRC
§ 162(m). As a result, the Companys ability to
deduct the full value of these awards at the time of vesting may
be limited. Information regarding our equity grant practices,
including the determination of exercise price, can be found in
the section captioned Other Executive Compensation
Policies, Practices and Guidelines Practices
Regarding Equity-Based Awards below.
Executive
Perquisites and Other Benefits (short-term compensation
element)
The Company maintains traditional health and welfare benefits
and a qualified 401(k) plan that are generally offered to all
employees (subject to basic plan eligibility requirements) and
are consistent with the types of benefits offered by other large
corporations. In addition to these traditional benefits, the
Company offers certain executive level perquisites to key
executives which are designed to be competitive with the
compensation practices of corporations in the relevant
compensation peer group, including comprehensive annual physical
examinations, a car allowance of $1,000 per month and annual
financial planning services, valued at approximately $4,000 per
year.
As discussed below, the CEO was entitled to two additional
perquisites in the 2008 fiscal year. First, consistent with the
Board of Directors travel protocols which encourage
Mr. Hagedorn to fly on a Company-owned aircraft for
security reasons, a Company-owned airplane was made available to
the CEO for personal use, subject to certain personal use
guidelines established by the Compensation Committee (as fully
described below in the section captioned Our Compensation
Practices Setting Compensation Level for
CEO). Second, the CEO was entitled to Company
reimbursement for a portion of his commuting expenses pursuant
to these guidelines. For information concerning changes to the
CEOs aircraft perquisites that occurred after the end of
the 2008 fiscal year, see the discussion in the section
captioned Recent Developments Amendment to
Compensation Package of James Hagedorn below.
Since the imputed income value of certain non-cash perquisites,
such as the aircraft perquisites provided to the CEO as
discussed above and the Company-paid financial planning
services, are required to be added to
Form W-2,
the Compensation Committee believes that it is appropriate to
provide a tax
gross-up to
offset the tax obligation associated with these imputed income
amounts.
Retirement
Plans and Deferred Compensation Benefits (long-term compensation
element)
Executive
Retirement Plan
The Scotts Company LLC Executive Retirement Plan (the
ERP) is a non-qualified deferred compensation plan.
The ERP provides executives, including the NEOs, the opportunity
to (1) defer compensation above the specified statutory
limits applicable to The Scotts Company LLC Retirement Savings
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Plan (the RSP), a qualified 401(k) plan generally
offered to all employees, and (2) defer compensation with
respect to Executive Incentive Pay (as defined in the ERP)
awarded to such executives. The ERP is an unfunded plan and is
subject to the claims of the Companys general creditors.
During the 2008 fiscal year, the ERP consisted of four parts:
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Compensation Deferral, which allowed continued deferral of
salary and bonuses (other than annual cash incentive
compensation under the EMIP).
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Crediting of Company matching contributions on qualifying
deferrals that could not be made to the RSP due to certain
statutory limits.
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Executive Incentive Plan Deferral, which allowed the deferral of
up to 100% of any cash incentive compensation earned under the
EMIP. Payouts earned under the SIP for the 2008 fiscal year were
not eligible for deferral.
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Retirement contributions (referred to as Base Retirement
Contributions), which were made by the Company to the ERP
once the statutory compensation cap was reached in the RSP
(and/or with respect to any qualifying deferrals to the ERP). A
Base Retirement Contribution was made to the ERP regardless of
whether deferral elections were made under the ERP.
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The Company matching contributions and Base Retirement
Contributions to the ERP were based on the same contribution
formulae as those used for the RSP. The Company matched the
Compensation Deferral at 100% for the first 3% of eligible
earnings contributed to the ERP and 50% for the next 2% of
eligible earnings contributed to the ERP. The Company also made
a Base Retirement Contribution in an amount equal to 2% of
eligible earnings for all eligible executives, regardless of
whether they made deferral elections under the ERP. This amount
increased to 4% once an executives eligible earnings
reached 50% of the Social Security wage base. Base Retirement
Contributions were only made to the ERP once an executive
exceeded the maximum statutory compensation allowable under the
RSP (and/or with respect to all qualifying deferrals to the ERP).
All accounts under the ERP are bookkeeping accounts and do not
represent claims against specific assets of the Company. Each
participant directs the portion of future credits to the
participants ERP account that will be, as well as the
existing balance of the participants ERP account that is,
credited to one or more benchmarked investment funds, including
a Company stock fund and mutual fund investments, which are
substantially consistent with the investment options permitted
under the RSP. Accordingly, there were no above-market or
preferential earnings on investments associated with the ERP for
any of the NEOs for the 2008 fiscal year.
As permitted by the terms of the ERP, the Company has
established a rabbi trust to assist with discharging obligations
under the ERP. The assets of the rabbi trust remain at all times
the assets of the Company, subject to the claims of its
creditors.
See the section captioned Recent Developments
Approval of Retention Awards to NEOs below for a
discussion of (1) the amendment to the ERP approved by the
Compensation Committee to authorize the grant of retention
awards under the ERP, and (2) the retention awards granted
to certain of the NEOs, each of which occurred after the end of
the 2008 fiscal year.
Other
Retirement and Deferred Compensation Plans
The Scotts Company LLC Excess Benefit Plan for Non Grandfathered
Associates (the Excess Pension Plan) is an unfunded
plan that provides benefits which cannot be provided under The
Scotts Company LLC Associates Pension Plan (the
Associates Pension Plan) due to specified
statutory limits. The Associates Pension Plan was frozen
effective December 31, 1997 and, therefore, no additional
benefits have accrued after that date under the Excess Pension
Plan for participating executives. Continued service taken into
account for vesting purposes under the Associates Pension
Plan is, however, recognized with respect to the entitlement to,
and the calculation of, subsidized early retirement benefits
under the Excess Pension Plan. For further details
26
regarding the Excess Pension Plan, see the discussion in the
section captioned EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION TABLES Pension
Benefits Table.
Our
Compensation Practices
Oversight
of Executive Officer Compensation
The Compensation Committee has oversight responsibility for all
elements of executive compensation for our CEO and other key
management employees, including the NEOs. As part of its
responsibility, the Compensation Committee is responsible for
evaluating the CEOs performance and setting the CEOs
annual compensation. In setting the CEOs compensation, the
Compensation Committee considers:
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The specific performance of the CEO;
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The performance of the Company against pre-determined
performance goals;
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Managements recommendations with respect to the CEOs
compensation; and
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The competitive level of the CEOs compensation as
benchmarked against the relevant compensation peer group.
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In addition to setting the compensation of the CEO and approving
the compensation recommendations for the NEOs and other key
management employees, the Compensation Committee is also
responsible for administering all equity-based incentive plans
to achieve the objectives of the compensation programs within
the framework approved by our shareholders. Under the terms of
these plans, the Compensation Committee has sole discretion and
authority to determine the size and type of all equity-based
awards, as well as the period of vesting and all other key terms
and conditions of the awards.
With respect to the annual incentive compensation plans, the
Compensation Committee has responsibility for approving the
overall plan design, as well as the performance metrics,
performance goals and payout levels proposed by management.
Role
of Outside Consultants
During the 2008 fiscal year, the Compensation Committee engaged
an independent consultant from Frederic W. Cook & Co.
to advise the Compensation Committee with respect to best
practices and competitive trends in the area of executive
compensation, as well as ongoing legal and regulatory
considerations. The consultant provided guidance to assist the
Compensation Committee in its evaluation of the compensation
recommendations submitted by management with respect to the CEO,
the NEOs and other key management employees. Frederic W.
Cook & Co. was engaged as a consultant to the
Compensation Committee and did not provide consulting services
directly to management.
During the 2008 fiscal year, the Company engaged consultants
from Hewitt Associates, Inc. and Towers Perrin. These firms
worked directly with management to advise the Company on best
practices and competitive trends, as well as ongoing legal and
regulatory considerations, with respect to executive
compensation. In addition, the firms advised the Company with
respect to the development of the relevant compensation peer
groups, including providing the compensation benchmark data for
such groups. Where applicable, the firms statistically adjusted
the relevant peer group data to more closely reflect the size of
the Company. Each firm was engaged by the Company to consult
with management and did not provide consulting services directly
to the Compensation Committee.
Compensation
Peer Groups
Prior to the 2008 fiscal year, the Company utilized a
compensation peer group that consisted of approximately 60
consumer-oriented companies as a reference for determining
competitive total compensation packages for the CEO, NEOs and
other key management employees. During the fiscal year ended
September 30, 2007 (the 2007 fiscal year), at
the direction of the Compensation Committee and in conjunction
with the Companys compensation consultants, a new, more
focused compensation peer group was
27
developed with the goal of enabling the Company to more closely
benchmark the total compensation packages of the CEO and other
NEOs with the types of companies that the Company typically
competes with to attract and retain executive talent. This
customized compensation peer group (the Primary
Compensation Peer Group), which was approved by the
Compensation Committee and used by management and the
Compensation Committee for the 2008 fiscal year, consisted of
the following companies:
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ACCO Brands Corporation
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Alberto-Culver Company
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The Black & Decker Corporation
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The Clorox Company
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Del Monte Foods Company
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Energizer Holdings, Inc.
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The Hershey Company
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The J. M. Smucker Company
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Jarden Corporation
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McCormick & Co., Inc.
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Newell Rubbermaid Inc.
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Revlon, Inc.
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The Stanley Works
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The Toro Company
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Wm. Wrigley Jr. Company
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The Compensation Committee believes this Primary Compensation
Peer Group of highly regarded consumer-oriented companies
reflects the pay practices of the broader consumer products
industry, and is more reflective of the size and complexity of
the Company. In general, the Primary Compensation Peer Group
reflects companies that range between $1.3 billion and
$6.5 billion of annual revenues. The Companys annual
revenues are slightly below the median revenues of the Primary
Compensation Peer Group.
The Primary Compensation Peer Group was used as the benchmark
for all NEOs for which a comparable job match could be found. A
secondary peer group (the Secondary Compensation Peer
Group), consisting of approximately 200 companies
between $1.0 billion and $6.0 billion, excluding
utilities and financial services companies, was used as the
benchmark for all NEO positions without a comparable match in
the Primary Compensation Peer Group. To account for the wide
range of companies included in the survey, the data was
statistically adjusted by an outside company to more closely
reflect the relative size and complexity of the Company. The
Primary Compensation Peer Group was used for Mr. Hagedorn,
Mr. Evans and Ms. Stump, while the Secondary
Compensation Peer Group was used for Mr. Sanders and
Mr. Lopez.
Use of
Tally Sheets
On an annual basis, management prepares and furnishes to the
Compensation Committee a comprehensive statement, known as a
Tally Sheet, reflecting the value of each element of
compensation, executive perquisites and other benefits provided
to the NEOs and other key management employees. The Tally Sheets
present the total value of all compensation elements based on a
target level of performance for the plans in which the NEOs
participate.
The Tally Sheets provide perspective to the Compensation
Committee on the overall level of executive compensation and
wealth accumulation, as well as the relationship between
short-term and long-term compensation elements, and how each
element relates to our compensation philosophy and guiding
principles. The Tally Sheets are instructive for the
Compensation Committee when compensation decisions are being
evaluated, particularly in connection with compensation
decisions made in connection with promotions, special retention
issues and separations from the Company.
Role
of Management in Compensation Decisions
While the Compensation Committee retains full oversight and
approval authority for all elements of executive compensation,
management, including the CEO, plays a significant role in the
compensation-setting process.
The CEO is responsible for conducting annual performance reviews
and establishing performance objectives for all of the other
NEOs, who in turn are responsible for conducting reviews and
establishing performance objectives for other key management
employees. As mentioned above, the Compensation Committee
establishes the annual performance objectives for the CEO and
completes an annual assessment of his performance. The
Compensation Committee believes that the performance evaluation
and goal-setting process is critical to the overall
compensation-setting process, because the personal performance
level of each NEO is one of the most heavily weighted factors
considered by the Compensation Committee when making
compensation decisions.
In conjunction with the Companys outside consultants,
management conducts annual market surveys of the base salary
levels, short-term incentives and long-term incentives for the
CEO and each of the NEOs and
28
other key management employees. Managements goal in
conducting these surveys is to better understand competitive
compensation programs and trends, as reflected by the
Companys compensation peer groups, as well as the level
and mix of compensation elements. The Compensation Committee
considers the survey information to help ensure that executive
compensation levels are competitive with the Companys
compensation peer groups, which facilitates our ability to
retain and motivate key executive talent.
The CEO and the Executive Vice President, Global Human Resources
make specific recommendations to the Compensation Committee with
respect to each element of executive compensation for the NEOs
other than the CEO. These recommendations are based on their
assessment of the competitive market trends and the performance
level of the individual NEO. The Compensation Committee, with
the assistance of its compensation consultant, independently
evaluates these recommendations taking into account the
competitive market data, the overall performance level of each
NEO and our compensation guiding principles.
Setting
Compensation Level for CEO
The Compensation Committee completed an evaluation of the
CEOs performance with respect to the Companys goals
and objectives and made its report to the Board of Directors.
Based on this assessment, consistent with the terms of its
charter, the Compensation Committee set the CEOs annual
compensation for the 2008 fiscal year, including base salary,
annual incentive compensation, long-term equity-based
compensation and perquisites and other benefits. When evaluating
Mr. Hagedorns total level of compensation for the
2008 fiscal year, the Compensation Committee considered
information including:
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The fact that Mr. Hagedorn has had no increase in his base
salary since becoming CEO in the 2001 fiscal year;
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His personal performance against pre-established goals and
objectives;
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The Companys performance and relative shareholder
return; and
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The compensation of CEOs at companies within our Primary
Compensation Peer Group.
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Base
Salary and Perquisites
When establishing Mr. Hagedorns compensation for the
2008 fiscal year, the Compensation Committee considered the
value of the CEOs perquisites and other benefits,
including his ability to use a Company-owned aircraft for
commuting and other personal use, and the Companys
reimbursement of a portion of his other commuting expenses. For
purposes of benchmarking his compensation against peers
reflected in our Primary Compensation Peer Group, the
anticipated value of his aircraft perquisites was considered as
part of a hypothetical base salary to ensure that his equivalent
total direct compensation (base salary, short-term cash-based
incentives and equity-based compensation) would be around the
50th percentile
of our Primary Compensation Peer Group. Consistent with this
analysis, Mr. Hagedorns base salary remained
unchanged for the 2008 fiscal year, and the Compensation
Committee (1) approved a new $300,000 guideline for
Mr. Hagedorns annual commuting perquisite (including
both the reimbursement of commuting hours on
Mr. Hagedorns personal aircraft and the direct
operating costs of commuting on Company-owned aircraft) and
(2) maintained a guideline of 100 total hours of personal
use (including both occupied hours and ferry hours) of
Company-owned aircraft. The combined total of these perquisites
was valued at approximately $600,000 which, when combined with
his base salary, approximates the
50th percentile
of base salary of peers reflected in our Primary Compensation
Peer Group.
In order to monitor compliance with the guidelines established
for Mr. Hagedorn aircraft perquisites, the
Compensation Committee reviewed quarterly updates regarding
Mr. Hagedorns aircraft use. Although
Mr. Hagedorns commuting expenses exceeded the
approved guidelines by approximately $63,000 in the 2008 fiscal
year, the hours of his personal use of the Company-owned
aircraft were well below the approved guidelines. In the
aggregate, the value attributable to Mr. Hagedorns
personal use of the Company-owned aircraft and the amount of
Mr. Hagedorns reimbursable commuting expenses in the
2008 fiscal year did not exceed the combined guidelines approved
by the Compensation Committee for these perquisites.
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Short-Term
Cash-Based Incentive Compensation
Mr. Hagedorns target incentive opportunity for
purposes of the EMIP, as well as the SIP, was 90% of his base
salary for the 2008 fiscal year, which was intentionally set at
a high level relative to the other NEOs. This put a greater
percentage of his total compensation at risk, consistent with
our performance-oriented pay philosophy, and was slightly below
the target incentive opportunity, expressed as a percentage of
base salary, of his peers as reflected in the Primary
Compensation Peer Group.
For the 2008 fiscal year, under both the EMIP and the SIP, 100%
of Mr. Hagedorns target incentive compensation
opportunity was directly attributable to attainment of annual
performance measures established at the Enterprise level and
approved by the Compensation Committee. Under the EMIP, the
measures used to determine Mr. Hagedorns incentive
compensation for the 2008 fiscal year, which were the same
measures used for other corporate level NEOs, were adjusted
net income (50% weighting) and modified free cash flow (50%
weighting). Under the SIP, the measures used to determine
Mr. Hagedorns incentive compensation for the 2008
fiscal year, which were the same measures used for all other
NEOs, were adjusted earnings per share (75% weighting) and
modified free cash flow (25% weighting).
A description of the specific performance goals and the payout
levels associated with each performance measure are discussed
above in the section captioned Elements of Executive
Compensation Annual Cash Incentive Compensation
Plans (short-term compensation element) and in
conjunction with the Summary Compensation Table for 2008 Fiscal
Year beginning on page 38 of this Proxy Statement.
Equity-Based
Compensation
For the 2008 fiscal year, the Compensation Committee established
the target value for Mr. Hagedorns equity-based
compensation at approximately $3.0 million. This positions
his long-term compensation at the
30th percentile
when compared to his peers reflected in the Primary Compensation
Peer Group, and the value of Mr. Hagedorns total
direct compensation was below the
50th percentile
of that peer group.
Of the long-term compensation value, approximately 60% of the
economic value of Mr. Hagedorns long-term
equity-based compensation was granted in the form of NSOs and
the remaining 40% was granted in the form of restricted stock
awards. Both the NSOs and the restricted stock are subject to
three-year, time-based cliff vesting. The Compensation
Committees decision to award a mix of NSOs and restricted
stock reflects a balance between rewarding Mr. Hagedorn for
future share price appreciation while attempting to mitigate the
dilution to existing shareholders since a grant of restricted
stock requires considerably fewer Common Shares than a grant of
NSOs, while delivering the same economic value measured as of
the time of grant.
See the section captioned Recent Developments
Amendment to Compensation Package of James Hagedorn
below for a discussion of certain changes to
Mr. Hagedorns compensation package that took effect
after the end of the 2008 fiscal year.
Setting
Compensation Levels for Other NEOs
The Compensation Committee strives to deliver an appropriate
level of total compensation to each of the NEOs by evaluating
and balancing the following objectives:
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The strategic importance of the position within our executive
ranks;
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The overall performance level and potential of the individual;
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The value of the job in the marketplace;
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Internal pay equity; and
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Our executive compensation structure and philosophy.
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Consistent with our performance-oriented pay philosophy, the
compensation structure for the NEOs, other than the CEO, is
allocated to deliver approximately one-third of the annual
compensation opportunity in the form of fixed pay (i.e.,
base salary) and the remaining two-thirds in the form of
variable pay (i.e., annual
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incentive compensation and long-term equity-based compensation).
The Compensation Committee believes that this pay mix is
generally in line with the pay mix of our compensation peer
groups.
Based on their assessment of the individual performance of each
NEO, the CEO and the Executive Vice President, Global Human
Resources, submit compensation recommendations to the
Compensation Committee for each NEO. These recommendations
address all elements of compensation, including base salary,
annual incentive compensation, long-term equity-based
compensation and perquisites and other benefits. In evaluating
these compensation recommendations, the Compensation Committee
considers information such as the Companys financial
performance as well as the compensation of similarly situated
executives as determined by reference to the benchmark data for
the relevant compensation peer group.
Base
Salary
For the 2008 fiscal year, the base salary increases awarded to
Mr. Sanders, Mr. Lopez and Ms. Stump were between
3% and 5% of their previous base salary rates, which was
consistent with the general range of increases awarded to all
other associates of the Company, based on their respective
levels of performance. Mr. Evans received a 10% increase in
his base salary rate, which reflected both his overall
performance level as well as the fact that his base salary level
was well below the level of his peers as reflected in our
Primary Compensation Peer Group.
Short-Term
Cash-Based Incentive Compensation
For purposes of the EMIP, as well as the SIP, the target
incentive opportunity for the NEOs, other than the CEO, was
maintained at 55% of base salary for the 2008 fiscal year, which
put less of their total pay at risk than that of the CEO, and
was slightly lower than the comparable percentage of short-term
cash-based incentives offered to similarly situated executives
as reflected in the applicable compensation peer group.
For the 2008 fiscal year, under both the EMIP and the SIP, the
target incentive compensation opportunity was directly
attributable to attainment of annual performance measures which
were approved by the Compensation Committee. For purposes of the
EMIP, the performance measures were established at the
Enterprise level for corporate level NEOs and at the
business unit level for NEOs with business unit responsibility.
For purposes of the SIP, the performance measures were based on
attainment of Enterprise level performance measures, regardless
of whether the NEO had business unit responsibility. The
specific performance measures and the relative weightings for
each NEO are summarized in the tables below.
EMIP
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Evans
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Sanders
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Lopez
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Stump
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(Enterprise)
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(Business Unit)
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(Business Unit)
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(Enterprise)
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Enterprise Level Measures:
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Adjusted Net Income vs. Budget
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50% weighting
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20% weighting
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20% weighting
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50% weighting
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Modified Free Cash Flow vs. Budget
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50% weighting
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20% weighting
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20% weighting
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50% weighting
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Business Unit Measures:
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Earnings Before Taxes and Amortization vs. Budget
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n/a
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45% weighting
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45% weighting
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n/a
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Net Sales Growth vs. Budget
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n/a
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15% weighting
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15% weighting
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n/a
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SIP
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Evans
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Sanders
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Lopez
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Stump
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Enterprise Level Measures:
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Adjusted Earnings Per Share vs. revised performance goals
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75% weighting
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75% weighting
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75% weighting
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75% weighting
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Modified Free Cash Flow vs. revised performance goals
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25% weighting
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25% weighting
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25% weighting
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25% weighting
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A description of the specific performance goals and the payout
levels associated with each performance measure are discussed
above in the section captioned Elements of Executive
Compensation Annual Cash Incentive Compensation
Plans (short-term compensation element) and in
conjunction with the Summary Compensation Table for 2008 Fiscal
Year beginning on page 38 of this Proxy Statement and the
narrative accompanying the table captioned Grants of
Plan-Based Awards for 2008 Fiscal Year beginning on
page 43 of this Proxy Statement.
Equity-Based
Compensation
For the 2008 fiscal year, the target value of the equity-based
compensation for each of the NEOs was determined by the
Compensation Committee based on a multiple that was generally
between 0.8 and 1.5 times the NEOs respective base salary
rate. The specific equity-based award granted to each NEO was
determined based on an assessment of the NEOs overall
performance level as well as the NEOs expected
contributions to the business. Consistent with the
Companys compensation philosophy of strongly linking
rewards to shareholder value creation and to motivate long-term
performance, the equity-based compensation awarded to
Mr. Evans approximated the
50th percentile
of the peers reflected in the Primary Compensation Peer Group,
while the equity-based compensation awarded to Mr. Sanders,
Mr. Lopez and Ms. Stump approximated the
75th percentile
of the applicable compensation peer group.
Approximately 60% of the economic value of the long-term
equity-based compensation granted to the NEOs was in the form of
NSOs and the remaining 40% was granted in the form of restricted
stock. Both the NSOs and the restricted stock are subject to
three-year, time-based cliff vesting. The Compensation
Committees decision to award a mix of NSOs and restricted
stock reflects a balance between rewarding the NEOs for future
share price appreciation while attempting to mitigate the
dilution to existing shareholders since a grant of restricted
stock requires considerably fewer Common Shares than a grant of
NSOs while delivering the same economic value measured as of the
time of grant.
Total
Direct Compensation
In general, the total direct compensation (based upon target
levels of performance) for Mr. Evans was below the
50th percentile
of peers reflected in our Primary Compensation Peer Group, which
the Compensation Committee believed was appropriate given that
Mr. Evans was just beginning his second year in his role as
Executive Vice President and Chief Financial Officer. The total
direct compensation (based upon target levels of performance)
for Ms. Stump was between the
50th and
75th percentile
of peers reflected in the Primary Compensation Peer Group and
the total direct compensation (based upon target levels of
performance) for Mr. Sanders and Mr. Lopez
approximated the
75th percentile
of peers reflected in the Secondary Compensation Peer Group. The
Compensation Committee believes that the total direct
compensation for each of these individuals was appropriate in
view of the overall compensation philosophy and recognized the
value of each of these individuals to the Company as a whole.
Performance
Shares
On October 30, 2007, in recognition of
Mr. Sanders ongoing commitment to the Company, the
Compensation Committee approved the award of up to 40,000
performance shares in the aggregate, which included up to 10,000
performance shares for the 2008 fiscal year performance period,
up to 10,000 performance shares for the 2009 fiscal year
performance period and up to 20,000 performance shares for the
2010 fiscal year performance period. Issued pursuant to a
Special Performance Share Award Agreement (with Related Dividend
Equivalents) under the 2006 Plan, each performance share
represents the right to receive one full Common Share if the
applicable performance goals are satisfied. On December 20,
2007, the Compensation Committee established the final
performance goal for the 2008 fiscal year performance period to
be based upon the results of North America Total, which
included, in addition to the North America consumer business,
Scotts
LawnService®
and Smith &
Hawken®.
The performance criteria which were established for the 2008
fiscal year performance period provided for performance shares
to be earned ratably 5,000 performance shares
(threshold) would be earned if at least 80% of the 2008 fiscal
year EBTA budget for North America Total were achieved and
10,000 performance shares (maximum) would be earned if 99% or
more of such 2008 fiscal year EBTA budget were achieved.
Performance shares would be earned on a
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straight-line basis for performance between threshold and
maximum. If the threshold performance goal was not satisfied,
none of the performance shares for the 2008 fiscal year
performance period would be awarded.
Based on the actual level of North America Total EBTA achieved
for the 2008 fiscal year, which was $277.4 million,
representing 80.1% of the budget, Mr. Sanders earned 5,038
performance shares for the 2008 fiscal year performance period.
Other
Executive Compensation Policies, Practices and
Guidelines
Practices
Regarding Equity-Based Awards
In general, all employees are eligible to receive grants of
equity-based awards; however, the Compensation Committee
typically limits participation to the CEO, the NEOs and other
key management employees. The decision to include certain key
management employees in the annual equity-based awards is
reflective of competitive market practice and serves to reward
those individuals for their past and future positive impact on
our business results.
Grants of option awards
and/or stock
awards are typically approved on an annual basis at a regularly
scheduled meeting of the Compensation Committee. The grant date
is established as the date of the Compensation Committee action.
In certain instances, an equity-based award may be granted to a
new hire as of the later of the date such grant is approved by
the Compensation Committee or the date employment commences. The
Company does not have any program, plan or practice to time
annual equity-based awards to our executives in coordination
with the release of material non-public information.
The exercise price for each NSO is equal to the closing price of
the Common Shares on the grant date, as reported on NYSE. If the
grant date is not a trading day on NYSE, the exercise price is
equal to the closing price on the next succeeding trading day.
Stock
Ownership Guidelines
The Compensation Committee has established stock ownership
guidelines, which vary by position, for the CEO and the NEOs.
The purpose of these guidelines is to align the interests of
each NEO with the long-term interests of the shareholders by
ensuring that a material amount of each NEOs accumulated
wealth is maintained in the form of Common Shares. The minimum
target levels of stock ownership established by position are as
follows:
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CEO
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5 times base salary plus target EMIP opportunity
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Other NEOs
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3 times base salary plus target EMIP opportunity
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The Compensation Committee believes that these stock ownership
guidelines are generally more stringent than the competitive pay
practices of our compensation peer groups since we include the
annual target EMIP opportunity (in addition to base salary) when
establishing the minimum amount of stock ownership desired,
while most of the other members of our compensation peer groups
look only at multiples of base salary. For purposes of achieving
the desired level of stock ownership, the following forms of
equity-based holdings are included:
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Common Shares held directly or indirectly in personal or
brokerage accounts;
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Common Shares credited to an account under the ERP;
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Common Shares held in an account under the RSP;
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Restricted stock grants;
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Performance shares; and
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Grants of NSOs or SARs, both vested and unvested. For this
purpose, the values of the NSO and SAR grants are based on the
Black-Scholes value at the time of grant.
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33
According to the Companys stock ownership guidelines, each
NEO has five years from the date of hire or promotion to fully
reach the appropriate ownership guideline for his or her
position.
Recoupment/Clawback
Policies
To protect the interests of the Company and its shareholders,
subject to applicable law, all equity-based awards and all
amounts paid under the EMIP and the SIP contain recoupment
provisions (known as clawback provisions) designed to enable the
Company to recoup Common Shares or other amounts earned or
received under the terms of an equity-based award, the EMIP or
the SIP based on subsequent events, such as violation of
non-compete covenants or engaging in conduct that is deemed to
be detrimental to the Company (as outlined in the underlying
plan and/or
award agreement).
Guidelines
with Respect to Tax Deductibility and Accounting
Treatment
The Companys ability to deduct certain elements of
compensation paid to each of the NEOs is generally limited to
$1 million annually, under IRC § 162(m). This
non-deductibility is generally limited to amounts that do not
meet certain technical requirements to be classified as
performance-based compensation. To ensure the
maximum tax deduction allowable, the Company attempts to
structure its cash-based incentive programs to qualify as
performance-based compensation under IRC § 162(m). For
the 2008 fiscal year, none of the NEOs, other than the CEO, had
non-performance-based compensation in excess of $1 million.
The Company accounts for stock-based compensation, including
option awards and stock awards, in accordance with
SFAS 123(R). Prior to making decisions to grant
equity-based awards, the Compensation Committee reviews pro
forma expense estimates, as well as an analysis of the potential
dilutive effect such awards could have on existing shareholders.
Where appropriate, the proposed level of the equity-based awards
may be adjusted to balance these objectives.
Decisions regarding the design, structure and operation of the
Companys incentive plans, including the EMIP, the SIP and
the equity-based incentive plans, contemplate an appropriate
balance between the underlying objectives of each plan and the
resulting accounting and tax implications to the Company. While
we view preserving the tax deductibility of executive
compensation as an important objective, there are instances
where the Compensation Committee has approved design elements
that may not be fully tax-deductible, but are accepted as
trade-offs that support the achievement of other compensation
objectives. For example, based on the desire to add a level of
individual accountability to the team oriented measurements in
the EMIP, a 25% discretionary element was included in the design
for the 2008 fiscal year, even though the use of such discretion
had the potential to limit the Companys tax deduction with
respect to such payment.
Due to the timing of the establishment of the SIP within the
2008 fiscal year, the payouts made under the SIP did not qualify
as performance-based compensation for purposes of IRC
§ 162(m). However, when it established the SIP in May
2008, the Compensation Committee concluded that the best
interests of the Company and its stakeholders would be served by
ensuring that meaningful incentives were maintained for eligible
employees to deliver financial results within the revised range
of the Companys guidance, as described in the
Companys May 5, 2008 earnings release.
For the 2008 fiscal year, the Company granted approximately 60%
of the target equity award value in the form of NSOs, with the
remaining 40% granted in the form of restricted stock. While the
restricted stock does not qualify as performance-based
compensation for purposes of IRC § 162(m), the
decision to use a combination of NSOs and restricted stock
reflected competitive pay practices and allowed the Company to
deliver the intended equity award value with fewer Common Shares
underlying the awards granted and to balance the overall market
risk associated with the equity-based compensation for each NEO.
Recent
Developments
Election
of Mark R. Baker to Serve as President and Chief Operating
Officer
Effective October 1, 2008, Mark R. Baker was elected to
serve as President and Chief Operating Officer of the Company.
Mr. Baker will remain on our Board of Directors, but
resigned from his positions as a
34
member and Chair of the Governance and Nominating Committee as
well as a member of the Compensation Committee. Mr. Baker
had recused himself from participation, discussions or voting
with regard to matters before those committees concerning his
prospective employment and election as an officer of the Company.
Mr. Baker executed an employment agreement with The Scotts
Company LLC, an Ohio limited liability company and a
wholly-owned subsidiary of the Company (Scotts LLC),
on September 9, 2008. The terms of Mr. Bakers
employment agreement are discussed below in the section
captioned EMPLOYMENT AGREEMENTS AND TERMINATION OF
EMPLOYMENT AND
CHANGE-IN-CONTROL
ARRANGEMENTS beginning on page 50 of this Proxy
Statement. In approving the elements of Mr. Bakers
compensation package, the Compensation Committee considered the
following factors, among others:
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The strategic importance of Mr. Bakers position and
job function to the Company;
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Mr. Bakers potential to make a significant
contribution to the Company in the future;
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The compensation packages currently extended to our CEO, NEOs
and other key management employees;
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A comparison of industry compensation practices, including
companies within our Primary Compensation Peer Group; and
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Recommendations of management, including our CEO.
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Amendment
to Compensation Package of James Hagedorn
Effective October 1, 2008, the Compensation Committee
approved a revised compensation structure for Mr. Hagedorn.
The new structure, which increased Mr. Hagedorns base
salary to $1.0 million, is designed, among other things, to
incorporate the approximate value of the personal aircraft usage
and commuting perquisites that Mr. Hagedorn had received in
the past as part of his overall compensation package directly
into his base salary. Accordingly, future Company-paid aircraft
perquisites have been discontinued. However, the Board of
Directors maintains travel protocols which encourage
Mr. Hagedorn to fly on Company-owned aircraft for reasons
of security. Therefore, in order to permit Mr. Hagedorn to
continue to retain the option of using Company-owned aircraft
for commuting and other personal use, the Compensation Committee
granted Mr. Hagedorn an option to purchase, with his own
funds, up to 100 flight hours per year for personal use
(including ferry hours incurred as a result of
Mr. Hagedorns use of the aircraft) at the
Companys incremental direct operating cost per flight
hour. In order to implement this arrangement, Mr. Hagedorn
and the Company have entered into an arms-length aircraft
time sharing agreement which is more fully described
in the section captioned CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.
In addition to establishing a new base salary rate, the
Compensation Committee approved an increase in
Mr. Hagedorns incentive target from 90% to 100% of
his base salary and maintained the target value of his annual
equity-based compensation at approximately $3.0 million,
which value is established annually as of the date of grant.
Based on the revised compensation structure,
Mr. Hagedorns total direct compensation will be
slightly below the 50th percentile of his peers, as
reflected in the Primary Compensation Peer Group. In addition,
the Compensation Committee adjusted the mix of
Mr. Hagedorns equity-based compensation for the 2009
fiscal year to reflect a higher proportion of option awards
versus stock awards to optimize the amount of
Mr. Hagedorns compensation that the Company can
deduct for income tax purposes as performance-based compensation
under IRC § 162(m).
Approval
of Retention Awards to NEOs
On October 8, 2008, the Compensation Committee approved an
amendment to the ERP to authorize grants of discretionary
retention awards under the ERP. Following its approval of this
amendment, the Compensation Committee approved the granting of
retention awards to certain key management employees of the
Company, including Mr. Evans, Mr. Sanders and
Ms. Stump. Consistent with the terms of the ERP, each
executive officer who was granted a retention award has the
right to elect an investment fund, including a Company stock
fund, against which the retention award will be benchmarked.
Mr. Evans, Mr. Sanders and
35
Ms. Stump elected the Company stock fund as the investment
fund against which their respective retention awards will be
benchmarked.
The retention awards approved by the Compensation Committee with
respect to the executive officers identified above, as well as
the retention award approved with respect to Mr. Lopez
(described below), were each in the amount of $1.0 million.
These awards reflected the Compensation Committees belief
that retaining the institutional knowledge and overall talent
possessed by the Companys key executive officers puts the
Company in the best position to ensure that it continues to
successfully achieve both its short-term and long-term goals
during challenging economic times. The retention awards serve to
further the Companys stated objective to retain the
necessary leadership talent to sustain and expand upon its
unique competencies and capabilities.
Each retention award was granted subject to the terms of a
retention award agreement, a form of which the Compensation
Committee approved prior to its approval of the individual
retention awards. The retention award agreement provides that
each executive officers interest in the retention award
vests as follows:
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One hundred percent on the third anniversary of the effective
date of the retention award agreement, provided the executive
officer remains an employee on such third anniversary;
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One hundred percent if a change of control of the Company occurs
prior to the third anniversary of the award date, and the
executive officers employment is subsequently terminated
without cause or the executive officer resigns for
good reason, in each case as defined in the
retention award agreement or, if applicable, the executive
officers employment agreement;
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Pro rata if, prior to the third anniversary of the award date,
the executive officers employment is terminated due to the
executive officers death, disability or retirement;
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Pro rata if, prior to the third anniversary of the award date,
Scotts LLC decides not to renew the executive officers
employment agreement, if applicable, and, after the employment
agreement has expired, the executive officers employment
is terminated without cause or the executive officer resigns for
good reason; and
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No vesting if, prior to the third anniversary of the award date,
the executive officers employment terminates or is
terminated under circumstances not otherwise described above.
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Each retention award is subject to forfeiture if the executive
officer is terminated for cause at any time or the executive
officer engages in certain actions prohibited by the retention
award agreement within 180 days before or 730 days
after the executive officers employment is terminated for
any reason. In the event of forfeiture, the executive officer
must repay any amount previously distributed from the executive
officers retention award account under the ERP.
Each retention award agreement provides for distribution of the
retention award, to the extent vested, to the executive officer
as follows:
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one-fourth of the vested retention award account balance in a
single sum on the third anniversary of the award date;
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one-third of the remaining vested retention award account
balance in a single sum on the fourth anniversary of the award
date; and
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at the executive officers election (which was made as of
the award date), the remaining vested retention award account
balance in a single sum on: (i) the fifth anniversary of
the award date; or (ii) the latest to occur of (A) the
fifth anniversary of the award date, (B) the date on which
the executive officers employment is terminated or
(C) a date specified by the executive officer, which may
not be later than the date the executive officer attains
age 65.
|
Distributions will be paid in cash to the extent the vested
retention award account is benchmarked against an investment
fund other than the Company stock fund. To the extent the vested
retention award account is
36
benchmarked against the Company stock fund, distributions will
be made in whole Common Shares, plus cash for any fractional
share.
On November 4, 2008, the Compensation Committee granted a
restricted stock unit award to Mr. Lopez. Because
Mr. Lopez is a French citizen and therefore not eligible to
participate in the ERP, the restricted stock unit award is not
subject to the terms of the ERP, and is instead governed by the
terms of the Companys 2006 Plan. The restricted stock unit
award was granted pursuant to an award agreement that contains
terms and conditions substantially similar to those approved by
the Compensation Committee in the form of retention award
agreement, including terms and conditions relating to vesting,
forfeiture and distribution.
On November 4, 2008, the Compensation Committee approved a
one-time payment of $125,000 to Mr. Sanders in recognition
of his continuing service in light of the recent organizational
changes.
COMPENSATION
COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis required by
Item 402(b) of SEC
Regulation S-K
with management and, based on such review and discussions, the
Compensation Committee recommended to the Board of Directors
(and the Board of Directors approved) that the Compensation
Discussion and Analysis be included in this Proxy Statement.
Submitted
by the Compensation Committee of the Board of Directors of the
Company:
Arnold W. Donald, Chair
Joseph P. Flannery
Karen G. Mills (interim member since 9/8/08)
Mark R. Baker (member until 9/8/08)
37
EXECUTIVE
COMPENSATION TABLES
For the 2008 fiscal year, the Company had the following NEOs
that are subject to this disclosure: James Hagedorn, who served
as Chief Executive Officer throughout the 2008 and 2007 fiscal
years; David C. Evans, who served as Chief Financial Officer
throughout the 2008 and 2007 fiscal years; Barry W. Sanders, who
served as the Companys Executive Vice President, North
America throughout the 2008 fiscal year and for part of the 2007
fiscal year; Claude L. Lopez, who was appointed as an executive
officer on October 1, 2007 and served as the Companys
Executive Vice President, International and Chief Marketing
Officer throughout the 2008 fiscal year; and Denise S. Stump,
who served as the Companys Executive Vice President,
Global Human Resources throughout the 2008 and 2007 fiscal
years. Each of Mr. Hagedorn, Mr. Evans,
Mr. Sanders, Mr. Lopez and Ms. Stump serves
pursuant to an employment agreement as described below in the
section captioned EMPLOYMENT AGREEMENTS AND TERMINATION
OF EMPLOYMENT AND
CHANGE-IN-CONTROL
ARRANGEMENTS Employment Agreements.
Summary
Compensation Table
The following table summarizes the total compensation paid to,
awarded to or earned by each of the NEOs of the Company for the
2008 and 2007 fiscal years, as applicable. The amounts shown
include compensation for services in all capacities that were to
be provided by the Company including any amounts which may have
been deferred. Since the table includes equity-based
compensation costs and changes in the actuarial present value of
the NEOs accumulated pension benefits, the total
compensation amount may be greater than the compensation that
actually was paid to the NEOs during the 2008 and 2007 fiscal
years.
Summary
Compensation Table for 2008 Fiscal Year
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Change in
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Pension Value
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and
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Non-Qualified
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Non-Equity
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Deferred
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Name and Principal
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Year
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Position (a)
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(b)
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($)(c)
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($)(d)
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($)(e)
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($)(f)
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($)(g)
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($)(11)(h)
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($)(i)
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($)(j)
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James Hagedorn
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2008
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600,000
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(1)
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0
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1,280,877
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(5)
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1,682,382
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(7)
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293,340
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(8)
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0
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(12)
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945,242
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(14)
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4,801,841
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President, Chief Executive
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2007
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600,000
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(1)
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30,926
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(3)
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1,244,698
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(5)
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1,851,390
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(7)
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92,777
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(9)
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7,114
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(12)
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761,106
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(14)
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4,588,011
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Officer and Chairman of the Board
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David C. Evans
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2008
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440,000
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(1)
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0
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179,287
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(5)
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244,216
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(7)
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138,182
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(8)
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0
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(13)
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57,361
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(14)
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1,059,046
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Executive Vice President
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2007
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400,000
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(1)
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19,257
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(3)
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124,579
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(5)
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243,151
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(7)
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37,799
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(9)
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613
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(13)
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56,242
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(14)
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881,641
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and Chief Financial Officer
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Barry W. Sanders
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2008
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400,000
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(1)
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125,000
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(4)
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635,110
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(6)
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213,291
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(7)
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125,620
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(8)
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0
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49,337
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(14)
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1,548,358
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Executive Vice President,
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2007
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367,333
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(1)
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19,257
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(3)
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285,210
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(5)
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229,456
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(7)
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32,720
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(9)
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0
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136,647
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(14)
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1,070,623
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North America
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Claude L. Lopez
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2008
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420,802
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(2)
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0
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100,917
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(5)
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164,556
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(7)
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154,395
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(10)
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0
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155,571
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(14)
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996,241
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Executive Vice President, International and Chief Marketing
Officer
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Denise S. Stump
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2008
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321,400
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(1)
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0
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182,607
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(5)
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245,180
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(7)
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100,936
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(8)
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0
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62,997
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(14)
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913,120
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Executive Vice President,
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2007
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312,000
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(1)
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19,257
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(3)
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142,822
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(5)
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254,202
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(7)
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29,483
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(9)
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0
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48,886
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(14)
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806,650
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Global Human Resources
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(1) |
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Reflects the amount of base salary received by each of the NEOs
for the 2008 and 2007 fiscal years, respectively. |
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(2) |
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Mr. Lopez, a French citizen, is paid in Euros. The amount
shown reflects base salary amounts received with respect to the
2008 fiscal year, converted to U.S. Dollars at an exchange rate
of 1.4069 USD per Euro, which is the same exchange rate used for
financial accounting purposes as of September 30, 2008. |
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(3) |
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Reflects the discretionary portion of the 2007
fiscal year EMIP payout for each NEO. This amount was based on
individual performance for the 2007 fiscal year. For
Mr. Evans, Mr. Sanders and Ms. Stump, this amount
was awarded at the discretion of Mr. Hagedorn, in his
capacity as the CEO, subject to approval by the Compensation
Committee. Mr. Hagedorn had no discretionary authority with
respect to his own annual incentive payout under the
EMIP only the Compensation Committee could award a |
38
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discretionary EMIP payout to Mr. Hagedorn. For the 2007
fiscal year, only 75% of the total weighted payout for the key
management team that reports to the CEO was to be determined
based directly on achievement of the performance metrics under
the EMIP (see footnote (9) to this table below), with the
remaining 25% placed into a pool to be awarded as described
above. Each NEO could earn more or less than 25% of the total
weighted payout based on the NEOs individual performance
for the 2007 fiscal year. The maximum discretionary amount that
could be awarded to the NEOs in the aggregate, however, was
limited by the size of the discretionary pool. |
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(4) |
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Reflects a special discretionary bonus award approved by the
Compensation Committee for retention purposes and in recognition
of Mr. Sanders service during the 2008 fiscal year. |
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(5) |
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Reflects the dollar amount recognized for financial statement
reporting purposes, for the 2008 and 2007 fiscal years, with
respect to the restricted stock awards granted to each NEO. The
amount is calculated in accordance with SFAS 123(R), and
thus may include amounts from awards granted in the 2008 and
2007 fiscal years as well as prior fiscal years. Pursuant to
applicable SEC Rules, the amounts shown exclude the impact of
estimated forfeitures related to service-based vesting
conditions. The value of the restricted stock awards is
determined using the fair market value of the underlying Common
Shares on the date of the grant, and expensed ratably over the
three-year restriction period, with the exception of the
restricted stock awards covering 33,100 Common Shares granted to
Mr. Hagedorn on November 8, 2007, which are being
expensed ratably over a
34-month
period. |
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(6) |
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Reflects the dollar amount recognized for financial statement
reporting purposes, for the 2008 fiscal year, with respect to
the restricted stock awards and performance share awards granted
to Mr. Sanders. The amount is calculated in accordance with
SFAS 123(R), and thus may include amounts from awards
granted in the 2008 fiscal year as well as prior fiscal years.
Pursuant to applicable SEC Rules, the amount shown excludes the
impact of estimated forfeitures related to service-based vesting
conditions. The value of the restricted stock awards is
determined using the fair market value of the underlying Common
Shares on the date of the grant, and expensed ratably over the
three-year restriction period. The value of the performance
share awards with respect to the 2008 fiscal year performance
period is determined using the fair market value of the
underlying Common Shares on the date of the grant, and expensed
ratably over the 2008 fiscal year. The value of the performance
shares attributable to the 2009 and 2010 fiscal year performance
periods is subject to market valuation adjustments until such
time as the Compensation Committee establishes the performance
criteria with respect to those performance periods. |
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(7) |
|
Reflects the dollar amount recognized for financial statement
reporting purposes, for the 2008 and 2007 fiscal years, with
respect to NSOs granted to each NEO. The amount is calculated in
accordance with SFAS 123(R), and thus may include amounts
from awards granted in the 2008 and 2007 fiscal years as well as
prior fiscal years. Pursuant to applicable SEC Rules, the amount
shown excludes the impact of estimated forfeitures related to
service-based vesting conditions. The value of the NSO awards is
determined using a binomial option valuation on the date of the
grant and expensed ratably over the three-year vesting period,
with the exception of the NSOs granted to Mr. Hagedorn on
November 8, 2007, which are being expensed ratably over a
34-month
period. Assumptions used in the calculation of the amount shown
are included in Note 12 to the Consolidated Financial
Statements included in the Companys Annual Report on
Form 10-K
filed with the SEC on November 25, 2008 and in Note 11
to the Consolidated Financial Statements included in the
Companys Annual Report on
Form 10-K
filed with the SEC on November 29, 2007. |
|
(8) |
|
Reflects the SIP payout calculated for the 2008 fiscal year for
each NEO. A more detailed description of the performance goals
and actual 2008 fiscal year performance results for purposes of
the SIP are discussed in the section captioned Elements of
Executive Compensation Annual Cash Incentive
Compensation Plans (short-term compensation element)
within the CD&A. |
|
(9) |
|
Reflects the non-discretionary portion of the 2007
fiscal year EMIP payout for each NEO. This amount represents 75%
of the total weighted payout calculated based on the performance
results under the EMIP for the 2007 fiscal year. |
39
|
|
|
(10) |
|
Reflects Mr. Lopez SIP payout calculated for the 2008
fiscal year, converted to U.S. dollars at an exchange rate of
1.4069 USD per Euro, which is the same exchange rate used for
financial accounting purposes as of September 30, 2008. A
more detailed description of the performance goals and actual
2008 fiscal year performance results for purposes of the SIP are
discussed in the section captioned Elements of Executive
Compensation Annual Cash Incentive Compensation
Plans (short-term compensation element) within the
CD&A. |
|
(11) |
|
Participant account balances in the ERP, a non-qualified
deferred compensation plan, are credited to one or more
benchmarked funds which are substantially consistent with the
investment options permitted under the RSP, a qualified 401(k)
plan. Accordingly, there were no above-market or preferential
earnings on amounts deferred under the ERP for any of the NEOs
for the 2008 or 2007 fiscal years. |
|
(12) |
|
For Mr. Hagedorn, the actuarial present value of the
accumulated benefit under both the Associates Pension Plan
and the Excess Pension Plan decreased by $28,906 with respect to
the 2008 fiscal year (and therefore is not reflected in this
column for the 2008 fiscal year pursuant to SEC Rules) and
increased by $7,114 with respect to the 2007 fiscal year. Both
plans were frozen as of December 31, 1997; therefore, no
service credits have been earned since that date by
Mr. Hagedorn. |
|
(13) |
|
For Mr. Evans, the actuarial present value of the
accumulated benefit under the Associates Pension Plan
decreased by $3,567 with respect to the 2008 fiscal year (and
therefore is not reflected in this column for the 2008 fiscal
year pursuant to SEC Rules) and increased by $613 with respect
to the 2007 fiscal year. The Associates Pension Plan was
frozen as of December 31, 1997; therefore, no service
credits have been earned since that date by Mr. Evans. |
|
(14) |
|
The amounts reported in this column consist of amounts provided
to each NEO with respect to an automobile allowance, annual
financial planning services, physical examinations, amounts
contributed by the Company to defined contribution and
non-qualified deferred compensation plans, commuting and other
personal use of Company-owned aircraft, reimbursement of other
commuting expenses, tax
gross-ups
and Common Shares purchased under the Discounted Stock Purchase
Plan, all of which are detailed in the table captioned All
Other Compensation (Supplements Summary Compensation
Table) set forth below. |
All
Other Compensation Table (Supplements Summary Compensation
Table)
The following table shows the detail for column (i), All Other
Compensation, of the Summary Compensation Table for 2008 Fiscal
Year.
All Other
Compensation (Supplements Summary Compensation Table)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto
|
|
Contribution
|
|
Compensation
|
|
Tax Gross-up
|
|
Commuting
|
|
|
|
|
Name
|
|
|
|
Perquisites
|
|
Plans
|
|
Plans
|
|
Payments
|
|
Expenses
|
|
Other
|
|
Total
|
(a)
|
|
Year
|
|
($)(b)
|
|
($)(4)(c)
|
|
($)(5)(d)
|
|
($)(e)
|
|
($)(f)
|
|
($)(g)
|
|
($)(h)
|
|
James Hagedorn
|
|
|
2008
|
|
|
|
12,000
|
(1)
|
|
|
17,380
|
|
|
|
34,548
|
|
|
|
132,770
|
(6)
|
|
|
326,206
|
(9)
|
|
|
422,338
|
(11)
|
|
|
945,242
|
|
|
|
|
2007
|
|
|
|
12,000
|
(2)
|
|
|
17,525
|
|
|
|
29,500
|
|
|
|
107,224
|
(6)
|
|
|
198,460
|
(10)
|
|
|
396,397
|
(12)
|
|
|
761,106
|
|
David C. Evans
|
|
|
2008
|
|
|
|
12,000
|
(1)
|
|
|
17,080
|
|
|
|
19,533
|
|
|
|
1,160
|
(7)
|
|
|
0
|
|
|
|
7,588
|
(13)
|
|
|
57,361
|
|
|
|
|
2007
|
|
|
|
12,000
|
(2)
|
|
|
17,525
|
|
|
|
17,835
|
|
|
|
392
|
(8)
|
|
|
0
|
|
|
|
8,490
|
(14)
|
|
|
56,242
|
|
Barry W. Sanders
|
|
|
2008
|
|
|
|
12,000
|
(1)
|
|
|
16,180
|
|
|
|
16,879
|
|
|
|
0
|
|
|
|
0
|
|
|
|
4,278
|
(15)
|
|
|
49,337
|
|
|
|
|
2007
|
|
|
|
11,333
|
(2)
|
|
|
16,960
|
|
|
|
13,025
|
|
|
|
144
|
(8)
|
|
|
0
|
|
|
|
95,185
|
(16)
|
|
|
136,647
|
|
Claude L. Lopez
|
|
|
2008
|
|
|
|
6,466
|
(3)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
149,105
|
(17)
|
|
|
155,571
|
|
Denise S. Stump
|
|
|
2008
|
|
|
|
12,000
|
(1)
|
|
|
17,380
|
|
|
|
9,262
|
|
|
|
1,160
|
(7)
|
|
|
0
|
|
|
|
23,195
|
(18)
|
|
|
62,997
|
|
|
|
|
2007
|
|
|
|
12,000
|
(2)
|
|
|
17,365
|
|
|
|
11,715
|
|
|
|
360
|
(8)
|
|
|
0
|
|
|
|
7,446
|
(19)
|
|
|
48,886
|
|
|
|
|
(1) |
|
Reflects the monthly automobile allowance provided to each of
the NEOs for the 2008 fiscal year. |
|
(2) |
|
Reflects the monthly automobile allowance provided to each of
the NEOs for the 2007 fiscal year. |
|
(3) |
|
Reflects the annual leave value of a Company-owned vehicle made
available to Mr. Lopez for the 2008 fiscal year for both
business and personal usage. The amount was determined in Euros
and converted to U.S. dollars at an exchange rate of 1.4069 USD
per Euro, which is the same exchange rate used for financial
accounting purposes as of September 30, 2008. |
40
|
|
|
(4) |
|
Reflects the Company matching and base retirement contributions
made in the 2008 and 2007 fiscal years under the RSP, a defined
contribution plan, on behalf of each NEO. Eligible participants
may contribute up to 75% of eligible earnings on a before-tax
basis through payroll deduction up to the specified statutory
limits under the IRC. The Company matches the before-tax
contributions at 100% for the first 3% of eligible earnings that
is contributed to the RSP and 50% for the next 2% of eligible
earnings contributed to the RSP (within the specified statutory
limitations). The matching contributions, and any earnings on
them, are immediately 100% vested. Mr. Lopez, a French
citizen, does not participate in the RSP. |
|
|
|
The Company also makes a Base Retirement Contribution in an
amount equal to 2% of eligible earnings for all eligible
associates, whether or not they choose to contribute to the RSP.
This amount increases to 4% once an associates eligible
earnings reach 50% of the Social Security wage base. The Base
Retirement Contributions, and any earnings on them, vest once an
associate has reached three years of service with the Company. |
|
(5) |
|
Reflects the amount of all Company contributions into the ERP, a
non-qualified deferred compensation plan, for each NEO. The ERP
provides executives, including the NEOs, the opportunity to
(a) defer compensation above the specified statutory limits
applicable to the RSP and (b) defer compensation with
respect to Executive Incentive Pay (as defined in the ERP)
awarded to such executives. Additional details with respect to
non-qualified deferred compensation provided for under the ERP
are shown in the table captioned Non-Qualified Deferred
Compensation for 2008 Fiscal Year on page 49 of this
Proxy Statement. Mr. Lopez, a French citizen, does not
participate in the ERP. |
|
(6) |
|
Reflects estimated tax
gross-up
payments with respect to aircraft usage and commuting expenses
for the 2008 and 2007 fiscal years, as appropriate. |
|
(7) |
|
Reflects tax
gross-up
payments with respect to Company paid financial-planning
services for the 2008 fiscal year. |
|
(8) |
|
Reflects tax
gross-up
payments with respect to personal aircraft usage in connection
with attending funeral services. |
|
(9) |
|
Reflects $76,506 for the costs of commuting on Company-owned
aircraft, calculated according to applicable SEC guidance which
measures the aggregate incremental cost to the Company of
personal use. This amount does not include the cost of ferry
legs, i.e., deadhead flights ($36,869). The
reported aggregate incremental cost of commuting on
Company-owned aircraft was based on the direct operating costs
associated with operating a flight from origination to
destination, such as fuel, oil, landing fees, crew hotels and
meals, on-board catering, trip-related maintenance, and
trip-related hangar/parking costs. Since Company-owned aircraft
are used primarily for business travel, the calculation method
excludes the fixed costs which do not change based on usage,
such as pilots salaries, the purchase cost of
Company-owned aircraft and the cost of maintenance not related
to trips. This amount also includes $249,700 reimbursable
directly to Mr. Hagedorn for a portion of the direct
operating costs associated with commuting in his personal
aircraft. Mr. Hagedorns commuting perquisite, which
was approved by the Compensation Committee for the 2008 fiscal
year as part of his overall compensation package, is discussed
in more detail in the section captioned Our Compensation
Practices Setting Compensation Level for
CEO within the CD&A. |
|
(10) |
|
Reflects $121,060 for the costs of commuting on Company-owned
aircraft, calculated according to applicable SEC guidance which
measures the aggregate incremental cost to the Company of
personal use. This amount does not include the cost of ferry
legs, i.e., deadhead flights ($59,610). The
reported aggregate incremental cost of commuting on
Company-owned aircraft was based on the direct operating costs
associated with operating a flight from origination to
destination, such as fuel, oil, landing fees, crew hotels and
meals, on-board catering, trip-related maintenance, and
trip-related hangar/parking costs. Since Company-owned aircraft
are used primarily for business travel, the calculation method
excludes the fixed costs which do not change based on usage,
such as pilots salaries, the purchase cost of
Company-owned aircraft and the cost of maintenance not related
to trips. This amount also includes $77,400 as an additional
perquisite for certain costs which the Company reimbursed to
Mr. Hagedorn for a portion of the direct operating costs
associated with commuting in his personal aircraft. |
41
|
|
|
(11) |
|
As a result of his participation in the Discounted Stock
Purchase Plan, Mr. Hagedorn realized additional
compensation of $2,667, associated with purchasing Common Shares
at a 10% discount from the then current market price.
Mr. Hagedorn also received a Company-paid physical
examination which increased his compensation by $4,703 for the
2008 fiscal year. The amount shown also includes $162,587
representing the cost of Mr. Hagedorns personal usage
of Company-owned aircraft, excluding the cost of commuting that
was reported in column (f). The value reported for his personal
usage does not include the cost of ferry legs, i.e.,
deadhead flights ($47,291). The reported aggregate
incremental cost of his personal usage of Company-owned aircraft
was based on the direct operating costs associated with
operating a flight from origination to destination, such as
fuel, oil, landing fees, crew hotels and meals, on-board
catering, trip-related maintenance, and trip-related
hangar/parking costs. Since Company-owned aircraft are used
primarily for business travel, the calculation method excludes
the fixed costs which do not change based on usage, such as
pilots salaries, the purchase cost of company-owned
aircraft and the cost of maintenance not related to trips. The
aggregate incremental cost reported does not include the
incremental tax cost to the Company ($287,213) associated with
the partial loss of a tax deduction of aircraft-related costs,
as a result of Mr. Hagedorns personal use of
Company-owned aircraft. Mr. Hagedorn also received a
deferred dividend of $252,381 (including $6,331 in interest)
related to an award covering 26,600 shares of restricted
stock which was granted on December 1, 2004 and vested on
December 1, 2007. |
|
(12) |
|
As a result of his participation in the Discounted Stock
Purchase Plan, Mr. Hagedorn realized additional
compensation of $2,667, associated with purchasing Common Shares
at a 10% discount from the then current market price.
Mr. Hagedorn elected to receive an opt-out payment in lieu
of receiving Company-paid financial planning services, which
increased his compensation by $4,000 for the 2007 fiscal year.
The value of a Company-paid physical examination received by
Mr. Hagedorn increased his compensation by $700 for the
2007 fiscal year. The amount shown also includes $370,280
representing the cost of Mr. Hagedorns personal usage
of Company-owned aircraft, excluding the cost of commuting that
was reported in column (f). The value reported for his personal
usage does not include the cost of ferry legs, i.e.,
deadhead flights ($117,740). The reported aggregate
incremental cost of his personal usage of Company-owned aircraft
was based on the direct operating costs associated with
operating a flight from origination to destination, such as
fuel, oil, landing fees, crew hotels and meals, on-board
catering, trip-related maintenance, and trip-related
hangar/parking costs. Since Company-owned aircraft are used
primarily for business travel, the calculation method excludes
the fixed costs which do not change based on usage, such as
pilots salaries, the purchase cost of Company-owned
aircraft and the cost of maintenance not related to trips. The
aggregate incremental cost reported does not include the
incremental tax cost to the Company ($491,850) associated with
the partial loss of a tax deduction of aircraft-related costs,
as a result of Mr. Hagedorns personal use of
Company-owned aircraft. Mr. Hagedorn also received a
deferred dividend of $18,750 related to an award of
30,000 shares of restricted stock which was granted on
November 19, 2003 and vested on November 19, 2006. |
|
(13) |
|
The value of Company-paid financial planning services for
Mr. Evans increased his compensation by $7,588 for the 2008
fiscal year. |
|
(14) |
|
The value of Company-paid financial planning services for
Mr. Evans increased his compensation by $3,415 for the 2007
fiscal year, and the value of a Company-paid physical
examination increased his compensation by $5,075 for the 2007
fiscal year. |
|
(15) |
|
As a result of his participation in the Discounted Stock
Purchase Plan, Mr. Sanders realized additional compensation
of $278, associated with purchasing Common Shares at a 10%
discount from the then current market price. Mr. Sanders
also elected to receive the opt-out payment in lieu of receiving
Company-paid financial planning services, which increased his
compensation by $4,000 for the 2008 fiscal year. |
|
(16) |
|
Mr. Sanders elected to receive the opt-out payment in lieu
of receiving Company-paid financial planning services, which
increased his compensation by $4,000 for the 2007 fiscal year.
The value of a Company-paid physical examination received by
Mr. Sanders increased his compensation by $4,935 for the
2007 fiscal year. Mr. Sanders also received a deferred
dividend of $86,250 related to an award of 10,000 performance
shares which was granted on December 9, 2005 and vested on
April 2, 2007. |
42
|
|
|
(17) |
|
Reflects Expatriate Allowance of 53,838 Euros, a
Holidays buy back bonus of 49,300 Euros and 2,843 Euros received
by Mr. Lopez in lieu of Company-paid financial planning
services. All amounts were paid to Mr. Lopez in Euros and
have been converted to U.S. dollars at an exchange rate of
1.4069 USD per Euro, which is the same exchange rate used for
financial accounting purposes as of September 30, 2008. |
|
(18) |
|
As a result of her participation in the Discounted Stock
Purchase Plan, Ms. Stump realized additional compensation
of $667 for the 2008 fiscal year, associated with purchasing
Common Shares at a 10% discount from the then current market
price. The value of Company-paid financial planning services for
Ms. Stump increased her compensation by $6,895 for the 2008
fiscal year, and the value of a Company-paid physical
examination increased her compensation by $6,143 for the 2008
fiscal year. Ms. Stump also received a deferred dividend of
$9,490 (including $240 in interest) related to an award covering
1,000 shares of restricted stock which was granted on
December 1, 2004 and vested on December 1, 2007. |
|
(19) |
|
As a result of her participation in the Discounted Stock
Purchase Plan, Ms. Stump realized additional compensation
of $667 for the 2007 fiscal year, associated with purchasing
Common Shares at a 10% discount from the then current market
price. The value of Company-paid financial planning services for
Ms. Stump increased her compensation by $6,779 for the 2007
fiscal year. |
Grants of
Plan-Based Awards Table
The following table sets forth information concerning
equity-based awards made to the NEOs during the 2008 fiscal year
as well as the range of potential payouts under the EMIP and the
SIP, each a non-equity incentive plan, with respect to
performance goals for the 2008 fiscal year.
Grants of
Plan-Based Awards for 2008 Fiscal Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future
|
|
Stock
|
|
Option
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
Payouts Under Equity
|
|
Awards:
|
|
Awards:
|
|
Exercise
|
|
Date Fair
|
|
|
|
|
Estimated Future Payouts
|
|
Incentive Plan Awards
|
|
Number of
|
|
Number of
|
|
or Base
|
|
Value of
|
|
|
|
|
Under Non-Equity Incentive
|
|
Threshold
|
|
Maximum
|
|
Shares of
|
|
Securities
|
|
Price of
|
|
Stock and
|
|
|
Grant
|
|
Plan Awards(1)
|
|
(common
|
|
(common
|
|
Stock or
|
|
Underlying
|
|
Option
|
|
Option
|
Name
|
|
Date
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
shares)
|
|
shares)
|
|
Units
|
|
Options
|
|
Awards
|
|
Awards
|
(a)
|
|
(b)
|
|
($)(c)
|
|
($)(d)
|
|
($)(e)
|
|
(f)
|
|
(g)
|
|
(#)(h)
|
|
(#)(i)
|
|
($/Sh)(j)
|
|
(5)(k)
|
|
James Hagedorn
|
|
|
11/8/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,100
|
(3)
|
|
|
|
|
|
|
|
|
|
|
1,266,075
|
|
|
|
|
11/8/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129,100
|
(4)
|
|
|
38.25
|
|
|
|
1,577,221
|
|
|
|
|
|
|
|
|
270,000
|
|
|
|
540,000
|
|
|
|
1,350,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David C. Evans
|
|
|
11/7/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
(3)
|
|
|
|
|
|
|
|
|
|
|
232,560
|
|
|
|
|
11/7/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
(4)
|
|
|
38.76
|
|
|
|
309,499
|
|
|
|
|
|
|
|
|
121,000
|
|
|
|
242,000
|
|
|
|
605,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry W. Sanders
|
|
|
10/30/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
(2)
|
|
|
40,000
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,800,400
|
|
|
|
|
11/7/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
(3)
|
|
|
|
|
|
|
|
|
|
|
193,800
|
|
|
|
|
11/7/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
(4)
|
|
|
38.76
|
|
|
|
247,599
|
|
|
|
|
|
|
|
|
110,000
|
|
|
|
220,000
|
|
|
|
550,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claude L. Lopez
|
|
|
11/7/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
(3)
|
|
|
|
|
|
|
|
|
|
|
116,280
|
|
|
|
|
11/7/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
(4)
|
|
|
38.76
|
|
|
|
185,699
|
|
|
|
|
|
|
|
|
136,550
|
|
|
|
273,101
|
|
|
|
682,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denise S. Stump
|
|
|
11/7/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,900
|
(3)
|
|
|
|
|
|
|
|
|
|
|
189,924
|
|
|
|
|
11/7/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,100
|
(4)
|
|
|
38.76
|
|
|
|
236,457
|
|
|
|
|
|
|
|
|
88,385
|
|
|
|
176,770
|
|
|
|
441,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amounts in columns (c), (d) and (e) are the
estimated potential threshold (minimum), target and maximum
incentive award payouts that each of the NEOs was eligible to
receive based on performance goals set pursuant to the EMIP for
the 2008 fiscal year. The amounts in columns (c) and
(d) are also the estimated potential threshold (minimum)
and target incentive award payouts that each of the NEOs was
eligible to receive based on performance goals set pursuant to
the SIP for the 2008 fiscal year. The maximum incentive award
payout under the SIP was identical to the target incentive award
payout, as the NEOs were not eligible to receive incentive
compensation under the SIP in an amount greater than their
respective target incentive opportunity unless the Company
achieved the performance level originally contemplated under the
EMIP. In no event could an NEO receive an incentive award payout
under both the SIP and the EMIP. A detailed description of the
performance goals and potential incentive award |
43
|
|
|
|
|
payouts under the EMIP and the SIP for threshold (minimum),
target and (with respect to the EMIP) maximum performance levels
are discussed in the section captioned Elements of
Executive Compensation Annual Cash Incentive
Compensation Plans (short-term compensation element)
within the CD&A. |
|
(2) |
|
On October 30, 2007, Mr. Sanders received a special
retention grant that provided the opportunity to receive up to
40,000 performance shares in the aggregate, which includes up to
10,000 performance shares for the 2008 fiscal year performance
period, up to 10,000 performance shares for the 2009 fiscal year
performance period and up to 20,000 performance shares for the
2010 fiscal year performance period. Each performance share
represents the right to receive one full Common Share if the
applicable performance goals are satisfied. Based on the
performance criteria established by the Compensation Committee
on December 20, 2007, the shares for the 2008 fiscal year
performance period are earned ratably 5,000
performance shares (threshold) would be earned if at least 80%
of the 2008 fiscal year EBTA budget for North America Total
(calculated in the same manner as for the EMIP) were achieved
and 10,000 performance shares (maximum) would be earned if 99%
or more of such 2008 fiscal year EBTA budget were achieved.
Performance shares would be earned on a straight-line basis for
performance between threshold and maximum. For the 2008 fiscal
year, Mr. Sanders earned 5,038 performance shares, as
described in the table captioned Option Exercises and
Stock Vested for 2008 Fiscal Year on page 46 of this
Proxy Statement. |
|
(3) |
|
Reflects the number of shares of restricted stock awarded under
the 2006 Plan on November 8, 2007 to Mr. Hagedorn and
on November 7, 2007 to each of the other NEOs, that are
subject to a three-year cliff vesting schedule. The shares of
restricted stock are held in an escrow account until they vest
or are forfeited. Each holder of restricted stock exercises all
voting rights associated with the shares of restricted stock
while they are held in the escrow account and will be credited
with any dividends paid on the Common Shares underlying the
restricted stock. In addition, each holder of restricted stock
will be credited with a reasonable rate of interest on any such
cash dividends that were or are declared and paid in respect of
the shares of restricted stock during the period that began on
the grant date and ends on the vesting date. The dividends and
interest are distributed with the related shares of restricted
stock if they vest, or forfeited if those shares of restricted
stock are forfeited. |
|
(4) |
|
Reflects the number of NSOs granted on November 8, 2007 to
Mr. Hagedorn and on November 7, 2007 to each of the
other NEOs, that are subject to a three-year cliff vesting
schedule and generally have ten-year terms. All grants were made
pursuant to the 2006 Plan. The 2006 Plan, which was approved by
the Companys shareholders, provides that the exercise
price, as reflected in column (j), will be the closing price of
a Common Share on NYSE on the date of the grant. |
|
(5) |
|
Reflects the grant date fair value, computed in accordance with
SFAS 123(R), for the restricted stock grants and NSO grants
identified in this table. |
Outstanding
Equity Awards Table
The following table provides information regarding outstanding
NSOs, SARs, restricted stock and performance share awards held
by the NEOs as of September 30, 2008.
The information is shown with the adjustments for the Special
Dividend. The payment of the Special Dividend required the
Company to adjust the number of Common Shares subject to NSOs
and SARs outstanding under the Companys equity-based
compensation plans at the time of the Special Dividend, as well
as the price at which such awards may be exercised. The
Compensation Committee approved the adjustments which were
consistent with Section 409A of the IRC and assure
compliance with SFAS 123(R). Accordingly, there were no
accounting charges associated with the adjustments nor were
there any tax implications to the Company or the holders of
outstanding awards, as a result of the NSO and SAR adjustments
associated with the Special Dividend.
44
Outstanding
Equity Awards at 2008 Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
Plan Awards:
|
|
Market or
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Number of
|
|
Value of
|
|
Number of
|
|
Payout Value
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
Unearned Shares,
|
|
of Unearned
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Units of
|
|
Units of
|
|
Units or Other
|
|
Shares, Units, or
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
Stock
|
|
Stock That
|
|
Rights That
|
|
Other Rights
|
|
|
|
|
Options/SARs(#)
|
|
Options/SARs(#)
|
|
Exercise
|
|
Expiration
|
|
That Have
|
|
Have Not
|
|
Have Not
|
|
That Have Not
|
Name
|
|
Grant Date
|
|
Exercisable(1)
|
|
Unexercisable(1)
|
|
Price(2)
|
|
Date
|
|
Not Vested
|
|
Vested
|
|
Vested
|
|
Vested
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
($)(e)
|
|
(f)
|
|
(#)(g)
|
|
($)(h)
|
|
(#)(i)
|
|
($)(j)
|
|
James Hagedorn
|
|
|
3/5/1999
|
|
|
|
83,274
|
|
|
|
0
|
|
|
|
14.77
|
|
|
|
3/4/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/22/1999
|
|
|
|
107,058
|
|
|
|
0
|
|
|
|
15.03
|
|
|
|
9/21/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/18/2000
|
|
|
|
142,752
|
|
|
|
0
|
|
|
|
12.72
|
|
|
|
10/15/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/23/2001
|
|
|
|
297,429
|
|
|
|
0
|
|
|
|
16.80
|
|
|
|
10/21/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/30/2003
|
|
|
|
297,386
|
*
|
|
|
0
|
|
|
|
21.23
|
|
|
|
1/29/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/19/2003
|
|
|
|
214,120
|
*
|
|
|
0
|
|
|
|
24.45
|
|
|
|
11/18/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/1/2004
|
|
|
|
196,553
|
|
|
|
0
|
|
|
|
29.01
|
|
|
|
12/1/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/12/2005
|
|
|
|
0
|
|
|
|
182,067
|
|
|
|
35.74
|
|
|
|
10/12/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/11/2006
|
|
|
|
0
|
|
|
|
153,690
|
|
|
|
38.58
|
|
|
|
10/11/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/8/2007
|
|
|
|
|
|
|
|
129,100
|
|
|
|
38.25
|
|
|
|
11/7/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94,800
|
(3)
|
|
|
2,241,072
|
(5)
|
|
|
0
|
|
|
|
0
|
|
David C. Evans
|
|
|
11/19/2003
|
|
|
|
28,549
|
*
|
|
|
0
|
|
|
|
24.45
|
|
|
|
11/18/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/1/2004
|
|
|
|
23,795
|
|
|
|
0
|
|
|
|
29.01
|
|
|
|
12/1/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/12/2005
|
|
|
|
0
|
|
|
|
18,801
|
|
|
|
35.74
|
|
|
|
10/12/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/11/2006
|
|
|
|
0
|
|
|
|
26,190
|
|
|
|
38.58
|
|
|
|
10/11/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/7/2007
|
|
|
|
|
|
|
|
25,000
|
|
|
|
38.76
|
|
|
|
11/6/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,600
|
(4)
|
|
|
345,144
|
(5)
|
|
|
0
|
|
|
|
0
|
|
Barry W. Sanders
|
|
|
11/7/2002
|
|
|
|
9,517
|
|
|
|
0
|
|
|
|
20.12
|
|
|
|
11/6/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/19/2003
|
|
|
|
28,549
|
*
|
|
|
0
|
|
|
|
24.45
|
|
|
|
11/18/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/1/2004
|
|
|
|
23,795
|
|
|
|
0
|
|
|
|
29.01
|
|
|
|
12/1/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/12/2005
|
|
|
|
0
|
|
|
|
26,893
|
|
|
|
35.74
|
|
|
|
10/12/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/11/2006
|
|
|
|
0
|
|
|
|
15,476
|
|
|
|
38.58
|
|
|
|
10/11/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/7/2007
|
|
|
|
|
|
|
|
20,000
|
|
|
|
38.76
|
|
|
|
11/6/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
(4)
|
|
|
295,500
|
(5)
|
|
|
30,000
|
(6)
|
|
|
709,200
|
(7)
|
Claude L. Lopez
|
|
|
12/1/2004
|
|
|
|
23,795
|
|
|
|
0
|
|
|
|
29.01
|
|
|
|
12/1/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/12/2005
|
|
|
|
0
|
|
|
|
16,183
|
|
|
|
35.74
|
|
|
|
10/12/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/11/2006
|
|
|
|
0
|
|
|
|
15,476
|
|
|
|
38.58
|
|
|
|
10/11/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/7/2007
|
|
|
|
0
|
|
|
|
15,000
|
|
|
|
38.76
|
|
|
|
11/6/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,200
|
(4)
|
|
|
193,848
|
(5)
|
|
|
0
|
|
|
|
0
|
|
Denise S. Stump
|
|
|
11/7/2002
|
|
|
|
2,758
|
|
|
|
0
|
|
|
|
20.12
|
|
|
|
11/6/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/19/2003
|
|
|
|
22,601
|
*
|
|
|
0
|
|
|
|
24.45
|
|
|
|
11/18/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/1/2004
|
|
|
|
23,795
|
|
|
|
0
|
|
|
|
29.01
|
|
|
|
12/1/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/12/2005
|
|
|
|
0
|
|
|
|
26,893
|
|
|
|
35.74
|
|
|
|
10/12/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/11/2006
|
|
|
|
0
|
|
|
|
22,738
|
|
|
|
38.58
|
|
|
|
10/11/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/7/2007
|
|
|
|
|
|
|
|
19,100
|
|
|
|
38.76
|
|
|
|
11/6/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000
|
(4)
|
|
|
330,960
|
(5)
|
|
|
0
|
|
|
|
0
|
|
|
|
|
(1) |
|
Those awards shown with an asterisk (*) are SARs. All of the
NSOs/SARs shown in columns (c) and (d) have a vesting
date that is the third anniversary of the grant date shown in
column (b), and an expiration date (shown in column (f)), that
is 10 years from the date of grant. |
|
(2) |
|
Each NSO or SAR was granted with an exercise price equal to the
closing price of one Common Share on NYSE on the date of grant.
Column (e) shows the exercise price after the adjustments
to account for the Special Dividend, where appropriate. |
|
(3) |
|
Reflects the aggregate number of shares of restricted stock for
Mr. Hagedorn that have not vested as of September 30,
2008. All such shares will vest on October 12, 2008,
October 11, 2009 or November 8, 2010, based on the
original grant date of the respective award. |
|
(4) |
|
Reflects the aggregate number of shares of restricted stock for
each NEO other than Mr. Hagedorn that have not vested as of
September 30, 2008. All such shares will vest on
October 12, 2008, October 11, 2009 or November 7,
2010, based on the original grant date of the respective award. |
45
|
|
|
(5) |
|
Reflects the market value of the shares of restricted stock that
had not vested as of September 30, 2008. The value is
calculated by multiplying column (g) by $23.64, which was
the closing share price of the Common Shares on
September 30, 2008, the last trading day of the 2008 fiscal
year. |
|
(6) |
|
Reflects performance shares that have not vested as of
September 30, 2008. With respect to the performance shares,
up to 10,000 performance shares are subject to vesting on
September 30, 2009 and up to 20,000 performance shares are
subject to vesting on September 30, 2010. |
|
(7) |
|
Reflects the market value of the performance shares that had not
vested as of September 30, 2008. The value is calculated by
multiplying column (i) by $23.64, which was the closing
share price of the Common Shares on September 30, 2008, the
last trading day of the 2008 fiscal year. |
Option
Exercises and Stock Vested Table
The following table provides information concerning the
aggregate amounts realized or received in connection with all
exercises of NSOs or the vesting of shares of restricted stock
for each NEO during the 2008 fiscal year.
Option
Exercises and Stock Vested for 2008 Fiscal Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
Acquired on
|
|
|
Value Realized
|
|
|
Acquired on
|
|
|
Value Realized
|
|
Name
|
|
Exercise
|
|
|
on Exercise
|
|
|
Vesting
|
|
|
on Vesting
|
|
(a)
|
|
(#)(b)
|
|
|
($)(c)
|
|
|
(#)(d)
|
|
|
($)(e)
|
|
|
James Hagedorn
|
|
|
107,071
|
(1)
|
|
|
1,603,765
|
(2)
|
|
|
26,600
|
(3)
|
|
|
970,368
|
(5)
|
David C. Evans
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Barry W. Sanders
|
|
|
0
|
|
|
|
0
|
|
|
|
5,038
|
(4)
|
|
|
134,061
|
(6)
|
Claude L. Lopez
|
|
|
21,411
|
(1)
|
|
|
364,619
|
(2)
|
|
|
0
|
|
|
|
0
|
|
Denise S. Stump
|
|
|
2,000
|
(1)
|
|
|
36,789
|
(2)
|
|
|
1,000
|
(3)
|
|
|
36,480
|
(5)
|
|
|
|
(1) |
|
Reflects the number of Common Shares acquired upon exercise of
NSOs by each NEO during the 2008 fiscal year. |
|
(2) |
|
Reflects the value realized upon exercise of NSOs and/or SARs by
each NEO during the 2008 fiscal year. The value realized upon
exercise of an NSO and/or SAR is calculated based on the excess
of the closing price of one Common Share on NYSE on the date of
exercise over the exercise price of the NSO and/or SAR,
multiplied by the number of Common Shares acquired upon
exercise. The value reported for Mr. Lopez is in U.S.
dollars. |
|
(3) |
|
Reflects the number of Common Shares acquired by each NEO upon
vesting of the related shares of restricted stock during the
2008 fiscal year. |
|
(4) |
|
Reflects the number of performance shares earned with respect to
the 2008 fiscal year. A detailed description of the performance
shares and the performance criteria for the 2008 fiscal year is
provided in the section captioned Our Compensation
Practices Setting Compensation Levels for Other
NEOs within the CD&A. |
|
(5) |
|
Reflects the value realized upon the vesting of shares of
restricted stock for each NEO during the 2008 fiscal year. The
value realized upon the vesting of restricted stock is
calculated by multiplying the number of Common Shares underlying
the vested shares of restricted stock by the closing price of
the underlying Common Shares on NYSE on the vesting date. |
|
(6) |
|
Reflects the value realized upon the performance share
settlement date for Mr. Sanders during the 2008 fiscal
year. The value realized upon settlement of the performance
shares is calculated by multiplying the number of Common Shares
underlying the settled performance shares by the closing price
of the underlying Common Shares on NYSE on the November 5,
2008 settlement date. |
46
Pension
Benefits Table
Scotts LLC maintains the Associates Pension Plan, a
tax-qualified, non-contributory defined benefit pension plan.
Eligibility for and accruals under the Associates Pension
Plan were frozen as of December 31, 1997. Monthly benefits
under the Associates Pension Plan upon normal retirement
(age 65) are determined under the following formula:
(a)(i) 1.5% of the individuals highest average annual
compensation for 60 consecutive months during the ten-year
period ending December 31, 1997; times
(ii) years of benefit service through December 31,
1997; reduced by
(b)(i) 1.25% of the individuals primary Social Security
benefit (as of December 31, 1997); times
(ii) years of benefit service through December 31, 1997
Compensation includes all earnings plus 401(k) contributions and
salary reduction contributions for welfare benefits, but does
not include earnings in connection with foreign service, the
value of a company car or separation or other special
allowances. An individuals primary Social Security benefit
is based on the Social Security Act as in effect on
December 31, 1997, and assumes constant compensation
through age 65 and that the individual will not retire
earlier than age 65. No more than 40 years of benefit
service are taken into account.
Benefits under the Associates Pension Plan are
supplemented by benefits under the Excess Pension Plan. The
Excess Pension Plan was established October 1, 1993 and
also frozen as of December 31, 1997. The Excess Pension
Plan provides additional benefits to participants in the
Associates Pension Plan whose benefits are reduced by
limitations imposed under IRC § 415 and
§ 401(a)(17). Under the Excess Pension Plan, executive
officers and certain key employees participating in the Excess
Pension Plan will receive, at the time and in the same form as
benefits are paid under the Associates Pension Plan,
additional monthly benefits in an amount which, when added to
the benefits paid to each participant under the Associates
Pension Plan, will equal the benefit amount such participant
would have earned but for the limitations imposed by the IRC.
47
The following table shows information related to the
participation in the Associates Pension Plan and the
Excess Pension Plan by James Hagedorn and David C. Evans, the
only two NEOs who participate in either of the plans. Since both
the Associates Pension Plan and the Excess Pension Plan
were frozen as of December 31, 1997, no further years of
credited service may be earned after that date.
Pension
Benefits at 2008 Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Present
|
|
|
|
|
|
Years
|
|
|
Value of
|
|
|
|
|
|
Credited
|
|
|
Accumulated
|
|
Name
|
|
Plan Name
|
|
Service
|
|
|
Benefit
|
|
(a)
|
|
(b)
|
|
(#)(1)(c)
|
|
|
($)(2)(d)
|
|
|
James Hagedorn
|
|
The Scotts Company LLC
Associates Pension Plan
|
|
|
9.9167
|
|
|
|
95,616
|
|
|
|
The Scotts Company LLC
Excess Benefit Plan For
Non Grandfathered Associates
|
|
|
2.0000
|
|
|
|
18,251
|
|
|
|
Total
|
|
|
|
|
|
|
113,867
|
|
David C. Evans
|
|
The Scotts Company LLC
Associates Pension Plan
|
|
|
3.0833
|
|
|
|
9,021
|
|
Barry W. Sanders
|
|
n/a
|
|
|
n/a
|
|
|
|
n/a
|
|
Claude L. Lopez
|
|
n/a
|
|
|
n/a
|
|
|
|
n/a
|
|
Denise S. Stump
|
|
n/a
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
(1) |
|
The number of years of credited service shown for each
participant, is the service earned under the respective plan.
Both plans were frozen as of December 31, 1997; therefore,
no service credit may be earned after that date.
Mr. Hagedorn entered the Excess Pension Plan on
January 1, 1996. |
|
(2) |
|
Assumptions used in the calculation of these amounts are
included in Note 9 to the Consolidated Financial Statements,
included in the Companys Annual Report on
Form 10-K
filed with the SEC on November 25, 2008. |
Non-Qualified
Deferred Compensation Table
The ERP is a non-qualified deferred compensation plan. The ERP
provides executives, including the NEOs, the opportunity to
(1) defer compensation above the specified statutory limits
applicable to the RSP and (2) defer compensation with
respect to Executive Incentive Pay (as defined in the ERP)
awarded to such executives. The ERP is an unfunded plan and is
subject to the claims of the Companys general creditors.
During the 2008 fiscal year, the ERP consisted of four parts:
|
|
|
|
|
Compensation Deferral, which allowed continued deferral of
salary and bonus (other than annual cash incentive compensation
under the EMIP).
|
|
|
|
Crediting of Company matching contributions that could not be
made to the RSP due to certain statutory limits.
|
|
|
|
Executive Incentive Plan Deferral, which allowed the deferral of
up to 100% of any cash incentive compensation earned under the
EMIP. Payouts earned under the SIP for the 2008 fiscal year were
not eligible for deferral.
|
|
|
|
Retirement contributions (referred to as Base Retirement
Contributions), which were made by the Company to the ERP
once the statutory compensation cap was reached in the RSP. A
Base Retirement Contribution was made to the ERP regardless of
whether deferral elections were made under the ERP.
|
48
Non-Qualified
Deferred Compensation for 2008 Fiscal Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
Aggregate
|
|
|
|
|
|
Aggregate
|
|
|
|
Contributions
|
|
|
Contributions
|
|
|
Earnings
|
|
|
Aggregate
|
|
|
Balance at
|
|
|
|
in Last Fiscal
|
|
|
in Last Fiscal
|
|
|
in Last
|
|
|
Withdrawals/
|
|
|
Last Fiscal
|
|
Name
|
|
Year
|
|
|
Year
|
|
|
Fiscal Year
|
|
|
Distributions
|
|
|
Year End
|
|
(a)
|
|
($)(2)(b)
|
|
|
($)(3)(c)
|
|
|
($)(4)(d)
|
|
|
($)(e)
|
|
|
($)(5)(6)(f)
|
|
|
James Hagedorn
|
|
|
25,900
|
|
|
|
34,548
|
|
|
|
(270,122
|
)
|
|
|
0
|
|
|
|
391,247
|
|
David C. Evans
|
|
|
10,688
|
|
|
|
19,533
|
|
|
|
(20,798
|
)
|
|
|
0
|
|
|
|
92,810
|
|
Barry W. Sanders
|
|
|
15,000
|
|
|
|
16,879
|
|
|
|
(10,782
|
)
|
|
|
0
|
|
|
|
94,676
|
|
Claude L. Lopez(1)
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Denise S. Stump
|
|
|
4,791
|
|
|
|
9,262
|
|
|
|
(27,512
|
)
|
|
|
0
|
|
|
|
94,320
|
|
|
|
|
(1) |
|
Mr. Lopez is a French citizen and therefore not eligible to
participate in the ERP. |
|
(2) |
|
This column includes contributions to the ERP made by
Mr. Hagedorn, Mr. Evans, Mr. Sanders and
Ms. Stump, respectively. These amounts are also included in
the Salary column numbers reported in the Summary
Compensation Table for 2008 Fiscal Year. |
|
(3) |
|
The method of determining these contributions is explained in
the narrative preceding this table. These contributions are also
included in the Deferred Compensation Plans column
numbers reported in the table captioned All Other
Compensation Table (Supplements Summary Compensation
Table). |
|
(4) |
|
This amount represents the aggregate market-based earnings
(losses) for the 2008 fiscal year credited to each NEOs
account in accordance with the ERP. The benchmarked funds which
may be chosen by a participant include a Company stock fund and
mutual fund investments that are substantially consistent with
the investment options permitted under the RSP. These amounts
are not reflected in the Summary Compensation Table for 2008
Fiscal Year. |
|
(5) |
|
This amount represents the account balance for each NEO as of
the end of the 2008 fiscal year. Distributions from the ERP
generally begin after six months have elapsed from when a
participant terminates employment (although, based on a
previously-filed election, the participant may specify a later
distribution date) and normally are paid in either a lump sum or
in annual installments over no more than nine years, whichever
the participant has elected. Distributions from the Company
stock fund are always made in the form of whole Common Shares
and the value of fractional Common Shares is distributed in
cash. Distributions from one of the mutual fund investments are
made in cash equal to the number of mutual fund shares credited
to the participant multiplied by the market value of those
mutual fund shares. |
|
(6) |
|
Includes amounts reported as compensation in the Summary
Compensation Table for 2008 Fiscal Year for previous fiscal
years as follows: (1) Mr. Hagedorn, $29,500;
(2) Mr. Evans, $17,835; (3) Mr. Sanders,
$13,025; and (4) Ms. Stump, $11,715. |
49
EMPLOYMENT
AGREEMENTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL
ARRANGEMENTS
Employment
Agreements
In connection with the transactions contemplated by the
Miracle-Gro Merger Agreement described on page 71 of this
Proxy Statement, The Scotts Company entered into an employment
agreement with James Hagedorn (the Hagedorn
Agreement). Mr. Hagedorn serves as Chief Executive
Officer and Chairman of the Board of Directors of the Company.
The Hagedorn Agreement has a rolling two-year term, unless
either party notifies the other party of his/its desire not to
renew at least 30 days prior to the end of the first year
of such two-year term. On March 18, 2005, the Hagedorn
Agreement was assumed by Scotts LLC as part of the Restructuring
Merger. The Hagedorn Agreement provides for a minimum annual
base salary of $200,000 for Mr. Hagedorn (his annual base
salary was $600,000 for the 2008 fiscal year) and participation
in the various benefit plans available to senior executive
officers of the Company. Upon certain types of termination of
employment (e.g., a termination by the Company for any
reason other than cause (as defined in the Hagedorn
Agreement) or a termination by Mr. Hagedorn constituting
good reason (also as defined)), he will become
entitled to receive certain severance benefits including a
payment equal to three times the sum of his base salary then in
effect plus his highest annual bonus in any of the three
preceding years (which would have been three times the sum of
(a) $600,000 and (b) $416,880, based on his annual
base salary as of September 30, 2008 and his annual bonuses
for the fiscal years ended September 30, 2008, 2007 and
2006). Upon termination of employment for any other reason,
Mr. Hagedorn or his beneficiary will be entitled to receive
all unpaid amounts of base salary and benefits under the
executive benefit plans in which he participated. The Hagedorn
Agreement also contains confidentiality and noncompetition
provisions which prevent Mr. Hagedorn from disclosing
confidential information about the Company and from competing
with the Company during his employment therewith and, upon
termination for cause or due to disability, or in the event
Mr. Hagedorn terminates his employment without good reason,
for an additional three years thereafter.
On September 10, 2008, Scotts LLC executed an employment
agreement with Mark R. Baker (the Baker Agreement).
Mr. Baker executed the Baker Agreement on September 9,
2008. The term of the Baker Agreement is three years commencing
as of October 1, 2008, with automatic one-year extensions
thereafter unless either Scotts LLC or Mr. Baker gives
written notice no later than April 1 prior to the end of the
then current term that such party does not wish the next
automatic extension to occur. If at any time during the initial
three-year term a change in control (as defined in the Baker
Agreement) occurs, then the term of the Baker Agreement will be
the later of the remainder of the initial three-year term or two
years beyond the month in which the effective date of the change
in control occurs. Mr. Baker will receive an annual base
salary of $900,000, which base salary will be reviewed at least
annually by the Compensation Committee to determine whether and
to what extent it will be adjusted. Mr. Baker may also be
entitled to an annual bonus award equal to 75% of his base
salary, depending on actual business results. In addition,
Mr. Baker is entitled to receive long-term incentive awards
which on the date of grant will have a value targeted to be
approximately $1,200,000, $2,700,000 and $3,300,000, for the
initial three years of the term, respectively. These long-term
incentive awards will be granted under terms and a vesting
schedule substantially similar to those established for Scotts
LLCs senior executives. The Baker Agreement further
provides Mr. Baker a one-time transition bonus of $850,000,
less applicable taxes, and 36,000 restricted Common Shares which
vest over a three-year period. The restricted Common Shares were
granted in a separate Restricted Stock Award Agreement which
requires compliance with certain non-competition and
non-solicitation provisions while Mr. Baker is employed by
Scotts LLC and for two years thereafter. Finally, the Baker
Agreement provides Mr. Baker with lump-sum relocation
benefits of $500,000, less applicable taxes.
The Baker Agreement contains provisions for termination in the
event of death or disability, voluntary termination by
Mr. Baker or termination for cause as described more fully
below. It also contains provisions providing relief to
Mr. Baker in the event of termination by Scotts LLC without
cause, or voluntary termination by Mr. Baker for good
reason, which generally would entitle Mr. Baker to a
severance payment equal to three times the sum of his annual
base salary and his average bonus received over the past three
years, a pro rated bonus award, a lump sum payment representing
Scotts LLCs portion of the monthly cost of
50
his medical and dental insurance benefits as of the effective
date of termination multiplied by twelve, and all other benefits
as to which he had a vested right. For termination by Scotts LLC
without cause or voluntary termination by Mr. Baker with
good reason, each following a change in control, the Baker
Agreement provides that Mr. Baker would receive a severance
payment equal to two times the sum of his annual base salary and
the target bonus for the fiscal year of termination, a prorated
target bonus award for the fiscal year of termination, a lump
sum equivalent to 18 months of health care premiums, and
all other benefits as to which he had achieved a vested right.
On November 19, 2007, Scotts LLC executed employment
agreements with Barry W. Sanders, David C. Evans and Denise S.
Stump to reflect the terms and conditions of their respective
employment with Scotts LLC. Messrs. Sanders and Evans
executed their employment agreements on November 16, 2007
and December 3, 2007, respectively and Ms. Stump
executed her employment agreement on December 11, 2007.
The initial terms of their employment agreements extend from
October 1, 2007 through September 30, 2010, subject to
earlier termination as provided in the agreement. The term of
each of the employment agreements will automatically extend for
successive one-year terms thereafter unless either Scotts LLC or
the respective executive officer gives written notice at least
60 days prior to the end of
his/her then
current term that such party does not wish the next automatic
extension to continue the employment agreement. If a change in
control (as such term is defined in the employment agreements)
occurs during the initial three-year term of the employment
agreement or any successive term, the term of the employment
agreement will be the later of (1) the remainder of the
initial three-year term or (2) two years beyond the month
in which the effective date of such change in control occurs.
The employment agreements provide for an annual base salary of
$400,000, $440,000 and $321,400 for Mr. Sanders,
Mr. Evans and Ms. Stump, respectively. The
Compensation Committee will review each of their base salary at
least annually to determine whether and to what extent it will
be adjusted.
Under the employment agreements, Mr. Sanders,
Mr. Evans and Ms. Stump are eligible to receive an
annual incentive compensation (bonus) award based upon
performance targets and award levels determined by the
Compensation Committee in accordance with Scotts LLCs
annual incentive compensation plan for executives. In addition,
they are eligible to receive a long-term incentive award based
upon performance targets and award levels determined by the
Compensation Committee in accordance with the long-term
incentive compensation plan for Scotts LLCs executives.
Pursuant to each of the executive employment agreements,
including the Baker Agreement, Scotts LLC will provide all
retirement and employee benefits which Scotts LLC makes
available to its other executives and employees, subject to the
applicable eligibility requirements of the underlying benefit
arrangements. Scotts LLC will also provide an annual automobile
allowance and an annual allowance for personal financial
planning.
If the employment of Mr. Baker, Mr. Sanders,
Mr. Evans or Ms. Stump is terminated due to
his/her
death or disability, Scotts LLC will pay the respective
executive officer (1) his/her base salary (subject to an
offset, in the case of disability, for any disability payments)
through the effective date of termination (within 30 days
of termination), (2) a prorated target annual bonus award
based on
his/her
respective target bonus opportunity for the year in which
termination occurs (within 70 days of termination and
subject to the individual or
his/her
estate, as applicable, signing and not revoking a release within
60 days of termination) and (3) all other rights and
benefits as to which the individual is vested under Scotts
LLCs other plans and programs.
Mr. Sanders, Mr. Evans or Ms. Stump may
voluntarily terminate
his/her
employment agreement without good reason upon 60 days
prior written notice to Scotts LLC, which notice period may be
waived by Scotts LLC. In the event of voluntary termination,
Scotts LLC will pay to the respective executive officer
(including Mr. Baker) (1) his/her accrued and unpaid
base salary through the effective date of termination (within
30 days of termination) and (2) all other benefits to
which the individual has a vested right as of the effective date
of termination under the applicable terms of Scotts LLCs
other plans and programs.
In the event that Mr. Sanders, Mr. Evans or
Ms. Stump is terminated by Scotts LLC without cause or by
the respective executive officer with good reason (as such terms
are defined in the employment agreement)
51
unrelated to a change in control, the individual will be
entitled to receive (1) all accrued and unpaid base salary
through the effective date of termination (within 30 days
of termination), (2) a lump sum payment equal to two times
his/her base
salary then in effect, (3) a lump sum payment equal to one
time his/her
target annual bonus award then in effect, (4) a lump sum
payment representing Scotts LLCs portion of the monthly
cost of
his/her
medical and dental insurance benefits as of the effective date
of termination multiplied by twelve and (5) all other
benefits to which the individual has a vested right as of the
effective date of termination under Scotts LLCs other
plans and programs. The lump sum payments described above are
payable within 70 days of the effective date of termination
and are subject to the appropriate executive officer signing and
not revoking a release within 60 days following
his/her
termination.
If Scotts LLC terminates Mr. Baker, Mr. Sanders,
Mr. Evans or Ms. Stump for cause, Scotts LLC will pay
the respective executive officer
his/her base
salary through the effective date of termination (within
30 days following his termination) and
he/she will
immediately forfeit all other rights and benefits (other than
vested benefits)
he/she would
otherwise be entitled to receive under the employment agreement.
In the event that, within two years following a change in
control, Scotts LLC terminates the Mr. Sanders,
Mr. Evans or Ms. Stump for any reason other than
death, disability or cause or
he/she
terminates
his/her
employment for good reason, Scotts LLC will pay (1) the
individuals accrued and unpaid base salary through the
effective date of termination (within 30 days of
termination), (2) a lump sum payment equal to two times
his/her
annual base salary then in effect, (3) a lump sum payment
equal to two times
his/her
target annual bonus award then in effect, (4) a lump sum
payment equal to a prorated target annual bonus award based on
his/her
target bonus opportunity for the fiscal year in which the
termination occurs, (5) a lump sum payment representing
Scotts LLCs portion of the monthly cost of
his/her
medical and dental insurance benefits as of the effective date
of termination multiplied by 24 and (6) all other benefits
to which the individual has a vested right as of the effective
date of termination under Scotts LLCs other plans and
programs.
The employment agreements do not supersede or nullify
Mr. Bakers, Mr. Sanders,
Mr. Evans or Ms. Stumps existing
confidentiality, noncompetition and nonsolicitation agreements
with Scotts LLC, which agreements remain in full force and
effect.
On July 1, 2001, Scotts France SAS entered into an
employment agreement with Claude L. Lopez (the Lopez
Agreement). The Lopez Agreement does not have a fixed term
and is terminable by either party upon due observance of the
applicable notice period set forth in the Chemical Industries
National Collective Agreement, Amendment III (the
CINC Agreement). The Lopez Agreement provides that
it automatically terminates upon Mr. Lopez reaching the
standard retirement age of the Company. Throughout this Proxy
Statement, all amounts paid to Mr. Lopez, who is paid in
Euros, have been converted to U.S. Dollars at an exchange
rate of 1.4069 USD per Euro, which is the same exchange rate
used for financial accounting purposes as of September 30,
2008.
Pursuant to the Lopez Agreement, Mr. Lopez is entitled to
an annual base salary, which is currently equivalent to $496,547
(which includes an expatriation allowance of
$75,745). The expatriation allowance, which is equal
to 18% of Mr. Lopezs annual base salary, is a
tax-advantaged supplement frequently paid to executives in
France who routinely travel outside of France for business. In
addition, Mr. Lopez is eligible to receive an annual
incentive (bonus) award based upon performance targets and award
levels determined by the Compensation Committee in accordance
with Scotts LLCs annual incentive plan for executives as
well as long-term incentive awards in accordance with the
long-term incentive plan for executives of Scotts LLC and its
subsidiaries.
Under the Lopez Agreement, Scotts France SAS will provide all
retirement and employee benefits that Scotts France SAS makes
available to its other executives and employees in France,
subject to the applicable eligibility requirements of the
underlying benefit arrangements. In addition, Scotts France SAS
will provide Mr. Lopez with a $4,000 annual allowance for
personal financial planning and with a company-paid automobile,
the personal use of which was valued at $6,466 for the most
recent fiscal year. In the 2008 fiscal year, Mr. Lopez also
received a payout of $69,360 as compensation for 39 accumulated
vacation days that Mr. Lopez had not used.
52
The Lopez Agreement does not specifically provide for payments
to Mr. Lopez if he is terminated as a result of his death
or disability, if he is terminated without cause, or if he were
to voluntarily terminate the agreement. However, he would be
entitled to certain benefits, including under the CINC
Agreement, if he were dismissed for any reason other than
serious misconduct. Given that the application of French labor
laws and customs are influenced by the facts and circumstances
surrounding the termination of employment, it is difficult to
ascertain the actual amount of benefits to which Mr. Lopez
would be entitled in the event of termination. At a minimum, the
CINC Agreement provides that if Mr. Lopez is dismissed by
Scotts France SAS for any reason (including his dismissal due to
disability) other than for serious misconduct, he would be
entitled to a lump sum severance payment equal to a specified
percentage (40% as of September 30, 2008) of his
monthly salary plus his annual incentive award, multiplied by
his years of service with Scotts France SAS and any of its
affiliates (approximately seven and one-half years as of
September 30, 2008). The amount of this payment is based on
the following three factors at the time of his dismissal: his
position with the company, his seniority and his age. For
purposes of calculating the severance payment under the CINC
Agreement, Mr. Lopez monthly compensation would be
the greater of (1) the last monthly compensation amount
paid before Mr. Lopez dismissal and (2) the
average of his last 12 months of compensation prior to his
dismissal (in both cases, excluding certain
non-recurring
items). The severance payment may not exceed an amount equal to
20 months of salary.
If Mr. Lopez voluntarily retires on or after age 65,
the CINC Agreement provides that he will be entitled to a lump
sum payment equal to a specified number of months of salary (two
months as of September 30, 2008) based on his years of
service with Scotts France SAS and any of its affiliates
(approximately seven and one-half years as of September 30,
2008). For purposes of calculating the severance payment under
the CINC Agreement, Mr. Lopez monthly salary would be
the greater of (1) the full monthly remuneration paid to
Mr. Lopez before the six-month notice period begins, and
(2) the monthly average of his last 12 months of
salary before the six-month notice period begins, excluding any
bonus payment made on a non-recurring basis or reimbursements
for professional expenses.
Mr. Lopez is not subject to any confidentiality,
non-competition or non-solicitation covenants.
53
PAYMENTS
ON TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
The Company and Scotts LLC have entered into certain agreements
and maintain certain plans that may provide compensation to the
NEOs in the event of a termination of employment or a change in
control of the Company.
Employment Agreements: Scotts LLC has entered
into employment agreements with Mr. Hagedorn,
Mr. Evans, Mr. Sanders, Mr. Lopez and
Ms. Stump, the Companys NEOs, and Mr. Baker, the
Companys President and Chief Operating Officer. Under the
terms of these employment agreements, described above in the
section captioned EMPLOYMENT AGREEMENTS AND TERMINATION
OF EMPLOYMENT AND
CHANGE-IN-CONTROL
ARRANGEMENTS Employment Agreements, each
NEO and Mr. Baker may be eligible for severance and
continued compensation and benefit eligibility as summarized in
the table below. For purposes of this disclosure, the employment
agreement for Mr. Baker is treated as if it was in effect
on the last day of the 2008 fiscal year.
|
|
|
|
|
|
|
Termination Due to:
|
|
Base Salary*
|
|
Annual Incentive
|
|
Welfare Benefits
|
|
Death
|
|
No additional payments
|
|
Prorated Target Annual Bonus Award
|
|
Per terms of applicable plans and programs
|
Disability
|
|
No additional payments
|
|
Prorated Target Annual Bonus Award
|
|
Per terms of applicable plans and programs
|
Voluntary by Executive
|
|
No additional payments
|
|
No payment (per terms of plan)
|
|
Per terms of applicable plans and programs
|
Without Cause or by Executive with Good Reason
|
|
Lump sum equal to two years base salary**
|
|
One times Target Annual Bonus Award**
|
|
Lump sum equivalent to 12 months of health care premiums.
Other benefits per terms of applicable plans and programs
|
For Cause
|
|
No additional payments
|
|
No payment (per terms of plan)
|
|
Per terms of applicable plans and programs
|
Within Two Years Subsequent to Change in Control without Cause
or by Executive with Good Reason
|
|
Lump sum equal to two times base salary
|
|
(a) Lump sum equal to two times Target Annual Bonus Award; plus
(b) Prorated Target Annual Bonus for the year of termination
|
|
Lump sum equivalent to 24 months of health care
premiums.*** Other benefits per terms of applicable plans and
programs
|
|
|
|
* |
|
In each circumstance surrounding a separation of employment from
Scotts LLC, base salary payments discontinue after the effective
date of termination. |
|
** |
|
Mr. Baker is entitled to a lump-sum payment equal to three
times the sum of (i) his then current base salary and
(ii) his average annual bonus award over the preceding
three completed fiscal years. |
|
*** |
|
Mr. Baker is entitled to a lump sum equivalent to
18 months of health care premiums. Mr. Hagedorn is
entitled to continuation of his then-current health and welfare
benefits for a period of three years following the date of
termination. |
54
The specific obligations to each of the NEOs and Mr. Baker
are detailed in separate tables that follow.
Equity-Based Compensation Plans: As previously
mentioned, grants of NSOs/SARs and restricted stock are
typically subject to three-year, time-based vesting. However,
our equity-based compensation plans generally provide for
accelerated vesting or forfeiture in certain situations, as
indicated in the following table. These acceleration and
forfeiture provisions apply to all participants under the
equity-based compensation plans.
|
|
|
|
|
|
|
Termination Due to:
|
|
Unvested NSOs/SARs
|
|
Unvested Restricted Stock
|
|
Unvested Performance Shares
|
|
Retirement
|
|
Vest on date of termination
|
|
Forfeited on date of termination
|
|
Forfeited on date of termination
|
Death or Disability
|
|
Vest on date of termination
|
|
Forfeited on date of termination
|
|
Forfeited on date of termination
|
For Cause
|
|
All unvested and unexercised NSOs/SARs are forfeited on date of
termination
|
|
Forfeited on date of termination
|
|
Forfeited on date of termination
|
Any Other Reason
|
|
Forfeited on date of termination
|
|
Forfeited on date of termination
|
|
Forfeited on date of termination
|
Subsequent to Change in Control
|
|
Generally vest
|
|
Generally vest
|
|
Generally vest
|
Retirement: A voluntary termination after a
participant reaches age 62, or reaches age 55 with
10 years of service.
Disability: A participants inability to
perform his or her normal duties for a period of at least six
months due to a physical or mental infirmity.
Upon a change in control of the Company, outstanding options and
SARs will be cancelled and the applicable NEO will receive cash
in the amount of, or Common Shares having a fair market value
equal to, the difference between the change in control price per
Common Share and the exercise price per share associated with
the cancelled option or SAR; provided, however, such
cancellation may not take affect if either (a) the
Compensation Committee determines prior to the change in control
that immediately after the change in control, the options and
SARs will be honored or assumed, or new awards with
substantially equivalent value substituted, or (b) the NEO
exercises, with the permission of the Compensation Committee,
the NEOs outstanding options and SARs within 15 days
of the date of the change in control.
55
Termination
of Employment and Change in Control James
Hagedorn
The following table describes the approximate payments that
would be made to Mr. Hagedorn pursuant to his employment
agreement or other plans or individual award agreements in the
event of his termination of employment under the circumstances
described below or in the event of a change in control of the
Company, assuming such termination of employment or change in
control took place on September 30, 2008, the last day of
the 2008 fiscal year (and, given the material revisions to
Mr. Hagedorns compensation structure that took effect
on October 1, 2008, further assuming that such revised
compensation structure was in place on September 30, 2008).
For further information concerning the outstanding NSOs, SARs
and shares of restricted stock held by Mr. Hagedorn as of
September 30, 2008, please see the table captioned
Outstanding Equity Awards at 2008 Fiscal Year-End on
page 45 of this Proxy Statement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits
|
|
Involuntarily Without
|
|
|
|
|
|
Involuntarily Without
|
|
|
|
|
and Payments
|
|
Cause or Good Reason
|
|
|
|
|
|
Cause or Good Reason
|
|
|
Death
|
|
Upon Termination
|
|
Termination
|
|
|
CIC Only
|
|
|
Termination (CIC)
|
|
|
or Disability
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary(1)
|
|
$
|
3,000,000
|
|
|
|
|
|
|
$
|
3,000,000
|
|
|
|
|
|
EMIP(2)
|
|
|
1,250,640
|
|
|
|
|
|
|
|
1,250,640
|
|
|
|
|
|
EMIP Pro Rata Payout
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term Incentives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and accelerated(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated(4)
|
|
|
|
|
|
$
|
2,241,072
|
|
|
|
2,241,072
|
|
|
|
|
|
Accrued Dividends(5)
|
|
|
|
|
|
|
586,150
|
|
|
|
586,150
|
|
|
|
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuation of Health & Welfare Benefits(6)
|
|
|
40,474
|
|
|
|
|
|
|
|
40,474
|
|
|
|
|
|
Accrued Retirement Benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assoc. Pension Plan(7)
|
|
|
95,616
|
|
|
|
|
|
|
|
95,616
|
|
|
|
$95,616
|
|
Excess Benefit Plan(8)
|
|
|
18,251
|
|
|
|
|
|
|
|
18,251
|
|
|
|
18,251
|
|
RSP(9)
|
|
|
653,058
|
|
|
|
|
|
|
|
653,058
|
|
|
|
653,058
|
|
ERP(9)
|
|
|
391,247
|
|
|
|
|
|
|
|
391,247
|
|
|
|
391,247
|
|
Total:
|
|
$
|
5,449,286
|
|
|
$
|
2,827,222
|
|
|
$
|
8,276,508
|
|
|
|
$1,158,172
|
|
|
|
|
(1) |
|
Lump-sum payment of cash severance benefit in an amount equal to
three times the executives base salary. |
|
(2) |
|
Lump-sum payment of cash severance benefit in an amount equal to
three times the highest annual bonus paid to the executive in
the three years preceding the date of termination. |
|
(3) |
|
Immediate vesting of all outstanding and unvested stock options,
valued based on the difference between the Common Share price as
of September 30, 2008 and the respective exercise prices.
None of the outstanding unvested stock options had an exercise
price less than the Common Share price as of September 30,
2008. |
|
(4) |
|
Immediate vesting of all unvested shares of restricted stock,
valued based on the Common Share price as of September 30,
2008. |
|
(5) |
|
Immediate vesting of all deferred cash dividends associated with
the unvested shares of restricted stock. |
|
(6) |
|
Continuation of certain health and welfare benefits for a period
of three years following the date of termination. |
|
(7) |
|
Lump-sum payment of cash equal to the executives accrued
benefits under the Associates Pension Plan. |
56
|
|
|
(8) |
|
Lump-sum payment of cash equal to the executives accrued
benefits under the Excess Pension Plan. |
|
(9) |
|
Reflects respective account balances as of September 30,
2008. |
Termination
of Employment and Change in Control Mark R.
Baker
The following table describes the approximate payments that
would be made to Mr. Baker pursuant to his employment
agreement or other plans or individual award agreements in the
event of his termination of employment under the circumstances
described below or in the event of a change in control of the
Company, assuming such termination of employment or change in
control took place on September 30, 2008, the last day of
the 2008 fiscal year (and further assuming the Baker Agreement,
which was not effective until October 1, 2008, was in
effect on September 30, 2008). For further information
concerning the outstanding NSOs and shares of restricted stock
held by Mr. Baker as of September 30, 2008, please see
the table captioned Outstanding Equity Awards at 2008
Fiscal Year-End on page 45 of this Proxy Statement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits
|
|
Involuntarily Without
|
|
|
|
|
|
Involuntarily Without
|
|
|
|
|
and Payments
|
|
Cause or Good Reason
|
|
|
|
|
|
Cause or Good Reason
|
|
|
Death
|
|
Upon Termination
|
|
Termination
|
|
|
CIC Only
|
|
|
Termination (CIC)
|
|
|
or Disability
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary(1)
|
|
$
|
2,700,000
|
|
|
|
|
|
|
$
|
1,800,000
|
|
|
|
|
|
EMIP(2)
|
|
|
2,025,000
|
|
|
|
|
|
|
|
1,350,000
|
|
|
|
|
|
EMIP Pro Rata Payout
|
|
|
385,425
|
(3)
|
|
|
|
|
|
|
675,000
|
(4)
|
|
|
$675,000
|
(4)
|
Long-term Incentives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated(6)
|
|
|
|
|
|
$
|
851,040
|
|
|
|
851,040
|
|
|
|
851,040
|
|
Accrued Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Stock Units:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated(7)
|
|
|
|
|
|
|
3,086
|
|
|
|
3,086
|
|
|
|
3,086
|
|
Dividend Equivalents(8)
|
|
|
|
|
|
|
912
|
|
|
|
912
|
|
|
|
912
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuation of Health & Welfare Benefits(9)
|
|
|
11,954
|
|
|
|
|
|
|
|
17,932
|
|
|
|
|
|
Accrued Retirement Benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assoc. Pension Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess Benefit Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSP(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ERP(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
5,122,379
|
|
|
$
|
855,038
|
|
|
$
|
4,697,970
|
|
|
|
$1,530,038
|
|
|
|
|
(1) |
|
Lump-sum payment of cash severance benefit in an amount equal to
three or two times the executives base salary. |
|
(2) |
|
Lump-sum payment of cash severance benefit in an amount equal to
three or two times the executives actual annual bonus
award (estimated at 57.1% of target) or target annual bonus
award, respectively. |
|
(3) |
|
Lump-sum payment of cash in an amount equal to the
executives actual annual bonus award (estimated at 57.1%
of target), prorated through the date of termination (assuming
he was employed throughout the entire 2008 fiscal year). |
|
(4) |
|
Lump-sum payment of cash in an amount equal to the
executives target annual bonus award, prorated through the
date of termination (assuming he was employed throughout the
entire 2008 fiscal year). |
57
|
|
|
(5) |
|
Immediate vesting of all outstanding and unvested stock options,
valued based on the difference between the Common Share price as
of September 30, 2008 and the respective exercise prices.
None of the outstanding unvested stock options had an exercise
price less than the Common Share price as of September 30,
2008. |
|
(6) |
|
Immediate vesting of all unvested shares of restricted stock,
valued based on the Common Share price as of September 30,
2008. |
|
(7) |
|
Immediate vesting of all unvested DSUs, valued based on the
Common Share price as of September 30, 2008. |
|
(8) |
|
Immediate vesting of all unvested dividend equivalents, valued
based on the Common Share price as of September 30, 2008. |
|
(9) |
|
Lump-sum payment of cash equal to one or one and one-half times
the annual premiums for COBRA continuation coverage of the
executives medical and dental benefits. |
|
(10) |
|
As of September 30, 2008, Mr. Baker was not eligible
to participate in either the RSP or the ERP. |
Termination
of Employment and Change in Control David C.
Evans
The following table describes the approximate payments that
would be made to Mr. Evans pursuant to his employment
agreement or other plans or individual award agreements in the
event of his termination of employment under the circumstances
described below or in the event of a change in control of the
Company, assuming such termination of employment or change in
control took place on September 30, 2008, the last day of
the 2008 fiscal year. For further information concerning the
outstanding NSOs, SARs and shares of restricted stock held by
Mr. Evans as of September 30, 2008, please see the
table captioned Outstanding Equity Awards at 2008 Fiscal
Year-End on page 45 of this Proxy Statement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits
|
|
Involuntarily Without
|
|
|
|
|
|
Involuntarily Without
|
|
|
|
|
and Payments
|
|
Cause or Good Reason
|
|
|
|
|
|
Cause or Good Reason
|
|
|
Death
|
|
Upon Termination
|
|
Termination
|
|
|
CIC Only
|
|
|
Termination (CIC)
|
|
|
or Disability
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary(1)
|
|
|
$880,000
|
|
|
|
|
|
|
|
$880,000
|
|
|
|
|
|
EMIP(2)
|
|
|
242,000
|
|
|
|
|
|
|
|
484,000
|
|
|
|
|
|
EMIP Pro Rata Payout(3)
|
|
|
|
|
|
|
|
|
|
|
242,000
|
|
|
$
|
242,000
|
|
Long-term Incentives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated(5)
|
|
|
|
|
|
$
|
345,144
|
|
|
|
345,144
|
|
|
|
|
|
Accrued Dividends(6)
|
|
|
|
|
|
|
81,900
|
|
|
|
81,900
|
|
|
|
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuation of Health & Welfare Benefits(7)
|
|
|
13,368
|
|
|
|
|
|
|
|
26,736
|
|
|
|
|
|
Accrued Retirement Benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assoc. Pension Plan(8)
|
|
|
9,021
|
|
|
|
|
|
|
|
9,021
|
|
|
|
9,021
|
|
Excess Benefit Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSP(9)
|
|
|
373,311
|
|
|
|
|
|
|
|
373,311
|
|
|
|
373,311
|
|
ERP(9)
|
|
|
92,810
|
|
|
|
|
|
|
|
92,810
|
|
|
|
92,810
|
|
Total:
|
|
|
$1,610,510
|
|
|
$
|
427,044
|
|
|
|
$2,534,923
|
|
|
$
|
717,142
|
|
|
|
|
(1) |
|
Lump-sum payment of cash severance benefit in an amount equal to
two times the executives base salary. |
|
(2) |
|
Lump-sum payment of cash severance benefit in an amount equal to
one or two times the executives target annual bonus award. |
58
|
|
|
(3) |
|
Lump-sum payment of cash in an amount equal to the
executives target annual bonus award, prorated through the
date of termination. |
|
(4) |
|
Immediate vesting of all outstanding and unvested stock options,
valued based on the difference between the Common Share price as
of September 30, 2008 and the respective exercise prices.
None of the outstanding unvested stock options had an exercise
price less than the Common Share price as of September 30,
2008. |
|
(5) |
|
Immediate vesting of all unvested shares of restricted stock,
valued based on the Common Share price as of September 30,
2008. |
|
(6) |
|
Immediate vesting of all deferred cash dividends associated with
the unvested shares of restricted stock. |
|
(7) |
|
Lump-sum payment of cash equal to one or two times the
Companys annual portion of the cost of the
executives medical and dental benefits. |
|
(8) |
|
Lump-sum payment of cash equal to the executives accrued
benefits under the Associates Pension Plan. |
|
(9) |
|
Reflects respective account balances as of September 30,
2008. |
Termination
of Employment and Change in Control Barry W.
Sanders
The following table describes the approximate payments that
would be made to Mr. Sanders pursuant to his employment
agreement or other plans or individual award agreements in the
event of his termination of employment under the circumstances
described below or in the event of a change in control of the
Company, assuming such termination of employment or change in
control took place on September 30, 2008, the last day of
the 2008 fiscal year. For further information concerning the
outstanding NSOs, SARs, shares of restricted stock and
performance shares held by Mr. Sanders as of
September 30, 2008, please see the table captioned
Outstanding Equity Awards at 2008 Fiscal Year-End on
page 45 of this Proxy Statement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits
|
|
Involuntarily Without
|
|
|
|
|
|
Involuntarily Without
|
|
|
|
|
and Payments
|
|
Cause or Good Reason
|
|
|
|
|
|
Cause or Good Reason
|
|
|
Death
|
|
Upon Termination
|
|
Termination
|
|
|
CIC Only
|
|
|
Termination (CIC)
|
|
|
or Disability
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary(1)
|
|
|
$800,000
|
|
|
|
|
|
|
|
$800,000
|
|
|
|
|
|
EMIP(2)
|
|
|
220,000
|
|
|
|
|
|
|
|
440,000
|
|
|
|
|
|
EMIP Pro Rata Payout(3)
|
|
|
|
|
|
|
|
|
|
|
220,000
|
|
|
$
|
220,000
|
|
Long-term Incentives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated(5)
|
|
|
|
|
|
|
$295,500
|
|
|
|
295,500
|
|
|
|
|
|
Accrued Dividends
|
|
|
|
|
|
|
72,100
|
|
|
|
72,100
|
|
|
|
|
|
Performance Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated(6)
|
|
|
|
|
|
|
709,200
|
|
|
|
709,200
|
|
|
|
|
|
Accrued Dividends(7)
|
|
|
|
|
|
|
15,000
|
|
|
|
15,000
|
|
|
|
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuation of Health & Welfare Benefits(8)
|
|
|
13,368
|
|
|
|
|
|
|
|
26,736
|
|
|
|
|
|
Accrued Retirement Benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assoc. Pension Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess Benefit Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSP(9)
|
|
|
201,206
|
|
|
|
|
|
|
|
201,206
|
|
|
|
201,206
|
|
ERP(9)
|
|
|
94,677
|
|
|
|
|
|
|
|
94,677
|
|
|
|
94,677
|
|
Total:
|
|
|
$1,329,251
|
|
|
|
$1,091,800
|
|
|
|
$2,874,419
|
|
|
$
|
515,883
|
|
59
|
|
|
(1) |
|
Lump-sum payment of cash severance benefit in an amount equal to
two times the executives base salary. |
|
(2) |
|
Lump-sum payment of cash severance benefit in an amount equal to
one or two times the executives target annual bonus award. |
|
(3) |
|
Lump-sum payment of cash in an amount equal to the
executives target annual bonus award, prorated through the
date of termination. |
|
(4) |
|
Immediate vesting of all outstanding and unvested stock options,
valued based on the difference between the Common Share price as
of September 30, 2008 and the respective exercise prices.
None of the outstanding unvested stock options had an exercise
price less than the Common Share price as of September 30,
2008. |
|
(5) |
|
Immediate vesting of all unvested shares of restricted stock,
valued based on the Common Share price as of September 30,
2008. |
|
(6) |
|
Immediate vesting of all unvested performance shares based on
the Common Share price as of September 30, 2008. |
|
(7) |
|
Immediate vesting of all deferred cash dividends associated with
the unvested shares of restricted stock. |
|
(8) |
|
Lump-sum payment of cash equal to one or two times the
Companys annual portion of the cost of the
executives medical and dental benefits. |
|
(9) |
|
Reflects respective account balances as of September 30,
2008. |
Termination
of Employment and Change in Control Claude L.
Lopez
The Lopez Agreement does not specifically provide for payments
to Mr. Lopez if he is terminated as a result of his death
or disability, if he is terminated without cause, or if he were
to voluntarily terminate the agreement. However, he would be
entitled to certain benefits, including under the CINC
Agreement, if he were dismissed for any reason other than
serious misconduct. Given that the application of French labor
laws and customs are influenced by the facts and circumstances
surrounding the termination of employment, it is difficult to
ascertain the actual amount of benefits to which Mr. Lopez
would be entitled in the event of termination. The following
table describes the approximate minimum payments that
Mr. Lopez would be entitled to under the CINC Agreement in
the event of his dismissal under the circumstances described
below or in the event of a change of control of the Company,
assuming such dismissal or change of control took place on
September 30, 2008, the last day of the 2008 fiscal year.
For further information concerning the outstanding NSOs, SARs
and shares of restricted stock held by Mr. Lopez as of
September 30, 2008, please
60
see the table captioned Outstanding Equity Awards at 2008
Fiscal Year-End on page 45 of this Proxy Statement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits
|
|
|
|
|
|
|
|
Involuntarily Without
|
|
|
|
|
and Payments
|
|
Involuntarily Without
|
|
|
|
|
|
Serious Misconduct
|
|
|
|
|
Upon Termination(1)
|
|
Serious Misconduct
|
|
|
CIC Only
|
|
|
(CIC)
|
|
|
Death or Disability
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary(2)
|
|
$
|
216,981
|
|
|
|
|
|
|
$
|
216,981
|
|
|
$
|
216,981 (Disability only
|
)
|
EMIP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMIP Pro Rata Payout
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term Incentives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated(4)
|
|
|
|
|
|
$
|
193,848
|
|
|
|
193,848
|
|
|
|
|
|
Accrued Dividends(5)
|
|
|
|
|
|
|
49,600
|
|
|
|
49,600
|
|
|
|
|
|
Benefits and Perquisites(6):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuation of Health & Welfare Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued Retirement Benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assoc. Pension Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess Benefit Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ERP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
216,981
|
|
|
$
|
243,448
|
|
|
$
|
460,429
|
|
|
|
$216,981
|
|
|
|
|
(1) |
|
Mr. Lopez compensation, which is paid in Euros, is
converted to U.S. Dollars at an exchange rate of 1.4069 USD per
Euro, which is the same exchange rate used for financial
accounting purposes as of September 30, 2008. |
|
(2) |
|
Lump-sum payment equal to 40% of the sum of Mr. Lopez
monthly salary, monthly expatriation allowance and 1/12 of his
annual target incentive opportunity, multiplied by 7.5 (his
approximate years of service), plus one additional month of
Salary. |
|
(3) |
|
Immediate vesting of all outstanding and unvested stock options,
valued based on the difference between the Common Share price as
of September 30, 2008 and the respective exercise prices.
None of the outstanding unvested stock options had an exercise
price less than the Common Share price as of September 30,
2008. |
|
(4) |
|
Immediate vesting of all unvested shares of restricted stock,
valued based on the Common Share price as of September 30,
2008. |
|
(5) |
|
Immediate vesting of all deferred cash dividends associated with
the unvested shares of restricted stock. |
|
(6) |
|
Mr. Lopez is not eligible for any benefit or perquisite
payments because of his current age and provisions applicable to
him as a French executive. |
Termination
of Employment and Change in Control Denise S.
Stump
The following table describes the approximate payments that
would be made to Ms. Stump pursuant to her employment
agreement or other plans or individual award agreements in the
event of her termination of employment under the circumstances
described below or in the event of a change in control of the
Company, assuming such termination of employment or change in
control took place on September 30, 2008, the last day of
the 2008 fiscal year. For further information concerning the
outstanding NSOs, SARs and shares of
61
restricted stock held by Ms. Stump as of September 30,
2008, please see the table captioned Outstanding Equity
Awards at 2008 Fiscal Year-End on page 45 of this
Proxy Statement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits
|
|
Involuntarily Without
|
|
|
|
|
|
Involuntarily Without
|
|
|
|
|
and Payments
|
|
Cause or Good Reason
|
|
|
|
|
|
Cause or Good Reason
|
|
|
Death
|
|
Upon Termination
|
|
Termination
|
|
|
CIC Only
|
|
|
Termination (CIC)
|
|
|
or Disability
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary(1)
|
|
|
$642,800
|
|
|
|
|
|
|
|
$642,800
|
|
|
|
|
|
EMIP(2)
|
|
|
176,770
|
|
|
|
|
|
|
|
353,540
|
|
|
|
|
|
EMIP Pro Rata Payout(3)
|
|
|
|
|
|
|
|
|
|
|
176,770
|
|
|
$
|
176,770
|
|
Long-term Incentives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated(5)
|
|
|
|
|
|
$
|
330,960
|
|
|
|
330,960
|
|
|
|
|
|
Accrued Dividends(6)
|
|
|
|
|
|
|
86,450
|
|
|
|
86,450
|
|
|
|
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuation of Health & Welfare Benefits(7)
|
|
|
9,760
|
|
|
|
|
|
|
|
19,520
|
|
|
|
|
|
Accrued Retirement Benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assoc. Pension Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess Benefit Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSP(8)
|
|
|
231,984
|
|
|
|
|
|
|
|
231,984
|
|
|
|
231,984
|
|
ERP(8)
|
|
|
94,320
|
|
|
|
|
|
|
|
94,320
|
|
|
|
94,320
|
|
Total:
|
|
|
$1,155,634
|
|
|
$
|
417,410
|
|
|
|
$1,936,344
|
|
|
$
|
503,074
|
|
|
|
|
(1) |
|
Lump-sum payment of cash severance benefit in an amount equal to
two times the executives base salary. |
|
(2) |
|
Lump-sum payment of cash severance benefit in an amount equal to
one or two times the executives target annual bonus award. |
|
(3) |
|
Lump-sum payment of cash in an amount equal to the
executives target annual bonus award, prorated through the
date of termination. |
|
(4) |
|
Immediate vesting of all outstanding and unvested stock options,
valued based on the difference between the Common Share price as
of September 30, 2008 and the respective exercise prices.
None of the outstanding unvested stock options had an exercise
price less than the Common Share price as of September 30,
2008. |
|
(5) |
|
Immediate vesting of all unvested shares of restricted stock,
valued based on the Common Share price as of September 30,
2008. |
|
(6) |
|
Immediate vesting of all deferred cash dividends associated with
the unvested shares of restricted stock. |
|
(7) |
|
Lump-sum payment of cash equal to one or two times the
Companys annual portion of the cost of the
executives medical and dental benefits. |
|
(8) |
|
Reflects respective account balances as of September 30,
2008. |
Employee
Confidentiality, Noncompetition, Nonsolicitation
Agreements
Mr. Baker, Mr. Sanders, Mr. Evans and
Ms. Stump are each parties to an employee confidentiality,
noncompetition, nonsolicitation agreement with Scotts LLC (which
are incorporated by reference into their respective employment
agreements), pursuant to which each executive officer agrees to
maintain the confidentiality of any confidential
information (as that term is defined in the employee
confidentiality, noncompetition, nonsolicitation agreement) of
Scotts LLC and its affiliates and not to directly or indirectly
disclose or reveal confidential information to any person or use
confidential information for the participants own personal
benefit or for the benefit of any person other than Scotts LLC
and its affiliates. The employee
62
confidentiality, noncompetition, nonsolicitation agreement also
contains provisions which prevent a participant from engaging in
specified competitive and solicitation activities during the
participants employment with Scotts LLC and its
affiliates, and for an additional two years thereafter. Failure
to abide by the terms of the confidentiality, noncompetition,
nonsolicitation agreement will result in forfeiture of any
future payment under the EMIP and will oblige the participant to
return to Scotts LLC any monies paid to the participant under
the EMIP within the three years prior to breach.
Mr. Hagedorn is not a party to a separate confidentiality,
noncompetition, nonsolicitation agreement in light of the
provisions contained in his employment agreement with Scotts LLC
addressing confidentiality, noncompetition and nonsolicitation.
EQUITY
COMPENSATION PLAN INFORMATION
There are five equity compensation plans under which the Common
Shares are authorized for issuance to eligible directors,
officers, employees or third party service providers:
|
|
|
|
|
the 1996 Plan;
|
|
|
|
the 2003 Plan;
|
|
|
|
the 2006 Plan;
|
|
|
|
the Discounted Stock Purchase Plan; and
|
|
|
|
the ERP.
|
The following table summarizes equity compensation plan
information for the 1996 Plan, the 2003 Plan, the 2006 Plan and
the Discounted Stock Purchase Plan, all of which are shareholder
approved, as a group and for the ERP, which is not shareholder
approved, in each case as of September 30, 2008. No
disclosure is included in respect of the RSP which is intended
to meet the qualification requirements of IRC
§ 401(a). The information is shown with the
adjustments for (i) the
2-for-1
stock split of the Common Shares distributed on November 9,
2005 to shareholders of record at the close of business on
November 2, 2005 and (ii) the Special Dividend paid on
March 5, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
|
(a)
|
|
|
(b)
|
|
|
Number of Common Shares
|
|
|
|
Number of Common
|
|
|
Weighted-Average
|
|
|
Remaining Available for
|
|
|
|
Shares to be Issued
|
|
|
Exercise Price of
|
|
|
Future Issuance Under
|
|
|
|
Upon Exercise of
|
|
|
Outstanding
|
|
|
Equity Compensation Plans
|
|
|
|
Outstanding Options,
|
|
|
Warrants and
|
|
|
(Excluding Common Shares
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Rights
|
|
|
Reflected In Column (a))
|
|
|
Equity compensation plans approved by shareholders
|
|
|
6,263,203
|
(1)
|
|
$
|
28.65
|
(2)
|
|
|
2,707,135
|
(3)
|
Equity compensation plans not approved by shareholders
|
|
|
40,039
|
(4)
|
|
|
n/a
|
|
|
|
n/a
|
(5)
|
Total
|
|
|
6,303,242
|
|
|
$
|
28.65
|
(2)
|
|
|
2,707,135
|
|
|
|
|
(1) |
|
Includes 1,634,800 Common Shares issuable upon exercise of
options granted under the 1996 Plan, 2,241,752 Common Shares
issuable upon exercise of options and SARs granted under the
2003 Plan, 1,960,432 Common Shares issuable upon exercise of
options granted under the 2006 Plan, 85,000 Common Shares
issuable upon vesting of restricted stock granted under the 2003
Plan and 264,465 Common Shares issuable upon vesting of
restricted stock granted under the 2006 Plan, 30,271 Common
Shares issuable upon vesting of DSUs granted under the 2006 Plan
and 40,000 Common Shares representing the maximum number of
performance shares granted under the 2006 Plan which may be
earned if the applicable performance goals are satisfied. Also
includes 3,174 and 3,309 Common Shares attributable to stock
units received by non-employee directors in lieu of their annual
cash retainer and held in their accounts under the 1996 Plan and
the 2003, respectively. The terms of the DSUs and the stock
units are described in this Proxy Statement in the section
captioned NON-EMPLOYEE DIRECTOR COMPENSATION. The
terms of the performance shares are described in this Proxy
Statement in the |
63
|
|
|
|
|
section captioned Our Compensation Practices
Setting Compensation Levels for Other NEOs
Performance Shares within the CD&A. |
|
(2) |
|
Represents the weighted-average exercise price of outstanding
options granted under the 1996 Plan, of outstanding options and
SARs granted under the 2003 Plan and of outstanding options
granted under the 2006 Plan, together with the weighted-average
price of outstanding stock units held in the accounts of
non-employee directors under the 1996 Plan, the 2003 Plan and
the 2006 Plan. Also see the discussion in note (1) above
with respect to DSUs and performance share awards granted under
the 2006 Plan. The weighted-average exercise price does not take
these awards into account. |
|
(3) |
|
Includes 2,527,155 Common Shares authorized and remaining
available for issuance under the 2006 Plan, as well as 179,980
Common Shares remaining available for issuance under the
Discounted Stock Purchase Plan. Of these 179,980 Common Shares,
2,620 Common Shares were subject to purchase rights as of
September 30, 2008 and were purchased on October 6,
2008. |
|
(4) |
|
Includes Common Shares credited to the benchmark Company stock
fund within the respective bookkeeping accounts of participants
in the ERP. This number has been rounded to the nearest whole
Common Share. |
|
(5) |
|
The terms of the ERP do not provide for a specified limit on the
number of Common Shares which may be credited to
participants bookkeeping accounts. Please see the
description of the ERP in the section captioned Elements
of Executive Compensation Retirement Plans and
Deferred Compensation Benefits (long-term compensation element)
Executive Retirement Plan within the
CD&A. Participant account balances in the ERP may be
credited to one or more benchmarked investment funds, including
a Company stock fund and mutual fund investments, which are
substantially consistent with the investment options permitted
under the RSP. The amount credited to the benchmark Company
stock fund is recorded as Common Shares. The weighted-average
price of amounts credited to the benchmark Company stock fund
within participants bookkeeping accounts under the ERP is
not readily calculable. The amount credited to one of the
benchmark mutual fund investments is recorded as mutual fund
shares. |
|
|
|
Distributions from the ERP generally begin after six months have
elapsed from when a participant terminates employment (although
the participant may specify a later date) and normally are paid
in either a lump sum or in annual installments over no more than
nine years, whichever the participant has elected. Distributions
from accounts benchmarked against the Company stock fund always
are made in the form of whole Common Shares and the value of
fractional Common Shares is distributed in cash. Distributions
from accounts benchmarked against the mutual fund investments
are made in cash equal to the number of mutual fund shares
credited to the participant multiplied by the market value of
those mutual fund shares. |
Discounted
Stock Purchase Plan
The Company currently maintains a Discounted Stock Purchase
Plan, which provides a means for employees of the Company and
any subsidiary of the Company designated for participation in
the Discounted Stock Purchase Plan to authorize payroll
deductions on a voluntary basis to be used for the periodic
purchase of Common Shares. All employees participating in the
Discounted Stock Purchase Plan have equal rights and privileges
which entitle eligible employees to purchase Common Shares at a
price (the DSPP Purchase Price) equal to at least
90% of the fair market value of the Common Shares at the end of
the applicable offering period.
The Discounted Stock Purchase Plan is administered by a
committee (the Committee) appointed by the Board of
Directors of the Company. The Committee establishes the number
of Common Shares that may be acquired during each offering
period and administers procedures through which eligible
employees may enroll in the Discounted Stock Purchase Plan. The
Discounted Stock Purchase Plan provides that each offering
period will consist of one calendar month, unless a different
period is established by the Committee and announced to eligible
employees before the beginning of the applicable offering period.
Any
U.S.-based
full-time or permanent part-time employee of the Company, or a
designated subsidiary of the Company, who has reached
age 18, is not a seasonal employee (as determined by the
Committee), has been an employee for at least 15 days
before the first day of the applicable offering period and
agrees to
64
comply with the terms of the Discounted Stock Purchase Plan is
eligible to participate in the Discounted Stock Purchase Plan.
Any
non-U.S.-based
employee of the Company, or a designated subsidiary of the
Company, who meets the eligibility criteria established by the
Committee and agrees to comply with the terms of the Discounted
Stock Purchase Plan is also eligible to participate in the
Discounted Stock Purchase Plan. Upon enrollment, a participant
must elect the rate at which the participant will make payroll
contributions for the purchase of Common Shares. Elections may
be in an amount of not less than $10 per offering period or more
than $24,000 per Plan Year, unless the Committee specifies
different minimum
and/or
maximum amounts at the beginning of the offering period. The
contribution rate elected by a participant will continue in
effect until modified by the participant.
A participants contributions are credited to the plan
account maintained on the participants behalf. As of the
last day of each offering period, the value of each
participants plan account is divided by the DSPP Purchase
Price established for that offering period. Each participant is
deemed to have purchased the number of whole and fractional
Common Shares produced by this calculation. As promptly as
practicable after the end of each offering period, the Company
issues or transfers the Common Shares purchased by a participant
during that offering period to the custodian for the Discounted
Stock Purchase Plan for transfer into that participants
custodial account.
Common Shares acquired through the Discounted Stock Purchase
Plan are held in a participants custodial account (and may
not be sold) until the earlier of (1) the beginning of the
offering period following the date the participant terminates
employment with the Company and its subsidiaries, (2) 12
full calendar months beginning after the end of the offering
period in which the Common Shares were purchased or (3) the
date on which a change in control affecting the Company occurs.
Upon any such event, all whole Common Shares and cash held in a
participants custodial account will be made available to
the participant under procedures developed by the custodian for
the Discounted Stock Purchase Plan. Any fractional Common Shares
that are to be withdrawn from a custodial account will be
distributed in cash equal to the fair market value of the
fractional Common Share on the termination date.
Participants are entitled to vote the number of whole and
fractional Common Shares credited to their respective custodial
accounts.
65
BENEFICIAL
OWNERSHIP OF SECURITIES OF THE COMPANY
The Common Shares are its only outstanding class of voting
securities. The following table furnishes certain information
regarding the beneficial ownership of the Common Shares as of
November 26, 2008 (unless otherwise indicated below) by
each of the current directors of the Company, by each of the
individuals named in the Summary Compensation Table for 2008
Fiscal Year on page 38 and by all current directors and
executive officers of the Company as a group, as well as by
persons known to the Company to beneficially own more than 5% of
the Companys outstanding Common Shares.
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of Beneficial Ownership(1)(2)
|
|
|
|
|
|
|
|
|
|
Common Share Equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Presently Held(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributable in Common Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested or
|
|
|
and Not
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
Scheduled
|
|
|
Scheduled
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
to Vest
|
|
|
to Vest
|
|
|
|
|
|
|
|
|
|
|
|
|
Presently
|
|
|
Distributable
|
|
|
Within
|
|
|
Within
|
|
|
|
|
|
|
|
|
Percent of
|
|
Name of Beneficial Owner
|
|
Held
|
|
|
in Cash
|
|
|
60 Days
|
|
|
60 Days
|
|
|
Options/SARs*
|
|
|
Total**
|
|
|
Class(3)(4)
|
|
|
Mark R. Baker(5)
|
|
|
43,000
|
(6)
|
|
|
1,451
|
|
|
|
0
|
|
|
|
19,725
|
(7)
|
|
|
33,342
|
|
|
|
76,342
|
|
|
|
|
(8)
|
Arnold W. Donald
|
|
|
2,000
|
|
|
|
0
|
|
|
|
4,458
|
(9)
|
|
|
0
|
|
|
|
109,480
|
|
|
|
115,938
|
|
|
|
|
(8)
|
David C. Evans(10)
|
|
|
20,600
|
(11)
|
|
|
0
|
|
|
|
0
|
|
|
|
36,483
|
(12)
|
|
|
71,145
|
|
|
|
91,745
|
|
|
|
|
(8)
|
Joseph P. Flannery
|
|
|
4,000
|
|
|
|
0
|
|
|
|
2,474
|
(13)
|
|
|
0
|
|
|
|
121,372
|
|
|
|
127,846
|
|
|
|
|
(8)
|
James Hagedorn(10)
|
|
|
20,666,808
|
(14)
|
|
|
0
|
|
|
|
17,518
|
(15)
|
|
|
63,700
|
(16)
|
|
|
1,520,639
|
|
|
|
22,204,965
|
|
|
|
33.19
|
%
|
Thomas N. Kelly Jr.
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,604
|
(17)
|
|
|
21,442
|
|
|
|
21,442
|
|
|
|
|
(8)
|
Carl F. Kohrt, Ph.D.
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,125
|
(18)
|
|
|
0
|
|
|
|
0
|
|
|
|
|
(8)
|
Katherine Hagedorn Littlefield
|
|
|
20,548,977
|
(19)
|
|
|
0
|
|
|
|
2,474
|
(20)
|
|
|
0
|
|
|
|
98,769
|
|
|
|
20,650,220
|
|
|
|
31.54
|
%
|
Claude L. Lopez(10)
|
|
|
8,200
|
(21)
|
|
|
0
|
|
|
|
0
|
|
|
|
40,400
|
(22)
|
|
|
23,795
|
|
|
|
31,995
|
|
|
|
|
(8)
|
Karen G. Mills
|
|
|
10,000
|
|
|
|
0
|
|
|
|
6,562
|
(23)
|
|
|
0
|
|
|
|
147,548
|
|
|
|
164,110
|
|
|
|
|
(8)
|
Nancy G. Mistretta
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,800
|
(24)
|
|
|
0
|
|
|
|
0
|
|
|
|
|
(8)
|
Patrick J. Norton
|
|
|
102,700
|
(25)
|
|
|
0
|
|
|
|
2,149
|
(26)
|
|
|
0
|
|
|
|
154,761
|
|
|
|
259,610
|
|
|
|
|
(8)
|
Barry W. Sanders(10)
|
|
|
14,926
|
(27)
|
|
|
0
|
|
|
|
0
|
|
|
|
36,483
|
(28)
|
|
|
88,754
|
|
|
|
103,680
|
|
|
|
|
(8)
|
Stephanie M. Shern
|
|
|
2,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,929
|
(29)
|
|
|
72,599
|
|
|
|
74,599
|
|
|
|
|
(8)
|
John S. Shiely
|
|
|
2,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,604
|
(30)
|
|
|
14,300
|
|
|
|
16,300
|
|
|
|
|
(8)
|
Denise S. Stump(10)
|
|
|
13,645
|
(31)
|
|
|
0
|
|
|
|
386
|
(32)
|
|
|
41,483
|
(33)
|
|
|
76,047
|
|
|
|
90,078
|
|
|
|
|
(8)
|
All current directors and executive officers as a group (19
individuals)
|
|
|
20,928,184
|
(34)
|
|
|
1,451
|
|
|
|
36,021
|
|
|
|
329,502
|
(35)
|
|
|
2,607,059
|
|
|
|
23,571,264
|
|
|
|
34.65
|
%
|
Hagedorn Partnership, L.P.
|
|
|
20,548,977
|
(36)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
20,548,977
|
|
|
|
31.43
|
%
|
800 Port Washington Blvd.,
Port Washington, NY 11050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morgan Stanley and affiliated institutional investment
managers(37)
|
|
|
7,402,378
|
(38)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
7,402,378
|
|
|
|
11.32
|
%
|
1585 Broadway
New York, NY 10036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNEST Partners, LLC(39)
|
|
|
4,347,210
|
(40)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
4,347,210
|
|
|
|
6.65
|
%
|
1180 Peachtree Street NE, Suite 2300
Atlanta, GA 30309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M&G Investment Funds 1(41)
|
|
|
3,353,004
|
(42)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,353,004
|
|
|
|
5.13
|
%
|
Governors House,
Laurence Pountney Hill,
London, EC4R 0HH, England
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Amounts represent Common Shares which can be acquired upon
exercise of options/SARs which are currently exercisable or will
first become exercisable within 60 days. |
|
** |
|
Amounts represent the total of all Common Shares presently held,
all Common Share equivalents presently held which are
distributable in Common Shares and which have vested or are
scheduled to vest |
66
|
|
|
|
|
within 60 days, and all Common Shares which can be acquired
upon exercise of options/SARs which are currently exercisable or
will first become exercisable within 60 days. |
|
|
|
(1) |
|
Unless otherwise indicated, the beneficial owner has sole voting
and dispositive power as to all Common Shares reflected in the
table. All fractional Common Shares have been rounded to the
nearest whole Common Share. The mailing address of each of the
current executive officers and directors of the Company is 14111
Scottslawn Road, Marysville, Ohio 43041. |
|
(2) |
|
All Common Share amounts have been adjusted to account for the
Special Dividend paid on March 5, 2007. |
|
(3) |
|
Common Share Equivalents Presently Held figures
include: (a) Common Shares represented by amounts credited
to the benchmark Company stock fund within the named
individuals bookkeeping account under the ERP;
(b) Common Shares subject to stock units (and related
dividend equivalents) held by the named director as a result of
the directors election to receive all or a portion of the
directors annual cash retainers in the form of stock units
rather than cash in accordance with the terms of the 1996 Plan,
the 2003 Plan and the 2006 Plan; (c) Common Shares which
are the subject of DSUs granted to the named directors (together
with related dividend equivalents) under the 2006 Plan; and
(d) Common Shares which are the subject of RSUs granted to
the named individuals (together with related dividend
equivalents) under the 2006 Plan. Under the terms of each of the
ERP, the 1996 Plan, the 2003 Plan and the 2006 Plan, the named
individual has no voting or dispositive power with respect to
the Common Shares attributable to the individuals
bookkeeping account under the ERP or the Common Shares subject
to stock units, DSUs or RSUs granted to the individual until
settlement. |
|
|
|
Distributions in respect of Common Shares represented by amounts
credited to the benchmark Company Stock fund within the named
individuals bookkeeping account under the ERP are to be
made in Common Shares. To the extent that Common Shares
represented by amounts credited to the benchmark Company stock
fund may be acquired by the named individuals within
60 days of November 26, 2008 (i.e., upon termination
without the need to satisfy additional vesting requirements),
the related Common Share Equivalents are included in
the figures in the Total column and in the
computation of the Percent of Class figures in the
table. The vesting schedule associated with the interests of
NEOs in retention awards granted under the ERP is discussed in
the section captioned Recent Developments
Approval of Retention Awards to NEOs within the
CD&A. |
|
|
|
Each whole stock unit represents the right to receive one Common
Share at the time described in the award agreement. Each
dividend equivalent represents the right to receive additional
stock units in respect of dividends that are declared and paid
during the period beginning on the grant date and ending on the
date the individual ceases to be a director of the Company, with
respect to the Common Share represented by the related stock
unit. Stock units are 100% vested on the grant date.
Distributions in respect of stock units held by directors are to
be made in cash or Common Shares, as elected by the director.
Mr. Baker has elected to receive cash in respect of his
1,452 stock units and, for this reason, these Common Share
Equivalents are not included in the figures in the
Total column or in the computation of the
Percent of Class figures in the table.
Mr. Donald and Ms. Mills have elected to receive
Common Shares in respect of all of their respective stock units
and, for this reason, these Common Share Equivalents
are included in the figures in the Total column and
in the computation of the Percent of Class figures
in the table. |
|
|
|
Each whole DSU represents a contingent right to receive one
Common Share. Each dividend equivalent represents the right to
receive additional DSUs in respect of dividends that are
declared and paid during the period beginning on the grant date
and ending on the settlement date, with respect to the Common
Share represented by the related DSU. The DSUs will vest in
accordance with the terms of each directors award
agreement subject to earlier vesting or forfeiture in accordance
with the terms of the award agreement. Subject to the terms of
the 2006 Plan, vested DSUs will be settled in a lump sum as soon
as administratively practicable, but not later than
90 days, following the earliest to occur of: (i) the
individuals cessation of service as a director of the
Company; (ii) the individuals death; (iii) the
date the individual becomes totally disabled; or (iv) the
fifth anniversary of the grant date. To the extent that the DSUs
vest within 60 days of November 26, 2008, the
Common Share Equivalents represented by the |
67
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|
|
|
DSUs are included in the figures in the Total column
or in the computation of the Percent of Class
figures in the table. |
|
|
|
Each whole RSU represents a contingent right to receive one
Common Share. Each dividend equivalent represents the right to
receive a cash amount equal to the dividends that are declared
and paid during the period beginning on the grant date and
ending on the settlement date with respect to the Common Share
represented by the related RSU. The RSUs will vest in accordance
with the terms of each individuals award agreement,
subject to earlier vesting or forfeiture in accordance with the
terms of the award agreement. Subject to the terms of the 2006
Plan, vested RSUs will be settled in a lump sum as soon as
administratively practicable, but not later than 90 days
following, the earliest to occur of: (i) the
individuals death; (ii) the date the individual
becomes totally disabled; or (iii) the vesting date. Given
the vesting schedules with respect to the RSUs, the Common
Share Equivalents represented by the RSUs are not included
in the figures in the Total column or in the
computation of the Percent of Class figures in the
table. |
|
(4) |
|
The Percent of Class computation is based upon the
sum of (a) 65,373,940 Common Shares outstanding on
November 26, 2008, (b) the number of Common Shares, if
any, attributable to the named individuals or groups
Common Share Equivalents which may be settled in
Common Shares within 60 days after November 26, 2008
as described in note (3) above and (c) the number of
Common Shares, if any, as to which the named individual or group
has the right to acquire beneficial ownership upon the exercise
of options and SARs which are currently exercisable or which
will first become exercisable within 60 days after
November 26, 2008. |
|
(5) |
|
Mr. Baker was elected to serve as President and Chief
Operating Officer of the Company, effective October 1, 2008. |
|
(6) |
|
Represents the aggregate of: (a) 7,000 Common Shares held
by Mr. Baker directly; and (b) 36,000 Common Shares
which are the subject of a restricted stock grant made to him on
October 1, 2008 as to which the restriction period will
lapse with respect to one-third of the Common Shares on
September 30, 2009, 2010 and 2011. |
|
(7) |
|
Represents the aggregate of: (a) 3,125 Common Shares which
are the subject of DSUs granted to Mr. Baker in his
capacity as a director of the Company on February 4, 2008,
which will vest on January 21, 2010, subject to earlier
vesting or forfeiture in accordance with the terms of his award
agreement; and (b) 16,600 Common Shares which are the
subject of RSUs granted to Mr. Baker in his capacity as an
executive officer on October 8, 2008 and will vest on
September 30, 2011, subject to earlier vesting or
forfeiture in accordance with the terms of his award agreement.
Given the vesting schedules of the DSUs and the RSUs, the
related 19,725 Common Share Equivalents are not
included in the figures in the Total column or in
the computation of the Percent of Class figures in
the table. |
|
(8) |
|
Represents ownership of less than 1% of the outstanding Common
Shares. |
|
(9) |
|
Represents the aggregate of: (a) 1,658 Common Shares
subject to stock units held by Mr. Donald; and
(b) 2,800 Common Shares which are the subject of DSUs
granted to Mr. Donald on February 4, 2008, which will
vest on January 22, 2009, subject to earlier vesting or
forfeiture in accordance with the terms of his award agreement. |
|
(10) |
|
Individual named in the Summary Compensation Table for 2008
Fiscal Year. |
|
(11) |
|
Represents the aggregate of: (a) 3,000 Common Shares held
by Mr. Evans directly; (b) 5,600 Common Shares which
are the subject of a restricted stock grant made to him on
October 11, 2006 as to which the restriction period will
lapse on October 11, 2009; (c) 6,000 Common Shares
which are the subject of a restricted stock grant made to him on
November 7, 2007 as to which the restriction period will
lapse on November 7, 2010; and (d) 6,000 Common Shares
which are the subject of a restricted stock grant made to him on
October 8, 2008 as to which the restriction period will
lapse on October 8, 2011. |
|
(12) |
|
Represents 36,483 Common Shares credited to the benchmark
Company stock fund within Mr. Evans bookkeeping
account under the ERP as a result of his election in respect of
the retention award granted to him on October 8, 2008.
Given the vesting schedule associated with Mr. Evans
interest in the |
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|
|
|
retention award, the related 36,483 Common Share
Equivalents are not included in the figures in the
Total column or in the computation of the
Percent of Class figures in the table. |
|
(13) |
|
Represents 2,474 Common Shares which are the subject of DSUs
granted to Mr. Flannery on February 4, 2008, which
were 100% vested on the date of grant. |
|
(14) |
|
Mr. Hagedorn is a general partner of Hagedorn Partnership,
L.P. (the Hagedorn Partnership), and has shared
voting and dispositive power with respect to the Common Shares
held by the Hagedorn Partnership. See note (36) below for
additional disclosures regarding the Hagedorn Partnership.
Includes, in addition to those Common Shares described in note
(36) below, (a) 21,505 Common Shares held directly by
Mr. Hagedorn; (b) 33,100 Common Shares which are the
subject of a restricted stock grant made to him on
October 11, 2006 as to which the restriction period will
lapse on October 11, 2009; (c) 33,100 Common Shares
which are the subject of a restricted stock grant made to him on
November 8, 2007 as to which the restriction period will
lapse on November 8, 2010; (d) 27,620 Common Shares
which are allocated to his account and held by the trustee under
the RSP; and (e) 2,506 Common Shares held in a custodial
account under the Discounted Stock Purchase Plan. |
|
|
|
Mr. Hagedorn also owns 4.975 shares, or 0.05% of the
outstanding shares, of Scotts Italia S.r.l., an indirect
subsidiary of the Company. Mr. Hagedorn is a nominee
shareholder to satisfy the two shareholder requirement for an
Italian corporation. The remaining 94.525 shares of Scotts
Italia S.r.l. are held by OM Scott International Investments,
Ltd., an indirect subsidiary of the Company. |
|
(15) |
|
Represents 17,518 Common Shares credited to the benchmark
Company stock fund within Mr. Hagedorns bookkeeping
account under the ERP. |
|
(16) |
|
Represents 63,700 Common Shares which are the subject of RSUs
granted to Mr. Hagedorn on October 8, 2008 and will
vest on October 8, 2011, subject to earlier vesting or
forfeiture in accordance with the terms of his award agreement.
Given the vesting schedule associated with the RSUs, the related
63,700 Common Share Equivalents are not included in
the figures in the Total column or in the
computation of the Percent of Class figures in the
table. |
|
(17) |
|
Represents 2,604 Common Shares which are the subject of DSUs
granted to Mr. Kelly on February 4, 2008, which will
vest on February 4, 2011, subject to earlier vesting or
forfeiture in accordance with the terms of his award agreement.
Given the vesting schedule of the DSUs, the related 2,604
Common Share Equivalents are not included in the
figures in the Total column or in the computation of
the Percent of Class figures in the table. |
|
(18) |
|
Represents 3,125 Common Shares which are the subject of DSUs
granted to Dr. Kohrt on February 4, 2008, which will
vest on February 4, 2011, subject to earlier vesting or
forfeiture in accordance with the terms of his award agreement.
Given the vesting schedule of the DSUs, the related 3,125
Common Share Equivalents are not included in the
figures in the Total column or in the computation of
the Percent of Class figures in the table. |
|
(19) |
|
Ms. Littlefield is a general partner and the Chair of the
Hagedorn Partnership and has shared voting and dispositive power
with respect to the Common Shares held by the Hagedorn
Partnership. See note (36) below for additional disclosures
regarding the Hagedorn Partnership. |
|
(20) |
|
Represents 2,474 Common Shares which are the subject of DSUs
granted to Ms. Littlefield on February 4, 2008, which
were 100% vested on date of grant. |
|
(21) |
|
Represents the aggregate of: (a) 2,600 Common Shares held
by Mr. Lopez directly; (b) 2,600 Common Shares which
are the subject of a restricted stock grant made to him on
October 11, 2006 as to which the restriction period will
lapse on October 11, 2009; and (c) 3,000 Common Shares
which are the subject of a restricted stock grant made to him on
November 7, 2007 as to which the restriction period will
lapse on November 7, 2010. |
|
(22) |
|
Represents the aggregate of: (a) 4,000 Common Shares which
are the subject of RSUs granted to Mr. Lopez on
October 8, 2008 and will vest on October 8, 2011,
subject to earlier vesting or forfeiture in accordance with the
terms of his award agreement; and (b) 36,400 Common Shares
which are the subject of RSUs granted to Mr. Lopez on
November 4, 2008 and will vest on November 4, 2011,
subject to earlier vesting or forfeiture in accordance with the
terms of his award agreement. Given the vesting |
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|
|
|
|
|
schedules of the RSUs, the related 40,400 Common Share
Equivalents are not included in the figures in the
Total column or in the computation of the
Percent of Class figures in the table. |
|
(23) |
|
Represents the aggregate of: (a) 3,373 Common Shares
subject to stock units held by Ms. Mills; and
(b) 3,189 Common Shares which are the subject of DSUs
granted to Ms. Mills on February 4, 2008, which were
100% vested on date of grant. |
|
(24) |
|
Represents 2,800 Common Shares which are the subject of DSUs
granted to Ms. Mistretta on February 4, 2008, which
will vest on February 4, 2011, subject to earlier vesting
or forfeiture in accordance with the term of her award
agreement. Given the vesting schedule of the DSUs, the related
2,800 Common Share Equivalents are not included in
the figures in the Total column or in the
computation of the Percent of Class figures in the
table. |
|
(25) |
|
Represents the aggregate of: (a) 102,500 Common Shares held
by Mr. Norton directly; and (b) 200 Common Shares
owned by Mr. Nortons spouse. Of those Common Shares
held by Mr. Norton, 92,500 are pledged as security for a
margin loan with a bank. |
|
(26) |
|
Represents 2,149 Common Shares which are the subject of DSUs
granted to Mr. Norton on February 4, 2008, which were
100% vested on date of grant. |
|
(27) |
|
Represents the aggregate of: (a) 3,300 Common Shares which
are the subject of a restricted stock grant made to him on
October 11, 2006 as to which the restriction period will
lapse on October 11, 2009; (b) 5,000 Common Shares
which are the subject of a restricted stock grant made to him on
November 7, 2007 as to which the restriction period will
lapse on November 7, 2010; (c) 6,500 Common Shares
which are the subject of a restricted stock grant made to
Mr. Sanders on October 8, 2008 as to which the
restriction period will lapse on October 8, 2011; and
(d) 126 Common Shares held in a custodial account under the
Discounted Stock Purchase Plan. The number shown does not
include up to 30,000 performance shares that may be received by
Mr. Sanders upon satisfaction of performance goals for the
fiscal years ending September 30, 2009 and 2010. Each whole
performance share represents the right to receive one full
Common Share if the applicable performance goals are satisfied. |
|
(28) |
|
Represents 36,483 Common Shares credited to the benchmark
Company stock fund within Mr. Sanders bookkeeping
account under the ERP as a result of his election in respect of
the retention award granted to him on October 8, 2008.
Given the vesting schedule associated with
Mr. Sanders interest in the retention award, the
related 36,483 Common Share Equivalents are not
included in the figures in the Total column or in
the computation of the Percent of Class figures in
the table. |
|
(29) |
|
Represents 2,929 Common Shares which are the subject of DSUs
granted to Mrs. Shern on February 4, 2008, which will
vest on February 4, 2011, subject to earlier vesting or
forfeiture in accordance with the terms of her award agreement.
Given the vesting schedule of the DSUs, the related 2,929
Common Share Equivalents are not included in the
figures in the Total column or in the computation of
the Percent of Class figures in the table. |
|
(30) |
|
Represents 2,604 Common Shares which are the subject of DSUs
granted to Mr. Shiely on February 4, 2008, which will
vest on February 4, 2011, subject to earlier vesting or
forfeiture in accordance with the terms of his award agreement.
Given the vesting schedule of the DSUs, the related 2,604
Common Share Equivalents are not included in the
figures in the Total column or in the computation of
the Percent of Class figures in the table. |
|
(31) |
|
Represents the aggregate of: (a) 3,200 Common Shares held
by Ms. Stump directly; (b) 4,900 Common Shares which
are the subject of a restricted stock grant made to her on
October 11, 2006 as to which the restriction period will
lapse on October 11, 2009; (c) 4,900 Common Shares
which are the subject of a restricted stock grant made to her on
November 7, 2007 as to which the restriction period will
lapse on November 7, 2010; and (d) 645 Common Shares
held in a custodial account under the Discounted Stock Purchase
Plan. |
|
(32) |
|
Represents 386 Common Shares credited to the benchmark Company
stock fund within Ms. Stumps bookkeeping account
under the ERP. |
|
(33) |
|
Represents the aggregate of: (a) 5,000 Common Shares which
are the subject of RSUs granted to Ms. Stump on
October 8, 2008 and will vest on October 8, 2011,
subject to earlier vesting or forfeiture |
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|
|
|
|
in accordance with the terms of her award agreement; and
(b) 36,483 Common Shares credited to the benchmark Company
stock fund within Ms. Stumps bookkeeping account
under the ERP as a result of her election in respect of the
retention award granted to her on October 8, 2008. Given
the vesting schedule of the RSUs and the vesting schedule
associated with Ms. Stumps interest in the retention
award, the related 41,483 Common Share Equivalents
are not included in the figures in the Total column
or in the computation of the Percent of Class
figures in the table. |
|
(34) |
|
See notes (6), (11), (14), (19), (21), (25), (27) and
(31) above and note (36) below. |
|
(35) |
|
See notes (7), (12), (16) through (18), (22), (24),
(28) through (30) and (33) above. |
|
(36) |
|
The Hagedorn Partnership is the record owner of 20,548,977
Common Shares. Of those Common Shares, 6,000,000 are pledged as
security for a line of credit with a bank. James Hagedorn,
Katherine Hagedorn Littlefield, Paul Hagedorn, Peter Hagedorn,
Robert Hagedorn and Susan Hagedorn are siblings, general
partners of the Hagedorn Partnership and former shareholders of
Sterns Miracle-Gro Products, Inc. (Miracle-Gro
Products). The general partners share voting and
dispositive power with respect to the securities held by the
Hagedorn Partnership. James Hagedorn and Katherine Hagedorn
Littlefield are directors of the Company. Community Funds, Inc.,
a New York not-for-profit corporation (Community
Funds), is a limited partner of the Hagedorn Partnership. |
|
|
|
The Amended and Restated Agreement and Plan of Merger, dated as
of May 19, 1995 (the Miracle-Gro Merger
Agreement), among The Scotts Company, ZYX Corporation,
Miracle-Gro Products, Sterns Nurseries, Inc., Miracle-Gro
Lawn Products Inc., Miracle-Gro Products Limited, the Hagedorn
Partnership, the general partners of the Hagedorn Partnership,
Horace Hagedorn, Community Funds and John Kenlon, as amended by
the First Amendment to Amended and Restated Agreement and Plan
of Merger, dated as of October 1, 1999 (the First
Amendment), limits the ability of the Hagedorn
Partnership, Community Funds, Horace Hagedorn and John Kenlon
(the Miracle-Gro Shareholders) to acquire additional
voting securities of the Company. Under the terms of the Merger
Agreement, as amended by the First Amendment, the Miracle-Gro
Shareholders may not collectively acquire, directly or
indirectly, beneficial ownership of Voting Stock (defined in the
Miracle-Gro Merger Agreement, as amended by the First Amendment,
to mean the Common Shares and any other securities issued by the
Company which are entitled to vote generally for the election of
directors of the Company) representing more than 49% of the
total voting power of the outstanding Voting Stock, except
pursuant to a tender offer for 100% of that total voting power,
which tender offer is made at a price per share which is not
less than the market price per share on the last trading day
before the announcement of the tender offer and is conditioned
upon the receipt of at least 50% of the Voting Stock
beneficially owned by shareholders of the Company other than the
Miracle-Gro Shareholders and their affiliates and associates. |
|
(37) |
|
All information presented in this table regarding Morgan Stanley
and its affiliated institutional investment managers, other than
the Percent of Class figure, was derived from the
Form 13F Holdings Report for the quarter ended
September 30, 2008 (the Morgan Stanley
Form 13F), filed by Morgan Stanley with the SEC on
November 14, 2008. |
|
(38) |
|
In the Morgan Stanley Form 13F, Morgan Stanley reported the
following: (a) Morgan Stanley & Co. Incorporated
had shared investment discretion and sole voting authority with
respect to 73,073 Common Shares and shared investment discretion
and shared voting authority with respect to 1,600 Common Shares;
(b) Morgan Stanley Capital Services Inc. had shared
investment discretion and sole voting authority with respect to
210,441 Common Shares; (c) Morgan Stanley Investment
Management Inc. had shared investment discretion and sole voting
authority with respect to 3,377,768 Common Shares and shared
investment discretion and no voting authority with respect to
580,795 Common Shares; and (e) Morgan Stanley Investment
Management Limited had shared investment discretion and sole
voting authority with respect to 2,262,329 Common Shares and
shared investment discretion and no voting authority with
respect to 896,372 Common Shares. |
|
(39) |
|
All information presented in this table regarding EARNEST
Partners, LLC (EARNEST), other than the
Percent of Class figure, was derived from the
Form 13F Holdings Report for the quarter ended
September 30, 2008 (the EARNEST Form 13F),
filed by EARNEST with the SEC on November 10, 2008. |
71
|
|
|
(40) |
|
In the EARNEST Form 13F, EARNEST reported sole investment
discretion with respect to 4,347,210 Common Shares, sole
voting authority with respect to 1,779,992 Common Shares, shared
voting authority with respect to 1,203,438 Common Shares and no
voting authority with respect to 1,363,780 Common Shares. |
|
(41) |
|
All information presented in this table regarding M&G
Investment Funds 1 (M&G Investment Funds),
other than the Percent of Class figures, was derived
from the Schedule 13G, dated November 6, 2008 (the
M&G Investment Funds 13G), filed by M&G
Investment Funds with the SEC on November 6, 2008 to report
beneficial ownership of the Common Shares as of October 24,
2008. |
|
(42) |
|
In the M&G Investment Funds Schedule 13G, M&G
Investment Funds reported shared voting and dispositive power
with respect to all of the 3,353,004 Common Shares reported. |
72
PROPOSAL NUMBER
2
RATIFICATION OF THE SELECTION OF THE
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP (Deloitte) has
served as the Companys independent registered public
accounting firm since 2004 and audited the Companys
consolidated financial statements as of and for the fiscal year
ended September 30, 2008, and the effectiveness of the
Companys internal control over financial reporting as of
September 30, 2008. The Audit Committee is directly
responsible for the selection of the Companys independent
registered public accounting firm and has selected Deloitte to
audit the Companys consolidated financial statements for
the fiscal year ending September 30, 2009. Although it is
not required to do so, the Board of Directors has determined to
submit the Audit Committees selection of the independent
registered public accounting firm to the Companys
shareholders for ratification of its action as a matter of good
corporate governance. In the event that the Audit
Committees selection of Deloitte to serve as the
Companys independent registered public accounting firm for
the fiscal year ending September 30, 2009, is not ratified
by the holders of a majority of the Common Shares represented at
the Annual Meeting (with an abstention being treated the same as
a vote AGAINST), the Audit Committee will evaluate
such shareholder vote when considering the selection of an
independent registered public accounting firm to serve as the
Companys auditors for the fiscal year ending
September 30, 2010. Even if the selection of Deloitte is
ratified by the shareholders, the Audit Committee, in its
discretion, could decided to terminate the engagement of
Deloitte and to engage another independent registered public
accounting firm if the Audit Committee determines such action
necessary or desirable.
Representatives of Deloitte are expected to be present at the
Annual Meeting, will have the opportunity to make a statement if
they desire to do so and are expected to be available to respond
to appropriate questions.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE RATIFICATION OF THE AUDIT COMMITTEES
SELECTION OF DELOITTE & TOUCHE LLP AS THE
COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
THE FISCAL YEAR ENDING SEPTEMBER 30, 2009.
AUDIT
COMMITTEE MATTERS
In accordance with applicable SEC Rules, the Audit Committee has
issued the following report:
Report of
the Audit Committee for the 2008 Fiscal Year
Role
of the Audit Committee, Independent Registered Public Accounting
Firm and Management
The Audit Committee consists of four directors, each of whom
satisfies the applicable independence requirements set forth in
the NYSE Rules and under SEC
Rule 10A-3,
and operates under a written charter adopted by the Board of
Directors. A copy of the Audit Committee charter is posted under
the Corporate Governance link on the Companys
Internet website at
http://investor.scotts.com
and is available in print to any shareholder who requests it
from the Corporate Secretary of the Company. The Audit Committee
is responsible for the appointment, compensation and oversight
of the work of the Companys independent registered public
accounting firm. Deloitte was appointed to serve as the
Companys independent registered public accounting firm for
the 2008 fiscal year.
Management has the primary responsibility for the preparation,
presentation and integrity of the Companys consolidated
financial statements, for the appropriateness of the accounting
principles and reporting policies that are used by the Company
and its subsidiaries, for the accounting and financial reporting
processes of the Company, including the establishment and
maintenance of adequate systems of disclosure controls and
procedures and internal control over financial reporting, and
for the preparation of the annual report on managements
assessment of the effectiveness of the Companys internal
control over financial reporting. The Companys independent
registered public accounting firm is responsible for performing
an audit of the Companys annual consolidated financial
statements in accordance with the standards of the Pu