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This excerpt taken from the SMG DEF 14A filed Dec 20, 2007. Employment
Agreements
In connection with the transactions contemplated by the
Miracle-Gro Merger Agreement described on page 61, Scotts
entered into an employment agreement with Mr. James
Hagedorn (the “Hagedorn Agreement”). Mr. Hagedorn
serves as President, Chief Executive Officer and Chairman of the
Board of Directors of the Company. The Hagedorn Agreement had an
original term of three years, and has been and will be
automatically renewed for an additional year each subsequent
year, unless either party notifies the other party of his/its
desire not to renew. On March 18, 2005, the Hagedorn
Agreement was assumed by Scotts LLC as part of the Restructuring
Merger. The Hagedorn Agreement provides for a minimum annual
base salary of $200,000 for Mr. Hagedorn (his annual base
salary was $600,000 for the 2007 fiscal year) and participation
in the various benefit plans available to senior executive
officers of the Company. Upon certain types of termination of
employment (e.g., a termination by the Company for any reason
other than “cause” (as defined in the Hagedorn
Agreement) or a termination by Mr. Hagedorn constituting
“good reason” (also as defined)), he will become
entitled to receive certain severance benefits including a
payment equal to three times the sum of his base salary then in
effect plus his highest annual bonus in any of the three
preceding years (which would have been three times the sum of
(a) $600,000 and (b) $2,999,031, based on his annual
base salary as of September 30, 2007 and his annual bonuses
for the fiscal years ended September 30, 2007, 2006 and
2005). 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.
On November 19, 2007, Scotts LLC executed employment
agreements with Barry W. Sanders, David C. Evans and Denise S.
Stump to reflect the terms and conditions of their respective
employment with Scotts LLC and the Company. Messrs. Sanders
and Evans and Ms. Stump executed their employment
agreements on November 19, 2007, December 3, 2007 and
December 11, 2007, respectively.
The initial terms of their employment agreements extend from
October 1, 2007 through September 30, 2010, subject to
earlier termination as provided in the agreement. The term of
each of the employment agreements will automatically extend for
successive one-year terms thereafter unless either Scotts LLC or
the respective executive officer gives written notice at least
60 days prior to the end of his/her then current term that
such party does not wish the next automatic extension to
continue the employment agreement. If a change in control (as
such term is defined in the employment agreement) occurs during
the initial three-year term of the employment agreement or any
successive term, the term of the employment agreement shall be
the later of (1) the remainder of the initial three-year
term or (2) two years beyond the month in which the
effective date of such change in control occurs.
The employment agreements provide for an annual base salary of
$400,000, $440,000 and $321,400 for Mr. Sanders,
Mr. Evans and Ms. Stump, respectively. The
Compensation and Organization Committee will review each of
their base salary at least annually to determine whether and to
what extent it will be adjusted.
Under the employment agreements, Mr. Sanders,
Mr. Evans and Ms. Stump are eligible to receive an
annual incentive compensation (bonus) award based upon
performance targets and award levels determined by the
Compensation and Organization Committee in accordance with
Scotts LLC’s annual incentive compensation plan for
executives. In addition, they are eligible to receive a
long-term incentive award based
upon performance targets and award levels determined by the
Compensation and Organization Committee in accordance with the
long-term incentive compensation plan for Scotts LLC’s
executives.
Pursuant to each employment agreement, Scotts LLC will provide
all retirement and employee benefits which Scotts LLC makes
available to its other executives and employees, subject to the
applicable eligibility requirements of the underlying benefit
arrangements. Scotts LLC will also provide a $12,000 annual
automobile allowance and a $4,000 annual allowance for personal
financial planning or personal financial planning up to a cost
of that amount.
If the employment of Mr. Sanders, Mr. Evans or
Ms. Stump is terminated due to his/her death or disability,
Scotts LLC will pay the respective executive officer
(1) his/her base salary (subject to an offset, in the case
of disability, for any disability payments) through the
effective date of termination (within 30 days of
termination), (2) a prorated target annual bonus award
based on his/her respective target bonus opportunity for the
year in which termination occurs (within 70 days of
termination and subject to the individual or his/her estate, as
applicable, signing and not revoking a release within
60 days of termination) and (3) all other rights and
benefits as to which the individual is vested under Scotts
LLC’s other plans and programs.
Mr. Sanders, Mr. Evans or Ms. Stump may
voluntarily terminate his/her employment agreement without good
reason upon 60 days’ prior written notice to Scotts
LLC, which notice period may be waived by Scotts LLC. In the
event of voluntary termination, Scotts LLC will pay to the
respective executive officer (1) his/her accrued and unpaid
base salary through the effective date of termination (within
30 days of termination) and (2) all other benefits to
which the individual has a vested right as of the effective date
of termination under the applicable terms of Scotts LLC’s
other plans and programs.
In the event that Mr. Sanders, Mr. Evans or
Ms. Stump is terminated by Scotts LLC without cause or by
the respective executive officer with good reason (as such terms
are defined in the employment agreement) unrelated to a change
in control, the individual will be entitled to receive
(1) all accrued and unpaid base salary through the
effective date of termination (within 30 days of
termination), (2) a lump sum payment equal to two times
his/her base salary then in effect, (3) a lump sum payment
equal to one time his/her target annual bonus award then in
effect, (4) a lump sum payment representing Scotts
LLC’s portion of the monthly cost of his/her medical and
dental insurance benefits as of the effective date of
termination multiplied by twelve and (5) all other benefits
to which the individual has a vested right as of the effective
date of termination under Scotts LLC’s other plans and
programs. The lump sum payments described above are payable
within 70 days of the effective date of termination and are
subject to the appropriate executive officer signing and not
revoking a release within 60 days following his/her
termination.
If Scotts LLC terminates Mr. Sanders, Mr. Evans or
Ms. Stump for cause, Scotts LLC will pay the respective
executive officer his/her base salary through the effective date
of termination (within 30 days following his termination)
and he/she will immediately forfeit all other rights and
benefits (other than vested benefits) he/she would otherwise be
entitled to receive under the employment agreement.
In the event that, within two years following a change in
control, Scotts LLC terminates the respective executive officer
for any reason other than death, disability or cause or he/she
terminates his/her employment for good reason, Scotts LLC will
pay (1) the individual’s accrued and unpaid base
salary through the effective date of termination (within
30 days of termination), (2) a lump sum payment equal
to two times his/her annual base salary then in effect,
(3) a lump sum payment equal to two times his/her target
annual bonus award then in effect, (4) a lump sum payment
equal to a prorated target annual bonus award based on his/her
target bonus opportunity for the fiscal year in which the
termination occurs, (5) a lump sum payment representing
Scotts LLC’s portion of the monthly cost of his/her medical
and dental insurance benefits as of the effective date of
termination multiplied by 24 and (6) all other benefits to
which the individual has a vested right as of the effective date
of termination under Scotts LLC’s other plans and programs.
The employment agreements do not supersede or nullify
Mr. Sanders’, Mr. Evans’ or Ms. Stump’s
existing confidentiality, noncompetition and nonsolicitation
agreements with Scotts LLC, which agreements remain in full
force and effect.
Employee
Confidentiality, Noncompetition, Nonsolicitation
Agreements
The Company’s shareholders approved the EMIP on
January 26, 2006. The EMIP is a performance-based
compensation plan as defined in Section 162(m) of the
Internal Revenue Code, as described above under the
caption “Elements of Executive Compensation —
EMIP (short-term compensation element)” of the
CD&A, the EMIP provides annual cash awards to the executive
officers, including the NEOs, and management of the Company
based upon the Company’s achievement of established
financial targets. All managers and more senior level employees
(including executive officers of the Company) of Scotts LLC and
all “affiliates” and “subsidiaries” as
defined in Internal Revenue Code Section 414(b) and
(c) are eligible to participate in the EMIP upon
recommendation by management and in the case of covered
employees (as defined in Internal Revenue Code
Section 162(m)) approval by the Compensation and
Organization Committee.
Unless the Incentive Review Committee, which is comprised of the
Chief Executive Officer, the Executive Vice President, Global
Human Resources and the Chief Financial Officer of Scotts LLC,
specifies otherwise, or the participant has an employment
agreement with the Company or one of its subsidiaries which
contains more stringent provisions regarding confidentiality,
noncompetition and nonsolicitation, each participant in the EMIP
must execute an employee confidentiality, noncompetition,
nonsolicitation agreement, which if breached will result in
forfeiture of any future payment under the EMIP and will oblige
the participant to return to Scotts LLC any monies paid to the
participant under the EMIP within the three years prior to
breach.
Mr. Sanders, Mr. Evans and Ms. Stump are each
parties to an employee confidentiality, noncompetition,
nonsolicitation agreement, with Scotts LLC; however,
Mr. Hagedorn is not in light of the provisions contained in
his employment agreement with Scotts LLC addressing
confidentiality, noncompetition and nonsolicitation.
The employee confidentiality, noncompetition, nonsolicitation
agreement contains confidentiality provisions under which a
participant in the EMIP agrees to maintain the confidentiality
of any “confidential information” (as that term is
defined in the employee confidentiality, noncompetition,
nonsolicitation agreement) of Scotts LLC and its affiliates and
not to directly or indirectly disclose or reveal confidential
information to any person or use confidential information for
the participant’s own personal benefit or for the benefit
of any person other than Scotts LLC and its affiliates. The
employee confidentiality, noncompetition, nonsolicitation
agreement also contains provisions which prevent a participant
from engaging in specified competitive and solicitation
activities during the participant’s employment with Scotts
LLC and its affiliates, and for an additional two years
thereafter.
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