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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
</TABLE>
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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 LOGO]
THE SCOTTS COMPANY
PROXY STATEMENT
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<PAGE> 3
[THE SCOTTS COMPANY LOGO]
THE SCOTTS COMPANY
41 SOUTH HIGH STREET
SUITE 3500
COLUMBUS, OHIO 43215
January 12, 2000
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, February 15, 2000, at The Westin Great Southern Hotel,
310 South High Street, Columbus, Ohio. 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 2003 Annual Meeting. The Board of Directors recommends that you
vote FOR each of the nominees.
In addition to the election of directors, you are being asked to
approve an amendment to the Amended Articles of Incorporation of the Company to
increase the authorized number of common shares from 50,000,000 to 100,000,000.
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 common shares as possible are represented.
Sincerely,
/s/Charles M. Berger
CHARLES M. BERGER,
Chairman, President and Chief Executive Officer
<PAGE> 4
[THE SCOTTS COMPANY LOGO]
THE SCOTTS COMPANY
-----------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, FEBRUARY 15, 2000
-----------------------------
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 Westin Great Southern Hotel, 310 South High Street,
Columbus, Ohio, on Tuesday, February 15, 2000, 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 2003 Annual Meeting;
2. To approve an amendment to the Amended Articles of
Incorporation of the Company to increase the authorized
number of common shares from 50,000,000 to 100,000,000; 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 December 20, 1999, has been fixed by the Board
of Directors of the Company as the record date for determining the shareholders
entitled to receive 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 ensure 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
Secretary of the Company in writing that you wish to vote your common shares in
person, your proxy will not be used.
By Order of the Board of Directors,
/s/G. Robert Lucas
G. ROBERT LUCAS,
Executive Vice President, General Counsel and
Corporate Secretary
41 South High Street
Suite 3500
Columbus, Ohio 43215
January 12, 2000
<PAGE> 5
[THE SCOTTS COMPANY LOGO]
THE SCOTTS COMPANY
41 SOUTH HIGH STREET
SUITE 3500
COLUMBUS, OHIO 43215
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, FEBRUARY 15, 2000
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 Westin Great Southern Hotel, 310 South High
Street, Columbus, Ohio, on Tuesday, February 15, 2000, 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 January 12, 2000. Only holders of record of the Company's common shares,
without par value (the "Common Shares"), on December 20, 1999 (the "Record
Date") will be entitled to vote at the Annual Meeting. As of the Record Date,
there were _____ Common Shares outstanding. Each Common Share entitles the
holder thereof to one vote. A quorum for the Annual Meeting is a majority of the
voting shares outstanding. There is no cumulative voting. There are no voting
securities of the Company outstanding other than the Common Shares.
Common Shares 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 street name 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 the approval of an amendment to the articles of incorporation, 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."
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 the
approval of the amendment to the Amended Articles of Incorporation of the
Company to increase the authorized number of Common Shares from 50,000,000 to
100,000,000.
<PAGE> 6
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 properly 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 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 Retirement
Savings Plan (the "RSP") and Common Shares have been allocated to such person's
account in the RSP, the shareholder is entitled to vote the allocated Common
Shares.
BENEFICIAL OWNERSHIP OF SECURITIES OF THE COMPANY
The following table furnishes certain information as of December 1,
1999 (except as otherwise noted), as to the Common Shares beneficially owned by
each of the directors of the Company, by each of the individuals named in the
Summary Compensation Table and by all 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>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP (1)
-------------------------------------------------------------
COMMON SHARES WHICH
CAN BE ACQUIRED UPON
EXERCISE OF OPTIONS OR
COMMON SHARES WARRANTS EXERCISABLE PERCENT OF
NAME OF BENEFICIAL OWNER PRESENTLY HELD WITHIN 60 DAYS TOTAL CLASS (2)
- - ------------------------ ---------------- ----------------------- ---------- ----------
<S> <C> <C> <C> <C>
James B Beard, Ph.D................... 16,727 (3) 33,000 49,727 (4)
Charles M. Berger (5)................. 20,432 (6) 400,000 420,432 1.45%
Joseph P. Flannery.................... 2,000 34,000 36,000 (4)
Horace Hagedorn....................... 37,526 (7) 34,000 71,526 (4)
James Hagedorn (5).................... 10,109,464 (8) 3,039,000 (9) 13,148,464 41.67%
Albert E. Harris...................... 2,000(10) 12,000 14,000 (4)
John Kenlon........................... 204,599(11) 45,642(12) 250,241 (4)
G. Robert Lucas (5)................... 2,503(13) 70,000 72,503 (4)
Karen G. Mills........................ 5,000 26,000 31,000 (4)
Jean H. Mordo (5)..................... 30,000 150,000 180,000 (4)
Patrick J. Norton..................... 5,100(14) 5,500 10,600 (4)
James L. Rogula (5)................... 2,079 10,000 12,079 (4)
John M. Sullivan...................... 1,000 29,000 30,000 (4)
L. Jack Van Fossen.................... 1,200 30,000 31,200 (4)
John Walker, Ph.D..................... 0 5,500 5,500 (4)
All directors and executive officers
as a group (27 persons)............. 10,531,332(15) 4,090,399 14,621,731 44.85%
Hagedorn Partnership, L.P............. 10,067,578(16) 3,000,000(16) 13,067,578 41.47%(16)
800 Port Washington Blvd.
Port Washington, NY 11050
</TABLE>
2
<PAGE> 7
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP (1)
-------------------------------------------------------------
COMMON SHARES WHICH
CAN BE ACQUIRED UPON
EXERCISE OF OPTIONS OR
COMMON SHARES WARRANTS EXERCISABLE PERCENT OF
NAME OF BENEFICIAL OWNER PRESENTLY HELD WITHIN 60 DAYS TOTAL CLASS (2)
- - ------------------------ ---------------- ----------------------- --------- ----------
<S> <C> <C> <C> <C>
Perry Corp............................ 1,823,432(17) 0 1,823,432(17) 6.40%
Richard Perry
599 Lexington Avenue
New York, NY 10022
</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) 28,513,006 Common
Shares outstanding on December 1, 1999, and (ii) the number of Common
Shares as to which the named person has the right to acquire beneficial
ownership upon the exercise of options or warrants exercisable within
60 days of September 30, 1999.
(3) Includes 11,727 Common Shares owned by Dr. Beard's spouse.
(4) Represents ownership of less than 1% of the outstanding Common Shares
of the Company.
(5) Individual named in the Summary Compensation Table.
(6) Includes 1,632 Common Shares allocated to Mr. Berger's account and held
by the trustee under the RSP.
(7) Mr. Horace Hagedorn is the father of the general partners of the
Hagedorn Partnership, L.P., a Delaware limited partnership (the
"Hagedorn Partnership"). He is not himself a partner of, and does not
have sole or shared voting or dispositive power with respect to any of
the Common Shares or Warrants held by, the Hagedorn Partnership. See
note (16) below.
(8) Mr. James Hagedorn is a general partner in the Hagedorn Partnership and
has shared voting and dispositive power with respect to the Common
Shares held by the Hagedorn Partnership. See note (16) below. He holds
33,700 Common Shares directly, and 8,186 Common Shares are allocated to
his account and held by the trustee under the RSP.
(9) Mr. James Hagedorn holds currently exercisable options to purchase
39,000 Common Shares. As a general partner of the Hagedorn Partnership,
he has shared voting and dispositive power with respect to the Warrants
held by the Hagedorn Partnership.
(10) Includes 1,000 Common Shares owned by Mr. Harris' spouse.
(11) Includes 6,652 Common Shares allocated to Mr. Kenlon's account and held
by the trustee under the RSP.
3
<PAGE> 8
(12) Mr. Kenlon owns Warrants to purchase 6,642 Common Shares. Each of Mr.
Kenlon's four children beneficially owns Warrants to purchase an
additional 15,000 Common Shares, for which Mr. Kenlon disclaims
beneficial ownership. The Hagedorn Partnership has the right to vote,
and a right of first refusal with respect to, the Company's securities
received by Mr. Kenlon and his children pursuant to the Merger
Agreement described below (197,947 Common Shares presently held by Mr.
Kenlon and Warrants to purchase an aggregate of 66,642 Common Shares).
See note (16) below. Mr. Kenlon also holds currently exercisable
options to purchase 39,000 Common Shares.
(13) Includes 200 Common Shares owned by Mr. Lucas' spouse, 2,000 Common
Shares held in a broker retirement account on behalf of Mr. Lucas and
303 Common Shares allocated to Mr. Lucas' account and held by the
trustee under the RSP.
(14) Includes 100 Common Shares owned by Mr. Norton's spouse.
(15) See notes (3) and (6) through (14) above and note (16) below. Also
includes Common Shares held by the respective spouses of executive
officers of the Company and by their children who live with them; and
Common Shares allocated to the accounts of executive officers and held
by the trustee under the RSP. Excludes any Common Shares attributable
to the named person's account in The Scotts Company Executive
Retirement Plan (the "Executive Plan"), because the named person has no
voting or dispositive power with respect to the portion of his account
attributed to Common Shares of the Company.
(16) The Hagedorn Partnership owns 9,869,631 Common Shares, 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
received by Mr. Kenlon and his children pursuant to the Merger
Agreement described below (197,947 Common Shares presently held by Mr.
Kenlon and Warrants to purchase an aggregate of 66,642 Common Shares).
See note (12) above. The general partners of the Hagedorn Partnership
are Mr. James Hagedorn, Ms. Katherine Hagedorn Littlefield, Mr. Paul
Hagedorn, Mr. Peter Hagedorn, Mr. Robert Hagedorn and Ms. Susan
Hagedorn, each of whom is a child of Mr. Horace Hagedorn and a former
shareholder of Stern's Miracle-Gro Products, Inc. ("Miracle-Gro
Products"). Community Funds, Inc., a New York not-for-profit
corporation ("Community Funds"), is a limited partner of the Hagedorn
Partnership.
The Amended and Restated Agreement and Plan of Merger, dated as of May
19, 1995 (the "Merger Agreement"), among the Company, ZYX Corporation,
Miracle-Gro Products, Stern's Nurseries, Inc., Miracle-Gro Lawn
Products Limited, the Hagedorn Partnership, the general partners of the
Hagedorn Partnership, Horace Hagedorn, Community Funds and John Kenlon,
as amended by the First Amendment to Amended and Restated Agreement and
Plan of Merger, dated as of October 1, 1999 (the "First Amendment"),
limits the ability of the Hagedorn Partnership, Community Funds, Horace
Hagedorn and John Kenlon (the "Miracle-Gro Shareholders") to acquire
additional voting securities of the Company. See "- The Merger
Agreement and the First Amendment" below.
4
<PAGE> 9
(17) Based on information contained in Amendment No. 1 to Schedule 13G,
dated February 16, 1999, as of December 31, 1998, Perry Corp., a New
York corporation, has sole voting and dispositive power with respect to
1,823,432 Common Shares of the Company. Perry Corp. is a private
investment firm, and Richard C. Perry is the President and sole
stockholder of Perry Corp.
THE MERGER AGREEMENT AND THE FIRST AMENDMENT
In connection with the transactions contemplated by the Merger
Agreement, the Hagedorn Partnership, Horace Hagedorn and John Kenlon acquired an
aggregate of 195,000 shares of Class A Convertible Preferred Stock, without par
value (the "Convertible Preferred Stock"), of the Company. On April 27, 1999,
John Kenlon converted 571 shares of Convertible Preferred Stock into 30,051
Common Shares, and on August 30, 1999, the Hagedorn Partnership converted 3,135
shares of Convertible Preferred Stock into 164,995 Common Shares. Effective
October 1, 1999, the preferred shareholders converted the remainder of their
shares of Convertible Preferred Stock into 10,068,104 Common Shares in
accordance with the terms of the First Amendment. In exchange for this early
conversion, the preferred shareholders received an aggregate amount of
approximately $6.4 million, representing the amount of the dividends on the
Convertible Preferred Stock that would have otherwise been payable through May
2000. Under the First Amendment, the Company also agreed to accelerate, from May
2000 (the month during which the Convertible Preferred Stock could first be
redeemed by the Company) to October 1, 1999, the termination of certain of the
standstill provisions in the Merger Agreement.
Under the terms of the First Amendment, the voting and transfer
restrictions on the Miracle-Gro Shareholders contained in the Merger Agreement
terminated as of October 1, 1999. The limitations on the ability of the
Miracle-Gro Shareholders to acquire additional voting securities of the Company
contained in the Merger Agreement also terminated as of October 1, 1999, except
for the restriction under which the Miracle-Gro Shareholders may not acquire,
directly or indirectly, beneficial ownership of Voting Stock (as that term is
defined in the Merger Agreement) representing more than 49% of the total voting
power of the outstanding Voting Stock, except pursuant to a tender offer for
100% of that total voting power, which tender offer is made at a price per share
which is not less than the market price per share on the last trading day before
the announcement of the tender offer and is conditioned upon the receipt of at
least 50% of the Voting Stock beneficially owned by shareholders of the Company
other than the Miracle-Gro Shareholders and their affiliates and associates.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Mr. James Hagedorn, an executive officer and director of the Company,
Mr. John Kenlon, an executive officer and director of the Company, and Mr.
Horace Hagedorn, a director of the Company, each filed an amended Form 3 during
the fiscal year ended September 30, 1999 (the "1999 fiscal year") in order to
report beneficial ownership of derivative securities of the Company which were
inadvertently omitted from their respective original Form 3's filed in July
1995.
5
<PAGE> 10
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Pursuant to the Code of Regulations of the Company, the Board of
Directors has set the authorized number of directors at 12, divided into three
classes with regular three-year staggered terms. The election of each class of
directors is a separate election. The four Class II directors hold office for
terms expiring at the Annual Meeting, the four Class III directors hold office
for terms expiring in 2001, and the four Class I directors hold office for terms
expiring in 2002. James B Beard, Ph.D., a Class II director, has chosen not to
serve another term and has withdrawn from re-nomination as a Class II director.
As a result of the withdrawal of James B Beard, Ph.D., from
re-nomination, a vacancy will be created in Class II and on the Audit Committee
of the Board as of the Annual Meeting date. As of the date of this Proxy
Statement, no person has been selected by the Board of Directors to fill the
vacancy in Class II. The Board of Directors does not contemplate selection of an
individual to fill the vacancy in Class II until such time as the Nominating and
Board Governance Committee makes a recommendation to the Board with respect to
the nominee, after the conclusion of a pending search of qualified candidates.
Upon the conclusion of such search, the Board, pursuant to Ohio law and the
Company's Code of Regulations, will fill the vacancy in Class II for the
remainder of the unexpired term. The proxies cannot be voted for more than three
nominees for election as Class II directors at the Annual Meeting.
The Board of Directors proposes that the three nominees identified
below be elected to Class II for a new term to expire at the Annual Meeting of
Shareholders to be held in 2003 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 December 1, 1999, 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.
6
<PAGE> 11
NOMINEES STANDING FOR RE-ELECTION TO THE BOARD OF DIRECTORS
CLASS II -- TERMS TO EXPIRE AT THE 2003 ANNUAL MEETING
JOHN KENLON, age 68
Senior Vice President, Consumer Gardens Group, of the Company since May 1999 and
Director of the Company since 1995
Mr. Kenlon was named Senior Vice President, Consumer Gardens Group, of
the Company, in May 1999. He was President, Consumer Gardens Group, of the
Company, from December 1996 until May 1999. He was previously Chief Operating
Officer and President of Scotts' Miracle-Gro Products, Inc. ("Scotts
Miracle-Gro"), since May 1995. Mr. Kenlon was the President of Miracle-Gro
Products from 1985 until May 1995. Mr. Kenlon began his association with the
Miracle-Gro companies in 1960. [It is expected that Mr. Kenlon will resign from
his offices with the Company, effective December 31, 1999, but he will remain a
member of the Board.]
Committee Membership: None at this time
JOHN M. SULLIVAN, age 64
Director of the Company since 1994
Mr. Sullivan serves as a director of Rental Services Corp. Mr. Sullivan
is also an independent director for various privately-held companies, including
Bell Sports, Inc. and Silver Cinemas International, Inc., of which he is
Chairman of the Board of Directors.
Committee Membership: Compensation and Organization
L. JACK VAN FOSSEN, age 62
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 1991 until 1995. Since July
1988, Mr. Van Fossen has served as President of Nessoff Corporation, a
privately-held investment company.
Committee Membership: Audit (Chairman)
7
<PAGE> 12
CLASS III -- TERMS TO EXPIRE AT THE 2001 ANNUAL MEETING
JOSEPH P. FLANNERY, age 67
Director of the Company since 1987
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
Corporation and Arvin Industries, Inc.
Committee Membership: Compensation and Organization (Chairman)
HORACE HAGEDORN, age 84
Vice Chairman of the Board and Director of the Company since 1995
Mr. Hagedorn was named Vice Chairman of the Board and a director of the
Company, and Chairman of the Board and Chief Executive Officer of Scotts'
Miracle-Gro, in May 1995. In March 1997, he retired as an officer of Scotts'
Miracle-Gro. Mr. Hagedorn founded Miracle-Gro Products in 1950 and served as
Chief Executive Officer of Miracle-Gro Products from 1985 until May 1995. Horace
Hagedorn is the father of James Hagedorn.
Committee Membership: None at this time
ALBERT E. HARRIS, age 67
Director of the Company since 1997
Mr. Harris is co-founder and, effective July 1997, the retired
President of EDBH, Inc., a privately-held company which develops international
optical businesses. From 1988 until July 1997, he served as either Chairman or
President of that company, which has established a chain of approximately 200
superoptical stores, operating under the "Vision Express(R)" name and located
primarily in the United Kingdom. Since 1992, Mr. Harris has also been a trustee
of Fifth Third Funds (previously named Fountain Square Funds), a mutual funds
family established by The Fifth Third Bank, and is currently the Chairman of
that group of funds. Fifth Third Funds is registered as an investment company
under the Investment Company Act of 1940.
Committee Membership: Nominating and Board Governance; Compensation and
Organization
PATRICK J. NORTON, age 48
Director of the Company since 1998
From 1983 until February 1997, Mr. Norton was the President, Chief
Executive Officer and a director of Barefoot Inc., the second largest lawn care
company in the United States prior to its acquisition in February 1997 by
ServiceMaster. Mr. Norton serves as an independent director for various
privately-held companies, including Svoboda Collins LLC, In The Swim, Inc. and
CARA, Inc.
Committee Membership: Audit
8
<PAGE> 13
CLASS I -- TERMS TO EXPIRE AT THE 2002 ANNUAL MEETING
CHARLES M. BERGER, age 63
Chairman of the Board, President and Chief Executive Officer of the Company
since 1996
Mr. Berger was elected Chairman of the Board, President and Chief
Executive Officer of the Company in August 1996. Mr. Berger came to the Company
from H.J. Heinz Company, where, from October 1994 until August 1996, he served
as Chairman and Chief Executive Officer of Heinz India Pvt. Ltd. (Bombay).
During his 32-year career at Heinz, he also held the positions of Chairman,
President and Chief Executive Officer of Weight Watchers International, a Heinz
affiliate; Managing Director and Chief Executive Officer of Heinz-Italy (Milan),
the largest Heinz profit center in Europe; General Manager, Marketing, for all
Heinz U.S. grocery products; Marketing Director for Heinz U.K. (London); and
Director of Corporate Planning at Heinz World Headquarters. He is also a former
director of Miracle-Gro Products.
Committee Membership: Finance
JAMES HAGEDORN, age 44
President, Scotts North America, of the Company since December 1998 and Director
of the Company since 1995
Mr. Hagedorn was named President, Scotts North America, in December
1998. He was previously Executive Vice President, U.S. Business Groups, of the
Company, since October 1996. From May 1995 until October 1996, he served as
Senior Vice President, Consumer Gardens Group, of the Company. He served as
Executive Vice President of Scotts' Miracle-Gro since May 1995, and Executive
Vice President of Miracle-Gro Products from 1989 until May 1995. James Hagedorn
is the son of Horace Hagedorn.
Committee Membership: Finance; Nominating and Board Governance
KAREN G. MILLS, age 45
Director of the Company since 1994
Ms. Mills has been President of MMP Group, Inc., an advisory company
serving leveraged buy-out firms, company owners and chief executive officers
since 1993. From 1983 until 1993, she served as Managing Director at E.S. Jacobs
and Company and as Chief Operating Officer of its Industrial Group. She
previously held positions at McKinsey and Co. and General Foods, Inc. Ms. Mills
is currently a member of the board of directors of Edwards Fine Foods and Dry
Bulk Shipping Inc., both privately-held companies, and Arrow Electronics, Inc.
Committee Membership: Finance; Nominating and Board Governance (Chairman)
9
<PAGE> 14
JOHN WALKER, PH.D., age 59
Director of the Company since 1998
Since September 1994, Dr. Walker has been Chairman of Advent
International plc, a private equity management company based in Boston,
Massachusetts which manages over $3 billion on a global basis. In May 1984, he
co-founded Trinity Capital Partners, a venture firm specializing in healthcare
and environmental business investments. He continued his association with
Trinity until 1994.
Committee Membership: Compensation and Organization; Finance
RECOMMENDATION AND VOTE
Under Ohio law and the Company's Code of Regulations, the three
nominees for election in Class II receiving the greatest number of votes will be
elected. Common Shares represented by the accompanying proxy card will be voted
FOR the election of the above-named 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 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-NAMED CLASS II DIRECTOR NOMINEES.
COMMITTEES AND MEETINGS OF THE BOARD
The Board of Directors held six regularly scheduled or special meetings
during the 1999 fiscal year. The Board of Directors has four standing
committees: the Audit Committee; the Compensation and Organization Committee;
the Finance Committee; and the Nominating and Board Governance 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 1999 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 seven times during the 1999 fiscal year.
Compensation and Organization Committee. The Compensation and
Organization Committee reviews, considers and acts upon matters concerning
salary and other compensation and benefits of all officers and other employees
of the Company. In addition, it 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. This Committee also
advises
10
<PAGE> 15
the Board regarding executive officer organizational issues and succession
plans. The Compensation and Organization Committee met four times during the
1999 fiscal year.
Finance Committee. The Finance Committee provides oversight of the
financial plans and policies of the Company and its subsidiaries by reviewing:
annual business plans; operating performance goals; investment, dividend payment
and stock repurchase programs; financial forecasts; and general corporate
financing matters. The Finance Committee met one time during the 1999 fiscal
year.
Nominating and Board Governance Committee. The Nominating and Board
Governance Committee recommends policies on the composition of the Board of
Directors and nominees for membership on the Board. This Committee has not
established a procedure for shareholders to recommend nominees to the Board for
the Annual Meeting. Rather, it conducts, and will conduct, its own search for
available, qualified nominees. The Nominating and Board Governance Committee met
four times during the 1999 fiscal year.
COMPENSATION OF DIRECTORS
Each director of the Company who is not an employee of the Company (the
"Non-employee Directors") receives a $30,000 annual retainer for Board and
committee meetings plus all reasonable travel and other expenses of attending
such meetings.
Non-employee Directors also receive an annual grant, on the first
business day following the date of each annual meeting of shareholders, of
options to purchase 5,000 Common Shares at an exercise price equal to the fair
market value of the Common Shares on the date of the grant. Non-employee
Directors who are members of a Board committee receive options to purchase an
additional 500 Common Shares (1,500 Common Shares in the case of committee
chairs) for each committee on which they serve. Options granted to a
Non-employee Director 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, except that
if the Non-employee Director ceases to be a member of the Board after having
been convicted of or pled guilty or nolo contendere to a felony, his or her
options will be canceled on the date he or she ceases to be a Director.
11
<PAGE> 16
PROPOSAL NO. 2
PROPOSAL TO APPROVE AN AMENDMENT TO THE AMENDED
ARTICLES OF INCORPORATION OF THE COMPANY TO
INCREASE THE AUTHORIZED NUMBER OF COMMON
SHARES TO 100,000,000
PROPOSAL
The Amended Articles of Incorporation of the Company currently
authorize 50,195,000 shares, of which 50,000,000 are Common Shares and 195,000
are shares of Convertible Preferred Stock. The Board of Directors unanimously
adopted a resolution proposing that Article Fourth of the Amended Articles of
Incorporation be amended in order to increase the authorized number of Common
Shares to 100,000,000, and recommending to the shareholders of the Company the
approval of such proposed amendment. The proposed amendment will not change the
authorized number of shares of Convertible Preferred Stock or the terms thereof.
PURPOSE
Of the 50,000,000 Common Shares currently authorized, as of December 1,
1999, 28,513,006 Common Shares were issued and outstanding, 3,000,000 Common
Shares were reserved for issuance upon exercise of the Company's Warrants and
6,871,407 Common Shares were reserved for issuance under the Company's stock
option and other stock-based employee benefit plans. Thus, only 11,615,587
Common Shares remain available for future issuance. The additional Common Shares
to be authorized under the proposed amendment will have rights identical to the
presently issued and outstanding Common Shares. Furthermore, adoption of the
proposed amendment and issuance of the additional Common Shares will not affect
the rights of the holders of presently issued and outstanding Common Shares,
except for effects incidental to increasing the number of Common Shares
outstanding. Existing shareholders will have no pre-emptive rights to purchase
any Common Shares issued in the future.
The Board of Directors believes that it is prudent and in the best
interests of the Company and its shareholders to increase the authorized number
of Common Shares to 100,000,000 to ensure that the Company has a sufficient
number of Common Shares available for future issuance. The Board believes that
having a sufficient number of Common Shares available for future issuance
provides the Company with additional flexibility to use its capital stock to
meet its business and financial needs as they arise. In addition, the proposed
amendment enables the Company to issue additional authorized Common Shares as
such needs arise without further shareholder approval, except to the extent
otherwise required by applicable law, the Amended Articles of Incorporation or
the rules of any securities exchange on which the Common Shares are then listed.
Such flexibility allows the Company to take timely advantage of available
corporate opportunities and favorable market conditions.
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<PAGE> 17
The additional Common Shares may be used for various corporate
purposes, including, without limitation, share splits and dividends,
acquisitions, public offerings and stock option and other employee benefit
plans. Specifically, the Board, as presently constituted, is considering using a
portion of the additional authorized Common Shares for a share split or share
dividend in the future, if and when the Board and management decide that market
conditions and the share price warrant splitting, or issuing a share dividend
upon, the Common Shares. The objective of such action would be to
proportionately lower the market price of the Common Shares. Such lower price
would be expected to increase liquidity and broaden the marketability of the
Common Shares. The Board has not made a final decision with respect to effecting
a share split or dividend, and may decide that it is in the best interests of
the Company and its shareholders not to effect either. Therefore, no assurances
can be given that the Board will decide to effect a share split or dividend even
if this Proposal No. 2 is adopted.
Except for Common Shares that may be issued (a) in any future share
split or dividend, (b) under existing stock option and other stock-based
employee benefit plans, or (c) upon exercise of the Company's Warrants, there
are no present plans to issue any of the additional Common Shares which will be
authorized by the adoption of the amendment to Article Fourth, nor are there any
pending negotiations, discussions, agreements or understandings with any third
party which involve the issuance of any of such Common Shares. The Board of
Directors does not intend to issue any of the additional Common Shares except on
terms which the Board deems to be in the best interests of the Company and its
shareholders.
The proposed amendment could be deemed to have an anti-takeover effect
by discouraging an attempt by a third party to acquire control of the Company
since the Company could issue the additional authorized Common Shares in an
effort to create voting impediments or dilute the Common Share ownership of the
person seeking to obtain control. However, the proposal to increase the
authorized number of Common Shares is not in response to any effort of which the
Company is aware to accumulate Common Shares or obtain control of the Company.
The Company believes that the proposal further encourages the incentive to
negotiate with the Board with respect to any proposal to acquire control of the
Company, which incentive is already present given the significant ownership
interest of the Hagedorn Partnership.
The proposed amendment is not a part of a plan by the Company to adopt
other measures intended to have or having potential anti-takeover effects. The
Company's Amended Articles of Incorporation and Code of Regulations currently
include the following provisions which may be considered to have anti-takeover
effects: (a) the classification of the Board of Directors of the Company into
three classes of directors so that each director serves a three year term, with
one class being elected each year; (b) the elimination of cumulative voting in
the election of directors; (c) the requirement of the affirmative vote of
two-thirds of the voting power of the Company as a condition to certain major
corporate transactions (e.g., adoption of certain amendments to the Company's
Amended Articles of Incorporation, approval of a merger or consolidation
involving the Company, approval of a combination or majority share acquisition
involving the issuance of shares of the Company, approval of a sale, exchange,
transfer or other disposition of all or substantially all of the Company's
assets, or approval of the dissolution of
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<PAGE> 18
the Company); (d) the authorization of 195,000 shares of Convertible Preferred
Stock, none of which are currently outstanding; and (e) certain procedural
requirements, including provisions limiting who may call special shareholder
meetings.
RECOMMENDATION AND VOTE
The affirmative vote of the holders of Common Shares entitling them to
exercise a majority of the voting power of the Company on the proposal, is
required to approve the proposed amendment. Abstentions and broker non-votes
will have the same legal effect as a vote against the proposed amendment.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ended September 30,
1999, 1998 and 1997, compensation awarded or paid to, or earned by, the
Company's Chief Executive Officer and the four other most highly compensated
executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
FISCAL --------------------------- UNDERLYING OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($)(1) BONUS($)(1) SARS (#)(2) COMPENSATION ($)
- - --------------------------- ------ --------------------------- ------------------- ----------------
<S> <C> <C> <C> <C> <C>
Charles M. Berger............ 1999 $512,855 [$724,620] 150,000 $ 12,074 (4)
Chairman of the Board, 1998 $461,290 $382,536 150,000 $ 28,189 (5)
President and Chief 1997 $407,000 $352,000 0 $ 3,200 (4)
Executive Officer (3)
James Hagedorn............... 1999 $369,000 [$438,507] 80,000 $ 11,744 (4)
President, Scotts 1998 $294,667 $218,003 90,000 $ 14,679 (4)
North America (6) 1997 $253,500 $180,000 126,000 $ 3,200 (4)
Jean H. Mordo................ 1999 $364,000 [$438,507] 60,000 $ 11,741 (4)
Group Executive Vice 1998 $312,750 $186,708 60,000 $ 29,647 (8)
President, International (7) 1997 $232,707 $190,000 150,000 $ 110,810 (9)
G. Robert Lucas.............. 1999 $277,749 [$291,706] 15,000 $ 11,673 (4)
Executive Vice President, 1998 $242,830 $145,789 25,000 $ 11,880 (4)
General Counsel and 1997 $ 98,242 $ 60,800 70,000 $ 50,000(11)
Corporate Secretary (10)
James L. Rogula.............. 1999 $257,748 [$219,409] 0 $ 55,752(13)
Senior Vice President, 1998 $235,850 $178,486 25,000 $ 14,848 (4)
Consumer 1997 $213,000 $165,946 55,000 $ 3,200 (4)
Ortho Business Group (12)
</TABLE>
- - ----------------
(1) Includes compensation which may be deferred under the Executive Plan.
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<PAGE> 19
(2) These numbers represent options for Common Shares granted pursuant to
the Company's 1992 Long Term Incentive Plan (the "1992 Plan") or the
Company's 1996 Stock Option Plan, as amended (the "1996 Plan"). See the
table under " - Grants of Options in 1999 Fiscal Year" for more
detailed information on such options.
(3) Mr. Berger was named Chairman, President and Chief Executive Officer of
the Company in August 1996.
(4) Contributions made by the Company to the RSP.
(5) Includes a $13,281 reimbursement for taxable relocation expense, and a
$14,908 contribution by the Company to the RSP.
(6) Mr. James Hagedorn was named President, Scotts North America, of the
Company in December 1998. He was previously Executive Vice President,
U.S. Business Groups, of the Company since October 1996.
(7) Mr. Mordo was named Group Executive Vice President, International, of
the Company, in May 1999. He was previously interim head of the
International Business Group of the Company from September 1998, and
Executive Vice President and Chief Financial Officer from January 1997
until September 1998.
(8) Includes a $15,911 reimbursement for taxable relocation expense, and a
$13,736 contribution by the Company to the RSP.
(9) Includes a $107,610 (net $70,000) sign-on bonus, and a $3,200
contribution by the Company to the RSP.
(10) Mr. Lucas was named Executive Vice President in May 1999, and General
Counsel and Corporate Secretary in May 1997. He was previously a Senior
Vice President of the Company from May 1997 until May 1999.
(11) Represents a $50,000 sign-on bonus.
(12) Mr. Rogula was named Senior Vice President, Consumer Ortho Business
Group, of the Company in May 1999. He was previously Senior Vice
President, Consumer Lawns Group, of the Company, since October 1996.
15
<PAGE> 20
(13) Includes a housing allowance of $41,831, a $5,079 tax equalization
payment in connection with a temporary relocation to California and a
$8,842 contribution by the Company to the RSP.
GRANTS OF OPTIONS IN 1999 FISCAL YEAR
The following table sets forth information concerning individual grants
of non-qualified stock options made during the 1999 fiscal year under the 1996
Plan to each of the individuals named in the Summary Compensation Table. The
Company has never granted stock appreciation rights.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM (2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- - ---- ------------- ------------ --------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Charles M. Berger..... 75,000 (3) 5.22% $30.000 10/20/08 $1,415,013 $3,585,921
75,000 (4) 5.22% $35.250 09/24/09 $1,662,640 $4,213,457
James Hagedorn........ 35,000 (5) 2.44% $35.125 03/04/09 $ 773,147 $1,959,307
45,000 (6) 3.13% $35.750 09/21/09 $1,011,734 $2,563,933
Jean H. Mordo......... 35,000 (5) 2.44% $35.125 03/04/09 $ 773,147 $1,959,307
25,000 (6) 1.74% $35.750 09/21/09 562,075 $1,424,407
G. Robert Lucas....... 15,000 (6) 1.04% $35.750 09/21/09 $ 337,245 $ 854,644
James L. Rogula 0 - - - - -
</TABLE>
- - -----------------
(1) In the event of a "Change in Control" (as defined in the 1996 Plan),
each option will be canceled in exchange for the payment to the
optionee of cash in an amount equal to the excess of the highest price
paid (or offered) for Common Shares of the Company during the preceding
30 day period over the exercise price for such option. Notwithstanding
the foregoing, if the Compensation and Organization Committee
determines that the optionee will receive a new award (or have the
options honored or assumed) 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 payment will be made as a result of
a Change in Control. If any cash payment is to be made with respect to
options granted within six months of the date on which a Change in
Control occurs, the cash payment will not occur unless and until the
cash payment may be made without subjecting the optionee to potential
liability under Section 16(b) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), by reason of such cash payment. 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 five 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 for cause,
any exercisable options held by him at the date of termination may be
exercised for a period of 90 days, subject to the stated terms of the
options.
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<PAGE> 21
(2) 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.
(3) These options were granted on October 21, 1998 under the 1996 Plan and
became exercisable on October 21, 1999.
(4) These options were granted on September 24, 1999 under the 1996 Plan
and become exercisable on September 24, 2000.
(5) These options were granted on March 5, 1999 under the 1996 Plan and
become exercisable on March 5, 2002.
(6) These options were granted on September 22, 1999 under the 1996 Plan
and become exercisable on September 22, 2002.
OPTION EXERCISES IN 1999 FISCAL YEAR AND OPTION VALUES AT END OF 1999 FISCAL
YEAR
The following table sets forth information with respect to options
exercised during the 1999 fiscal year and unexercised options held as of the end
of the 1999 fiscal year by each of the individuals named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SECURITIES VALUE OF UNEXERCISED
SECURITIES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
UNDERLYING OPTIONS AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
OPTIONS VALUE ------------------------------ -----------------------------
NAME EXERCISED REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---- ---------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles M. Berger............ 0 - 325,000 225,000 $4,556,250 $ 956,250
James Hagedorn............... 0 - 39,000 281,000 $ 573,375 $2,260,875
Jean H. Mordo................ 0 - 150,000 120,000 $2,006,250 $ 396,875
G. Robert Lucas.............. 0 - 70,000 40,000 $ 586,250 $ 72,500
James L. Rogula.............. 23,000 $530,475 10,000 65,000 $ 166,250 $ 758,750
</TABLE>
- - ------------------
(1) "Value of Unexercised In-the-Money Options at Fiscal Year-End" is
based upon the fair market value of the Company's Common Shares on September 30,
1999 ($34.63) less the exercise price of in-the-money options at the end of the
1999 fiscal year.
PENSION PLANS
The Company maintains a tax-qualified, non-contributory defined benefit
pension plan (the "Pension Plan"). Eligibility for and accruals under the
Pension Plan were frozen as of December 31, 1997.
Monthly benefits under the Pension Plan upon normal retirement (age 65)
are determined under the following formula:
17
<PAGE> 22
(a) (i) 1.5% of the individual's highest average annual compensation for 60
consecutive months during the ten-year period ending December 31,
1997; times
(ii) years of benefit service through December 31, 1997; reduced by
(b) (i) 1.25% of the individual's primary Social Security benefit (as of
December 31, 1997); times
(ii) years of benefit service through December 31, 1997.
Compensation includes all earnings plus 401(k) contributions and salary
reduction contributions for welfare benefits, but does not include earnings in
connection with foreign service, the value of a company car or separation or
other special allowances. An individual's primary Social Security benefit is
based on the Social Security Act as in effect on December 31, 1997, and assumes
constant compensation through age 65 and that the individual will not retire
earlier than age 65. No more than 40 years of benefit service are taken into
account. The Pension Plan includes additional provisions for early retirement.
Benefits under the Pension Plan are supplemented by benefits under The
O.M. Scotts & Sons Company Excess Benefit Plan (the "Excess Benefit Plan"). The
Excess Benefit Plan was established October 1, 1993 and was frozen as of
December 31, 1997. 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 Internal Revenue Code (the
"Code"). Under the Excess Benefit Plan, executive officers and certain key
employees will receive, at the time and in the same form as benefits are 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.
The estimated annual benefits under the Pension Plan and the Excess
Benefit Plan payable upon retirement at normal retirement age for each of the
executive officers of the Company named in the Summary Compensation Table are:
<TABLE>
<CAPTION>
YEARS OF BENEFIT
SERVICE TOTAL BENEFIT
---------------- -------------
<S> <C> <C>
Charles M. Berger........... 0.333 $ 134.01
James Hagedorn.............. 9.9167 $ 3,368.46
Jean H. Mordo............... N/A N/A
G. Robert Lucas............. N/A N/A
James L. Rogula............. 1.9167 $ 461.93
</TABLE>
Associates participate in the RSP, formerly known as "The Scotts
Company Profit Sharing and Savings Plan." The RSP, as amended and restated
effective as of December 31, 1997, consolidated various defined contribution
retirement plans in effect at the Company and its domestic subsidiaries. The RSP
permits 401(k) contributions, employee after-tax contributions, Company matching
contributions, Company retirement contributions, and, between 1998 and
18
<PAGE> 23
2002 for participants whose benefits were frozen under the Pension Plan (and the
Scotts-Sierra Horticultural Products Company Retirement Plan for Salaried
Employees), certain transitional contributions based on age and service.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company entered into an Employment Agreement with Mr. Berger
effective August 7, 1998 (the "Berger Agreement"), providing for his employment
as Chairman, President and Chief Executive Officer of the Company until August
2001, at an annual base salary of $500,000, plus an incentive bonus under The
Scotts Company Executive and Management Incentive Plan (the "Bonus Plan"). If
Mr. Berger's employment is terminated by the Company without "cause" (as defined
in the Berger Agreement), as a result of his death or disability, as a result of
"cause" by Mr. Berger (also as defined) or as a result of a "change of control"
(also as defined), he will be entitled to have his base salary continued at the
rate then in effect for two years thereafter, and to receive incentive
compensation equal to the lesser of his target percentage under the Bonus Plan
then in effect or the amount of his last actual bonus under the Bonus Plan, also
for the two-year period after the date of termination. If Mr. Berger voluntarily
terminates his employment, or if his employment is terminated for any other
reason (including for "cause" by the Company), Mr. Berger is entitled to receive
his base salary through the date of termination. In connection with entering
into his Employment Agreement, Mr. Berger entered into three Stock Option
Agreements with the Company dated as of September 23, 1998, October 21, 1998 and
September 24, 1999, respectively. Mr. Berger was granted options to purchase
150,000 Common Shares of the Company under the two agreements dated as of 1998,
and 75,000 Common Shares under the agreement dated as of 1999, totaling 225,000
Common Shares. The options vest one year from the respective dates of grant. The
options are exercisable at a purchase price of $30.125 per share under the
September 23, 1998 agreement, $30.000 per share under the October 21, 1998
agreement and $35.250 per share under the September 24, 1999 agreement. The
exercise price is subject to adjustment in the event of certain corporate
changes. These options expire ten years from the respective dates of grant.
In connection with the transactions contemplated by the Merger
Agreement, the Company entered into an employment agreement with Mr. James
Hagedorn (the "Employment Agreement"). The Employment Agreement has a term of
three years, and is automatically renewed for an additional year each subsequent
year, unless either party notifies the other party of his/its desire not to
renew. The Employment Agreement provides for a minimum annual base salary of
$200,000 for Mr. Hagedorn and participation in the various benefit plans
available to senior executive officers of the Company. In addition, pursuant to
the Employment Agreement, the Company granted to Mr. Hagedorn options to acquire
24,000 Common Shares. Upon certain types of termination of employment (e.g., a
termination by the Company for any reason other than "cause" (as defined in the
Employment Agreement) or a termination by Mr. Hagedorn
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<PAGE> 24
constituting "good reason" (also as defined)), he will become entitled to
receive certain severance benefits including a payment equal to three times the
sum of his base salary then in effect plus his highest annual bonus in any of
the three preceding years. Upon termination of employment for any other reason,
Mr. Hagedorn or his beneficiary will be entitled to receive all unpaid amounts
of base salary and benefits under the executive benefit plans in which he
participated.
The Employment Agreement also contains confidentiality and
noncompetition provisions which prevent Mr. Hagedorn from disclosing
confidential information about the Company and from competing with the Company
during his employment therewith and for an additional three years thereafter.
The Company entered into an employment arrangement with Mr. Mordo
effective March 1, 1997, relating to his employment with the Company. If Mr.
Mordo's employment is terminated by the Company without "cause" (as defined in
such employment agreement), as a result of his death or disability or as a
result of a "change of control" (also as defined), he will be entitled to have
his base salary continued at the rate then in effect for two years thereafter,
and to receive incentive compensation at least comparable to the prior year's
level for the two-year period after termination. Mr. Mordo was also granted
options to purchase 150,000 Common Shares of the Company, one-third of which
vested in each of March 1997, March 1998 and March 1999.
The Company entered into an employment arrangement with Mr. Lucas
effective May 1, 1997, relating to his employment with the Company. If Mr.
Lucas' employment is terminated by the Company without "cause," as a result of
his death or disability or as a result of a "change of control," he will be
entitled to have his base salary continued at the rate then in effect for two
years thereafter, and to receive incentive compensation at least comparable to
the prior year's level for the two-year period after termination. Mr. Lucas was
also granted options to purchase 70,000 Common Shares of the Company, one-third
of which vested in each of May 1997, May 1998 and May 1999.
REPORT OF THE COMPENSATION AND ORGANIZATION COMMITTEE ON EXECUTIVE COMPENSATION
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933 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 BELOW UNDER "EXECUTIVE
COMPENSATION--PERFORMANCE GRAPH" SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY
SUCH FILINGS.
ROLE OF THE COMPENSATION AND ORGANIZATION COMMITTEE
The Compensation and Organization Committee (the "Committee") is made
up of four members of the Board of Directors who are neither current nor former
employees of the Company. The Committee reviews the Company's organizational
structure, succession planning and the ongoing functions of the executive
officers. It is also responsible for the Company's executive compensation
policies and programs. The Committee reviews and
20
<PAGE> 25
recommends to the Board all compensation payments to the CEO and the executive
officers of the Company and the aggregate incentive payments to the participants
in the Executive and Management Incentive Plan (the "Executive Incentive Plan").
In reaching compensation decisions, the Committee reviews information
from various sources, including proxy statement surveys and industry surveys.
The Committee has also retained external legal counsel and compensation
consultants.
OBJECTIVES OF THE EXECUTIVE COMPENSATION PROGRAM
The Committee's primary objective is the establishment of compensation
for the Company's executive officers who drive action to maximize long-term
shareholder value. The executive compensation program is designed with a
performance orientation, where a large portion of executive compensation is "at
risk." In pursing this objective, the Committee believes the Company's executive
compensation program must:
o Emphasize pay for performance, motivating both long-term and
short-term performance for the benefit of the Company's shareholders;
o Place greater emphasis on variable incentive compensation versus fixed
or base pay;
o Encourage, by rewarding decision-making that emphasizes long-term
shareholder value;
o Provide a total compensation program competitive with those companies
with which the Company competes for top management talent on a global
basis; and
o Ensure the Company's continued growth and performance by attracting,
retaining and motivating talented executives and employees necessary
to meet the Company's strategic goals.
The Committee sets compensation levels, which are designed to be
competitive with a comparison group of consumer products companies of similar
size and complexity (the "Comparison Group"). This comparative data may not
include the compensation paid by all of the companies that are included in the
S&P 500 Household Index which is used for comparative purposes in the
performance graph. Base salary and annual incentive opportunities are targeted
at the median of the Comparison Group companies, while long-term incentives are
targeted at the 75th percentile. Through the use of these and other tools, the
Company has been successful in attracting executives who as key members of the
top management team have been instrumental in improving the performance of the
Company.
The Committee does not have a policy that requires its executive
compensation programs to qualify as performance-based compensation under Section
162(m) of the Internal Revenue Code of 1986, as amended. The design and
administration of the Company's 1996 Stock Option Plan qualifies under Section
162(m) of the Code as performance-based compensation. In all
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<PAGE> 26
cases, the Committee will continue to carefully consider the net cost and value
to the shareholders of its compensation policies.
OVERVIEW OF EXECUTIVE COMPENSATION AND 1999 COMMITTEE ACTIONS
The Company's executive compensation program consists of three
principal components:
o Base Salary
o Executive Incentive Plan
o 1996 Stock Option Plan
BASE SALARY
The base salaries of the Company's executive officers and subsequent
adjustments to base salaries are determined relative to the following factors:
(1) the strategic importance to the Company of the executive officer's job
function; (2) the individual's performance in his or her position; (3) the
individual's potential to make a significant contribution to the Company in the
future; and (4) a comparison of industry compensation practices. The Committee
believes that all of these factors are important and the relevance of each
factor varies from individual to individual.
EXECUTIVE INCENTIVE PLAN
All executive officers are eligible to participate in the Executive
Incentive Plan, which provides annual incentive compensation opportunities based
on various performance measures related to the financial performance of the
Company and the achievement of individual goals and objectives for the fiscal
year.
The Committee oversees the operation of the Executive Incentive Plan by
evaluating and approving the targets and the objectives to be met by the Company
and the executive officers and the amount of bonus payable at specified levels
of attainment of those targets and objectives. At the end of each fiscal year,
the Committee determines the extent to which the targets and objectives have
been met and awards bonuses accordingly.
Bonuses for corporate officers are based on the Company's earnings per
share (80%) as well as on individual goals (20%). Bonuses for officers in the
Company's ten business groups are based on the Company's earnings per share
(30%), the adjusted contribution margins of their particular business group
(50%) and individual goals (20%).
1996 STOCK OPTION PLAN
Using the Black-Scholes method, the Committee targets annual stock
option grants to its executive officers at the 75th percentile of expected value
for long-term incentive grants to executives of Comparison Group companies. The
1996 Stock Option Plan enables the Committee to grant both incentive stock
options and non-qualified stock options, although no
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<PAGE> 27
incentive stock options have been granted to date. All options granted have a
three-year cliff vesting provision. The Committee has on occasion adjusted
annual grants based on corporate or individual performance.
COMPENSATION OF THE CEO
The Committee establishes the CEO's annual goals and objectives and
evaluates his performance against these goals and objectives annually in
executive session.
On September 23, 1998, the Committee approved a three-year employment
agreement for the CEO through September 2001. His base salary of $500,000 will
remain frozen for the remainder of the agreement, while his target bonus under
the Executive Incentive Plan will increase from 65% in 1999, to 75% in 2000, and
85% in 2001.
Consistent with the focus on performance-based compensation, Mr.
Berger's target bonus opportunity was set at 65% of his salary for 1999. In his
position, 80% of Mr. Berger's target bonus is directly attributable to corporate
performance (earnings per share) with a performance modifier of 0 to 250%. With
respect to the remaining 20% of the target bonus, with a performance modifier of
0 to 200%, the Committee considered Mr. Berger's individual accountabilities,
including:
o Organizational development, with a global focus
o Strategic Planning
o Integration of new business operations
o Financial operations and investor relations
o Continued category growth and market share growth in both
domestic and international markets
In consideration of Mr. Berger's performance during 1999, he earned a bonus of
[$724,620].
As contemplated by Mr. Berger's employment agreement, a total of 75,000
stock options was granted on September 24, 1999 to Mr. Berger. The stock options
will fully vest on the first anniversary of the grant date.
SUBMITTED BY THE COMPENSATION AND
ORGANIZATION COMMITTEE OF THE COMPANY:
Joseph P. Flannery, Chairman
Albert E. Harris
John M. Sullivan
John Walker, Ph.D.
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<PAGE> 28
PERFORMANCE GRAPH
The following line graph compares the yearly percentage change in the
Company's cumulative total shareholder 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 (a) Standard & Poor's 500
Consumer Household Non-Durable Products Index ("S&P 500 Household Index"); and
(b) the Russell 2000 ("the Russell 2000"); each for the period from September
30, 1994 to September 30, 1999. The comparison assumes $100 was invested on
September 30, 1994 in the Company's Common Shares and in each of the foregoing
indices and assumes reinvestment of dividends.
[TOTAL SHAREHOLDER RETURNS GRAPH]
<TABLE>
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
9/94 9/95 9/96 9/97 9/98 9/99
==========================================================================================================
The Scotts Company $100.00 $142.74 $124.19 $169.36 $197.58 $223.39
==========================================================================================================
S&P 500 Household Index $100.00 $131.39 $173.76 $243.55 $240.64 $309.67
==========================================================================================================
Russell 2000 $100.00 $123.37 $139.57 $185.89 $150.53 $176.95
==========================================================================================================
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. James Hagedorn is the President and Treasurer and owns 83% of the
shares of Hagedorn Aviation, a company which owns the aircraft used for certain
business travel by James Hagedorn and, on occasion, the senior management of the
Company. Horace Hagedorn is the Vice President of Hagedorn Aviation and owns the
remaining 17% equity interest. The Company pays charges by Hagedorn Aviation for
flight time at the rate of $150 per hour of flight. The charges cover the cost
to operate and maintain the aircraft. During the 1999 fiscal year, the Company
paid a total of approximately $25,000 to Hagedorn Aviation for such service,
which constituted more than five percent of Hagedorn Aviation's consolidated
gross revenues for its last full fiscal year.
Under the terms of the First Amendment, in connection with the
conversion of the outstanding shares of Convertible Preferred Stock, the Company
paid the Hagedorn Partnership, Horace Hagedorn and John Kenlon, the holders of
the outstanding shares of Convertible Preferred Stock, an aggregate amount of
approximately $6.4 million, representing the aggregate amount of dividends that
would have otherwise been payable on such shares of Convertible Preferred Stock
from October 1, 1999 through May 30, 2000. See "BENEFICIAL OWNERSHIP OF
SECURITIES OF THE COMPANY - The Merger Agreement and the First Amendment."
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<PAGE> 29
Paul Hagedorn, a brother of James Hagedorn and a general partner of the
Hagedorn Partnership, is employed as a Graphics Design Specialist under an
employment agreement dated May 19, 1995 with Scotts' Miracle-Gro (as successor
to Miracle-Gro Products). The agreement renews for an annual term each May,
unless terminated by either party 90 days prior to May 19th of the then current
year. Under the agreement, in the 1999 fiscal year, Mr. Hagedorn received a
salary and bonus of $129,826. He also received employment benefits consistent
with those offered to other associates of the Company. If the agreement is
terminated by Scotts' Miracle-Gro without "cause" (as defined) or by Mr.
Hagedorn for "good reason" (also as defined), Mr. Hagedorn is entitled to salary
payments and health insurance benefits for the remainder of the term of the
agreement, beginning on the "date of termination" (also as defined). In the 1999
fiscal year, the Company paid aggregate rent and utility expenses of $9,306 for
an office for Mr. Hagedorn and reimbursed Mr. Hagedorn $36,722 for his other
office and business expenses.
INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed
PricewaterhouseCoopers LLP as the Company's independent auditors for the 2000
fiscal year. PricewaterhouseCoopers LLP, a certified public accounting firm, has
served as the Company's independent auditors since 1986.
A representative of PricewaterhouseCoopers LLP is expected to be
present at the Annual Meeting to respond to appropriate questions and to make
such statements as he or she may desire.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Proposals by shareholders intended to be presented at the 2001 Annual
Meeting of Shareholders must be received by the Secretary of the Company no
later than September 14, 2000, 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, 41 South High Street, Suite 3500, Columbus, Ohio 43215,
Attention: Secretary. If a shareholder intends to present a proposal at the 2001
Annual Meeting of Shareholders, but has not sought the inclusion of such
proposal in the Company's proxy, notice of meeting and proxy statement, such
proposal must be received by the Secretary of the Company prior to November 28,
2000 or the Company's management proxies for the 2001 Annual Meeting will be
entitled to use their discretionary voting authority should such proposal then
be raised, without any discussion of the matter in the Company's proxy, notice
of meeting or proxy statement.
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<PAGE> 30
OTHER BUSINESS
The Board of Directors is aware of no other matter that will be
presented for action at the 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.
ANNUAL REPORT
The Company's 1999 Annual Report to Shareholders containing audited
financial statements for the 1999 fiscal year is being mailed to all
shareholders of record with this Proxy Statement.
Sincerely,
/s/Charles M. Berger
CHARLES M. BERGER,
Chairman, President and Chief Executive Officer
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<PAGE> 31
THE SCOTTS COMPANY
2000 ANNUAL MEETING OF SHAREHOLDERS
The Westin Great Southern Hotel
310 South High Street
Columbus, Ohio
(614) 222-7000
Fax (614) 228-8820
FEBRUARY 15, 2000 AT 10:00 A.M.
DIRECTIONS:
TRAVELING SOUTH ON I-71 (FROM CLEVELAND/NORTHERN OHIO)
Take I-71 South to the Main Street exit. This exit is a cloverleaf which
branches to the right. Proceed through the light. This road will curve to the
left and become Rich Street. Go about five blocks to High Street and turn left.
Go one block to Main Street. The Hotel is on the corner of High and Main
Streets. Valet parking is available in front of the Hotel on High Street.
TRAVELING NORTH ON I-71 (FROM CINCINNATI AREA)
Take I-71 North. Just before reaching the downtown area, exit onto I-70 East.
Take the first exit which is the Front/High Street exit. Go straight to the
second light, which is High Street, and turn left. Just before the third light
you will see the Hotel on your right. Valet parking is available in front of the
Hotel on High Street.
TRAVELING EAST ON I-70 (FROM DAYTON/INDIANAPOLIS AREA)
Take I-70 East to the Front/High Street exit. Go straight off the exit to the
second light which is High Street and turn left. Just before the third light you
will see the Hotel on your right. Valet parking is available in front of the
Hotel on High Street.
TRAVELING WEST ON I-70 (FROM PENNSYLVANIA/WEST VIRGINIA AREAS)
Take I-70 West to the Fourth Street exit. Stay in the middle lane. Proceed
straight through the first and second lights. At the third light turn right onto
High Street. The Hotel is on the corner of High and Main Streets. Valet parking
is available in front of the Hotel on High Street.
TRAVELING FROM PORT COLUMBUS INTERNATIONAL AIRPORT
Take International Gateway (the main airport road) and follow it to I-670 West.
Take I-670 West to the Third Street exit and after exiting pass eight lights to
Mound Street and turn right. Go two blocks to High Street and turn right. The
Hotel is on the corner of High and Main Streets. Valet parking is available in
front of the Hotel on High Street.
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<PAGE> 32
THE SCOTTS COMPANY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
FEBRUARY 15, 2000
The undersigned holder(s) of common shares of The Scotts Company (the "Company")
hereby appoints Charles M. Berger or G. Robert Lucas, 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 Westin Great Southern Hotel, 310
South High Street, Columbus, Ohio, on Tuesday, February 15, 2000, at 10:00 a.m.,
local time, and any adjournment(s) thereof, and to vote all of the common 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 II for terms to expire at the 2003
Annual Meeting:
John Kenlon, John M. Sullivan, L. Jack Van Fossen
[ ] Vote for all nominees [ ] Vote for all nominees except_______________
2. To approve an amendment to The Scotts Company Amended Articles of
Incorporation to increase the authorized number of common shares to
100,000,000:
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> 33
WHERE A CHOICE IS INDICATED, THE COMMON SHARES REPRESENTED BY THIS PROXY WHEN
PROPERLY EXECUTED WILL BE VOTED OR NOT VOTED AS SPECIFIED. IF NO CHOICE IS
INDICATED, THE COMMON SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" THE
ELECTION OF THE NOMINEES LISTED IN PROPOSAL 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 COMMON SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE
DISCRETION OF THE PROXIES ON SUCH MATTERS OR FOR SUCH SUBSTITUTE NOMINEE(S) AS
THE DIRECTORS MAY RECOMMEND.
The undersigned hereby acknowledges receipt of the Notice of the Annual Meeting
of Shareholders, dated January 12, 2000, the Proxy Statement furnished
therewith, and the Annual Report of the Company for the fiscal year ended
September 30, 1999. Any proxy heretofore given to vote the common shares which
the undersigned is entitled to vote at the Annual Meeting is hereby revoked.
Dated ____________________, 2000
________________________________
________________________________
Shareholder sign name exactly as 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 holder 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.
