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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>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] 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)
XXXXXXXXXXXXXXXX
(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 FOR 2000 ANNUAL MEETING
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<PAGE> 3
[THE SCOTTS COMPANY LOGO]
THE SCOTTS COMPANY
41 SOUTH HIGH STREET
SUITE 3500
COLUMBUS, OHIO 43215
January 14, 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 14, 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 14, 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 28,521,006 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.
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 facsimile. Officers or
<PAGE> 6
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.............. 199,599(11) 45,642(12) 245,241 (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)....... 2,061 10,000 12,061 (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)..... 10,526,332(15) 4,090,399 14,616,731 44.83%
Hagedorn Partnership,
L.P.................... 10,067,578(16) 3,000,000(16) 13,067,578 41.47%
800 Port Washington Blvd.
Port Washington, NY 11050
Perry Corp. ............. 1,823,432(17) 0 1,823,432(17) 6.40%
Richard Perry
599 Lexington Avenue
New York, NY 10022
</TABLE>
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(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.
2
<PAGE> 7
(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 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 of 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.
(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 (192,947
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. 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.
3
<PAGE> 8
(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 Hagedorn Partnership, Horace Hagedorn and John Kenlon 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, those 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, a director of the Company and a former executive officer 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.
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 to
retire and has withdrawn from re-nomination as a Class II director.
As a result of the retirement of Dr. Beard, 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 evaluation
4
<PAGE> 9
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.
NOMINEES STANDING FOR RE-ELECTION TO THE BOARD OF DIRECTORS
CLASS II -- TERMS TO EXPIRE AT THE 2003 ANNUAL MEETING
<TABLE>
<S> <C>
[JOHN KENLON PHOTO] John Kenlon, age 68, Retired Senior Vice President, Consumer
Gardens Group, of the Company and Director of the Company
since 1995
Mr. Kenlon was named Senior Vice President,
Consumer Gardens Group, of the Company, in May
1999, a change to make titles uniform within the
executive team of the Company. He was previously
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. Mr. Kenlon
retired as an officer of the Company, effective
December 31, 1999, but remains a member of the
Board of Directors.
Committee Membership: None at this time
[JOHN M. SULLIVAN PHOTO] 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 L. Jack Van Fossen, age 62, Director of the Company since
PHOTO] 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)
</TABLE>
5
<PAGE> 10
<TABLE>
<S> <C>
DIRECTORS REMAINING IN OFFICE
CLASS III -- TERMS TO EXPIRE AT THE 2001 ANNUAL MEETING
[JOSEPH P. FLANNERY Joseph P. Flannery, age 67, Director of the Company since
PHOTO] 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 PHOTO] 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 and director 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 PHOTO] 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 Patrick J. Norton, age 49, Director of the Company since
PHOTO] 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
</TABLE>
6
<PAGE> 11
<TABLE>
<S> <C>
CLASS I -- TERMS TO EXPIRE AT THE 2002 ANNUAL MEETING
[CHARLES M. BERGER Charles M. Berger, age 63, Chairman of the Board, President
PHOTO] 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 PHOTO] 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 PHOTO] Karen G. Mills, age 46, 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)
[JOHN WALKER PHOTO] 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 (Chairman)
</TABLE>
7
<PAGE> 12
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 executive officers and certain 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 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 reimbursement of 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 for each committee on which they serve (with committee chairs
receiving options to purchase a total of an additional 1,500 Common Shares for
each committee they chair). Options granted to a Non-employee Director become
exercisable six months after the
8
<PAGE> 13
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 (a) having been convicted of, or pled guilty or nolo contendere to, a
felony, his or her options will be cancelled on the date he or she ceases to be
a Director, or (b) having retired, any outstanding options (whether or not then
exercisable) may be exercised at any time prior to the expiration of the term of
the options or within five years following retirement, whichever period is
shorter.
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.
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.
9
<PAGE> 14
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 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 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.
10
<PAGE> 15
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 ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(1) OPTIONS(#)(2) COMPENSATION($)
--------------------------- ------- ------------- ----------- ------------------- ----------------
<S> <C> <C> <C> <C> <C>
Charles M. Berger............. 1999 $512,855 $634,605 150,000 $ 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 $421,254 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 $326,063 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 $255,469 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 $204,312 0 $ 55,752(13)
Senior Vice President, 1998 $235,850 $178,486 25,000 $ 14,848(4)
Consumer Ortho 1997 $213,000 $165,946 55,000 $ 3,200(4)
Business Group(12)
</TABLE>
- - ---------------
(1) Includes compensation which may be deferred under the Executive Plan.
(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 Executive Vice President and Chief
Financial Officer since January 1997.
(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.
11
<PAGE> 16
(10) Mr. Lucas was named Executive Vice President in February 1999, and General
Counsel and Corporate Secretary in May 1997. He was previously a Senior
Vice President of the Company from May 1997 until February 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 October 1998. He was previously Senior Vice President,
Consumer Lawns Group, of the Company, since October 1996.
(13) Includes a housing allowance of $41,831, a $5,079 tax equalization payment
in connection with a temporary relocation to California and a $8,842
contribution by the Company to the RSP.
GRANTS OF OPTIONS IN 1999 FISCAL YEAR
The following table sets forth information concerning individual grants of
non-qualified stock options made during the 1999 fiscal year under the 1996 Plan
to each of the individuals named in the Summary Compensation Table. The Company
has never granted stock appreciation rights.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/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(7) -- -- -- -- --
</TABLE>
- - ---------------
(1) In the event of a "Change in Control" (as defined in the 1996 Plan), each
optionee will be permitted in his discretion, to surrender any option or
portion thereof in exchange for the payment in cash of 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
option 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 (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 optionee's employment is
terminated for cause. In the event an optionee'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.
(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.
12
<PAGE> 17
(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.
(7) Mr. Rogula is eligible to receive a grant of options to purchase Common
Shares in September 2000, which grant will be based primarily upon the
performance of the Consumer Ortho Business Group during both the 1999 and
2000 fiscal years. The grant will be based upon two years of results,
covering the expected time to transition and integrate the Ortho business.
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 SECURITIES VALUE OF UNEXERCISED
NUMBER UNDERLYING UNEXERCISED IN-THE-MONEY
OF SECURITIES OPTIONS AT OPTIONS AT
UNDERLYING FISCAL YEAR-END(#) 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:
<TABLE>
<S> <C> <C>
(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.
</TABLE>
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
13
<PAGE> 18
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 of 1986
(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 each 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 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
as of 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. 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.
14
<PAGE> 19
In connection with the transactions contemplated by the Merger Agreement,
the Company entered into an employment agreement with Mr. James Hagedorn (the
"Hagedorn Agreement"). The Hagedorn 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 Hagedorn
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 Hagedorn 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 Hagedorn Agreement) or a
termination by Mr. Hagedorn constituting "good reason" (also as defined)), he
will become entitled to receive certain severance benefits including a payment
equal to three times the sum of his base salary then in effect plus his highest
annual bonus in any of the three preceding years. Upon termination of employment
for any other reason, Mr. Hagedorn or his beneficiary will be entitled to
receive all unpaid amounts of base salary and benefits under the executive
benefit plans in which he participated. The Hagedorn Agreement also contains
confidentiality and noncompetition provisions which prevent Mr. Hagedorn from
disclosing confidential information about the Company and from competing with
the Company during his employment therewith and 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 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 "Bonus 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.
15
<PAGE> 20
OBJECTIVES OF THE EXECUTIVE COMPENSATION PROGRAM
The Committee's primary objective is the establishment of compensation
programs 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 pursuing this objective, the Committee believes the Company's
executive compensation program must:
- Emphasize pay for performance, motivating both long-term and
short-term performance for the benefit of the Company's
shareholders;
- Place greater emphasis on variable incentive compensation versus
fixed or base pay;
- Reward decision-making that emphasizes long-term shareholder value;
- Provide a total compensation program competitive with those
companies with which the Company competes for top management talent
on a global basis; and
- 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 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:
- Base Salary
- Bonus Plan
- 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.
BONUS PLAN
All executive officers are eligible to participate in the Bonus 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.
16
<PAGE> 21
The Committee oversees the operation of the Bonus 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 incentive stock options have been
granted to date. All options granted have a three-year cliff vesting provision.
The Committee has on occasion adjusted grants based on corporate or individual
performance.
COMPENSATION OF THE CEO
The Committee, in conjunction with the CEO, 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 until August 2001. His base salary of $500,000 will remain
frozen for the remainder of the agreement, while his target bonus under the
Bonus Plan will increase from 65% in the 1999 fiscal year, to 75% in the 2000
fiscal year, and 85% in the 2001 fiscal year.
Consistent with the focus on performance-based compensation, Mr. Berger's
target bonus opportunity was set at 65% of his salary for the 1999 fiscal year.
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:
- Organizational development, with a global focus
- Strategic planning
- Integration of new business operations
- Financial operations and investor relations
- Continued category growth and market share growth in both domestic
and international markets
In consideration of Mr. Berger's performance during the 1999 fiscal year,
he earned a bonus of $634,605.
As contemplated by Mr. Berger's employment agreement, options to purchase
75,000 Common Shares were granted on September 24, 1999 to Mr. Berger. The
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.
17
<PAGE> 22
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>
<CAPTION>
THE SCOTTS COMPANY S&P 500 HOUSEHOLD INDEX RUSSELL 2000
------------------ ----------------------- ------------
<S> <C> <C> <C>
9/94 $100.00 $100.00 $100.00
9/95 $142.74 $131.39 $123.37
9/96 $124.19 $173.76 $139.57
9/97 $169.36 $243.55 $185.89
9/98 $197.58 $240.64 $150.53
9/99 $223.39 $309.67 $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."
18
<PAGE> 23
Horace Hagedorn, a director of the Company, served as a consultant to the
Company, from April 1, 1997 through May 15, 1999. As a consultant, he assisted
the Company with its general business needs in the areas of advertising,
marketing and strategic planning. Mr. Hagedorn was paid $60,000 per quarter for
such consulting services, beginning with the quarter ended June 30, 1997. The
Company paid Mr. Hagedorn $150,000 for his consulting services during the 1999
fiscal year.
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 in Atlanta, Georgia 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 16, 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 30,
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.
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
19
<PAGE> 24
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.
OUTER COLUMBUS MAP
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.
<PAGE> 25
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:
<TABLE>
<S> <C>
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 [ ]
</TABLE>
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)
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. THE PROXY CANNOT BE VOTED FOR MORE THAN THREE NOMINEES
FOR ELECTION AS CLASS II DIRECTORS. 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 14, 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
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.
Proxy Card
