THE J.M. SMUCKER COMPANY DEF 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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
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(as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to Section
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THE J. M. SMUCKER COMPANY
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by
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TABLE OF CONTENTS
THE J. M. SMUCKER COMPANY
STRAWBERRY LANE
ORRVILLE, OHIO 44667-0280
July 10, 2006
Dear Shareholder:
You are cordially invited to attend The J. M. Smucker
Companys Annual Meeting of Shareholders at
11:00 a.m., Eastern Daylight Time, on Thursday,
August 17, 2006, in Fisher Auditorium at the Ohio
Agricultural Research and Development Center, 1680 Madison
Avenue, Wooster, Ohio. A Notice of the Annual Meeting and the
proxy statement follow. Please review this material for
information concerning the business to be conducted at the
meeting and the nominees for election as Directors.
If you were a shareholder of record as of the close of business
on June 19, 2006, you will also find enclosed a proxy card
or cards and an envelope in which to return the card(s). Your
vote is very important. Whether or not you plan to attend
the meeting, please complete, sign, date, and return your
enclosed proxy card(s), or vote over the phone or the Internet,
at your earliest convenience. This will ensure representation of
your common shares at the annual meeting if you are unable to
attend. You may, of course, withdraw your proxy and change your
vote prior to or at the Annual Meeting by following the steps
described in the proxy statement. For more information
concerning voting by proxy, please see the section of the proxy
statement entitled Questions and Answers About the Annual
Meeting and Voting.
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Chairman and |
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President and |
Co-Chief Executive Officer
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Co-Chief Executive Officer |
THE J. M. SMUCKER COMPANY
STRAWBERRY LANE
ORRVILLE, OHIO 44667-0280
NOTICE OF 2006 ANNUAL MEETING OF SHAREHOLDERS
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Date: |
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Thursday, August 17, 2006 |
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Time: |
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11:00 a.m., Eastern Daylight Time |
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Place: |
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Ohio Agricultural Research and Development Center, Fisher
Auditorium
1680 Madison Avenue
Wooster, Ohio 44691 |
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Purpose: |
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1. To elect Directors to the class whose term of office
will expire in 2009; |
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2. To ratify the Audit Committees appointment of
Ernst & Young LLP as the Companys Independent
Registered Public Accounting Firm for the 2007 fiscal year; |
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3. To approve The J. M. Smucker Company 2006 Equity
Compensation Plan; and |
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4. To consider any other matter that may properly come
before the meeting. |
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Who Can Vote: |
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Shareholders of record at the close of business on June 19,
2006 |
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How Can You Vote: |
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Please complete, sign, date, and return your proxy card(s), or
vote your common shares by calling the toll-free telephone
number or by using the Internet as described in the instructions
included with your proxy card(s) at your earliest convenience.
You may also vote in person at the annual meeting. |
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Who May Attend: |
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All shareholders are cordially invited to attend the annual
meeting. |
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Vice President, General Counsel and Secretary |
Orrville, Ohio, July 10, 2006
Your vote is important. Please complete, sign, date, and
return your proxy
card(s), or vote your common shares by calling the toll-free
telephone number
or by using the Internet as described in the instructions
included with
your proxy card(s) at your earliest convenience.
THE J. M. SMUCKER COMPANY
STRAWBERRY LANE
ORRVILLE, OHIO 44667-0280
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 17, 2006
PROXY SOLICITATION AND COSTS
The J. M. Smucker Company (the Company or
Smucker) is furnishing this document to you in
connection with the solicitation by the Board of Directors (the
Board) of Smucker of the enclosed form of proxy for
its August 17, 2006 annual meeting. In addition to
solicitation by mail, the Company may solicit proxies in person,
by telephone, facsimile, or
e-mail. Also, the
Company has engaged a professional proxy solicitation firm, D.
F. King & Co., Inc., to assist it in soliciting
proxies. The Company will pay a fee of approximately $9,000,
plus expenses, for its services and will bear all costs of the
proxy solicitation.
The Company pays for the preparation and mailing of the Notice
of Annual Meeting and proxy statement. Smucker has also made
arrangements with brokerage firms and other custodians, nominees
and fiduciaries for the forwarding of this proxy statement and
other meeting materials to the beneficial owners of its common
shares at its expense. This proxy statement is dated
July 10, 2006, and is first being mailed to Smucker
shareholders on or about July 10, 2006.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
What is a proxy?
A proxy is your legal designation of another person (the
proxy) to vote the common shares you own. By
completing and returning the enclosed proxy card(s), which
identifies the individuals or trustees authorized to act as your
proxy, you are giving each of those individuals authority to
vote your common shares as you indicate on the proxy card(s).
Why did I receive more than one proxy card?
You will receive multiple proxy cards if you hold your common
shares in different ways (e.g., trusts, custodial accounts,
joint tenancy) or in multiple accounts. If your common shares
are held by a broker or bank (i.e., in street name),
you will receive your proxy card and other voting information
from your broker, bank, trust or other nominee and should return
your proxy card to them pursuant to their directions. You
should complete, sign, date, and return your proxy card(s), or
vote by telephone or by using the Internet as described in each
proxy card you receive.
What is the record date and what does it mean?
The Companys Board of Directors established June 19,
2006 as the record date for the annual meeting of shareholders
to be held on August 17, 2006. Shareholders who own common
shares of Smucker at the close of business on the record date
are entitled to notice of and to vote at the annual meeting.
What is the difference between a registered
shareholder and a street-name holder?
These terms describe how your common shares are held. If your
common shares are registered directly in your name with
Computershare Investor Services, Smuckers transfer agent,
you are a registered
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shareholder. If your common shares are held in the name of
a brokerage, bank, trust, or other nominee as a custodian, you
are a street-name holder.
How many common shares are entitled to vote at the
meeting?
As of the record date, there were 57,140,448 common shares
outstanding and entitled to vote at the annual meeting.
How many votes must be present to hold the annual meeting?
A majority of Smuckers outstanding common shares as of the
June 19, 2006 record date must be present in person or by
proxy in order for the Company to hold the annual meeting. This
majority of outstanding common shares is referred to as a
quorum. For purposes of determining whether a quorum is present,
each common share is deemed to entitle the holder to one vote
per share. Properly signed proxy cards that are marked
abstain are known as abstentions.
Properly signed proxies that are held in street name (e.g., by a
broker, bank, trust or other nominee) and not voted on one or
more of the items before the annual meeting, but are otherwise
voted on at least one item, are known as broker
non-votes.
Both abstentions and broker non-votes are counted as present for
the purpose of determining the presence of a quorum. Abstentions
are also counted as shares present and entitled to be voted.
Broker non-votes, however, are not counted as shares present and
entitled to be voted with respect to the matter on which the
broker has expressly not voted. Thus, except for
Proposal 3, broker non-votes will not affect the outcome of
any of the matters being voted upon at the meeting. With regard
to Proposal 3, abstentions and broker non-votes will have
the same effect as votes against the proposal, unless the total
votes cast for or against the proposal represent more than 50%
in interest of all securities entitled to vote on the proposal.
In that case, abstentions and broker non-votes will not have any
effect on the result of the vote.
Who will count the votes?
A representative from Computershare Investor Services,
Smuckers transfer agent, will determine if a quorum is
present and tabulate the votes and serve as the Companys
inspector of election at the annual meeting.
What vote is required to approve each proposal?
Proposal 1: The four candidates receiving the greatest
number of votes, based upon one vote for each common share owned
as of the record date, will be elected. Votes withheld in
respect of any candidate in the election of Directors will have
no impact on the election.
Proposal 2: The affirmative vote of the holders of at least
a majority of the total voting power of the Company, based upon
one vote for each common share owned as of the record date, is
necessary to ratify the Audit Committees appointment of
the Independent Registered Public Accounting Firm (hereinafter
referred to as the independent auditors). As
discussed in more detail elsewhere in this proxy statement, the
Audit Committee does not presently intend to reconsider its
appointment of the Independent Registered Public Accounting Firm
unless the proposal receives the affirmative vote of less than a
majority of the votes cast at the meeting.
Proposal 3: The proposal to approve The
J. M. Smucker Company 2006 Equity Compensation Plan
requires the affirmative vote of a majority of the votes cast at
the meeting, giving effect to the ten-votes-per-share provision
of Smuckers Amended and Restated Articles of
Incorporation, provided that the total votes cast on the
proposal represents over 50% in interest of all securities
entitled to vote on the proposal.
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How do I vote my common shares?
If you are a registered shareholder, you can vote your proxy in
the following manner:
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by attending the annual meeting and voting; or |
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by completing, signing, dating, and returning the enclosed proxy
card(s); or |
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by calling the toll-free telephone number indicated on your
proxy card(s); or |
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by using the Internet as described on your proxy card(s). |
Please refer to the specific instructions set forth on the
enclosed proxy card(s).
If you hold your common shares in street name, your broker,
bank, trustee or other nominee will provide you with materials
and instructions for voting your common shares.
Can I change my vote after I have mailed in my proxy card?
Yes, if you are a registered shareholder, you may revoke your
proxy in any of the following ways:
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sending a written notice to the corporate secretary of Smucker,
provided that the written notice is received prior to the annual
meeting and states that you revoke your proxy; |
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signing and dating a new, later-dated proxy card(s) and
submitting that proxy card to Computershare Investor Services so
that it is received prior to the annual meeting; |
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voting by telephone or using the Internet prior to the annual
meeting in accordance with the instructions included with the
proxy card(s); or |
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attending the annual meeting and voting in person. |
Your mere presence at the annual meeting will not revoke your
proxy. You must take affirmative action in order to revoke your
proxy.
If your common shares are held in street name, you must contact
your broker, bank, trust or other nominee in order to revoke
your proxy. If you wish to vote in person at the annual meeting,
you must contact your broker and request a document called a
legal proxy. You must bring this legal proxy
obtained from your broker, bank, trust or other nominee to the
annual meeting in order to vote in person.
What are the Boards recommendations on how I should
vote my common shares?
The Board recommends that you vote your common shares as follows:
Proposal 1 FOR the election of the four
Board of Directors nominees with terms expiring at the 2009
Annual Meeting of Shareholders.
Proposal 2 FOR the ratification of the
Audit Committees appointment of Ernst & Young LLP
as the Independent Registered Public Accounting Firm of Smucker
for the 2007 fiscal year.
Proposal 3 FOR the approval of The J. M.
Smucker Company 2006 Equity Compensation Plan.
Who may attend the meeting?
All shareholders are eligible to attend the meeting; however,
only those shareholders of record at the close of business on
June 19, 2006 are entitled to vote at the meeting.
Do I need an admission ticket to attend the meeting?
Tickets are not required to attend the meeting. If you are a
registered shareholder, properly mark your proxy card to
indicate that you will be attending the meeting. If you hold
your shares in nominee or street name, you are required to bring
evidence of share ownership to the meeting (e.g., account
statement, broker verification).
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What type of accommodations can the Company make at the
annual meeting for people with disabilities?
The Company can provide reasonable assistance to help you
participate in its annual meeting if you tell the corporate
secretary about your disability and how you plan to attend.
Please call or write the corporate secretary of Smucker at least
two weeks before the annual meeting at 330-684-3838 or
Strawberry Lane, Orrville, Ohio 44667.
Does Smucker have cumulative voting?
Under Ohio law, all of the common shares may be voted
cumulatively in the election of Directors if a shareholder of
record wishing to exercise cumulative voting rights provides
written notice to the Companys president, one of its vice
presidents, or the corporate secretary not less than
48 hours before the time of the meeting if notice of the
meeting has been given at least ten days before the meeting. The
notice must state that the shareholder desires that the voting
at the election be cumulative. Also, an announcement of the
Companys receipt of the shareholders intent to
exercise cumulative voting rights must be made when the meeting
is convened by the chairman or the corporate secretary or by or
on behalf of the shareholder giving the notice. Under cumulative
voting, the number of votes to which each shareholder otherwise
is entitled is multiplied by the number of Directors to be
elected, and the shareholder then may cast that aggregate number
of votes all for one nominee, or may divide them out among the
nominees as the shareholder deems appropriate.
The Company intends to vote all proxies solicited whether or not
there is cumulative voting at the meeting. In the event that
there is cumulative voting, unless a shareholder provides
contrary instructions on his, her or its proxy card, all votes
represented by proxy cards will be divided evenly among the
nominees named in this document, unless it appears that voting
in that way would not be effective to elect all of those
nominees. In that case, the votes represented by proxies will be
cast as recommended by the Board of Directors at the annual
meeting so as to maximize the number of nominees elected.
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ELECTION OF DIRECTORS
(Proposal 1 on the proxy card)
Unless instructed otherwise, the proxies intend to vote FOR
the election of Paul J. Dolan, Nancy Lopez,
Gary A. Oatey, and Timothy P. Smucker, as Directors,
each for a term of three years. Messrs. Paul J.
Dolan, Gary A. Oatey and Timothy P. Smucker, comprise
the class of Directors whose term of office expires this year
and whose members are standing for re-election at the 2006
annual meeting. Ms. Lopez has been nominated by the Board
to stand for election at the 2006 annual meeting.
After many years of distinguished service, Fred A. Duncan
and Charles S. Mechem, Jr. will be retiring from the
Board at the August 2006 Board meeting. The Company appreciates
Mr. Duncans and Mr. Mechems years of
service and thanks them for their guidance during their tenure
with the Board.
In the event of the death or inability to act of any of the
nominees for Directors, the proxy with respect to such nominee
or nominees will be voted for such other person or persons as
the Board of Directors may recommend. The Company has no reason
to believe that the persons listed as nominees for Directors
will be unable to serve.
The members of the Board of Directors, including those who are
nominees for election, with information as to each of them based
on data furnished to the Company by these persons as of
June 30, 2006, are as follows:
Nominees For Election as Directors Whose Proposed Terms
Would Expire at the 2009 Annual Meeting
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PAUL J. DOLAN |
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Mr. Dolan, 47, has been a director since April 2006. He has been
the president of the Cleveland Indians, the Major League
Baseball team operating in Cleveland, Ohio, since January 2004,
after having served as vice president and general counsel of the
Indians, since February 2000. Prior to joining the Indians,
Mr. Dolan had been a partner at the law firm of Thrasher,
Dinsmore & Dolan, since 1992. He also serves as
chairman and chief executive officer of Fastball Sports
Productions, LLC, a sports media company. Mr. Dolan is a
member of the Executive Compensation Committee. The Company
sponsors several advertising and promotional activities with the
Cleveland Indians organization. |
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NANCY LOPEZ |
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Ms. Lopez, 49, has been nominated by the Board of Directors
to stand for election at the 2006 annual meeting of
shareholders. In 2000, Ms. Lopez founded the Nancy Lopez
Golf Company, which focuses on the design and manufacture of
top-quality golf equipment for women. Ms. Lopez is also an
accomplished professional golfer, having won 48 career titles,
including three majors, on the Ladies Professional Golf
Association (LPGA) Tour. She is a member of the LPGA Hall of
Fame and captained the 2005 U.S. Solheim Cup Team to
victory. In 2003, Ms. Lopez was named to the Hispanic
Business magazines list of 80 Elite Hispanic Women. If
elected, Ms. Lopez will be a member of the Nominating and
Corporate Governance Committee. |
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GARY A. OATEY |
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Mr. Oatey, 57, has been a Director since January 2003. He
has been the chairman and chief executive officer of Oatey Co.,
a privately owned manufacturer of plumbing products, since
January 1995. Mr. Oatey also is a director of Shiloh
Industries, Inc., a manufacturer of engineered metal products
for the automotive and heavy truck industries. Mr. Oatey is
a member of the Nominating and Corporate Governance Committee. |
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TIMOTHY P. SMUCKER |
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Mr. Smucker, 62, has been a Director since 1973. He has been the
Companys chairman since 1987 and co-chief executive
officer since February 2001. Mr. Smucker also is a director
of Dreyers Grand Ice Cream Inc., a manufacturer and
distributor of premium ice cream products; and Hallmark Cards,
Incorporated, a marketer of greeting cards and other personal
expression products. Mr. Smucker is a member of the
management board of GS1, a global standards organization with
member organizations in over 100 countries, and is also a member
of the board of governors of GS1 U.S. Mr. Smucker is the
brother of Richard Smucker, the father of Mark Smucker and the
uncle of Paul Smucker Wagstaff, the latter two being vice
presidents of Smucker. |
Directors With Terms Expiring at the 2006 Annual
Meeting
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FRED A. DUNCAN |
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Mr. Duncan, 60, has been a Director since April 1999. He has
been the Companys senior vice president, special markets,
since February 2004. Prior to that, he was vice president,
special markets, since November 2001, and vice president and
general manager, industrial market, of the Company, since
February 1995. Mr. Duncan also is a director of Bush
Brothers and Company, a food processing and manufacturing
company. |
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CHARLES S. MECHEM, JR. |
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Mr. Mechem, 75, has been a Director since 1982. He retired as
chairman of Convergys Corporation, a provider of customer
management products and services, in 2000, a post he was elected
to in 1996. He has been commissioner emeritus of the Ladies
Professional Golf Association, since 1995. He also is a director
of the Ladies Professional Golf Association; Royal Associates,
Inc., a manufacturer of steel golf shafts; and Messer
Construction Company, a regional construction company.
Mr. Mechem is Chair of the Nominating and Corporate
Governance Committee and a member of the Executive Compensation
Committee. |
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Directors With Terms Expiring at the 2007 Annual
Meeting
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KATHRYN W. DINDO |
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Ms. Dindo, 57, has been a Director since February 1996. She has
been vice president since 1998 and chief risk officer since
November 2001 of FirstEnergy Corp., a utility holding company.
Prior to that time, she was vice president and controller of
Caliber System, Inc., a subsidiary of FDX Corporation, a
transportation services company, since January 1996.
Ms. Dindo also is a director of Bush Brothers and Company,
a food processing and manufacturing company. Ms. Dindo is
Chair of the Audit Committee and a member of the Executive
Compensation Committee. The Company purchases utility services,
electricity and natural gas, from FirstEnergy and its affiliates. |
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RICHARD K. SMUCKER |
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Mr. Smucker, 58, has been a Director since 1975. He has been the
Companys president since 1987, co-chief executive officer,
since February 2001 and chief financial officer from June 2003
until January 2005. Mr. Smucker also is a director of Wm.
Wrigley Jr. Company, a manufacturer of confectionery,
primarily chewing gum, products; The Sherwin-Williams Company, a
manufacturer of coatings and related products; and serves as an
advisor to the board of directors of Buttonwood Capital
Partners, an asset management firm. In addition, he has been on
the board of trustees of Miami University (Ohio) since May 2003.
Mr. Smucker is the brother of Tim Smucker and the uncle of
both Mark Smucker and Paul Smucker Wagstaff, the latter two
being vice presidents of the Company. |
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WILLIAM H. STEINBRINK |
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Mr. Steinbrink, 63, has been a Director since 1994. He served as
interim president of Wittenberg University (Ohio) from
June 1, 2004, through June 30, 2005. Prior to that
time, he had been associated with the law firm of Jones Day,
since September 2001. Mr. Steinbrink is the former
president and chief executive officer of CSM Industries, Inc., a
manufacturer of specialty metals, a position he held between
November 1996 and November 2000. Mr. Steinbrink is a member
of the Nominating and Corporate Governance Committee. Jones Day
has provided legal services on behalf of Smucker on a variety of
matters, and it is anticipated that Jones Day will continue to
provide services to the Company. |
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Directors With Terms Expiring at the 2008 Annual
Meeting
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VINCENT C. BYRD |
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Mr. Byrd, 51, has been a Director since April 1999. He has been
the Companys senior vice president, consumer market, since
February 2004. Prior to that time, he was vice president and
general manager, consumer market, of the Company, since January
1995. Mr. Byrd also is a director of Spangler Candy
Company, a manufacturer of confectionery products; and Myers
Industries, Inc., an international manufacturer of polymer
products for industrial, agricultural, automotive, commercial
and consumer markets. |
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R. DOUGLAS COWAN |
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Mr. Cowan, 65, has been a Director since January 2003. He has
been the chairman and chief executive officer of The Davey Tree
Expert Company, an employee-owned company providing
horticultural services throughout the United States and Canada,
since May 1997. Mr. Cowan also serves as chairman of the
board of trustees of Kent State University and as trustee of the
board of trustees of Northeastern Ohio Universities College of
Medicine. Mr. Cowan is a member of the Audit Committee. The
Company purchases tree maintenance related services from The
Davey Tree Expert Company. |
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ELIZABETH VALK LONG |
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Ms. Long, 56, has been a Director since May 1997. She was
executive vice president of Time Inc., the magazine publishing
subsidiary of Time Warner Inc., from May 1995 until her
retirement in August 2001. She also is a director of Steelcase
Inc., a furniture and office systems manufacturer; and Belk,
Inc., a large, privately owned department store chain in the
United States. Ms. Long is Chair of the Executive
Compensation Committee and a member of the Audit Committee. |
The Board of Directors recommends a vote FOR each of the
nominees for election to the Board of Directors.
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CORPORATE GOVERNANCE
Corporate Governance Guidelines
The Companys corporate governance guidelines are designed
to formalize the Boards role and to confirm its
independence from management and its role of aligning management
and Board interests with the interests of shareholders. The
corporate governance guidelines provide in pertinent part that:
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a majority of Directors shall be independent, as set
forth under the rules of the New York Stock Exchange, the
Securities and Exchange Commission, and as further set forth in
the corporate governance guidelines; |
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all members of the Nominating and Corporate Governance
Committee, the Executive Compensation Committee and the Audit
Committee shall be independent and that there shall
be at least three members on each such Committee; |
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the independent Directors shall meet in executive
session on a regular basis in conjunction with regularly
scheduled Board meetings and such meetings shall be chaired by
the Nominating and Corporate Governance Committee Chair; |
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the Board and each Committee of the Board will conduct an annual
self-evaluation; and |
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the corporate secretary of Smucker shall provide all new
Directors with materials and training in Smuckers new
director orientation program. |
The Companys corporate governance guidelines are posted on
its website at www.smuckers.com. A copy will be provided free of
charge to any shareholder submitting a written request to
Shareholder Relations, The J. M. Smucker Company,
Strawberry Lane, Orrville, Ohio 44667.
Shareholder Recommendations For Director Nominees
The Nominating and Corporate Governance Committee is responsible
for identifying and recommending qualified candidates to the
Board for nomination. The Committee considers all suggestions
for membership on the Board of Directors, including nominations
made by the Companys shareholders. Shareholders
nominations for Directors must be made in writing, must include
the nominees written consent to the nomination and
detailed background information sufficient for the Committee to
evaluate the nominees qualifications. Nominations should
be submitted to the corporate secretary at The J. M.
Smucker Company, Strawberry Lane, Orrville, Ohio 44667. The
corporate secretary will then forward nominations to the Chair
of the Nominating and Corporate Governance Committee. All
recommendations must include qualifications which meet, at a
minimum, the following criteria:
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candidates must be committed to the Companys basic beliefs
and shall possess integrity, intelligence, and strength of
character; |
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nonemployee Director candidates must meet the independence
requirements set forth below under the heading Director
Independence; |
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candidates must have significant experience in a senior
executive role, together with knowledge of corporate governance
issues and a commitment to attend Board meetings and related
Board activities; and |
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candidates must not have any affiliations or relationships which
could lead to a real or perceived conflict of interest. |
When filling a vacancy on the Board, the Nominating and
Corporate Governance Committee shall consider such additional
factors as it deems appropriate. Smucker does not currently pay
fees to any third party to assist in identifying and evaluating
candidates for the Board of Directors.
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Director Independence
Smucker requires that a majority of its Directors be
independent as defined by the rules of the New York
Stock Exchange, the Securities and Exchange Commission, and may
in the future amend its corporate governance guidelines to
establish such additional criteria as the Board may determine to
be appropriate. The Board makes a determination as to the
independence of each Director on an annual basis. The Board has
determined that the following seven Directors are independent
Directors: R. Douglas Cowan, Kathryn W. Dindo,
Paul J. Dolan, Elizabeth Valk Long, Charles S.
Mechem, Jr., Gary A. Oatey, and William H.
Steinbrink.
In general, independent means that a Director has no
material relationship with Smucker or any of its subsidiaries.
The existence of a material relationship is determined upon a
review of all relevant facts and circumstances and generally is
a relationship that might reasonably be expected to compromise
the Directors ability to maintain his or her independence
from management.
The Board considers the issue of materiality from the standpoint
of the persons or organizations with which the Director has an
affiliation, as well as from the standpoint of the Director.
The following standards will be applied by the Board of
Directors of Smucker in determining whether individual Directors
qualify as independent under the rules of the New
York Stock Exchange. References to Smucker include its
consolidated subsidiaries.
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No Director will be qualified as independent unless the Board of
Directors affirmatively determines that the Director has no
material relationship with Smucker, either directly or as a
partner, shareholder or officer of an organization that has a
relationship with Smucker. Smucker will disclose these
affirmative determinations. |
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No Director who is a former employee of Smucker can be
independent until three years after the end of his or her
employment relationship with Smucker. |
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No Director whose immediate family member is, or has been within
the last three years, an executive officer of Smucker, can
be independent. |
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No Director who received, or whose immediate family member has
received, more than $100,000 in any twelve-month period in
direct compensation from Smucker, other than Director and
Committee fees and pension or other forms of deferred
compensation for prior service (provided such compensation is
not contingent in any way on continued service), can be
independent until three years after he or she ceases to receive
more than $100,000 in any twelve-month period in such
compensation. |
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No Director who is affiliated with or employed by, or whose
immediate family member is affiliated with or employed in a
professional capacity by, a present or former internal or
external auditor of Smucker can be independent until three years
after the end of the affiliation or the employment or auditing
relationship. |
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No Director who is employed, or whose immediate family member is
employed, as an executive officer of another company where any
of Smuckers present executive officers serve on that
companys compensation committee can be independent until
three years after the end of such service or employment
relationship. |
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No Director who is an employee, or whose immediate family member
is an executive officer, of a company (excluding charitable
organizations) that makes payments to, or receives payments
from, Smucker for property or services in an amount which, in
any single fiscal year, exceeds the greater of $1,000,000 or 2%
of such other companys consolidated gross revenues can be
independent until three years after falling below such threshold. |
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No Director can be independent if Smucker has made charitable
contributions to any charitable organization in which such
Director serves as an executive officer if, within the preceding
three years, contributions by Smucker to such charitable
organization in any single completed fiscal year of such |
10
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charitable organization exceeded the greater of $1,000,000 or 2%
of such charitable organizations consolidated gross
revenues. |
The value of the services purchased from Jones Day in fiscal
year 2006 does not exceed the greater of $1,000,000 or 2% of
Jones Days consolidated gross revenues.
The value of the services, electricity and natural gas,
purchased from FirstEnergy and its affiliates in fiscal year
2006 does not exceed the greater of $1,000,000 or 2% of
FirstEnergys consolidated gross revenues.
The value of advertising and promotional activities sponsored
with the Cleveland Indians organization in fiscal year
2006 does not exceed the greater of $1,000,000 or 2% of the
Cleveland Indians gross revenues.
The value of the services purchased from The Davey Tree Expert
Company in fiscal year 2006 does not exceed the greater of
$1,000,000 or 2% of The Davey Tree Expert Companys
consolidated gross revenues.
Communications with the Board
Interested parties who wish to communicate with members of the
Board as a group, with nonemployee Directors as a group, or with
individual Directors, may do so by writing to Board Members
c/o corporate secretary, The J. M. Smucker Company,
Strawberry Lane, Orrville, Ohio 44667. The Directors have
requested that the corporate secretary act as their agent in
processing any communications received. All communications that
relate to matters that are within the scope of responsibilities
of the Board and its Committees will be forwarded to the
appropriate Directors. Communications relating to matters within
the responsibility of one of the Committees of the Board will be
forwarded to the Chair of the appropriate Committee.
Communications relating to ordinary business matters are not
within the scope of the Boards responsibility and will be
forwarded to the appropriate officer at Smucker. Solicitations,
advertising materials, and frivolous or inappropriate
communications will not be forwarded.
Policy on Ethics and Conduct
Ethics is one of Smuckers Basic Beliefs and, as a Basic
Belief, is fundamental to Smuckers business. Smucker
emphasizes that ethical conduct is vital to ensure successful,
sustained business relationships.
Smuckers Policy on Ethics and Conduct applies to all
employees and Directors of the Company, its subsidiaries, and
its affiliates. The policy details specifics concerning the
manner in which employees and Directors are expected to conduct
themselves and, imposes on each person the responsibility for
making ethical choices.
Any changes to this policy and any waivers of this policy for or
on behalf of any Director, executive officer, or senior
financial officer of the Company must be approved by the Board,
or by a committee of the Board, to which authority to issue such
waivers has been delegated by the Board. Any such waivers will
be promptly disclosed to the public, as required by applicable
law. Waivers of this policy for any other employee may be made
only by an authorized officer of the Company. Waivers of the
Policy on Ethics and Conduct will be disclosed on the
Companys website at www.smuckers.com.
The Policy on Ethics and Conduct is posted on the Companys
website at www.smuckers.com. A copy will be provided free of
charge to any shareholder submitting a written request to
Shareholder Relations, The J. M. Smucker Company, Strawberry
Lane, Orrville, Ohio 44667.
The Board has established means for employees to report
violations of the policy either with their manager or
supervisor, or with the general counsel. Reports to the general
counsel may be made in writing, by phone, or in person, and may
be submitted anonymously through the Companys hotline.
11
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
Board of Directors
During the 2006 fiscal year, there were four meetings of the
Companys Board of Directors. All Directors are required
to, and did, attend at least 75% of the total number of Board
and Committee meetings for which they were eligible.
Additionally, all Directors attended the August 2005 annual
meeting, with the exception of Mr. Dolan who was elected to
the Board in April 2006. The Board of Directors has a Nominating
and Corporate Governance Committee, an Executive Compensation
Committee, and an Audit Committee.
All of the Committees are comprised entirely of independent
Directors in accordance with the New York Stock Exchange listing
standards. Charters for each Committee are posted on the
Companys website at www.smuckers.com. A copy will be
provided free of charge to any shareholder submitting a written
request to Shareholder Relations, The J. M. Smucker Company,
Strawberry Lane, Orrville, Ohio 44667. The table below shows
members of each of the Committees during fiscal year 2006. If
elected to the Board, Ms. Lopez will serve on the
Nominating and Corporate Governance Committee. Upon
Mr. Mechems retirement from the Board, Mr. Oatey
will become Chair of the Nominating and Corporate Governance
Committee.
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Nominating and Corporate |
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Executive Compensation |
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Name |
|
Governance Committee |
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Committee |
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Audit Committee |
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R. Douglas Cowan
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X |
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Kathryn W. Dindo
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X |
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X |
(Chair) |
Paul J. Dolan (effective April 2006)
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X |
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Elizabeth Valk Long
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X |
(Chair) |
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X |
|
Charles S. Mechem, Jr.
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X |
(Chair) |
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X |
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Gary A. Oatey
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X |
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William H. Steinbrink
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X |
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Director Compensation
Directors who are employees of Smucker receive no compensation
for their services as a Director. In fiscal year 2006, the
Companys nonemployee Directors were eligible to receive
the following compensation for their services:
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Fiscal 2006 |
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|
|
Annual Retainer
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|
$ |
30,000 |
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|
per year |
Annual Retainer for Committee Chair
|
|
$ |
4,000 |
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|
per year |
Attendance Fee for Board Meetings
|
|
$ |
1,500 |
|
|
per meeting |
Attendance Fee for Committee Meetings
|
|
$ |
1,200 |
|
|
per meeting |
Annual Grant of Stock Options
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|
|
2,000 |
|
|
stock options per nonemployee Director, granted each September |
Annual Grant of Deferred Stock Units
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400 |
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|
deferred stock units per nonemployee Director joining the Board
after January 1, 1997, granted each August (with a maximum
lifetime grant of 6,000 units) |
During fiscal year 2006, nonemployee Directors elected to
receive all or 50% of their annual retainer and committee fees
in the form of deferred stock units under Smuckers Amended
and Restated Nonemployee Director Stock Plan, which was approved
by shareholders at the August 2004 annual meeting. All deferred
stock units, together with dividends credited on those deferred
stock units, are paid out in the form of common shares upon
termination of service as a nonemployee Director.
12
In 2001, the shareholders of Smucker approved the implementation
of a Nonemployee Director Stock Option Plan. The plan is
designed to provide additional compensation for nonemployee
Directors of Smucker and to attract and retain candidates of the
highest quality to serve on the Board. At the April 2004 meeting
of the Executive Compensation Committee, the Committee, as part
of the compensation structure set forth in the above summary,
approved an increase in the annual grant of stock options (made
annually in September) to each eligible nonemployee Director
from 1,500 options to 2,000 options, unless otherwise determined
by the Executive Compensation Committee. Such increase in
options was effective for fiscal year 2005. The options granted
under this plan vest fully six months after the date of grant
and have a term of ten years.
At its April 2006 meeting, the Executive Compensation Committee
and the Board of Directors approved an increase in the
compensation paid to its nonemployee Directors effective
October 1, 2006. The increase in compensation paid to
nonemployee Directors is based on a review of director
compensation conducted by the Companys outside
compensation consultant, concurrent with the Companys
biannual range review of executive compensation. This
independent review of directors compensation was compared
to a peer group of food industry companies. Based on this
independent data, a decision was made to increase the pay for
Smuckers nonemployee Directors to provide compensation
more competitive to relative current market conditions. After
implementation of these increases, Director compensation will be
at the 52nd percentile of its peer group. Effective
October 1, 2006, compensation for nonemployee Directors
will be as follows:
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Fiscal 2007 (effective October 1, 2006) |
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Annual Retainer
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$ |
40,000 |
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|
per year |
Annual Retainer for Committee Chair (except Audit
Committee)
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$ |
5,000 |
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per year |
Annual Retainer for Audit Committee Chair
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$ |
10,000 |
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per year |
Attendance Fee for Board Meetings
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$ |
1,500 |
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|
per meeting |
Attendance Fee for Committee Meetings
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|
$ |
1,500 |
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|
per meeting |
Annual Grant of Deferred Stock Units
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|
$ |
60,000 |
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|
worth deferred stock units granted annually in October |
The annual grant of deferred stock units having a value of
$60,000 will be issued out of The J. M. Smucker Company 2006
Equity Compensation Plan, subject to shareholder approval of the
Plan. All deferred stock units, together with dividends credited
on those deferred stock units, will be paid out in the form of
common shares upon termination of services as a nonemployee
Director.
Smucker provides transportation to and from Board and Committee
meetings for its nonemployee Directors via the Companys
aircraft or commercial airlines as appropriate. Periodically, a
Directors spouse will be included in these transportation
arrangements. The total cost of transportation for spouses of
nonemployee Directors for fiscal year 2006 was less than $10,000.
The Board does not have specific guidelines for share ownership
by Directors, but believes that the ownership of the
Companys common shares shall be a matter of conscience for
each Director and encourages each Director to own a reasonable
number of Smucker common shares.
Executive Sessions and Presiding Director
In its 2006 fiscal year, the Board held three regularly
scheduled executive sessions in which only the independent
Directors were present. As provided in the Companys
corporate governance guidelines as in effect during the 2006
fiscal year, these meetings were chaired by the Chair of the
Nominating and Corporate Governance Committee and were held in
conjunction with regularly scheduled meetings of the Board.
There is no executive session held on the day of the annual
shareholders meeting, unless otherwise specifically
requested by a Director.
13
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee has three
members and met three times during the 2006 fiscal year. The
principal functions of this Committee include:
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developing qualifications/criteria for selecting and evaluating
Director nominees and evaluating current Directors; |
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considering and proposing Director nominees for election at the
annual meeting; |
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selecting candidates to fill Board vacancies as they may occur; |
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making recommendations to the Board regarding Board committee
memberships; |
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considering key management succession planning issues as
presented annually by management; |
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developing and generally monitoring the Companys corporate
governance guidelines and procedures; and |
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performing other functions or duties deemed appropriate by the
Board. |
The Nominating and Corporate Governance Committee charter is
posted on the Companys website at www.smuckers.com. A copy
will be provided free of charge to any shareholder submitting a
written request to Shareholder Relations, The J. M. Smucker
Company, Strawberry Lane, Orrville, Ohio 44667. The Nominating
and Corporate Governance Committee believes this charter is an
accurate and adequate statement of the Committees
responsibilities and the Committee will review this charter on
an annual basis to confirm that it continues to be an accurate
and adequate statement of such responsibilities.
Executive Compensation Committee
The Executive Compensation Committee currently has four members,
including Mr. Dolan, who joined the Board in April 2006,
and Mr. Mechem, who will be retiring from the Board in
August 2006. The Committee met four times during the 2006 fiscal
year. The principal functions of this Committee include:
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establishing, implementing and regularly reviewing the
Companys compensation philosophy; |
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determining the total compensation packages and performance
goals of Smucker executives; |
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assuring that the total compensation paid to Smucker executives
is fair, equitable and competitive, based on an internal review
and comparison to peer companies; |
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approving and administering the terms and policies of
Smuckers restricted stock program and all long-term
incentive compensation programs for key executives; |
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approving and administering the terms and policies of
Smuckers management incentive program; |
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considering employee benefit programs generally; and |
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reviewing the compensation paid to nonemployee Directors of the
Board and making recommendations, as appropriate. |
The Executive Compensation Committee operates under a written
charter, which was revised in January 2005. This charter is
posted on the Companys website at www.smuckers.com. A copy
will be provided free of charge to any shareholder submitting a
written request to Shareholder Relations, The J. M. Smucker
Company, Strawberry Lane, Orrville, Ohio 44667. The Executive
Compensation Committee believes the charter is an accurate and
adequate statement of the Committees responsibilities. The
Committee will review this charter on an annual basis to confirm
that it continues to be an accurate statement of such
responsibilities. A more detailed report of the Executive
Compensation Committee is set forth below under the heading
Report of the Executive Compensation Committee.
14
Audit Committee
The Audit Committee has three members and met nine times during
the 2006 fiscal year, including four telephonic meetings, during
the 2006 fiscal year to review Smuckers quarterly filings
on Form 10-Q and
annual filing on
Form 10-K. The
principal functions of this Committee include:
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annual determination that at least one of its members meets the
definition of audit committee financial expert
within the meaning of the Sarbanes-Oxley Act of 2002; |
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|
|
reviewing annually the financial literacy of each of its
members, as required by the New York Stock Exchange; |
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|
|
reviewing with the independent auditors of Smucker the scope and
thoroughness of the auditors examination and considering
recommendations of the independent auditors; |
|
|
|
appointing the independent auditors and approving their fees for
the year; |
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|
|
reviewing the sufficiency and effectiveness of Smuckers
system of internal controls, including compliance with
Section 404 of the Sarbanes-Oxley Act of 2002 with the
Companys financial officers, the independent auditors,
and, to the extent the Committee deems necessary, legal counsel; |
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|
|
reviewing and discussing Smucker quarterly and annual filings on
Form 10-Q and
Form 10-K,
respectively; |
|
|
|
reviewing and approving the charter for Smuckers internal
audit function, the annual internal audit plan, and summaries of
recommendations; and |
|
|
|
performing other functions or duties deemed appropriate by the
Board. |
As part of her responsibilities, the Chair of the Audit
Committee meets quarterly with Smucker management and
independent auditors to review earnings release information.
In addition, the Audit Committee reviewed the financial literacy
of each of its members, as required by the listing standards of
the New York Stock Exchange, and determined that each of its
members meet the criteria established by the stock exchange. The
Audit Committee also reviewed the definition of an audit
committee financial expert as set forth in the
Sarbanes-Oxley Act of 2002 and determined that two of its
members, Kathryn W. Dindo and R. Douglas Cowan, satisfy the
criteria of an audit committee financial expert under the Act.
The Board of Directors adopted a resolution at its April 2006
meeting designating Ms. Dindo and Mr. Cowan as
financial experts, within the meaning of the
Sarbanes-Oxley Act of 2002.
A more detailed report of the Audit Committee is set forth below
under the heading Report of the Audit Committee. The
Audit Committee operates under a written charter, which was
revised in January 2005. This charter is posted on the
Companys website at www.smuckers.com. A copy will be
provided free of charge to any shareholder submitting a written
request to Shareholder Relations, The J. M. Smucker Company,
Strawberry Lane, Orrville, Ohio 44667. The Audit Committee
believes the charter is an accurate and adequate statement of
the Audit Committees responsibilities. The Audit Committee
will review this charter on an annual basis to confirm that it
continues to be an accurate and adequate statement of such
responsibilities.
15
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is composed of three independent Directors,
each of whom satisfies the independence requirement of
Rule 10A-3 under
the Securities Exchange Act of 1934, and serves as the primary
communication link between the Board of Directors as the
representative of the shareholders, on the one hand, and the
Companys Independent Registered Public Accounting Firm,
Ernst & Young, LLP, and the Companys internal
auditors, on the other hand. Management has the primary
responsibility for financial statements and the reporting
process, including the systems of internal control.
In fulfilling its responsibilities, the Audit Committee reviewed
with management the financial statements and related disclosures
included in Smuckers quarterly reports on
Form 10-Q, and the
audited financial statements and related financial statement
disclosures included in the Companys Annual Report on
Form 10-K for the
fiscal year ended April 30, 2006. Also, the Audit Committee
reviewed with the independent auditors their judgments as to
both the quality and the acceptability of Smuckers
accounting principles. The Audit Committees review with
the independent auditors included a discussion of other matters
required under U.S. generally accepted auditing standards,
including those matters required by the Statement on Auditing
Standards No. 61, Communication With Audit Committees, and
by the Sarbanes-Oxley Act of 2002.
The Audit Committee received the written disclosures from the
independent auditors required by the Independence Standards
Board Statement No. 1, and has discussed those disclosures
with the independent auditors. The Audit Committee also has
considered the compatibility of non-audit services with the
auditors independence.
The Audit Committee discussed with Smuckers internal and
independent auditors the overall scope and plans for their
respective audits and reviewed Smuckers plans for
compliance with the management certification requirements
pursuant to Section 404 of the Sarbanes-Oxley Act of 2002.
The Audit Committee met with the internal and independent
auditors to discuss the results of the auditors
examinations, their evaluation of Smuckers internal
controls, including a review of the disclosure control process
as well as the overall quality of Smuckers financial
reporting. The Audit Committee, or the Committee Chair, also
preapproved services provided by Ernst & Young LLP
during the 2006 fiscal year.
In reliance on the reviews and discussions referred to above,
the Audit Committee recommended to the Board of Directors that
the audited financial statements be included in Smuckers
Annual Report on
Form 10-K for the
fiscal year ended April 30, 2006. The Audit Committee
authorized the appointment of Ernst & Young LLP as
Smuckers Independent Registered Public Accounting Firm for
the 2007 fiscal year.
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|
|
AUDIT COMMITTEE |
|
|
Kathryn W. Dindo, Chair |
|
R. Douglas Cowan |
|
Elizabeth Valk Long |
16
SERVICE FEES PAID TO THE INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The following table summarizes the aggregate fees, including out
of pocket expenses, billed by Ernst & Young LLP for the
years ended April 30, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
2005 |
|
|
|
|
|
Audit Fees(1)
|
|
$ |
1,662,900 |
|
|
$ |
1,647,000 |
|
Audit-Related Fees(2)
|
|
|
1,500 |
|
|
|
0 |
|
Tax Fees(3)
|
|
|
888,000 |
|
|
|
779,300 |
|
All Other Fees
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$ |
2,552,400 |
|
|
$ |
2,426,300 |
|
|
|
(1) |
Audit fees primarily relate to (i) the audit of the
Companys consolidated financial statements as of and for
the years ended April 30, 2006 and 2005, including
statutory audits of certain international subsidiaries;
(ii) the assessment of internal controls over financial
reporting in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002; and (iii) the reviews of the
Companys unaudited condensed consolidated interim
financial statements as of July 31, October 31, and
January 31 for fiscal years 2006 and 2005. |
|
(2) |
Audit-related fees are for the Companys subscription to
on-line research services. |
|
(3) |
Tax fees are primarily for tax work in connection with the
Companys realignment of its legal entity structure and for
tax compliance, preparation, and planning services. |
AUDIT COMMITTEE PREAPPROVAL POLICIES AND PROCEDURES
The Audit Committee charter, as well as the policies and
procedures adopted by the Audit Committee, require that all
audit and permitted non-audit services provided by the
independent auditors be preapproved by the Audit Committee.
These services may include audit services, audit-related
services, tax services and, in limited circumstances, other
services. The Audit Committees preapproval identifies the
particular type of service and is subject to a specific
engagement authorization.
Should it be necessary to engage the independent auditors for
additional, permitted services between scheduled Committee
meetings, the Chair of the Audit Committee has been delegated
the authority to approve up to $200,000 for additional services
for a specific engagement. The Committee Chair then reports such
preapproval at the next meeting of the Audit Committee. The
approval policies and procedures of the Committee do not include
delegation of the Audit Committees responsibility to
management.
All of the services described above were approved by the Audit
Committee or the Committee Chair before Ernst & Young
LLP was engaged to render the services or otherwise in
accordance with the approval process adopted by the Audit
Committee.
COMMUNICATIONS WITH THE AUDIT COMMITTEE
The Companys Policy on Ethics and Conduct has established
procedures for confidential, anonymous complaints by employees
and from third parties received by Smucker regarding accounting,
internal accounting controls or auditing matters. The Policy on
Ethics and Conduct is posted on the Companys website at
www.smuckers.com. A copy will be provided free of charge to any
shareholder submitting a written request to Shareholder
Relations, The J. M. Smucker Company, Strawberry Lane, Orrville,
Ohio 44667.
17
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
(Proposal 2 on proxy card)
The Audit Committee has appointed Ernst & Young LLP as
the Companys Independent Registered Public Accounting Firm
for the fiscal year ending April 30, 2007. The Audit
Committee has requested that the shareholders ratify this
decision. Ernst & Young LLP has served as
Smuckers independent auditors since 1955.
The Audit Committees selection of the Companys
Independent Registered Public Accounting Firm is not required by
Smuckers Code of Regulations or otherwise to be submitted
to a vote of the shareholders for ratification. In addition, the
Sarbanes-Oxley Act of 2002 requires the Audit Committee to be
directly responsible for the appointment, compensation and
oversight of the audit work of the Companys independent
auditors. However, Smuckers Board of Directors is
submitting the selection of Ernst & Young LLP to
shareholders for ratification as a matter of good corporate
practice. In light of that fact, while Smuckers Code of
Regulations provides that actions of the Directors may be
ratified by the affirmative vote of a majority of the
outstanding shares, the Audit Committee does not presently
intend to reconsider whether to retain Ernst & Young
LLP based upon the results of this vote unless the proposal
fails to receive a majority of the votes cast at the meeting. If
the Audit Committee determines to reconsider this appointment,
it may retain that firm or another without re-submitting the
matter to shareholders. Even if the selection is ratified, the
Audit Committee in its discretion may direct the appointment of
a different independent accounting firm at any time during the
year if it determines that such a change would be in the best
interests of the Company and its shareholders.
A representative of Ernst & Young LLP will be present
at the meeting with an opportunity to make a statement if so
desired and to respond to appropriate questions with respect to
that firms examination of Smuckers financial
statements and records for the fiscal year ended April 30,
2006.
The Board of Directors recommends a vote FOR
ratification of the Audit Committees
appointment of Ernst & Young LLP as the
Companys
Independent Registered Public Accounting Firm.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee of the Board of Directors
is composed of four independent Directors, all of whom meet the
independence requirements of the New York Stock Exchange.
Mr. Dolan was appointed to the Executive Compensation
Committee at the time of his election to the Board in April
2006. The first Executive Compensation Committee meeting
Mr. Dolan attended was the June 13, 2006 meeting. The
Executive Compensation Committee is responsible for
establishing, overseeing and reviewing Smuckers executive
compensation policies and the compensation and benefits for
executive officers of Smucker on an annual basis. The Executive
Compensation Committee evaluates Smuckers performance and
all compensation paid to its executive officers on an ongoing
basis.
Compensation Philosophy
The Executive Compensation Committee believes that an effective
executive compensation program must have two parts.
First, the compensation program should have a cash component
that is competitive enough to retain highly qualified executives
while also providing performance-based incentives. The Committee
believes that Smuckers base salary structure, management
incentive plan, supplemental executive retirement plan, and
voluntary deferred compensation plan combine to meet these
requirements.
18
Second, the compensation program should have an equity-based
component in order to provide long-term incentives and ensure
that managements long-term interests are aligned with
those of other Smucker shareholders. The equity-based components
of the compensation program are currently provided by the
Restricted Stock Bonus Plan, the 1987 Stock Option Plan, and the
1998 Equity and Performance Incentive Plan, as amended and
restated effective as of June 6, 2005. If approved by the
shareholders, The J. M. Smucker Company 2006 Equity Compensation
Plan, attached hereto as Annex A, will replace each of the
plans noted above.
Outside Compensation Consultant
To assist it in fulfilling its obligations, the Committee works
with a nationally recognized compensation consulting firm that
routinely advises the Committee on matters that come before it
and provides the Committee independent analysis regarding
competitive market-based salaries for key officers. The
Committee meets with its outside consultant on a regular basis
and in executive session upon the request of the Committee. The
Committees outside consultant also provides services for
the Company with respect to various other compensation matters.
Salaries
Base compensation for all salaried positions at Smucker,
including executive officers, is determined by reference to
individual performance and position within the salary range for
the particular job classification. Smuckers human
resources department develops the salary ranges and
classifications with assistance from outside consultants to
ensure that the overall salary structure and benefit package
remains competitive. Smuckers goal with regard to salaries
and total compensation is to provide a structure that is
competitive with other comparably sized companies.
Smucker generally targets its salary ranges at approximately the
median of companies with comparable revenues across a broad
spectrum of industries, and the ranges approved by the Executive
Compensation Committee for the current fiscal year are
consistent with that target goal.
Although the salary ranges for the officers are recommended by
the human resources department based on its own research and the
advice of outside consultants, the salary ranges for all
officers, including executive officers, are regularly reviewed
by the Committee and are subject to its approval, as are any
changes to an individual officers salary grade level. The
Committee also reviews, on an annual basis, the perquisites
provided to the Companys officers.
No less often than every other year, the Executive Compensation
Committee requests that its outside compensation consultant
conduct a formal review of appropriate salary ranges, as well as
management incentive plan target ranges and equity-based
compensation for officers of Smucker. In 2006, the outside
compensation consultant to the Committee conducted a full review
of salaries for officers of Smucker. This review included a
formal analysis of pay levels based on companies with comparable
revenues across a broad spectrum of industries. The resulting
study, presented to the Committee at its April 2006 meeting,
indicated that the salary ranges for officers of Smucker were
below the median of similarly sized companies, while management
incentive bonuses and equity-based compensation opportunities
were in line with the Companys market median pay target.
Based upon the conclusions of the outside consultants
report, the Executive Compensation Committee, in April 2006,
approved revised salary ranges for officers of Smucker to be
effective May 1, 2006.
Managements salary recommendations for individual officers
of Smucker, including executive officers, are submitted to the
Executive Compensation Committee for consideration at its April
meeting. These recommendations generally are based upon the
salary increase guidelines that have been determined by
management for all corporate salaries as part of the planning
and budgeting process for the coming fiscal year.
Tim Smucker, Smuckers Chairman, and Richard Smucker,
Smuckers President, operate jointly as Co-Chief Executive
Officers. Management submitted no recommendation concerning a
salary increase for Tim
19
Smucker or Richard Smucker. The Committee respected the request
of the Co-Chief Executive Officers that their increases be less
than the Companys salary increase guidelines and less than
the level of increases suggested for the officer group as a
whole so as to allow additional salary increases for certain
individuals demonstrating superior performance while remaining
within corporate salary increase guidelines. As a result, the
Executive Compensation Committee determined that each of them
should be given a salary increase of 2.9% for fiscal 2007.
Factors considered when assessing executive officers
performance for salary compensation purposes, including Tim
Smucker and Richard Smucker, include, in no particular order:
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Smuckers sales and earnings results; |
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market share gains; |
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achieving Smuckers business plan and strategic
goals; and |
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individual performance evaluations. |
These factors are viewed as a whole and no single factor is
necessarily weighed more heavily than any other.
Tally Sheets
In addition, the Executive Compensation Committee reviewed tally
sheets setting forth all components of the compensation for the
Co-Chief Executive Officers and other key executive officers.
The tally sheets included a specific review of dollar amounts
for salary, bonus, perquisites and long-term incentive
compensation for fiscal years 2005 and 2006, the value of
unexercised stock options and restricted stock awards, and the
actual projected payout obligation under Smuckers
qualified and non-qualified executive retirement plans. The
tally sheets for Tim Smucker and Richard Smucker also included
potential payment obligations under their respective consulting
and non-compete agreements. In its review of tally sheets, the
Committee also reviewed the issue of internal pay equity between
the compensation of other Company officers compared to the
compensation of the Co-Chief Executive Officers. Based on a
review of the tally sheets, the Executive Compensation Committee
found the executive officers, including the Co-Chief
Executive Officers, compensation to be reasonable and
effective in promoting Smuckers compensation philosophy as
described above.
Management Incentive Plan
Smucker maintains a management incentive plan designed to
recognize key management members based on their contribution to
the achievement of Smucker objectives and their individual
performance. A target award is set for each participant based on
salary grade level and competitive award levels for similar
positions at comparable companies, which are generally the same
companies used in establishing base salary ranges. The actual
award participants receive, if any, is based on the following
criteria:
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Smuckers performance in relation to its earnings goal for
the year; |
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personal performance of the management employee; and |
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if the participant is part of a strategic business area, that
areas performance in relation to its profit goal. |
After the end of each fiscal year, management presents to the
Executive Compensation Committee a summary and recommendation
for management incentive bonuses. The presentation includes:
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information on Smuckers performance for the fiscal year
just ended (non-GAAP earnings per share for the year with a
comparison to the prior year and to Smuckers plan, and
relevant margins for the strategic business areas); |
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awards to each executive officer in the plan during the prior
three years; |
20
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salary for the fiscal year just ended and target award
information; and |
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a specific recommendation for management incentive bonuses based
on the above criteria. |
The Executive Compensation Committee then reviews the
information and recommendations with management and its outside
compensation consultant and makes a decision as to which
recommendations to accept and whether the recommendations
require modification.
No awards under the management incentive plan are made if
Smucker does not meet minimum performance standards, and the
maximum award a participant may receive is limited to twice the
target award.
The management incentive awards for Tim Smucker and Richard
Smucker are made based on the same corporate performance
standards as used for other participants in the management
incentive plan; however, no recommendation is made by management
concerning the individual awards for the Chairman or the
President. The management incentive awards for each of Tim
Smucker and Richard Smucker are determined by the Executive
Compensation Committee based on its evaluation of each of their
individual performances.
The amount of the incentive awards based on corporate
performance is determined by a mathematical calculation, the
elements of which are the same for all participants, including
Tim Smucker and Richard Smucker. With respect to the 2006 fiscal
year, the corporate portion of the awards were paid at 110% of
target for all participants, including Tim Smucker and Richard
Smucker, based on the Companys non-GAAP earnings per share
results for the year.
In addition to the portion of the award based on corporate
performance, the total incentive plan award for each participant
includes an amount related to individual performance. This
individual performance award is based on an assessment of the
participants individual contributions in helping Smucker
to achieve its earnings and other goals. It may be above or
below the corporate award portion if the Executive Compensation
Committee determines that to be appropriate in an individual
case. All management incentive awards are paid to the
participants in cash.
Long-Term Incentive Compensation Philosophy
Long-term incentive compensation is stock-based and is designed
to help align the interests of management with the interests of
Smucker shareholders. In the past, both restricted stock awards
and stock options have been used in the long-term compensation
program, with restricted stock awards granted every other year
primarily to selected executives, and stock options granted
every year in October to key managers and executives. During
fiscal year 2005, stock options were granted in October 2004
consistent with past practice. After evaluating a number of
alternatives, in April 2005 the Executive Compensation Committee
approved implementation of a new long-term incentive program in
the form of annual awards of performance-based restricted stock
or performance-based restricted stock units. Beginning in fiscal
year 2006, key senior managers and executives received grants of
restricted stock or restricted stock units, depending on Company
and individual performance. In order to qualify awards as
performance-based under Section 162(m) of the
Internal Revenue Code, the Executive Compensation Committee will
grant performance shares and/or performance units with a
one-year performance period, which will be payable in restricted
stock, and may only exercise discretion to reduce the award of
restricted stock made to Tim Smucker or Richard Smucker. Stock
options will not be used under this arrangement.
Restricted stock awards are currently made under the 1998 Equity
and Performance Incentive Plan, but in the future will be issued
under The J. M. Smucker Company 2006 Equity
Compensation Plan, if approved by shareholders. Prior to fiscal
year 2006, restricted stock awards were granted every other year
primarily to selected executives. As mentioned above, beginning
in fiscal year 2006, restricted stock and restricted stock units
are the sole long-term incentive compensation vehicle used by
Smucker for participants receiving equity compensation. Awards
of restricted stock or restricted stock units will be approved
by the Executive Compensation Committee in June of each year, if
Smucker meets specified predetermined performance
21
requirements for the most recently ended fiscal year. The
Executive Compensation Committee will establish performance
criteria for grants of restricted stock and restricted stock
units each year based upon Company performance. Target grant
levels for grants of restricted stock or restricted stock units
as long-term incentive compensation are determined for
individual participants based on salary grade level and a review
of the prevailing competitive awards for similar positions at
other comparable companies. The companies considered are largely
the same as those used in establishing base salary ranges.
No stock option awards were made to executive officers in fiscal
year 2006. At its April 2006 meeting, the Executive Compensation
Committee approved the acceleration of vesting of stock options
previously awarded to employees under its equity-based
compensation plans, effective April 12, 2006. As a result
of the accelerated vesting, approximately 441,000 stock options
with exercise prices of either $43.38 or $44.17 became
immediately exercisable. All of these options had an exercise
price above the Companys stock price on the date of
acceleration. Approximately 110,000 and 331,000 of these stock
options would originally have vested in October 2006 and October
2007, respectively. Stock options issued to employees typically
vested at a rate of one-third per year, beginning one year after
the date of grant. Stock options were last granted to employees
in October 2004. In June 2005, the Company replaced the use of
stock options to employees in favor of issuing performance-based
restricted stock or performance-based restricted stock units.
The purpose of the accelerated vesting was to minimize future
non-cash stock option compensation expense that the Company
would otherwise recognize in its results of operations with the
adoption of Financial Accounting Standards No. 123
(revised), Share-Based Payments
(SFAS 123R). This standard became effective
for the Company on May 1, 2006, the beginning of fiscal
year 2007. By accelerating the vesting of these stock options,
the Company will not incur pretax compensation expense of
approximately $2.7 million and $1.0 million in fiscal
years 2007 and 2008, respectively, that otherwise would have
been required upon adoption of SFAS 123R.
Pension Plan and Nonqualified Supplemental Retirement Plan
Under The J. M. Smucker Company Employees Retirement Plan
(the Plan), retirement benefits are payable to all
eligible employees of Smucker and its subsidiaries, including
officers. Benefits are based on the employees years of
service and compensation. Certain executive officers of Smucker,
including those named in the Summary Compensation Table, are
also eligible to participate in a nonqualified supplemental
retirement plan (the Supplemental Plan) entitling
them, upon retirement, to receive a benefit from the
Supplemental Plan. The amounts set forth in the Pension Plan
Table assume participation in the Supplemental Plan and set
forth the estimated annual benefit, computed as a straight-life
annuity, payable under both the Supplemental Plan and the Plan,
as amended, at normal retirement (age 65). The Plan
provides a pension based upon years of service with Smucker and
upon final average pay (average base compensation [i.e., salary
only] for the five most highly compensated consecutive years of
employment). Benefits under the Plan are one percent of final
average pay times the participants years of service with
Smucker. Benefits under the Supplemental Plan at retirement,
based upon years of service (maximum 25 years), are
55 percent of the average total compensation (i.e., all
compensation including salary and bonus) for the five most
highly compensated consecutive years of employment, offset by
the benefits derived from the Plan and by 100 percent of
the Social Security benefit.
Voluntary Deferred Compensation Plan
In April 2003, the Board approved the Voluntary Deferred
Compensation Plan, which was made available to officers and
business general managers effective January 1, 2004.
Elections to defer all or a portion of the participants
base compensation must be made prior to January 1st of
the year in which services relating to the compensation deferred
are provided. Elections to defer all or a portion of the
participants bonus must be made prior to
October 31st of the fiscal year to which the bonus
relates. Such deferred compensation will be tracked as if
invested in a Fidelity Investment managed account as directed by
22
the participant. A copy of the Voluntary Deferred Compensation
Plan is filed with the Smucker Annual Report on
Form 10-K for its
fiscal year 2003.
Tax Deductibility of Executive Compensation
The Executive Compensation Committee has considered the
potential impact on Smuckers compensation plans of the
$1,000,000 cap on deductible compensation under
Section 162(m) of the Internal Revenue Code. Compensation
that qualifies as performance-based compensation is exempt from
the cap on deductible compensation. To date, only Tim Smucker
and Richard Smucker have been paid compensation in excess of
$1,000,000 that could be subject to the Section 162(m)
limitation. The Executive Compensation Committee is generally
committed to establishing executive compensation programs that
will maximize as much as possible the deductibility of
compensation paid to executive officers. To the extent, however,
that the Executive Compensation Committee from time to time
believes it to be consistent with its compensation philosophy
and in the best interests of Smucker and its shareholders to
award compensation that is not fully deductible, it may choose
to do so.
During 2006, the Executive Compensation Committee continued to
monitor the regulatory developments under Internal Revenue Code
Section 409A, which was enacted as part of the American
Jobs Creation Act of 2004 (the Act).
Section 409A imposes additional limitations on
non-qualified deferred compensation plans and subjects those
plans to additional conditions. The Company intends to amend its
compensation plans in order to ensure their full compliance with
the Act before the transition period expires on
December 31, 2006.
The Executive Compensation Committee believes that
Smuckers compensation plans and practices are sound and
well considered. It also believes that the level of compensation
provided to the executive officers is appropriately related to
both the competitive market and the historic and current
performance of Smucker. The Executive Compensation Committee in
the future will continue to focus on these factors and on
maintaining a compensation system that will encourage
maximization of long-term shareholder value.
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EXECUTIVE COMPENSATION COMMITTEE |
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Elizabeth Valk Long, Chair |
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Kathryn W. Dindo |
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Paul J. Dolan |
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Charles S. Mechem, Jr. |
23
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
Each of the following Directors served as a member of the
Companys Executive Compensation Committee during fiscal
year 2006: Kathryn W. Dindo, Paul J. Dolan (effective
April 2006), Elizabeth Valk Long, and Charles S.
Mechem, Jr. During fiscal year 2006, no Smucker executive
officer or Director was a member of the Board of Directors of
any other company where the relationship would be construed to
constitute a committee interlock within the meaning of the rules
of the Securities and Exchange Commission.
Dan Mechem, son of Charles S. Mechem, Jr., a member of
the Companys Board, is Vice President and General Manager
of Nielsen BuzzMetrics, formerly known as Intelliseek prior to
being acquired by Nielsen/VNU. BuzzMetrics provides the Company
with various Internet monitoring and reporting services. The
Company incurred approximately $237,000 in fees related to
BuzzMetrics in fiscal year 2006.
CONSULTING AND NON-COMPETE ARRANGEMENTS
The Board of Directors believes that a significant portion of
the value of Smucker and the success of its business is
attributable to the public image of the Smuckers
brand and the integral identification of the Smucker family
and its values with that brand. Therefore, the Board authorized
the Company to enter into agreements with each of Tim Smucker
and Richard Smucker securing his continuing public
representation of Smucker when he is no longer an active
executive.
Under these agreements, each of Tim Smucker and Richard Smucker
has committed to maintain his public representation of the
Company for three years following the termination of full-time
employment with Smucker. The Board also believed that it was
crucial to the strength of the Smuckers brand that
neither Tim Smucker nor Richard Smucker should undertake
activities after the end of his employment with the Company that
might be to the competitive disadvantage of Smucker. In
particular, the Board wished to ensure that neither Tim Smucker
nor Richard Smucker would, in any event, provide the benefit of
his experience in the food industry to competitors of Smucker.
Therefore, the agreements with each of Tim Smucker and Richard
Smucker provide that for three years from the date of his
respective termination of employment or for three years after
the end of the public representation period, whichever is later,
he will not enter into any relationship that might be to
Smuckers competitive disadvantage. During the three-year
public representation period, the former executive will receive
annual compensation in an amount equal to his base salary in
effect as of the time his active employment with Smucker ended,
plus benefits and perquisites, including without limitation,
medical insurance and life insurance, but excluding stock
options, restricted shares or other equity-based benefits.
However, all outstanding stock options will immediately vest and
all restricted shares will continue to vest during the public
representation period pursuant to the existing vesting schedule.
He will also receive each year during that period an amount
equal to 50 percent of his target award applicable under
the Management Incentive Plan at the date of his termination.
The agreements further provide to each of Tim Smucker and
Richard Smucker certain severance benefits upon termination of
employment. Specifically, in the event of the death or
disability of either individual, he (or his estate) will be
entitled to receive for three years after the event, annual
compensation equal to the base salary he was receiving at the
time the event occurred, plus the benefits described above. He
(or his estate) also will receive an amount equal to
50 percent of his target bonus awards in effect at the time
of the event. Also, any unvested options and restricted shares
will vest immediately. At the end of the three-year period
following the death or disability, he (or his spouse) will be
eligible for retirement benefits under the Supplemental Plan
without application of early retirement reduction factors. If
either Tim Smucker or Richard Smucker voluntarily terminates
employment and commences receiving his monthly retirement
benefits under the Supplemental Plan, he will receive any
accrued but unpaid salary as of the date of such retirement and
will be reimbursed for any expenses incurred but not yet paid.
In addition, he will be entitled to any options, restricted
shares or other plan benefits which by their terms extend beyond
termination of employment.
24
In the event that either Tim Smucker or Richard Smucker is
terminated by Smucker without cause or if he resigns for good
reason (as specifically defined in the agreements), he will
receive the same benefits as in the case of death or disability
as described above. If Smucker terminates either Tim Smucker or
Richard Smucker for cause, however, he will receive only that
compensation to which he is otherwise entitled as of the date of
termination.
In December 2005, the Company entered into a consulting
agreement with Richard G. Jirsa, a Vice President of the Company
who retired on December 30, 2005. Under this agreement,
Mr. Jirsa will provide consulting services related to
accounting and finance matters. The consulting agreement was
effective January 1, 2006 and provides for a term of two
years (unless earlier terminated in accordance with its terms).
Mr. Jirsa received a consulting fee of $100,000.
25
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth a summary of the compensation
over the past three fiscal years for the Companys Co-Chief
Executive Officers and the other four most highly compensated
executive officers (the Named Executive Officers).
Summary Compensation Table
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Long Term |
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Annual Compensation |
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Compensation Awards |
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(a) |
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(b) |
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(c) |
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(d) |
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(e) |
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Other |
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Restricted |
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Securities |
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(f) |
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Annual |
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Stock |
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Underlying |
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All Other |
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Salary |
|
Bonus |
|
Compensation |
|
Awards |
|
Options |
|
Compensation |
Name and Principal Position |
|
Year |
|
($) |
|
($)(1) |
|
($)(5) |
|
($)(2) |
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(#)(3) |
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($)(4) |
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Timothy P. Smucker
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2006 |
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$ |
680,000 |
|
|
$ |
613,600 |
|
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$ |
73,809 |
|
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$ |
1,270,948 |
|
|
|
0 |
|
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$ |
8,309 |
|
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Chairman and Co-Chief |
|
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2005 |
|
|
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658,231 |
|
|
|
737,900 |
|
|
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36,154 |
|
|
|
1,516,078 |
|
|
|
50,000 |
|
|
|
7,834 |
|
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Executive Officer |
|
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2004 |
|
|
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609,752 |
|
|
|
751,700 |
|
|
|
27,173 |
|
|
|
0 |
|
|
|
30,000 |
|
|
|
7,714 |
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Richard K. Smucker
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2006 |
|
|
|
680,000 |
|
|
|
613,600 |
|
|
|
84,142 |
|
|
|
1,270,948 |
|
|
|
0 |
|
|
|
8,309 |
|
|
President and Co-Chief |
|
|
2005 |
|
|
|
640,865 |
|
|
|
737,900 |
|
|
|
48,293 |
|
|
|
1,516,078 |
|
|
|
50,000 |
|
|
|
8,134 |
|
|
Executive Officer |
|
|
2004 |
|
|
|
585,000 |
|
|
|
751,700 |
|
|
|
26,432 |
|
|
|
0 |
|
|
|
30,000 |
|
|
|
7,864 |
|
Vincent C. Byrd
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|
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2006 |
|
|
|
326,154 |
|
|
|
196,400 |
|
|
|
|
|
|
|
347,298 |
|
|
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0 |
|
|
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8,332 |
|
|
Senior Vice President, |
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2005 |
|
|
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306,154 |
|
|
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231,000 |
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356,533 |
|
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15,000 |
|
|
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8,169 |
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Consumer Market |
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|
2004 |
|
|
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270,000 |
|
|
|
235,400 |
|
|
|
|
|
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0 |
|
|
|
10,000 |
|
|
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7,596 |
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Fred A. Duncan
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2006 |
|
|
|
309,692 |
|
|
|
176,100 |
|
|
|
|
|
|
|
326,620 |
|
|
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0 |
|
|
|
8,372 |
|
|
Senior Vice President, |
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2005 |
|
|
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291,487 |
|
|
|
190,800 |
|
|
|
|
|
|
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339,996 |
|
|
|
15,000 |
|
|
|
7,703 |
|
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Special Markets |
|
|
2004 |
|
|
|
268,862 |
|
|
|
195,140 |
|
|
|
|
|
|
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0 |
|
|
|
10,000 |
|
|
|
7,588 |
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Steven Oakland
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|
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2006 |
|
|
|
267,598 |
|
|
|
135,240 |
|
|
|
|
|
|
|
242,305 |
|
|
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0 |
|
|
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8,126 |
|
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Vice President and General |
|
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2005 |
|
|
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258,690 |
|
|
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160,000 |
|
|
|
|
|
|
|
248,295 |
|
|
|
10,000 |
|
|
|
8,224 |
|
|
Manager, Consumer Oils and |
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|
2004 |
|
|
|
220,780 |
|
|
|
116,400 |
|
|
|
|
|
|
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0 |
|
|
|
7,000 |
|
|
|
7,664 |
|
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Baking |
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Richard F. Troyak
|
|
|
2006 |
|
|
|
262,000 |
|
|
|
140,240 |
|
|
|
|
|
|
|
239,696 |
|
|
|
0 |
|
|
|
8,134 |
|
|
Vice President, Operations |
|
|
2005 |
|
|
|
253,205 |
|
|
|
155,000 |
|
|
|
|
|
|
|
248,295 |
|
|
|
10,000 |
|
|
|
7,980 |
|
|
|
|
|
2004 |
|
|
|
230,000 |
|
|
|
178,600 |
|
|
|
|
|
|
|
0 |
|
|
|
7,000 |
|
|
|
7,664 |
|
|
|
(1) |
Includes amounts deferred by certain officers listed below
pursuant to Smuckers deferred compensation programs. |
|
(2) |
Smuckers 1998 Equity and Performance Incentive Plan was
implemented in 1998. Restricted shares issued after 2003 from
this Plan generally vest four years from the date of grant or
upon the attainment of age 60 and 10 years of service
with the Company, whichever is earlier. Shares awarded under the
Plan are entitled to dividends at the same rate and on the same
terms as unrestricted shares of the same class. The aggregate
number and value of restricted shares held by the individuals
listed above, as of April 30, 2006, are as follows: Timothy
P. Smucker, 30,000 shares ($1,177,800); Richard K. Smucker,
60,255 shares ($2,365,611); Vincent C. Byrd,
15,115 shares ($593,415); Fred A. Duncan,
14,785 shares ($580,459); Steven Oakland,
10,955 shares ($430,093); and Richard F. Troyak,
10,955 shares ($430,093). |
The individuals listed above also received the following number
of restricted shares after April 30, 2006, the value of
which is shown in the table above: Timothy P. Smucker,
31,655 shares; Richard K. Smucker, 31,655 shares;
Vincent C. Byrd, 8,650 shares; Fred A. Duncan,
8,135 shares; Steven Oakland, 6,035 shares; and
Richard F. Troyak, 5,970 shares. The 2006 value shown above
represents the pre-tax value of the restricted shares based on
the reported closing price of Smuckers common shares on
the date of the award, June 13, 2006. The restricted shares
received by Timothy P. Smucker and Fred A. Duncan in June 2006
vested immediately because they had attained the age of 60 and
had ten years of service with Smucker.
|
|
(3) |
All options are for common shares. Smucker does not award stock
appreciation rights (SARs). |
26
|
|
(4) |
Amounts shown in column (f) represent contributions by
Smucker on behalf of the individual indicated under
Smuckers 401(k) Savings Plan and the value of allocations
during the year under Smuckers Employee Stock Ownership
Plan. The specific breakdown for each individual (401(k) amounts
first, followed by ESOP allocations) for fiscal year 2006 is as
follows: Timothy P. Smucker, $6,600 and $1,709; Richard K.
Smucker, $6,600 and $1,709; Vincent C. Byrd, $6,623 and $1,709;
Fred A. Duncan, $6,663 and $1,709; Steven Oakland, $6,417 and
$1,709; and Richard F. Troyak, $6,425 and $1,709. |
|
(5) |
The executive officers named above receive various perquisites
provided by or paid by Smucker. These perquisites may, from time
to time, include personal use of corporate aircraft, personal
use of Company-provided automobiles, memberships in social
clubs, annual physical examinations, tax preparation and
financial planning services, and reimbursement for cell phone
expenses. The Board requires Timothy P. Smucker and Richard K.
Smucker to use corporate aircraft for all travel, where possible. |
|
|
Timothy P. Smucker and Richard K. Smucker each received
perquisites in excess of $50,000 for fiscal year 2006. The
aggregate value of each perquisite or other personal benefit
exceeding 25% of the total perquisites provided to each of them
is shown below. The value of perquisites received by each of the
remaining Named Executive Officers is not reflected in column
(c) because the aggregate value thereof for each such
person did not exceed the lesser of $50,000 or 10% of the total
annual salary and bonus reported. |
|
|
The Company used incremental costs including costs related to
fuel, landing fees, crew meals and other miscellaneous costs in
valuing personal use of the aircraft in fiscal years 2006 and
2005, whereas 2004 had been valued using the Standard Industry
Fare Level (SIFL) rates, as published by the Internal
Revenue Service. |
Personal
Use of Aircraft
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
Timothy P. Smucker
|
|
$ |
41,246 |
|
|
$ |
18,823 |
|
|
$ |
3,427 |
|
Richard K. Smucker
|
|
$ |
60,233 |
|
|
$ |
26,513 |
|
|
$ |
6,671 |
|
Stock Option Plans
In April 2005, the Executive Compensation Committee approved
implementation of a new long-term incentive program in the form
of performance-based restricted stock or performance-based
restricted stock units. The program does not provide for stock
options to be issued under this arrangement. As a result, no
stock options were issued to the Named Executive Officers in
fiscal year 2006.
At its April 2006 meeting, the Executive Compensation Committee
approved the acceleration of vesting of stock options previously
awarded to employees under its equity-based compensation plans,
effective April 12, 2006. As a result of the accelerated
vesting, approximately 441,000 stock options with exercise
prices of either $43.38 or $44.17 became immediately
exercisable. All of these options had an exercise price above
the Companys stock price on the date of acceleration.
Approximately 110,000 and 331,000 of these stock options would
originally have vested in October 2006 and October 2007,
respectively.
The purpose of the accelerated vesting was to minimize future
non-cash stock option compensation expense that the Company
would otherwise recognize in its results of operations with the
adoption of Financial Accounting Standards No. 123
(revised), Share-Based Payments
(SFAS 123R). This standard became effective
for the Company on May 1, 2006, the beginning of fiscal
year 2007. By accelerating the vesting of these stock options,
the Company will not incur pretax compensation expense of
approximately $2.7 million and $1.0 million in fiscal
years 2007 and 2008, respectively, that otherwise would have
been required upon adoption of SFAS 123R.
27
Previously issued options exercised by the Named Executive
Officers during the 2006 fiscal year, along with the number of
unexercised options held by such officers at fiscal year-end and
the value of their unexercised,
in-the-money options,
are set forth in the following table.
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
Value of |
|
|
|
|
|
|
Securities Underlying |
|
Unexercised |
|
|
Shares |
|
|
|
Unexercised Options |
|
In-the-Money Options |
|
|
Acquired |
|
|
|
at FY-End (#) |
|
at FY-End ($) |
|
|
on Exercise |
|
Value |
|
Exercisable/ |
|
Exercisable/ |
Name |
|
(#) |
|
Realized($) |
|
Unexercisable |
|
Unexercisable |
|
|
|
|
|
|
|
|
|
Timothy P. Smucker
|
|
|
18,901 |
|
|
$ |
413,128 |
|
|
|
368,377 / 0 |
|
|
$ |
3,199,196 / 0 |
|
Richard K. Smucker
|
|
|
18,901 |
|
|
|
413,128 |
|
|
|
373,510 / 0 |
|
|
|
3,203,431 / 0 |
|
Vincent C. Byrd
|
|
|
9,450 |
|
|
|
209,951 |
|
|
|
120,362 / 0 |
|
|
|
1,019,041 / 0 |
|
Fred A. Duncan
|
|
|
9,450 |
|
|
|
209,053 |
|
|
|
120,362 / 0 |
|
|
|
1,019,041 / 0 |
|
Steven Oakland
|
|
|
0 |
|
|
|
0 |
|
|
|
52,000 / 0 |
|
|
|
196,000 / 0 |
|
Richard F. Troyak
|
|
|
7,560 |
|
|
|
174,769 |
|
|
|
56,724 / 0 |
|
|
|
256,270 / 0 |
|
Pension Plan
Under The J. M. Smucker Company Employees Retirement Plan
(the Plan), retirement benefits are payable to all
eligible employees of Smucker and its subsidiaries, including
officers. Certain executive officers of Smucker, including the
Named Executive Officers, are also eligible to participate in
the Supplemental Plan entitling them, upon retirement, to
receive a benefit from the Supplemental Plan. The amounts set
forth in the pension plan table below assume participation in
the Supplemental Plan and set forth the estimated annual
benefit, computed as a straight-life annuity, payable under both
the Supplemental Plan and the Plan, as amended, at normal
retirement (age 65):
Pension Plan Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years of Service |
|
|
|
Remuneration |
|
15 |
|
20 |
|
25 |
|
30 |
|
35 |
|
|
|
|
|
|
|
|
|
|
|
$ |
200,000 |
|
|
$ |
51,500 |
|
|
$ |
76,500 |
|
|
$ |
86,500 |
|
|
$ |
86,500 |
|
|
$ |
86,500 |
|
|
400,000 |
|
|
|
126,500 |
|
|
|
176,500 |
|
|
|
196,500 |
|
|
|
196,500 |
|
|
|
196,500 |
|
|
600,000 |
|
|
|
201,500 |
|
|
|
276,500 |
|
|
|
306,500 |
|
|
|
306,500 |
|
|
|
306,500 |
|
|
800,000 |
|
|
|
276,500 |
|
|
|
376,500 |
|
|
|
416,500 |
|
|
|
416,500 |
|
|
|
416,500 |
|
|
1,000,000 |
|
|
|
351,500 |
|
|
|
476,500 |
|
|
|
526,500 |
|
|
|
526,500 |
|
|
|
526,500 |
|
|
1,200,000 |
|
|
|
426,500 |
|
|
|
576,500 |
|
|
|
636,500 |
|
|
|
636,500 |
|
|
|
636,500 |
|
|
1,400,000 |
|
|
|
501,500 |
|
|
|
676,500 |
|
|
|
746,500 |
|
|
|
746,500 |
|
|
|
746,500 |
|
|
1,600,000 |
|
|
|
576,500 |
|
|
|
776,500 |
|
|
|
856,500 |
|
|
|
856,500 |
|
|
|
856,500 |
|
|
1,800,000 |
|
|
|
651,500 |
|
|
|
876,500 |
|
|
|
966,500 |
|
|
|
966,500 |
|
|
|
966,500 |
|
|
2,000,000 |
|
|
|
726,500 |
|
|
|
976,500 |
|
|
|
1,076,500 |
|
|
|
1,076,500 |
|
|
|
1,076,500 |
|
|
2,200,000 |
|
|
|
801,500 |
|
|
|
1,076,500 |
|
|
|
1,186,500 |
|
|
|
1,186,500 |
|
|
|
1,186,500 |
|
|
2,400,000 |
|
|
|
876,500 |
|
|
|
1,176,500 |
|
|
|
1,296,500 |
|
|
|
1,296,500 |
|
|
|
1,296,500 |
|
The Plan provides a pension based upon years of service with
Smucker and upon final average pay (average base compensation
[i.e., salary only] for the five most highly compensated
consecutive years of employment). Benefits under the Plan are
one percent of final average pay times the participants
years of service with Smucker. Benefits under the Supplemental
Plan at retirement, based upon years of service (maximum
25 years), are 55 percent of the average total
compensation (i.e., all compensation including salary and bonus)
for the five most highly compensated consecutive years of
employment, offset by the benefits derived from the Plan and by
100 percent of the Social Security benefit.
28
Messrs. Timothy P. Smucker, Richard K. Smucker, Vincent C.
Byrd, Fred A. Duncan, Steven Oakland, and Richard F. Troyak were
credited under the Plan with 36, 33, 29, 28, 23 and 27 full
years of benefit service, respectively, at April 30, 2006.
RELATED PARTY TRANSACTIONS
Mark T. Smucker, Vice President, International and Managing
Director of Canada, for Smucker, received approximately $370,300
in compensation in fiscal year 2006, including salary, bonus
paid in fiscal year 2006, housing and other living expenses, use
of Company car, financial and tax planning services, and other
W-2 reportable items. Mr. Smuckers compensation does
not reflect the Companys tax equalization policy for
employees on foreign assignment. Mr. Smucker was also
granted 3,035 deferred shares in June 2005 based on the
performance of the Company for fiscal year ended April 30,
2005 and 3,885 deferred shares in June 2006 based on the
performance of the Company for fiscal year ended April 30,
2006. The awards were granted pursuant to the 1998 Equity and
Performance Incentive Plan. He is the son of the Companys
Chairman and Co-Chief Executive Officer, Timothy P. Smucker, and
nephew of the Companys President and Co-Chief Executive
Officer, Richard K. Smucker.
Paul Smucker Wagstaff, Vice President, Foodservice and Beverage
Markets of Smucker, received approximately $321,600 in
compensation in fiscal year 2006, including salary, bonus paid
in fiscal year 2006, financial and tax planning services, and
other W-2 reportable
items. He was also granted 3,035 restricted shares in June 2005
based on the performance of the Company for fiscal year ended
April 30, 2005 and 3,885 restricted shares in June 2006
based on the performance of the Company for fiscal year ended
April 30, 2006. The awards were granted pursuant to the
1998 Equity and Performance Incentive Plan. He is the nephew of
the Companys Chairman and
Co-Chief Executive
Officer, Timothy P. Smucker, and the Companys President
and Co-Chief Executive
Officer, Richard K. Smucker.
Zachary Easton, founder of Coronado Capital Management, managed
approximately $13 million of Smuckers pension assets
and received approximately $110,000 in fees from the Company for
fiscal year 2006. Kent Wadsworth, Manager of Marketing, New
Products and Hungry Jack for Smucker, received approximately
$118,900 in compensation in fiscal year 2006, including salary,
bonus paid in fiscal year 2006, and other
W-2 reportable items.
He was also granted 380 restricted shares in June 2005 based on
the performance of the Company for fiscal year ended
April 30, 2005 and 455 restricted shares in June 2006 based
on the performance of the Company for fiscal year ended
April 30, 2006. The awards were granted pursuant to the
1998 Equity and Performance Incentive Plan. Kimberly Wagstaff,
Assistant Product Manager, Pillsbury Baking for Smucker,
received approximately $67,200 in compensation in fiscal year
2006, including salary, bonus paid in fiscal year 2006,
relocation assistance, and other
W-2 reportable items.
Ms. Wagstaffs compensation does not reflect the
Companys tax equalization policy for employees on foreign
assignment. Ms. Wagstaff is sister of, and both
Mr. Easton and Mr. Wadsworth are
brothers-in-law of,
Paul Smucker Wagstaff, Vice President, Foodservice and Beverage
Markets of Smucker.
Ronald H. Neill, husband of M. Ann Harlan, the Companys
Vice President, General Counsel and Secretary, is a partner in
Calfee, Halter, & Griswold, LLP. The law firm, from
time to time, provides legal services for the Company. Calfee,
Halter, & Griswold, LLP received approximately $296,000
in fees earned during fiscal year 2006. Mr. Neill does not
perform any legal services for the Company.
Paul J. Dolan, a member of the Companys Board, is
President of the Cleveland Indians, the major league baseball
team operating in Cleveland, Ohio. Mr. Dolans family
also owns the Cleveland Indians organization. The Company
incurred approximately $202,000 in advertising and promotional
activities related to its sponsorship with the Cleveland
Indians organization in fiscal year 2006.
Related party transactions regarding members of the Executive
Compensation Committee of the Company have been disclosed under
the Compensation Committee Interlocks and Insider
Participation section of the proxy statement.
29
TOTAL SHAREHOLDER RETURN GRAPH
Comparison of Five Year Cumulative Total Return*
AMONG THE J. M. SMUCKER COMPANY, THE S&P 500 INDEX, AND
THE S&P PACKAGED FOODS & MEATS INDEX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/01 | |
|
4/02 | |
|
4/03 | |
|
4/04 | |
|
4/05 | |
|
4/06 | |
The J. M. Smucker Company
|
|
|
100.00 |
|
|
|
135.60 |
|
|
|
136.86 |
|
|
|
201.70 |
|
|
|
195.45 |
|
|
|
158.30 |
|
S&P 500
|
|
|
100.00 |
|
|
|
87.37 |
|
|
|
75.75 |
|
|
|
93.08 |
|
|
|
98.97 |
|
|
|
114.23 |
|
S&P Packaged Foods & Meats
|
|
|
100.00 |
|
|
|
115.56 |
|
|
|
105.96 |
|
|
|
136.91 |
|
|
|
146.52 |
|
|
|
141.78 |
|
|
|
* |
$100 invested on 4/30/01 in stock or index including
reinvestment of dividends. Fiscal year ending April 30. |
Copyright
© 2006,
Standard & Poors, a division of The McGraw-Hill
Companies, Inc. All rights reserved. www.researchdatagroup.com/
S&P.htm
30
OWNERSHIP OF COMMON SHARES
Beneficial Ownership of Smucker Common Shares
The following table sets forth, as of June 19, 2006 (unless
otherwise noted), the beneficial ownership of the Companys
common shares by:
|
|
|
|
|
each person or group known to Smucker to be the beneficial owner
of more than 5% of the outstanding common shares of the Company; |
|
|
|
each Director, each nominee for Director and each Named
Executive Officer of Smucker; and |
|
|
|
all Directors and executive officers of Smucker as a group. |
Unless otherwise noted, the shareholders listed in the table
below have sole voting and investment powers with respect to the
common shares beneficially owned by them. The address of each
Director, nominee for Director and executive officer is
Strawberry Lane, Orrville, Ohio 44667. As of June 19, 2006,
there were 57,140,448 common shares outstanding.
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
Common Shares |
|
Percent of |
|
|
Beneficially |
|
Outstanding |
Name |
|
Owned(1)(2)(3)(4) |
|
Common Shares |
|
|
|
|
|
Ariel Capital Management, LLC(5)
|
|
|
5,700,134 |
|
|
|
9.98 |
% |
Timothy P. Smucker
|
|
|
2,079,512 |
|
|
|
3.62 |
% |
Richard K. Smucker
|
|
|
2,601,262 |
|
|
|
4.52 |
% |
Vincent C. Byrd
|
|
|
175,887 |
|
|
|
0.31 |
% |
R. Douglas Cowan
|
|
|
11,779 |
|
|
|
* |
|
Kathryn W. Dindo
|
|
|
22,075 |
|
|
|
* |
|
Paul J. Dolan
|
|
|
593 |
|
|
|
* |
|
Fred A. Duncan
|
|
|
193,905 |
|
|
|
0.34 |
% |
Elizabeth Valk Long
|
|
|
26,049 |
|
|
|
* |
|
Nancy Lopez
|
|
|
|
|
|
|
* |
|
Charles S. Mechem, Jr.
|
|
|
25,116 |
|
|
|
* |
|
Gary A. Oatey
|
|
|
15,127 |
|
|
|
* |
|
Steven Oakland
|
|
|
75,891 |
|
|
|
0.13 |
% |
William H. Steinbrink
|
|
|
31,636 |
|
|
|
* |
|
Richard F. Troyak
|
|
|
89,233 |
|
|
|
0.16 |
% |
26 Directors and executive officers as a group(6)
|
|
|
4,983,861 |
|
|
|
8.48 |
% |
|
|
(1) |
In accordance with Securities and Exchange Commission rules,
each beneficial owners holdings have been calculated
assuming full exercise of outstanding stock options covering
common shares, if any, exercisable by such owner within
60 days after June 19, 2006. The common share numbers
include such options as follows: Timothy P. Smucker, 368,377;
Richard K. Smucker, 373,510; Vincent C. Byrd, 120,362; Fred A.
Duncan, 120,362; Steven Oakland, 52,000; Richard F. Troyak,
56,724; and all Directors and executive officers as a group,
1,609,447. |
|
(2) |
Includes restricted stock as follows: Timothy P. Smucker,
30,000; Richard K. Smucker, 91,910; Vincent C. Byrd,
23,765; Fred A. Duncan, 8,000; Steven Oakland, 16,990; Richard
F. Troyak, 16,925; and all executive officers as a group,
304,540. |
|
(3) |
Beneficial ownership of the following shares included in the
table is disclaimed by Timothy P. Smucker: 477,798 common shares
held by trusts for the benefit of family members of which
Timothy P. Smucker is a trustee with sole investment power or a
co-trustee with shared investment power; 202,062 common |
31
|
|
|
shares owned by the Willard E. Smucker Foundation of which
Timothy P. Smucker is a trustee with shared investment power;
and 131,456 common shares with respect to which Timothy P.
Smucker disclaims voting or investment power.
Beneficial ownership of the following shares included in the
table is disclaimed by Richard K. Smucker: 1,433,392 common
shares held by trusts for the benefit of family members
(including Timothy P. Smucker) of which Richard K. Smucker is a
trustee with sole investment power or a co-trustee with shared
investment power; 202,062 common shares owned by the Willard E.
Smucker Foundation of which Richard K. Smucker is a trustee with
shared investment power; and 90,417 common shares with respect
to which Richard K. Smucker disclaims voting or investment
power.
The number of common shares beneficially owned by all Directors
and executive officers as a group has been computed to eliminate
duplication of beneficial ownership. |
|
(4) |
Includes shares held for the benefit of the individual named
under the terms of Smuckers Nonemployee Director Stock
Plan as follows: R. Douglas Cowan, 3,279; Kathryn W. Dindo,
13,111; Paul J. Dolan, 593; Elizabeth Valk Long, 14,604; Charles
S. Mechem, Jr., 14,616; Gary A. Oatey, 4,627; and
William H. Steinbrink, 18,960. The shares indicated are
held in trust for the Directors named and are voted pursuant to
their direction. |
|
(5) |
According to a Schedule 13G/ A of Ariel Capital Management,
LLC, 200 E. Randolph Drive, Chicago, IL 60601, filed
on April 10, 2006, Ariel is a U.S. limited liability
company organized under the laws of the State of Delaware. As of
March 31, 2006, Ariel had sole voting power of 4,795,022
common shares and sole dispositive power of 5,699,779 common
shares. |
|
(6) |
Because under the Companys Amended and Restated Articles
of Incorporation shareholders may be entitled on certain matters
to cast ten votes per share with regard to certain common shares
and only one vote per share with regard to others, there may not
be a correlation between the percent of outstanding common
shares owned and the voting power represented by those shares.
The total voting power of all the common shares can be
determined only at the time of a shareholder meeting due to the
need to obtain certifications as to beneficial ownership on
common shares not held as of record in the name of individuals.
The ten-vote provisions apply to Proposal 3, Approval of
The J. M. Smucker Company 2006 Equity Compensation Plan, on this
years ballot. |
Smucker has entered into agreements with Timothy P. Smucker and
Richard K. Smucker and members of their immediate families,
including Mrs. H. Ray Clark, Timothy P. Smuckers and
Richard K. Smuckers aunt, and members of her immediate
family, and with the majority of the executive officers of
Smucker relating to the disposition of common shares held by
them. These shareholders are the beneficial owners of
approximately 9% of the outstanding common shares, including
options exercisable within 60 days of the record date.
Under the agreements, which have no expiration date, Smucker has
a purchase option with respect to any proposed transfers of
these common shares, except for gifts and bequests to or for the
benefit of family members, and sales pursuant to any offer,
merger, or similar transaction that is approved or recommended
by Smuckers Board of Directors.
The agreements provide that Smucker may assign its purchase
rights to Smuckers ESOP or any of its other employee
benefit plans. The agreements reflect the practice followed by
Smucker for a number of years of providing for the purchase of
common shares at prices at or somewhat below market with the
effect of establishing a method for the orderly disposition of
blocks of common shares that could not otherwise be readily
absorbed by the public market.
Section 16(a) Beneficial Ownership Reporting
Compliance
Under the U.S. securities laws, Smuckers Directors
and executive officers are required to report their initial
ownership of common shares and any subsequent changes in that
ownership to the Securities and Exchange Commission and the New
York Stock Exchange. Due dates for the reports are specified by
those laws, and Smucker is required to disclose in this document
any failure in the past year to file by the required dates.
Based solely on written representations of the Companys
Directors and executive officers and on
32
copies of the reports that they have filed with the Securities
and Exchange Commission, the Companys belief is that all
of the Companys Directors and executive officers complied
with all filing requirements applicable to them with respect to
transactions in the Companys equity securities during
fiscal year 2006, except as described below.
On June 8, 2005, a Form 4 was timely filed with the
Securities and Exchange Commission on behalf of Tim Smucker
reflecting the June 6, 2005, grant of Smucker restricted
common shares, along with all other Smucker executive officers.
Mr. Smuckers restricted stock immediately vested on
June 6, 2005 since he had attained age 60 and
10 years of service with the Company. The transaction to
report the 13,599 shares withheld to satisfy his personal
tax liability was filed on June 16, 2005.
APPROVAL OF THE J. M. SMUCKER COMPANY 2006 EQUITY
COMPENSATION PLAN
(Proposal 3 on proxy card)
On June 13, 2006, the Executive Compensation Committee of
the Board unanimously approved and adopted, subject to the
approval of the Companys shareholders at the annual
meeting, The J. M. Smucker Company 2006 Equity Compensation Plan
(the Plan). The Plan allows the Board, acting
through its Executive Compensation Committee, to design
compensatory awards that are responsive to the Companys
needs, and includes authorization for a variety of awards
designed to align the interests of management with those of
shareholders.
Smucker has historically granted equity awards to employees and
nonemployee Directors under various incentive compensation
plans, including the 1987 Stock Option Plan, the Amended
Restricted Stock Bonus Plan, the Amended and Restated 1997
Stock-Based Incentive Plan, the 1998 Equity and Performance
Incentive Plan, as amended and restated, the Amended and
Restated Nonemployee Director Stock Plan and the Nonemployee
Director Stock Option Plan. The plans listed above are referred
to in this description as the Existing Plans. If
approved by shareholders, the Plan will become effective and no
further awards will be made under the Existing Plans, except
that the provisions relating to the deferral of Director
retainers and fees under the Amended and Restated Nonemployee
Director Stock Plan will continue to apply to services rendered
through December 31, 2006 and awards of performance shares
and performance units granted under the 1998 Equity and
Performance Plan and outstanding on the effective date of the
Plan may be converted to restricted stock under the 1998 Equity
and Performance Plan once such performance shares and
performance units are earned.
The approval of the Plan is, as provided in the Companys
Amended and Restated Articles of Incorporation, a matter to
which shareholders are entitled to cast ten votes for each share
held, subject to the holding requirements set forth in the
Amended and Restated Articles of Incorporation. The following
summary of the principal provisions of the Plan is not intended
to be exhaustive and is qualified in its entirety by the terms
of the Plan, a copy of which is set forth as Annex A to
this proxy statement.
The Plan authorizes the Board to provide equity-based
compensation in the form of stock options, stock appreciation
rights (or SARs), restricted stock, restricted stock units,
performance shares and units, incentive awards and other
equity-based awards for the purpose of providing the
Companys nonemployee Directors, consultants, officers and
employees incentives and rewards for superior performance. Some
of the key features of the Plan that reflect the Boards
commitment to effective management of incentive compensation are
set forth below and are described more fully under the heading
Summary of the Plan and in the Plan, which is
attached to this proxy statement.
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Plan Limits. Total awards under the Plan are limited to
2,500,000 shares. The Plan limits the number of shares that
can be issued as awards to nonemployee Directors and as other
share-based awards under Section 9 and Section 10 of
the Plan to 250,000. The Plan also limits the aggregate number
of stock options and SARs that may be granted to any one
participant in a calendar year to 600,000 and the aggregate
number of shares of restricted stock and restricted stock units
subject to the achievement of specified management
objectives (as discussed below), performance shares and |
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shares underlying other equity-based awards that may be granted
to any one participant in a calendar year to 200,000. Under the
Plan, no participant will receive performance units in any
calendar year having a value at the date of grant in excess of
$4,000,000. And, under the Plan, no participant will receive an
incentive award upon the achievement of management objectives in
any calendar year having a value at the date of grant in excess
of $4,000,000 nor will such award exceed 200,000 shares. |
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No Liberal Recycling Provisions. The Plan provides that
only shares covering awards that expire or are forfeited will
again be available for issuance under the Plan. The following
shares will not be added back to the aggregate Plan limit:
(1) shares tendered in payment of the option price;
(2) shares withheld by Smucker to satisfy the tax
withholding obligation; and (3) shares that are repurchased
by Smucker with option right proceeds. Further, all shares
covered by a SAR, to the extent that it is exercised and settled
in shares, and whether or not shares are actually issued to the
participant upon exercise of the right, will be considered
issued or transferred pursuant to the Plan. |
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Minimum Vesting Periods. The Plan provides that: |
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Restricted stock and restricted stock units may not become
unrestricted by the passage of time before the third anniversary
of the date of grant, provided that restrictions may be removed
on an annual, ratable basis during the three year period.
Notwithstanding the previous sentence, if a grant of restricted
stock or restricted stock units specifies management objectives
that, if achieved, will result in termination of restrictions,
then the restrictions may, in no event, lapse sooner than one
year from the date of grant. The grant of restricted stock or
restricted stock units may, however, provide for the earlier
lapse of restrictions in the event of the retirement, the
attainment of reasonable age and service requirements approved
by the Board, death or disability of a participant or a change
in control of the Company. |
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The period of time within which management objectives relating
to performance shares and performance units must be achieved
will be a minimum of one year, subject to earlier lapse or
modification in the event of retirement, death or disability of
a participant or a change in control of the Company. |
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If the Board grants incentive awards under the Plan with respect
to any one or more fiscal years of the Company, any restricted
stock or restricted stock units awarded in settlement of an
incentive award must be subject to restrictions for at least
three years, except that the restrictions may lapse on an
annual, ratable basis during the three-year period and the Board
may accelerate the lapse of such restrictions in the event of
the retirement, the attainment of reasonable age and service
requirements approved by the Board, death or disability of a
participant or a change in control of the Company. |
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No Repricing. Smucker has never repriced underwater stock
options or SARs, and repricing of options and SARs is prohibited
without shareholder approval under the Plan. |
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Other Features. |
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The Plan also provides that no stock options or SARs will be
granted with an exercise or base price less than the fair market
value of Smuckers common stock on the date of grant. |
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The Plan is designed to allow awards made under the Plan to
qualify as performance-based compensation under
Section 162(m) of the Internal Revenue Code. |
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The Board has delegated to its Executive Compensation Committee
(consisting of only independent Directors) administration of the
Plan if approved. Pursuant to such delegation, the Executive
Compensation Committee will have all of the powers and authority
of the Board as described herein. |
34
Shares Available Under the Plan. As stated above, subject
to adjustment as provided in the Plan, the number of Smucker
common shares that may be issued or transferred under the Plan:
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upon the exercise of option rights and SARs; |
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in payment of restricted stock and released from a substantial
risk of forfeiture thereof; |
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in payment of restricted stock units; |
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in payment of performance shares or performance units that have
been earned; |
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as awards to nonemployee Directors; |
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as other awards contemplated by the Plan; or |
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in payment of dividend equivalents paid with respect to awards
made under the Plan, |
will not exceed in the aggregate 2,500,000 common shares. Shares
issued under the Plan may be shares of original issuance or
treasury shares or a combination of the foregoing.
Common shares covered by an award granted under the Plan will
not be counted as used unless and until they are actually issued
and delivered to a participant and, therefore, the total number
of shares available under the Plan as of a given date will not
be reduced by any shares relating to prior awards that have
expired or have been forfeited or cancelled. Notwithstanding
anything to the contrary contained in the Plan:
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If common shares are tendered or otherwise used in payment of
the option price of an option right, the total number of shares
covered by the option being exercised will reduce the aggregate
Plan limit. |
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Common shares withheld by Smucker to satisfy the tax withholding
obligation will count against the aggregate Plan limit. |
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The number of common shares covered by an appreciation right, to
the extent that it is exercised and settled in common shares,
and whether or not shares are actually issued to the participant
upon exercise of the right, will be considered issued or
transferred pursuant to the Plan. |
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In the event that Smucker repurchases shares with option right
proceeds, those shares will not be added to the aggregate Plan
limit. |
The Plan contains a number of limits on the number of common
shares that can be issued, including to any one participant in a
calendar year as described above. Further, the Plan limits the
aggregate number of common shares that may be issued or
transferred by Smucker upon the exercise of incentive stock
options to 2,500,000 common shares. The limits contained in the
Plan are subject to certain adjustments as provided in the Plan
in the event of stock splits, stock dividends, recapitalizations
and certain other events.
Eligibility. Nonemployee Directors, consultants, officers
and other employees of Smucker and its subsidiaries or any
person who has agreed to commence serving in any of those
capacities within 90 days of the date of grant, presently
estimated to be 181 persons as of June 19, 2006, may be
selected by the Board to receive benefits under the Plan.
Types of Awards Authorized. The Plan provides for the
granting of dividend equivalents, option rights, SARs,
restricted stock, restricted stock units (which may also be
referred to as deferred stock units), performance shares,
performance units, incentive awards, awards to nonemployee
Directors and other awards that may be denominated or payable
in, valued in whole or in part by reference to or otherwise
based on or related to, the Companys common shares or
factors that may influence the value of its common shares.
Awards granted under the Plan will be upon such terms as may be
approved by the Board and set forth in an evidence of award. An
evidence of award will contain such terms and provisions,
consistent with the Plan, as the Board may approve.
Stock options and SARs will not be granted with an exercise
price or base price, as the case may be, less than the market
value per share. The closing market price of the Companys
common shares as reported
35
on the New York Stock Exchange on June 19, 2006 was
$40.41 per share. No option right or SAR may be exercisable
more than 10 years from the date of grant.
Each grant of an award will specify the period of continuous
service or other conditions that must be satisfied before the
award is exercisable, vested or earned. Restricted stock and
restricted stock units that vest upon the passage of time must
be subject to restrictions for at least three years, except that
the restrictions may be removed on an annual, ratable basis
during the three year period. Restrictions relating to
restricted stock and restricted stock units that vest upon the
achievement of management objectives may not terminate sooner
than one year from the date of grant. The specified performance
period relating to performance shares and performance units will
be a period of time not less than one year.
Any grant of option rights, SARs, restricted stock or restricted
stock units may provide for the earlier vesting or termination
of restrictions relating to such award in the event of the
retirement, the attainment of reasonable age and service
requirements approved by the Board, death or disability of a
participant or a change in control of the Company. The
performance period relating to any grant of performance shares
or performance units may be subject to earlier lapse or
modification in the event of the retirement, death or disability
of a participant or a change in control of the Company.
Incentive awards may be granted that represent a conditional
right to receive restricted stock or restricted stock units upon
the achievement of management objectives. Restricted stock or
restricted stock units awarded in settlement of such award will
be subject to a risk of forfeiture and a restriction on
transferability for a period of at least three years, except
that the restrictions may be removed on an annual, ratable basis
during the three year period and the Board may accelerate the
lapse of such restrictions in the event of the retirement, the
attainment of reasonable age and service requirements approved
by the Board, death or the disability of a participant or a
change in control of the Company.
The Board may, in its discretion, authorize the granting to
nonemployee Directors of option rights, SARs or other awards
under the Plan and may also authorize the grant or sale of
common shares, restricted stock or restricted stock units to
nonemployee Directors. Nonemployee Directors are not eligible to
receive performance shares or performance units under the Plan.
Each grant of an award to a nonemployee Director will be on such
terms and conditions as approved by the Board, will not be
required to be subject to any minimum vesting period, and will
be evidenced by an evidence of award in such form as will be
approved by the Board.
Management Objectives. The Plan requires that the Board
establish management objectives for purposes of
performance shares, performance units and incentive awards. When
so determined, option rights, SARs, restricted stock, restricted
stock units, other awards under the Plan or dividend credits may
also specify management objectives. Management objectives may be
described in terms of either company-wide objectives or
objectives that are related to the performance of the individual
participant or a subsidiary, division, department, region or
function within Smucker or a subsidiary in which the participant
is employed. The management objectives may be based on the
performance of Smucker relative to the performance of other
companies. Management objectives applicable to any award to a
participant who is, or is determined by the Board likely to
become, a covered employee within the meaning of
Section 162(m) of the Internal Revenue Code, will be
limited to specified levels of or growth in:
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Profits (e.g., operating income, income from
continuing operations, EBIT, EBT, net income, earnings per
share, residual or economic earnings these
profitability metrics could be measured before special items and
subject to GAAP definition); |
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Cash Flow (e.g., EBITDA, operating cash flow,
total cash flow, cash flow in excess of cost of capital or
residual cash flow or cash flow return on investment); |
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Returns (e.g., profits or cash flow returns on:
assets, invested capital, net capital employed, and equity); |
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Working Capital (e.g., working capital divided by
sales, days sales outstanding, days sales inventory,
and days sales in payables); |
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Profit Margins (e.g., profits divided by revenues,
gross margins and material margins divided by revenues, and
material margins divided by sales pounds); |
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Liquidity Measures (e.g.,
debt-to-capital,
debt-to-EBITDA, total
debt ratio); |
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Sales Growth, Cost Initiative and Stock Price Metrics
(e.g., revenues, revenue growth, stock price
appreciation, total return to shareholders, sales and
administrative costs divided by sales, and sales and
administrative costs divided by profits); and |
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Strategic Initiative Key Deliverable Metrics consisting
of one or more of the following: product development, strategic
partnering, research and development, market penetration,
geographic business expansion goals, cost targets, customer
satisfaction, employee satisfaction, management of employment
practices and employee benefits, supervision of litigation and
information technology, and goals relating to acquisitions or
divestitures of subsidiaries, affiliates and joint ventures. |
Administration and Amendments. The Plan is to be
administered by the Board, except that the Board has the
authority to delegate its powers under the Plan to the Executive
Compensation Committee or another committee of the Board (or a
subcommittee thereof). The Board has delegated the
administration of the Plan to its Executive Compensation
Committee. The Executive Compensation Committee is, therefore,
authorized to interpret the Plan and related agreements and
other documents. The Board may amend the Plan from time to time
without further approval by the Companys shareholders,
except where the amendment (1) would materially increase
the benefits accruing to participants under the Plan;
(2) would materially increase the number of securities
which may be issued under the Plan, (3) would materially
modify the requirements for participation in the Plan or
(4) must otherwise be approved by the shareholders of the
Company in order to comply with applicable law or rules of the
New York Stock Exchange or, if the shares are not traded on the
New York Stock Exchange, the requirements of the principal
national securities exchange upon which the common shares are
traded or quoted.
In the case of involuntary termination of employment or
termination of employment by reason of death, disability,
retirement, closing of business or operation units or
elimination of job position, or in the case of unforeseeable
emergency or other special circumstances of or relating to a
participant, the Board may in its sole discretion accelerate the
time at which awards may be exercised, the time at which the
substantial risk of forfeiture or prohibition or restriction on
transfer will lapse or terminate, or the time at which
performance shares or performance units will be deemed to have
been fully earned or may waive any other limitation or
requirement under any award, except in the case of a
covered employee where such action would result in
the loss of the otherwise available exemption of the award under
Section 162(m) of the Code.
Change in Control. An evidence of award under the Plan
may provide that, upon a change in control of Smucker, any
awards that are outstanding as of the date of the change in
control that are subject to vesting requirements and that are
not then vested, shall become fully vested and immediately
exercisable and all restrictions and other conditions prescribed
by the Board, if any, with respect to awards granted pursuant to
the Plan will automatically lapse, expire and terminate and all
such awards will be deemed to be fully earned. The events giving
rise to a change in control are set forth in the Plan attached
to this proxy statement.
Transferability. Except as otherwise determined by the
Board, no award granted under the Plan is transferable by a
participant except, upon death, by will or the laws of descent
and distribution, and in no event shall an award granted under
the Plan be transferred for value. Except as otherwise
determined by the Board, option rights and SARs are exercisable
during the optionees lifetime only by him or her or by his
or her guardian or legal representative.
Adjustments. The number of shares authorized under the
Plan, subject to various limits contained in the Plan, covered
by outstanding awards under the Plan and, if applicable, the
prices per share applicable to such awards, may be adjusted in
the event of stock dividends, stock splits, combinations of
shares, recapitalizations, mergers, consolidations, spin-offs,
split-offs, spin-outs, split-ups, reorganizations, liquidations,
issuances of rights or warrants, and similar events. In the
event of any such transaction or event, the Board, in its
discretion, may provide in substitution for any or all
outstanding awards under the Plan such alternative
consideration, if any, as it, in good faith, may determine to be
equitable in the circumstances and
37
may require the surrender of all awards so replaced. The Board
may also make or provide for such adjustments in the number of
shares available under the Plan and the other limitations
contained in the Plan as the Board may determine appropriate to
reflect any transaction or event described above.
Detrimental Activity. Any grant may provide that if a
participant, either during employment by Smucker or a subsidiary
or within a specified period after termination of employment,
engages in any detrimental activity, as defined in
the Plan attached to this proxy statement, the participant shall
forfeit any awards granted under the Plan then held by the
participant or return to Smucker, in exchange for payment by
Smucker of any amount actually paid for the common shares by the
participant, all common shares that the participant has not
disposed of that were offered pursuant to the Plan within a
specified period prior to the date of the commencement of the
detrimental activity. With respect to any common shares acquired
under the Plan that the participant has disposed of, if so
provided in the evidence of award for such grant, the
participant will pay to Smucker in cash the difference between
(i) any amount actually paid therefor by the participant
pursuant to the Plan and (ii) the market value per share of
the common shares on the date they were acquired.
Withholding Taxes. To the extent that Smucker is required
to withhold federal, state, local or foreign taxes in connection
with any payment made or benefit realized by a participant or
other person under the Plan, and the amounts available to
Smucker for such withholding are insufficient, it will be a
condition to the receipt of such payment or the realization of
such benefit that the participant or such other person make
arrangements satisfactory to Smucker for payment of the balance
of such taxes required to be withheld, which arrangements (in
the discretion of the Board) may include relinquishment of a
portion of such benefit.
Termination. No grant will be made under the Plan more
than 10 years after the date on which the Plan is first
approved by the Companys shareholders, but all grants made
on or prior to such date will continue in effect thereafter
subject to the terms of the grant and of the Plan.
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Federal Income Tax Consequences |
The following is a brief summary of some of the federal income
tax consequences of certain transactions under the Plan based on
federal income tax laws in effect on January 1, 2006. This
summary is not intended to be complete and does not describe
state or local tax consequences.
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Tax Consequences to Participants |
Non-qualified Option Rights. In general, (1) no
income will be recognized by an optionee at the time a
non-qualified option right is granted; (2) at the time of
exercise of a non-qualified option right, ordinary income will
be recognized by the optionee in an amount equal to the
difference between the option price paid for the shares and the
fair market value of the shares, if unrestricted, on the date of
exercise; and (3) at the time of sale of shares acquired
pursuant to the exercise of a non-qualified option right,
appreciation (or depreciation) in value of the shares after the
date of exercise will be treated as either short-term or
long-term capital gain (or loss) depending on how long the
shares have been held.
Incentive Option Rights. No income generally will be
recognized by an optionee upon the grant or exercise of an
incentive stock option, or ISO. The exercise of an ISO, however,
may result in alternative minimum tax liability. If common
shares are issued to the optionee pursuant to the exercise of an
ISO, and if no disqualifying disposition of such shares is made
by such optionee within two years after the date of grant or
within one year after the transfer of such shares to the
optionee, then upon sale of such shares, any amount realized in
excess of the option price will be taxed to the optionee as a
long-term capital gain and any loss sustained will be a
long-term capital loss.
If common shares acquired upon the exercise of an ISO are
disposed of prior to the expiration of either holding period
described above, the optionee generally will recognize ordinary
income in the year of disposition in an amount equal to the
excess (if any) of the fair market value of such shares at the
time of exercise (or, if less, the amount realized on the
disposition of such shares if a sale or exchange) over the
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option price paid for such shares. Any further gain (or loss)
realized by the participant generally will be taxed as
short-term or long-term capital gain (or loss) depending on the
holding period.
SARs. No income will be recognized by a participant in
connection with the grant of a tandem SAR or a free-standing
SAR. When the SAR is exercised, the participant normally will be
required to include as taxable ordinary income in the year of
exercise an amount equal to the fair market value of any
unrestricted common shares received on the exercise.
Restricted Stock. The recipient of restricted stock
generally will be subject to tax at ordinary income rates on the
fair market value of the restricted stock (reduced by any amount
paid by the participant for such restricted stock) at such time
as the shares are no longer subject to forfeiture or
restrictions on transfer for purposes of Section 83 of the
Internal Revenue Code (Restrictions). However, a
recipient who so elects under Section 83(b) of the Internal
Revenue Code within 30 days of the date of transfer of the
shares will have taxable ordinary income on the date of transfer
of the shares equal to the excess of the fair market value of
such shares (determined without regard to the Restrictions) over
the purchase price, if any, of such restricted stock. If a
Section 83(b) election has not been made, any dividends
received with respect to restricted stock that is subject to the
Restrictions generally will be treated as compensation that is
taxable as ordinary income to the participant.
Restricted Stock Units. No income generally will be
recognized upon the award of restricted stock units. The
recipient of a restricted stock unit award generally will be
subject to tax at ordinary income rates on the fair market value
of unrestricted common shares on the date that such shares are
transferred to the participant under the award (reduced by any
amount paid by the participant for such restricted stock units),
and the capital gains/loss holding period for such shares will
also commence on such date.
Performance Shares and Performance Units. No income
generally will be recognized upon the grant of performance
shares or performance units. Upon payment in respect of the
earn-out of performance shares or performance units, the
recipient generally will be required to include as taxable
ordinary income in the year of receipt an amount equal to the
fair market value of any unrestricted common shares received.
Incentive Awards. No income generally will be recognized
upon the grant of incentive awards. Upon payment in respect of
the earn-out of the incentive awards, the recipient will be
taxed as described above in the applicable section relating to
restricted stock or restricted stock units.
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Tax Consequences to Smucker or Subsidiary |
To the extent that a participant recognizes ordinary income in
the circumstances described above, Smucker or the subsidiary for
which the participant performs services will be entitled to a
corresponding deduction provided that, among other things, the
income meets the test of reasonableness, is an ordinary and
necessary business expense, is not an excess parachute
payment within the meaning of Section 280G of the
Internal Revenue Code and is not disallowed by the
$1 million limitation on certain executive compensation
under Section 162(m) of the Internal Revenue Code.
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Registration with the SEC |
Smucker intends to file a Registration Statement on
Form S-8 relating
to the issuance of common shares under the Plan with the
Securities and Exchange Commission pursuant to the Securities
Act of 1933, as amended, as soon as is practicable after
approval of the Plan by Smuckers shareholders.
In April 2006, the Executive Compensation Committee and the
Board of Directors, as part of an overall review of director
compensation, approved an annual grant of deferred stock units
to each nonemployee Director. The annual grant of deferred stock
units will, until otherwise changed by the Board, be equal in
value to $60,000 and will be granted to the nonemployee
Directors each October 1, commencing on October 1,
2006. If the Plan is approved by shareholders at the annual
meeting, the deferred stock units will be granted under the
Plan. Set forth in the table below is the dollar value and
number of common shares
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underlying the deferred stock units that Smucker anticipates
will be awarded on October 1, 2006 under the Plan to the
nonemployee Directors as of the date of this proxy statement. It
is not possible to determine other specific amounts that may be
awarded under the Plan.
The J. M. Smucker Company 2006 Equity Compensation
Plan
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Name and Position |
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Dollar Value |
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Number of Units |
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Nonemployee Director Group
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$ |
420,000 |
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10,393 |
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As of the date hereof, the Nonemployee Director Group consists
of seven nonemployee Directors. The table above reflects the
receipt of common shares by each nonemployee Director equal in
value to $60,000 at an assumed fair market value of
$40.41 per share, the closing price of Smuckers
common shares on June 19, 2006. The table does not reflect
the receipt of any common shares that a Director may receive
because of an election to receive additional compensation in the
form of common shares.
|
|
|
Vote Required to Approve the Plan |
The approval of the adoption of the Plan requires the
affirmative vote of a majority of the votes cast at the meeting,
giving effect to the ten-votes-per-share provision of
Smuckers Amended and Restated Articles of Incorporation,
provided that the total votes cast represent over 50% in
interest of all Smucker common shares entitled to vote on this
proposal.
The Board of Directors recommends a vote FOR the
approval of
The J. M. Smucker Company 2006 Equity Compensation Plan.
40
EQUITY COMPENSATION PLAN INFORMATION
The table below sets forth certain information with respect to
the following equity compensation plans of Smucker as of
April 30, 2006: the 1987 Stock Option Plan, the Amended and
Restated Nonemployee Director Stock Plan, the 1998 Equity and
Performance Incentive Plan, the Nonemployee Director Stock
Option Plan, and the Amended and Restated 1997 Stock-Based
Incentive Plan. All of these equity compensation plans have been
approved by shareholders, with the exception of the Amended and
Restated 1997 Stock-Based Incentive Plan, which was assumed by
Smucker as a result of the International Multifoods Corporation
acquisition in June 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities |
|
|
|
|
Weighted-Average |
|
Remaining Available for |
|
|
Number of Securities to |
|
Exercise Price of |
|
Future Issuance Under |
|
|
be Issued Upon |
|
Outstanding |
|
Equity Compensation |
|
|
Exercise of |
|
Options, |
|
Plans (Excluding |
|
|
Outstanding Options, |
|
Warrants and |
|
Securities Reflected in |
|
|
Warrants and Rights |
|
Rights |
|
Column (a)) (1) (5) |
Plan Category |
|
(a) |
|
(b) |
|
(c) |
|
|
|
|
|
|
|
Equity compensation plans approved by security holders(2)(3)
|
|
|
2,698,214 |
|
|
$ |
34.39 |
|
|
|
1,560,627 |
|
Equity compensation plans not approved by security holders(4)
|
|
|
322,643 |
|
|
$ |
47.22 |
|
|
|
247,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,020,857 |
|
|
$ |
35.83 |
|
|
|
1,808,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
As of April 30, 2006, there were 694,654 shares
remaining available for grant as awards other than options. The
weighted average exercise price of outstanding options,
warrants, and rights in column (b) does not take restricted
stock, restricted stock units or other non-option awards into
account. |
|
(2) |
69,322 deferred stock units are outstanding under the Amended
and Restated Nonemployee Director Stock Plan. The
weighted-average exercise price of outstanding options, warrants
and rights in column (b) does not take these deferred stock
units into account. |
|
(3) |
In June 2005, the Company granted several executive officers
performance shares and performance units with a one-year
performance period, payable in restricted stock in June 2006.
The actual number of performance shares and performance units
earned was not known as of April 30, 2006. Subsequent to
April 30, 2006, the performance shares and performance
units earned were converted into 63,310 restricted shares. The
actual number of restricted shares earned was included in column
(a) for purposes of including the performance units and
performance shares outstanding at April 30, 2006. The
weighted-average exercise price of outstanding options, warrants
and rights in column (b) does not take these performance
shares and performance units into account. |
|
(4) |
This row sets forth the number of outstanding options under The
Amended and Restated 1997 Stock-Based Incentive Plan which was
initially adopted by the stockholders of International
Multifoods Corporation in 1997. The Plan was subsequently
assumed by Smucker as a result of the June 18, 2004
acquisition of Multifoods. This Plan provides for the following
types of awards: stock options, stock appreciation rights,
restricted stock and restricted stock units. Smuckers
Compensation Committee administers the Plan and determines the
employees to whom awards are to be granted, the types of awards
to be granted, the number of shares subject to each award and
the other terms and conditions of each award. Following the
acquisition, only former employees of Multifoods and its
subsidiaries that are employed by Smucker are eligible to
receive awards under the Plan. No further awards will be granted
under the Plan, upon approval of The J. M. Smucker Company 2006
Equity Compensation Plan. |
|
(5) |
Upon approval of The J. M. Smucker Company 2006 Equity
Compensation Plan, Proposal 3 on this years ballot,
no further awards will be made under the Existing Plans, except
that the provisions relating to the deferral of director
retainers and fees under the Amended and Restated Nonemployee
Director Stock Plan will continue to apply to services rendered
through December 31, 2006. As of April 30, 2006,
189,020 shares are available under this Plan. Awards of
performance shares and performance units |
41
|
|
|
granted under the 1998 Equity and Performance Plan and
outstanding on the effective date of The J. M. Smucker Company
2006 Equity Compensation Plan may be converted to restricted
stock under the 1998 Equity and Performance Plan, expected in
June 2007, once such performance shares and performance units
are earned. |
As of June 19, 2006, there were 188,533 shares
remaining available for grants under the Amended and Restated
Nonemployee Director Stock Plan.
As of June 19, 2006, 2,930,928 options were outstanding
with a weighted average exercise price of $36.03 and a weighted
average term of approximately 5.7 years. Additionally,
approximately 554,850 shares of restricted stock,
restricted stock units, and the maximum possible number of
restricted shares related to performance shares and performance
units remain outstanding.
Not included in the equity compensation plan table above are an
additional 59,252 options at a weighted-average exercise price
of $45.99, which Smucker assumed as a result of the
June 18, 2004 acquisition of International Multifoods
Corporation. Of this, 56,532 options are outstanding under the
Amended and Restated 1986 Stock Option Incentive Plan and the
Amended and Restated 1989 Stock-Based Incentive Plan. Although
both of these plans have terminated and no additional awards may
be granted under the plans, outstanding awards under the plans
continue to be exercisable. Additionally, there are 2,720
options outstanding as the result of a 1998 consulting agreement
between Multifoods and a former consultant/employee, at a
weighted-average exercise price of $54.11.
ANNUAL REPORT
The Companys Annual Report for the fiscal year ended
April 30, 2006 was mailed to each shareholder on or about
July 10, 2006.
2007 SHAREHOLDER PROPOSALS
The deadline for shareholders to submit proposals to be
considered for inclusion in the proxy statement for next
years annual meeting of shareholders is March 12,
2007.
According to the Companys regulations, the deadline for
shareholders to notify Smucker of business to be brought before
next years annual meeting of shareholders is 60 calendar
days before the first anniversary of the date on which this
proxy statement is first mailed by the Company. After that date,
which is expected to be May 11, 2007, the notice would be
considered untimely. If, however, public announcement of the
date of next years annual meeting of shareholders is not
made at least 75 days before the date of that annual
meeting, the deadline for shareholders to notify the Company
will then be the close of business on the tenth calendar day
following the date on which public announcement of next
years annual meeting date is first made.
OTHER MATTERS
The Company does not know of any matters to be brought before
the meeting except as indicated in this notice. However, if any
other matters properly come before the meeting for action, it is
intended that the person authorized under solicited proxies may
vote or act thereon in accordance with his or her own judgment.
HOUSEHOLDING OF PROXY MATERIALS
In accordance with the notices the Company has sent to
registered shareholders, the Company is sending only one copy of
its annual report and proxy statement to shareholders who share
the same last name and mailing address, unless they have
notified Smucker that they want to continue receiving multiple
copies. The Company understands that the brokerage community has
mailed similar notices to holders of common shares who hold
their shares in street name. This practice, known as
householding, is permitted by the Securities
42
and Exchange Commission and is designed to reduce duplicate
mailings and save printing and postage costs, as well as natural
resources.
Shareholders who currently receive multiple copies of the annual
report and proxy statement at their address and would like to
request householding of their communications, should
contact their broker if they are a street name holder or, if
they are a registered shareholder, should contact Computershare
by calling
1-800-456-1169, or
inform them in writing at Computershare Investor Services, P.O.
Box A3309, Chicago, IL
60602-3309.
Shareholders who are householding their
communications, but who wish to begin to receive separate copies
of the annual report and proxy statement in the future may also
notify their broker or Computershare Investor Services. Smucker
will promptly deliver a separate copy of the annual report and
proxy statement at a shared address to which a single copy was
delivered upon written or oral request to Shareholder Relations,
The J. M. Smucker Company, Strawberry Lane, Orrville, Ohio
44667, 330-684-3838.
ELECTRONIC DELIVERY OF SMUCKER SHAREHOLDER COMMUNICATIONS
If you are a registered shareholder and received the
Companys annual report and proxy statement by mail,
Smucker encourages you to conserve natural resources, as well as
reduce printing and mailing costs, by signing up to receive your
Smucker shareholder communications via
e-mail. With your
consent, the Company will stop mailing paper copies of these
documents and notify you by
e-mail when the
documents are available to you, where to find them, and how to
quickly submit your vote on-line. Your electronic delivery will
be effective until you cancel it.
To participate, you will need your Computershare account number
which can be found on your Smucker dividend statement. Your
account number begins with the letter C, followed by
10 digits. You can participate by accessing
www.computershare.com/consent/smuckers and following the
instructions provided.
Please note that although there is no charge for accessing
Smuckers annual meeting materials online, you may incur
costs from service providers such as your Internet access
provider and your telephone company. If you have any questions
or need assistance, please call
1-800-456-1169 (within
the U.S., Puerto Rico, and Canada) or
312-360-5254 (outside
the U.S., Puerto Rico and Canada).
If you hold your common shares in street name, visit
www.icsdelivery.com to enroll in electronic delivery of your
shareholder communications.
VOTING RIGHTS OF COMMON SHARES
Under Article Fourth of the Companys Amended and
Restated Articles of Incorporation, the holder of each
outstanding common share is entitled to one vote on each matter
submitted to a vote of the shareholders except for the following
specific matters:
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any matter that relates to or would result in the dissolution or
liquidation of Smucker, whether voluntary or involuntary, and
whether pursuant to Section 1701.86 or 1701.91 of the Ohio
Revised Code or otherwise; |
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|
|
the adoption of any amendment of the articles of incorporation,
or the regulations of Smucker, or the adoption of amended
articles of incorporation, other than the adoption of any
amendment or amended articles of incorporation that increases
the number of votes to which holders of common shares are
entitled or expands the matters to which Section 2(a) of
Article Fourth applies; |
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any proposal or other action to be taken by the shareholders of
Smucker, whether or not proposed by the shareholders of Smucker,
and whether proposed by authority of the Board of Directors of
Smucker or otherwise, relating to Smuckers rights
agreement or any successor plan; |
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any matter relating to any stock option plan, stock purchase
plan, executive compensation plan, executive benefit plan or
other similar plan, arrangement, or agreement; |
43
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|
adoption of any agreement or plan of or for the merger,
consolidation, or majority share acquisition of Smucker or any
of its subsidiaries with or into any other person, whether
domestic or foreign, corporate or noncorporate, or the
authorization of the lease, sale, exchange, transfer, or other
disposition of all, or substantially all, of Smuckers
assets; |
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|
any matter submitted to Smuckers shareholders pursuant to
Article Fifth (which relates to procedures applicable to certain
business combinations) or Article Seventh (which relates to
procedures applicable to certain proposed acquisitions of
specified percentages of Smuckers outstanding shares) of
the Amended and Restated Articles of Incorporation, as they may
be further amended, or any issuance of common shares of Smucker
for which shareholder approval is required by applicable stock
exchange rules; and |
|
|
|
any matter relating to the issuance of common shares, or the
repurchase of common shares that Smuckers Board of
Directors determines is required or appropriate to be submitted
to Smuckers shareholders under the Ohio Revised Code or
applicable stock exchange rules. |
On those listed matters previously stated, common shares are
entitled to ten votes per share, if they meet the requirements
set forth in the Amended and Restated Articles of Incorporation.
Shares which would be entitled to ten votes per share include:
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|
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|
|
common shares beneficially owned for four consecutive years as
of the June 19, 2006 record date; |
|
|
|
common shares received as a result of the International
Multifoods Corporation acquisition on June 18, 2004; or |
|
|
|
common shares received through Smuckers various equity
plans. |
In the event of a change in beneficial ownership, the new owner
of that share will be entitled to only one vote with respect to
that share on all matters until four years pass without a
further change in beneficial ownership of the share. The ten
vote per share provisions apply to Proposal 3, Approval of
The J. M. Smucker Company 2006 Equity Compensation Plan, on this
years ballot.
The express terms of the common shares provide that a change in
beneficial ownership occurs whenever any change occurs in the
person or group of persons who has or shares voting power,
investment power, the right to receive sale proceeds, or the
right to receive dividends or other distributions in respect of
those common shares. In the absence of proof to the contrary, a
change in beneficial ownership will be deemed to have occurred
whenever common shares are transferred of record into the name
of any other person. Moreover, corporations, general
partnerships, limited partnerships, voting trustees, banks,
trust companies, brokers, nominees, and clearing agencies will
be entitled to only one vote per share on common shares held of
record in their respective names unless proof is provided to
establish that there has been no change in the person or persons
who direct the exercise of any of the rights of beneficial
ownership. Thus, shareholders who hold common shares in street
name or through any of the other indirect methods mentioned
above must be able to submit proof of beneficial ownership to
Smucker in order to be entitled to exercise ten votes per share.
The foregoing is merely a summary of the voting terms of the
common shares and should be read in conjunction with, and is
qualified in its entirety by reference to, the express terms of
those common shares as set forth in Smuckers current
Amended and Restated Articles of Incorporation. A copy of the
Amended and Restated Articles of Incorporation is posted on the
Companys website at www.smuckers.com. A copy will be
provided free of charge to any shareholder submitting a written
request to Shareholder Relations, The J. M. Smucker Company,
Strawberry Lane, Orrville, Ohio 44667.
44
Annex A
THE J. M. SMUCKER COMPANY
2006 EQUITY COMPENSATION PLAN
1. Purpose. The purpose of The
J. M. Smucker Company 2006 Equity Compensation Plan is
to attract and retain Directors, consultants, officers and other
employees of The J. M. Smucker Company, an Ohio corporation, and
its Subsidiaries and to provide to such persons incentives and
rewards for performance.
2. Definitions. As used in this Plan,
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|
(a) Appreciation Right means a right granted
pursuant to Section 5 or Section 9 of this Plan, and
will include both Free-Standing Appreciation Rights and Tandem
Appreciation Rights. |
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|
(b) Base Price means the price to be used as
the basis for determining the Spread upon the exercise of a
Free-Standing Appreciation Right or a Tandem Appreciation Right. |
|
|
(c) Board means the Board of Directors of the
Company and, to the extent of any delegation by the Board to a
committee (or subcommittee thereof) pursuant to Section 12
of this Plan, such committee (or subcommittee). |
|
|
(d) Change in Control has the meaning set forth
in Section 14 of this Plan. |
|
|
(e) Code means the Internal Revenue Code of
1986, as amended from time to time. |
|
|
(f) Common Shares means the shares of common
stock, without par value, of the Company or any security into
which such Common Shares may be changed by reason of any
transaction or event of the type referred to in Section 13
of this Plan. |
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|
(g) Company means The J. M. Smucker Company, an
Ohio corporation and its successors. |
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|
(h) Covered Employee means a Participant who
is, or is determined by the Board to be likely to become, a
covered employee within the meaning of
Section 162(m) of the Code (or any successor provision). |
|
|
(i) Date of Grant means the date specified by
the Board on which a grant of Option Rights, Appreciation
Rights, Performance Shares, Performance Units, Incentive Awards
or other awards contemplated by Section 10 of this Plan, or
a grant or sale of Restricted Stock, Restricted Stock Units, or
other awards contemplated by Section 10 of this Plan will
become effective (which date will not be earlier than the date
on which the Board takes action with respect thereto). |
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(j) Detrimental Activity means: |
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(i) Engaging in any activity, as an employee, principal,
agent, or consultant for another entity that competes with the
Company in any actual, researched, or prospective product,
service, system, or business activity for which the Participant
has had any direct responsibility during the last two years of
his or her employment with the Company or a Subsidiary, in any
territory in which the Company or a Subsidiary manufactures,
sells, markets, services, or installs such product, service, or
system, or engages in such business activity. |
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(ii) Soliciting any employee of the Company or a Subsidiary
to terminate his or her employment with the Company or a
Subsidiary. |
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(iii) The disclosure to anyone outside the Company or a
Subsidiary, or the use in other than the Companys or a
Subsidiarys business, without prior written authorization
from the Company, of any confidential, proprietary or trade
secret information or material relating to the business of the
Company and its Subsidiaries, acquired by the Participant during
his or her employment with the Company or its Subsidiaries or
while acting as a consultant for the Company or its Subsidiaries
thereafter. |
A-1
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(iv) The failure or refusal to disclose promptly and to
assign to the Company upon request all right, title and interest
in any invention or idea, patentable or not, made or conceived
by the Participant during employment by the Company and any
Subsidiary, relating in any manner to the actual or anticipated
business, research or development work of the Company or any
Subsidiary or the failure or refusal to do anything reasonably
necessary to enable the Company or any Subsidiary to secure a
patent where appropriate in the United States and in other
countries. |
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(v) Activity that results in Termination for Cause. For the
purposes of this Section, Termination for Cause
shall mean a termination: |
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(A) due to the Participants willful and continuous
gross neglect of his or her duties for which he or she is
employed, or |
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(B) due to an act of dishonesty on the part of the
Participant constituting a felony resulting or intended to
result, directly or indirectly, in his or her gain for personal
enrichment at the expense of the Company or a Subsidiary. |
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(vi) Any other conduct or act determined to be injurious,
detrimental or prejudicial to any significant interest of the
Company or any Subsidiary unless the Participant acted in good
faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Company. |
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(k) Director means a member of the Board of
Directors of the Company. |
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(l) Effective Date means the date that this
Plan is approved by the shareholders of the Company. |
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(m) Evidence of Award means an agreement,
certificate, resolution or other type or form of writing or
other evidence approved by the Board that sets forth the terms
and conditions of the awards granted. An Evidence of Award may
be in an electronic medium, may be limited to notation on the
books and records of the Company and, with the approval of the
Board, need not be signed by a representative of the Company or
a Participant. |
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(n) Exchange Act means the Securities Exchange
Act of 1934, as amended, and the rules and regulations
thereunder, as such law, rules and regulations may be amended
from time to time. |
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(o) Existing Plans means the 1987 Stock Option
Plan, the Amended Restricted Stock Bonus Plan, the Amended and
Restated 1997 Stock-Based Incentive Plan, the 1998 Equity and
Performance Incentive Plan (As Amended and Restated Effective as
of June 6, 2005), the Amended and Restated Nonemployee
Director Stock Plan and the Nonemployee Director Stock Option
Plan. |
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(p) Free-Standing Appreciation Right means an
Appreciation Right granted pursuant to Section 5 or
Section 9 of this Plan that is not granted in tandem with
an Option Right. |
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(q) Incentive Awards has the meaning set forth
in Section 11 of this Plan. |
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(r) Incentive Stock Options means Option Rights
that are intended to qualify as incentive stock
options under Section 422 of the Code or any
successor provision. |
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(s) Management Objectives means the measurable
performance objective or objectives established pursuant to this
Plan for Participants who have received grants of Performance
Shares or Performance Units or Incentive Awards or, when so
determined by the Board, Option Rights, Appreciation Rights,
Restricted Stock, Restricted Stock Units, dividend credits and
other awards pursuant to this Plan. Management Objectives may be
described in terms of Company-wide objectives or objectives that
are related to the performance of the individual Participant or
of the Subsidiary, division, department, region or function
within the Company or Subsidiary in which the Participant is
employed. The Management Objectives may be made relative to the
performance of other companies. The |
A-2
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Management Objectives applicable to any award to a Covered
Employee will be based on specified levels of or improvement in
one or more of the following metrics: |
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(i) Profits (e.g., operating income, income
from continuing operations, EBIT, EBT, net income, material
margins, earnings per share, residual or economic
earnings these profitability metrics could be
measured before special items and subject to GAAP definition); |
|
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(ii) Cash Flow (e.g., EBITDA, operating cash
flow, total cash flow, cash flow in excess of cost of capital or
residual cash flow or cash flow return on investment); |
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(iii) Returns (e.g., profits or cash flow
returns on: assets, invested capital, net capital employed, and
equity); |
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(iv) Working Capital (e.g., working capital
divided by sales, days sales outstanding, days sales
inventory, and days sales in payables); |
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(v) Profit Margins (e.g., profits divided by
revenues, gross margins and material margins divided by
revenues, and material margin divided by sales pounds); |
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(vi) Liquidity Measures (e.g.,
debt-to-capital, debt-to-EBITDA, total debt ratio); |
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(vii) Sales Growth, Cost Initiative and Stock Price
Metrics (e.g., revenues, revenue growth, stock price
appreciation, total return to shareholders, sales and
administrative costs divided by sales, and sales and
administrative costs divided by profits); and |
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(viii) Strategic Initiative Key Deliverable Metrics
consisting of one or more of the following: product
development, strategic partnering, research and development,
market penetration, geographic business expansion goals, cost
targets, customer satisfaction, employee satisfaction,
management of employment practices and employee benefits,
supervision of litigation and information technology, and goals
relating to acquisitions or divestitures of subsidiaries,
affiliates and joint ventures. |
If the Board determines that a change in the business,
operations, corporate structure or capital structure of the
Company, or the manner in which it conducts its business, or
other events or circumstances render the Management Objectives
unsuitable, the Board may in its discretion modify such
Management Objectives or the related levels of achievement, in
whole or in part, as the Board deems appropriate and equitable,
except in the case of a Covered Employee where such action would
result in the loss of the otherwise available exemption of the
award under Section 162(m) of the Code. In such case, the
Board will not make any modification of the Management
Objectives or the level or levels of achievement with respect to
such Covered Employee.
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(t) Market Value per Share means, as of any
particular date, the average of the high and low sales prices of
the Common Shares as reported on the New York Stock Exchange
Composite Tape or, if not listed on such exchange, on any other
national securities exchange on which the Common Shares are
listed, or if there are no sales on such day, on the next
preceding trading day during which a sale occurred. If there is
no regular trading market for such Common Shares, the Market
Value per Share shall be determined by the Board. |
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(u) Nonemployee Director means a person who is
a nonemployee director of the Company within the
meaning of Rule 16b-3 of the Securities and Exchange
Commission promulgated under the Exchange Act. |
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(v) Optionee means the optionee named in an
Evidence of Award evidencing an outstanding Option Right. |
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(w) Option Price means the purchase price
payable on exercise of an Option Right. |
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(x) Option Right means the right to purchase
Common Shares upon exercise of an option granted pursuant to
Section 4 or Section 9 of this Plan. |
A-3
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(y) Participant means a person who is selected
by the Board to receive benefits under this Plan and who is at
the time a consultant, an officer, or other employee of the
Company or any one or more of its Subsidiaries, or who has
agreed to commence serving in any of such capacities within
90 days of the Date of Grant, and will also include each
Nonemployee Director who receives an award under this Plan. |
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(z) Performance Period means, in respect of a
Performance Share or Performance Unit, a period of time
established pursuant to Section 8 of this Plan within which
the Management Objectives relating to such Performance Share or
Performance Unit are to be achieved. |
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(aa) Performance Share means a bookkeeping
entry that records the equivalent of one Common Share awarded
pursuant to Section 8 of this Plan. |
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|
(bb) Performance Unit means a bookkeeping entry
awarded pursuant to Section 8 of this Plan that records a
unit equivalent to $1.00 or such other value as is determined by
the Board. |
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|
(cc) Plan means The J. M. Smucker Company 2006
Equity Compensation Plan, as may be amended from time to time. |
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|
(dd) Restricted Stock means Common Shares
granted or sold pursuant to Section 6 or Section 9 of
this Plan as to which neither the substantial risk of forfeiture
nor the prohibition on transfers has expired. |
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|
(ee) Restriction Period means the period of
time during which Restricted Stock Units are subject to
restrictions, as provided in Section 7 or Section 9 of
this Plan. |
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|
(ff) Restricted Stock Unit means an award made
pursuant to Section 7 or Section 9 of this Plan of the
right to receive Common Shares at the end of a specified period.
An award of Restricted Stock Units may be described as an award
of Deferred Stock Units. |
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|
(gg) Spread means the excess of the Market
Value per Share on the date when an Appreciation Right is
exercised over the Option Price or Base Price provided for in
the related Option Right or Free-Standing Appreciation Right,
respectively. |
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(hh) Subsidiary means a corporation, company or
other entity (i) at least 50 percent of whose
outstanding shares or securities (representing the right to vote
for the election of directors or other managing authority) are,
or (ii) which does not have outstanding shares or
securities (as may be the case in a partnership, joint venture
or unincorporated association), but at least 50 percent of
whose ownership interest representing the right generally to
make decisions for such other entity is, now or hereafter, owned
or controlled, directly or indirectly, by the Company except
that for purposes of determining whether any person may be a
Participant for purposes of any grant of Incentive Stock
Options, Subsidiary means any corporation in which
at the time the Company owns or controls, directly or
indirectly, at least 50 percent of the total combined
voting power represented by all classes of stock issued by such
corporation. |
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(ii) Tandem Appreciation Right means an
Appreciation Right granted pursuant to Section 5 or
Section 9 of this Plan that is granted in tandem with an
Option Right. |
3. Shares Available Under the Plan.
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(a) Maximum Shares Available Under Plan. |
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(i) Subject to adjustment as provided in Section 13 of
this Plan, the number of Common Shares that may be issued or
transferred (i) upon the exercise of Option Rights or
Appreciation Rights, (ii) in payment of Restricted Stock
and released from substantial risks of forfeiture thereof, (iii)
in payment of Restricted Stock Units, (iv) in payment of
Performance Shares or Performance Units that have been earned,
(v) as awards to Nonemployee Directors, (vi) as awards
contemplated by Section 10 of this Plan, or (vii) in
payment of dividend equivalents paid with respect to awards |
A-4
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made under the Plan will not exceed in the aggregate 2,500,000
Common Shares. Such shares may be shares of original issuance or
treasury shares or a combination of the foregoing. |
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(ii) Common Shares covered by an award granted under the
Plan shall not be counted as used unless and until they are
actually issued and delivered to a Participant and, therefore,
the total number of shares available under the Plan as of a
given date shall not be reduced by any shares relating to prior
awards that have expired or have been forfeited or cancelled.
Notwithstanding anything to the contrary contained herein:
(A) if Common Shares are tendered or otherwise used in
payment of the Option Price of an Option Right the total number
of shares covered by the Option Right being exercised shall
reduce the aggregate plan limit described above; (B) Common
Shares withheld by the Company to satisfy the tax withholding
obligation shall count against the plan limit described above;
and (C) the number of Common Shares covered by an
Appreciation Right, to the extent that it is exercised and
settled in Common Shares, and whether or not shares are actually
issued to the participant upon exercise of the right, shall be
considered issued or transferred pursuant to the Plan. In the
event that the Company repurchases shares with Option Right
proceeds, those shares will not be added to the aggregate plan
limit described above. |
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(b) Life of Plan Limits. Notwithstanding anything in
this Section 3, or elsewhere in this Plan, to the contrary
and subject to adjustment as provided in Section 13 of this
Plan: |
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(i) The aggregate number of Common Shares actually issued
or transferred by the Company upon the exercise of Incentive
Stock Options will not exceed 2,500,000 Common Shares. |
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(ii) Awards will not be granted under Section 9 or
Section 10 of the Plan to the extent they would involve the
issuance of more than 250,000 shares in the aggregate. |
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(c) Individual Participant Limits. Notwithstanding
anything in this Section 3, or elsewhere in this Plan to
the contrary, and subject to adjustment as provided in
Section 13 of this Plan: |
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(i) No Participant will be granted Option Rights or
Appreciation Rights, in the aggregate, for more than 600,000
Common Shares during any calendar year. |
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(ii) No Participant will be granted Restricted Stock or
Restricted Stock Units that specify Management Objectives,
Performance Shares or other awards under Section 10 of this
Plan, in the aggregate, for more than 200,000 Common Shares
during any calendar year. |
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(iii) Notwithstanding any other provision of this Plan to
the contrary, in no event will any Participant in any calendar
year receive an award of Performance Units having an aggregate
maximum value as of their respective Dates of Grant in excess of
$4,000,000. |
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(iv) The maximum value of any Incentive Award that may be
earned by any Participant by achievement of Management
Objectives in any calendar year shall not exceed $4,000,000 in
cash and shall not exceed 200,000 Common Shares. |
4. Option Rights. The Board may, from time to time
and upon such terms and conditions as it may determine,
authorize the granting to Participants of options to purchase
Common Shares. Each such grant will be subject to all of the
requirements contained in the following provisions:
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(a) Each grant will specify the number of Common Shares to
which it pertains subject to the limitations set forth in
Section 3 of this Plan. |
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(b) Each grant will specify an Option Price per share,
which may not be less than the Market Value per Share on the
Date of Grant. |
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(c) Each grant will specify whether the Option Price will
be payable (i) in cash or by check acceptable to the
Company or by wire transfer of immediately available funds,
(ii) by the actual or constructive transfer to the Company
of Common Shares owned by the Optionee for at least six months
having a value at the time of exercise equal to the total Option
Price, (iii) by a combination of such methods of payment,
or (iv) by such other methods as may be approved by the
Board. |
A-5
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(d) To the extent permitted by law, any grant may provide
for deferred payment of the Option Price from the proceeds of
sale through a bank or broker on a date satisfactory to the
Company of some or all of the shares to which such exercise
relates. |
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(e) Successive grants may be made to the same Participant
whether or not any Option Rights previously granted to such
Participant remain unexercised. |
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(f) Each grant will specify the period or periods of
continuous service by the Optionee with the Company or any
Subsidiary that is necessary before the Option Rights or
installments thereof will become exercisable. A grant of Option
Rights may provide for the earlier exercise of such Option
Rights in the event of the retirement, the attainment of
reasonable age and service requirements approved by the Board,
death or disability of a Participant or a Change in Control. |
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(g) Any grant of Option Rights may specify Management
Objectives that must be achieved as a condition to the exercise
of such rights. |
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(h) Option Rights granted under this Plan may be
(i) options, including, without limitation, Incentive Stock
Options, that are intended to qualify under particular
provisions of the Code, (ii) options that are not intended
so to qualify, or (iii) combinations of the foregoing.
Incentive Stock Options may only be granted to Participants who
meet the definition of employees under
Section 3401(c) of the Code. |
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(i) The exercise of an Option Right will result in the
cancellation on a share-for-share basis of any Tandem
Appreciation Right authorized under Section 5 of this Plan. |
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(j) No Option Right will be exercisable more than
10 years from the Date of Grant. |
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(k) Each grant of Option Rights will be evidenced by an
Evidence of Award. Each Evidence of Award shall be subject to
this Plan and shall contain such terms and provisions,
consistent with this Plan, as the Board may approve. |
5. Appreciation Rights.
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(a) The Board may also authorize the granting (i) to
any Optionee, of Tandem Appreciation Rights in respect of Option
Rights granted hereunder, and (ii) to any Participant, of
Free-Standing Appreciation Rights. A Tandem Appreciation Right
will be a right of the Optionee, exercisable by surrender of the
related Option Right, to receive from the Company an amount
determined by the Board, which will be expressed as a percentage
of the Spread (not exceeding 100 percent) at the time of
exercise. Tandem Appreciation Rights may be granted at any time
prior to the exercise or termination of the related Option
Rights; provided, however, that a Tandem Appreciation
Right awarded in relation to an Incentive Stock Option must be
granted concurrently with such Incentive Stock Option. A
Free-Standing Appreciation Right will be a right of the
Participant to receive from the Company an amount determined by
the Board, which will be expressed as a percentage of the Spread
(not exceeding 100 percent) at the time of exercise. |
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(b) Each grant of Appreciation Rights will be subject to
all of the requirements contained in the following provisions: |
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(i) Each grant will specify that the amount payable on
exercise of an Appreciation Right will be paid by the Company in
Common Shares. |
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(ii) Any grant may specify that the amount payable on
exercise of an Appreciation Right may not exceed a maximum
specified by the Board at the Date of Grant. |
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(iii) Any grant may specify waiting periods before exercise
and permissible exercise dates or periods. |
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(iv) Any grant may specify that such Appreciation Right may
be exercised only in the event of, or earlier in the event of,
the retirement, the attainment of reasonable age and service
requirements approved by the Board, death or disability of a
Participant or a Change in Control. |
A-6
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(v) Any grant of Appreciation Rights may specify Management
Objectives that must be achieved as a condition of the exercise
of such Appreciation Rights. |
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(vi) Each grant of Appreciation Rights will be evidenced by
an Evidence of Award, which Evidence of Award will describe such
Appreciation Rights, identify the related Option Rights (if
applicable), and contain such other terms and provisions,
consistent with this Plan, as the Board may approve. |
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(c) Any grant of Tandem Appreciation Rights will provide
that such Tandem Appreciation Rights may be exercised only at a
time when the related Option Right is also exercisable and at a
time when the Spread is positive, and by surrender of the
related Option Right for cancellation. Successive grants of
Tandem Appreciation Rights may be made to the same Participant
regardless of whether any Tandem Appreciation Rights previously
granted to the Participant remain unexercised. |
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(d) Regarding Free-Standing Appreciation Rights only: |
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(i) Each grant will specify in respect of each
Free-Standing Appreciation Right a Base Price, which may not be
less than the Market Value per Share on the Date of Grant; |
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(ii) Successive grants may be made to the same Participant
regardless of whether any Free-Standing Appreciation Rights
previously granted to the Participant remain unexercised; and |
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(iii) No Free-Standing Appreciation Right granted under
this Plan may be exercised more than 10 years from the Date
of Grant. |
6. Restricted Stock. The Board may also authorize
the grant or sale of Restricted Stock to Participants. Each such
grant or sale will be subject to all of the requirements
contained in the following provisions:
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(a) Each such grant or sale will constitute an immediate
transfer of the ownership of Common Shares to the Participant in
consideration of the performance of services, entitling such
Participant to voting, dividend and other ownership rights, but
subject to the substantial risk of forfeiture and restrictions
on transfer hereinafter referred to. |
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(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such
Participant that is less than the Market Value per Share at the
Date of Grant. |
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(c) Each such grant or sale will provide that the
Restricted Stock covered by such grant or sale will be subject
to a substantial risk of forfeiture within the
meaning of Section 83 of the Code for a period to be
determined by the Board at the Date of Grant, or upon
achievement of Management Objectives referred to in subparagraph
(e) below. If the elimination of restrictions is based on
the passage of time rather than the achievement of Management
Objectives, the period of time will be no shorter than three
years, except that the restrictions may be removed on an annual,
ratable basis during the three year period. |
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(d) Each such grant or sale will provide that during the
period for which such substantial risk of forfeiture is to
continue, the transferability of the Restricted Stock will be
prohibited or restricted in the manner and to the extent
prescribed by the Board at the Date of Grant (which restrictions
may include, without limitation, rights of repurchase or first
refusal in the Company or provisions subjecting the Restricted
Stock to a continuing substantial risk of forfeiture in the
hands of any transferee). |
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(e) Any grant of Restricted Stock may specify Management
Objectives that, if achieved, will result in termination or
early termination of the restrictions applicable to such
Restricted Stock; provided, however, that notwithstanding
subparagraph (c) above, restrictions relating to Restricted
Stock that vests upon the achievement of Management Objectives
may not terminate sooner than one year from the Date of Grant.
Each grant may specify in respect of such Management Objectives
a minimum acceptable level of achievement and may set forth a
formula for determining the number of shares of Restricted Stock
on which restrictions will terminate if performance is at or
above the minimum or threshold level or levels, or is at or
above the target level or levels, but falls short of maximum
achievement of the specified Management Objectives. The grant of
Restricted Stock will specify that, before the termination or
early |
A-7
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termination of restrictions applicable to such Restricted Stock,
the Board must determine that the Management Objectives have
been satisfied. |
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(f) Notwithstanding anything to the contrary contained in
this Plan, any grant or sale of Restricted Stock may provide for
the earlier termination of restrictions on such Restricted Stock
in the event of the retirement, the attainment of reasonable age
and service requirements approved by the Board, death or
disability of a Participant or a Change in Control. |
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(g) Any such grant or sale of Restricted Stock may require
that any or all dividends or other distributions paid thereon
during the period of such restrictions be automatically deferred
and reinvested in additional shares of Restricted Stock, which
may be subject to the same restrictions as the underlying award. |
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(h) Each grant or sale of Restricted Stock will be
evidenced by an Evidence of Award and will contain such terms
and provisions, consistent with this Plan, as the Board may
approve. Unless otherwise directed by the Board, (i) all
certificates representing shares of Restricted Stock will be
held in custody by the Company until all restrictions thereon
will have lapsed, together with a stock power or powers executed
by the Participant in whose name such certificates are
registered, endorsed in blank and covering such Shares or
(ii) all shares of Restricted Stock will be held at the
Companys transfer agent in book entry form with
appropriate restrictions relating to the transfer of such shares
of Restricted Stock. |
7. Restricted Stock Units. The Board may also
authorize the granting or sale of Restricted Stock Units (which
may also be referred to as Deferred Stock Units) to
Participants. Each such grant or sale will be subject to all of
the requirements contained in the following provisions:
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(a) Each such grant or sale will constitute the agreement
by the Company to deliver Common Shares to the Participant in
the future in consideration of the performance of services, but
subject to the fulfillment of such conditions (which may include
the achievement of Management Objectives) during the Restriction
Period as the Board may specify. If a grant of Restricted Stock
Units specifies that the Restriction Period will terminate upon
the achievement of Management Objectives, then, notwithstanding
anything to the contrary contained in subparagraph
(c) below, such Restriction Period may not terminate sooner
than one year from the Date of Grant. Each grant may specify in
respect of such Management Objectives a minimum acceptable level
of achievement and may set forth a formula for determining the
number of shares of Restricted Stock Units on which restrictions
will terminate if performance is at or above the minimum or
threshold level or levels, or is at or above the target level or
levels, but falls short of maximum achievement of the specified
Management Objectives. The grant of such Restricted Stock Units
will specify that, before the termination or early termination
of restrictions applicable to such Restricted Stock Units, the
Board must determine that the Management Objectives have been
satisfied. |
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(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such
Participant that is less than the Market Value per Share at the
Date of Grant. |
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(c) If the Restriction Period lapses only by the passage of
time rather than the achievement of Management Objectives as
provided in subparagraph (a) above, each such grant or sale
will be subject to a Restriction Period of not less than three
years, except that a grant or sale may provide that the
Restriction Period will expire ratably during the three-year
period, on an annual basis, as determined by the Board at the
Date of Grant. |
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(d) Notwithstanding anything to the contrary contained in
this Plan, any grant or sale of Restricted Stock Units may
provide for the earlier lapse or other modification of the
Restriction Period in the event of the retirement, the
attainment of reasonable age and service requirements approved
by the Board, death or disability of a Participant or a Change
in Control. |
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(e) During the Restriction Period, the Participant will
have no right to transfer any rights under his or her award and
will have no rights of ownership in the Restricted Stock Units
and will have no right to vote them, but the Board may at the
Date of Grant, authorize the payment of dividend equivalents on |
A-8
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such Restricted Stock Units on either a current or deferred or
contingent basis, either in cash or in additional Common Shares. |
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(f) Each grant or sale will specify the time and manner of
payment of the Restricted Stock Units that have been earned.
Each grant or sale will specify that the amount payable with
respect thereto will be paid by the Company in Common Shares. |
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(g) Each grant or sale of Restricted Stock Units will be
evidenced by an Evidence of Award and will contain such terms
and provisions, consistent with this Plan, as the Board may
approve. |
8. Performance Shares and Performance Units. The
Board may also authorize the granting of Performance Shares and
Performance Units that will become payable to a Participant upon
achievement of specified Management Objectives during the
Performance Period. Each such grant will be subject to all of
the requirements contained in the following provisions:
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(a) Each grant will specify the number of Performance
Shares or Performance Units to which it pertains, which number
may be subject to adjustment to reflect changes in compensation
or other factors; provided, however, that no such
adjustment will be made in the case of a Covered Employee where
such action would result in the loss of the otherwise available
exemption of the award under Section 162(m) of the Code. |
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(b) The Performance Period with respect to each Performance
Share or Performance Unit will be such period of time (not less
than one year) as will be determined by the Board at the time of
grant, which may be subject to earlier lapse or other
modification in the event of the retirement, death or disability
of a Participant or a Change in Control. |
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(c) Any grant of Performance Shares or Performance Units
will specify Management Objectives which, if achieved, will
result in payment or early payment of the award, and each grant
may specify in respect of such specified Management Objectives a
level or levels of achievement and will set forth a formula for
determining the number of Performance Shares or Performance
Units that will be earned if performance is at or above the
minimum or threshold level or levels, or is at or above the
target level or levels, but falls short of maximum achievement
of the specified Management Objectives. The grant of Performance
Shares or Performance Units will specify that, before the
Performance Shares or Performance Units will be earned and paid,
the Board must determine that the Management Objectives have
been satisfied. |
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(d) Each grant will specify the time and manner of payment
of Performance Shares or Performance Units that have been
earned. Any grant may specify that the amount payable with
respect thereto may be paid by the Company in Common Shares, in
Restricted Stock or Restricted Stock Units or in any combination
thereof and may either grant to the Participant or retain in the
Board the right to elect among those alternatives. |
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(e) Any grant of Performance Shares or Performance Units
may specify that the amount payable or the number of Common
Shares, shares of Restricted Stock or Restricted Stock Units
with respect thereto may not exceed a maximum specified by the
Board at the Date of Grant. |
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(f) The Board may at the Date of Grant of Performance
Shares, provide for the payment of dividend equivalents to the
holder thereof on either a current or deferred or contingent
basis, either in cash or in additional Common Shares. |
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(g) Each grant of Performance Shares or Performance Units
will be evidenced by an Evidence of Award and will contain such
other terms and provisions, consistent with this Plan, as the
Board may approve. |
9. Awards to Nonemployee Directors. The Board may,
from time to time and upon such terms and conditions as it may
determine, authorize the granting to Nonemployee Directors
Option Rights, Appreciation Rights or other awards contemplated
by Section 10 of this Plan and may also authorize the grant
or sale of Common Shares, Restricted Stock or Restricted Stock
Units (which may also be referred to as Deferred Stock
A-9
Units) to Nonemployee Directors. Each grant of an award to a
Nonemployee Director will be upon such terms and conditions as
approved by the Board, will not be required to be subject to any
minimum vesting period, and will be evidenced by an Evidence of
Award in such form as will be approved by the Board. Each grant
will specify in the case of an Option Right an Option Price per
share, and in the case of a Free-Standing Appreciation Right, a
Base Price per share, which will not be less than the Market
Value per Share on the Date of Grant. Each Option Right and
Free-Standing Appreciation Right granted under the Plan to a
Nonemployee Director will expire not more than 10 years
from the Date of Grant and will be subject to earlier
termination as hereinafter provided. If a Nonemployee Director
subsequently becomes an employee of the Company or a Subsidiary
while remaining a member of the Board, any award held under this
Plan by such individual at the time of such commencement of
employment will not be affected thereby. Nonemployee Directors,
pursuant to this Section 9, may be awarded, or may be
permitted to elect to receive, pursuant to procedures
established by the Board, all or any portion of their annual
retainer, meeting fees or other fees in Common Shares,
Restricted Stock, Restricted Stock Units or other awards under
the Plan in lieu of cash.
10. Other Awards.
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(a) The Board may, subject to limitations under applicable
law, grant to any Participant such other awards that may be
denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Common
Shares or factors that may influence the value of such shares,
including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Common
Shares, purchase rights for Common Shares, awards with value and
payment contingent upon performance of the Company or specified
Subsidiaries, affiliates or other business units thereof or any
other factors designated by the Board, and awards valued by
reference to the book value of Common Shares or the value of
securities of, or the performance of specified Subsidiaries or
affiliates or other business units of the Company. The Board
shall determine the terms and conditions of such awards. Common
Shares delivered pursuant to an award in the nature of a
purchase right granted under this Section 10 shall be
purchased for such consideration, paid for at such time, by such
methods, and in such forms, including, without limitation,
Common Shares, other awards, notes or other property, as the
Board shall determine. |
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(b) The Board may grant Common Shares as a bonus, or may
grant other awards in lieu of obligations of the Company or a
Subsidiary to pay cash or deliver other property under this Plan
or under other plans or compensatory arrangements, subject to
such terms as shall be determined by the Board. |
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(c) Share-based awards, pursuant to this Section 10,
are not required to be subject to any minimum vesting period. |
11. Incentive Awards. The Board is authorized to
grant Incentive Awards, which awards shall represent a
conditional right to receive Restricted Stock or Restricted
Stock Units upon achievement of pre-established Management
Objectives, subject to the following terms and conditions:
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(a) It is the intent of the Company that Incentive Awards
under this Section 11 granted to persons who are Covered
Employees within the meaning of Section 162(m) of the Code
shall constitute qualified performance-based
compensation within the meaning of Section 162(m) of
the Code. Accordingly, this Section 11 shall be interpreted
in a manner consistent with Section 162(m) of the Code. |
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(b) If the Board determines to grant Incentive Awards with
respect to any one or more fiscal years, the Board shall select
the Participants to be granted such awards and establish the
Management Objectives, amounts payable and other terms of
settlement, and all other terms of such awards. Such
determinations by the Board shall be made, in the case of any
Covered Employee, not later than the end of the first quarter of
that fiscal year or such earlier date as may be necessary to
comply with Section 162(m) of the Code. |
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(c) The Board shall specify whether and to what extent an
Incentive Award shall be settled in shares of Restricted Stock,
Restricted Stock Units or in a combination thereof at the time
of grant of |
A-10
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such award. If any Restricted Stock or Restricted Stock Units
are awarded in settlement of such an Award, such Restricted
Stock or Restricted Stock Units shall be subject to a
restriction on transferability and a risk of forfeiture for a
period extending until at least the end of the third fiscal year
following the year to which such award related (except that the
restrictions may lapse on an annual, ratable basis during the
three-year period and the Board may accelerate the lapse of such
restrictions in the event of the retirement, the attainment of
reasonable age and service requirements approved by the Board,
death or disability of a Participant or a Change in Control).
The Board may specify additional or longer restrictions on
transferability and risks of forfeiture with respect to such
Restricted Stock or Restricted Stock Units. |
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(d) As promptly as practicable following completion of the
year or other period with respect to which Management Objectives
relating to Incentive Awards are to be achieved, the Board shall
determine whether and to what extent such Management Objectives
have in fact been achieved. All such determinations by the Board
shall be made in writing. The Board may, in its discretion,
increase or reduce the amounts payable in settlement of such an
award after the date of grant and prior to settlement (including
upon consideration by the Board of other performance criteria),
except that the Committee may not exercise discretion to
increase the amounts payable in settlement of such an award to a
Covered Employee. |
12. Administration of the Plan.
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(a) This Plan will be administered by the Board, which may
from time to time delegate all or any part of its authority
under this Plan to the Executive Compensation Committee of the
Board or any other committee of the Board (or a subcommittee
thereof), as constituted from time to time. To the extent of any
such delegation, references in this Plan to the Board will be
deemed to be references to such committee or subcommittee. |
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(b) The interpretation and construction by the Board of any
provision of this Plan or of any agreement, notification or
document evidencing the grant of Option Rights, Appreciation
Rights, Restricted Stock, Restricted Stock Units, Performance
Shares, Performance Units, Incentive Awards or other awards
pursuant to Section 10 of this Plan and any determination
by the Board pursuant to any provision of this Plan or of any
such agreement, notification or document will be final and
conclusive. |
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(c) The Board or, to the extent of any delegation as
provided in Section 12(a), the committee, may delegate to
one or more of its members or to one or more officers of the
Company, or to one or more agents or advisors, such
administrative duties or powers as it may deem advisable, and
the Board, the committee, or any person to whom duties or powers
have been delegated as aforesaid, may employ one or more persons
to render advice with respect to any responsibility the Board,
the committee or such person may have under the Plan. The Board
or the committee may, by resolution, authorize one or more
officers of the Company to do one or both of the following on
the same basis as the Board or the committee: (i) designate
employees to be recipients of awards under this Plan;
(ii) determine the size of any such awards; provided,
however, that (A) the Board or the Committee shall not
delegate such responsibilities to any such officer for awards
granted to an employee who is a Director or an executive officer
or any person subject to Section 162(m) of the Code;
(B) the resolution providing for such authorization sets
forth the total number of Common Shares such officer(s) may
grant; and (iii) the officer(s) shall report periodically
to the Board or the committee, as the case may be, regarding the
nature and scope of the awards granted pursuant to the authority
delegated. |
13. Adjustments. The Board may make or provide for
such adjustments in the numbers of Common Shares covered by
outstanding Option Rights, Appreciation Rights, Restricted Stock
Units, Performance Shares and Performance Units granted
hereunder and, if applicable, in the number of Common Shares
covered by other awards granted pursuant to Section 10
hereof, in the Option Price and Base Price provided in
outstanding Appreciation Rights, and in the kind of shares
covered thereby, as the Board, in its sole discretion may
determine is equitably required to prevent dilution or
enlargement of the rights of Participants or Optionees that
otherwise would result from (a) any stock dividend, stock
split, combination of shares, recapitalization or other change
in the capital structure of the Company, or (b) any merger,
consolidation,
A-11
spin-off, split-off, spin-out, split-up, reorganization, partial
or complete liquidation or other distribution of assets,
issuance of rights or warrants to purchase securities, or
(c) any other corporate transaction or event having an
effect similar to any of the foregoing. Moreover, in the event
of any such transaction or event, the Board, in its discretion,
may provide in substitution for any or all outstanding awards
under this Plan such alternative consideration, if any, as it
may determine to be equitable in the circumstances and may
require in connection therewith the surrender of all awards so
replaced. The Board may also make or provide for such
adjustments in the numbers of shares specified in Section 3
of this Plan as the Board in its sole discretion, exercised in
good faith, may determine is appropriate to reflect any
transaction or event described in this Section 13;
provided, however, that any such adjustment to the number
specified in Section 3(b)(i) will be made only if and to
the extent that such adjustment would not cause any option
intended to qualify as an Incentive Stock Option to fail so to
qualify.
14. Change in Control. For purposes of this Plan,
except as may be otherwise prescribed by the Board in an
Evidence of Award made under this Plan, a Change in
Control shall be deemed to have occurred upon the
occurrence of any of the following events:
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(a) A filing pursuant to any federal or state law in
connection with any tender offer for shares of the Company
(other than a tender offer by the Company); |
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(b) The occurrence of or the signing of any agreement for a
merger, consolidation, combination (as defined in
Section 1701.01(Q), Ohio Revised Code), or majority share
acquisition (as defined in Section 1701.01(R), Ohio Revised
Code) involving the Company and as a result of which the holders
of shares of the Company prior to the transaction become, or
will become, by reason of the transaction, the holders of such
number of shares of the surviving or acquiring corporation as
entitle them to exercise less than one-third of the voting power
of such corporation in the election of directors; |
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(c) The signing of any agreement for the sale of all or
substantially all of the assets of the Company; |
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(d) The adoption of any resolution of reorganization or
dissolution of the Company by the shareholders; |
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(e) The occurrence of any other event or series of events,
which, in the opinion of the Board of Directors, will, or is
likely to, if carried out, result in a change of control of the
Company; |
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(f) If during any period of two consecutive years,
individuals who at the beginning of such period constitute the
Directors of the Company cease for any reason to constitute a
majority thereof (unless the election, or the nomination for
election by the Companys shareholders, of each Director of
the Company first elected during such period was approved by a
vote of at least two-thirds of the Directors then still in
office who were Directors of the Company at the beginning of any
such period); or |
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(g) The acquisition by any person (including a group within
the meaning of Sections 13(d)(3) or 14(d)(2) of the
Exchange Act other than the Company (or any of its Subsidiaries)
of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of the
Companys then outstanding securities, unless such
acquisition is approved by the vote of at least two-thirds of
the Directors of the Company then in office. |
15. Detrimental Activity. Any Evidence of Award may
provide that if a Participant, either during employment by the
Company or a Subsidiary or within a specified period after
termination of such employment, shall engage in any Detrimental
Activity, and the Board shall so find, forthwith upon notice of
such finding, the Participant shall:
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(a) Forfeit any award granted under the Plan then held by
the Participant; |
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(b) Return to the Company, in exchange for payment by the
Company of any amount actually paid therefor by the Participant,
all Common Shares that the Participant has not disposed of that
were offered pursuant to this Plan within a specified period
prior to the date of the commencement of such Detrimental
Activity, and |
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(c) With respect to any Common Shares so acquired that the
Participant has disposed of, pay to the Company in cash the
difference between: |
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(i) Any amount actually paid therefor by the Participant
pursuant to this Plan, and |
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(ii) The Market Value per Share of the Common Shares on the
date of such acquisition. |
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(d) To the extent that such amounts are not paid to the
Company, the Company may set off the amounts so payable to it
against any amounts that may be owing from time to time by the
Company or a Subsidiary to the Participant, whether as wages,
deferred compensation or vacation pay or in the form of any
other benefit or for any other reason. |
16. Non U.S. Participants. In order to facilitate
the making of any grant or combination of grants under this
Plan, the Board may provide for such special terms for awards to
Participants who are foreign nationals or who are employed by
the Company or any Subsidiary outside of the United States of
America or who provide services to the Company under an
agreement with a foreign nation or agency, as the Board may
consider necessary or appropriate to accommodate differences in
local law, tax policy or custom. Moreover, the Board may approve
such supplements to or amendments, restatements or alternative
versions of this Plan (including, without limitation, sub-plans)
as it may consider necessary or appropriate for such purposes,
without thereby affecting the terms of this Plan as in effect
for any other purpose, and the Secretary or other appropriate
officer of the Company may certify any such document as having
been approved and adopted in the same manner as this Plan. No
such special terms, supplements, amendments or restatements,
however, will include any provisions that are inconsistent with
the terms of this Plan as then in effect unless this Plan could
have been amended to eliminate such inconsistency without
further approval by the shareholders of the Company.
17. Transferability.
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(a) Except as otherwise determined by the Board, no Option
Right, Appreciation Right, Restricted Stock, Restricted Stock
Unit, Performance Share, Performance Unit, award contemplated by
Section 9 or 10 of this Plan, Incentive Award or dividend
equivalents paid with respect to awards made under the Plan
shall be transferable by the Participant except by will or the
laws of descent and distribution and, in no event shall any such
award granted under the Plan be transferred for value. Except as
otherwise determined by the Board, Option Rights and
Appreciation Rights will be exercisable during the
Participants lifetime only by him or her or, in the event
of the Participants legal incapacity to do so, by his or
her guardian or legal representative acting on behalf of the
Participant in a fiduciary capacity under state law or court
supervision. |
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(b) The Board may specify at the Date of Grant that part or
all of the Common Shares that are (i) to be issued or
transferred by the Company upon the exercise of Option Rights or
Appreciation Rights, upon the termination of the Restriction
Period applicable to Restricted Stock Units or upon payment
under any grant of Performance Shares or Performance Units or
Incentive Awards or (ii) no longer subject to the
substantial risk of forfeiture and restrictions on transfer
referred to in Section 6 of this Plan, will be subject to
further restrictions on transfer. |
18. Withholding Taxes. To the extent that the
Company is required to withhold federal, state, local or foreign
taxes in connection with any payment made or benefit realized by
a Participant or other person under this Plan, and the amounts
available to the Company for such withholding are insufficient,
it will be a condition to the receipt of such payment or the
realization of such benefit that the Participant or such other
person make arrangements satisfactory to the Company for payment
of the balance of such taxes required to be withheld, which
arrangements (in the discretion of the Board) may include
relinquishment of a portion of such benefit. If a
Participants benefit is to be received in the form of
Common Shares, and such Participant fails to make arrangements
for the payment of tax, the Company shall withhold such Common
Shares having a value equal to the amount required to be
withheld. Notwithstanding the foregoing, when a Participant is
required to pay the Company an amount required to be withheld
under applicable income and employment tax laws, the Participant
may elect to satisfy the obligation, in whole or in part, by
electing to have withheld, from the shares required to be
delivered to the Participant, Common Shares having a value equal
to the
A-13
amount required to be withheld (except in the case of Restricted
Stock where an election under Section 83(b) of the Code has
been made), or by delivering to the Company other Common Shares
held by such Participant. The shares used for tax withholding
will be valued at an amount equal to the Market Value per Share
of such Common Shares on the date the benefit is to be included
in Participants income. In no event shall the Market Value
per Share of the Common Shares to be withheld and delivered
pursuant to this Section to satisfy applicable withholding taxes
in connection with the benefit exceed the minimum amount of
taxes required to be withheld. Participants shall also make such
arrangements as the Company may require for the payment of any
withholding tax obligation that may arise in connection with the
disposition of Common Shares acquired upon the exercise of
Option Rights.
19. Compliance with Section 409A of the Code.
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(a) To the extent applicable, it is intended that this Plan
and any grants made hereunder comply with the provisions of
Section 409A of the Code. This Plan and any grants made
hereunder shall be administrated in a manner consistent with
this intent, and any provision that would cause this Plan or any
grant made hereunder to fail to satisfy Section 409A of the
Code shall have no force and effect until amended to comply with
Section 409A of the Code (which amendment may be
retroactive to the extent permitted by Section 409A of the
Code and may be made by the Company without the consent of
Participants). Any reference in this Plan to Section 409A
of the Code will also include any proposed, temporary or final
regulations, or any other guidance, promulgated with respect to
such Section by the U.S. Department of the Treasury or the
Internal Revenue Service. |
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(b) In order to determine for purposes of Section 409A
of the Code whether a Participant is employed by a member of the
Companys controlled group of corporations under
Section 414(b) of the Code (or by a member of a group of
trades or businesses under common control with the Company under
Section 414(c) of the Code) and, therefore, whether the
Common Shares that are or have been purchased by or awarded
under this Plan to the Participant are shares of service
recipient stock within the meaning of Section 409A of
the Code: |
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(i) In applying Code Section 1563(a)(1), (2) and
(3) for purposes of determining the Companys controlled
group under Section 414(b) of the Code, the language
at least 50 percent is to be used instead of
at least 80 percent each place it appears in
Code Section 1563(a)(1), (2) and (3), and |
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(ii) In applying Treasury Regulation Section
1.414(c)-2 for purposes of determining trades or businesses
under common control with the Company for purposes of Section
414(c) of the Code, the language at least
50 percent is to be used instead of at least
80 percent each place it appears in Treasury
Regulation Section 1.414(c)-2. |
20. Amendments.
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(a) The Board may at any time and from time to time amend
this Plan in whole or in part; provided, however, that if
an amendment to this Plan (i) would materially increase the
benefits accruing to participants under this Plan,
(ii) would materially increase the number of securities
which may be issued under this Plan, (iii) would materially
modify the requirements for participation in this Plan or
(iv) must otherwise be approved by the shareholders of the
Company in order to comply with applicable law or the rules of
the New York Stock Exchange or, if the Common Shares are not
traded on the New York Stock Exchange, the principal
national securities exchange upon which the Common Shares are
traded or quoted, then, such amendment will be subject to
shareholder approval and will not be effective unless and until
such approval has been obtained. |
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(b) The Board will not, without the further approval of the
shareholders of the Company, authorize the amendment of any
outstanding Option Right or Appreciation Right to reduce the
Option Price or the Base Price, as applicable. Furthermore, no
Option Right or Appreciation Right will be cancelled and
replaced with awards having a lower Option Price or Base Price
without further approval of the shareholders of the Company.
This Section 20(b) is intended to prohibit the repricing of
Option Rights |
A-14
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and Appreciation Rights and will not be construed to prohibit
the adjustments provided for in Section 13 of this Plan. |
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(c) If permitted by Section 409A of the Code, in the
case of involuntary termination of employment or termination of
employment by reason of death, disability, retirement, closing
of business or operation units, or elimination of job position,
or in the case of unforeseeable emergency or other special
circumstances (including reaching reasonable age and service
requirements approved by the Board from time to time), of or
relating to a Participant who holds an Option Right or
Appreciation Right not immediately exercisable in full, or any
shares of Restricted Stock as to which the substantial risk of
forfeiture or the prohibition or restriction on transfer has not
lapsed, or any Restricted Stock Units as to which the
Restriction Period has not been completed, or any Performance
Shares or Performance Units or Incentive Awards which have not
been fully earned, or any other awards made pursuant to
Section 10 subject to any vesting schedule or transfer
restriction, or who holds Common Shares subject to any transfer
restriction imposed pursuant to Section 17(b) of this Plan,
the Board may, in its sole discretion, accelerate the time at
which such Option Right, Appreciation Right or other award may
be exercised or the time at which such substantial risk of
forfeiture or prohibition or restriction on transfer will lapse
or the time when such Restriction Period will end or the time at
which such Performance Shares or Performance Units or Incentive
Awards will be deemed to have been fully earned or the time when
such transfer restriction will terminate or may waive any other
limitation or requirement under any such award except in the
case of a Covered Employee where such action would result in the
loss of the otherwise available exemption of the award under
Section 162(m) of the Code. |
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(d) Subject to Section 20(b) hereof, the Board may
amend the terms of any award theretofore granted under this Plan
prospectively or retroactively, except in the case of a Covered
Employee where such action would result in the loss of the
otherwise available exemption of the award under
Section 162(m) of the Code. In such case, the Board will
not make any modification of the Management Objectives or the
level or levels of achievement with respect to such Covered
Employee. Subject to Section 13 above, no such amendment
shall impair the rights of any Participant without his or her
consent. The Board may, in its discretion, terminate this Plan
at any time. Termination of this Plan will not affect the rights
of Participants or their successors under any awards outstanding
hereunder and not exercised in full on the date of termination. |
21. Governing Law. The Plan and all grants and
awards and actions taken thereunder shall be governed by and
construed in accordance with the internal substantive laws of
the State of Ohio.
22. Effective Date/Termination. This Plan will be
effective as of the Effective Date. No grants will be made on or
after the Effective Date under the Existing Plans, except that
(i) outstanding awards granted under the Existing Plans
will continue unaffected following the Effective Date;
(ii) the provisions relating to the deferral of Director
retainers and fees under the Amended and Restated Nonemployee
Director Stock Plan shall continue to apply to services rendered
through December 31, 2006; and (iii) awards of
performance shares and performance units granted under the 1998
Equity and Performance Incentive Plan (As Amended and Restated
Effective as of June 6, 2005) and outstanding as of the
Effective Date may be converted to restricted stock under such
plan once such performance shares and performance units are
earned. No grant will be made under this Plan more than
10 years after the Effective Date, but all grants made on
or prior to such date will continue in effect thereafter subject
to the terms thereof and of this Plan.
23. Miscellaneous Provisions.
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(a) The Company will not be required to issue any
fractional Common Shares pursuant to this Plan. The Board may
provide for the elimination of fractions or for the settlement
of fractions in cash. |
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(b) This Plan will not confer upon any Participant any
right with respect to continuance of employment or other service
with the Company or any Subsidiary, nor will it interfere in any
way with any right the Company or any Subsidiary would otherwise
have to terminate such Participants employment or other
service at any time. |
A-15
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(c) To the extent that any provision of this Plan would
prevent any Option Right that was intended to qualify as an
Incentive Stock Option from qualifying as such, that provision
will be null and void with respect to such Option Right. Such
provision, however, will remain in effect for other Option
Rights and there will be no further effect on any provision of
this Plan. |
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(d) No award under this Plan may be exercised by the holder
thereof if such exercise, and the receipt of stock thereunder,
would be, in the opinion of counsel selected by the Board,
contrary to law or the regulations of any duly constituted
authority having jurisdiction over this Plan. |
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(e) Absence on leave approved by a duly constituted officer
of the Company or any of its Subsidiaries shall not be
considered interruption or termination of service of any
employee for any purposes of this Plan or awards granted
hereunder, except that no awards may be granted to an employee
while he or she is absent on leave. |
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(f) No Participant shall have any rights as a stockholder
with respect to any shares subject to awards granted to him or
her under this Plan prior to the date as of which he or she is
actually recorded as the holder of such shares upon the stock
records of the Company. |
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(g) The Board may condition the grant of any award or
combination of awards authorized under this Plan on the
surrender or deferral by the Participant of his or her right to
receive a cash bonus or other compensation otherwise payable by
the Company or a Subsidiary to the Participant. |
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(h) Except with respect to Option Rights and Appreciation
Rights, the Board may permit Participants to elect to defer the
issuance of Common Shares under the Plan pursuant to such rules,
procedures or programs as it may establish for purposes of this
Plan and which are intended to comply with the requirements of
Section 409A of the Code. The Board also may provide that
deferred issuances and settlements include the payment or
crediting of dividend equivalents or interest on the deferral
amounts. |
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(i) If any provision of this Plan is or becomes invalid,
illegal or unenforceable in any jurisdiction, or would
disqualify this Plan or any award under any law deemed
applicable by the Board, such provision shall be construed or
deemed amended or limited in scope to conform to applicable laws
or, in the discretion of the Board, it shall be stricken and the
remainder of this Plan shall remain in full force and effect. |
A-16
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MR A SAMPLE
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Mark this box with an X if you have made changes to your name or address details above. |
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Annual Meeting Proxy Card
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The Board of Directors recommends a vote FOR the following proposals:
A Proposals
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Election of Directors to the class whose term of office will expire in 2009.
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Withhold |
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01 Paul J. Dolan |
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02 Nancy Lopez |
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03 Gary A. Oatey |
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04 Timothy P. Smucker |
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Ratification of appointment of Independent Registered Public Accounting Firm. |
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Approval of The J. M. Smucker Company 2006 Equity Compensation Plan. |
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Will Attend |
Will
attend meeting/number attending |
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PLEASE REFER TO THE REVERSE SIDE FOR INTERNET AND TELEPHONE VOTING INSTRUCTIONS.
B Authorized Signatures Sign Here This section must be completed for your instructions to be executed.
NOTE: Please sign your name(s) EXACTLY as your name(s) appear(s) on this proxy. All joint
holders must sign. When signing as attorney, trustee, executor, administrator, guardian or
corporate officer, please provide your FULL title.
Signature 1 Please keep signature within the box
Signature 2 Please keep signature within the box
Date (mm/dd/yyyy)
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1 U P X
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C O Y
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Proxy THE J. M. SMUCKER COMPANY
THE J. M. SMUCKER COMPANY
Strawberry Lane, Orrville, Ohio 44667-0280
Solicited by the Board of Directors for the Annual Meeting of Shareholders on August 17, 2006
The undersigned hereby appoints Timothy P. Smucker, Richard K. Smucker, and M. Ann Harlan, or
any one of them, proxies with full power of substitution to vote, as designated on the reverse
side, all common shares that the undersigned is entitled to vote at the Annual Meeting of
Shareholders of The J. M. Smucker Company to be held on August 17, 2006, or at any adjournment or
adjournments, and any postponement or postponements thereof.
When properly executed, this proxy will be voted in the manner directed. If properly executed, but
if no direction is given, this proxy will be voted FOR all Proposals.
Please mark, sign, date, and return this proxy card promptly, using the enclosed envelope. No
postage is required if mailed in the United States.
If you plan to attend the meeting, please mark the indicated box on the other side of this proxy
card.
Telephone and Internet Voting Instructions
You can vote by telephone OR Internet! Available 24 hours a day 7 days a week!
Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy.
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Call toll free 1-800-652-VOTE (8683) in the United States or Canada any time on a touch tone
telephone. There is NO CHARGE to you for the call. |
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Follow the simple instructions provided by the recorded message. |
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Go to the following web site: WWW.COMPUTERSHARE.COM/EXPRESSVOTE |
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Enter the information requested on your computer screen and follow the simple instructions. |
If you vote by telephone or the Internet, please DO NOT mail back this proxy card.
Proxies submitted by telephone or the Internet must be received by 11:59 p.m., Eastern Daylight Time, on August 16, 2006.
THANK YOU FOR VOTING
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MR A SAMPLE
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Mark this box with an X if you have made
changes to your name or address details above. |
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Annual Meeting Proxy Card
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The Board of Directors recommends a vote FOR the following proposals:
Proposals
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1. |
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Election of Directors to the class whose term of
office will expire in 2009. |
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For
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Withhold
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01 Paul J. Dolan
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02 Nancy Lopez
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03 Gary A. Oatey
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04 Timothy P. Smucker
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Abstain |
2.
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Ratification of appointment of Independent
Registered Public Accounting Firm.
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Against
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Abstain |
3.
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Approval of The J. M. Smucker Company
2006 Equity Compensation Plan.
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Instructions Regarding Non-directed and/or
Unallocated Shares
(Select only one of the following options)
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I wish to vote Non-directed and/or
Unallocated Shares under the Plan in
the same way as my Allocated Shares.
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I do not wish to vote Non-directed
Shares or Unallocated Shares.
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I wish to vote Non-directed Shares
or Unallocated Shares differently
from my Allocated Shares and will
call the Transfer Agent at
(440) 239-7350 to request a
separate card for that purpose.
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Will Attend |
Will attend meeting/number attending
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PLEASE REFER TO THE REVERSE SIDE FOR INTERNET AND TELEPHONE VOTING INSTRUCTIONS.
Authorized Signatures Sign Here This section must
be completed for your instructions to be executed.
NOTE: Please sign your name(s) EXACTLY as your name(s) appear(s) on this proxy.
All joint holders must sign. When signing as attorney, trustee, executor, administrator,
guardian or corporate officer, please provide your FULL title.
Signature 1 Please keep signature within the box
Signature 2 Please keep signature within the box
Date (mm/dd/yyyy)
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Proxy - THE J. M. SMUCKER COMPANY
VOTING INSTRUCTIONS
TO:
SEI Private Trust Company, Trustee (the Trustee) under
The J. M. Smucker Company Employee Stock Ownership Plan and Trust (the Plan)
AND TO:
Fidelity Management Trust Company, Trustee (the Trustee) under
The J. M. Smucker Company Employee Savings Plan,
The J. M. Smucker Company Orrville Represented Employee Savings Plan, and
The J. M. Smucker Company Salinas Represented Employee Savings Plan
(each referred to hereinafter as the Plan)
I, the undersigned, as a Participant in or a Beneficiary of one or more of the above-referenced
Plans, hereby instruct the Trustee to vote
(in person or by proxy), in accordance with my confidential instructions on the reverse and the
provisions of the Plan(s), all common shares
of The J. M. Smucker Company (the Company) allocated to my account under the Plan(s) (Allocated
Shares) as of the record date for the
Annual Meeting of Shareholders of the Company to be held on August 17, 2006.
In addition to voting your Allocated Shares you may also use this card to vote Unallocated Shares
held in the ESOP Suspense Account
(Unallocated Shares), if applicable, and/or non-directed shares held in the savings plans as
determined in accordance with the terms of the
Plan(s) (Non-directed Shares). For more information concerning voting Unallocated Shares and
Non-directed Shares, please refer to the
reverse side of this card and the enclosed instructions.
The Trustee will vote any shares allocated to your account for which timely instructions are
received from you by 12:00 noon, Eastern Daylight Time, August 14, 2006, in accordance with the Plan(s).
When properly executed, this voting instruction card will be voted in the manner directed. If
properly executed, but if no direction is given, this voting instruction card will be voted FOR all Proposals and for Allocated Shares
only.
Please mark, sign, date, and return this voting instruction card promptly, using the enclosed
envelope. No postage is required if mailed in the United States.
Telephone and Internet Voting Instructions
You can vote by telephone OR Internet! Available 24 hours a day 7 days a week!
Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote
your proxy.
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Call toll free 1-800-652-VOTE (8683) in the United States
or Canada any time on a touch tone telephone. There is
NO CHARGE to you for the call. |
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Follow the simple instructions provided by the recorded message. |
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Go to the following web site:
WWW.COMPUTERSHARE.COM/EXPRESSVOTE |
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Enter the information requested on your computer
screen and follow the simple instructions. |
If you vote by telephone or the Internet, please DO NOT mail back this proxy card.
Proxies submitted by telephone or the Internet must be received by 11:59 p.m., Eastern Daylight
Time, on August 13, 2006.
THANK YOU FOR VOTING
Annual Meeting Proxy Card
The Board of Directors recommends a vote FOR the following proposals:
A Proposals
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1. |
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Election of Directors to the class whose term of office will expire in 2009. |
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For
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Withhold |
01 Paul J. Dolan
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02 Nancy Lopez
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03 Gary A. Oatey
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04 Timothy P. Smucker
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2.
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Ratification of appointment of Independent
Registered Public Accounting Firm.
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For
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Against
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Abstain
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3.
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Approval of The J. M. Smucker Company 2006
Equity Compensation Plan.
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For
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Against
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Abstain
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Certification of Ten-Vote Shares
The ten vote per common share provisions stated in The J. M. Smucker Companys Amended and Restated
Articles of Incorporation apply to Proposal 3 on this voting form. In order to exercise the ten
vote per common share provision, please complete the information below. Should you choose not to
provide the information below, all shares represented will be counted as one vote per common share.
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1.
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Of the shares you are entitled to vote, the number of Smucker
common shares beneficially owned by you for four consecutive
years as of June 19, 2006. _____________ |
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2. |
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Of the shares you are entitled to vote, the number of
Smucker common shares received by you in connection
with the International Multifoods Corporation
acquisition in June 2004. _____________ |
B Authorized Signatures Sign Here This section must be completed for your instructions to be executed.
NOTE: Please sign your name(s) EXACTLY as your name(s) appear(s) on this proxy. All joint
holders must sign. When signing as attorney, trustee, executor, administrator, guardian or
corporate officer, please provide your FULL title.
Signature 1 Please keep signature within the box
Signature
2 Please keep signature within the box
Date (mm/dd/yyyy)
nn
/nn/ nnnn
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0 0 9 3 4 9 4
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1 U P X |
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Proxy THE J. M. SMUCKER COMPANY
THE J. M. SMUCKER COMPANY
Strawberry Lane, Orrville, Ohio 44667-0280
Solicited by the Board of Directors for the Annual Meeting of Shareholders on August 17, 2006
The undersigned hereby appoints Timothy P. Smucker, Richard K. Smucker, and M. Ann Harlan, or
any one of them, proxies with full power of substitution to vote, as designated on the reverse
side, all common shares that the undersigned is entitled to vote at the Annual Meeting of
Shareholders of The J. M. Smucker Company to be held on August 17, 2006, or at any adjournment or
adjournments, and any postponement or postponements thereof.
When properly executed, this proxy will be voted in the manner directed. If properly executed, but
if no direction is given, this proxy will be voted FOR all Proposals.
Please mark, sign, date, and return this proxy card promptly, using the enclosed envelope. No
postage is required if mailed in the United States.
THE J. M. SMUCKER COMPANY
PROXY
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To:
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SEI Private Trust Company, Trustee (the Trustee) under The J. M. Smucker Company
Nonemployee Director Stock Plan (the Plan). |
I, the undersigned, as a Plan Participant, hereby instruct the Trustee to vote (in person or
by proxy), in accordance with my confidential instructions below and the provisions of the Plan,
all Common Shares of The J. M. Smucker Company (the Company) allocated to my account under the
Plan as of the record date for the Annual Meeting of Shareholders of the Company to be held on
August 17, 2006. In the event the Trustee does not receive timely voting instructions from Plan
Participants, the Trustee shall vote those shares in the same proportion as shares for which the
Trustee has received voting instructions.
1. Election of Directors to the class whose term of office will expire in 2009
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Paul J. Dolan
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For ___
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Withhold ___ |
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Nancy Lopez
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For ___
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Withhold ___ |
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Gary A. Oatey
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For ___
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Withhold ___ |
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Timothy P. Smucker
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For ___
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Withhold ___ |
2. Ratification of appointment of Independent Registered Public Accounting Firm
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For ___
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Against ___
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Abstain ___ |
3. Approval of The J. M. Smucker Company 2006 Equity Compensation Plan
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For ___
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Against ___
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Abstain ___ |
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Dated ___, 2006
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Signature: _______________________________________ |
Please note that the Trustee will vote any shares allocated to your account for which timely
instructions are not received by the Trustee as may be directed by voting Plan Participants. The
deadline for receiving timely instructions is 12:00 p.m., Eastern Daylight Time, August 11, 2006.
Please complete, date, sign, and return in the enclosed envelope.
THE J. M. SMUCKER COMPANY
LETTER
TO ALL PARTICIPANTS IN:
THE J. M. SMUCKER COMPANY EMPLOYEE STOCK OWNERSHIP PLAN AND
TRUST,
THE J. M. SMUCKER COMPANY EMPLOYEE SAVINGS PLAN,
THE J. M. SMUCKER COMPANY ORRVILLE
REPRESENTED EMPLOYEE SAVINGS PLAN,
AND THE J. M. SMUCKER COMPANY SALINAS REPRESENTED EMPLOYEE
SAVINGS PLAN
Enclosed are materials relating to the Annual Meeting of Shareholders of The J. M. Smucker
Company, which will be held on August 17, 2006. You are receiving these materials because you were
a participant in one or more of the benefit plans listed above as of the June 19, 2006 record date.
As a participant in one of the plans, you are also a beneficial owner of common shares of Smucker
that are held in the plans. As such, you are entitled to direct the trustee under each of the
plans on how to vote those shares with respect to issues being submitted to the shareholders at
Smuckers Annual Meeting. The trustee of The J. M. Smucker Company Employee Stock Ownership Plan
and Trust is SEI Private Trust Company. The trustee of The J. M. Smucker Company Employee Savings
Plan, The J. M. Smucker Company Orrville Represented Employee Savings Plan, and The J. M. Smucker
Company Salinas Represented Employee Savings Plan is Fidelity Management Trust Company.
The purpose of this letter is to give you information on how to provide voting direction to the trustee on
shares allocated to your account under one or more of the plans. The letter also discusses a right
that you have under the plans to provide direction to the trustee on how certain other shares
should be voted that are allocated to other participants, but are not voted, or which are not yet
allocated to anyone. The letter also outlines what it means if you exercise your right with
respect to those other shares. Before making a decision on how to instruct the trustee, you should
carefully read this letter and the enclosed materials.
HOW DO I PROVIDE DIRECTION TO THE TRUSTEE?
As a participant in one or more of the plans referenced at the top of this letter, you may direct the
trustee how to vote all shares allocated to your account. You may also direct the trustee how to
vote the following other plan shares:
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shares allocated to the accounts of other
participants who do not themselves provide direction to the trustee on
how to vote those shares (these are non-directed shares); and |
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if you are a participant in the Employee Stock Ownership Plan, shares in that plan that have not
been allocated to participants (these are unallocated shares). |
If you do not direct the trustee how to vote the shares which are allocated to your account, those
shares will be voted by the trustee in accordance with the direction of other participants.
The trustee will vote shares under a particular plan based upon the direction of participants in the
plan who timely return voting instruction cards like the one that is enclosed. If you are a
participant in more than one plan, you will receive one voting instruction card listing the shares
for all plans in which you participate.
To direct the trustee how to vote shares allocated to your account under the plan or plans in which you participate, simply mark your choices on the back of
the enclosed voting instruction card. With respect to non-directed shares and unallocated shares,
you may, by marking the appropriate square on the back of the card, direct the trustee to either:
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vote a portion of the non-directed shares and unallocated shares under a plan
the same way you directed the
trustee to vote your allocated shares; |
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not to vote non-directed shares and unallocated shares pursuant to your
direction because you do not wish to
undertake the fiduciary duties described below which arise from that direction;
or |
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vote the non-directed shares and unallocated shares differently than
your allocated shares, in which case you
should also contact the transfer agent, Computershare Investor Services, at (440)
239-7350 to obtain another
voting instruction card for that purpose. |
If you elect to direct the trustee how to vote your allocated shares and/or the non-directed
shares and unallocated shares, the enclosed voting instruction card must be returned to the
trustee. The address to which the card must be mailed or delivered is The J. M. Smucker Company,
c/o Computershare Investor Services, P.O. Box A3800, Chicago, IL 60690-9608. In order for the
trustee to be able to vote the shares at the Annual Meeting, the deadline for voting instruction
cards to be received by the trustee is 12:00 noon, Eastern Daylight Time, August 14, 2006. A
prepaid, addressed envelope is enclosed for you to use in returning the card.
Your decision whether
or not to direct the trustee to vote shares in the plans will be treated confidentially by the
trustee and will not be disclosed to Smucker or any of its employees, officers, or directors.
VOTING RIGHTS OF SHARES
Our Amended and Restated Articles of Incorporation provide generally that each
common share will entitle the holder to one vote on each matter to be considered at the meeting,
except for certain matters listed in the Amended and Restated Articles of Incorporation. On those
listed matters, shareholders are entitled to exercise ten votes per share unless there has been a
change in beneficial ownership of the common shares. In that event, the new owner will be entitled
to only one vote with respect to that share on all matters until four years pass without a further
change in beneficial ownership of the share. The ten-vote provisions apply to Proposal 3, Approval
of The J. M. Smucker Company 2006 Equity Compensation Plan, on the ballot for this Annual
Meeting.
FIDUCIARY STATUS
Each plan participant is a named fiduciary (as defined in Section 402
(a) (2) of the Employee Retirement Income Security Act of 1974, as amended) with respect to a
decision to direct the trustee how to vote the shares allocated to his or her account. Individuals
considered to be named fiduciaries are required to act prudently, solely in the interest of the
participants and beneficiaries of the plans, and for the exclusive purpose of providing benefits to
participants and beneficiaries of the plans. A named fiduciary may be subject to liability for his
or her actions as a fiduciary. By signing, dating, and returning the enclosed voting instruction
card, you are accepting your designation under the plans as a named fiduciary. You should
therefore exercise your voting rights prudently. You should mark, sign, date, and return the
voting instruction card only if you are willing to act as a named fiduciary.
If you direct the trustee how to vote non-directed shares and unallocated shares, you will be named fiduciary with
respect to that decision also. You are similarly required to act prudently, solely in the interest
of the participants and beneficiaries of the plan, and for the exclusive purpose of providing
benefits to participants and beneficiaries of the plan in giving direction on non-directed shares,
if you choose to do so.
All questions and requests for assistance should be directed to Smuckers
shareholder relations department at
(330) 684-3838.
Dear Shareholder:
The enclosed voting instruction card permits you to give
instructions on how to vote the common shares of The J. M.
Smucker Company (Smucker) at the Annual Meeting of
Shareholders to be held on August 17, 2006.
The Companys Amended and Restated Articles of
Incorporation provide generally that each common share will
entitle the holder to one vote on each matter properly submitted
to shareholders, except for certain matters listed in the
Amended and Restated Articles of Incorporation. The reverse side
of this letter sets forth the matters entitled to ten votes per
share and the specific length of time you must hold these shares
in order to receive ten votes per share treatment.
On those listed matters, shareholders are entitled to exercise
ten votes per common share unless there has been a change in
beneficial ownership of the common share within the last four
years, as of the June 19, 2006 annual meeting record date.
Additionally, Smucker common shares received in connection with
the acquisition of International Multifoods Corporation on
June 18, 2004 are also entitled to ten votes per share. In
the event of a change in beneficial ownership, the new owner of
that common share will be entitled to only one vote with respect
to that common share on all matters until four years pass
without a further change in beneficial ownership of the share.
The ten vote per common share provisions apply to
Proposal 3, Approval of The J. M. Smucker Company 2006
Equity Compensation Plan on this years ballot. In
order to exercise the ten votes per common share provision, you
must complete the Certification of Ten-Vote Shares
section indicated on the voting instruction form. You will not
be able to certify these ten-vote shares if voting by telephone.
Should you choose not to complete the Certification of
Ten-Vote Shares section, but have properly executed the
voting instruction form, all shares represented will be counted
as one vote per common share. Smucker reserves the right to
request proof of beneficial ownership regarding shares you have
certified which are entitled to ten votes per common share.
Please contact our shareholder relations department at
330-684-3838 or One Strawberry Lane, Orrville, Ohio 44667 if you
have any questions on certifying ten-vote shares.
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Timothy P. Smucker
Chairman and Co-Chief Executive Officer |
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Richard K. Smucker
President and Co-Chief Executive Officer |
Express Terms of Common Shares
Section 1.
Except as expressly set forth in Section 2 of this
Division II, each outstanding Common Share shall entitle the
holder thereof to one vote on each matter properly submitted to
the shareholders for their vote, consent, waiver, release, or
other action, including any vote or consent for the election or
removal of directors.
Section 2.
(a) Notwithstanding Section 1 of this Division II,
each outstanding Common Share shall entitle the holder thereof
to ten votes on each of the following matters properly submitted
to the shareholders to the extent such matters (x) are
required under the Ohio Revised Code, any provisions of these
Amended Articles of Incorporation or the Regulations of the
Company or applicable stock exchange rules, to be submitted to
the shareholders for their vote, consent, waiver or other action
or (y) are submitted or presented to the shareholders for
their vote, consent waiver or other action: (1) any matter
that relates to or would result in the dissolution or
liquidation of the Company, whether voluntary or involuntary,
and whether pursuant to Section 1701.86 or 1701.91 of the Ohio
Revised Code or otherwise, (2) the adoption of any
amendment to these Amended Articles of Incorporation, or the
Regulations of the Company, or the adoption of Amended Articles
of Incorporation, other than the adoption of any amendment or
Amended Articles of Incorporation that increases the number of
votes to which holders of Common Shares are entitled or expand
the matters to which this Section 2(a) applies,
(3) any proposal or other action to be taken by the
shareholders of the Company, whether or not proposed by the
shareholders of the Company, and whether proposed by authority
of the Board of Directors or otherwise, relating to the Rights
Agreement, dated as of April 22, 1999, as amended on
August 28, 2000, and as it may be further amended from time
to time pursuant to its terms, or any successor plan,
(4) any matter relating to any stock option plan, stock
purchase plan, executive compensation plan, executive benefit
plan, or other similar plan, arrangement or agreement,
(5) adoption of any agreement or plan of or for the merger,
consolidation, or majority share acquisition of the Company or
any subsidiary with or into any other person, whether domestic
or foreign, corporate, or noncorporate, or the authorization of
the lease, sale, exchange, transfer or other disposition of all,
or substantially all, of the Companys assets, (6) any
matter submitted to the shareholders pursuant to
Article Fifth or Article Seventh of these Amended Articles
of Incorporation, as they may be further amended, or any
issuance of shares of the Company for which shareholder approval
is required by applicable stock exchange rules or (7) any
matter relating to the issuance of shares of the Company, or the
repurchase of shares of the Company that the Board of Directors
determines is required or appropriate to be submitted to the
shareholders under the Ohio Revised Code or applicable stock
exchange rules, except that:
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(i) no holder of Common Shares shall be entitled to
exercise more than one vote on any such matter in respect of any
Common Share with respect to which there has been a change in
beneficial ownership following the Effective Time of the Merger
(as such terms are defined in the Agreement and Plan of Merger,
dated as of October 9, 2001, as it may be amended from time
to time (the Merger Agreement), by and among The
Procter & Gamble Company, The Procter & Gamble Ohio
Brands Company and the Company) and during the four years
immediately preceding the date on which a determination is made
of the shareholders who are entitled to take any such action; and |
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(ii) no holder shall be entitled to exercise more than one
vote on any such matter in respect of any Common Share if the
aggregate voting power such holder otherwise would be entitled
to exercise as of the date of such a determination (disregarding
the voting power of any Common Shares held by such holder on
August 20, 1985 or acquired by such holder in a transaction
not involving any change in beneficial ownership by reason of
Section 2 (c) of this Division II) would constitute
one-fifth or more of the voting power of the Company and the
holders of the Common Shares have not authorized the ownership
of Common Shares by such person as and to the extent
contemplated by Article Seventh hereof. |
(b) A change in beneficial ownership of an outstanding
Common Share shall be deemed to have occurred whenever a change
occurs in any person or group of persons who, directly or
indirectly, through any contract, arrangement, understanding,
relationship or otherwise has or shares (1) voting power,
which includes the power to vote, or to direct the voting of
such Common Share, (2) investment power, which includes the
power to direct the sale or other disposition of such Common
Share, (3) the right to receive or retain the proceeds of
any sale or other disposition of such Common Share, or
(4) the right to receive any distributions, including cash
dividends, in respect of such Common Share.
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(A) In the absence of proof to the contrary provided in
accordance with the procedures referred to in Section 2
(d) of this Division II, a change in beneficial ownership
shall be deemed to have occurred whenever a Common Share is
transferred of record into the name of any other person. |
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(B) In the case of a Common Share held of record in the
name of a corporation, general partnership, limited partnership,
voting trustee, bank, trust company, broker, nominee or clearing
agency, if it has not been established pursuant to the
procedures referred to in Section 2 (d) of this
Division II that there has been no change in the person or
persons who direct the exercise of the rights referred to in
clauses (b)(1) through (b)(4) of Section 2 of this Division
II with respect to such Common Share during the period of four
years immediately preceding the date on which a determination is
made of the shareholders who are entitled to take any action,
then a change in beneficial ownership shall be deemed to have
occurred during such period. |
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(C) In the case of a Common Share held of record in the
name of any person as a trustee, agent, guardian or custodian
under the Uniform Gifts to Minors Act as in effect in any state,
a change in beneficial ownership shall be deemed to have
occurred whenever there is a change in the beneficiary of such
trust, the principal of such agent, the ward of such guardian or
the minor for whom such custodian is acting or in such trustee,
agent, guardian or custodian. |
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(D) In the case of Common Shares beneficially owned by a
person or group of persons who, after acquiring directly or
indirectly the beneficial ownership of five percent of the
outstanding Common Shares, failed to notify the Company of such
ownership, a change in beneficial ownership of such Common
Shares shall be deemed to occur on each day while such failure
continues. |
(c) Notwithstanding anything in this Section 2 of this
Division II to the contrary, no change in beneficial ownership
shall be deemed to have occurred solely as a result of:
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(1) any event that occurred prior to August 20, 1985
or pursuant to the terms of any contract (other than a contract
for the purchase and sale of Common Shares contemplating prompt
settlement), including contracts providing for options, rights
of first refusal and similar arrangements in existence on such
date to which any holder of Common Shares is a party; |
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(2) any transfer of any interest in a Common Share pursuant
to a bequest or inheritance, by operation of law upon the death
of any individual, or by any other transfer without valuable
consideration, including a gift that is made in good faith and
not for the purpose of circumventing this Article Fourth; |
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(3) any change in the beneficiary of any trust, or any
distribution of a Common Share from trust, by reason of the
birth, death, marriage or divorce of any natural person, the
adoption of any natural person prior to age 18 or the passage of
a given period of time or the attainment by any natural person
of a specific age, or the creation or termination of any
guardianship or custodial arrangement; |
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(4) any appointment of a successor trustee, agent, guardian
or custodian with respect to a Common Share if neither such
successor has nor its predecessor had the power to vote or to
dispose of such Common Share without further instructions from
others; |
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(5) any change in the person to whom dividends or other
distributions in respect of a Common Share are to be paid
pursuant to the issuance or modification of a revocable dividend
payment order; or |
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(6) any issuance of a Common Share by the Company or any
transfer by the Company of a Common Share held in treasury
unless otherwise determined by the Board of Directors at the
time of authorizing such issuance, or transfer, including
without limitation those Common Shares issued pursuant to the
Merger Agreement. |
(d) For purposes of Section 2 of this Division II, all
determinations concerning changes in beneficial ownership, or
the absence of any such change, shall be made by the Company or,
at any time when a transfer agent is acting with respect to the
Common Shares, by such transfer agent on the Companys
behalf. Written procedures designed to facilitate such
determinations shall be established by the Company and refined
from time to time. Such procedures shall provide, among other
things, the manner of proof of facts that will be accepted and
the frequency with which such proof may be required to be
renewed. The Company and any transfer agent shall be entitled to
rely on all information concerning beneficial ownership of the
Common Shares coming to their attention from any source and in
any manner reasonably deemed by them to be reliable, but neither
the Company nor any transfer agent shall be charged with any
other knowledge concerning the beneficial ownership of the
Common Shares.
(e) In the event of any stock split or stock dividend with
respect to the Common Shares, each Common Share acquired by
reason of such split or dividend shall be deemed to have been
beneficially owned by the same person continuously from the same
date as that on which beneficial ownership of the Common Share,
with respect to which such Common Share was distributed, was
acquired.
Section 3.
No reference to any matter in this Division II shall be
deemed to entitle any shareholder of the Company the right to
vote thereon, consent thereto, grant a waiver or release in
respect thereof, or take any other action with respect thereto.
Section 4.
Each Common Share, whether at any particular time the
holder thereof is entitled to exercise ten votes or one vote
pursuant to Section 2 of this Division II, shall be
identical to all other Common Shares in all respects, and
together the Common Shares shall constitute a single class of
shares of the Company.