THE SCOTTS COMPANY
14111 Scottslawn Road
Marysville, Ohio 43041
PROXY STATEMENT
for
Annual Meeting of Stockholders
Tuesday, March 8, 1994
This Proxy Statement is furnished in connection with the
solicitation on behalf of the Board of Directors of The Scotts
Company (the "Company") of proxies for use at the Annual Meeting
of Stockholders (the "Annual Meeting") to be held at the Columbus
Marriott North, 6500 Doubletree Avenue, Columbus, Ohio, on Tuesday,
March 8, 1994, at 9:00 a.m., Eastern Standard Time, and at any
adjournment or adjournments thereof, for the purposes set forth in
the accompanying Notice of Annual Meeting of Stockholders. This
Proxy Statement and the accompanying proxy card are first being
mailed on or about January 25, 1994, to all stockholders of the
Company. Only holders of record of the Company's Class A Common
Stock, $.01 par value (the "Common Shares"), at the close of
business on January 7, 1994, will be entitled to vote at the Annual
Meeting. As of that date, there were 18,658,535 Common Shares
outstanding. Each Common Share entitles the holder thereof to one
vote. A quorum for the Annual Meeting is a majority of the Common
Shares outstanding. There is no cumulative voting. There are no
other voting securities of the Company outstanding.
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 the
Common Shares represented thereby FOR the election as directors of
the Company of those persons named below and FOR the ratification
of the selection of Coopers & Lybrand as independent auditors of
the Company for the 1994 fiscal year.
The Board of Directors is not currently aware of any
matters other than those referred to herein which will come before
the Annual Meeting. If any other matter should be presented at the
Annual Meeting for action, the persons named in the accompanying
proxy card will vote the Common Shares represented by the proxy in
their discretion, in accordance with their best judgment in light
of the conditions then prevailing.
Without affecting any vote previously taken, any
stockholder executing a proxy may revoke it 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
requesting in writing that the proxy be withdrawn. Attendance at
the Annual Meeting will not, in and of itself, constitute
revocation of a proxy.
The expense of preparing, printing and mailing proxy
materials to the Company's stockholders will be borne by the
Company. The Company has engaged Corporate Investor
Communications, Inc. to assist in the solicitation of proxies from
stockholders at a fee of $4,500 plus reimbursement of reasonable
out-of-pocket expenses. In addition, proxies may be solicited
personally or by telephone by officers or employees of the Company,
none of whom will receive additional compensation therefor. The
Company will also reimburse brokerage houses and other nominees who
are record holders of Common Shares of the Company not beneficially
owned by them for their reasonable expenses in forwarding proxy
materials to, and obtaining proxies from, the beneficial owners of
such Common Shares.
If a stockholder is a participant in The O. M. Scott &
Sons Company Amended Profit Sharing Plan (the "O. M. Scott Profit
Sharing Plan") and Common Shares have been allocated to such
person's account in the O. M. Scott Profit Sharing Plan, the
trustee will vote the allocated Common Shares.
BENEFICIAL OWNERSHIP OF COMMON SHARES
The following table furnishes certain information as of
January 7, 1994 (except as otherwise noted), as to the Common
Shares beneficially owned by each of the nominees for election as
a director of the Company, by each of the executive officers of the
Company 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.
Amount and Nature of Beneficial Ownership(1)
Common Shares Which
Can be Acquired
Name of Beneficial Upon Exercise of
Owner or Number of Common Shares Options Exercisable Percent
Persons in Group Presently Held Within 60 Days Total of Class(2)
Government of Singapore 1,060,600(3) 0 1,060,600(3) 5.68%(3)
Investment Corporation
Pte Ltd
250 North Bridge Road
#33-00 Raffles City Tower
Singapore 0617
Thorsell, Parker
Partners 997,100(4) 0 997,100(4) 5.34%(4)
Incorporated
215 Main Street
Westport, CT 06880
James B Beard 16,727 4,000 20,727 (5)
John S. Chamberlin 22,727 4,000 26,727 (5)
Alberto Cribiore 0 0 0 (5)
Joseph P. Flannery 25,454 4,000 29,454 (5)
Theodore J. Host(6) 45,454(7) 172,139 217,593 1.16%
Tadd C. Seitz(6) 462,454 57,266 519,720 2.78%
Donald A. Sherman 22,727 4,000 26,727 (5)
John M. Sullivan 0 0 0 (5)
L. Jack Van Fossen 1,200 0 1,200 (5)
J. Blaine McKinney (6) 0 18,742 18,742 (5)
Richard B. Stahl(6) 102,545(8) 9,799 112,344 (5)
Paul D. Yeager(6) 140,885(9) 12,622 153,507 (5)
All directors and
executive officers
as a group (19 persons) 1,299,023(10) 325,018 1,624,041 8.55%
______________
(F1) Unless otherwise indicated, the beneficial owner has sole
voting and investment power as to all of the Common Shares
reflected in the table.
(F2) The percent of class is based upon the sum of 18,658,535
Common Shares outstanding on January 7, 1994, and the number
of Common Shares as to which the named person has the right
to acquire beneficial ownership upon the exercise of options
exercisable within 60 days of January 7, 1994.
(F3) Based on information contained in a Schedule 13D dated
October 18, 1993 filed with the Securities and Exchange
Commission, Government of Singapore Investment Corporation Pte
Ltd, an agency of the Singapore government and an investment
manager, shares voting and investment power with respect to
749,400 Common Shares with the Government of Singapore and
shares voting and investment power with respect to 311,200
Common Shares with the Monetary Authority of Singapore.
(F4) Based on information provided to the Company by Thorsell,
Parker Partners Incorporated ("Thorsell, Parker"), Thorsell,
Parker, a registered investment advisor, is deemed to have
beneficial ownership of 997,100 Common Shares as of
December 31, 1993, all of which Common Shares are held in
portfolios of clients for which Thorsell, Parker serves as
investment manager with investment discretion. Thorsell,
Parker also exercises sole voting power with respect to
747,825 of such Common Shares.
(F5) Represents ownership of less than 1% of the outstanding Common
Shares of the Company.
(F6) Executive officer of the Company named in the Summary
Compensation Table.
(F7) Includes 45,454 Common Shares which were issued to Mr. Host
at the time of his employment by the Company and which are
pledged to Bank One, N.A.
(F8) Includes 25,000 Common Shares held in the Richard B. Stahl and
Nancy E. Stahl 1992 Charitable Remainder Trust. In his
capacity as trustee of said Trust, Mr. Stahl exercises sole
voting and investment power with respect to such Common
Shares. Also includes 1,000 Common Shares held by the son of
Mr. Stahl who shares his home.
(F9) Includes 100 Common Shares held by each of Mr. Yeager's wife
and his two daughters who share his home.
(F10) See Notes (7), (8) and (9) above. Also includes Common Shares
held by the respective spouses of executive officers of the
Company and by their children who reside with them.
To the Company's knowledge, based solely on a review of
the copies of the reports furnished to the Company and written
representations that no other reports were required, during the
fiscal year ended September 30, 1993 (the "1993 Fiscal Year"), all
filing requirements applicable to officers, directors and greater
than 10% beneficial owners of the Company under Section 16(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), were complied with; except that one report covering one
transaction was filed late by Mr. Stahl, an executive officer of
the Company.
ELECTION OF DIRECTORS
(Item 1 on Proxy)
General Information
As set by the Board of Directors pursuant to the By-Laws
of the Company, the authorized number of directors to be elected
is nine. The directors will hold office from the time of their
election until the next annual meeting of stockholders of the
Company and until their successors are duly elected and qualified,
or until their earlier death, resignation or removal. All nominees
are presently members of the Board of Directors of the Company and
also serve as members of the Board of Directors of The O. M. Scott
& Sons Company ("O. M. Scott"). All of the nominees were first
appointed from time to time as indicated below and have been
elected as directors annually since their respective appointments.
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 or unable 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.
The following information with respect to the principal
occupation or employment, other affiliations and business
experience of each nominee during the last five years has been
furnished to the Company by such nominee. Except as indicated,
each of the nominees has had the same principal occupation for the
last five years.
Information Concerning Nominees as of January 25, 1994
Tadd C. Seitz, age 52 Chairman of the Board, Chief
Executive Officer and Director
of the Company since 1987; Chief
Executive Officer of O. M. Scott
since 1983
Mr. Seitz became a director of the Company in 1987 and
of O. M. Scott in 1983. Mr. Seitz has been the Chief Executive
Officer of the Company since 1987 and of O. M. Scott since 1983.
He was also President of O. M. Scott from 1983 until 1991.
Previously, Mr. Seitz served as O. M. Scott's Director of Marketing
and as General Manager of The W. Atlee Burpee Company. Mr. Seitz
has been employed by O. M. Scott for twenty-one years. Mr. Seitz
has also served as a director of Holophane Corporation, a producer
of industrial lighting, since 1993.
Committee Membership: Executive (Chairman)
James B Beard, age 58 Director of the Company since
1989
Dr. Beard became a director of the Company and of O. M.
Scott in 1989. He is Professor Emeritus of Turfgrass Physiology
and Ecology at Texas A & M University where he served from 1975 to
1992. Presently, he is President and Chief Scientist at the
International Sports Turf Institute. Dr. Beard is the author of
6 books and over 500 scientific articles on turfgrass science and
is an active lecturer and consultant both nationally and
internationally. He is a Fellow of the American Association of the
Advancement of Science and was the first President of the
International Turfgrass Society.
Committee Membership: Audit
John S. Chamberlin, age 65 Director of the Company since
1989
Mr. Chamberlin became a director of the Company and of
O. M. Scott in 1989. Since 1988, Mr. Chamberlin has served as an
advisor for investment firms. In 1990 and 1991, he was Chief
Executive Officer of N.J. Publishing, Inc. He has been Senior
Advisor to Mancuso & Co. since 1990, Chairman of Life Fitness Co.
since 1992, Chairman of WNS, Inc. since 1993, a director of
Curaflex Health Services, Inc. since 1992, and a director of Health
Self Rehabilitation Corporation since 1993.
Committee Memberships: Executive and Compensation
Alberto Cribiore, age 49 Director of the Company since 1987
Mr. Cribiore became a director of the Company and of
O. M. Scott in 1987. He is Vice President and a director of
Clayton, Dubilier & Rice, Inc. ("CD&R"), a private investment firm
which he joined in 1985. Currently, Mr. Cribiore is a general
partner of various CD&R managed investment partnerships. He is
also a director of other corporations in which investment
partnerships managed by CD&R have invested, including Kendall
International, Inc. and its subsidiary The Kendall Company, and CDV
Holding, Inc. and its subsidiary The Van Kampen Merritt Companies,
Inc.
Committee Membership: None at this time.
Joseph P. Flannery, age 61 Director of the Company since
1987
Mr. Flannery has been a director of the Company and of
O. M. Scott since 1987. He was a consultant to CD&R from September
1988 to December 1990. Mr. Flannery has been President, Chief
Executive Officer and Chairman of the Board of Directors of
Uniroyal Holding, Inc. since 1982. Mr. Flannery is also a director
of Ingersoll-Rand Company, K-Mart Corporation, Newmont Mining &
Newmont Gold Company, Arvin Industries, Inc., and APS Holding
Corporation.
Committee Membership: Compensation (Chairman)
Theodore J. Host, age 48 President, Chief Operating Officer
and Director of the Company since
1991; President and Chief Operating
Officer of O. M. Scott since 1991
Mr. Host became President, Chief Operating Officer and
a director of the Company and of O. M. Scott in 1991. Prior to
joining the Company, Mr. Host was Senior Vice President, Marketing
with Coca-Cola USA from 1990 to 1991 and was with American Home
Products, Inc. for twenty-three years, serving as President of the
Boyle-Midway Household Products division for five years before
joining Coca-Cola USA.
Committee Membership: None at this time.
Donald A. Sherman, age 42 Director of the Company since
1988
Mr. Sherman became a director of the Company and of O. M.
Scott in 1988. Mr. Sherman has been President of Waterfield
Mortgage Company in Fort Wayne, Indiana, since 1989.
Committee Membership: Audit (Chairman)
John M. Sullivan, age 58 Director of the Company since
1994
Mr. Sullivan was appointed to the Boards of Directors of
the Company and O. M. Scott on January 18, 1994 to fill a vacancy
in the Board. Mr. Sullivan was Chairman of the Board from 1987 to
1993, and President and Chief Executive Officer from 1984 to 1993,
of Prince Holdings, Inc., a corporation which, through its
subsidiaries, manufactures sporting goods. Since his retirement
from Prince Holdings, Inc. and its subsidiaries in 1993,
Mr. Sullivan has served as an independent director for various
corporations, none of which, other than the Company, are subject
to the Exchange Act.
Committee Membership: None at this time.
L. Jack Van Fossen, age 56 Director of the Company
since 1993
Mr. Van Fossen was appointed to the Boards of Directors
of the Company and O. M. Scott on October 21, 1993 to fill the
vacancy created by the resignation of Joseph L. Rice III.
Mr. Van Fossen has been President and Chief Executive Officer of
Red Roof Inns, Inc., an owner and operator of motels, since 1991.
From 1988 to 1991, Mr. Van Fossen was self-employed as an
independent business consultant. Mr. Van Fossen also serves as a
director of Cardinal Distribution, Inc.
Committee Membership: Audit
To be elected, each nominee for director must receive the
affirmative vote of the holders of a majority of the Common Shares
present, in person or represented by proxy, at the Annual Meeting
and entitled to vote thereon.
Common Shares represented by the accompanying proxy card
will be voted FOR the election of the above nominees unless
authority to vote for one or more nominees is withheld.
Stockholders 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 and broker non-votes 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.
Committees and Meetings of the Board
The composition of the Board of Directors of the Company
and O. M. Scott is identical. The Company's Board of Directors
held four regularly scheduled or special meetings during the 1993
Fiscal Year. The Board of Directors of O. M. Scott held four
regularly scheduled meetings during the 1993 Fiscal Year. Each
Board of Directors has three standing committees: an Executive
Committee, an Audit Committee and a Compensation Committee. While
the composition and responsibilities of the standing committees of
the two Boards are identical, the level of activity of the
corresponding committees of each Board varies depending on the
matters being considered. Neither the Company's Board of Directors
nor the Board of Directors of O. M. Scott has a standing Nominating
Committee or a committee performing similar functions.
Each current member of the Board of Directors of the
Company nominated for election attended at least 75% of the
aggregate of the total number of meetings of the Board of Directors
of the Company and the total number of meetings held by the
committees of such Board on which he served during the period he
served.
Executive Committee. The Executive Committee of each
Board has the authority, with certain exceptions, to take all
actions that may be taken by its full Board of Directors. It may
meet between regularly scheduled meetings to take such action as
is necessary for the operation of the Company or O. M. Scott, as
the case may be. The Executive Committee of the Company's Board
and the corresponding committee of O. M. Scott's Board each met
five times during the 1993 Fiscal Year.
Audit Committee. The Audit Committee of each Board
reviews and approves the scope and results of any outside audit of
the Company or O. M. Scott, as the case may be, and the fees
therefor, and makes recommendations to its respective Board of
Directors or management concerning auditing and accounting matters
and the selection of outside auditors. The Audit Committee of the
Board of each of the Company and O. M. Scott met two times during
the 1993 Fiscal Year.
Compensation Committee. The Compensation Committee of
each Board reviews, considers and acts upon matters of salary and
other compensation and benefits of all officers and other employees
of the Company or O. M. Scott, as the case may be, and acts upon
all matters concerning, and exercises such authority as is
delegated to it under the provisions of, any benefit, retirement
or pension plan. The Compensation Committee of the Company's Board
and the corresponding committee of O. M. Scott's Board each met
four times during the 1993 Fiscal Year.
Compensation of Directors
Each director of the Company and O. M. Scott, other than
any director employed by the Company, O. M. Scott or CD&R, receives
a $25,000 annual retainer for Board and committee meetings plus all
reasonable travel and other expenses of attending such meetings.
Directors, other than those employed by the Company or
O. M. Scott or associated with CD&R (the "Nonemployee Directors"),
receive an annual grant on the first business day following the
date of each annual meeting of stockholders (commencing with the
1994 Annual Meeting) of options to purchase 4,000 Common Shares at
an exercise price equal to the fair market value on the date of the
grant. In addition, on November 11, 1992, each of the Nonemployee
Directors of the Company on that date (Messrs. Beard, Chamberlin,
Flannery and Sherman and Henry O. Timnick (who is no longer a
director of either the Company or O. M. Scott)) was granted options
to purchase 4,000 Common Shares at an exercise price of $16.25.
Options granted to Nonemployee Directors become exercisable six
months after the date of grant and remain exercisable until the
earlier to occur of (i) the tenth anniversary of the date of grant
or (ii) the first anniversary of the date the Nonemployee Director
ceases to be a member of the Company's Board of Directors.
PERFORMANCE GRAPH
The following line graph compares the yearly percentage
change in the Company's cumulative total stockholder return (as
measured by dividing (i) the sum of (A) the cumulative amount of
dividends for the measurement period, assuming dividend
reinvestment, and (B) the difference between the price of the
Company's Common Shares at the end and the beginning of the
measurement period; by (ii) the price of the Company's Common
Shares at the beginning of the measurement period) against the
cumulative return of the Standard & Poor's 500 Composite Stock
Index ("S&P 500 Comp") and of an index comprised of the common
stock of Duracell International Inc., First Brands Corp., Lesco
Inc., Newell Co., Rubbermaid Inc. and Stanley Works (the "Peer
Group") for the period from January 31, 1992 to September 30, 1993.
The Company's Common Shares became registered under Section 12 of
the Exchange Act on January 31, 1992. The comparison assumes $100
was invested on January 31, 1992 in the Company's Common Shares and
in each of the foregoing indices and assumes reinvestment of
dividends.
The above-mentioned graph has been filed in Form SE.
REPORT OF
THE COMPENSATION COMMITTEE
OF
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any
of the Company's previous filings under the Securities Act of 1933,
as amended, 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 on page 9 shall not be incorporated
by reference into any such filings.
The Compensation Committee (the "Committee") of the Board
of Directors of the Company is comprised of two outside directors.
Neither of the Committee members serves on the Board of the other
Committee member's organization. None of the Company's executive
officers serves on the Board of either Committee member's
organization. The Committee has access to outside legal counsel
and compensation consultants.
Role of Compensation Committee
The Committee has the oversight responsibility for the
Company's executive compensation program. The Committee reviews
the general compensation philosophy of the Company, the components
of the compensation program, the details of each component, each
executive officer's goals and the related measurements of the
executive officer's attainment thereof, and the actual results of
the compensation program compared to the philosophy to determine
if the program is achieving anticipated objectives. To ensure that
actual compensation and performance are aligned, the Committee
reviews the individual levels of compensation and awards for all
corporate officers.
Since the Company is a newly public corporation, the
challenge faced by the Committee is to direct the development of
a compensation program which addresses the current and future needs
of the Company. The Committee retained a compensation consultant
to evaluate current compensation levels and propose new plans. As
the Company does not fit into a readily identifiable industry
group, the compensation consultant retained by the Committee used
broad industry survey data and other industry measures, such as the
Industrial Composite of the Value Line Companies, as the bases for
its recommendations on compensation levels and performance measures
for all three components of the Company's compensation program
described below.
Compensation Philosophy
In designing its compensation program, the Company
follows its belief that compensation should reflect the value
created for stockholders while supporting the Company's strategic
goals. The compensation plans have been designed to achieve
attainment of the following objectives:
Compensation should be meaningfully related to the value
created for stockholders.
Compensation plans should support the short and long term
strategic goals and objectives of the Company.
Compensation plans should enable the Company to recruit,
maintain and motivate the executive talent required to meet
the Company's strategic goals.
Compensation plans should reflect and promote the Company's
values and reward individuals for outstanding contributions
to the Company's success.
Performance should be a key determinant of pay.
Minimum stock ownership must be attained by all corporate
officers and directors.
Plans Implemented During the 1993 Fiscal Year
In November 1992, the Committee implemented a
compensation program which consists of three components: base
salary (the only fixed portion of each executive officer's
compensation), an annual incentive plan, and a long term incentive
plan. The Committee believes that the Company's most direct
competitors for executive talent are not necessarily the same
corporations that would be included in a peer group established to
compare stockholder returns. Thus, the compensation comparative
peer group is not the same as the peer group index in the graph
included at page 9 of this Proxy Statement.
1. Base Salary - Base salary is targeted at the competitive
50th percentile of salaries for individuals in competitive
companies identified by the Company's compensation consultant.
Base salaries for executive officers are reviewed by the
Committee on an annual basis and may be changed at that time based
on: (a) the Committee's agreement that an individual's contribution
to the Company has changed; and (b) changes in the competitive 50th
percentile salary levels.
2. Executive Annual Incentive Plan (the "Annual Incentive
Plan") - Annual incentive payouts are targeted for the competitive
50th percentile of short term incentives for individuals in similar
positions with other companies to which the Company's compensation
consultant compared the Company. The Annual Incentive Plan pays
annual bonuses according to the achievement of predetermined
targets for Earnings Before Interest, Taxes and Amortization
("EBITA") and Cash Flow plus Capital. A portion of each
individual's award is also based on individual performance against
predetermined goals. Goals are linked to both operating and
strategic accomplishments.
Targets for the executive officers, including the five
executive officers named in the Summary Compensation Table, are
expressed as a percent of salary and vary according to position
based on competitive analyses.
Prior to the beginning of each fiscal year, the Committee
approves goals for EBITA and Cash Flow plus Capital. It also
reviews and approves individual goals for all corporate officers.
Each year, in December, the Committee reviews results and
determines payouts based on the achievement of targets.
3. Long Term Incentive Plan - The Company's 1992 Long Term
Incentive Plan (the "Long Term Incentive Plan") contains two
components, options and performance shares. Options may be granted
annually and generally vest in equal amounts over three years.
Performance shares are generally granted for a three year
performance period. Performance shares may, at an executive
officer's election, be paid out in the form of options or cash, as
long as the executive officer makes an irrevocable election to
receive such form of payment prior to the beginning of the
performance period. Performance targets are set in advance at the
start of the performance period by the Committee, and performance
shares (or their converted equivalent) are earned, if at all,
through achievement of targets. Options and performance shares are
valued at the closing "asked" price of the Company's Common Shares
on the date of grant.
The Committee has established Return on Equity ("ROE")
and Revenue Growth targets for the performance share awards.
Targets have been set at the competitive 75th percentile of
corporate performance for comparative corporations.
In addition to the plans described above, effective
October 1, 1993, the Committee, in conjunction with the
Compensation Committee of O. M. Scott, established The O. M. Scott
& Sons Company Excess Benefit Plan for executive officers. The
Excess Benefit Plan insures that participants are paid pension and
profit sharing benefits at the levels which would have been payable
but for the reduction in these benefits required to comply with
limitations imposed under the Internal Revenue Code of 1986, as
amended.
Evaluation of Plan Performance
With the changes resulting from the Company's becoming
a public corporation, the Committee believes that the pay for
performance linkage has been enhanced. Following the philosophy
of strengthening the performance-related pay components, base
salary merit increases for 1993 for the executive officers as a
group were an aggregate 3%. Based on the recommendation of the
Company's compensation consultant, the newness of the compensation
program and the low rate of inflation, the Committee determined
that a 3% merit increase target was sufficient to maintain
competitive positioning of base salaries at the 50th percentile.
The payments made under the Annual Incentive Plan were based on
EBITA (70%) and Cash Flow plus Capital (30%). EBITA was 93.9% of
budget and Cash Flow plus Capital was 99.2% of budget, leading to
a composite corporate performance for purposes of the Annual
Incentive Plan of 95.4%. This measure was used in the calculation
of executive bonuses.
Based on the recommendation of the Company's compensation
consultant, the Committee determined the aggregate value of the
awards to be made to each executive officer under the Long Term
Incentive Plan for the 1993 Fiscal Year. The value of such awards
was then divided equally between options and performance shares to
be granted. Options and performance shares were valued at the
closing "asked" price of the Company's Common Shares on the date
of grant. The number of options granted to each executive officer
was then determined based upon the Black-Scholes valuation of the
value of an option with a term of ten years.
The performance shares granted were divided into thirds
with one-third being earned based on the Company's performance
(based equally on the achievement of predetermined ROE and Revenue
Growth targets) for the 1993 Fiscal Year, one-third being earned
based on the Company's cumulative performance for the 1993 and 1994
fiscal years and one-third being earned based on the Company's
cumulative performance for the 1993, 1994 and 1995 fiscal years.
Based on the Company's performance for the 1993 Fiscal Year,
approximately 104.3% of the competitive 75th percentile of
comparative performance target was achieved and participants
received 104.3% of their target performance share awards (or their
converted equivalent).
The compensation of Mr. Seitz, Chairman and Chief
Executive Officer of the Company, reflects the additional
responsibilities of managing a public corporation and the
operational success of the Company. In 1993, the Committee
increased the base salary of the Chairman and Chief Executive
Officer toward the competitive 50th percentile level. Annual and
long term incentives also reflected the operational results. Mr.
Seitz's annual incentive bonus for the 1993 Fiscal Year, paid in
the 1994 Fiscal Year, correlated with corporate performance and
represented 95.3% of his target bonus. Long Term Incentive Plan
awards granted in the 1993 Fiscal Year were in line with the
recommendation of the Company's compensation consultant for
competitive compensation for chief executive officers of a group
of comparative corporations identified by the consultant.
Submitted By the Compensation Committee of the Company as of
September 30, 1993:
Joseph P. Flannery and Henry O. Timnick*
____________________
*Mr. Timnick resigned as a member of the Company's Board of
Directors effective December 15, 1993.
COMPENSATION OF EXECUTIVE OFFICERS
Summary of Cash and Certain Other Compensation
The following table shows, for the fiscal years ended
September 30, 1993, 1992 and 1991, 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
Long Term
Annual Compensation Compensation
Awards
Securities
Underlying
Name and Fiscal Salary Bonus Options All Other
Principal Position Year ($) ($) SARs(#)(1) Compensation($)(2)
Tadd C. Seitz:
Chairman of the 1993 $341,725 $189,780 85,019 $3,270
Board and Chief 1992 $323,925 $191,066 0 --
Executive Officer 1991 $300,000 $ 88,597 0 --
Theodore J. Host:
President and 1993 $283,750 $162,963 53,108 $3,270
Chief Operating 1992 $292,745 $250,000 136,364(4) --
Officer (3) 1991 $ 0 $ 0 0 --
Paul D. Yeager:
Executive Vice 1993 $192,750 $115,103 18,739 $3,270
President and Chief1992 $173,950 $ 91,827 0 --
Financial Officer 1991 $157,350 $ 43,465 0 --
J. Blaine McKinney:
Senior Vice President1993 $177,333 $ 87,365 35,409 $3,270
Consumer Business 1992 $ 58,333 $ 30,000 0 --
Group (3) 1991 $ 0 $ 0 0 --
Richard B. Stahl:
Senior Vice President1993 $163,600 $ 89,679 14,546 $3,270
and General Manager, 1992 $155,000 $ 82,800 0 --
Professional Business1991 $145,667 $ 43,316 0 --
Group
___________________
(F1) Except as noted, these numbers represent options for Common
Shares granted pursuant to the Company's Long Term Incentive
Plan. See the table under "OPTION GRANTS IN LAST FISCAL YEAR"
for more detailed information on such options.
(F2) In accordance with the transition provisions of the revised
rules governing the disclosure of executive compensation
adopted by the Securities and Exchange Commission, amounts of
"All Other Compensation" are excluded for the Company's 1992
and 1991 fiscal years. Includes contributions to the O. M.
Scott Profit Sharing Plan.
(F3) Messrs. Host and McKinney were not executive officers of the
Company prior to the 1992 fiscal year.
(F4) These options expire on January 8, 2002; provided, however,
that if Mr. Host's active employment with the Company and its
subsidiaries is terminated for cause, these options will be
forfeited.
Grants of Options
The following table sets forth information concerning
individual grants of options made during the 1993 Fiscal Year to
each of the executive officers named in the Summary Compensation
Table. The Company has never granted stock appreciation rights.
OPTION GRANTS IN LAST FISCAL YEAR
% of Total Potential Realizable
Number of Options Value at Assumed
Securities Granted to Annual Rates of
Underlying Employees Stock Price
Options in Fiscal Exercise Expira- Appreciation
Granted(#) Year Price tion for Option Term(1)
Name ($/Share) Date 5%($) 10%($)
Tadd C. Seitz 41,630(2)(3) 7.2% $16.25 11/4/02 $425,542 $1,078,175
43,389(3)(4) 7.5% $16.25 9/30/03 $443,522 $1,123,732
Theodore J. Hos 26,000(2)(3) 4.5% $16.25 11/4/02 $265,772 $ 673,374
27,108(3)(4) 4.7% $16.25 9/30/03 $277,098 $ 702,070
Paul D. Yeager 9,175(2)(3) 1.6% $16.25 11/4/02 $ 93,787 $ 237,623
9,564(3)(4) 1.7% $16.25 9/30/03 $ 97,763 $ 247,698
J. Blaine McKinney 25,000(2)(3) 4.3% $16.25 11/4/02 $255,550 $ 647,475
10,409(3)(4) 1.8% $16.25 9/30/03 $106,401 $ 269,583
Richard B. Stahl 7,120(2)(3) 1.2% $16.25 11/4/02 $ 72,781 $ 184,401
7,426(3)(4) 1.3% $16.25 9/30/03 $ 75,909 $ 192,326
______________
(F1) 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.
(F2) These options were granted on November 4, 1992 under the Company's Long
Term Incentive Plan and become exercisable in three approximately equal
installments on each of the first three anniversaries of the date of grant,
subject to right of the Compensation Committee of the Company's Board of
Directors to accelerate the exercisability of such options in its
discretion.
(F3) In the event of a "change in control" (as defined in the Long Term
Incentive Plan), each option will be cancelled in exchange for a payment
in cash of an amount equal to the excess of the highest price paid (or
offered) for Common Shares during the preceding 30 trading days over the
exercise price for such option. Notwithstanding the foregoing, if the
Compensation Committee determines that the holder of the option will
receive a new award (or have his prior award honored) in a manner which
preserves its value and eliminates the risk that the value of the award
will be forfeited due to an involuntary termination, no settlement will
occur as a result of a change in control. In the event of termination of
employment by reason of retirement, long term disability or death, the
options may thereafter be exercised in full for a period of 5 years,
subject to the stated term of the options. The options are forfeited if
the holder's employment is terminated for cause. In the event an option
holder's employment is terminated for any reason other than retirement,
long term disability, death or cause, any exercisable options held by him
at the date of termination may be exercised for a period of 30 days.
(F4) These options were earned under the Long Term Incentive Plan based upon
the Company's performance during the 1993 Fiscal Year and represent
performance shares converted into options based upon the Black-Scholes
valuation of $5.39 on November 4, 1992 (the date the performance shares
were granted). Pursuant to the Long Term Incentive Plan, performance
shares are earned based upon the Company's cumulative Revenue Growth and
cumulative ROE over the applicable performance period. Performance shares
may, at the election of the holder thereof prior to the commencement of
the performance period, be paid in the form of options or cash.
Performance shares are converted into options based upon the Black-Scholes
valuation of the options on the date the performance shares are granted.
ROE and Revenue Growth targets have been set at the competitive 75th
percentile of corporate performance for corporations included in the
Industrial Composite of the Value Line Companies. On November 4, 1992,
each of Messrs. Seitz, Host, Yeager, McKinney and Stahl received two other
grants of performance shares which may be earned based upon the Company's
cumulative Revenue Growth and cumulative ROE over the 1993 and 1994 fiscal
years and over the 1993, 1994 and 1995 fiscal years, respectively. Each
of the named executive officers elected to have the performance shares
earned converted into options. The number of options which may be received
if the target number of performance shares are earned with respect to each
such performance period are: (a) Mr. Seitz - 41,600; (b) Mr. Host -
25,990; (c) Mr. Yeager - 9,170; (d) Mr. McKinney - 7,650; and (e) Mr. Stahl
- 7,120. In order for the target number of performance shares (and the
options convertible therefrom) to be earned by each of the named executive
officers, the Company's cumulative Revenue Growth over the applicable
performance period must be 10% and the Company's cumulative ROE must be
15% or another combination of Revenue Growth and ROE which yields similar
value. Depending on the actual Revenue Growth and ROE achieved, the number
of performance shares (and the options convertible therefrom) earned by
each of the named executive officers may range from 0 to an anticipated
140% of the target number. The Compensation Committee has determined to
cap earned performance shares at two times the targeted number.
Option Exercises and Holdings
The following table sets forth information with respect to
unexercised options held as of the end of the 1993 Fiscal Year by each of the
executive officers named in the Summary Compensation Table. No options were
exercised during the 1993 Fiscal Year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Number of
Securities Securities
Underlying Underlying Value of Unexercised
Options Unexercised In-the-Money Options
Exercised Value Options at at FY-End($)(1)
Realized($) FY-End(#)
Exer- Unexer- Exer- Unexer-
cisable cisable cisable cisable
Tadd C. Seitz 0 - - 43,389 41,630 $ 92,202 $ 88,464
Theodore J. Host 0 - - 118,017 71,455 $ 828,058 $ 440,481
Paul D. Yeager 0 - - 9,564 9,175 $ 20,324 $ 19,497
J. Blaine McKinney 0 - - 10,409 25,000 $ 22,119 $ 53,125
Richard B. Stahl 0 - - 7,426 7,120 $ 15,780 $ 15,130
________________
(F1) "Value of Unexercised In-the-Money Options at FY-End" is based upon the
fair market value of the Company's Common Shares on September 30, 1993
($18.375) less the exercise price of in-the-money options at the end of
the 1993 Fiscal Year.
Pension Plans
O. M. Scott maintains a tax-qualified non-contributory defined
benefit pension plan (the "Pension Plan"). All employees of O. M. Scott and its
subsidiaries (except for Hyponex Corporation, a wholly-owned subsidiary of O. M.
Scott ("Hyponex"), and O. M. Scott & Sons, Ltd., a wholly owned subsidiary of
O. M. Scott in United Kingdom) are eligible to participate upon meeting certain
age and service requirements. The following table shows the estimated annual
benefits (assuming payment made in the form of a single life annuity) payable
upon retirement at normal retirement age (65 years of age) to an employee in
specified compensation and years of service classifications.
PENSION PLANS TABLE
$ 100,000 $ 13,308 $ 19,962 $ 26,616 $ 33,270 $ 39,924
250,000 35,808 53,712 71,616 89,520 107,424
500,000 73,308 109,962 146,616 183,270 219,924
750,000 110,808 166,212 221,616 277,020 332,424
1,000,000 148,308 222,462 296,616 370,770 444,924
1,250,000 185,808 278,712 371,616 464,520 557,424
Monthly benefits under the Pension Plan upon normal retirement (age
65) are based upon an employee's average final pay and years of service, and are
reduced by 1.25% of the employee's PIA times the number of years of such
employee's service. Average final pay is the average of the 60 highest
consecutive months' compensation during the 120 months prior to retirement. Pay
includes all earnings and a portion of sales incentive payments, management
incentive payments and executive incentive payments, but does not include
earnings in connection with foreign service, the value of a company car,
separation or other special allowances and commissions. Additional provisions
for early retirement are included.
At September 30, 1993, the credited years of service (including
certain prior service with ITT Corporation, from whom O. M. Scott was acquired
in 1986) and the 1993 annual covered compensation for purposes of the Pension
Plan and the Excess Benefit Plan of the five executive officers of the Company
named in the Summary Compensation Table were as follows:
Covered
Years of Service Compensation
Mr. Seitz 17 years 9 months $534,780
Mr. Host 1 year 10 months $448,796
Mr. Stahl 17 years 9 months $255,512
Mr. Yeager 24 years 1 month $296,603
Mr. McKinney 1 year 4 months $266,448
Effective October 1, 1993, O. M. Scott also established the Excess
Benefit Plan which provides additional benefits to participants in the Pension
Plan whose benefits are reduced by limitations imposed under Sections 415 and
401(a)(17) of the Code. Under the Excess Benefit Plan, executive officers and
certain key employees will receive, at the same time and in the same form as
benefits paid under the Pension Plan, additional monthly benefits in an amount
which, when added to the benefits paid to the participant under the Pension
Plan, will equal the benefit amount such participant would have earned but for
the limitations imposed by the Code to the extent such limitations apply.
CERTAIN TRANSACTIONS
O. M. Scott entered into an Employment Agreement with Mr. Host
effective October 1991 providing for his continued employment as President and
Chief Operating Officer of O. M. Scott until December 1996 at an annual base
salary of at least $270,000 per year, plus incentive bonus under the O. M. Scott
Executive Incentive Plan. If Mr. Host's employment is terminated for specified
reasons, the Employment Agreement provides that he will receive, subject to
certain limitations, his full base salary which would have been paid until the
first anniversary of his date of termination.
In connection with the entering into of his Employment Agreement,
Mr. Host received a signing bonus of $250,000, and in January 1992, pursuant to
such Agreement, purchased 45,454 Common Shares at a purchase price of $9.90 per
share, and was granted options, which vested one-third on the date of grant and
one-third on each of the first and second anniversaries of his date of
employment, to purchase 136,364 Common Shares at a purchase price of $9.90 per
share.
On February 23, 1993, the Company purchased all of the 2,414,895
Common Shares held by the Clayton & Dubilier Private Equity Fund II Limited
Partnership ("Fund II") for approximately $41.4 million, including transaction
costs. Fund II is an investment partnership, the general partner of which is
Clayton & Dubilier Associates II Limited Partnership ("Associates"). The
general partners of Associates are Joseph L. Rice III and Alberto Cribiore, a
director of the Company and of O. M. Scott, who share investment discretion with
respect to the Common Shares held by Fund II. Messrs. Rice and Cribiore,
together with Mr. Peter F. Dolle, own all of the outstanding stock of CD&R. Mr.
Dolle is a limited partner of Associates, but did not share investment
discretion with respect to the Common Shares held by Fund II. Fund II and
Associates were organized by CD&R.
O. M. Scott paid CD&R fees of $25,000 per month during the period
from October 1992 through February 1993, for advisory and management consulting
services. Mr. Cribiore is a shareholder of CD&R.
PROPOSAL TO RATIFY
SELECTION OF INDEPENDENT AUDITORS
(Item 2 on Proxy)
The stockholders are asked to ratify the selection by the Board of
Directors of the Company of Coopers & Lybrand as the Company's independent
auditors for the 1994 fiscal year. Coopers & Lybrand, a certified public
accounting firm, has served as the Company's independent auditors since 1986.
A representative of Coopers & Lybrand is expected to be present at
the Annual Meeting to respond to appropriate questions and to make such
statements as he may desire.
Ratification of the selection of Coopers & Lybrand as the Company's
independent auditors for the 1994 fiscal year requires the affirmative vote of
a majority of the Common Shares present or represented at the Annual Meeting.
The Board of Directors recommends that you vote FOR the ratification
of the selection of Coopers & Lybrand as the Company's independent auditors for
the 1994 fiscal year and your proxy will be so voted unless you specify
otherwise. Abstentions and broker non-votes on this proposal will be counted
as present for quorum purposes. The effect of an abstention or broker non-vote
on the proposal to ratify the selection of Coopers & Lybrand is the same as a
"no" vote.
PROPOSALS BY STOCKHOLDERS
Proposals by stockholders intended to be presented at the 1995 Annual
Meeting of Stockholders must be received by the Secretary of the Company no
later than September 27, 1994, to be included in the Company's proxy, notice of
meeting and proxy statement relating to such meeting and should be mailed to The
Scotts Company, 14111 Scottslawn Road, Marysville, Ohio 43041, Attention:
Secretary.
OTHER BUSINESS
The Board of Directors is aware of no other matter that will be
presented for action at the 1994 Annual Meeting. If any other matter requiring
a vote of the stockholders properly comes before the Annual Meeting, the persons
authorized under management proxies will vote and act according to their best
judgment in light of the conditions then prevailing.
ANNUAL REPORT
The Company's 1993 Annual Report to Stockholders (which does not form
a part of the proxy solicitation materials) containing audited financial
statements for the 1993 Fiscal Year is being mailed to all stockholders of
record with this Proxy Statement.
The form of proxy and the Proxy Statement have been approved by the
Board of Directors of the Company and are being mailed and delivered to
stockholders by its authority.
/s/ Craig D. Walley
Craig D. Walley
Vice President and Secretary
