SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c)
or ss.240.14a-12
The Scotts 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):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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The Scotts Company
Proxy Statement
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The Scotts Company
14111 Scottslawn Road
Marysville, Ohio 43041
March 22, 1996
Dear Fellow Shareholders:
The Annual Meeting of the Shareholders (the "Annual Meeting") of The Scotts
Company, an Ohio corporation (the "Company"), will be held at 10:00 a.m.,
local time, on Tuesday, April 9, 1996, at the Columbus Marriott North Hotel,
6500 Doubletree Avenue, Columbus, Ohio 43229. The enclosed Notice of Annual
Meeting of Shareholders and Proxy Statement contain detailed information about
the business to be transacted at the Annual Meeting.
The Board of Directors has nominated three directors, each for a term to
expire at the 1999 Annual Meeting. The Board of Directors recommends that you
vote FOR the nominees.
In addition to the election of directors, you are being asked to approve The
Scotts Company 1996 Stock Option Plan. The Board of Directors recommends that
you vote FOR this proposal.
On behalf of the Board of Directors and management, I cordially invite you to
attend the Annual Meeting. Whether or not you plan to attend the Annual
Meeting, the prompt return of your proxy in the enclosed return envelope will
save the Company additional expenses of solicitation and will help ensure that
as many shares as possible are represented.
Sincerely,
Tadd C. Seitz
Chairman, Interim President and Chief Executive Officer
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The Scotts Company
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held Tuesday, April 9, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Annual
Meeting") of The Scotts Company, an Ohio corporation (the "Company"), will be
held at the Columbus Marriott North Hotel, 6500 Doubletree Avenue, Columbus,
Ohio 43229, on Tuesday, April 9, 1996 at 10:00 a.m., local time, for the
following purposes:
1. To elect three directors, each for a term of three years to expire at the
1999 Annual Meeting;
2. To approve The Scotts Company 1996 Stock Option Plan; and
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment(s) thereof.
The close of business on March 8, 1996, has been fixed by the Board of
Directors of the Company as the record date for determining the shareholders
entitled to notice of, and to vote at, the Annual Meeting.
You are cordially invited to attend the Annual Meeting. Whether or not you
plan to attend the Annual Meeting, you may insure your representation by
completing, signing, dating and promptly returning the enclosed proxy card. A
return envelope, which requires no postage if mailed in the United States, has
been provided for your use. If you attend the Annual Meeting and inform the
office of the Secretary of the Company in writing that you wish to vote your
shares in person, your proxy will not be used.
By Order of the Board of Directors
Tadd C. Seitz
Chairman, Interim President and Chief
Executive Officer
The Scotts Company
14111 Scottslawn Road
Marysville, Ohio 43041
March 22, 1996
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The Scotts Company
14111 Scottslawn Road
Marysville, Ohio 43041
PROXY STATEMENT
for
Annual Meeting of Shareholders
Tuesday, April 9, 1996
This Proxy Statement is furnished in connection with the solicitation on
behalf of the Board of Directors of The Scotts Company, an Ohio corporation
(the "Company"), of proxies for use at the Annual Meeting of Shareholders (the
"Annual Meeting") to be held at the Columbus Marriott North Hotel, 6500
Doubletree Avenue, Columbus, Ohio 43229, on Tuesday, April 9, 1996, at 10:00
a.m., local time, and at any adjournment(s) thereof, for the purposes set
forth in the accompanying Notice of Annual Meeting of Shareholders. This Proxy
Statement and the accompanying form of proxy are first being mailed to
shareholders on or about March 22, 1996. Only holders of record of the
Company's common shares, without par value (the "Common Shares"), and the
Company's Class A Convertible Preferred Stock, without par value (the
"Convertible Preferred Stock"), will be entitled to vote at the Annual
Meeting. As of March 8, 1996, there were 18,980,553 Common Shares outstanding
and 195,000 shares of Convertible Preferred Stock outstanding. Each Common
Share entitles the holder thereof to one vote. Each share of Convertible
Preferred Stock entitles the holder thereof to the number of votes equal to
the number of Common Shares into which such share of Convertible Preferred
Stock could be converted as of the record date for the Annual Meeting. As of
March 8, 1996, the holders of the Convertible Preferred Stock were entitled to
an aggregate of 10,263,158 votes. A quorum for the Annual Meeting is a
majority of the voting shares outstanding. There is no cumulative voting.
Other than the Common Shares and the Convertible Preferred Stock, there are no
other voting securities of the Company outstanding.
Common Shares and shares of Convertible Preferred Stock represented by
signed proxies that are returned to the Company will be counted toward the
quorum in all matters even though they are marked as "Abstain," "Against" or
"Withhold Authority" on one or more or all matters or they are not marked at
all. Broker/dealers who hold their customers' shares in street name, may,
under the applicable rules of the exchange and other self-regulatory
organizations of which the broker/dealers are members, sign and submit proxies
for such shares and may vote such shares on routine matters, which, under such
rules, typically include the election of directors, but broker/dealers may not
vote such shares on other matters, which typically include amendments to the
articles of incorporation of the Company and the approval of certain stock
compensation plans, without specific instructions from the customer who owns
such shares. Proxies signed and submitted by broker/dealers which have not
been voted on certain matters as described in the previous sentence are
referred to as broker non-votes. Such proxies count toward the establishment
of a quorum. The effect of an abstention or broker non-vote on each of the
matters to be voted upon at the meeting is the same as a "no" vote.
If the accompanying proxy card is properly signed and returned to the
Company prior to the Annual Meeting and not revoked, it will be voted in
accordance with the instructions contained therein. If no instructions are
given, the persons designated as proxies in the accompanying proxy card will
vote FOR the election as directors of those persons named below and FOR
approval of The Scotts Company 1996 Stock Option Plan.
The Board of Directors is not currently aware of any matters other than
those referred to herein which will come before the Annual Meeting. If any
other matter should be presented at the Annual Meeting for action, the persons
named in the accompanying proxy card will vote the proxy in their own
discretion.
You may revoke your proxy at any time before it is actually voted at the
Annual Meeting by delivering written notice of revocation to the office of the
Secretary of the Company, by submitting a subsequently dated proxy, or by
attending the Annual Meeting and voting in person. Attendance at the Annual
Meeting will not, in itself, constitute revocation of the proxy.
The expense of preparing, printing and mailing proxy materials to the
Company's shareholders will be borne by the Company. In addition, proxies may
be solicited personally or by telephone, mail or telegram. Officers or
employees of the Company may assist with personal or telephone solicitation
and will receive no additional compensation therefor. The Company will also
reimburse brokerage houses and other nominees for their reasonable expenses in
forwarding proxy materials to beneficial owners of the Common Shares.
If a shareholder is a participant in The Scotts Company Profit Sharing
and Savings Plan (the "PSP") and Common Shares have been allocated to such
person's account in the PSP, the trustee will vote the allocated Common
Shares.
BENEFICIAL OWNERSHIP OF SECURITIES OF THE COMPANY
The following table furnishes certain information as of March 8, 1996,
as to the Common Shares beneficially owned by each of the directors of the
Company, by each of the executive officers of the Company named in the Summary
Compensation Table and by all current directors and executive officers of the
Company as a group, and, to the Company's knowledge, by the only persons
beneficially owning more than 5% of the outstanding Common Shares.
<TABLE>
Amount and Nature of Beneficial Ownership (1)
---------------------------------------------
Common Shares
Which Can Be
Acquired Upon
Conversion of
Convertible
Preferred Stock
Name of Common or Upon Exercise Percent of
Beneficial Owner Shares of Options or Class (2)
Presently Warrants Total
Held Exercisable
Within
60 Days
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
James B Beard........... 16,727 12,000 28,727 (3)
John S. Chamberlin...... 22,727 12,000 34,727 (3)
Joseph P. Flannery...... 10,000 12,000 22,000 (3)
Horace Hagedorn......... 0 526(4) 526 (3)
James Hagedorn.......... 0 13,262,631(5) 13,262,631 41.2%(5)
Theodore J. Host (6).... 45,454(7) 279,166 324,620 1.7%
Michael P. Kelty (6).... 52,909(8) 23,173 76,082 (3)
John Kenlon............. 0 234,642(9) 234,642 1.2%(9)
J. Blaine McKinney (6).. 2,100 67,592 69,692 (3)
Karen Gordon Mills...... 0 4,000 4,000 (3)
Tadd C. Seitz (6)....... 242,204(10) 226,793 468,997 2.4%
Donald A. Sherman....... 22,727 12,000 34,727 (3)
John M. Sullivan........ 1,000 8,000 9,000 (3)
L. Jack Van Fossen...... 1,200 8,000 9,200 (3)
Paul D. Yeager (6)...... 115,885(11) 48,457 164,342 (3)
All current directors and
executive officers as a
group (20 persons).... 563,300(12) 13,973,665 14,536,935 44.2%
</TABLE>
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<TABLE>
Amount and Nature of Beneficial Ownership (1)
---------------------------------------------
Common Shares
Which Can Be
Acquired Upon
Conversion of
Convertible
Preferred Stock
or Upon
Name of Common Exercise of Percent
Beneficial Owner Shares Options or Total of
Presently Warrants Class
Held Exercisable (2)
Within 60 Days
<S> <C> <C> <C> <C>
Hagedorn Partnership, L.P. 0 13,262,631(13) 13,262,631 41.2%(13)
800 Port Washington Blvd.
Port Washington, NY 11050
The Capital Group
Companies, Inc. 1,819,200(14) 0 1,819,200(14) 9.6%
333 South Hope Street
Los Angeles, CA 90071
Capital Guardian Trust 1,305,200(14) 0 1,305,200(14) 6.9%
Company
333 South Hope Street
Los Angeles, CA 90071
</TABLE>
(1) Unless otherwise indicated, the beneficial owner has sole voting and
dispositive power as to all Common Shares reflected in the table.
(2) The percent of class is based upon the sum of (i) 18,980,553 Common
Shares outstanding on March 8, 1996, and (ii) the number of Common Shares
as to which the named person has the right to acquire beneficial
ownership upon conversion of Convertible Preferred Stock or upon the
exercise of options or warrants to purchase Common Shares ("Warrants")
exercisable within 60 days of March 8, 1996.
(3) Represents ownership of less than 1% of the outstanding Common Shares of
the Company.
(4) Mr. Hagedorn owns (beneficially and of record) 10 shares of Convertible
Preferred Stock (less than 1% of such class) which are convertible into
526 Common Shares. Mr. Hagedorn is the father of the general partners of
Hagedorn Partnership, L.P., a Delaware limited partnership (the "Hagedorn
Partnership"), but is not himself a partner of, and does not have sole or
shared voting or dispositive power with respect to any of the Convertible
Preferred Stock or Warrants held by, the Hagedorn Partnership. See note
(13) below.
(5) Mr. Hagedorn is a general partner in the Hagedorn Partnership and has
shared voting and dispositive power with respect to the Convertible
Preferred Stock and Warrants held by the Hagedorn Partnership. See note
(13) below.
(6) Executive officer of the Company named in the Summary Compensation Table.
(7) Includes 45,454 Common Shares which were issued to Mr. Host at the time
of his employment by the Company and which are pledged to Bank One, N.A.
(8) Includes 12,727 Common Shares owned by Dr. Kelty's wife.
(9) Mr. Kenlon beneficially owns 4,332 shares of Convertible Preferred Stock
(2.2% of such class), which are convertible into 228,000 Common Shares,
and Warrants to purchase 6,642 Common Shares. Each of Mr. Kenlon's four
children beneficially own Warrants to purchase an additional 15,000
Common Shares, for which Mr. Kenlon disclaims beneficial ownership. The
Hagedorn Partnership has the right to vote all of the Company's
securities held by Mr. Kenlon and his children, and has a right of first
refusal with respect to such securities. See note (13) below.
(10) Includes 20,000 Common Shares owned by Mr. Seitz' wife.
(11) Includes 100 common shares held by each of Mr. Yeager's wife and his two
daughters.
(12) See notes (4), (5) and (7) through (11) above and note (13) below. Also
includes Common Shares held by the respective spouses of executive
officers of the Company and by their children who live with them.
(13) The Hagedorn Partnership owns (beneficially and of record) 190,658 shares
of Convertible Preferred Stock (97.8% of such class), which are
convertible into 10,034,631 Common Shares, and Warrants to purchase
2,933,358 Common Shares, and has the right to vote, and a right of first
refusal with respect to, the Company's securities held by Mr. Kenlon and
his children. See note (9) above. The general partners of the Hagedorn
Partnership are Mr. James Hagedorn, Katherine Hagedorn Littlefield, Paul
Hagedorn, Peter Hagedorn, Robert Hagedorn and Susan Hagedorn, each of
whom is a child of Mr. Horace Hagedorn and a former shareholder of
Stern's Miracle-Gro Products, Inc. Community Funds, Inc., a New York
not-for-profit corporation, is a limited partner in the Hagedorn
Partnership.
(14) Based on information contained in a Schedule 13G dated February 9, 1996
filed with the Securities and Exchange Commission, certain operating
subsidiaries of The Capital Group Companies, Inc. ("Capital Group")
exercise investment discretion over various institutional accounts which
held, as of December 29, 1995, 1,819,200 common shares of the Company
(9.6% of the outstanding common shares). Of such common shares, Capital
Group exercises sole voting power over 1,111,200 common shares and sole
dispositive power over 1,819,200 common shares. Capital Guardian Trust
Company ("Capital Guardian Trust"), a bank and one of such operating
companies, exercises investment discretion over 1,305,200 of said common
shares. Of such common shares, Capital Guardian Trust exercises sole
voting power over 1,097,200 common shares and sole dispositive power over
1,305,200 common shares. Capital Research and Management Company, a
registered investment adviser, and Capital International Limited, another
operating subsidiary, have investment discretion with respect to 500,000
and 14,000 common shares, respectively, of the above common shares.
To the Company's knowledge, based solely on a review of the copies of
the reports furnished to the Company and written representations that no other
reports were required during the 1995 fiscal year, all filing requirements
applicable to officers, directors and beneficial owners of more than 10% of
the outstanding common shares of the Company under Section 16(a) of the
Securities Exchange Act in 1934, as amended (the "Exchange Act"), were
complied with; except that Richard B. Stahl, a former executive officer, filed
one report late covering eight transactions all related to the cashless
exercise of stock options.
Miracle-Gro Merger Agreement
On May 19, 1995, pursuant to the Amended and Restated Agreement and Plan
of Merger, dated as of May 19, 1995, amending and restating the original
Agreement and Plan of Merger, dated as of January 26, 1995 (as so amended and
restated, the "Merger Agreement"), the Company acquired Stern's Miracle-Gro
Products, Inc. ("Miracle-Gro Products"), Miracle-Gro Products Limited
("Miracle-Gro UK"), Miracle-Gro Lawn Products, Inc. ("Miracle-Gro Lawn
Products") and the assets of Stern's Nurseries, Inc. ("Nurseries")
(collectively, the "Miracle-Gro Companies"). The acquisition was structured as
a merger of the Company's wholly-owned subsidiary, ZYX Corporation ("Merger
Sub"), into Miracle-Gro Products (the "Merger"), with Miracle-Gro Products
surviving, followed by stock transfers of all of the outstanding capital stock
of Miracle-Gro UK and Miracle-Gro Lawn Products to Miracle-Gro Products (the
"Subsequent Stock Transfers") and an asset transfer of all of the assets, but
none of the liabilities, of Nurseries to Miracle-Gro Products (the "Asset
Transfer" and, collectively with the Merger and the Subsequent Stock
Transfers, the "Merger Transactions"). Following the Merger Transactions,
Miracle-Gro Products was merged into its wholly-owned subsidiary, Scotts'
Miracle-Gro Products, Inc., which is the ultimate surviving corporation of the
Merger Transactions ("Scotts' Miracle-Gro"). Scotts' Miracle-Gro markets the
leading brands of garden plant foods, Miracle-Gro(R) and Miracid(R).
By operation of the Merger, each share of capital stock of Merger Sub was
converted into one share of the voting common stock of Miracle-Gro Products,
and the outstanding capital stock of Miracle-Gro Products was converted into
the right to receive Convertible Preferred Stock and Warrants, as described
below. As a result of the Merger Transactions, the Company became the owner of
all of the outstanding common shares of the surviving corporation, Miracle-Gro
Products, and its wholly-owned subsidiaries, Miracle-Gro UK and Miracle-Gro
Lawn Products.
Prior to the Merger Transactions, the Miracle-Gro Companies were
privately held by: Horace Hagedorn, Chairman and Chief Executive Officer of
Miracle-Gro Products, individually; members of the Hagedorn family through the
Hagedorn Partnership; Community Funds, Inc., a New York not-for-profit
corporation (the "Charity"), as a result of a charitable donation by Horace
Hagedorn on May 1, 1995; and John Kenlon, the President of Scotts'
Miracle-Gro.
As consideration for the Merger Transactions, Mr. Hagedorn, the Hagedorn
Partnership, the Charity and Mr. Kenlon received, in the aggregate, $195
million face amount of Convertible Preferred Stock, convertible at $19 per
share (subject to adjustment) into approximately 35% of the total voting power
of the Company, and Warrants to purchase, at prices ranging from $21 to $29
per share, an additional 3,000,000 Common Shares, which, if exercised, would
enable them to exercise, together with the Convertible Preferred Stock,
approximately 42% of the total voting power of the Company.
The Merger Agreement provides for certain voting rights of, and certain
voting restrictions on, the holders of the Convertible Preferred Stock and the
Warrants (collectively, including the general and limited partners of the
Hagedorn Partnership, the "Miracle-Gro Shareholders"). The Merger Agreement
also limits the ability of the Miracle-Gro Shareholders to acquire additional
voting securities of the Company or to transfer the Convertible Preferred
Stock or the Warrants. See "-Voting Restrictions on the Miracle-Gro
Shareholders" and "-Standstill Restrictions on the Miracle-Gro Shareholders"
below.
Voting Restrictions on the Miracle-Gro Shareholders
The Merger Agreement provides that until the earlier of the end of the
fifth anniversary of the effective date of the Merger (May 19, 2000) (the
"Standstill Period") and such time as the Miracle-Gro Shareholders cease to
own at least 19% of the Company's Voting Stock (as that term is defined in the
Merger Agreement), the Miracle-Gro Shareholders will be required to vote their
shares of Convertible Preferred Stock and Common Shares (i) for the Company's
nominees to the Board of Directors, in accordance with the recommendation of
the Board of Directors' Nominating Committee, and (ii) on all matters to be
voted on by holders of Voting Stock, in accordance with the recommendation of
the Board of Directors, except with respect to a proposal as to which
shareholder approval is required under the Ohio General Corporation Law
relating to (a) the acquisition of Voting Stock of the Company, (b) a merger
or consolidation, (c) a sale of all or substantially all of the assets of the
Company, (d) a recapitalization of the Company or (e) an amendment to the
Company's Amended Articles of Incorporation or Code of Regulations which would
materially adversely affect the rights of the Miracle-Gro Shareholders. The
Company has agreed that, without the prior consent of the Shareholder
Representative (as that term is defined in the Merger Agreement), it shall not
(x) issue Voting Stock (or Voting Stock equivalents) constituting in the
aggregate more than 12.5% of total voting power of the outstanding Voting
Stock (the "Total Voting Power") (other than pursuant to employee benefit
plans in the ordinary course of business) or (y) in a single transaction or
series of related transactions, make any acquisition or disposition of assets
which would require disclosure pursuant to Item 2 of Form 8-K under the
Exchange Act, provided, however, that if five-sixths of the Board of Directors
determine that it is in the best interests of the Company to make an
acquisition pursuant to clause (y), such acquisition may be made without the
consent of the Shareholder Representative. In addition, during the Standstill
Period, the Miracle-Gro Shareholders will be limited in their ability to enter
into any voting trust agreement without the Company's consent or to solicit
proxies or become participants in any election contest (as such terms are used
in Rule 14a-11 of Regulation 14A under the Exchange Act) relating to the
election of directors of the Company. Following the Standstill Period or such
time as the Miracle-Gro Shareholders cease to own at least 19% of the Voting
Stock, the voting restrictions provided in the Merger Agreement will expire.
Standstill Restrictions on the Miracle-Gro Shareholders
The Merger Agreement provides that during the Standstill Period, the
Miracle-Gro Shareholders may not acquire or agree to acquire, directly or
indirectly, beneficial ownership of Voting Stock representing more than 43% of
Total Voting Power (the "Standstill Percentage"). For purposes of calculating
beneficial ownership of Voting Stock against the Standstill Percentage, Common
Shares underlying unexercised Warrants or any subsequently granted employee
stock options will not be included. However, the terms of the Warrants provide
that, if exercised during the Standstill Period and to the extent that such
exercise would increase the aggregate beneficial ownership of the Miracle-Gro
Shareholders to more than 43% of Total Voting Power, such exercise may only be
for cash and not for Common Shares. To the extent that a recapitalization of
the Company or a Common Share repurchase program by the Company increases the
aggregate beneficial ownership of the Miracle-Gro Shareholders to an amount in
excess of 44% of the Total Voting Power, the Miracle-Gro Shareholders will be
required to divest themselves of sufficient shares of Voting Stock to fall
within the 44% of Total Voting Power limit. The Company has agreed that it
will use reasonable efforts to ensure that employee stock options are funded
with Common Shares repurchased in the open market rather than with
newly-issued Common Shares.
The Miracle-Gro Shareholders have agreed that, after the Standstill
Period, they will not acquire, directly or indirectly, beneficial ownership of
Voting Stock representing more than 49% of the Total Voting Power except
pursuant to a tender offer for 100% of the Total Voting Power, which tender
offer 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.
Restrictions on Transfers
During the Standstill Period, the Merger Agreement provides that no
Miracle-Gro Shareholder may transfer any Common Shares obtained upon
conversion of the Convertible Preferred Stock or exercise of the Warrants,
except (i) to the Company or any person approved by the Company; (ii) to a
Permitted Transferee (as that term is defined in the Merger Agreement) who
agrees in writing to abide by the provisions of the Merger Agreement; (iii)
pursuant to a merger or consolidation of the Company or a plan of liquidation
which has been approved by the Company's Board of Directors; (iv) in a bona
fide public offering registered under the Securities Act of 1933 (the
"Securities Act") and designed to prevent any person or group from acquiring
beneficial ownership of 3% or more of the Total Voting Power; (v) subject to
the Company's right of first offer, pursuant to Rule 145 or Rule 144A under
the Securities Act, provided that such sale would not knowingly result in any
person or group's acquiring beneficial ownership of 3% or more of the Total
Voting Power and all such sales by the Miracle-Gro Shareholders within the
preceding three months would not exceed, in the aggregate, the greatest of the
limits set forth in Rule 144(e)(1) under the Securities Act; (vi) in response
to a tender offer made by or on behalf of the Company or with the approval of
the Company's Board of Directors; or (vii) subject to the Company's right of
first offer, in any other transfer which would not to the best knowledge of
the transferring Miracle-Gro Shareholder result in any person or group's
acquiring beneficial ownership of 3% or more of the Total Voting Power.
Neither the Convertible Preferred Stock nor, during the Standstill
Period, the Warrants may be transferred except (i) to the Company or any
person or group approved by the Company; (ii) to a Permitted Transferee who
agrees in writing to abide by the provisions of the Merger Agreement; (iii)
pursuant to a merger or consolidation of the Company or a plan of liquidation
of the Company; or (iv) with respect to Convertible Preferred Stock
representing no more than 15% of the outstanding Common Shares on a fully
diluted basis or any number of Warrants: (A) subject to the Company's right of
first offer, pursuant to Rule 145 or Rule 144A under the Securities Act,
provided that such sale would not knowingly result in any person or group's
acquiring beneficial ownership of 3% or more of the Total Voting Power and all
such sales by the Miracle-Gro Shareholders within the preceding three months
would not exceed, in the aggregate, the greatest of the limits set forth in
Rule 144(e)(1) under the Securities Act; or (B) subject to the Company's right
of first offer, in any other transfer which would not, to the best knowledge
of the transferring Miracle-Gro Shareholder, result in any person or group's
acquiring beneficial ownership of 3% or more of the Total Voting Power. For
purposes of clauses (A) and (B) only, the Company's right of first offer with
respect to shares of Convertible Preferred Stock would be at a price equal to
(x) the aggregate Market Price (as that term is defined in the Merger
Agreement) of the Common Shares into which such shares of Convertible
Preferred Stock could be converted at the time of the applicable transfer
notice multiplied by (y) 105%.
Following the Standstill Period, the Warrants and the Common Shares
underlying the Warrants and the Convertible Preferred Stock will be freely
transferable, subject to the requirements of the Securities Act and applicable
law.
Proposal No. 1
ELECTION OF DIRECTORS
Pursuant to the Code of Regulations of Scotts, the Board of Directors
has set the authorized number of directors at 12, divided into three classes
with regular three-year staggered terms. The three (reduced from four due to
the resignation of Theodore J. Host on February 22, 1996) Class I directors
hold office for terms expiring at the Annual Meeting, the four Class II
directors hold office for terms expiring in 1997 and the four Class III
directors hold office for terms expiring in 1998. The election of each class
of directors is a separate election. Pursuant to the terms of the Merger
Agreement, the Miracle-Gro Shareholders, through their Shareholder
Representative, designated Messrs. Horace Hagedorn, John Kenlon and James
Hagedorn as Board members. Until the earlier of the expiration of the
Standstill Period and such time as the Miracle-Gro Shareholders no longer
beneficially own at least 19% of the Voting Stock of the Company, the
Shareholder Representative will continue to be entitled to designate one
person to be nominated for election as a director in the class whose term
expires in any year.
As a result of the resignation of Theodore J. Host as President, Chief
Executive Officer and a director of the Company on February 22, 1996, a
vacancy was created and continues to exist in Class I. No person has been
nominated by the Board of Directors for election as a Class I Director at the
Annual Meeting to fill this vacancy. The Board of Directors does not
contemplate selection of a nominee to fill the vacancy created by Mr. Host's
resignation until such time as a replacement for Mr. Host as President and
Chief Executive Officer of the Company is named. The Board believes that the
person chosen to serve as President and Chief Executive Officer of the Company
should also become a member of the Board and, accordingly, has chosen to leave
one position in Class I available. The proxies cannot be voted for more than
three nominees for election as Class I Directors at the Annual Meeting.
The Board of Directors proposes that the three nominees described below
be elected to Class I for a new term to expire at the 1999 Annual Meeting of
Shareholders and until their successors are duly elected and qualified, or
until their earlier death, resignation or removal. The Board of Directors has
no reason to believe that any of the nominees will not serve if elected, but
if any of them should become unavailable to serve as a director, and if the
Board designates a substitute nominee, the persons named in the accompanying
proxy card will vote for the substitute nominee designated by the Board of
Directors.
The following information, as of March 8, 1996, with respect to the
principal occupation or employment, other affiliations and business experience
of each director during the last five years, has been furnished to the Company
by each director. Except where indicated, each director has had the same
principal occupation for the last five years.
<PAGE>
Nominees Standing for Re-Election to the Board of Directors
Class I -- Terms to Expire at the 1999 Annual Meeting
James Hagedorn, age 40 Senior Vice President, Consumer Garden Group,
of the Company since May 1995 and Director of
the Company since 1995
Mr. Hagedorn was Executive Vice President from 1989 until consummation
of the Merger in May 1995 of Miracle-Gro Products. Mr. Hagedorn has been
Executive Vice President of Scotts' Miracle-Gro since May 1995. Mr. Hagedorn
also serves on the boards of Miracle Holdings Limited and Miracle Garden Care
Ltd., both U.K. companies which are affiliates of Miracle-Gro UK. He was
previously an officer and an F-16 pilot in the United States Air Force. He is
a board member of several not-for-profit corporations, including: The Farms
for City Kids Foundation, Clark Botanic Garden, Children's House and North
Shore University Hospital. James Hagedorn is the son of Horace Hagedorn.
Committee Membership: None at this time
Karen Gordon Mills, age 42 Director of the Company since 1994
Ms. Mills is President of MMP Group, Inc., a management company that
monitors equity investments and provides consulting and investment banking
services. From 1983 to 1993, she served as Managing Director at E.S. Jacobs
and Company and as Chief Operating Officer of its Industrial Group. Ms.
Mills is currently on the boards of Triangle Pacific Corp., Armor All
Products, Inc., Arrow Electronics, Inc. and Telex Communications, Inc.
Committee Membership: Nominating
Tadd C. Seitz, age 54 Chairman of the Board of the Company since 1991,
Interim President and Chief Executive Officer of
the Company since February 1996 and Director of
the Company since 1987
In February 1996, Mr. Seitz resumed his former posts as President and
Chief Executive Officer of the Company on an interim basis. Mr. Seitz was the
Chief Executive Officer of the Company from 1987 to April 1995. He was also
President of the Company's main operating subsidiary from 1983 until 1991. Mr.
Seitz has been employed by the Company and its predecessors for 23 years. Mr.
Seitz also serves as a director of Holophane Corporation.
Committee Memberships: Executive (Chairman) and Nominating
<PAGE>
Members of the Board of Directors Continuing in Office
Class II -- Terms to Expire at the 1997 Annual Meeting
James B Beard, age 60 Director of the Company since 1989
Dr. Beard is Professor Emeritus of Turfgrass Physiology and Ecology at
Texas A&M University where he served from 1975 to 1992. He has been President
and Chief Scientist at the International Sports Turf Institute since July
1992. Dr. Beard is the author of six books and over 500 scientific articles on
turfgrass science and is an active lecturer and consultant both nationally and
internationally. He is a Fellow of the American Association of the Advancement
of Science and was the first President of the International Turfgrass Society.
Committee Membership: Audit
John Kenlon, age 64 Director of the Company since 1995
Mr. Kenlon was named Chief Operating Officer and President of Scotts'
Miracle-Gro in May 1995. Mr. Kenlon was the President of Miracle-Gro Products
from December 1985 until the consummation of the Merger in May 1995. Mr.
Kenlon began his association with the Miracle-Gro Companies in 1960.
Committee Membership: Nominating
John M. Sullivan, age 60 Director of the Company since 1994
Mr. Sullivan was Chairman of the Board from 1987 to 1993, and President
and Chief Executive Officer from 1984 to 1993, of Prince Holdings, Inc., a
corporation which, through its subsidiaries, manufactures sporting goods.
Since his retirement from Prince Holdings, Inc. and its subsidiaries in 1993,
Mr. Sullivan has served as an independent director for various corporations,
none of which, other than the Company, is registered under or subject to the
requirements of the Exchange Act or the Investment Company Act of 1940.
Committee Memberships: Compensation and Organization; Nominating
L. Jack Van Fossen, age 58 Director of the Company since 1993
Mr. Van Fossen was Chief Executive Officer and President of Red Roof
Inns, Inc., an owner and operator of motels, from May 1991 to June 1995. Since
July 1988, Mr. Van Fossen has also served as President of Nessoff Corporation,
a privately owned investment company. Mr. Van Fossen also serves as a director
of Cardinal Health, Inc.
Committee Membership: Audit
Class III -- Terms to Expire at the 1998 Annual Meeting
John S. Chamberlin, age 67 Director of the Company since 1989
Since 1988, Mr. Chamberlin has served as an advisor for investment
firms. In 1990 and 1991, he was Chief Executive Officer of N.J. Publishing,
Inc. He has been Senior Advisor to Mancuso & Co. since 1990, Chairman of Life
Fitness Co. since 1992, Chairman of WNS, Inc. since 1993, and a director of
Healthsouth Corporation since 1993.
Committee Memberships: Executive; Compensation and Organization
Joseph P. Flannery, age 63 Director of the Company since 1987
Mr. Flannery was a consultant to Clayton, Dubilier & Rice, Inc. from
September 1988 to December 1990. Mr. Flannery has been President, Chief
Executive Officer and Chairman of the Board of Directors of Uniroyal Holding,
Inc. since 1986. Mr. Flannery is also a director of Ingersoll Rand Company,
Kmart Corporation, Newmont Mining, Newmont Gold Company, Arvin Industries,
Inc., and APS Holding Corporation.
Committee Membership: Compensation and Organization (Chairman)
Horace Hagedorn, age 80 Vice Chairman of the Board of the Company since
May 1995 and Director of the Company since 1995
Mr. Hagedorn was named Chairman and Chief Executive Officer of Scotts'
Miracle-Gro in May 1995. Mr. Hagedorn founded Miracle-Gro Products in 1950 and
served as Chief Executive Officer of Miracle-Gro Products from 1985 until the
consummation of the Merger in May 1995. Horace Hagedorn is the father of James
Hagedorn. His philanthropic interests include the "Miracle-Gro Kids" program,
in which 50 needy fifth grade children are fully sponsored through a four-year
college scholarship. He serves as a trustee on the boards of the North Shore
University Hospital and the Institute for Community Development, both in
Manhasset, New York, and the board of the Buckley Country Day School in
Roslyn, New York. Mr. Hagedorn's recognitions include the "Man of the Year"
award from the National Lawn and Garden Distributors Association, and the
Distinguished Service Medal from the Garden Writers of America Association. He
was elected New York Regional Area "Entrepreneur of the Year" in 1993.
Committee Membership: Executive
Donald A. Sherman, age 45 Director of the Company since 1988
Mr. Sherman has been President of Waterfield Mortgage Company in Fort
Wayne, Indiana, since 1989. He also serves as a director of Union Acceptance
Corporation.
Committee Membership: Audit (Chairman)
Recommendation and Vote
Under Ohio law and the Company's Code of Regulations, the three nominees
for election in Class I receiving the greatest number of votes will be
elected.
Common Shares and shares of Convertible Preferred Stock represented by
the accompanying proxy card will be voted FOR the election of the above
nominees unless authority to vote for one or more nominees is withheld.
Shareholders may withhold authority to vote for the entire slate as nominated
or, by writing the name of one or more nominees in the space provided in the
proxy card, withhold the authority to vote for such nominee or nominees.
Common Shares and Convertible Preferred Stock as to which the authority to
vote is withheld will be counted for quorum purposes but will not be counted
toward the election of directors, or toward the election of the individual
nominees specified on the form of proxy.
Your Board of Directors recommends a vote FOR the election of the above
Class I nominees.
Committees and Meetings of the Board
The Board of Directors held six regularly scheduled or special meetings
during the fiscal year ended September 30, 1995 (the "1995 fiscal year"). The
Board of Directors has four standing committees: the Executive Committee, the
Audit Committee, the Compensation and Organization Committee and the
Nominating Committee. Each current member of the Board attended at least 75%
of the aggregate of the total number of meetings of the Board of Directors and
of the committees on which he or she served during the 1995 fiscal year or, in
the case of Messrs. Horace Hagedorn, John Kenlon and James Hagedorn, during
the period in which they were directors.
Executive Committee. The Executive Committee has authority, with certain
exceptions, to take all actions that may be taken by the full Board of
Directors. It may meet between regularly scheduled Board meetings to take such
action as is necessary for the operation of the Company. The Executive
Committee did not meet during the 1995 fiscal year.
Audit Committee. The Audit Committee reviews and approves the scope and
results of any outside audit of the Company and the fees therefor and makes
recommendations to the Board of Directors or management concerning auditing
and accounting matters and the selection of outside auditors. The Audit
Committee met six times during the 1995 fiscal year.
Compensation and Organization Committee. The Compensation and
Organization Committee reviews, considers and acts upon matters of salary and
other compensation and benefits of all officers and other employees of the
Company, and 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. The Compensation and Organization Committee
met four times during the 1995 fiscal year.
Nominating Committee. The Nominating Committee recommends policies on
the composition of the Board of Directors and nominees for membership on the
Board. The Nominating Committee did not meet during the 1995 fiscal year.
Compensation of Directors
Each director of the Company, other than any director employed by the
Company, receives a $25,000 annual retainer for Board and committee meetings
plus all reasonable travel and other expenses of attending such meetings.
Under the Company's 1992 Long Term Incentive Plan, directors, other than
those employed by the Company (the "Non-employee Directors"), receive an
annual grant on the first business day following the date of each annual
meeting of shareholders of options to purchase 4,000 Common Shares at an
exercise price equal to the fair market value of the underlying Common Shares
on the date of the grant. Options granted to Non-employee Directors become
exercisable six months after the date of grant and remain exercisable until
the earlier to occur of (i) the tenth anniversary of the date of grant or (ii)
the first anniversary of the date the Non-employee Director ceases to be a
member of the Company's Board of Directors.
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table shows, for the fiscal years ended September 30,
1995, 1994 and 1993, compensation awarded or paid to, or earned by, each
person serving as the Company's Chief Executive Officer during the 1995 fiscal
year and the three other most highly compensated executive officers of the
Company.
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation Awards
Name and Fiscal Salary Bonus Securities Underlying All Other
Principal Position Year ($) ($) Options/SARs(#) (1) Compensation($)
- ------------------ ------ ----------------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Tadd C. Seitz:
Chairman of the 1995 $379,500 $ 40,000 173,367 $ 3,383(2)
Board, Interim 1994 $362,500 $228,965 85,527(3) $ 3,270(2)
President and 1993 $341,725 $189,780 85,019 $ 3,270(2)
Chief Executive
Officer (4)
Theodore J. Host:
President, Chief 1995 $355,750 $ 0 110,857 $115,234(5)
Executive Officer 1994 $307,833 $196,650 54,277(3) $ 3,270(2)
and Chief Operating 1993 $283,750 $162,963 53,108 $ 3,270(2)
Officer (6)
Paul D. Yeager:
Executive Vice 1995 $212,025 $ 0 35,253 $ 3,383(2)
President and Chief 1994 $202,250 $125,000 17,252(3) $ 3,270(2)
Financial Officer 1993 $192,750 $115,103 18,739 $ 3,270(2)
J. Blaine McKinney:
Senior Vice 1995 $199,533 $ 0 35,819 $ 3,383(2)
President, 1994 $191,667 $105,000 20,818(3) $ 1,907(2)
Consumer Business 1993 $177,333 $ 87,365 35,409 $ 0
Group
Michael P. Kelty:
Senior Vice 1995 $175,917 $ 0 22,859 $ 3,383(2)
President, 1994 $156,917 $ 59,719 7,858 $ 3,270(2)
Professional 1993 $138,000 $ 58,158 7,830 $ 3,270(2)
Business Group
</TABLE>
- ---------------------------
(1) These numbers represent options for Common Shares granted pursuant to the
Company's 1992 Long Term Incentive Plan. See the table under "OPTION
GRANTS IN LAST FISCAL YEAR" for more detailed information on such options.
(2) Includes contributions made by the Company to the PSP.
(3) Reflects number of options actually granted with respect to the 1994
fiscal year. The Company has determined that the number of options
previously reported as granted with respect to the 1994 fiscal year was
incorrect.
(4) Mr. Seitz resigned as Chief Executive Officer of the Company effective as
of April 6, 1995. On February 23, 1996, Mr. Seitz resumed his former posts
as President and Chief Executive Officer of the Company on an interim
basis. He also serves as Chairman of the Board.
(5) Includes contribution in the amount of $3,383 made by the Company to the
PSP. In January, 1992, Mr. Host entered into an Employment Agreement with
the Company pursuant to which he agreed to purchase 45,454 of the
Company's Common Shares at $9.90 per share. The Internal Revenue Service
required Mr. Host to report additional compensation as income for tax
purposes, as a result of such purchase. The Compensation and Organization
Committee of the Company's Board of Directors agreed to reimburse Mr. Host
the sum of $111,851 to cover his increased tax liability.
(6) Mr. Host resigned as President and Chief Executive Officer of the Company
effective as of February 22, 1996. Mr. Host became Chief Executive Officer
of the Company effective as of April 6, 1995. He had been Chief Operating
Officer of the Company from October 1991 until April 6, 1995.
Grants of Options
The following table sets forth information concerning individual grants
of options made during the 1995 fiscal year to each of the executive officers
named in the Summary Compensation Table. The Company has never granted stock
appreciation rights.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
% of Potential Realizable
Number of Total Value at Assumed
Securities Options Annual Rates of Stock
Underlying Granted to Exercise Price Appreciation
Options Employees in Price Expiration for Option Term(1)
Name Granted(#) Fiscal Year ($/Share) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Tadd C. Seitz................. 87,840(2)(3) 13.10% $15.50 9/30/04 $856,396 $2,170,263
41,607(3)(4) 6.20% $16.25 11/03/02 $322,506 $ 773,474
43,920(3)(5) 13.90% $17.25 9/30/03 $412,696 $1,017,135
Theodore J. Host.............. 56,580(2)(3) 12.90% $15.50 9/30/04 $551,627 $1,397,922
25,987(3)(4) 3.90% $16.25 11/03/02 $201,432 $ 483,098
28,290(3)(5) 4.20% $17.25 9/30/03 $268,889 $ 662,707
Paul D. Yeager................ 18,000(2)(3) 2.70% $15.50 9/30/04 $175,491 $ 444,726
9,163(3)(4) 1.40% $16.25 11/03/02 $ 71,025 $ 170,340
8,090(3)(5) 1.20% $17.25 9/30/03 $ 76,893 $ 189,512
J. Blaine McKinney............ 15,000(2)(3) 2.20% $15.50 9/30/04 $146,243 $ 370,605
9,979(3)(4) 1.50% $16.25 11/03/02 $ 77,350 $ 185,510
10,840(3)(5) 1.60% $17.25 9/30/03 $103,031 $ 253,932
Michael P. Kelty.............. 15,000(2)(3) 2.20% $15.50 9/30/04 $146,243 $ 370,605
3,829(3)(4) 0.60% $16.25 11/03/02 $ 29,680 $ 71,181
4,030(3)(5) 1.30% $17.25 9/30/03 $ 38,304 $ 94,405
- --------------------
</TABLE>
(1) The amounts reflected in this table represent certain assumed rates of
appreciation only. Actual realized values, if any, on option exercises
will be dependent on the actual appreciation of the Common Shares of the
Company over the term of the options. There can be no assurances that
the Potential Realizable Values reflected in this table will be
achieved.
(2) These options were granted under the Company's 1992 Long Term Incentive
Plan and become exercisable in three approximately equal installments on
each of the first three anniversaries of the date of grant, subject to
the right of the Compensation and Organization Committee of the
Company's Board of Directors to accelerate the exercisability of such
options in its discretion.
(3) In the event of a "change in control" (as defined in the 1992 Long Term
Incentive Plan), each option will be canceled in exchange for a payment
in cash of an amount equal to the excess of the highest price paid (or
offered) for Common Shares during the preceding 30 trading days over the
exercise price for such option. Notwithstanding the foregoing, if the
Compensation and Organization Committee determines that the holder of
the option will receive a new award (or have his prior award honored) in
a manner which preserves its value and eliminates the risk that the
value of the award will be forfeited due to an involuntary termination,
no settlement will occur as a result of a change in control. In the
event of termination of employment by reason of retirement, long-term
disability or death, the options may thereafter be exercised in full for
a period of 5 years, subject to the stated term of the options. The
options are forfeited if the holder's employment is terminated for
cause. In the event an option holder's employment is terminated for any
reason other than retirement, long-term disability, death or cause, any
exercisable options held by him at the date of termination may be
exercised for a period of 30 days.
(4) These options (or a percent thereof) were originally to be earned under
the 1992 Long Term Incentive Plan based upon the Company's performance
during the 1995 fiscal year. However, on December 13, 1994, the
Compensation and Organization Committee of the Company's Board of
Directors approved the grant of 100% of the Common Shares subject to
these options as of September 30, 1994.
(5) These options (or a percent thereof) were originally to be earned under
the 1992 Long Term Incentive Plan based upon the Company's performance
during the 1996 fiscal year. However, on December 13, 1994, the
Compensation and Organization Committee of the Company's Board of
Directors approved the grant of 100% of the Common Shares subject to
these options as of September 30, 1994.
Option Exercises and Holdings
The following table sets forth information with respect to unexercised
options held as of the end of the 1995 fiscal year by each of the executive
officers named in the Summary Compensation Table.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number
of Securities Number of Securities Underlying Value of Unexercised
Underlying Unexercised Options at In-the-Money
Options Value FY-End (#) Options at FY-End($)(1)
Name Exercised Realized($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tadd C. Seitz.............. 0 - - 127,389 216,524 $ 733,770 $1,264,758
Theodore J. Host........... 0 - - 216,222 138,384 $ 2,126,785 $ 808,291
Paul D. Yeager............. 0 - - 27,538 43,706 $ 159,089 $ 256,788
J. Blaine McKinney......... 0 - - 40,666 51,380 $ 235,299 $ 295,040
Michael P. Kelty........... 0 - - 11,722 26,825 $ 67,523 $ 162,129
- ------------------------------------
</TABLE>
- --------------------------
(1) "Value of Unexercised In-the-Money Options at FY-End" is based upon the
fair market value of the Company's Common Shares on September 30, 1995
($22.125) less the exercise price of in-the-money options at the end of
the 1995 fiscal year.
Pension Plans
The Company maintains a tax-qualified non-contributory defined benefit
pension plan (the "Pension Plan"). All employees of the Company and its
subsidiaries (except for Hyponex Corporation, Scotts-Sierra Horticultural
Products Company, Republic Tool and Manufacturing Corp. and their respective
subsidiaries) are eligible to participate upon meeting certain age and service
requirements. The following table shows the estimated annual benefits
(assuming payment made in the form of a single life annuity) payable upon
retirement at normal retirement age (65 years of age) to an employee in
specified compensation and years of service classifications.(footnote #1)
- --------
(footnote #1)
The Internal Revenue Code of 1986, as amended (the "Code"), places
certain limitations on the annual pension benefits which can be paid from the
Pension Plan. Such limitations are not reflected in the table. This table
reflects the total aggregate benefits payable annually upon retirement under
both the Pension Plan and The O.M. Scott & Sons Company Excess Benefit Plan
(which has been assumed by and is maintained by the Company) (the "Excess
Benefit Plan"), which is discussed below. The Pension Plan and the Excess
Benefit Plan require an offset of 1.25% of the Social Security primary
insurance amount ("PIA") for each year of service and such amount has been
deducted from the figures in the table. The PIA used in developing the figures
in the table is $13,764.00. Thus, the offset is $5,161.50 for a person with 30
years of service. The maximum possible offset is $6,882.00 for a person with
40 years of service.
- --------
<TABLE>
PENSION PLANS TABLE
Annualized
Average Years of Service
Final Pay 10 15 20 25 30
__________________________________________________________________________________________
<C> <C> <C> <C> <C> <C>
$ 100,000 $13,201.50 $19,802.25 $26,403.00 $33,003.75 $39,604.50
250,000 35,701.50 53,552.25 71,403.00 89,253.75 107,104.50
500,000 73,201.50 109,802.25 146,403.00 183,003.75 219,604.50
750,000 110,701.50 166,052.25 221,403.00 276,753.75 332,104.50
1,000,000 148,201.50 222,302.25 296,403.00 370,503.75 444,604.50
1,250,000 185,701.50 278,552.25 371,403.00 464,253.75 557,104.50
</TABLE>
Monthly benefits under the Pension Plan upon normal retirement (age 65)
are based upon an employee's average final pay and years of service, and are
reduced by 1.25% of the employee's PIA times the number of years of such
employee's service. Average final pay is the average of the 60 highest
consecutive months' compensation during the 120 months prior to retirement.
Pay includes all earnings and a portion of sales incentive payments,
management incentive payments and executive incentive payments, but does not
include earnings in connection with foreign service, the value of a company
car, separation or other special allowances and commissions. Additional
provisions for early retirement are included.
At September 30, 1995, the credited years of service (including certain
prior service with ITT Corporation, from whom the Company's predecessor was
acquired in 1986) and the 1995 annual covered compensation for purposes of the
Pension Plan and the Excess Benefit Plan of the five executive officers of the
Company named in the Summary Compensation Table were as follows:
Covered
Years of Service Compensation
------------------------------------------------------
Mr. Seitz 19 years 9 months $377,000
Mr. Host 3 years 11 months $368,750
Mr. Yeager 26 years 1 month $207,050
Mr. McKinney 3 years 4 months $194,433
Dr. Kelty 16 years 3 months $175,167
Effective October 1, 1993, the Excess Benefit Plan was established. The
Excess Benefit Plan provides additional benefits to participants in the
Pension Plan whose benefits are reduced by limitations imposed under Sections
415 and 401(a)(17) of the Code. Under the Excess Benefit Plan, executive
officers and certain key employees will receive, at the same time and in the
same form as benefits paid under the Pension Plan, additional monthly benefits
in an amount which, when added to the benefits paid to the participant under
the Pension Plan, will equal the benefit amount such participant would have
earned but for the limitations imposed by the Code to the extent such
limitations apply.
Employment Agreements and Termination of Employment and Change-in-Control
Arrangements
The Company entered into an Employment Agreement with Mr. Host effective
October 1991 (the "Host Agreement") providing for his continued employment as
President and Chief Operating Officer of the Company until December 1996 at an
annual base salary of at least $270,000 per year, plus incentive bonus under
The Scotts Company Executive Annual Incentive Plan. In connection with the
entering into of his Employment Agreement, pursuant to a Stock Option Plan and
Agreement dated as of January 9, 1992, Mr. Host was granted options, which
vested one-third on the date of grant and one-third on each of the first and
second anniversaries of his date of employment, to purchase 136,364 Common
Shares at a purchase price of $9.90 per share. These options expire on January
8, 2002.
Mr. Host resigned his positions with the Company on February 22, 1996.
The Company intends to negotiate a severance package with Mr. Host based on
the terms of the Host Agreement.
Certain Relationships and Related Transactions
The discussion of the consideration received by Messrs. Horace Hagedorn,
John Kenlon and James Hagedorn included in "BENEFICIAL OWNERSHIP OF SECURITIES
OF THE COMPANY - Miracle-Gro Merger Agreement" above is incorporated by
reference herein.
<PAGE>
Performance Graph
The following line graph compares the yearly percentage change in the
Company's cumulative total stockholder return (as measured by dividing (i) the
sum of (A) the cumulative amount of dividends for the measurement period,
assuming dividend reinvestment, and (B) the difference between the price of
the Company's Common Shares at the end and the beginning of the measurement
period; by (ii) the price of the Company's Common Shares at the beginning of
the measurement period) against the cumulative return of the Standard & Poor's
500 Composite Stock Index ("S&P 500 Comp") and of an index comprised of the
common stock of Duracell International, Inc., First Brands Corp., Lesco Inc.,
Newell Co., Rubbermaid Inc. and Stanley Works (the "Peer Group") for the
period from January 31, 1992 to September 30, 1995. The Company's Common
Shares became registered under Section 12 of the Exchange Act on January 31,
1992. The comparison assumes $100 was invested on January 31, 1992 in the
Company's Common Shares and in each of the foregoing indices and assumes
reinvestment of dividends.
[GRAPHIC OMITTED]
The omitted line graph is represented by the following table:
IPO-1/31/92 1992 1993 1994 1995
----------- ------ ------ ------ ------
THE SCOTTS COMPANY .............. 100 82.9 96.72 81.58 116.45
S&P 500 INDEX ................... 100 104.4 117.91 122.26 158.62
PEER GROUP ...................... 100 90.31 97.77 104.93 112.73
<PAGE>
Report of the Compensation and Organization Committee
Notwithstanding anything to the contrary set forth in the Company's
previous filings under the Securities Act or the Exchange Act that might
incorporate future filings, including this Proxy Statement, in whole or in
part, this Report and the graph set forth above under "ELECTION OF DIRECTORS -
Performance Graph" shall not be incorporated by reference into any such
filings.
The Compensation and Organization Committee of the Board of Directors of
the Company (the "Committee") is comprised of three outside directors, none of
whom is or was formerly an officer of the Company. During the 1995 fiscal
year, none of the Company's executive officers served on the board of any
entity of which a Committee member was an executive officer or on the
compensation committee of any entity of which any director of the Company was
an executive officer. The Committee has retained outside legal counsel and
compensation consultants.
Role of the Compensation and Organization Committee
The Committee has the oversight responsibility for the Company's
executive compensation program. The Committee reviews the general compensation
philosophy of the Company and, in consideration thereof, determines the forms
and terms of compensation to be paid to the Chairman, the Chief Executive
Officer and the executive officers of the Company who report to the Chief
Executive Officer. The Committee annually reviews the performance of the Chief
Executive Officer and determines the amount of salary adjustment, if any, he
should receive. In addition, the Committee reviews the performance of the
executive officers reporting to the Chief Executive Officer as well as his
compensation adjustment recommendations for those executive officers. The
Committee oversees the operation of the Company's Executive Annual Incentive
Plan (the "Bonus Plan") by evaluating and approving the net income growth
target to be met by the Company during the fiscal year and targeting the
levels at which bonuses will be paid. Payouts are adjusted according to a
scale established by the compensation consultant for performance results that
deviate from target net income growth. At the end of each fiscal year, the
Committee determines the extent to which the net income growth target has been
met or exceeded by the Company and awards bonuses accordingly. In addition,
the Committee is charged with administering the Company's 1992 Long Term
Incentive Plan (the "1992 LTIP") and makes awards of stock options pursuant
thereto.
The Committee provides advice to the management of the Company on issues
regarding management development and the appointment of executives to
positions reporting directly to the Chief Executive Officer. In this regard,
the Committee annually reviews executive continuity plans of the Company.
Compensation Philosophy
In designing the compensation program for the executive officers of the
Company who report to the Chief Executive Officer, the Committee follows the
belief that the amounts of compensation received by the executive officers
should reflect not only the value created for shareholders during the fiscal
year but also the extent to which the Company's short-term and long-term
strategic goals and objectives for net income growth have been advanced. The
compensation program has been designed to achieve the following objectives:
Incentive compensation should be meaningfully related to the value created
for shareholders. The Committee has linked executive performance to
corporate performance by making awards under the Bonus Plan contingent
based upon the Company's achievement of the net income growth target. In
light of the historic performance of the S & P 500 companies, the Committee
establishes an ongoing target for the Company's net income growth per year
(the "Net Income Growth Target").
The various other elements of the compensation program should also support
the short-term and long-term strategic goals and objectives of the Company,
mentioned above, by rewarding the Company's executive officers based upon
the achievement of these goals.
The various elements of the compensation program should assist the Company
in recruiting, maintaining and motivating the executive talent required to
meet the Company's strategic goals.
Performance should be a key determinant of pay.
Minimum stock ownership must be attained by all corporate officers and
directors. This requirement is based on tenure and level within the
Company. Corporate officers and directors have two years following
appointment to comply with these guidelines.
During 1993, Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), was enacted to limit corporate deductions for
compensation paid to a publicly-held corporation's five most highly
compensated executive officers to $1 million per year per executive officer,
unless certain requirements (relating to "performance-based compensation") are
met. The Company has begun to review its existing compensation plans in light
of the final regulations under Section 162 (m) issued by the Internal Revenue
Service in December of 1995, for the purpose of ensuring compliance.
Committee Activity During Fiscal 1995
The Committee, representing the Board of Directors, managed the
transition of the Chief Executive Officer responsibilities from Tadd C. Seitz
to Theodore J. Host, who had served as Chief Operating Officer since October
1991. The Committee, Mr. Seitz and Mr. Host established a transition plan
which was implemented at the Company's Annual Meeting of Shareholders on April
6, 1995, whereby Mr. Seitz remains Chairman of the Board of the Company and an
employee of the Company until he retires in July 1996. The Committee also
consulted with its independent compensation consultant regarding the
compensation programs for both executives.
Based on the recommendation of its compensation consultant, the
Committee confirmed that for the 1996 fiscal year, the compensation program
should continue salary and Bonus Plan targets at the competitive 50th
percentile of base salaries and bonus payments for executive officers in
similar positions in corporations within the compensation consultant's data
base with such data then being adjusted to reflect the Company's annual
revenue. The comparative group of companies used to calculate base salaries
and bonuses consisted of approximately 425 companies (the "Compensation
Comparative Group") in a proprietary data base maintained by the Company's
compensation consultant. The Company is not privy to the identity of these
companies but has been advised that they represent a broad cross section of
general industry and they are comparable to the Company as to sales volumes
and net income growth performance. The Company believes some but not all of
the companies in the Peer Group identified in the Performance Graph are
included in the Compensation Comparative Group.
The compensation consultant recommended and the Committee approved for
1996 the following elements of the Company's executive compensation program:
The Bonus Plan has been designed to pay out based on year-to-year growth
in net income before accounting changes and extraordinary items. The
Committee recognizes that accounting changes often adversely affect the
reporting of year-to-year changes in net income. The Committee established
a net income measure that assures accurate comparability of year-to-year
net income growth when considering the impact of acquisitions, mergers and
dispositions. Payouts are adjusted according to a scale established by the
compensation consultant for performance results that deviate from the Net
Income Growth Target. Executives responsible for the business units of the
Company may have up to 25% of their target bonus based upon the
year-to-year improvement of the "contribution to profit" results of their
specific business unit. Individual awards may be adjusted up or down by the
Committee by up to 15% after consideration of the subjective evaluation by
the Incentive Review Committee (comprised of the Chief Executive Officer,
the Vice President, Human Resources and the Chief Financial Officer) of an
individual's performance.
Grants of stock options under the 1992 LTIP are set at the 75th percentile
of stock option grants made to executive officers in similar positions in a
group of comparative manufacturing and consumer products companies
identified by the compensation consultant with compensation data adjusted
to reflect the Company's annual revenue. The comparative companies are a
subset of the Compensation Comparative Group. All such grants are to be in
the form of non-qualified stock options with exercise prices equal to the
closing "asked" price of the Company's Common Shares on the date of grant.
In January, 1992, Mr. Host entered into an Employment Agreement
with the Company pursuant to which he agreed to purchase 45,454 of the
Company's Common Shares at $9.90 per share. The Internal Revenue Service
required Mr. Host to report additional compensation as income for tax
purposes, as a result of such purchase. The Committee agreed to reimburse Mr.
Host the sum of $111,851 to cover his increased tax liability.
Salary Adjustments, Bonus Awards and Stock Option Grants During the 1995
Fiscal Year
Salary Adjustments. Continuing the Company's philosophy of strengthening
the performance-related pay components, base salary merit increases for 1995
for executive officers as a group were an aggregate 3%. Based on the
recommendation of the compensation consultant and the continuing low rate of
inflation, the Committee determined that a 3% merit increase target was
sufficient to maintain competitive positioning of base salaries of the
Company's executive officers at the 50th percentile of the Compensation
Comparative Group.
Effective January 1, 1995, the Committee increased the base salary
component of the compensation of Mr. Seitz, Chairman and then Chief Executive
Officer, and Mr. Host, President and then Chief Operating Officer, of the
Company, by 5%. These increases were based on the Company's performance in
fiscal 1994, including the successful integration of Grace-Sierra
Horticultural Products Company acquired by the Company in December 1993. The
Committee also increased Mr. Host's salary by 20% in April 1995 to reflect his
new responsibilities as Chief Executive Officer. According to information
provided by the compensation consultant, this later increase places Mr. Host's
salary at the low end of the competitive range for chief executive officers
based on the previously discussed data base maintained by the compensation
consultant.
Bonuses Granted Pursuant to the Bonus Plan. The Company's net income
growth, when measured against the Net Income Growth Target, did not warrant
the payment of bonuses to executives. However, one executive did receive a
bonus payment based upon business unit performance.
Special Bonus. In December, 1995, the Committee awarded a special
bonus of $40,000 to Mr. Seitz. The bonus was awarded in light of Mr. Seitz's
planned retirement in July, 1996, in order to increase his 1995 earnings to
be used in calculating his monthly pension benefits.
Stock Options. Based on the recommendation of the Company's compensation
consultant, the Committee determined the aggregate value of the awards to be
made to each executive officer under the 1992 LTIP for the 1995 fiscal year.
The number of options granted to each executive officer was then determined
based upon the Black-Scholes valuation of the value of an option with a
ten-year term and set at the 75th percentile of the stock option grants target
discussed above. Grants made in fiscal year 1995 to Mr. Seitz and Mr. Host
exceeded the 75th percentile for their respective offices but were at the
level recommended by the Committee's compensation consultant. The Committee
has determined that future grants for the Chief Executive Officer will be set
at the 75th percentile as previously discussed. All options granted were
non-qualified stock options and they were granted at the closing "asked" price
of the Company's Common Shares on the date of grant. Stock option grants made
to Mr. Seitz and Mr. Host as well as the three other most highly compensated
executive officers are reflected in the "Option Grants in Last Fiscal Year"
table on page 13 of this Proxy Statement.
Submitted by the Compensation and Organization Committee of the Company:
Joseph P. Flannery, Chairman, John S. Chamberlin and John M. Sullivan
Proposal No. 2
PROPOSAL TO APPROVE THE ADOPTION OF
THE SCOTTS COMPANY 1996 STOCK OPTION PLAN
The Board of Directors of the Company (the "Board") unanimously
recommends the approval of the adoption of The Scotts Company 1996 Stock
Option Plan (the "Plan").
General
The Board adopted the Plan on February 12, 1996, subject to the approval
of the Company's shareholders. The Board believes that the Plan will further
assist the Company in attracting, retaining and motivating the best qualified
directors, officers and other key employees, and will further enhance the
long-term mutuality of interest between the Company's shareholders and its
directors, officers and key employees. The principal features of the Plan are
summarized below, but such summary is qualified in its entirety by reference
to the full text of the Plan, which is attached as Exhibit A.
Under the Plan, the Compensation and Organization Committee (the
"Committee") of the Board may grant options to officers and other key
employees of the Company and its subsidiaries. The number of grantees and the
number of Common Shares subject to options awarded to each grantee may vary
from year to year. The maximum number of Common Shares for which an individual
may receive awards of options is limited to 150,000 Common Shares over a
one-year period. As of the date of this Proxy Statement, no determination has
been made regarding the identity of the officers and key employees to whom
awards of options may be made under the Plan or the number and type of such
awards that will be made to any such officer or key employee. The Company
estimates that approximately 100 employees of the Company and its subsidiaries
will be eligible to receive options under the Plan, including the current
Chief Executive Officer and the three other most highly compensated current
executive officers named in the Summary Compensation Table.
Additionally, each year, on the first business day following the date of
the annual meeting of shareholders, each Non-employee Director will
automatically receive an option to acquire 4,000 Common Shares at the fair
market value thereof on the date the option is granted.
The maximum number of Common Shares that may be issued under the Plan is
1,500,000. The Common Shares may be unissued shares or treasury shares.
Pursuant to the Merger Agreement with the Miracle-Gro Shareholders, the
Company has agreed that it will use reasonable efforts to ensure that employee
stock options are funded with Common Shares repurchased in the open market
rather than with newly-issued Common Shares. If there is a stock split, stock
dividend, recapitalization, or other relevant change affecting the Company's
Common Shares, appropriate adjustments will be made by the Committee in the
number of shares that may be issued in the future and in the number of shares
and price under all outstanding grants made before the event. If Common Shares
under an option are not issued, those Common Shares will again be available
for inclusion in future grants. The awards authorized under the Plan are
subject to applicable tax withholding by the Company.
Grants Under the Plan
Options for Employees. The Committee may grant employees options
qualifying as incentive stock options under Section 422 of the Code and
non-qualified stock options. The exercise price of either a non-qualified
stock option or an incentive stock option will be equal to the fair market
value of the Common Shares on the date of grant. With respect to any
individual who owns 10% or more of the stock of the Company or one of its
subsidiaries (a "10% Owner"), the exercise price for an incentive stock option
will be equal to 110% of the fair market value of the Common Shares on the
date of grant. For purposes of the Plan, fair market value means, on any date,
the closing price of the Common Shares as reported on the New York Stock
Exchange (or on such other recognized market or quotation system on which the
trading prices of the Common Shares are traded or quoted at the relevant time)
on such date. On March 8, 1996, the fair market value of the Common Shares was
$16 1/8. To exercise an option, an employee may pay the exercise price in
cash, or if permitted by the Committee, by delivering other Common Shares. The
Committee may provide that if an employee exercises an option by surrendering
Common Shares, the employee will be granted a new option (a "Reload Option")
for a number of Common Shares equal to the number so surrendered, with such
other terms and conditions as the Committee determines.
The term of each option will be fixed by the Committee but may not
exceed ten years from the date of grant. With respect to a 10% Owner, the term
of any incentive stock option may not exceed five years from the date of
grant. The Committee will determine the time or times when each option may be
exercised. Options may be made exercisable in installments, and the
exercisability of options may be accelerated by the Committee. In the event
that the Committee does not specify a specific exercise schedule at the time
of grant, each option will become exercisable in three approximately equal
annual installments beginning on the first anniversary of the date of grant.
Options for Non-employee Directors. Under the Plan, each Non-employee
Director who is a member of the Board on the first business day after each
annual meeting of shareholders during the term of the Plan will receive an
automatic annual grant of a non-qualified stock option to purchase 4,000
Common Shares. The exercise price for each such option will be the fair market
value of a Common Share, on the date the option is granted. Each such option
will become exercisable six months after the date it is granted, and will
remain exercisable until the earlier of (i) the tenth anniversary of the date
of grant or (ii) the first anniversary of the date the director ceases to be a
member of the Board; provided, however, that all options will be canceled on
the date a director ceases to be a member of the Board if the director leaves
the Board after having been convicted of, or pled guilty or nolo contendere
to, a felony.
Termination of Employment. In the event of termination of employment by
reason of retirement, long-term disability or death, any option held by an
employee may thereafter be exercised in full for a period of five years (or
such shorter period as the Committee will determine at grant), subject in each
case to the stated term of the option. In the case of an incentive stock
option, this five-year period is shortened to three months after termination
of employment by reason of retirement and to one year after termination of
employment by reason of death or long-term disability. In the event of an
employee's termination of employment for cause, any options held by him will
be forfeited. In the event of an employee's termination of employment for any
reason other than retirement, long-term disability, death or cause, any
options held by him will be exercisable, to the extent exercisable at the date
of termination, for a period of thirty days.
Change in Control Provisions. The Plan provides that, except as provided
below, in the event of a "Change in Control" (as defined in the Plan), each
option granted to an employee will be canceled in exchange for cash in an
amount equal to the excess of the highest price offered in conjunction with
the Change in Control or paid for Common Shares during the preceding
thirty-day period over the exercise price for such option. Notwithstanding the
foregoing, if the Committee determines that the grantee of such award will
receive a new award (or have his prior award honored) in a manner which
preserves its value and eliminates the risk that the value of the award will
be forfeited due to involuntary termination, no cash settlement will occur as
a result of a Change in Control. Options granted to a non-employee director
will be canceled upon a Change in Control for a payment in cash unless the
Common Shares remain publicly traded, and the director remains a director of
the Company, immediately following the Change in Control. If any cash payment
would result in the optionee incurring potential liability under Section 16(b)
of the Exchange Act, the cash payment will be deferred until the first time at
which such cash payment can occur without subjecting the individual to such
potential liability.
Other Information. Awards under the Plan are not transferable except by
will or the laws of descent and distribution and may be exercised only by the
grantee during his or her lifetime. The Board may terminate or suspend the
Plan at any time but such termination or suspension will not affect any
options then outstanding under the Plan. Unless terminated by action of the
Board, the Plan will continue in effect until February 12, 2006, but awards
granted prior to such date will continue in effect until they expire in
accordance with their terms. The Board or the Committee may also amend the
Plan as it deems advisable; however, it is presently intended that all
material amendments to the Plan will be submitted to the shareholders for
their approval to the extent required by Rule 16b-3 promulgated under the
Exchange Act as time to time in effect and the Code. The Committee may amend
the term of any award or option theretofore granted, retroactively or
prospectively, but no such amendment will adversely affect any such award or
option without the holder's consent. No amendment which affects the provisions
of the Plan pertaining to the options granted to non-employee directors may be
adopted within six months of any prior amendment relating to such provisions
of the Plan.
Federal Income Tax Consequences
The following is a brief summary of the principal federal income tax
consequences to the Company and participants in the Plan based on federal
income tax laws currently in effect.
Non-qualified Stock Options. An individual will not recognize income
upon the grant of a non-qualified stock option. The individual may recognize
ordinary income upon the exercise of a non-qualified stock option, in which
event the Company will receive a tax deduction equal to the amount of income
recognized, provided that any applicable withholding requirements are
satisfied. Generally, the amount of such ordinary income and deduction is the
excess, if any, of the fair market value on the exercise date of the Common
Shares acquired over the aggregate exercise price paid. Any ordinary income
recognized by an individual upon the exercise of a non-qualified stock option
will increase his tax basis for the Common Shares received. Upon a subsequent
sale or exchange of such Common Shares, the individual will recognize capital
gain or loss to the extent of the difference between the selling price of such
Common Shares and his tax basis in such Common Shares. Such gain or loss will
be long-term or short-term capital gain or loss, depending on the individual's
holding period for such Common Shares.
If the holder of a non-qualified stock option pays the exercise price,
in whole or in part, with previously acquired Common Shares, the holder will
recognize ordinary income in the amount by which the fair market value of the
Common Shares received exceeds the exercise price. The individual will not
recognize gain or loss upon delivery of the previously acquired Common Shares
to the Company. The Common Shares received by the holder equal in number to
the previously acquired Common Shares exchanged therefor will have the same
basis and holding period for capital gain purposes as the previously acquired
Common Shares. Common Shares received by the holder of the non-qualified stock
option in excess of the number of previously acquired Common Shares will have
a basis equal to the fair market value of such additional shares as of the
date ordinary income is recognized. The holding period for such additional
Common Shares will commence as of the date of exercise.
Incentive Stock Options. An employee will not recognize income upon
either the grant of an incentive stock option or upon the exercise of the
incentive stock option. The employee will recognize gain or loss, depending on
his basis in the Common Shares (which is generally equal to the exercise price
paid for the Common Shares), upon the sale or other disposition of the Common
Shares acquired upon exercise. If certain statutory holding periods are met,
such gain or loss will be long-term capital gain or loss and the Company will
not be entitled to any Federal income tax deduction. If the holding periods
are not met, the employee may be required to recognize ordinary income and the
Company will be entitled to a tax deduction equal to the amount of ordinary
income, if any, recognized, provided that applicable withholding tax
requirements are satisfied.
Incentive stock options will be treated as non-qualified stock options
to the extent that the aggregate fair market value of the Common Shares
(determined at the time the options are granted) with respect to which
incentive stock options are exercisable for the first time by an individual
during a calendar year (whether as a result of acceleration of exercisability
or otherwise) exceeds $100,000.
An employee who exercises an incentive stock option may be subject to an
alternative minimum tax since, for purposes of the alternative minimum tax,
the option will be treated as a non-qualified stock option. Accordingly, the
taxable event for alternative minimum tax purposes will generally occur on the
exercise of the option.
Other Matters. The Plan is intended to comply with Section 162(m) of the
Code which was enacted as part of the Omnibus Budget Reconciliation Act of
1993. Section 162(m) of the Code prohibits a publicly-held corporation, such
as the Company, from claiming a deduction on its federal income tax return for
compensation in excess of $1 million paid for a given fiscal year to the chief
executive officer (or person acting in that capacity) at the close of the
corporation's fiscal year and the four most highly compensated officers of the
corporation, other than the chief executive officer, at the end of the
corporation's fiscal year. Upon the approval of the Plan by the shareholders,
options awarded under the Plan will qualify as performance-based compensation,
as defined in Code Section 162(m) and the regulations issued by the Department
of the Treasury under such section. As such, the income attributable to such
options is not subject to the deduction limit of Code Section 162(m).
Recommendation and Vote
To be approved, this proposal requires the affirmative vote of the
holders of a majority of the voting stock of the Company present in person or
represented by proxy at the Annual Meeting and entitled to vote thereon.
The Board of Directors recommends you vote FOR the approval of the
adoption of The Scotts Company 1996 Stock Option Plan and your proxy will be
so voted unless you specify otherwise. Abstentions on this proposal will be
counted for quorum purposes but not voted.
INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed Coopers & Lybrand
L.L.P. as the Company's independent auditors for the 1996 fiscal year. Coopers
& Lybrand L.L.P., a certified public accounting firm, has served as the
Company's independent auditors since 1986.
A representative of Coopers & Lybrand L.L.P. is expected to be present
at the Annual Meeting to respond to appropriate questions and to make such
statements as he may desire.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Proposals by shareholders intended to be presented at the 1997 Annual
Meeting of Shareholders must be received by the Secretary of the Company no
later than November 22, 1996, to be included in the Company's proxy, notice of
meeting and proxy statement relating to such meeting and should be mailed to
The Scotts Company, 14111 Scottslawn Road, Marysville, Ohio 43041, Attention:
Office of the Secretary.
OTHER BUSINESS
The Board of Directors is aware of no other matter that will be
presented for action at the 1996 Annual Meeting. If any other matter requiring
a vote of the shareholders properly comes before the Annual Meeting, the
persons authorized under management proxies will vote and act according to
their best judgments in light of the conditions then prevailing.
<PAGE>
ANNUAL REPORT
The Company's 1995 Annual Report to Shareholders containing audited
financial statements for the 1995 fiscal year is being mailed to all
shareholders of record with this Proxy Statement.
Tadd C. Seitz
Chairman, Interim President and Chief
Executive Officer
---------------------------------
Exhibit A
THE SCOTTS COMPANY
1996 STOCK OPTION PLAN
SECTION l.
PURPOSE
The purpose of the Plan is to foster and promote the long-term financial
success of the Company and materially increase shareholder value by (a)
encouraging and providing for the acquisition of an ownership interest in the
Company by Employees and Eligible Directors, and (b) enabling the Company to
attract and retain the services of an outstanding management team upon whose
judgment, interest, and special effort the successful conduct of its
operations is largely dependent.
SECTION 2.
DEFINITIONS
2.1 Definitions. Whenever used herein, the following terms shall
have the respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Award" means any Option.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" means (i) the willful failure by a Participant to perform
substantially his duties as an Employee of the Company (other than due to
physical or mental illness) after reasonable notice to the Participant of such
failure, (ii) the Participant's engaging in serious misconduct that is
injurious to the Company or any Subsidiary, (iii) the Participant's having
been convicted of, or entered a plea of nolo contendere to, a crime that
constitutes a felony or (iv) the breach by the Participant of any written
covenant or agreement with the Company or any Subsidiary not to disclose any
information pertaining to the Company or any Subsidiary or not to compete or
interfere with the Company or any Subsidiary.
(e) "Change in Control" means the occurrence of any of the following
events:
(i) the members of the Board at the beginning of any consecutive
twenty-four calendar month period (the "Incumbent Directors") cease for
any reason other than due to death to constitute at least a majority of
the members of the Board, provided that any director whose election, or
nomination for election by the Company's shareholders, was approved by a
vote of at least a majority of the members of the Board then still in
office who were members of the Board at the beginning of such
twenty-four calendar month period, shall be treated as an Incumbent
Director; or
(ii) any "person," including a "group" (as such terms are used in
Sections 13(d) and 14(d)(2) of the Act, but excluding the Company, any
of its Subsidiaries, or any employee benefit plan of the Company or of
any of its Subsidiaries,) is or becomes the "beneficial owner" (as
defined in Rule 13(d)(3) under the Act), directly or indirectly, of
securities of the Company representing more than 49% of the combined
voting power of the Company's then outstanding securities; or
(iii) the shareholders of the Company shall approve a definitive
agreement (1) for the merger or other business combination of the
Company with or into another corporation, a majority of the directors of
which were not directors of the Company immediately prior to the merger
and in which the shareholders of the Company immediately prior to the
effective date of such merger own less than 50% of the voting power in
such corporation; or (2) for the sale or other disposition of all or
substantially all of the assets of the Company; or
(iv) the purchase of Stock pursuant to any tender or exchange
offer made by any "person," including a "group" (as such terms are used
in Sections 13(d) and l4(d)(2) of the Act), other than the Company, any
of its Subsidiaries, or an employee benefit plan of the Company or of
any of its Subsidiaries, for more than 49% of the Stock of the Company.
(f) "Change in Control Price" means the highest price per share of Stock
offered in conjunction with any transaction resulting in a Change in Control
(as determined in good faith by the Committee if any part of the offered price
is payable other than in cash) or, in the case of a Change in Control
occurring solely by reason of a change in the composition of the Board, the
highest Fair Market Value of the Stock on any of the 30 trading days
immediately preceding the date on which a Change in Control occurs.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" means the Compensation and Organization Committee of the
Board which shall have the meaning ascribed to a "compensation committee" in
Section 1.162-27(c)(4) of the final regulations promulgated under Section
162(m) of the Code and which shall consist of three or more members, each of
whom shall be (i) a person from time to time permitted by the rules
promulgated under Section 16 of the Act in order for grants of Awards to be
exempt transactions under said Section 16 and (ii) receiving remuneration in
no other capacity than as a director, except as permitted under Section
1.162-27(e)(3) of the final regulations promulgated under Section 162(m) of
the Code and the rulings thereunder.
(i) "Company" means The Scotts Company, an Ohio corporation, and any
successor thereto.
(j) "Director Option" means a Nonstatutory Stock Option granted to each
Eligible Director pursuant to Section 6.7 without any action by the Board or
the Committee.
(k) "Disability" means the inability of the Participant to perform his
duties for a period of at least six months due to a physical or medical
infirmity. Notwithstanding the foregoing, with respect to Incentive Stock
Options, the term "Disability" shall be defined as such term is defined in
Section 22(e)(3) of the Code.
(l) "Eligible Director" means, on any date, a person who is serving
as a member of the Board and who is not an Employee.
(m) "Employee" means any officer or other key executive and
management employee of the Company or of any of its Subsidiaries.
(n) "Fair Market Value" means, on any date, the closing price of the
Stock as reported on the New York Stock Exchange (or on such other recognized
market or quotation system on which the trading prices of the Stock are traded
or quoted at the relevant time) on such date. In the event that there are no
Stock transactions reported on the New York Stock Exchange (or such other
market or system) on such date, Fair Market Value shall mean the closing price
on the immediately preceding date on which Stock transactions were so
reported.
(o) "Option" means the right to purchase Stock at a stated price for a
specified period of time. For purposes of the Plan, an Option may be either
(i) an "Incentive Stock Option" (ISO) within the meaning of Section 422 of the
Code or (ii) a "Nonstatutory Stock Option" (NSO) which does not qualify for
treatment as an "Incentive Stock Option."
(p) "Participant" means any Employee designated by the Committee to
participate in the Plan.
(q) "Plan" means The Scotts Company 1996 Stock Option Plan, as in effect
from time to time.
(r) "Retirement" means termination of a Participant's employment on or
after the normal retirement date or, with the Committee's approval, on or
after any early retirement date established under any retirement plan
maintained by the Company or a Subsidiary in which the Participant
participates.
(s) "Stock" means the Common Shares, without par value, of the
Company.
(t) "Subsidiary" means any corporation or partnership in which the
Company owns, directly or indirectly, 50% or more of the total combined voting
power of all classes of stock of such corporation or of the capital interest
or profits interest of such partnership.
2.2 Gender and Number. Except when otherwise indicated by the context,
words in the masculine gender used in the Plan shall include the feminine
gender, the singular shall include the plural, and the plural shall include
the singular.
SECTION 3.
ELIGIBILITY AND PARTICIPATION
Except as otherwise provided in Section 6.7, the only persons eligible
to participate in the Plan shall be those Employees selected by the Committee
as Participants.
SECTION 4.
POWERS OF THE COMMITTEE
4.l Power to Grant. The Committee shall determine the Participants to
whom Awards shall be granted, the type or types of Awards to be granted and
the terms and conditions of any and all such Awards. The Committee may
establish different terms and conditions for different types of Awards, for
different Participants receiving the same type of Award and for the same
Participant for each Award such Participant may receive, whether or not
granted at different times.
4.2 Administration. The Committee shall be responsible for the
administration of the Plan. The Committee, by majority action thereof, is
authorized to prescribe, amend, and rescind rules and regulations relating to
the Plan, to provide for conditions deemed necessary or advisable to protect
the interests of the Company, and to make all other determinations (including,
without limitation, whether a Participant has incurred a Disability) necessary
or advisable for the administration and interpretation of the Plan in order to
carry out its provisions and purposes. Determinations, interpretations, or
other actions made or taken by the Committee pursuant to the provisions of the
Plan shall be final, binding, and conclusive for all purposes and upon all
persons.
SECTION 5.
STOCK SUBJECT TO PLAN
5.1 Number. Subject to the provisions of Section 5.3, the number of
shares of Stock subject to Awards under the Plan may not exceed 1,500,000
shares of Stock. Subject to the provisions of Section 5.3, no Employee shall
receive Awards for more than 150,000 shares of Stock over any one-year period.
For this purpose, to the extent that any Award is cancelled (as described in
Section 1.162-27(e)(2)(vi)(B) of the final regulations promulgated under
Section 162(m) of the Code), such cancelled Award shall continue to be counted
against the maximum number of shares of Stock for which Awards may be granted
to an Employee under the Plan. The shares of Stock to be delivered under the
Plan may consist, in whole or in part, of treasury Stock or authorized but
unissued Stock, not reserved for any other purpose.
5.2 Cancelled, Terminated, or Forfeited Awards. Except as provided in
Section 5.1, any shares of Stock subject to an Award which for any reason is
cancelled, terminated or otherwise settled without the issuance of any Stock
shall again be available for Awards under the Plan.
5.3 Adjustment in Capitalization. In the event of any Stock dividend or
Stock split, recapitalization (including, without limitation, the payment of
an extraordinary dividend), merger, consolidation, combination, spin-off,
distribution of assets to shareholders, exchange of shares, or other similar
corporate change, the aggregate number of shares of Stock available for Awards
under Section 5.1 or subject to outstanding Awards and the respective prices
and/or limitations applicable to outstanding Awards may be appropriately
adjusted by the Committee, whose determination shall be conclusive. If,
pursuant to the preceding sentence, an adjustment is made to the number of
shares subject to outstanding Options held by Participants a corresponding
adjustment shall be made to the number of shares subject to outstanding
Director Options and if an adjustment is made to the number of shares of Stock
authorized for issuance under the Plan, a corresponding adjustment shall be
made to the number of shares subject to each Director Option thereafter
granted pursuant to Section 6.7.
SECTION 6.
OPTIONS
6.1 Grant of Options. Options may be granted to Participants at such
time or times as shall be determined by the Committee. Options granted under
the Plan may be of two types: (i) Incentive Stock Options and (ii)
Nonstatutory Stock Options. The Committee shall have complete discretion in
determining the number of Options, if any, to be granted to a Participant.
Without limiting the foregoing, the Committee may grant Options containing
provisions for the issuance to the Participant, upon exercise of such Option
and payment of the exercise price therefor with previously owned shares of
Stock, of an additional Option for the number of shares so delivered, having
such other terms and conditions not inconsistent with the Plan as the
Committee shall determine. Each Option shall be evidenced by an Option
agreement that shall specify the type of Option granted, the exercise price,
the duration of the Option, the number of shares of Stock to which the Option
pertains, and such other terms and conditions not inconsistent with the Plan
as the Committee shall determine.
6.2 Option Price. Nonstatutory Stock Options and Incentive Stock Options
granted pursuant to the Plan shall have an exercise price which is not less
than the Fair Market Value of the Stock on the date the Option is granted. To
the extent that an Incentive Stock Option is granted to a Participant who owns
(actually or constructively under the provisions of Section 424(d) of the
Code) Stock possessing more than 10% of the total combined voting power of all
classes of Stock of the Company or of any Subsidiary, such Incentive Stock
Option shall have an exercise price which is not less than 110% of the Fair
Market Value on the date the Option is granted.
6.3 Exercise of Options. Options awarded to a Participant under the Plan
shall be exercisable at such times and shall be subject to such restrictions
and conditions including the performance of a minimum period of service, as
the Committee may impose, either at or after the time of grant of such
Options; provided, however, that if the Committee does not specify another
exercise schedule at the time of grant, each Option shall become exercisable
in three approximately equal installments on each of the first three
anniversaries of the date of grant, subject to the Committee's right to
accelerate the exercisability of such Option in its discretion.
Notwithstanding the foregoing, no Option shall be exercisable for more than 10
years after the date on which it is granted; provided, however, in the case of
an Incentive Stock Option granted to a Participant who owns (actually or
constructively under the provisions of Section 424(d) of the Code) Stock
possessing more than 10% of total combined voting power of all classes of
Stock of the Company or any Subsidiary, such Incentive Stock Option shall not
be exercisable for more than 5 years after the date on which it is granted.
6.4 Payment. The Committee shall establish procedures governing the
exercise of Options, which shall require that written notice of exercise be
given and that the Option price be paid in full in cash or equivalents,
including by personal check, at the time of exercise or pursuant to any
arrangement that the Committee shall approve. The Committee may, in its
discretion, permit a Participant to make payment in Stock already owned by
him, valued at its Fair Market Value on the date of exercise, as partial or
full payment of the exercise price. As soon as practicable after receipt of a
written exercise notice and full payment of the exercise price, the Company
shall deliver to the Participant a certificate or certificates representing
the acquired shares of Stock.
6.5 Incentive Stock Options. Notwithstanding anything in the Plan to the
contrary, no term of this Plan relating to Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be so exercised, so as to disqualify the Plan under Section 422
of the Code, or, without the consent of any Participant affected thereby, to
cause any Incentive Stock Option previously granted to fail to qualify for the
Federal income tax treatment afforded under Section 421 of the Code. Further,
the aggregate Fair Market Value (determined as of the time an Incentive Stock
Option is granted) of the Stock with respect to which Incentive Stock Options
are exercisable for the first time by any Participant during any calendar year
(under all option plans of the Company and all Subsidiaries of the Company)
shall not exceed $100,000.
6.6 Director Options. Notwithstanding anything else contained herein to
the contrary, on the first business day following the date of each annual
meeting of shareholders during the term of the Plan, each Eligible Director
shall receive a Director Option to purchase 4,000 shares of Stock at an
exercise price per share equal to the Fair Market Value of the Stock on the
date of grant. Each Director Option shall be exercisable six months after the
date of grant and shall remain exercisable until the earlier to occur of (i)
the tenth anniversary of the date of grant or (ii) the first anniversary of
the date the Eligible Director ceases to be a member of the Board, except that
if the Eligible Director ceases to be a member of the Board after having been
convicted of, or pled guilty or nolo contendere to, a felony, his Director
Options shall be cancelled on the date he ceases to be a director. An Eligible
Director may exercise a Director Option in the manner described in Section
6.4.
SECTION 7.
TERMINATION OF EMPLOYMENT
7.1 Termination of Employment Due to Retirement. Unless otherwise
determined by the Committee at the time of grant, in the event a Participant's
employment terminates by reason of Retirement, any Options granted to such
Participant which are then outstanding (whether or not exercisable prior to
the date of such termination) may be exercised at any time prior to the
expiration of the term of the Options or within five (5) years (or such
shorter period as the Committee shall determine at the time of grant)
following the Participant's termination of employment, whichever period is
shorter. Notwithstanding any provision contained herein, with respect to any
Incentive Stock Option, a Participant who terminates his employment by reason
of Retirement may exercise such Incentive Stock Option at any time prior to
the expiration of the term of the Option or within three (3) months following
the Participant's termination of employment, whichever period is shorter.
7.2 Termination of Employment Due to Death or Disability. Unless
otherwise determined by the Committee at the time of grant, in the event a
Participant's employment terminates by reason of death or Disability, any
Options granted to such Participant which are then outstanding (whether or not
exercisable prior to the date of such termination) may be exercised by the
Participant or the Participant's designated beneficiary, and if none is named,
in accordance with Section 10.2, at any time prior to the expiration date of
the term of the Options or within five (5) years (or such shorter period as
the Committee shall determine at the time of grant) following the
Participant's termination of employment, whichever period is shorter.
Notwithstanding any provision contained herein, with respect to any Incentive
Stock Option, a Participant whose employment terminates by reason of death or
Disability may exercise (or his designated beneficiary may exercise, in the
case of death) such Incentive Stock Option at any time prior to the expiration
of the term of the Option or within one (1) year following the Participant's
termination of employment, whichever period is shorter.
7.3 Termination of Employment For Cause. Unless otherwise determined by
the Committee at the time of grant, in the event a Participant's employment is
terminated for Cause, any Options granted to such Participant which are then
outstanding (whether or not exercisable prior to the date of such termination)
shall be forfeited.
7.4 Termination of Employment for Any Other Reason. Unless otherwise
determined by the Committee at or after the time of grant, in the event the
employment of the Participant shall terminate for any reason other than one
described in Section 7.1, 7.2 or 7.3, any Options granted to such Participant
which are exercisable at the date of the Participant's termination of
employment shall remain exercisable until the earlier to occur of (i) the
expiration of the term of such Options or (ii) the thirtieth day following the
Participant's termination of employment, whichever period is shorter.
SECTION 8.
CHANGE IN CONTROL
8.l Accelerated Vesting and Payment. Subject to the provisions of
Section 8.2 below, in the event of a Change in Control, each Option (excluding
any Director Option) shall be cancelled in exchange for a payment in cash of
an amount equal to the excess of the Change in Control Price over the exercise
price for such Option.
8.2 Alternative Awards. Notwithstanding Section 8.l, no cancellation or
cash settlement or other payment shall occur with respect to any Award or any
class of Awards if the Committee reasonably determines in good faith prior to
the occurrence of a Change in Control that such Award or Awards shall be
honored or assumed, or new rights substituted therefor (such honored, assumed
or substituted award hereinafter called an "Alternative Award"), by a
Participant's employer (or the parent or a subsidiary of such employer)
immediately following the Change in Control, provided that any such
Alternative Award must:
(i) be based on stock which is traded on an established securities
market, or which will be so traded within 60 days of the Change in Control;
(ii) provide such Participant (or each Participant in a class of
Participants) with rights and entitlements substantially equivalent to or
better than the rights, terms and conditions applicable under such Award,
including, but not limited to, an identical or better exercise or vesting
schedule and identical or better timing and methods of payment;
(iii) have substantially equivalent economic value to such Award
(determined at the time of the Change in Control); and
(iv) have terms and conditions which provide that in the event that the
Participant's employment is involuntarily terminated or constructively
terminated, any conditions on a Participant's rights under, or any
restrictions on transfer or exercisability applicable to, each such
Alternative Award shall be waived or shall lapse, as the case may be.
For this purpose, a constructive termination shall mean a termination by
a Participant following a material reduction in the Participant's
compensation, a material reduction in the Participant's responsibilities or
the relocation of the Participant's principal place of employment to another
location, in each case without the Participant's written consent.
8.3 Director Options. Upon a Change in Control, each Director Option
granted to an Eligible Director shall be cancelled in exchange for a payment
in cash of an amount equal to the excess of the Change in Control Price over
the exercise price for such Director Option unless (i) the Stock remains
traded on an established securities market following the Change in Control and
(ii) such Eligible Director remains on the Board following the Change in
Control.
8.4 Options Granted Within Six Months of the Change in Control. If any
Option (including a Director Option) granted within six months of the date on
which a Change in Control occurs (i) is held by a person subject to the
reporting requirements of Section 16(a) of the Act and (ii) is to be cashed
out pursuant to Section 8.1 or 8.3, such cash out shall not occur unless and
until, in the opinion of the Company's counsel, such cash out could occur
without such reporting person being potentially subject to liability under
Section 16(b) of the Act by reason of such cash out.
SECTION 9.
AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN
The Board or the Committee may at any time terminate or suspend the
Plan, and from time to time may amend or modify the Plan; provided, however,
that no amendment may be made to Section 6.6 or any other provision of the
Plan relating to Director Options within six months of the last date on which
any such provision was amended. Any such amendment, termination or suspension
may be made without the approval of the shareholders of the Company except as
such shareholder approval may be required (a) to satisfy the requirements of
Rule 16b-3 under the Act, or any successor rule or regulation, (b) to satisfy
applicable requirements of the Code or (c) to satisfy applicable requirements
of any securities exchange on which are listed any of the Company's equity
securities. No amendment of the Plan shall result in any Committee member's
losing his status as a "disinterested person" as defined in Rule 16b-3 under
the Act, or any successor rule or regulation, with respect to any employee
benefit plan of the Company or result in the Plan's losing its status as a
plan satisfying the requirements of said Rule 16b-3. No amendment,
modification, or termination of the Plan shall in any manner adversely affect
any Award theretofore granted under the Plan, without the consent of the
Participant.
SECTION 10
MISCELLANEOUS PROVISIONS
10.1 Nontransferability of Awards. No Awards granted under the Plan may
be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution.
All rights with respect to Awards granted to a Participant under the Plan
shall be exercisable during his lifetime only by such Participant and all
rights with respect to any Director Options granted to an Eligible Director
shall be exercisable during his lifetime only by such Eligible Director.
10.2 Beneficiary Designation. Each Participant and each Eligible
Director under the Plan may from time to time name any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid or by whom any right under the Plan is to
be exercised in case of his death. Each designation shall revoke all prior
designations by the same Participant or Eligible Director, shall be in a form
prescribed by the Committee, and shall be effective only when filed in writing
with the Committee. In the absence of any such designation, benefits remaining
unpaid at the Participant's death shall be paid to or exercised by his
surviving spouse, if any, or otherwise to or by his estate and Director
Options outstanding at the Eligible Director's death shall be exercised by his
surviving spouse, if any, or otherwise by his estate.
10.3 No Guarantee of Employment or Participation. Nothing in the Plan
shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Company or any
Subsidiary. No Employee shall have a right to be selected as a Participant,
or, having been so selected, to receive any future Awards. Nothing in the Plan
shall confer upon an Eligible Director a right to continue to serve on the
Board or to be nominated for reelection to the Board.
10.4 Tax Withholding. The Company shall have the power to withhold, or
require a Participant or Eligible Director to remit to the Company, an amount
sufficient to satisfy Federal, State, and local withholding tax requirements
on any Award under the Plan, and the Company may defer payment of cash or
issuance of Stock until such requirements are satisfied. The Committee may, in
its discretion, permit a Participant to elect, subject to such conditions as
the Committee shall impose, (i) to have shares of Stock otherwise issuable
under the Plan withheld by the Company or (ii) to deliver to the Company
previously acquired shares of Stock having a Fair Market Value sufficient to
satisfy all or part of the Participant's estimated total Federal, state, and
local tax obligation associated with the transaction.
10.5 Indemnification. Each person who is or shall have been a member of
the Committee or of the Board shall be indemnified and held harmless by the
Company against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him in connection with or resulting
from any claim, action, suit, or proceeding to which he may be made a party or
in which he may be involved by reason of any action taken or failure to act
under the Plan and against and from any and all amounts paid by him in
settlement thereof, with the Company's approval, or paid by him in
satisfaction of any judgment in any such action, suit, or proceeding against
him, provided he shall give the Company an opportunity, at its own expense, to
handle and defend the same before he undertakes to handle and defend it on his
own behalf. The foregoing right of indemnification shall not be exclusive and
shall be independent of any other rights of indemnification to which such
persons may be entitled under the Company's Articles of Incorporation or Code
of Regulations, by contract, as a matter of law, or otherwise.
10.6 No Limitation on Compensation. Nothing in the Plan shall be
construed to limit the right of the Company to establish other plans or to pay
compensation to its Employees or directors, in cash or property, in a manner
which is not expressly authorized under the Plan.
10.7 Requirements of Law. The granting of Awards and the issuance of
shares of Stock shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required. Notwithstanding the foregoing, no
Stock shall be issued under the Plan unless the Company is satisfied that such
issuance will be in compliance with applicable federal and state securities
laws. Certificates for Stock delivered under the Plan may be subject to such
stock transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed or traded, the Nasdaq National Market or any applicable federal or
state securities law. The Committee may cause a legend or legends to be placed
on any such certificates to make appropriate reference to such restrictions.
10.8 Term of Plan. The Plan shall be effective upon its adoption by the
Committee, subject to approval by the Board and approval by the affirmative
vote of the holders of a majority of the shares of voting stock present in
person or represented by proxy at the 1996 Annual Meeting of Shareholders. The
Plan shall continue in effect, unless sooner terminated pursuant to Section 9,
until the tenth anniversary of the date on which it is adopted by the Board.
10.9 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Ohio.
10.10 No Impact On Benefits. Plan Awards are not compensation for
purposes of calculating an Employee's rights under any employee benefit plan.
___________________________
(GRAPHIC OMITTED: MAP TO ANNUAL MEETING OF SHAREHOLDERS OF THE SCOTTS COMPANY
TO BE HELD ON APRIL 9, 1996)
___________________________
THE SCOTTS COMPANY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 9, 1996
The undersigned holder(s) of shares of The Scotts Company (the "Company")
hereby appoints Tadd C. Seitz or Christiane Schmenk, the Proxies of the
undersigned, with full power of substitution, to attend the Annual Meeting of
Shareholders of the Company to be held at the Columbus Marriott North Hotel,
6500 Doubletree Avenue, Columbus, Ohio, on Tuesday, April 9, 1996, at 10:00
a.m., local time, and any adjournment(s) thereof, and to vote all of the
shares which the undersigned is entitled to vote at such Annual Meeting or at
any adjournment(s) thereof:
1. To elect three directors in Class I for terms to expire at the 1999
Annual Meeting:
James Hagedorn, Karen Gordon Mills, Tadd C. Seitz
|_| Vote for all nominees |_| Vote for all nominees except _______________
2. To approve the adoption of The Scotts Company 1996 Stock Option Plan
FOR AGAINST ABSTAIN
|_| |_| |_|
In their discretion, the Proxies are authorized to vote upon such other
matters (none known at the time of solicitation of this proxy) as may properly
come before the Annual Meeting or any adjournment(s) thereof.
(This Proxy continues and must be signed and dated on the reverse side)
<PAGE>
Where a choice is indicated, the shares represented by this Proxy when
properly executed will be voted or not voted as specified. If no choice is
indicated, the shares represented by this Proxy will be voted "FOR" the
election of the nominees listed in Item no. 1 as Directors of the Company and
"FOR" proposal no. 2. If any other matters are properly brought before the
Annual Meeting or any adjournment(s) thereof, or if a nominee for election as
a Director named in the Proxy Statement is unable to serve or for good cause
will not serve, the shares represented by this Proxy will be voted in the
discretion of the Proxy on such matters or for such substitute nominee(s) as
the Directors may recommend. Proxies cannot be voted for more than three
nominees for election as Class I Directors at the Annual Meeting.
The undersigned hereby acknowledges receipt of the Notice of the Annual
Meeting of Shareholders, dated March 22, 1996, the Proxy Statement furnished
therewith, and the Annual Report of the Company for the fiscal year ended
September 30, 1995. Any proxy heretofore given to vote the shares which the
undersigned is entitled to vote at the Annual Meeting of Shareholders is
hereby revoked.
Dated __________________________, 1996
______________________________________
______________________________________
Shareholder sign name exactly as it is
stenciled hereon.
Note: Please fill in, sign and
return this proxy in the enclosed
envelope. When signing as Attorney,
Executor, Administrator, Trustee or
Guardian, please give full title as
such. If signer is a corporation,
please sign the full corporate name
by authorized officer. Joint Owners
should sign individually. (Please
note any change of address on this
proxy).
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE SCOTTS COMPANY
