def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12
Dr Pepper Snapple Group, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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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 Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the date of its filing. |
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Amount Previously Paid: |
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Form, Schedule or Registration Statement No.: |
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Filing Party: |
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Date Filed: |
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March 25, 2011
To our Stockholders:
We are pleased to invite you to attend the annual meeting of
stockholders of Dr Pepper Snapple Group, Inc. to be held on
Thursday, May 19, 2011 at 10:00 a.m., Central Daylight
Time, at the Dallas/Plano Marriott at Legacy Town Center, 7120
Dallas Parkway, Plano, Texas 75024.
Details regarding the business to be conducted, information you
should consider in casting your vote and how you may vote are
more fully described in the accompanying Notice of Annual
Meeting of Stockholders and Proxy Statement.
In accordance with rules approved by the Securities and Exchange
Commission, this year we are again furnishing proxy materials to
our stockholders primarily over the Internet. As a result, we
are mailing to many of our stockholders a notice instead of a
paper copy of our Proxy Statement and our 2010 Annual Report.
The notice contains instructions on how to access those
documents over the Internet. The notice also contains
instructions on how each of those stockholders can receive a
paper copy of our proxy materials, including our Proxy
Statement, our 2010 Annual Report and a proxy card or voting
instruction form. Stockholders who do not receive a notice will
receive a paper copy of the proxy materials by mail.
Your vote is important. Whether or not you plan to attend the
annual meeting, we hope you will vote as soon as possible.
Thank you for your ongoing support of Dr Pepper Snapple Group.
Sincerely,
Wayne R. Sanders
Chairman of the Board
Larry D. Young
President and Chief Executive Officer
DR PEPPER SNAPPLE GROUP,
INC.
5301 Legacy Drive
Plano, Texas 75024
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
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Date and Time: |
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May 19, 2011, 10:00 a.m., Central Daylight Time |
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Place of Meeting: |
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Dallas/Plano Marriott at Legacy Town Center, 7120 Dallas
Parkway, Plano, Texas 75024 |
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Business to be conducted: |
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1. To elect Class III directors Joyce M.
Roché, Wayne R. Sanders, Jack L. Stahl and Larry D.
Young to hold office for a three-year term and until
their respective successors shall have been duly elected and
qualified.
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2. To ratify the appointment of Deloitte & Touche
LLP as our independent registered public accounting firm for
fiscal year 2011.
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3. To hold an advisory vote on the compensation of our
Named Executive Officers as disclosed in these materials.
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4. To hold an advisory vote on whether an advisory vote on
the compensation of our Named Executive Officers should be held
every one, two or three years.
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5. To transact such other business as may properly come
before the meeting.
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Adjournments and Postponements: |
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Any action on the business to be conducted may be considered at
the date and time of the Annual Meeting as specified above or at
any time or date to which the Annual Meeting may be properly
adjourned and postponed. |
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Record Date: |
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You are entitled to vote at the Annual Meeting if you were a
stockholder of record as of the close of business on
March 21, 2011. |
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Voting Rights: |
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A holder of shares of our common stock is entitled to one vote,
in person or by proxy, for each share of our common stock on all
matters properly brought before the Annual Meeting. |
YOUR VOTE
IS VERY IMPORTANT.
Whether or not you plan to attend the Annual Meeting, we hope
you will vote as soon as possible. You may vote your shares via
a toll-free telephone number or over the Internet. If you
received a paper copy of a proxy card or voting instruction form
by mail, you may submit your proxy card or voting instruction
form for the Annual Meeting by completing, signing, dating and
returning your proxy card or voting instruction form in the
pre-addressed envelope provided. For specific instructions on
how to vote your shares, please refer to the section entitled
General Information Questions and
Answers How can I vote my shares without attending
the Annual Meeting? beginning on page 3 of the Proxy
Statement.
This Notice of Annual Meeting of Stockholders and Proxy
Statement and form of proxy are being distributed on or about
March 25, 2011.
By Order of the Board of Directors
James L. Baldwin
Corporate Secretary
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL STOCKHOLDERS MEETING TO BE HELD ON MAY 19,
2011
The
Companys Proxy Statement and Annual Report to Stockholders
for the fiscal
year ended December 31, 2010 are available at
www.proxyvote.com.
DR PEPPER
SNAPPLE GROUP, INC.
5301 Legacy Drive
Plano, Texas 75024
TABLE OF CONTENTS
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DR PEPPER
SNAPPLE GROUP, INC.
5301 Legacy Drive
Plano, Texas 75024
PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 19, 2011
QUESTIONS AND ANSWERS
Why did I
receive this Proxy Statement?
This Proxy Statement is being made available to you over the
Internet or paper copies of these materials are being delivered
to you by mail as a stockholder of record, as of March 21,
2011, of Dr Pepper Snapple Group, Inc., a Delaware corporation
(referred to in this Proxy Statement as the Company,
we, us and our), in
connection with the solicitation by our Board of Directors
(referred to in this Proxy Statement as the Board)
of proxies to be voted at the Annual Meeting of Stockholders
(referred to in this Proxy Statement as the Annual
Meeting). As a stockholder, you are invited to attend the
Annual Meeting and are entitled to and are requested to vote on
the items of business described in this Proxy Statement.
When and
where is the Annual Meeting to be held?
The Annual Meeting will be held at Dallas/Plano Marriott at
Legacy Town Center, 7120 Dallas Parkway, Plano, Texas 75024, on
May 19, 2011, at 10:00 a.m., Central Daylight Time, or
at any adjournments thereof, for the purposes stated in the
Notice of Annual Meeting of Stockholders.
Do I need
a ticket to attend the Annual Meeting?
You will need an admission ticket or proof of ownership of our
common stock to enter the Annual Meeting. If you hold shares
directly in your name as a stockholder of record and have
received a copy of our proxy materials, an admission ticket is
attached to your printed proxy card. If you plan to attend the
Annual Meeting, please vote your proxy prior to the Annual
Meeting but keep the admission ticket and bring it with you to
the Annual Meeting.
If your shares are held beneficially in the name of a broker,
trustee or other nominee and you wish to be admitted to the
Annual Meeting, you will have to bring either a copy of the
voting instruction form provided by your broker, trustee or
other nominee, or a copy of a brokerage statement showing your
ownership of our common stock as of March 21, 2011.
If you are representing an entity holding shares, then you must
present a proxy signed by that entity evidencing that you are
authorized to attend the Annual Meeting and vote the shares or
are otherwise representing the entity at the Annual Meeting. If
you are representing an entity whose shares are held
beneficially in the name of a broker, trustee or other nominee
you will have to bring either a copy of the voting instruction
form provided by such entitys broker, trustee or other
nominee, or a copy of a brokerage statement showing the
entitys ownership of our common stock as of March 21,
2011, in addition to the proxy signed by the entity you are
representing.
All stockholders must also present a form of photo
identification, such as a valid drivers license or
passport, in order to be admitted to the Annual Meeting.
Are Proxy
Materials available via the Internet?
Under rules adopted by the Securities and Exchange Commission
(SEC), we primarily furnish proxy materials to our
stockholders on the Internet, rather than mailing paper copies
of the materials (including our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010, filed on
February 22, 2011 (our 2010
Form 10-K))
to each stockholder. If you received a notice regarding the
availability of proxy materials (the
Notice) by mail or electronic mail, you will not
receive a paper copy of these proxy materials unless you request
one. Instead, the Notice will instruct you as to how you may
vote your shares. The Notice will also instruct you as to how
you may access your proxy card to vote over the Internet. If you
received a Notice by mail or electronic mail and would like to
receive a paper copy of our proxy materials, free of charge,
please follow the instructions included in the Notice.
The Notice was mailed on or about March 25, 2011 to our
stockholders of record on the record date.
What
information is contained in this Proxy Statement?
This Proxy Statement lets our stockholders know when and where
we will hold the Annual Meeting. Additionally, this Proxy
Statement:
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includes information regarding the matters that will be
discussed and voted on at the Annual Meeting, and
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provides information about the Company that our stockholders
should consider in order to make an informed decision at the
Annual Meeting.
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What
should I do if I receive more than one Notice about the Internet
availability of the proxy materials or more than one paper copy
of the proxy materials?
You may receive more than one Notice (either by mail or
electronic mail) or more than one paper or electronic copy of
the proxy materials, including multiple paper copies of this
Proxy Statement and multiple proxy cards or voting instruction
forms. For example, if you hold your shares in more than one
brokerage account, you may receive a separate Notice or a
separate voting instruction form for each brokerage account in
which you hold shares. If you are a stockholder of record and
your shares are registered in more than one name, you may
receive more than one Notice or more than one proxy card. If you
hold your shares through a broker, bank, trustee or another
nominee, rather than owning shares registered directly in their
name, you are considered the beneficial owner of shares held in
street name. As the beneficial owner, you are entitled to direct
the voting of your shares by your intermediary. Your
intermediary will forward the proxy materials to you with a
voting instruction form or provide electronic access to the
materials and to voting facilities. To vote all of your shares
by proxy, you must complete, sign, date and return each proxy
card and voting instruction form that you receive and vote over
the Internet the shares represented by each Notice that you
receive (unless you have requested and received a proxy card or
voting instruction form for the shares represented by one or
more of those Notices).
How may I
obtain a copy of the Companys 2010
Form 10-K
and other financial information?
Stockholders may request a free copy of our 2010 Annual Report,
which includes our 2010
Form 10-K,
from:
Dr Pepper
Snapple Group, Inc.
Attn: Investor Relations
5301 Legacy Drive
Plano, Texas 75024
Alternatively, stockholders can access the 2010 Annual Report,
which includes our 2010
Form 10-K
and other financial information, on the Investor Center section
of our website at:
www.drpeppersnapplegroup.com
The Company also will furnish any exhibit to the 2010
Form 10-K
if specifically requested.
What
items of business will be voted on at the Annual
Meeting?
The items of business scheduled to be voted on at the Annual
Meeting are:
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Proposal 1:
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A proposal to elect Class III directors, Joyce M.
Roché, Wayne R. Sanders, Jack L. Stahl and Larry D. Young,
to hold office for a three-year term and until their respective
successors shall have been duly elected and qualified.
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Proposal 2:
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A proposal to ratify the appointment of Deloitte &
Touche LLP (Deloitte & Touche) as our
independent registered public accounting firm for fiscal year
2011.
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Proposal 3:
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A proposal to approve an advisory resolution regarding the
compensation of our Named Executive Officers (as defined in the
first paragraph of Historical Executive Compensation
Information on page 35); and
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Proposal 4:
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A proposal to act upon an advisory vote on whether an advisory
vote on the compensation of our Named Executive Officers should
be held every one, two or three years.
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We also will consider any other business that properly comes
before the Annual Meeting.
How does
the Board recommend that I vote?
The Board unanimously recommends a vote:
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1.
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FOR each of the nominees for director listed in these
materials and on the proxy card;
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FOR the ratification of Deloitte & Touche as
our independent registered public accounting firm for fiscal
year 2011;
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3.
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FOR the approval, on an advisory basis, of the
compensation of our Named Executive Officers as disclosed in
this Proxy Statement; and
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FOR the approval, on an advisory basis, that the future
advisory votes on the compensation of our Named Executive
Officers be held each year.
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What
shares can I vote at the Annual Meeting?
The Board has fixed the close of business on March 21, 2011
as the record date for the Annual Meeting. Only holders of
record of the outstanding shares of our common stock at the
close of business on the record date are entitled to vote at the
Annual Meeting or any adjournments thereof.
As of the close of business on the record date, we had
221,321,125 shares of common stock, $0.01 par value
per share, issued and outstanding. A holder of shares of our
common stock is entitled to one vote for each share of our
common stock, in person or by proxy, on all matters properly
brought before the Annual Meeting.
How can I
vote my shares at the Annual Meeting?
Shares held in your name as the stockholder of record may be
voted in person at the Annual Meeting. Shares for which you are
the beneficial owner but not the stockholder of record may be
voted in person at the Annual Meeting only if you obtain a legal
proxy from the broker, trustee or nominee that holds your shares
giving you the right to vote the shares. Even if you plan to
attend the Annual Meeting, we recommend that you also vote by
proxy as described below so that your vote will be counted if
you later decide not to attend the Annual Meeting. Voting in
person will replace any previous votes that you submitted by
proxy.
How can I
vote my shares without attending the Annual Meeting?
Whether you hold shares directly as the stockholder of record or
through a broker, trustee or other nominee as the beneficial
owner, you may direct how your shares are voted without
attending the Annual Meeting. There are three ways to vote by
proxy:
By Internet Stockholders who have
received a Notice by mail may submit proxies over the Internet
by following the instructions on the Notice. Stockholders who
have received a Notice by
e-mail may
submit proxies over the Internet by following the instructions
included in the
e-mail.
Stockholders who have received a paper copy of a proxy card or
voting instruction form by mail may submit proxies over the
Internet by following the instructions on the proxy card or
voting instruction form.
By Telephone Stockholders of record
who live in the United States or Canada may submit proxies by
telephone by calling
(800) 690-6903
and following the instructions. Stockholders of record who have
received
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a Notice by mail must have the control number that appears on
their Notice available when voting. Stockholders of record who
received Notice by
e-mail must
have the control number included in the
e-mail
available when voting. Stockholders of record who have received
a proxy card by mail must have the control number that appears
on their proxy card available when voting. Most stockholders who
are beneficial owners of their shares living in the United
States or Canada and who have received a voting instruction form
by mail may vote by phone by calling the number specified on
voting instruction form provided by their broker, trustee or
nominee. Those stockholders should check the voting instruction
form for telephone voting availability.
By Mail Stockholders who have received
a paper copy of a proxy card or voting instruction form by mail
may submit proxies by completing, signing and dating their proxy
card or voting instruction form and mailing it in the
accompanying pre-addressed envelope.
Telephone and Internet voting facilities for stockholders of
record will be available 24 hours a day and will close at
11:59 p.m. (EDT) on May 18, 2011. Votes cast by mail
must be received in sufficient time to allow processing. Votes
received by mail prior to the day of the Annual Meeting will be
processed, but votes received the day of the Annual Meeting may
not be processed depending on the time received. Shares
represented by duly executed proxies in the accompanying proxy
card or voting instruction form will be voted in accordance with
the instructions indicated on such proxies or voting instruction
forms, and, if no such instructions are indicated thereon, will
be voted (i) FOR each of the nominees for election
to the Board, (ii) FOR ratification of
Deloitte & Touche as our independent registered public
accounting firm for fiscal year 2011, (iii) FOR the
approval, on an advisory basis, of the compensation of our Named
Executive Officers as disclosed in these materials and
(iv) FOR the approval, on an advisory basis, that
future advisory votes on the compensation of our Named Executive
Officers be held each year.
How many
shares must be present or represented to conduct business at the
Annual Meeting?
The presence, in person or by proxy, of the holders of a
majority of the issued and outstanding shares of our common
stock entitled to vote at the Annual Meeting or any adjournment
thereof is necessary to constitute a quorum to transact business.
Abstentions and broker nonvotes (shares held by brokers,
trustees or other nominees as to which they have no
discretionary power to vote on a particular matter and have
received no instructions from the beneficial owners of such
shares or persons entitled to vote on the matter) will be
counted for the purpose of determining whether a quorum is
present. If your shares are held by a broker, trustee or other
nominee on your behalf and you do not instruct the broker,
trustee or other nominee as to how to vote these shares on
Proposal 1 (the election of directors), Proposal 3
(the approval of the resolution regarding the compensation of
our Named Executive Officers) or Proposal 4 (the vote
regarding frequency of advisory votes on executive compensation
of our Named Executive Officers), the broker, trustee or other
nominee may not exercise discretion to vote for or against those
proposals. This would be a broker non-vote and these
shares will not be counted as having been voted on the
applicable proposal. With respect to Proposal 2
(ratification of the appointment of Deloitte & Touche
as our independent registered public accounting firm for fiscal
year 2011), the broker, trustee or other nominee may exercise
its discretion to vote for or against that proposal in the
absence of your instruction. Please instruct your broker,
trustee or other nominee so your vote can be counted.
What is
the voting requirement to approve each of the
proposals?
The following voting requirements will be in effect for each
proposal described in this Proxy Statement:
Proposal 1. To be elected, a director must
receive the affirmative vote of the holders of a majority of our
common stock which has voting power present in person or
represented by proxy and which has actually voted (the number of
shares voted for a director nominee must exceed the
number of votes cast against that nominee).
Proposal 2. Ratification of the appointment of
Deloitte & Touche as our independent registered public
accounting firm requires the affirmative vote of the holders of
a majority of our common stock which has
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voting power present in person or represented by proxy and which
has actually voted (the number of shares voted for
ratification must exceed the number of votes cast
against ratification).
Proposal 3. The advisory (non-binding)
resolution to approve the compensation of our Named Executive
Officers as disclosed in this Proxy Statement requires the
affirmative vote of the holders of a majority of our common
stock which has voting power present in person or represented by
proxy and which has actually voted (the number of shares voted
for the resolution must exceed the number of votes
cast against the resolution).
Proposal 4. The advisory (non-binding) proposal
regarding how frequently advisory votes regarding the
compensation of our Named Executive Officers will occur requires
a plurality of the votes cast for the three options presented at
the Annual Meeting. The frequency option that receives the most
affirmative votes of all the votes cast on Proposal 4 in
person or by proxy at the Annual Meeting is the option that will
be deemed the recommendation of the stockholders.
What if I
want to change my vote?
If the enclosed proxy card or voting instruction form is signed
and returned, you may, nevertheless, revoke it at any time prior
to the Annual Meeting either by (i) your filing a written
notice of revocation received by the person or persons named
therein, (ii) your attendance at the Annual Meeting and
voting the shares covered thereby in person, or (iii) your
delivery of another duly executed proxy card or voting
instruction form dated subsequent to the date thereof to the
addressee named in the enclosed proxy card or voting instruction
form.
Who will
pay for this solicitation?
The cost of preparing, assembling, printing and mailing this
Proxy Statement and the enclosed proxy card and the cost of
soliciting proxies related to the Annual Meeting will be borne
by us. We will request brokers, trustees or other nominees to
solicit their customers who are beneficial owners of shares of
common stock listed of record in name of the broker, trustee or
other nominee, and will reimburse such brokers, trustees or
other nominees for the reasonable
out-of-pocket
expenses for such solicitation.
Who will
serve as inspector of elections?
The inspector of elections will be a representative from
Broadridge Financial Solutions, Inc.
What
happens if additional matters are presented at the Annual
Meeting?
Other than the four items of business described in this Proxy
Statement, we are not aware of any other business to be acted
upon at the Annual Meeting. If you grant a proxy, the persons
named as proxy holders, James L. Baldwin, Martin M. Ellen and
Larry D. Young, will have the discretion to vote your shares on
any additional matters properly presented for a vote at the
Annual Meeting. If for any reason any of our nominees is not
available as a candidate for director, the persons named as
proxy holders will vote your proxy for such other candidate or
candidates as may be nominated by the Board.
5
PROPOSALS
Proposal 1:
ELECTION OF DIRECTORS
The Board is divided into three classes, each serving three-year
terms. This years nominees for re-election to the Board
for a three-year term as Class III directors are {ages
are as of the date of the Annual Meeting}:
Joyce M. Roché
Ms. Roché, age 63, has served as our director
since February 2011. Ms. Roché served as President and
Chief Executive Officer of Girls Inc., a national non-profit
research, education and advocacy organization, from 2000 until
her retirement in 2010. From 1998 to 2000, Ms. Roché
was an independent marketing consultant. She served as President
and Chief Operating Officer of Carson Products Company from 1996
to 1998 and also held senior marketing positions with Carson
Products Company, Revlon, Inc. and Avon, Inc.
Ms. Roché served on the board of directors of
Anheuser-Busch Companies, Inc. from 1998 to 2008 and The May
Department Stores Company from 2003 to 2006. She is currently
also a member of the boards of directors of AT&T, Inc.,
Macys, Inc., Tupperware Brands Corporation and The
Association of Governing Boards of Universities and Colleges and
serves as chair of the Board of Trustees for Dillard University.
Wayne R. Sanders
Mr. Sanders, age 63, has served as the Chairman
of the Board and chairman of the Corporate Governance and
Nominating Committee since May 2008. Mr. Sanders served as
the Chairman and the Chief Executive Officer of Kimberly-Clark
Corporation from 1992 until his retirement in 2003.
Mr. Sanders has served on the board of directors of Texas
Instruments Incorporated since 1997 and Belo Corp. since 2003.
He previously served on the board of directors of Adolph Coors
Company. Mr. Sanders is also a National Trustee and
Governor of the Boys & Girls Club of America and was a
member of the Marquette University Board of Trustees from 1992
to 2007, serving as Chairman from 2001 to 2003.
Jack L. Stahl
Mr. Stahl, age 58, has served as our director and
chairman of the Compensation Committee since May 2008.
Mr. Stahl served as Chief Executive Officer and President
of Revlon, Inc. from February 2002 until his retirement in
September 2006. From February 2000 to March 2001, he served as
President and Chief Operating Officer of The
Coca-Cola
Company and previously served as Group President of The
Coca-Cola
Companys Americas Group and as Chief Financial Officer of
The
Coca-Cola
Company. Mr. Stahl served on the board of directors of
Schering-Plough Corporation from 2007 to 2009 and has served on
the board of directors of Delhaize Group since 2008.
Larry D. Young
Mr. Young, age 56, has served as our director
since the Companys formation in October 2007.
Mr. Young has served as our President and Chief Executive
Officer (Mr. Young is also referred to in this Proxy
Statement as our CEO) since October 2007. From
October 2007 to May 2008, Mr. Young also served as
President and Chief Executive Officer of CSAB (as hereinafter
defined). Mr. Young joined CSAB as President and Chief
Operating Officer of the Bottling Group segment and Head of
Supply Chain in 2006 after the acquisition of Dr Pepper/
Seven Up Bottling Group, Inc. (DPSUBG). He had been
President and Chief Executive Officer of DPSUBG since May 2005.
From 1997 to 2005, Mr. Young served as President and Chief
Operating Officer of Pepsi-Cola General Bottlers, Inc. and
Executive Vice President of Corporate Affairs at PepsiAmericas,
Inc.
For a discussion of specific experience, qualifications,
attributes or skills that qualify each of the above members to
serve as one of our directors, see Selection,
Qualifications and Experience of Directors beginning on
page 12.
THE BOARD RECOMMENDS A VOTE FOR EACH OF THE
NOMINEES FOR DIRECTOR SET FORTH ABOVE.
6
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Proposal 2:
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RATIFICATION
OF DELOITTE & TOUCHE AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2011
|
Deloitte & Touche has been selected by the Audit
Committee as our independent registered public accounting firm
for fiscal year 2011, subject to ratification by the
stockholders. Deloitte & Touche was also our
independent registered public accounting firm for fiscal years
2008, 2009 and 2010. A representative of Deloitte &
Touche is expected to be present at the Annual Meeting. That
representative will have an opportunity to make a statement, if
desired, and will be available to respond to appropriate
questions.
We are asking our stockholders to ratify the appointment of
Deloitte & Touche as our registered independent public
accounting firm as a matter of good corporate governance even
though ratification is not required by our By-laws, other
governing documents or otherwise. If our stockholders fail to
ratify the appointment, the Audit Committee will reconsider
whether or not to retain Deloitte & Touche as our
independent registered public accounting firm for fiscal year
2011. Even if the appointment is ratified, the Audit Committee
in its discretion may direct the appointment of a different
independent registered public accounting firm at any time during
fiscal year 2011 if it is determined that such a change would be
in the best interests of the Company and its stockholders.
The affirmative vote of the holders of shares of our common
stock having a majority of the voting power eligible to vote and
voting, either in person or by proxy, at the Annual Meeting will
be required to ratify the appointment of Deloitte &
Touche.
Independent
Registered Public Accounting Firms Fees
Fees for professional services provided by our independent
registered public accounting firm in each of the last two fiscal
years, in each of the following categories, were as follows:
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2010
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2009
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(in 000s)
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Audit Fees
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$
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3,488
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(1)
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$
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4,665
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(2)
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Audit-Related Fees
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Tax Fees
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80
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All Other Fees
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Total Fees
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$
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3,568
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|
$
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4,665
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(1) |
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Audit Fees primarily relate to auditing of our 2010 consolidated
financial statements, auditing the Companys assessment of
its compliance with Section 404 of the Sarbanes-Oxley Act
of 2002 (SOX) as it relates to internal controls
over financial reporting, auditing of tax transactions in Mexico
and Canada, and statutory audits in Mexico and review of our
private placement and registration statements on
Forms 144A,
S-3 and
S-8. |
|
(2) |
|
Audit Fees primarily relate to auditing of our 2009 consolidated
financial statements and review of our registration statements
on
Forms S-3
and S-8,
reviewing our current reports on
Form 8-K,
reviewing the revision of portions of the Annual Report for the
year ended December 31, 2008 to retrospectively reflect the
subsequent changes in our internal reporting and operating
segments, assessing the Companys compliance with
Section 404 of SOX as it relates to internal controls over
financial reporting, and statutory audits in Mexico. |
The Audit Committee has approved all of our independent
registered public accounting firms engagements and fiscal
year 2010 fees presented above. All audit and non-audit services
provided to us by our independent registered public accounting
firm are required to be pre-approved by the Audit Committee in
accordance with the policies and procedures set forth in the
current Audit Committee Charter available on our website at
www.drpeppersnapplegroup.com.
THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION
OF DELOITTE & TOUCHE AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2011.
7
Proposal 3:
ADVISORY VOTE ON APPROVING EXECUTIVE COMPENSATION
In accordance with recent legislation and rules adopted by the
SEC, we are providing stockholders with the opportunity to cast
an advisory (non-binding) vote on compensation programs for our
Named Executive Officers. Our overall executive compensation
policies and procedures are described in the Compensation
Discussion and Analysis section and the tabular
disclosures regarding compensation of our Named Executive
Officers (together with the accompanying narrative disclosure)
in this Proxy Statement. Our compensation policies and
procedures are centered on a
pay-for-performance
culture and are strongly aligned with the long-term interests of
our stockholders, as described in the Compensation Discussion
and Analysis. The Compensation Committee, which is comprised
entirely of independent directors, in consultation with Mercer,
a leading human resources consulting firm, oversees our
executive compensation program and monitors our policies to
ensure they continue to emphasize programs that reward
executives for results that are consistent with stockholder
interests.
The Compensation Committee bases its executive compensation
decisions on certain objectives, including the following:
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Total compensation targets are designed to be competitive with
the companies and markets in which we compete;
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Pay is generally performance-based, with our overall performance
judged both against internal goals and the performance of
competitors;
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A
pay-for-performance
culture links compensation to both individual and collective
performance and will result in differentiated compensation;
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A substantial percentage of total compensation is variable, or
at risk, both through annual incentive compensation
and the granting of long-term incentive awards; and
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Equity incentive awards are used to align the interests of
management with those of our stockholders.
|
The past year was one of significant strategic and financial
accomplishments. Among our key accomplishments were the
following:
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completion of our licensing arrangements with PepsiCo Inc.
following its acquisition of The Pepsi Bottling Group, Inc. and
PepsiAmericas, Inc., resulting in a one-time cash payment of
$900 million before taxes, fees and related expenses;
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completion of our licensing agreement with The
Coca-Cola
Company, following its acquisition of the North American
Bottling Business of
Coca-Cola
Enterprises, resulting in a one-time cash payment of
$715 million before taxes, fees and related expenses;
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repurchase of over $1 billion of our common stock and
payment of total dividends to our stockholders of $0.80 per
share; and
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increase in net sales in fiscal year 2010 compared to fiscal
year 2009 by almost 2% in spite of a difficult economic
environment.
|
In 2010, we also adopted Stock Ownership Guidelines for our
directors and officers to further align the interests of our
directors and executive officers with those of our stockholders.
In 2011, we are further enhancing the
pay-for-performance
culture by including performance based equity awards as a part
of our long-term equity incentive program. Also, in 2011, our
Compensation Committee discontinued the
gross-up
payments to our CEO to cover tax costs associated with his
personal use of a corporate jet.
Actions like those described above evidence our philosophy of
aligning executive compensation with company performance and
increasing long-term stockholder value. We will continue to
design and implement our executive compensation programs and
policies in line with this philosophy to promote superior
performance results and
8
generate greater value for our stockholders. For the reasons
discussed above, the Board recommends that stockholders vote in
favor of the following resolution:
RESOLVED, that the compensation paid to the Companys
Named Executive Officers, as disclosed pursuant to the
compensation disclosure rules and regulations of the SEC,
including the Compensation Discussion and Analysis, compensation
tables and the narrative discussion is hereby APPROVED.
Because your vote on this proposal is advisory, it will not be
binding on the Board. However, the Compensation Committee and
the Board will consider the outcome of the vote when making
future compensation decisions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
APPROVAL OF THE EXECUTIVE COMPENSATION DISCLOSED IN THIS PROXY
STATEMENT.
Proposal 4:
FREQUENCY OF ADVISORY VOTE ON APPROVING EXECUTIVE
COMPENSATION
Under recent legislation and rules adopted by the SEC, our
stockholders may approve, on an advisory (non-binding) basis,
the frequency of the advisory vote on the compensation of our
Named Executive Officers. Stockholders may choose to approve
holding an advisory vote on the compensation of our Named
Executive Officers every year, once every two years or once
every three years.
After considering the benefits and consequences of each option
for the frequency of submitting the advisory vote on the
compensation of our Named Executive Officers to stockholders,
the Board recommends submitting the advisory vote on the
compensation of our Named Executive Officers at the Annual
Meeting of our stockholders every year.
We believe an annual advisory vote on the compensation of our
Named Executive Officers will allow us to obtain information on
stockholders views of the compensation of our Named
Executive Officers on a more consistent basis. In addition, we
believe an annual advisory vote on the compensation of our Named
Executive Officers will provide the Board and the Compensation
Committee with frequent input from stockholders on our
compensation programs for our Named Executive Officers. Finally,
we believe an annual advisory vote on the compensation of our
Named Executive Officers is a good corporate governance practice
and is in the best interests of our stockholders.
For the reasons discussed above, the Board recommends that
stockholders vote in favor of holding an advisory vote on the
compensation of our Named Executive Officers at the Annual
Meeting of our stockholders every year. In voting on this
proposal on the frequency of the advisory vote on the
compensation of our Named Executive Officers, stockholders
should be aware that they are not voting for or
against the Boards recommendation. Rather,
stockholders will be casting votes to recommend an advisory vote
on the compensation of our Named Executive Officers every year,
once every two years or once every three years, or they may
abstain entirely from voting on the proposal.
The option that receives a plurality of the votes cast by the
holders of shares of our common stock eligible to vote and
voting, either in person or by proxy, at the Annual Meeting will
be considered by the Board and the Compensation Committee as the
stockholders recommendation as to the frequency of future
advisory votes on the compensation of our Named Executive
Officers. However, the outcome of this advisory vote on the
frequency of the advisory vote on the compensation of our Named
Executive Officers is not binding on us or the Board.
Nevertheless, the Board will review and consider the outcome of
this vote when making determinations as to when the advisory
vote on the compensation of our Named Executive Officers will
again be submitted to stockholders. A scheduling vote similar to
this will occur at least once every six years.
THE BOARD OF DIRECTORS RECOMMENDS AN ANNUAL VOTE FOR FUTURE
ADVISORY VOTES ON EXECUTIVE COMPENSATION.
9
BOARD OF
DIRECTORS
Biographical
Information
In addition to the persons who are standing for re-election as
Class III directors (whose biographical information is
included in Proposal 1 above), the following is a
biographical summary of our other directors {ages are as of
the date of the Annual Meeting}:
John L. Adams, age 66, has served as our director
since April 2008. Mr. Adams served as Executive Vice
President of Trinity Industries, Inc. from January 1999 to June
2005 and held the position of Vice Chairman from July 2005 to
March 2007. Prior to joining Trinity Industries, Mr. Adams
spent 25 years in various positions with Texas Commerce
Bank, N.A. and its successor, Chase Bank of Texas, National
Association. From 1997 to 1998, he served as Chairman and Chief
Executive Officer of Chase Bank of Texas. Mr. Adams has
served on the board of directors of Trinity Industries, Inc.
since 2007 and Group 1 Automotive, Inc., since 1999, where he
has served as non-executive chairman since April 2005. He
previously served on the boards of directors of American Express
Bank Ltd. and Phillips Gas Company.
Terence D. Martin, age 68, has served as our
director and chairman of the Audit Committee since April 2008.
Mr. Martin served as Senior Vice President and Chief
Financial Officer of Quaker Oats Company from 1998 until his
retirement in 2001. From 1995 to 1998, he was Executive Vice
President and Chief Financial Officer of General Signal
Corporation. Mr. Martin was Chief Financial Officer and
Member of the Executive Committee of American Cyanamid Company
from 1991 to 1995 and served as Treasurer from 1988 to 1991.
From 2002 through March 2011, Mr. Martin served on the
board of directors of Del Monte Foods Company.
Pamela H. Patsley, age 54, has served as our
director since April 2008. Ms. Patsley served as Executive
Chairman of MoneyGram International from January 2009 to
September 2009 and has served as Chairman and Chief Executive
Officer from September 2009 to present. Previously,
Ms. Patsley served as Senior Executive Vice President of
First Data Corporation from March 2000 to October 2007 and
President of First Data International from May 2002 to October
2007. She retired from those positions in October 2007. From
1991 to 2000, she served as President and Chief Executive
Officer of Paymentech, Inc., prior to its acquisition by First
Data. Ms. Patsley also previously served as Chief Financial
Officer of First USA, Inc. Ms. Patsley served on the board
of directors of Molson Coors Brewing Company from 1996 to 2009;
Pegasus Solutions, Inc. from 2002 to 2006; and Paymentech, Inc.
from 1995 to 1999. In addition to her Chairmans role at
MoneyGram International, Ms. Patsley has served on the
board of Texas Instruments Incorporated since 2004.
Ronald G. Rogers, age 62, has served as our director
since May 2008. Mr. Rogers served in various positions with
Bank of Montreal between 1972 and 2005. From 2002 until his
retirement in 2005, he served as Deputy Chair, Enterprise
Risk & Portfolio Management, BMO Financial Group, and
from 1994 to 2002, he served as Vice Chairman,
Personal & Commercial Client Group.
M. Anne Szostak, age 60, has served as
our director since May 2008. Since June 2004, Ms. Szostak
has served as President and Chief Executive Officer of Szostak
Partners LLC, a consulting firm that advises executive officers
on strategic and human resource issues. From 1998 until her
retirement in 2004, she served as Corporate Executive Vice
President and Director Human Resources and Diversity
of FleetBoston Financial Corporation (now Bank of America). She
also served as Chairman and Chief Executive Officer of Fleet
Bank Rhode Island from 2001 to 2003.
Ms. Szostak served on the board of directors of ChoicePoint
Corporation from 2006 to 2008. Ms. Szostak has served as a
director of Belo Corp. since 2004, Tupperware Brands Corporation
since 2000 and Spherion Corporation since 2005.
Michael F. Weinstein, age 62, has served as our
director since February 2009. Mr. Weinstein co-founded and
has served as Chairman of INOV8 Beverage Company LLC
(INOV8) from January 2005 to present. Previously,
Mr. Weinstein served as President of Liquid Logic
Consulting from January 2004 to December 2004; and as President,
Global Innovation and Business Development, for Cadbury
Schweppes plc from January 2003 to December 2003.
Mr. Weinstein has served on the board of directors of H.J.
Heinz Company since 2006.
10
For a discussion of specific experience, qualifications,
attributes or skills that led to the conclusion that each of the
above members should serve as one of our directors, see
Selection, Qualifications and Experience of
Directors beginning on page 12.
Directors
Compensation
Non-employee directors receive compensation from us for their
services on the Board or its committees. Mr. Young, our
only executive director, does not receive compensation for his
services as a director. In fiscal year 2010, we compensated our
non-employee directors as follows: an annual cash retainer of
$100,000 and an annual equity grant of restricted stock units
(RSUs) with a value of $100,000. In addition, the
chairperson of the Audit Committee and the Compensation
Committee received an annual equity grant of RSUs with a value
of $30,000 and $25,000, respectively. All of the RSUs vest three
years from the date of grant.
Mr. Sanders, as the Chairman of the Board, was entitled to
an annual cash retainer of $100,000. Mr. Sanders also
received an annual equity grant of RSUs with a value of $200,000
which vests three years from the date of grant.
Director compensation paid in fiscal year 2010 was as follows:
Director
Compensation in Fiscal Year 2010
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Change in
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Pension Value
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and
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Nonqualified
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Fees Earned
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Non-Equity
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Deferred
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or Paid
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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in Cash
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Name
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($)
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($)(1)(2)
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($)
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($)
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($)
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($)
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($)
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Wayne R. Sanders
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100,000
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200,000
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300,000
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Terence D. Martin
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100,000
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130,000
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230,000
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Jack L. Stahl
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100,000
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125,000
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225,000
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John L. Adams
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100,000
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100,000
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200,000
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Pamela H. Patsley
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100,000
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100,000
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200,000
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Ronald G. Rogers
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100,000
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100,000
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200,000
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M. Anne Szostak
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100,000
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100,000
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200,000
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Michael F. Weinstein
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100,000
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100,000
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200,000
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(1) |
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The amounts reported in the Stock Awards column reflect the
grant date fair value associated with each respective
directors RSUs under the Dr Pepper Snapple Group, Inc.
Omnibus Stock Incentive Plan of 2009. Even though the RSUs may
be forfeited, the amounts reported do not reflect this
contingency. |
|
(2) |
|
The following table shows the aggregate number of outstanding
RSUs for each non-employee director as of December 31,
2010. All of these awards vest three years from their respective
grant dates. |
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Name
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RSUs(a)
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Wayne R. Sanders
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41,821
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Terence D. Martin
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19,314
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Jack L. Stahl
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18,572
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John L. Adams
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14,857
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Pamela H. Patsley
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14,857
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Ronald G. Rogers
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14,857
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M. Anne Szostak
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14,857
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Michael F. Weinstein
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10,822
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11
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(a) |
|
The amounts reported in the RSUs column also include dividend
equivalent payments under the Dr Pepper Snapple Group, Inc.
Omnibus Stock Incentive Plan of 2008 and the Dr Pepper Snapple
Group, Inc. Omnibus Stock Incentive Plan of 2009. |
Based on a study performed by an independent consultant, the
Compensation Committee has recommended and the Board has
approved the same levels of compensation for our non-employee
directors in fiscal year 2011.
Stock Ownership Guidelines The Board believes
that the directors should have a meaningful ownership interest
in the Company. Effective November 1, 2015, or, if a
director is elected after November 1, 2010, within five
years after the date of such election, the Stock Ownership
Guidelines require non-executive directors to own shares of the
Companys common stock having a value equal to a minimum of
three times their respective annual retainer. Though not yet
required, all of the directors met these guidelines as of
December 31, 2010. For a more complete discussion of the
Stock Ownership Guidelines, see Compensation Discussion
and Analysis Stock Ownership Guidelines on
page 32.
Classification of the Board At the annual
meeting of stockholders to be held in 2012, the Board intends to
submit a proposal to the stockholders to amend the
Companys corporate documents to phase-in the elimination
of the classification of the Board so that all directors to be
elected at or after the annual meeting of stockholders to be
held in 2013 will be elected for one-year terms, provided that
the unexpired term of any director shall not be effected.
Communications
with the Board
Any interested party may communicate with the Board, the
Chairman of the Board (who is the presiding director of
executive sessions) or the non-employee directors as a group by
submitting an
e-mail
through the Companys website at
www.drpeppersnapplegroup.com under the Investor Center and
Contact the Board captions or by sending a written communication
to: Corporate Secretary, Dr Pepper Snapple Group, Inc., 5301
Legacy Drive, Plano, Texas 75024.
SELECTION,
QUALIFICATIONS AND EXPERIENCE OF DIRECTORS
Selection
of Directors
Process
The Board is responsible for approving candidates for the Board.
As discussed in the section Corporate
Governance Board Committees and Meetings
Corporate Governance and Nominating Committee on
page 17, the Corporate Governance and Nominating Committee
is responsible for the identification of candidates for the
Board and making recommendations to the Board. The Corporate
Governance and Nominating Committee will also consider
nominations by a stockholder pursuant to the provisions of our
By-laws relating to stockholder nominations and as described
under Stockholders Proposals for 2011 Annual Meeting
at the end of this Proxy Statement.
Qualifications
The Corporate Governance and Nominating Committee seeks director
candidates (including any candidate who may be recommended by a
stockholder) who have certain personal and professional
attributes including:
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Sound personal and professional integrity,
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An inquiring and independent mind,
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Willingness to devote the required time to carrying out the
duties and responsibilities of Board membership,
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Commitment to serve on the Board for several years to develop
knowledge about the Companys businesses, and
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12
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Willingness to represent the best interests of all stockholders
and observe the fiduciary duties that a director owes to the
stockholders.
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In addition, a director candidate must have, when considered
with the collective experience of other Board members,
appropriate qualifications and skills that have been developed
through extensive business experience, including the following:
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Practical wisdom and mature judgment,
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Leadership,
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Interpersonal skills,
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Financial acumen,
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Broad training and experience at the policy-making level in
business, finance and accounting, government, education or
technology, and
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Expertise (including industry expertise) that is useful to the
Company and complementary to the background and experience of
other Board members, so that an optimal balance of Board members
can be achieved and maintained.
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Diversity
In accordance with our Corporate Governance Guidelines,
diversity of viewpoints is one of the characteristics considered
by the Corporate Governance and Nominating Committee in making
recommendations for nominations. The Board has not adopted any
policy on diversity with respect to our directors, but it seeks
a balance of experience among the directors so that the Board as
a whole has experience and training from different disciplines
(including operations, accounting, finance, risk management,
marketing and human resources) and different industries
(including the beverage industry, consumer products and banking)
which creates the balance sought.
Experience
of our Directors
The Corporate Governance and Nominating Committee has reviewed
the background of all of our directors, including those who are
being proposed for election to the Board, and determined that
they individually possess the personal and professional
attributes to be a director. Further, the Corporate Governance
and Nominating Committee has reviewed the experience of the
members of the Board and determined that they collectively
possess the qualifications and skills necessary for the Board.
Detailed biographical information for each of the directors is
set forth in Proposals Proposal 1:
Election of Directors on page 6 and Board of
Directors Biographical Information on
page 10.
The following is a summary of the qualifications and skills
demonstrated by the individual directors experience.
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Mr. Sanders, the Chairman of the Board,
has: extensive leadership experience as a board
chairman, chief executive officer and other executive level
positions in a public company, financial acumen developed
through his extensive executive experience, operational and
marketing experience, consumer product company experience, and
significant public company board experience (including audit and
compensation committee chairmanship experience).
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Mr. Adams has: extensive leadership
experience as a vice chairman and chief executive officer and
other executive level positions in public companies, financial
acumen and risk management experience developed through his
chief executive officer experience, been designated by the
Corporate Governance and Nominating Committee as a financial
expert under the New York Stock Exchange (NYSE)
listing standards, training as a lawyer, and substantial public
company board experience (including board chairmanship, risk
management, audit committee and compensation committee
experience).
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Mr. Martin has: extensive leadership
experience as a chief financial officer of a public company,
financial acumen and risk management experience developed
through his public accounting and chief financial
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13
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officer experience, been designated by the Corporate Governance
and Nominating Committee as a financial expert under the NYSE
listing standards, and other public company board experience
(including audit committee chairmanship and compensation
committee experience).
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Ms. Patsley has: extensive leadership
experience as a chairman and chief executive officer, chief
financial officer and other executive level positions in public
companies, financial acumen and risk management experience
developed through her experience in public accounting and her
chief executive officer and chief financial officer experience,
been designated by the Corporate Governance and Nominating
Committee as a financial expert under the NYSE listing
standards, and extensive public company board experience
(including audit committee chairmanship experience).
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Ms. Roché has: extensive leadership
experience as a chief operating officer of a public company and
the chief executive officer of a national nonprofit organization
and considerable experience in the marketing and merchandising
areas, consumer products company experience, financial acumen
developed from her chief executive officer and executive officer
experience, and significant public company board experience
(including compensation, corporate governance, audit, and public
policy committee experience).
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Mr. Rogers has: extensive senior level
executive leadership experience, banking experience, financial
acumen developed from his banking experience, and experience in
enterprise risk management.
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Mr. Stahl has: extensive leadership
experience as president, chief executive officer, chief
operating officer and chief financial officer in public
companies, beverage industry experience, financial acumen from
his chief financial officer experience, and broad public company
board experience.
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Ms. Szostak has: extensive senior level
executive leadership experience for a Fortune 100 company,
experience as a chief executive officer of two major bank
subsidiaries of public companies, substantial banking
experience, significant human resource experience, experience in
risk management, and significant experience on other public
company boards (including compensation committee chairmanship
and audit and corporate governance and nominating committee
experience).
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Mr. Weinstein has: senior level executive
experience as a chief executive officer and chief operating
officer, extensive experience in the beverage industry,
substantial experience in sales, advertising and new product
development and other public company board experience (including
compensation and audit committee experience).
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Mr. Young, our CEO, has: extensive senior
level executive experience as our CEO and chief operating
officer, substantial experience in the beverage industry, and
substantial sales and marketing experience.
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Corporate
Governance
Corporate
Governance Guidelines
On May 19, 2010, the Board adopted revised Corporate
Governance Guidelines. The Corporate Governance Guidelines
include, among other things:
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formation of an Audit Committee, Compensation Committee and
Corporate Governance and Nominating Committee comprised solely
of independent directors;
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Board requirement to annually assess the performance of the
Chief Executive Officer (references in this Proxy Statement to
the Chief Executive Officer refers generically to
the person holding that title and not to any specific
individual);
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Board stewardship of our Code of Business Conduct and Ethics and
Insider Trading Policy;
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assessment of Board and director performance;
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power to retain outside advisors; and
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Categorical Standards of Director Independence.
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14
Our Corporate Governance Guidelines are available on our website
at www.drpeppersnapplegroup.com under the Investor Center and
Corporate Governance captions.
Director
Independence
In connection with the adoption of the Corporate Governance
Guidelines, the Board adopted our Categorical Standards of
Director Independence, which are attached as Annex A to our
Corporate Governance Guidelines. The Categorical Standards of
Director Independence are consistent with the independence
standards set forth in Section 303A.02 of the NYSE listing
standards. The Board has made an affirmative determination that
Mr. Sanders, Mr. Adams, Mr. Martin,
Ms. Patsley, Ms. Roché, Mr. Rogers,
Mr. Stahl and Ms. Szostak are independent and have no
material relationship with the Company.
Board
Committees and Meetings
We have five standing committees of the Board the
Audit Committee, the Compensation Committee, the Corporate
Governance and Nominating Committee, the Special Award Committee
and the Capital Transaction Committee. The charters for each of
the Audit Committee, the Compensation Committee and the
Corporate Governance and Nominating Committee are available on
our website at www.drpeppersnapplegroup.com under the Investor
Center and Corporate Governance captions.
Audit
Committee
In 2010, the Audit Committee consisted of three independent
directors Mr. Martin (Chairman), Mr. Adams
and Ms. Patsley. Mr. Martin has served as Chairman
since formation of the Audit Committee in 2008. All of such
Audit Committee members are independent in accordance with
applicable laws and regulations and as defined in the current
NYSE listing standards. Upon consideration of the attributes of
an audit committee financial expert as set forth in
Item 401(h) of
Regulation S-K
promulgated by the SEC, the Board determined that
Mr. Martin, Ms. Patsley and Mr. Adams possess
those attributes through their experience, and each was
designated as an Audit Committee Financial Expert. As of
March 1, 2011, the Board approved a change in the Audit
Committee and as of that date, the Audit Committee consists of
four independent directors Mr. Martin
(Chairman), Mr. Adams, Ms. Roché and
Mr. Rogers.
The Audit Committee of the Board is responsible for:
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appointing our independent auditors and monitoring their
performance, qualifications and independence;
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reviewing the quality and integrity of our consolidated
financial statements and disclosures;
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monitoring our system of internal controls over financial
reporting;
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monitoring the performance of our corporate audit
department; and
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monitoring our compliance with legal and regulatory requirements.
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The Audit Committee has selected Deloitte & Touche as
our independent registered public accounting firm for fiscal
year 2011, subject to ratification by our stockholders. On
May 19, 2010, the Board approved the restated Audit
Committee Charter, a copy of which is available on our website
at www.drpeppersnapplegroup.com under the Investor Center and
Corporate Governance captions. The Report of the Audit Committee
for fiscal year 2010 is included in this Proxy Statement on
page 50.
Compensation
Committee
In 2010, the Compensation Committee consisted of three
independent directors Mr. Stahl (Chairman),
Mr. Rogers and Ms. Szostak. Mr. Stahl has served
as the Chairman of the Compensation Committee since its
formation in 2008. All of such Compensation Committee members
are independent as defined in the current NYSE listing
standards. As of March 1, 2011, the Board approved a change
in the Compensation Committee and as of that date the
Compensation Committee consists of Mr. Stahl (Chairman),
Ms. Patsley and Ms. Szostak.
15
The Compensation Committee is responsible for:
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setting the compensation of the Chief Executive Officer, after
consideration of the Boards evaluation of the performance
of the Chief Executive Officer;
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determining the compensation levels of our other executive
officers, after consultation with the Chief Executive Officer;
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approving and administering our executive compensation program;
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administering our equity-based and incentive compensation plans;
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overseeing regulatory compliance with Section 162(m) of the
Internal Revenue Code (the Code) to maximize
deductibility of compensation paid; and
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reviewing and discussing with management our Compensation
Discussion and Analysis for inclusion in our proxy statement or
annual report, in accordance with applicable regulations.
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Information regarding the processes and procedures followed by
the Compensation Committee in considering and determining
executive compensation is provided below under the heading
Compensation Discussion and Analysis.
On May 19, 2010, the Board approved the restated
Compensation Committee Charter, a copy of which is available on
our website at www.drpeppersnapplegroup.com under the Investor
Center and Corporate Governance captions. The Report of the
Compensation Committee on Executive Compensation for fiscal year
2010 is included in this Proxy Statement on page 34.
The Compensation Committee has the authority to retain
compensation consultants and other outside advisors to assist in
the evaluation of executive officer compensation. The
Compensation Committee has retained Mercer, a wholly-owned
subsidiary of Marsh & McLennan Companies, Inc., to
assist the Compensation Committee with its responsibilities
related to the Companys executive officer and board of
director compensation programs. For more information on the
Compensation Committees relationship with Mercer, see
Role of Compensation Consultant in the Compensation
Discussion and Analysis section of this Proxy Statement.
Mercers fees for executive compensation consulting to the
Compensation Committee in fiscal year 2010 were approximately
$261,000.
During 2010, the Compensation Committee requested that Mercer:
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conduct an analysis of compensation for our key executive
officers, including the Chief Executive Officer, and assess how
target compensation aligned with our philosophy and objectives;
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develop recommendations for the Compensation Committee on the
size and structure of long-term incentive awards for the Chief
Executive Officer and key executive officers;
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provide perspectives on the composition of our peer group for
2010-2011;
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assist the Compensation Committee in the review of incentive
plan design, severance programs and related benefit and
perquisite programs;
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assess the Boards compensation;
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provide the Compensation Committee ongoing advice and counsel on
market compensation trends, legislative and regulatory updates
and their impact on our executive compensation programs; and
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assist in the preparation of the Compensation Discussion and
Analysis section of our proxy statement.
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During 2010, the Company retained Mercer and other affiliates of
Marsh & McLennan Companies to provide services,
unrelated to executive compensation, which have been approved by
the Compensation Committee. The aggregate fees paid for these
other services were approximately $845,000, consisting of
$600,000 for pension administration, $220,000 for administrative
services related to employee benefit communications and $25,000
for a computer software solution for tracking market data
research. Management decided to retain Mercer to provide these
other services. The Compensation Committee reviewed these other
services provided by Mercer, prior to
16
engagement. In 2011, the pension administration services are
being performed by another provider not affiliated with Mercer.
Because of the policies and procedures Mercer and the
Compensation Committee have in place, the Compensation Committee
is confident that the advice it receives from the executive
compensation consultant is objective and not influenced by
Mercers or its affiliates relationships with the
Company. These policies and procedures include:
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The consultant receives no incentive or other compensation based
on the fees charged to the Company for other services provided
by Mercer or any of its affiliates;
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The consultant is not responsible for selling other Mercer or
affiliate services to the Company;
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Mercers professional standards prohibit the individual
consultant from considering any other relationships Mercer or
any of its affiliates may have with the Company in rendering his
or her advice and recommendations;
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The Compensation Committee has the sole authority to retain and
terminate the executive compensation consultant;
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The consultant has direct access to the Compensation Committee
without management intervention;
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The Compensation Committee evaluates the quality and objectivity
of the services provided by the consultant each year and
determines whether to continue to retain the consultant; and
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The protocols for the engagement (described below) limit how the
consultant may interact with management.
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While it is necessary for the consultant to interact with
management to gather information, the Compensation Committee has
adopted protocols governing if and when the consultants
advice and recommendations can be shared with management. These
protocols are included in the consultants engagement
letter. This approach protects the Compensation Committees
ability to receive objective advice from the consultant so that
the Compensation Committee may make independent decisions about
executive pay at the Company.
Corporate
Governance and Nominating Committee
Since its formation in 2008, the Corporate Governance and
Nominating Committee has consisted of three independent
directors Mr. Sanders (Chairman),
Mr. Martin and Mr. Stahl. Mr. Sanders has served
as the Chairman of the Corporate Governance and Nominating
Committee since its formation. The Corporate Governance and
Nominating Committee is responsible for:
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assisting the Board by identifying individuals qualified to
become members of the Board and recommending to the Board
candidates to stand for election at the next annual meeting of
stockholders;
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recommending committee assignments after consultation with the
Chairman of the Board;
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assessing and reporting to the Board as to the independence of
each director;
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monitoring significant developments in the law and practice of
corporate governance and of the duties and responsibilities of
directors of public companies; and
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leading the Board in its annual performance self-evaluation and
evaluation of management, including establishing criteria to be
used in connection with such evaluation.
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On May 19, 2010, the Board approved the restated Corporate
Governance and Nominating Committee Charter, a copy of which is
available on our website at www.drpeppersnapplegroup.com under
the Investor Center and Corporate Governance captions.
In 2010, the Corporate Governance and Nominating Committee
considered our current directors and other candidates to fill
the slate of nominees for election to the Board. Based on an
evaluation of the background, skills and areas of expertise
represented by the various candidates against the qualifications
for directors as set forth in our
17
Corporate Governance Guidelines and as discussed in the section
Selection, Qualifications and Experience of
Directors on page 12, the Corporate Governance and
Nominating Committee determined that the following persons
possess the appropriate skill level, expertise and
qualifications and recommended that Joyce M. Roché, Wayne
R. Sanders, Jack L. Stahl, and Larry D. Young be re-elected to
the Board as Class III directors.
Special
Award Committee
On February 10, 2009, the Board formed a Special Award
Committee with the Chief Executive Officer named as the sole
member, so long as the Chief Executive Officer is a member of
the Board. The Special Award Committee has the authority to make
equity awards to employees (other than members of our executive
leadership team) under our Omnibus Stock Incentive Plan of 2009
in accordance with limitations as may, from time to time, be
established by the Compensation Committee. The Compensation
Committee has set forth the following limitations for the
Special Award Committee: (i) awards may be made to
employees, other than members of the executive leadership team,
(ii) awards may be made to new hires, for retention
purposes, promotions, in connection with employee relationship
issues, or in the discretion of the Special Award Committee for
exceptional performance, (iii) awards are limited to the
aggregate of $2 million each calendar year,
(iv) awards shall not exceed $100,000 to any one
individual, and (v) awards must be granted at the closing
market price on the effective date of the award. The Special
Award Committee reports to the Compensation Committee at each
regularly scheduled meeting on the awards it has made under this
limited authority since its last report. For a description of
the equity award procedures that apply to the Special Award
Committee, see Compensation Discussion and
Analysis Long-Term Incentive Awards
Equity Award Procedures on page 31.
Capital
Transaction Committee
On November 20, 2009, the Board formed a Capital
Transaction Committee, consisting of the Chairman of the Board
and the Chief Executive Officer, so long as the Chief Executive
Officer is a member of the Board. The Board granted general
authority to the Capital Transaction Committee to approve note
issuances, commercial paper transactions and interest rate
swaps, but excluding any transaction which includes the issuance
of the Companys common stock or preferred stock or a
feature to convert debt to common stock or preferred stock,
provided that (i) the aggregate amount of such transactions
does not exceed $750 million initial aggregate principal or
notional amount in any calendar year and (ii) our debt to
EBITDA ratio immediately prior to a contemplated transaction is
at or below 2.25x and the consummation of such transaction will
not result in our adjusted debt to EBITDA ratio exceeding 2.25x.
From time to time, the Board has approved certain capital
transactions and granted additional authority to the Capital
Transaction Committee to implement such capital transactions.
The Capital Transaction Committee reports to the Board on the
transactions it approves under the authority granted by the
Board.
2010
Meetings
During 2010, there were nine (9) meetings of the Board.
During 2010, there were ten (10) meetings held by the Audit
Committee and four (4) executive sessions of the Audit
Committee to meet with our independent registered public
accounting firm, our chief financial officer, our senior vice
president-controller and the vice president of corporate audit;
six (6) meetings held by the Compensation Committee; three
(3) meetings held by the Corporate Governance and
Nominating Committee; seven (7) meetings held by the
Special Award Committee; and three (3) meetings held by the
Capital Transaction Committee. Each incumbent director attended
at least 75% of the meetings of the Board and the Board
committees of which each was a member during his or her
respective tenures.
Executive
Sessions and Lead Independent Director
In compliance with the requirements of the NYSE, our Corporate
Governance Guidelines require the non-employee directors to meet
at least twice annually in regularly scheduled executive
sessions. Mr. Sanders, as lead independent director,
presides over non-employee director executive sessions. Five
(5) executive sessions were held in 2010.
18
Attendance
at Annual Meeting
It is our policy that all directors attend the Annual Meeting.
We anticipate that all members of the Board will be present at
the Annual Meeting. In 2010, each director attended the annual
meeting of stockholders held on May 20, 2010.
Board
Leadership Structure and Role in Risk Oversight
The Chairman of the Board and the Chief Executive Officer titles
are held by different persons. Mr. Sanders, as the Chairman
of the Board, is also the lead independent director.
Mr. Young is our CEO. In May 2008, the Company became a
stand-alone company as the result of a spin-off by Cadbury, plc
(Cadbury) which held the Cadbury Schweppes Americas
Beverages business group of entities (CSAB). At that
time, it was decided to separate the Chairman of the Board and
the Chief Executive Officer positions. Most important among the
considerations was that separation of the Chairman of the Board
and the Chief Executive Officer positions allowed our CEO to
direct his energy towards operational issues and the Chairman of
the Board could focus on governance and other related issues of
our new publicly-held company. At this time, the Company
believes that separating the Chairman of the Board and the Chief
Executive Officer positions enhances the independence of the
Board, provides independent business counsel for the Chief
Executive Officer, and facilitates the discussion among Board
members.
The Board has overall responsibility for oversight of risk and
has delegated the responsibility for the risk oversight process
to the Audit Committee. The Company is responsible for
management of risk and has formed an Enterprise Risk Management
Committee, which reports to the Audit Committee at each
regularly scheduled meeting. The Audit Committee reports on risk
to the Board.
19
BUSINESS
EXPERIENCE OF EXECUTIVE OFFICERS
Other than Mr. Young, who is a director and whose business
experience is summarized under Proposals
Proposal 1: Election of Directors beginning on
page 6, the following is a summary of the business
experience of our executive leadership team {ages are as of
the date of the Annual Meeting}:
James L. Baldwin, Executive Vice President, General Counsel,
age 50, has served as our Executive Vice President,
General Counsel and Secretary since the Companys spin-off
in May 2008. From July 2003 to May 2008, he served as Executive
Vice President and General Counsel of CSAB. From June 2002 to
July 2003, he served as Senior Vice President and General
Counsel of Dr Pepper/Seven Up, Inc., from August 1998 to June
2002 as General Counsel of Motts LLP and from March 1997
to August 1998 as Vice President and Assistant General Counsel
of Dr Pepper/Seven Up, Inc.
Tina S. Barry, Executive Vice President, Corporate
Affairs, age 54, has served as our Executive
Vice President since December 2010. Prior to that,
Ms. Barry served as our Senior Vice President, Corporate
Affairs from September 2008 until December 2010. She served as
our Vice President, Corporate Communications from May 2008 until
September 2008. Prior to joining the Company in May 2008 she was
Vice President of Corporate Communications for Kimberly-Clark
Corporation, where she served for 23 years in various
management positions.
Rodger L. Collins, President, Packaged Beverages,
age 53, has served as our President, Packaged Beverages
since February 2009. Prior to that, Mr. Collins served in
various executive capacities with us and CSAB, including
President of Bottling Group Sales and Finished Goods Sales
(September 2008 February 2009); President of Sales
for the Bottling Group (October 2007 September
2008); Midwest Division President for the Bottling Group
(January 2005 October 2007); and Regional Vice
President (October 2001 December 2004).
Martin M. Ellen, Executive Vice President, Chief Financial
Officer, age 57, joined the Company in April 2010 as
our Executive Vice President, Finance and transitioned into the
role of Executive Vice President, Chief Financial Officer in May
2010. Prior to joining the Company, Mr. Ellen served as
Senior Vice President Finance and Chief Financial
Officer at Snap-on Incorporated since 2002, where he had
responsibility for all of the financial operations at this
global publicly-traded company.
Derry L. Hobson, Executive Vice President, Supply Chain,
age 60, has served as our Executive Vice President of
Supply Chain since the Companys spin-off in May 2008. From
October 2007 to May 2008 Mr. Hobson also served as the
Executive Vice President of Supply Chain of CSAB.
Mr. Hobson joined CSAB as Senior Vice President of
Manufacturing in 2006 through the acquisition of DPSUBG, where
he had been Executive Vice President since 1999.
James J. Johnston, Jr., President, Beverage Concentrates
and Latin America Beverages, age 54, has served as our
President, Beverage Concentrates and Latin America Beverages
since September 2009. Prior to that, Mr. Johnston served in
various executive capacities with us and CSAB, including
President, Beverage Concentrates (November 2008
September 2009); President of Concentrate Sales (September
2008 November 2008); President of Finished Goods and
Concentrate Sales (October 2007 September 2008);
Executive Vice President of Sales (January 2005
October 2007); Executive Vice President of Strategy (December
2003 January 2005); and Senior Vice President of
Licensing (October 1997 December 2003).
Lawrence N. Solomon, Executive Vice President, Human
Resources, age 56, has served as our Executive Vice
President of Human Resources since the Companys spin-off
in May 2008. From March 2004 to May 2008, he served as the
Executive Vice President of Human Resources of CSAB. From May
1999 to March 2004, he served as Senior Vice President of Human
Resources for Dr Pepper/Seven Up, Inc., prior to which he served
on Cadbury Schweppes, plc global human resources team.
David J. Thomas, Ph.D., Executive Vice President,
Research & Development, age 49, has served as
our Executive Vice President, Research and Development since
December 2010. From spin-off in May 2008 until December 2010,
Dr. Thomas served as our Senior Vice President,
Research & Development. From November
20
2006 to May 2008, Dr. Thomas served as the Senior Vice
President, Research & Development for CSAB.
Dr. Thomas served as Vice President Global
Product Development for Gerber Products from July 2005 until
October 2006. Dr. Thomas holds a Ph.D. Degree in Food
Science, with an emphasis in Flavor Biochemistry from the
University of Wisconsin-Madison.
James R. Trebilcock, Executive Vice President, Marketing,
age 53, has served as our Executive Vice President,
Marketing since September 2008. From spin-off in May 2008 to
September 2008, Mr. Trebilcock served as our Senior Vice
President Marketing. From February 2003 to May 2008,
Mr. Trebilcock served as the Senior Vice
President Consumer Marketing of CSAB.
Mr. Trebilcock has held various positions in CSAB and its
predecessor businesses since July 1987.
21
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 21, 2011, the
record date, certain information with respect to the shares of
our common stock beneficially owned by (i) stockholders
known to us to own more than 5% of the outstanding shares of
such classes, (ii) each of our directors and Named
Executive Officers, and (iii) all of our executive officers
and directors as a group.
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Amount and Nature
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Percent of Total
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Percent of Total
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of Beneficial
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Shares of Common
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Voting Power
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Ownership of
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Stock Owned
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Owned
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Name
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Common Stock
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Beneficially
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Beneficially
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BENEFICIAL OWNERS OF MORE THAN 5% OF OUR COMMON STOCK
|
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FMR LLC(1)
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23,859,665
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10.5
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%
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10.5
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%
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82 Devonshire Street
Boston, MA 02109
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BlackRock Inc.(2)
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18,270,624
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8.1
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%
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8.1
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%
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40 East 52nd Street
New York, NY 10022
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The Vanguard Group Inc.(3)
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|
13,272,311
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5.8
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%
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|
5.8
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%
|
100 Vanguard Blvd
Malvern, PA 19355
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Morgan Stanley(4)
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|
13,151,100
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|
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|
5.8
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%
|
|
|
5.8
|
%
|
1585 Broadway
New York, NY 10036
|
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|
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|
|
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|
Cedar Rock Capital Ltd.(5)
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|
11,819,158
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5.2
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%
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|
5.2
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%
|
110 Wigmore Street
London W1U 3RW
United Kingdom
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SECURITY OWNERSHIP OF MANAGEMENT
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DIRECTORS:
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|
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|
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Wayne R. Sanders(6)(7)
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74,088
|
|
|
|
*
|
|
|
|
*
|
|
John L. Adams(6)(8)
|
|
|
34,063
|
|
|
|
*
|
|
|
|
*
|
|
Terence D. Martin(6)
|
|
|
5,282
|
|
|
|
*
|
|
|
|
*
|
|
Pamela H. Patsley(6)
|
|
|
4,063
|
|
|
|
*
|
|
|
|
*
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|
Joyce M. Roché
|
|
|
1,000
|
|
|
|
*
|
|
|
|
*
|
|
Ronald G. Rogers(6)
|
|
|
4,063
|
|
|
|
*
|
|
|
|
*
|
|
Jack L. Stahl(6)
|
|
|
5,079
|
|
|
|
*
|
|
|
|
*
|
|
M. Anne Szostak(6)
|
|
|
6,563
|
|
|
|
*
|
|
|
|
*
|
|
Michael F. Weinstein
|
|
|
2,000
|
|
|
|
*
|
|
|
|
*
|
|
NAMED EXECUTIVE OFFICERS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Larry D. Young(9)
|
|
|
746,608
|
|
|
|
*
|
|
|
|
*
|
|
Martin M. Ellen(9)(10)
|
|
|
69,668
|
|
|
|
*
|
|
|
|
*
|
|
James J. Johnston(9)
|
|
|
159,703
|
|
|
|
*
|
|
|
|
*
|
|
Rodger L. Collins(9)
|
|
|
141,212
|
|
|
|
*
|
|
|
|
*
|
|
Derry L. Hobson(9)
|
|
|
122,160
|
|
|
|
*
|
|
|
|
*
|
|
All other Executive Officers (5 persons)(9)
|
|
|
383,747
|
|
|
|
*
|
|
|
|
*
|
|
All Executive Officers and Directors as a Group (19 persons)
|
|
|
1,759,299
|
|
|
|
*
|
|
|
|
*
|
|
22
|
|
|
(1) |
|
Based on a Schedule 13G/A filed by the stockholder with the
SEC on February 14, 2011. Such stockholder has indicated
that it has sole voting power to vote 5,514,517 shares and
sole dispositive power with respect to all shares. |
|
(2) |
|
Based on a Schedule 13G/A filed by the stockholder with the
SEC on February 4, 2011. Such stockholder has indicated
that it has sole voting power and sole dispositive power with
respect to all shares. |
|
(3) |
|
Based on a Schedule 13G/A filed by the stockholder with the
SEC on February 10, 2011. Such stockholder has indicated
that it has sole voting power to vote 290,489 shares, sole
dispositive power with respect to 12,981,822 shares and
shared power to dispose of 290,489 shares. |
|
(4) |
|
Based on a Schedule 13G/A filed jointly by Morgan Stanley
and Morgan Stanley Investment Management Limited (25 Cabot
Square, Canary Wharf, London E14 4QA, England) with the SEC on
February 9, 2011. According to such filing, Morgan Stanley
has sole voting power to vote 11,047,823 shares, shared
voting power with respect to 573,174 shares and sole
dispositive power with respect to all shares. Additionally,
according to such filing, Morgan Stanley Investment Management
Limited has sole voting power with respect to
10,499,067 shares, shared voting power with respect to
573,174 shares and sole dispositive power with respect to
12,595,565 shares. The securities reported by Morgan
Stanley as a parent holding company are owned, or may be deemed
to be beneficially owned, by Morgan Stanley Investment
Management Limited, a wholly-owned subsidiary of Morgan Stanley. |
|
(5) |
|
Based on a Schedule 13G filed by the stockholder with the
SEC on February 14, 2011. Such stockholder has indicated
that it has shared voting power and shared dispositive power
with respect to all shares. |
|
(6) |
|
Includes the following shares related to RSUs and dividend
equivalent payments made with respect to the RSUs granted under
the Omnibus Stock Incentive Plan of 2008 that will vest within
60 days after March 21, 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
|
|
|
RSUs
|
|
Equivalent Payments
|
|
Wayne R. Sanders
|
|
|
19,715
|
|
|
|
602
|
|
John L. Adams
|
|
|
3,943
|
|
|
|
120
|
|
Terrance D. Martin
|
|
|
5,126
|
|
|
|
156
|
|
Pamela H. Patsley
|
|
|
3,943
|
|
|
|
120
|
|
Ronald G. Rogers
|
|
|
3,943
|
|
|
|
120
|
|
Jack L. Stahl
|
|
|
4,929
|
|
|
|
150
|
|
M. Anne Szostak
|
|
|
3,943
|
|
|
|
120
|
|
|
|
|
(7) |
|
The shares shown include 30,000 shares held in the name of
a family trust Mr. Sanders is a trustee of the
family trust and has a pecuniary interest in the shares of the
issuer held by the family trust. |
|
(8) |
|
The shares shown include 5,000 shares held by John L. Adams
IRA Rollover and 5,000 shares held by John L. Adams IRA SEP
Rollover. |
|
(9) |
|
Includes the following shares related to stock options, RSUs and
dividend equivalent payments made with respect to the grants
under the Omnibus Stock Incentive Plan of 2008 and the Omnibus
Stock Incentive Plan of 2009 that, with respect to stock
options, the Named Executive Officers and other executive
officers have the right to exercise as of March 21, 2011 or
will have the right to exercise within 60 days after
March 21, 2011 and with respect to RSUs, such RSUs will
vest within 60 days after March 21, 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend Equivalent
|
|
|
Exercisable Options
|
|
RSUs
|
|
Payments
|
|
Larry D. Young
|
|
|
584,967
|
|
|
|
94,637
|
|
|
|
2,892
|
|
Martin M. Ellen
|
|
|
42,562
|
|
|
|
14,797
|
|
|
|
309
|
|
James J. Johnston
|
|
|
118,716
|
|
|
|
16,561
|
|
|
|
506
|
|
Rodger L. Collins
|
|
|
118,716
|
|
|
|
16,561
|
|
|
|
506
|
|
Derry L. Hobson
|
|
|
106,312
|
|
|
|
15,378
|
|
|
|
470
|
|
Other Executive Officers
|
|
|
308,855
|
|
|
|
45,541
|
|
|
|
1,392
|
|
23
|
|
|
(10) |
|
The shares shown are owned by Martin Robin Partners, L.P., and
Mr. Ellen has a pecuniary interest in the limited
partnership. |
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the Exchange Act) requires our directors,
certain officers and persons who beneficially own more than 10%
of our outstanding common stock to file with the SEC initial
reports of ownership and reports of changes in ownership of our
common stock held by such persons. These persons are also
required to furnish us with copies of all forms they file under
this regulation. To our knowledge, based solely on a review of
the copies of such reports furnished to us and without further
inquiry, during 2010 all required forms for our current filing
persons were filed on time.
Code of
Conduct
We are dedicated to earning the trust of our clients and
investors and our actions are guided by the principles of
honesty, trustworthiness, integrity, dependability and respect.
The Board has adopted a Code of Business Conduct and Ethics that
applies to all employees and directors. This Code of Business
Conduct and Ethics is posted on our website at
www.drpeppersnapplegroup.com under the Investor Center and
Corporate Governance captions. We intend to satisfy the
disclosure requirement under Item 5.05 of
Form 8-K
regarding an amendment to, or waiver from, a provision of the
Code of Business Conduct and Ethics for our senior financial
officers, including the Chief Executive Officer, if any, either
by posting such information on our website at
www.drpeppersnapplegroup.com under the Investor Center and
Corporate Governance captions or by filing a
Form 8-K.
24
COMPENSATION
DISCUSSION AND ANALYSIS
Executive
Summary
We are a leading integrated brand owner, manufacturer and
distributor of non-alcoholic beverages in the United States,
Canada and Mexico, with a diverse portfolio of flavored
carbonated soft drinks (CSDs) and non-carbonated
beverages (NCBs), including
ready-to-drink
teas, juices, juice drinks and mixers. Our brand portfolio
includes popular CSD brands such as Dr Pepper, Sunkist soda,
7UP, A&W, Canada Dry, Crush, Squirt, Peñafiel,
Schweppes and Venom Energy, and NCB brands such as Snapple,
Motts, Hawaiian Punch, Clamato, Roses and
Mr & Mrs T mixers. Our largest brand, Dr Pepper, is a
leading flavored CSD in the United States according to The
Nielsen Company. We have some of the most recognized beverage
brands in North America, with significant consumer awareness
levels and long histories that evoke strong emotional
connections with consumers.
We were formed in 2008, when Cadbury separated its beverage
business in the United States, Canada, Mexico and the Caribbean
(the Americas Beverages business) from its global
confectionery business by contributing the subsidiaries that
operated its Americas Beverages business to us. After the
separation, we became an independent publicly-traded company
listed on the NYSE under the symbol DPS.
Maintaining our industry leading brand positions requires a
talented and motivated executive team. Our overall executive
compensation program is, therefore, designed to be competitive
with other leading companies in our industry, considering our
size and scale, and also to be competitive with other leading
beverage and consumer packaged goods companies of similar size
and scale.
Following the spin-off from Cadbury and in an effort to recruit
and retain a talented and motivated executive team, we undertook
a significant review of our entire compensation program to
ensure that its design was compatible with our new position as
an independent, NYSE-listed company, which is included in the
S&P 500. As a result of this review, the following
objectives were established as the basis for our program design
and these objectives continue to guide our executive
compensation programs:
|
|
|
|
|
Total compensation targets are designed to be competitive with
the companies in the markets in which we compete;
|
|
|
|
Pay is generally performance-based, with our overall performance
judged both against internal goals and the performance of
competitors;
|
|
|
|
A
pay-for-performance
culture links compensation to both individual and collective
performance and will result in differentiated compensation;
|
|
|
|
A substantial percentage of total compensation is variable, or
at risk, both through annual incentive compensation
and the granting of long-term incentive awards; and
|
|
|
|
Equity incentive awards are used to align the interests of
management with those of our stockholders.
|
To accomplish these objectives, our executive officers
total compensation is comprised of a mix of base salary,
management incentive plan awards (our annual cash incentive
program) and long-term incentive awards (equity awards of
options and RSUs).
The past year was one of significant strategic and financial
accomplishments. Among our key accomplishments were the
following:
|
|
|
|
|
completion of our licensing arrangements with PepsiCo Inc.
following its acquisition of The Pepsi Bottling Group, Inc. and
PepsiAmericas, Inc., resulting in a one-time cash payment of
$900 million before taxes, fees and related expenses;
|
|
|
|
completion of our licensing agreement with The
Coca-Cola
Company, following its acquisition of the North American
Bottling Business of
Coca-Cola
Enterprises, resulting in a one-time cash payment of
$715 million before taxes, fees and related
expenses; and
|
|
|
|
repurchase of over $1 billion our common stock and payment
of total dividends to our stockholders of $0.80 per share.
|
25
In addition to the above events and in spite of a difficult
economic environment, the Company increased net sales in fiscal
year 2010 compared to fiscal year 2009 by almost 2%. Net income
and diluted earnings per share were approximately the same in
fiscal year 2010 compared to fiscal year 2009, even though we
recorded a $100 million loss in fiscal year 2010 for the
early extinguishment of debt in connection with the repurchase
of approximately $476 million of the Companys senior
unsecured notes due in 2018.
In 2010, we also adopted Stock Ownership Guidelines for our
directors and officers to further align the interests of our
directors and executive officers with those of our stockholders.
In 2011, the Compensation Committee discontinued the
gross-up
payments to our CEO to cover tax costs associated with his
personal use of a corporate jet. Additionally, the Compensation
Committee is further enhancing our
pay-for-performance
culture by including performance based equity awards as a part
of our long-term equity incentive program.
We believe that the executive compensation decisions made in
2010, as are reflected in the section of this Proxy Statement
entitled Historical Executive Compensation
Information, were necessary to attract and retain our
executive management team and that our executive management team
was a key factor in our performance.
Role of
the Compensation Committee
The Compensation Committee administers our executive
compensation program. The Compensation Committee establishes and
monitors our overall compensation strategy to ensure that
executive compensation supports our business objectives. In
carrying out its responsibilities, the Compensation Committee is
responsible for setting the compensation of the Chief Executive
Officer and all of our other executive officers. As part of this
compensation setting process, the Compensation Committee, with
assistance from its executive compensation consultant, Mercer,
reviews the compensation (including salary, annual incentives,
long-term incentives and other benefits) of similarly situated
executive officers in our peer group. The Compensation Committee
also consults with the other independent directors on the Board
before setting annual compensation for the executives. The
committee chair regularly reports on committee actions at Board
meetings.
For a more complete description of the responsibilities of the
Compensation Committee, see Corporate
Governance Board Committees and Meetings
Compensation Committee beginning on page 15 and the
charter for the Compensation Committee posted on our website at
www.drpeppersnapplegroup.com under the Investor Center and
Corporate Governance captions.
Role of
Compensation Consultant
The Compensation Committee has retained Mercer as its outside
executive compensation consultant to advise the Compensation
Committee on executive compensation matters. Mercer regularly
attends Compensation Committee meetings and reports directly to
the Compensation Committee on matters relating to compensation
for our executive officers, including the Chief Executive
Officer. Please see Corporate Governance Board
Committees and Meetings Compensation Committee
beginning on page 15 for a list of Mercers duties in
2010. As discussed in that section, the Company uses Mercer for
other services that are unrelated to executive compensation. If
the Company decides to use Mercer on a significant project, then
management will review the decision with the Compensation
Committee prior to Mercers engagement by the Company.
Role of
Company Management
The Chief Executive Officer develops preliminary recommendations
regarding compensation matters with respect to all key
executives (other than the Chief Executive Officer) and provides
these recommendations to the Compensation Committee. The
management team is responsible for the administration of the
compensation programs once Compensation Committee decisions are
finalized.
26
The
Compensation Program
The key components of our current compensation program for our
key executives are:
|
|
|
|
|
base salary;
|
|
|
|
short-term (annual) cash incentives;
|
|
|
|
long-term, equity-based incentives (both time based and
performance based); and
|
|
|
|
other benefits.
|
In 2010, the Compensation Committee reviewed our executive
compensation program to determine how well actual compensation
targets met our overall philosophy and the compensation in our
targeted markets. Overall, the Compensation Committee believes
the program remains aligned with our key objectives.
Peer
Group
In the second half of 2009, our Compensation Committee, with the
assistance of Mercer, reviewed potential peers in light of our
new publicly-traded status. As a result, a set of peer companies
was identified that were used to calibrate our executive
compensation program for 2010. These companies represented
leading beverage and consumer packaged goods companies of
similar size and scale to us, and include:
|
|
|
|
|
Brown-Forman
|
|
Del Monte
|
|
McCormick
|
Campbell Soup
|
|
General Mills
|
|
Molson Coors
|
Chiquita Brands
|
|
Heinz
|
|
Ralcorp
|
Coca-Cola
Enterprises*
|
|
Hershey
|
|
Sara Lee
|
ConAgra
|
|
Hormel
|
|
|
Constellation Brands
|
|
J.M. Smucker
|
|
|
Dean Foods
|
|
Kellogg
|
|
|
|
|
|
* |
|
Coca-Cola
Enterprises was eliminated from the group during 2010 due to its
acquisition by The
Coca-Cola
Company. |
Base
Salary
Base salary is designed to compensate our key executives in part
for their roles and responsibilities and also to provide a
stable level of compensation that serves as a retention tool
throughout the executives career. Salaries are targeted at
the median of the market for similar positions in the peer
companies. Adjustments are made annually based on individual
performance.
In general, base salary is the smallest component of the overall
compensation package, assuming that we are achieving or
exceeding targeted performance levels for our incentive
programs. On average, base salary currently represents
approximately 15% to 30% of the total compensation package for
the Chief Executive Officer and key executive officers. This is
consistent with our philosophy to have low fixed and high
at risk compensation.
Salary increases for our NEOs (as defined in the first paragraph
of Historical Executive Compensation Information on
page 35) in 2010 were made by the Compensation Committee,
considering the challenging economic environment, the level of
base salary relative to key comparators and the performance of
the given executive. As a result of these actions, the base
salaries for our CEO and three other NEOs are near the market
median. The salary for Mr. Hobson is above the median,
recognizing his outstanding performance in 2009 and the
complexity and importance of our Supply Chain function.
Management
Incentive Compensation
The Management Incentive Plan (MIP), our annual cash
incentive program, is designed to reward the achievement of
specific pre-set financial results typically measured over the
fiscal year. Each participant is assigned an annual incentive
target expressed as a percentage of base salary. For the NEOs,
these targets ranged from 70% to
27
125% of base salary. The actual awards are calculated based on
year-end salary. For any NEO promoted during the year, the
calculation is pro-rated and is based upon the NEOs actual
time in each position, the NEOs previous base salary and
MIP target percentage and new base salary and MIP target
percentage.
Specific
Plan for 2010
Awards under the MIP for 2010 were based on a series of key
financial metrics that reflected the Companys key
objectives for the year. The metrics vary based on the roles and
responsibilities of each executive. In addition, a portion of
the incentive plan was focused on our drive to improve our Cash
Conversion Cycle metric, since this was targeted as a
company-wide area of focus for 2010.
In addition to overall financial performance, the Company
established a series of key operating metrics to focus various
plan participants, including some of our NEOs, on operational
excellence in 2010. These operating metrics included the
following areas: all channel volume distribution, new route
penetration, case fill rate, overall equipment effectiveness and
market share. The phrase operating metrics is used
to capture this portion of the annual incentive plan described
below.
The key metrics and weights for our NEOs and other senior
executives were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEO and
|
|
|
|
|
|
|
Chief Financial
|
|
Business Unit
|
|
Senior Staff
|
Metric
|
|
Officer
|
|
Presidents
|
|
Executives
|
|
Financial Metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share (EPS)
|
|
|
60
|
%
|
|
|
|
|
|
|
|
|
Company Net Sales
|
|
|
30
|
%
|
|
|
|
|
|
|
15
|
%
|
Company Net Income
|
|
|
|
|
|
|
40
|
%
|
|
|
40
|
%
|
Segment Net Sales
|
|
|
|
|
|
|
15
|
%
|
|
|
|
|
Segment Operating Profit (SOP)
|
|
|
|
|
|
|
15
|
%
|
|
|
15
|
%
|
Operating Metrics
|
|
|
|
|
|
|
20
|
%
|
|
|
20
|
%
|
Cash Conversion Cycle
|
|
|
10
|
%
|
|
|
10
|
%
|
|
|
10
|
%
|
Results
for Fiscal Year 2010
Financial
Metrics
In fiscal year 2010, the targeted financial goals at the
corporate level, the potential payouts for achieving these
goals, and the fiscal year 2010 results (against which the
targets are measured and as determined by the Compensation
Committee) were as follows:
|
|
|
|
|
|
|
|
|
|
|
Potential Payout as a
|
|
|
Percentage
|
|
|
of Target
|
|
|
Target
|
|
|
Metric
|
|
100%
|
|
Results
|
|
|
($ in millions except EPS)
|
|
EPS(1)
|
|
$
|
2.35
|
|
|
$
|
2.45
|
|
Company Net Sales
|
|
$
|
5,763
|
|
|
$
|
5,636
|
|
Company Net Income(1)
|
|
$
|
590
|
|
|
$
|
595
|
|
Segment Net Sales:
|
|
|
|
|
|
|
|
|
Beverage Concentrates
|
|
$
|
1,102
|
|
|
$
|
1,156
|
|
Packaged Beverages
|
|
$
|
4,317
|
|
|
$
|
4,098
|
|
Latin America Beverages
|
|
$
|
430
|
|
|
$
|
382
|
|
SOP(2):
|
|
|
|
|
|
|
|
|
Beverage Concentrates
|
|
$
|
728
|
|
|
$
|
759
|
|
Packaged Beverages
|
|
$
|
641
|
|
|
$
|
569
|
|
Latin America Beverages
|
|
$
|
65
|
|
|
$
|
42
|
|
28
|
|
|
(1) |
|
The reconciliation of the fiscal year 2010 results for EPS and
Company Net Income to amounts reported by the Company are as
follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Company Net Income
|
|
|
EPS
|
|
(in millions)
|
|
As reported
|
|
$
|
2.17
|
|
|
$
|
528
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Loss on extinguishment of 2018 Notes(a)
|
|
|
.27
|
|
|
|
65
|
|
Tax gain related to the Kraft Indemnity obligations(b)
|
|
|
(.04
|
)
|
|
|
(10
|
)
|
Loss related to the Williamson strike(c)
|
|
|
.05
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
Results
|
|
$
|
2.45
|
|
|
$
|
595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
See discussion in Part 1, Item 7 of the 2010
Form 10-K
under the caption Loss on Early Extinguishment of
Debt. |
|
(b) |
|
See discussion in Part 1, Item 7 of the 2010
Form 10-K
under the caption Interest Expense and Other Income. |
|
(c) |
|
See discussion in Part 1, Item 7 of the 2010
Form 10-K
under the caption Results of Operation by
Segment Packaged Beverages. In reporting the
results of operations, the Company considered the items in
(a) and (b) above to be non-recurring and, as such,
would have been excluded when calculating the MIP. The strike at
the Williamson, NY manufacturing facility was not reported as a
non-recurring item in reporting earnings. However, the
Compensation Committee has discretion under the MIP to adjust
the results if there is an unanticipated business condition that
materially affected the fairness of the goals and unduly
influenced the Companys ability to meet those goals. For
fiscal year 2010, the Compensation Committee considered the
strategic nature of this strike and concluded that event was an
unanticipated business condition that materially affected the
fairness of the goals and unduly influenced the Companys
ability to meet those goals. Consequently, the Compensation
Committee excluded those costs when considering the achievement
of the goals. As a result of that exclusion, the performance
against the financial and operating metrics improved and the
payments to be made under the MIP for fiscal year 2010 were
increased by approximately 8%. |
|
|
|
(2) |
|
Certain adjustments were also made to the SOP for each segment
to eliminate costs allocated to the segments for certain
investments made in the business in fiscal year 2010. These
investments were not included in the operating plan for the
segment used to calculate the MIP targets for fiscal year 2010. |
Operating
Metrics
The performance measures for operating metrics for fiscal year
2010 were set at levels that are challenging, but achievable.
Since 2010 was the second full year the Company operated as an
independent company and used operating metrics as a performance
measure for determining incentive compensation, it was difficult
to predict achievability. However, the Compensation Committee
set such measures at levels that they reasonably believed would
contribute to the success of the Company in fiscal year 2010 and
expected operations to meet based on the achievable, but
challenging standard. For fiscal year 2010, our Compensation
Committee determined that results based on various operating
metrics were 61.7% of target for the President, Packaged
Beverages, 45.2% of target for the President, Beverage
Concentrates and Latin America Beverages, and 114.7% of target
for the Executive Vice President, Supply Chain. The performance
against targets in fiscal year 2010 reflects that operating
metrics are being set at challenging levels.
Operating metrics were first used as a performance metric in
fiscal year 2009. In that year, the results based on various
operating metrics were 112.6% of target for the President,
Packaged Beverages, 100.6% of target for the President, Beverage
Concentrates and Latin America Beverages, and 107.7% of target
for the Executive Vice President, Supply Chain.
29
Cash
Conversion Cycle
The cash conversion cycle metric used by the Company is a
standard financial measure that is the arithmetic sum of days of
sales outstanding plus the number of days product is in
inventory less the number of days payables that are outstanding.
In 2010, our first year of using this measure, the Company set a
target to improve the cash conversion cycle by 1.3 days.
The actual improvement in the cash conversion cycle was
8.5 days bringing the cash conversion cycle to
38.0 days. As a result of this improvement, the performance
under this metric was 200% of target for each of our NEOs.
Long-Term
Incentive Awards
Overview
Our long-term incentive awards are used to link our performance
and increases in stockholder value to the total compensation for
our key executives. These awards are also key components of our
ability to attract and retain our key executives. The annualized
value of the awards to our key executives is intended to be the
largest component of our overall compensation package. On
average, and assuming performance is on target, these awards
currently represent over 50% of the total compensation package
for our NEOs, consistent with our emphasis on linking executive
pay to stockholder value.
Specific
Programs for 2010
Our incentive plans allow for the granting of stock options,
restricted stock and RSUs, each linked to our stock price. For
2010, the Compensation Committee believed it was important to
continue using equity vehicles to provide alignment with
stockholder interests, consistent with our emphasis following
our spin-off from Cadbury in 2008. To provide an emphasis on
performance through the use of stock options and on retention
through the use of time-based RSUs, the Compensation Committee
made grants and awards in 2010 to our key executives consisting
of 30% stock options and 70% time-based RSUs (weighted by
value). The higher weighting in both 2009 and 2010 on RSUs was
done primarily to provide additional emphasis on retention in
the uncertain economic environment. The Compensation Committee
believes that these awards to our key executives will focus
attention on building stockholder value over the long-term,
reinforce the importance of their roles as stewards of the
business, and help to retain the executives.
The following provides more detail about the various award
programs:
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Stock Options: Stock options are granted with
an exercise price equal to the closing market price of our
common stock on the grant date. Stock options generally vest
over a period of three years with one third becoming exercisable
on each anniversary of the grant date as long as the recipient
is still employed by us on the date of vesting, and generally
expire after ten years. Stock options only have value if our
stock price appreciates after the options are granted. Our
incentive plans prohibit the repricing of any outstanding award.
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RSUs: RSUs are equivalent in value to one
share of our common stock and generally vest on the third
anniversary of the award date. RSUs do not generally entitle the
recipient to voting rights until the units vest. Holders of RSUs
receive a dividend equivalent payment of additional RSUs. These
dividend equivalents are governed by the terms of an RSU
agreement. The additional RSUs equal: (i) the product of
the per-share cash dividend payable with respect to each share
of common stock on that date, multiplied by the total number of
RSUs which have not been settled or forfeited as of the record
date for such dividend, divided by (ii) the closing price
of one share of common stock on the payment date of that
dividend.
|
Changes
for 2011
In 2011, the Compensation Committee approved a performance share
unit (PSU) plan. Each PSU is equivalent in value to
one share of our common stock. PSUs will vest three years from
the beginning date of a pre-determined performance period to the
extent the Company has met two performance criteria during the
performance period, which criteria are based on: (i) the
percentage growth in net income and (ii) the percentage
yield from cash flow from operations.
30
Equity
Award Procedures
We have established equity award procedures to develop a
consistent practice with respect to the granting of equity-based
awards. Under these procedures, the Board, with respect to
equity awards to non-executive directors, and the Compensation
Committee, with respect to employee awards, may grant equity
awards at its first regularly-scheduled meeting in each calendar
year (or at any special meeting, so long as this special meeting
occurs on or before March 2 of each calendar year), and the
effective date of these equity awards will be March 2 (or if not
a NYSE trading day, the first NYSE trading day after March 2).
The Compensation Committee may also make equity awards to new
hires, employees receiving promotions, employees receiving
retention grants and persons becoming employees as a result of
an acquisition at any regularly scheduled meeting or at any
special meeting called for that purpose. The Board may also make
equity awards to persons who become new directors at any
regularly scheduled meeting or at any special meeting called for
that purpose. The Special Award Committee may make awards to
employees at any time, but the effective date of such awards is
the first business day of the next succeeding month after the
Special Award Committee selects employees for awards. Awards by
the Special Award Committee are also governed by the limitations
established by the Compensation Committee. For a more complete
description of the authority and limitations of the Special
Award Committee, see Corporate Governance
Board Committees and Meetings Special Award
Committee on page 18.
Our equity award procedures require that the exercise or grant
price of an equity award equal the closing price of our common
stock on the effective date of the award. Our procedures also
set forth the procedural and control requirements for granting
equity awards.
Benefits
Our benefit programs are established based upon an assessment of
competitive market factors and a determination of what is needed
to attract and retain high caliber executives. Our primary
benefits for executives include participation in our broad-based
plans: retirement plans, savings plans, health and dental plans
and various insurance plans, including disability and life
insurance.
We also provide certain executives, including the NEOs, the
following benefits:
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Supplemental Savings Plan: The only
nonqualified deferred compensation plan sponsored by us for NEOs
is the Supplemental Savings Plan (the SSP), a
non-tax qualified defined contribution plan. The SSP is for
employees who are actively enrolled in the Savings Incentive
Plan (SIP) and whose deferrals under the SIP are
limited by the Code compensation limitations. Employees may
elect to defer up to 75% of their base salary over the
compensation limit (established in the Code) to the SSP, and we
match 100% of the first 4% of base salary that is contributed by
these employees. Employees participating in the SSP are always
fully vested in their, as well as our, contributions to the plan.
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Executive Service Allowance: All NEOs and
other key executives receive an annual allowance that can be
used for obtaining financial planning, tax preparation services
and other related benefits. The executive pays tax on this
allowance.
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Automobile Allowance: We provide our NEOs with
an automobile allowance. This benefit provides eligible
executives with an opportunity to use their car for both
business and personal use in an efficient manner. The executive
pays tax on this allowance.
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Executive Long Term Disability: We provide our
NEOs with an executive long term disability program that is
supplemental to our group disability program. The executive long
term disability program provides a benefit of up to 60% of total
target compensation. Total target compensation equals the sum of
base pay and target performance based incentive compensation.
Executives recognize imputed income for tax purposes for
premiums paid for the executive long term disability premiums.
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Annual Physicals: We provide our NEOs with the
opportunity to have executive physicals on an annual basis.
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Aircraft Usage: As a result of the
recommendations contained in an independent, third-party
security study, the Board has determined that Mr. Young
must travel by corporate jet (chartered or company-owned)
|
31
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for all business and personal air travel. Per Internal Revenue
Service (IRS) regulations, our CEO recognizes
imputed income on the personal use of a corporate jet at rates
established by the IRS. In 2010, the Company grossed up
Mr. Youngs base salary for up to $150,000 of income
that was attributed to Mr. Young for personal air travel to
cover the taxes accruing to Mr. Young as a result of this
benefit.
|
Changes
for 2011
In 2011, the Compensation Committee discontinued the gross up of
Mr. Youngs base salary to cover the taxes accruing to
Mr. Young as a result of his personal use of a corporate
jet.
Stock
Ownership Guidelines
In 2010, the Company adopted stock ownership guidelines, which
provide that (1) the Chief Executive Officer is required to
own shares of the Companys common stock having a value
equal to a minimum of five times his or her annual base salary,
(2) the Chief Financial Officer, President
Packaged Beverages, and President Beverage
Concentrates and Latin America Beverages, are each required to
own shares of the Companys common stock having a value
equal to a minimum of four times their respective annual base
salary and (3) all executive vice presidents are required
to own shares of the Companys common stock having a value
equal to a minimum of three times their respective annual base
salary. There are varying requirements of ownership for other
officers of the Company. Non-Executive directors serving on the
Board are required to own shares of the Companys common
stock having a value equal to a minimum of three times their
respective annual retainer. All unvested time based RSUs shall
be included as shares owned for purposes of determining
compliance with the guidelines, but unvested performance based
RSUs and stock options are excluded from the determination of
shares owned for purposes of determining compliance with the
guidelines. The officers and directors shall meet such minimum
guidelines five years after November 1, 2010 or, if elected
or appointed after November 1, 2010, then five years after
the date of such election or appointment. Though not yet
required, all of the NEOs and all of our non-executive directors
met these guidelines as of December 31, 2010. In addition
to the Stock Ownership Guidelines, our Insider Trading Policy
prohibits directors, officers and employees from entering into
hedge transactions which would normally be entered into if an
investor thought the market price for the shares was going to
decline.
Tax
Treatment
Under Section 162(m) of the Code, we generally receive an
annual federal income tax deduction for compensation paid to the
Chief Executive Officer and the other three most highly paid
executives (excluding the chief financial officer) only if the
compensation is less than $1 million or is
performance-based. The applicable awards granted under the MIP,
the Omnibus Stock Incentive Plan of 2008 and the Omnibus Stock
Incentive Plan of 2009 are fully tax-deductible for us. RSUs
granted under the Omnibus Stock Incentive Plan of 2008 and the
Omnibus Stock Incentive Plan of 2009 that vest solely over time
are not performance-based compensation and are subject to the
limitation of tax deductibility under Section 162(m) of the
Code. The Compensation Committee intends to continue seeking a
tax deduction to the extent possible for all executive
compensation, as long as it is in the best interest of the
Company and our stockholders.
Compensation
Programs and Risk Taking
At the request of our Compensation Committee, Mercer undertook a
detailed review of the Companys compensation programs in
connection with the preparation of this Proxy Statement to
determine if disclosure was required under Item 402(s) of
Regulation S-K.
The risk assessment by Mercer of the Companys compensation
programs focused on areas such as overall program design,
balance of short-term and long-term compensation, incentive plan
design (type of metrics used, award opportunity and incentive
plan leverage) and administrative provisions.
With respect to the overall program design and balance of
short-term and long-term compensation, Mercer found that:
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A significant portion (over 50%) of target total compensation
for our executive leadership team is provided in equity and
focused on long-term performance for stockholders. With annual
compensation accounting for
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32
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less than half of the targeted package, the structure lessens
the ability for excessive short-term financial benefits.
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The relationship between fixed and variable/at-risk compensation
is heavily weighted to incentives, in support of our
pay-for-performance
philosophy. However, the portion at risk (from approximately 70%
to 85%) is consistent with practices at our peer companies.
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Balance is also provided through an appropriately set cap (200%
of target) that limits the upside potential of the MIP:
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○
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A cap with less upside potential may not generate enough
incentive for executives to exceed target;
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○
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Conversely, a plan that is uncapped may cause excessive
risk-taking on the part of the executives in order to maximize
short-term compensation; and
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○
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The only part of the program with uncapped opportunity is stock
options. However, the impact of this vehicle is lessened due to
vesting of awards over multiple years (versus immediate or very
short-term vesting) and its low weighting within the current
long-term-incentive plan (30% stock options / 70%
RSUs).
|
With respect to incentive plan risk management, Mercer noted the
following:
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The MIP incorporates multiple financial metrics (EPS, net sales,
net income, segment net sales and SOP), operating metrics and
other metrics that may be important to the business in a given
year. Additional diversification is provided by varying the
metrics and weightings based on the focus and responsibilities
of each position.
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Metric performance and subsequent payouts for the MIP are
approved by the Compensation Committee.
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The MIP has a maximum / capped award opportunity.
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For certain metrics (e.g., EPS), the Compensation Committee may
exclude any unusual
and/or
extraordinary items, which provides protection should
formula-driven results result in inappropriate payouts.
|
With respect to our stock ownership guidelines, Mercer noted
that:
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The guidelines specify that, within a five-year period,
executives should hold an amount of Company stock ranging from
five times base salary for the Chief Executive Officer down to
one times base salary for vice presidents; and
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The guidelines are consistent with market practices.
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Based on these findings, Mercer concluded that (i) the
design and balance of short-term and long-term compensation
effectively align risk and reward, appropriately balance
short-term and long-term incentives and pay mix, the amount of
pay at risk is appropriately set for the industry and caps are
in place on incentive programs, (ii) incentive plan designs
motivate a high degree of business performance through alignment
with the Companys business strategy and contain prudent
risk management design through the use of multiple metrics,
capped award opportunities, and a process that requires
Compensation Committee approval of key elements and
(iii) the stock ownership guidelines approved in 2010
further align executives interests with stockholders over
the long term by requiring executives to keep a significant
portion of wealth tied to the Companys future.
As the result of this risk assessment, Mercer reported to the
Compensation Committee and to management that overall the
Companys program is aligned to the interests of its
stockholders, appropriately rewards pay for performance and does
not promote unnecessary and excessive risk. Based on the review
and report of Mercer, the Compensation Committee believes that
the Companys compensation programs do not provide
incentives for excessive risk-taking and, therefore, do not
encourage Company management or employees to take unreasonable
risks relating to the Companys business.
33
REPORT OF
THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
In 2010, the Compensation Committee was comprised of
Mr. Stahl, Mr. Rogers and Ms. Szostak. The
Compensation Committee oversees our compensation program on
behalf of the Board. In fulfilling its oversight
responsibilities, the Compensation Committee reviewed and
discussed with management the Compensation Discussion and
Analysis set forth in this Proxy Statement.
In reliance on the review and discussions referred to above, the
Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in this Proxy
Statement and the Companys Annual Report on
Form 10-K
for the year ended December 31, 2010 (through incorporation
by reference to this Proxy Statement).
Submitted by the
Compensation Committee of the Board
Jack L. Stahl, Chairman
Ronald G. Rogers
M. Anne Szostak
34
HISTORICAL
EXECUTIVE COMPENSATION INFORMATION
The executive compensation disclosure contained in this section
reflects compensation information for 2010. The following
disclosure tables provide information for
(1) Mr. Young, our President and CEO;
(2) Mr. Ellen, our Chief Financial Officer;
(3) Mr. Johnston, our President, Beverage Concentrates
and Latin America Beverages; (4) Mr. Collins, our
President, Packaged Beverages; (5) Mr. Hobson, our
Executive Vice President, Supply Chain; and
(6) Mr. Stewart, our former Chief Financial Officer.
These persons are sometimes herein collectively referred to as
Named Executive Officers or NEOs and
individually as NEO.
Summary
Compensation Table
The following table sets forth information regarding the
compensation earned by NEOs in fiscal years 2008, 2009 and 2010.
Summary
Compensation Table
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Change in
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Pension Value
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and
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Nonqualified
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Non-Equity
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Deferred
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Name and Principal Position
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Year
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($)
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($)
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($)(2)
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($)(3)
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($)(4)
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($)(5)
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($)(6)
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($)
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Larry D. Young
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2010
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976,923
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3,324,983
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1,424,995
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1,614,251
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14,693
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278,551
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7,634,396
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President & CEO
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2009
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934,616
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(1)
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2,519,992
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1,079,998
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1,839,488
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30,619
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114,665
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6,519,378
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2008
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867,308
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2,399,994
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2,328,073
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1,643,155
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229,831
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206,130
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7,674,491
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Martin M. Ellen
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2010
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397,789
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3,543,707
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(7)
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1,518,745
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(7)
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459,715
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179,422
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6,099,378
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Chief Financial Officer
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2009
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2008
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James J. Johnston
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2010
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515,385
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699,993
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299,997
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422,574
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34,419
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139,581
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2,111,949
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Pres. Beverage Concentrates
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2009
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519,231
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(1)
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629,988
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269,998
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651,121
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70,036
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78,370
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2,218,744
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& Latin America Beverages
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2008
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454,423
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419,987
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398,682
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513,791
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57,314
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54,690
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1,898,887
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Rodger L. Collins
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2010
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517,693
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699,993
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299,997
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347,153
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100,036
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1,964,872
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Pres. Packaged Beverages
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2009
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510,000
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(1)
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629,988
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269,998
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715,633
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95,638
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2,221,257
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2008
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452,462
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419,987
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398,682
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658,717
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237,224
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2,167,072
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Derry L. Hobson
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2010
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444,231
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559,976
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239,995
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329,838
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84,158
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1,658,198
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EVP Supply Chain
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2009
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430,578
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(1)
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1,059,991
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239,998
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474,654
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78,108
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2,283,329
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2008
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376,923
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389,986
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369,576
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514,542
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58,009
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1,709,036
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John O. Stewart
|
|
|
2010
|
|
|
|
197,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
204,536
|
|
|
|
6,963
|
|
|
|
1,470,691
|
|
|
|
1,879,305
|
|
Former Chief Financial
|
|
|
2009
|
|
|
|
532,212
|
(1)
|
|
|
|
|
|
|
629,988
|
|
|
|
269,998
|
|
|
|
670,392
|
|
|
|
13,957
|
|
|
|
76,723
|
|
|
|
2,193,270
|
|
Officer
|
|
|
2008
|
|
|
|
509,135
|
|
|
|
|
|
|
|
599,992
|
|
|
|
567,463
|
|
|
|
874,120
|
|
|
|
94,132
|
|
|
|
104,339
|
|
|
|
2,749,181
|
|
|
|
|
(1) |
|
Salary disclosed reflects 27 biweekly pay periods that occurred
in fiscal year 2009, excluding Mr. Collins who did receive
the typical 26 biweekly pay periods because he is on a different
payroll system. |
|
(2) |
|
The amounts reported in the Stock Awards column reflect the
grant date fair value associated with awards of RSUs to each of
the NEOs (amounts do not include any RSUs that have been paid as
dividend equivalents subsequent to the date of the award). Even
though the awards may be forfeited, the amounts do not reflect
this contingency. Assumptions used to calculate these amounts
(disregarding forfeiture assumptions) are included in
Note 16 Stock-Based Compensation, to our
Consolidated Financial Statements, which are included in our
2010
Form 10-K.
For further information on the stock awards granted in fiscal
year 2010, see the Grants of Plan-Based Awards table on
page 37. |
|
(3) |
|
The amounts reported in the Option Awards column represent the
grant date fair value associated with option grants to each of
the NEOs. Even though the awards may be forfeited, the amounts
do not reflect this contingency. Assumptions used to calculate
these amounts (disregarding forfeiture assumptions) are included
in Note 16 Stock-Based Compensation to our
Consolidated Financial Statements, which are included in our |
35
|
|
|
|
|
2010
Form 10-K.
For further information on the stock option grants awarded in
fiscal year 2010, see the Grants of Plan-Based Awards table on
page 37. |
|
(4) |
|
The amounts reported in the Non-Equity Incentive Plan
Compensation column reflect the amounts earned by each NEO under
the Companys MIP for fiscal year 2010. In fiscal year
2008, these amounts include amounts earned under the Annual
Incentive Plan for 2008 and a performance-based cash award
related to the successful spin-off from Cadbury. |
|
(5) |
|
The amounts reported in the Change in Pension Value and
Nonqualified Deferred Compensation Earnings column represent an
estimate of the aggregate change during fiscal year 2010 in the
actuarial present value of accumulated benefits under the
Personal Pension Account Plan and the Pension Equalization Plan
(as applicable), as described in more detail in the Pension
Benefits table on page 40. The change in the actuarial
present value of the accumulated benefits under the plans was
determined in accordance with Financial Accounting Standards
Board (FASB) Accounting Standards Codification (ASC) Topic 715
(Retirement Benefits). Assumptions used to calculate
these amounts are included in Note 15 Employee
Benefit Plans, to our Consolidated Financial Statements,
which are included in our 2010
Form 10-K. |
|
(6) |
|
All Other Compensation for fiscal year 2010 is
summarized as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability
|
|
|
|
|
|
|
|
|
Automobile
|
|
Service
|
|
Income
|
|
Company
|
|
|
|
|
|
|
Allowance
|
|
Allowance
|
|
Premiums
|
|
Contributions
|
|
Other
|
|
|
|
|
($)
|
|
($)
|
|
($)(a)
|
|
($)(b)
|
|
($)(c)
|
|
Total ($)
|
|
Mr. Young
|
|
|
35,100
|
|
|
|
24,000
|
|
|
|
6,778
|
|
|
|
159,416
|
|
|
|
53,257
|
|
|
|
278,551
|
|
Mr. Ellen
|
|
|
24,000
|
|
|
|
20,000
|
|
|
|
5,042
|
|
|
|
5,075
|
|
|
|
125,305
|
|
|
|
179,422
|
|
Mr. Johnston
|
|
|
28,600
|
|
|
|
19,000
|
|
|
|
4,665
|
|
|
|
83,860
|
|
|
|
3,456
|
|
|
|
139,581
|
|
Mr. Collins
|
|
|
28,600
|
|
|
|
19,000
|
|
|
|
6,794
|
|
|
|
41,350
|
|
|
|
4,292
|
|
|
|
100,036
|
|
Mr. Hobson
|
|
|
24,700
|
|
|
|
14,000
|
|
|
|
7,825
|
|
|
|
34,962
|
|
|
|
2,671
|
|
|
|
84,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Stewart
|
|
|
11,000
|
|
|
|
9,500
|
|
|
|
|
|
|
|
30,878
|
|
|
|
1,419,313
|
|
|
|
1,470,691
|
|
|
|
|
(a) |
|
Includes the gross up for taxes to be paid by the NEO on the
premium that was included in the NEOs income. |
|
(b) |
|
The amounts reported in the Company Contributions column
represent our matching contributions to the tax-qualified
defined contribution plans and non-tax qualified defined
contribution plans. The contributions to the tax qualified
defined contribution plans for 2010 are as follows: $27,955 for
Mr. Young, $5,075 for Mr. Ellen, $30,405 for
Mr. Johnston, $17,150 for Mr. Collins, $17,150 for
Mr. Hobson and $15,257 for Mr. Stewart. The
contributions to the non-tax qualified defined contributions
plans for 2010 are as follows: $131,461 for Mr. Young,
$53,455 for Mr. Johnston, $24,200 for Mr. Collins,
$17,812 for Mr. Hobson and $15,621 for Mr. Stewart. |
|
(c) |
|
The amounts reported in the Other column represent the following
costs for fiscal year 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legacy
|
|
Taxable
|
|
|
|
|
|
|
Corporate
|
|
Executive
|
|
Plan Share
|
|
Moving
|
|
Severance
|
|
|
|
|
Aircraft
|
|
Physicals
|
|
Dividends
|
|
Expenses
|
|
Payments
|
|
Total
|
|
|
($)(i)
|
|
($)
|
|
($)
|
|
($)
|
|
($)(ii)
|
|
($)
|
|
Mr. Young
|
|
|
46,558
|
|
|
|
|
|
|
|
6,699
|
|
|
|
|
|
|
|
|
|
|
|
53,257
|
|
Mr. Ellen
|
|
|
305
|
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
|
|
|
|
125,305
|
|
Mr. Johnston
|
|
|
|
|
|
|
2,251
|
|
|
|
1,205
|
|
|
|
|
|
|
|
|
|
|
|
3,456
|
|
Mr. Collins
|
|
|
1,042
|
|
|
|
2,582
|
|
|
|
668
|
|
|
|
|
|
|
|
|
|
|
|
4,292
|
|
Mr. Hobson
|
|
|
1,582
|
|
|
|
|
|
|
|
1,089
|
|
|
|
|
|
|
|
|
|
|
|
2,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Stewart
|
|
|
|
|
|
|
3,853
|
|
|
|
939
|
|
|
|
|
|
|
|
1,414,521
|
|
|
|
1,419,313
|
|
36
|
|
|
(i) |
|
For SEC purposes, the cost of personal use of a corporate
aircraft is calculated based on the incremental cost to us. We
calculated the incremental cost using costs of charter aircraft
and estimated variable costs of operating the aircraft. Fixed
costs which do not change based on usage, such as pilot
salaries, depreciation of aircraft and cost of maintenance are
excluded. Mr. Youngs amount includes a gross up for
applicable income taxes. |
|
(ii) |
|
For a discussion of the material terms of
Mr. Stewarts severance payment, see
Compensation Discussion and Analysis
Post-Termination Compensation Retirement of John
Stewart. |
|
|
|
(7) |
|
We entered into a letter of understanding with Mr. Ellen in
connection with his employment in 2010. The Letter of
Understanding provides that to replace the equity awards that
Mr. Ellen lost when he left his previous employer, the
Company awarded Mr. Ellen non-qualified stock options and
RSUs (comprised of 70% RSUs and 30% stock options) with a total
cash value of $3,750,000, vesting ratably over a five-year
period. |
Grants of
Plan-Based Awards
The following table sets forth information regarding equity plan
awards and non-equity incentive plan awards by us to our NEOs in
fiscal year 2010. For a discussion of the material terms of
these awards, see Compensation Discussion and
Analysis The Compensation Program and
Historical Executive Compensation Information
Summary Compensation Table.
Grants of
Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
Exercise
|
|
Grant Date
|
|
|
|
|
|
|
|
|
Stock
|
|
All Other
|
|
or
|
|
Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Options
|
|
Base
|
|
Value
|
|
|
|
|
Estimated Future Payouts Under
|
|
Estimated Future Payouts
|
|
Number
|
|
Awards:
|
|
Price
|
|
of Stock
|
|
|
|
|
Non-Equity Incentive
|
|
Under Equity Incentive
|
|
of Shares
|
|
Number of
|
|
of
|
|
and
|
|
|
|
|
Plan Awards(1)
|
|
Plan Awards
|
|
of Stock or
|
|
Securities
|
|
Option
|
|
Option
|
|
|
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units
|
|
Underlying
|
|
Awards
|
|
Awards
|
Name
|
|
Grant Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)(2)
|
|
Option (#)(3)
|
|
($/Sh)(4)
|
|
(5)
|
|
Larry D. Young
|
|
|
|
|
|
|
312,500
|
|
|
|
1,250,000
|
|
|
|
2,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,555
|
|
|
|
|
|
|
|
|
|
|
|
3,324,983
|
|
|
|
|
3/2/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
203,862
|
|
|
|
31.50
|
|
|
|
1,424,995
|
|
Martin M. Ellen
|
|
|
|
|
|
|
118,125
|
|
|
|
472,500
|
|
|
|
945,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/1/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,894
|
|
|
|
|
|
|
|
|
|
|
|
918,719
|
|
|
|
|
4/1/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73,985
|
|
|
|
|
|
|
|
|
|
|
|
2,624,988
|
|
|
|
|
4/1/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,043
|
|
|
|
35.48
|
|
|
|
393,750
|
|
|
|
|
4/1/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
134,408
|
|
|
|
35.48
|
|
|
|
1,124,995
|
|
James J. Johnston
|
|
|
|
|
|
|
104,000
|
|
|
|
416,000
|
|
|
|
832,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,222
|
|
|
|
|
|
|
|
|
|
|
|
699,993
|
|
|
|
|
3/2/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,918
|
|
|
|
31.50
|
|
|
|
299,997
|
|
Rodger L. Collins
|
|
|
|
|
|
|
104,000
|
|
|
|
416,000
|
|
|
|
832,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,222
|
|
|
|
|
|
|
|
|
|
|
|
699,993
|
|
|
|
|
3/2/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,918
|
|
|
|
31.50
|
|
|
|
299,997
|
|
Derry L. Hobson
|
|
|
|
|
|
|
78,750
|
|
|
|
315,000
|
|
|
|
630,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,777
|
|
|
|
|
|
|
|
|
|
|
|
559,976
|
|
|
|
|
3/2/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,334
|
|
|
|
31.50
|
|
|
|
239,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John O. Stewart
|
|
|
|
|
|
|
102,500
|
|
|
|
410,000
|
|
|
|
820,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amounts reported in the Estimated Future Payouts Under
Non-Equity Incentive Plan Awards column represent the potential
payouts of annual cash incentive awards granted to our NEOs in
fiscal year 2010 under the MIP subject to the achievement of
certain performance measures. The actual amount of the awards
made to the NEOs and paid in cash is included in the Non-Equity
Incentive Plan Compensation column of the Summary Compensation
Table. |
37
|
|
|
(2) |
|
Represents the number of shares subject to RSU awards made in
fiscal year 2010 under the Omnibus Stock Incentive Plan of 2009.
All of these awards vest three years from their respective grant
dates with the exception of the grant of 73,985 RSUs granted to
Mr. Ellen on April 1, 2010 to compensate
Mr. Ellen for grants forfeited at his previous employer,
which vest ratably over 5 years. |
|
(3) |
|
Represents the number of shares subject to stock option grants
made in fiscal year 2010 under the Omnibus Stock Incentive Plan
of 2009. All options granted in fiscal year 2010 to NEOs have a
term of ten years from the grant date and vest one-third on the
first, second and third anniversaries of the grant date,
contingent on the NEO continuing his employment with the Company
through each date, with the exception of the grant of 134,408
stock options made to Mr. Ellen on April 1, 2010 to
compensate Mr. Ellen for grants forfeited at his previous
employer, which vest ratably over 5 years. |
|
(4) |
|
The exercise price for the option awards, which were determined
based on the closing share price of a share of our common stock
on the date of grant. |
|
(5) |
|
Represents the grant date fair value of the equity incentive
plan awards, which generally reflects the amount we would
expense in our financial statements in accordance with
ASC 718 Stock Compensation over the
awards vesting schedule, and does not correspond to the
actual value that may be realized by or paid to the NEOs. |
38
Outstanding
Equity Awards
The following table sets forth information regarding exercisable
and unexercisable stock options and vested and unvested equity
awards held by each NEO as of December 31, 2010. All such
awards relate to shares of our common stock.
Outstanding
Equity Awards at Fiscal Year End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Payout
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Number
|
|
|
Market
|
|
|
Number of
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
of
|
|
|
Value of
|
|
|
Unearned
|
|
|
Unearned
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Shares or
|
|
|
Shares,
|
|
|
Shares,
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
or
|
|
|
Units of
|
|
|
Units or
|
|
|
Units or
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Units of
|
|
|
Stock
|
|
|
Other
|
|
|
Other
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Stock
|
|
|
That
|
|
|
Rights
|
|
|
Rights
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
That
|
|
|
Have Not
|
|
|
That Have
|
|
|
That Have
|
|
|
|
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Unearned
|
|
|
Exercise
|
|
|
Expiration
|
|
|
Have Not
|
|
|
Vested
|
|
|
Not
|
|
|
Not
|
|
Name
|
|
Grant Date
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Options (#)
|
|
|
Price ($)
|
|
|
Date
|
|
|
Vested (#)(1)
|
|
|
($)(1)
|
|
|
Vested (#)
|
|
|
Vested ($)
|
|
|
Larry D. Young
|
|
|
5/7/2008
|
|
|
|
210,305
|
|
|
|
105,152
|
|
|
|
|
|
|
|
25.36
|
|
|
|
5/7/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2009
|
|
|
|
100,778
|
|
|
|
201,556
|
|
|
|
|
|
|
|
13.48
|
|
|
|
3/2/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2010
|
|
|
|
|
|
|
|
203,862
|
|
|
|
|
|
|
|
31.50
|
|
|
|
3/2/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/7/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96,847
|
|
|
|
3,405,141
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
191,308
|
|
|
|
6,726,389
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107,461
|
|
|
|
3,778,329
|
|
|
|
|
|
|
|
|
|
Martin M. Ellen
|
|
|
4/1/2010(2
|
)
|
|
|
|
|
|
|
134,408
|
|
|
|
|
|
|
|
35.48
|
|
|
|
4/1/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/1/2010
|
|
|
|
|
|
|
|
47,043
|
|
|
|
|
|
|
|
35.48
|
|
|
|
4/1/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/1/2010(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,001
|
|
|
|
2,637,035
|
|
|
|
|
|
|
|
|
|
|
|
|
4/1/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,250
|
|
|
|
922,950
|
|
|
|
|
|
|
|
|
|
James J. Johnston
|
|
|
5/7/2008
|
|
|
|
36,015
|
|
|
|
18,007
|
|
|
|
|
|
|
|
25.36
|
|
|
|
5/7/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2009
|
|
|
|
25,195
|
|
|
|
50,388
|
|
|
|
|
|
|
|
13.48
|
|
|
|
3/2/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2010
|
|
|
|
|
|
|
|
42,918
|
|
|
|
|
|
|
|
31.50
|
|
|
|
3/2/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/7/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,948
|
|
|
|
595,892
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,826
|
|
|
|
1,681,562
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,623
|
|
|
|
795,425
|
|
|
|
|
|
|
|
|
|
Rodger L. Collins
|
|
|
5/7/2008
|
|
|
|
36,015
|
|
|
|
18,007
|
|
|
|
|
|
|
|
25.36
|
|
|
|
5/7/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2009
|
|
|
|
25,195
|
|
|
|
50,388
|
|
|
|
|
|
|
|
13.48
|
|
|
|
3/2/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2010
|
|
|
|
|
|
|
|
42,918
|
|
|
|
|
|
|
|
31.50
|
|
|
|
3/2/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/7/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,948
|
|
|
|
595,892
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,826
|
|
|
|
1,681,562
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,623
|
|
|
|
795,425
|
|
|
|
|
|
|
|
|
|
Derry L. Hobson
|
|
|
5/7/2008
|
|
|
|
33,386
|
|
|
|
16,692
|
|
|
|
|
|
|
|
25.36
|
|
|
|
5/7/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2009
|
|
|
|
22,395
|
|
|
|
44,790
|
|
|
|
|
|
|
|
13.48
|
|
|
|
3/2/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2010
|
|
|
|
|
|
|
|
34,334
|
|
|
|
|
|
|
|
31.50
|
|
|
|
3/2/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/7/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,737
|
|
|
|
553,313
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,513
|
|
|
|
1,494,757
|
|
|
|
|
|
|
|
|
|
|
|
|
5/18/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,852
|
|
|
|
803,476
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,098
|
|
|
|
636,326
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts include RSUs attributable to dividend equivalents, which
are determined by multiplying the total number of shares or
other rights awarded under an equity incentive plan that have
not vested times $35.16, the closing price of a share of our
common on the NYSE on December 31, 2010. |
|
(2) |
|
Represent stock options and RSUs that were awarded to
Mr. Ellen to compensate Mr. Ellen for grants forfeited
at his previous employer. |
As of December 31, 2010, Mr. Stewart did not hold any
stock options or RSU awards.
39
Options
Exercised and Stock Vested
The following table sets forth information regarding RSU awards
that have vested and stock options that were exercised by our
NEOs during fiscal year 2010.
Options
Exercised and Stock Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
Stock Awards
|
|
|
|
Acquired on
|
|
|
Value Realized on
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
|
|
Exercise
|
|
|
Exercise
|
|
|
Acquired on Vesting
|
|
|
on Vesting
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
Former Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John O. Stewart
|
|
|
107,580
|
|
|
|
1,676,116
|
|
|
|
42,634
|
|
|
|
1,593,233
|
|
Pension
Benefits
The following table sets forth information regarding pension
benefits accrued by each NEO under our defined benefit plans and
supplemental contractual arrangements for 2010.
Pension
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Years of
|
|
Present Value of
|
|
Payments During
|
|
|
|
|
Credited Service
|
|
Accumulated Benefit
|
|
Last Fiscal Year
|
Name
|
|
Plan Name
|
|
(#)
|
|
($)(1)
|
|
($)
|
|
Larry D. Young
|
|
Personal Pension Account Plan
|
|
|
2.67
|
|
|
|
37,057
|
|
|
|
|
|
Pension Equalization Plan
|
|
|
2.67
|
|
|
|
273,086
|
|
|
|
James J. Johnston
|
|
Personal Pension Account Plan
|
|
|
16.09
|
|
|
|
288,620
|
|
|
|
|
|
Pension Equalization Plan
|
|
|
16.09
|
|
|
|
353,149
|
|
|
|
Former Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
John O. Stewart
|
|
Personal Pension Account Plan
|
|
|
2.15
|
|
|
|
16,727
|
|
|
|
|
|
Pension Equalization Plan
|
|
|
2.15
|
|
|
|
103,325
|
|
|
115,026
|
|
|
|
(1) |
|
The actuarial present value of benefits accumulated under the
respective plans in accordance with the assumptions included in
Note 15 Employee Benefit Plans, to our audited
Consolidated Financial Statements, which are included in our
2010 Form 10-K. These amounts assume that each NEO retires at
age 65. The discount rate used to determine the present value of
accumulated benefits is 5.60%. The present values assume no
pre-retirement mortality and utilize the RP2000 healthy white
collar male and female tables, projected to calendar year 2015. |
Personal
Pension Account Plan
NEOs, other than Mr. Ellen, Mr. Collins and
Mr. Hobson, are provided with retirement benefits under our
personal pension account plan (the PPA Plan), a
tax-qualified defined benefit pension plan covering full-time
and part-time employees with at least one year of service who
were actively employed (other than former bottling group
employees) as of December 31, 2006. The PPA Plan was closed
to employees who were hired after December 31, 2006.
Further, as of December 31, 2008, all future pay and
service credits to the PPA Plan have been frozen. However, the
PPA Plan does provide a minimum annual interest credit on
individual account balances of 5%.
Participants fully vest in their retirement benefits after three
years of service or upon attaining age 65. Participants are
also eligible for early retirement benefits if they separate
from service on or after attaining age 55 with
10 years of service. Participants who leave the Company
before they are fully vested in their retirement benefit forfeit
their accrued benefit under the PPA Plan.
40
The Code places limitations on compensation and pension benefits
for tax-qualified defined benefit plans such as the PPA Plan. We
have established a non-qualified supplemental defined benefit
pension program (our Pension Equalization Plan), as discussed
below, to restore some of the pension benefits limited by the
Code.
Pension
Equalization Plan
We sponsor a pension equalization plan (the PEP), an
unfunded, non-tax qualified excess defined benefit plan covering
key employees who were actively employed as of December 31,
2006 and whose base salary exceeded certain statutory limits
imposed by the Code. As with the PPA Plan, the PEP was closed to
employees who were hired after December 31, 2006 and as of
December 31, 2008, all future pay and service credits to
the PEP have been frozen. However, the PEP does provide a
minimum annual interest credit on individual account balances of
5%.
The purpose of the PEP is to restore to PEP participants any PPA
Plan benefits that are limited by statutory restrictions imposed
by the Code that are taken into consideration when determining
their PPA Plan benefits. Participants fully vest in their
benefits under the PEP after three years of service.
Participants who voluntarily resign from service before they are
vested in their benefits under the PEP forfeit their unvested
accrued benefit. Participants who are terminated without
cause or resign for good reason are
entitled to have their unvested accrued benefits under the PEP
automatically vested.
In addition, pursuant to the terms of the executive employment
agreements, if any NEO is terminated without cause
or resigns for good reason and is not vested in his
accrued benefit under the PPA Plan, such NEO will be entitled to
have his accrued and unvested benefits under the PPA Plan paid
under the PEP. As of December 31, 2009, all NEOs (other
than Mr. Ellen, Mr. Collins and Mr. Hobson who do
not participate in the PPA Plan) have vested in their accrued
benefits under the PPA Plan. Since Mr. Ellen,
Mr. Collins and Mr. Hobson are not participants in the
PPA Plan, they receive no benefits under the PEP.
Deferred
Compensation
Savings
Incentive Plan
The SIP, a tax-qualified 401(k) defined contribution plan,
permits participants to contribute up to 75% of their base
salary in the SIP within certain statutory limitations under the
Code and we match 100% of the first 4% of base salary, on a per
paycheck basis, that is deferred to the SIP by a participant.
Employees participating in the SIP are always fully vested in
their, as well as our, contributions to the plan. Participants
self-direct the investment of their account balances among
various mutual funds. All of our NEOs participate in the SIP.
Also as part of the SIP, we offer an enhanced defined
contribution component (the EDC) on a tax-qualified
basis to the SIP plan account. The EDC provides a contribution
equal to 3% of eligible compensation to individual accounts
annually. EDC contributions are 100% vested after three years of
service with the Company.
Supplemental
Savings Plan
The SSP is a nonqualified deferred compensation plan sponsored
by the Company in 2010 for NEOs, and is a non-tax qualified
defined contribution plan. The SSP is for employees who are
actively enrolled in the SIP and whose deferrals under the SIP
are limited by Code compensation limitations. Employees may
elect to defer up to 75% of their base salary over the Code
compensation limit to the SSP, and we match 100% of the first 4%
of base salary, on a per paycheck basis, that is contributed by
these employees. Employees participating in the SSP are always
fully vested in their, as well as our, contributions to the
plan. Participants self-direct the investment of their account
balances among various mutual funds. In 2010, all of our NEOs,
except Mr. Ellen, participated in the SSP.
Also as part of the SSP, we offer an enhanced defined
contribution component (the Non-qualified EDC) on a
non-tax qualified basis to the SSP plan account. The
Non-qualified EDC provides a contribution equal to 3% of
eligible compensation over statutory pay limits to individual
accounts annually. The Non-qualified EDC contributions are 100%
vested after three years of service with the Company or prior
affiliates.
41
The SSP also offers our executive officers the opportunity to
defer up to 100% of their annual bonus. Participants will make
yearly elections on payout options of bonus deferrals under the
plan. Vesting is immediate and the participant has multiple
distribution options available during each annual enrollment
period. Participants self-direct the investment of their account
balances among various mutual funds.
The following table sets forth information regarding the
nonqualified deferred compensation under the SSP for each NEO in
fiscal year 2010.
Non-qualified
Defined Contribution and Deferred Compensation Plans
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Registrant
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Executive
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Contributions
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Aggregate
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Aggregate
|
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Aggregate
|
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Contributions in
|
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in Last
|
|
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Earnings
|
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Withdrawals/
|
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Balance at
|
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Last Fiscal Year
|
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Fiscal Year($)
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in Last
|
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Distributions
|
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Last FYE
|
|
Name
|
|
($)(1)
|
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(2)
|
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Fiscal Year ($)(3)
|
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($)
|
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($)
|
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|
Larry D. Young
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87,831
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131,461
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47,461
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568,148
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James J. Johnston
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24,335
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53,455
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19,428
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235,739
|
|
Rodger L. Collins
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377,000
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|
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24,200
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|
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63,330
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|
|
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691,170
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Derry L. Hobson
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292,454
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17,812
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34,840
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608,009
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Former Chief Financial Officer
|
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|
|
|
|
|
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|
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John O. Stewart
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660,532
|
|
|
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15,621
|
|
|
|
163,735
|
|
|
826,352
|
|
|
977,839
|
|
Not included in the table above are the Non-qualified EDC
Contributions funded on January 31, 2011, which are as
follows:
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Larry D. Young
|
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$
|
218,570
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James J. Johnston
|
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$
|
87,543
|
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Rodger L. Collins
|
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$
|
29,650
|
|
Derry L. Hobson
|
|
$
|
20,217
|
|
|
|
|
|
|
Former Chief Financial Officer
|
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|
|
|
John O. Stewart
|
|
$
|
18,675
|
|
|
|
|
(1) |
|
Aggregate amount of contributions made by our NEOs to the SSP in
fiscal year 2010. |
|
(2) |
|
Aggregate amount of the Companys contributions to the
NEOs accounts under the SSP in fiscal year 2010. |
|
(3) |
|
Aggregate amount of earnings credited to the NEOs accounts
under the SSP in fiscal year 2010. |
Post-Termination
Compensation
Retirement
of John Stewart
John O. Stewart, our former chief financial officer, advised the
Board that he was retiring and separated from the Company on
May 21, 2010. Pursuant to a letter agreement with the
Company, Mr. Stewart received certain benefits, as if he
were terminated without cause under his executive
employment agreement and certain equity incentive awards with us
vested through his separation date. Additionally, in
consideration of Mr. Stewarts employment until his
separation date and his meeting certain performance
requirements, certain remaining unvested RSU awards and
remaining unvested stock option grants fully vested on his
separation date.
Pursuant to his executive employment agreement, Mr. Stewart
received cash payments totaling $1,414,521 consisting of the
following:
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|
(1)
|
$476,252 of salary continuation payments, which reflects the
offset of Mr. Stewarts base salary and target annual
bonus at his new employer;
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|
(2)
|
$922,500, equal to 12 months of his annual base salary and
100% of his MIP target award; and
|
|
|
(3)
|
$15,769 for accrued unused vacation up to his separation date.
|
42
Mr. Stewart continued to receive medical, dental and vision
benefits until December 2010, when he obtained other employment.
Mr. Stewart received outplacement services and certain
payments under the qualified and non-qualified pension plans.
In addition, Mr. Stewart will receive a lump sum cash
payment equal to his MIP payment for fiscal year 2010, pro-rated
through his separation date and based on the actual performance
targets achieved, which will be payable when such awards are
paid under the MIP to all employees.
Executive
Employment Agreements
Mr. Young and Mr. Hobson have executive employment
agreements with us. Each of the executive employment agreements
was entered into in October 2007 and has a term of
10 years. Each agreement includes non-competition and
non-solicitation provisions, which provide that the executive
will not, for a period of one year after termination of
employment, (i) become engaged with companies that are in
competition with us, including but not limited to a
predetermined list of companies or (ii) solicit or attempt
to entice away any of our employees or customers.
The executive employment agreements of Mr. Young and
Mr. Hobson each provide that severance payments occur and
salary and benefits continue if termination of employment occurs
without cause or if the executive leaves for
good reason. Under the executive employment
agreements:
(A) cause is defined as termination of the
executives employment for his:
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willful failure to substantially perform his duties,
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breach of a duty of loyalty toward the Company,
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commission of an act of dishonesty toward the Company, theft of
our corporate property, or usurpation of our corporate
opportunities,
|
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unethical business conduct including any violation of law
connected with the executives employment, or
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|
conviction of any felony involving dishonest or immoral
conduct; and
|
(B) good reason is defined as a resignation by
the executive for any of the following reasons:
|
|
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|
|
our failure to perform any of our material obligations under the
employment agreement,
|
|
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|
a relocation by us of the executives principal place of
employment to a site outside a 50 mile radius of the
current site of the principal place of employment, or
|
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|
the failure by a successor acquirer to assume the employment
agreement.
|
In the event we terminate Mr. Youngs employment
without cause or he resigns for good
reason during the employment term, he is entitled to the
equivalent of 5.625 times base salary made up as follows:
|
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|
(1)
|
salary continuation for up to 15 months equal to his annual
base salary and his target award under the MIP (subject to
mitigation for new employment);
|
|
|
(2)
|
a lump sum salary payment equal to 15 months of his annual
base salary; and
|
|
|
(3)
|
a lump sum cash payment equal to 125% of his target award under
the MIP.
|
In addition, Mr. Young will receive a lump sum cash payment
equal to his MIP payment, pro-rated through the employment
termination date and based on the actual performance targets
achieved for the year in which such termination of employment
occurred and payable when such awards are paid under the plan to
all employees.
Mr. Young will continue to receive medical, dental and
vision benefits until other employment is obtained, but not to
exceed the salary continuation period. Mr. Young will also
be entitled to receive outplacement services and certain
payments under the qualified and non-qualified pension plans.
See discussion of pension benefits to be paid
43
under the PPA Plan under Pension Benefits
Personal Pension Account Plan on page 40 and the PEP
under Pension Benefits Pension Equalization
Plan on page 41.
In the event we terminate Mr. Hobsons employment
without cause or he resigns for good
reason during the employment term, he is entitled to the
equivalent of 2.55 times base salary made up as follows:
|
|
|
|
(1)
|
salary continuation for up to nine months equal to his annual
base salary and 75% of his target award under the MIP (subject
to mitigation for new employment);
|
|
|
(2)
|
a lump sum salary payment equal to nine months of his annual
base salary; and
|
|
|
(3)
|
a lump sum cash payment equal to 75% of his target award under
the MIP.
|
In addition, Mr. Hobson will receive a lump sum cash
payment equal to his MIP payment, pro-rated through the
employment termination date and based on the actual performance
targets achieved for the year in which such termination of
employment occurred and payable when such awards are paid under
the plan to all employees.
Mr. Hobson will continue to receive medical, dental and
vision benefits until other employment is obtained, but not to
exceed the salary continuation period. Mr. Hobson will also
be entitled to receive outplacement services and certain
payments under the qualified and non-qualified plans.
Letters
of Understanding
Historically, Cadbury entered into executive employment
agreements with our executive officers. During our review of our
compensation program following the spin-off from Cadbury, we
decided that we will not be entering into executive employment
agreements with future executive officers. As a result, when we
hire a new executive or a current executive is promoted, the
executive will receive an offer letter which we refer to as
letters of understanding. Mr. Ellen received a
letter of understanding outlining the conditions of his
employment with us. When Mr. Johnston and Mr. Collins
received promotions in 2008, each received a letter of
understanding in replacement for his executive employment
agreement with us. The letters of understanding have no term.
In the event Mr. Ellens, Mr. Johnstons or
Mr. Collins employment is involuntarily terminated,
each is entitled to receive severance benefits under our
Severance Pay Plan for Salaried Employees (Severance Pay
Plan), which benefits include:
|
|
|
|
(1)
|
Mr. Ellen will receive a lump sum severance payment equal
to 4.0 times his annual base salary, while Mr. Johnston and
Mr. Collins will receive a lump sum severance payment equal
to 3.5 times their annual base salary; and
|
|
|
(2)
|
a lump sum cash payment equal to their MIP payment, pro-rated
through the employment termination date and based on the actual
performance targets achieved for the year in which such
termination of employment occurred and payable when such awards
are paid under the plan to all employees.
|
Under the Severance Pay Plan, Mr. Johnston is entitled to
outplacement services and certain payments under the qualified
and non-qualified pension plans. See discussion of pension
benefits to be paid under the PPA Plan under Pension
Benefits Personal Pension Account Plan on
page 40 and the PEP under Pension
Benefits Pension Equalization Plan on
page 41.
Under the Severance Pay Plan, each of Mr. Ellen and
Mr. Collins is entitled to outplacement services and
certain payments under the qualified and non-qualified savings
plans.
Neither Mr. Ellen, Mr. Johnston nor Mr. Collins
would be eligible for severance under the Severance Pay Plan, if
he were terminated (i) for cause, (ii) because of
inadequate or unsatisfactory performance, (iii) as the
result of misconduct (including mismanagement of a position of
employment by action or inaction, neglect that jeopardizes the
life or property of another, intentional wrongdoing or
malfeasance, intentional violation of a law, or violation of a
policy or rule adopted to ensure the orderly work and the safety
of employees), (iv) for gross neglect in job performance or
(v) because his position is eliminated and he refuses to
accept another position, with generally comparable base salary
and incentive compensation, that is located no more than
50 miles from their former office,
44
or it does not cause a significant detrimental impact to the
executives that commute. (These items are hereinafter referred
to as Disqualifying Conditions.)
Mr. Ellen, Mr. Johnston and Mr. Collins have each
signed a non-compete agreement, which provides each will not,
for a period of one year after termination of employment,
(i) become engaged with companies that are in competition
with us, including but not limited to a predetermined list of
companies or (ii) solicit or attempt to entice away any of
our employees or customers.
Change
in Control
The Compensation Committee believes that severance benefits
and/or
change of control benefits are necessary in order to attract and
retain the caliber and quality of executive that we need in our
most senior positions. The Compensation Committee approved a
Change in Control Severance Plan in February 2009. The Change in
Control Severance Plan generally provides that a payment will be
made to a plan participant if there is a change in control of
the Company and, within two years after the change in control,
the participants employment is terminated or the
participant voluntarily terminates his employment under certain
adverse circumstances, including a significant adverse change in
responsibilities of his position. The Compensation Committee
determined that Mr. Young, Mr. Ellen,
Mr. Johnston, Mr. Collins and Mr. Hobson should
participate in the Change in Control Severance Plan. The levels
of payments and benefits available upon termination were set to
be comparable to those provided within our peer group, and are
as follows: (a) Mr. Young, as our CEO, is entitled to
a payment equal to 3.0 times the sum of his base salary, plus
his annual bonus; (b) Mr. Ellen, as Chief Financial
Officer, is entitled to a payment equal to 2.75 times the sum of
his base salary, plus his annual bonus;
(c) Mr. Johnston and Mr. Collins would each be
entitled to a payment equal to 2.5 times the sum of their
respective base salary, plus their respective annual bonus; and
(d) Mr. Hobson would be entitled to a payment equal to
2.0 times the sum of his base salary, plus his annual bonus.
Payments under the Change in Control Severance Plan will be
grossed up to cover any applicable excise taxes under
section 4999 of the Code (the 280G gross up
payment). Termination payments may be reduced by 10% to
avoid the excise tax and 280G gross up payment.
In addition, plan participants also receive other benefits,
including benefit continuation for the number of years equal to
their payment multiplier, payment of unvested and vested
qualified and non-qualified pension benefits and outplacement
services.
Tables
of Potential Payments and Assumptions
The following tables below outline the potential payments to
Mr. Young, Mr. Ellen, Mr. Johnston,
Mr. Collins and Mr. Hobson upon the occurrence of
various termination events, including termination for
cause or not for good reason,
termination without cause or for good
reason or termination due to death or
disability or voluntary termination or
with Disqualifying Conditions. Also, the table
reflects potential payments related to
change-in-control
and subsequent qualified termination within a specified window.
The following assumptions apply with respect to the tables below
and any termination of employment of an NEO:
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|
|
|
|
The tables include estimates of amounts that would have been
paid to: (i) Mr. Young and Mr. Hobson assuming a
termination event occurred on December 31, 2010 and
(ii) Mr. Ellen, Mr. Johnston and Mr. Collins
in the event they terminate their employment voluntarily or with
Disqualifying Conditions or their employment is terminated
involuntarily without Disqualifying Conditions on
December 31, 2010. The employment of these NEOs did not
actually terminate on December 31, 2010, and as a result,
these NEOs did not receive any of the amounts shown in the
tables below. The actual amounts to be paid to a NEO in
connection with a termination event can only be determined at
the time of such termination event.
|
|
|
|
The tables assume that the price of a share of our common stock
is $35.16 per share, the closing market price per share on the
NYSE on December 31, 2010.
|
|
|
|
Each NEO is entitled to receive amounts earned during the term
of his employment regardless of the manner of termination. These
amounts include accrued base salary, accrued vacation time and
other employee benefits to which the NEO was entitled on the
date of termination, and are not shown in the tables below.
|
45
|
|
|
|
|
For purposes of the tables below, the specific definitions of
cause and good reason are defined in the
executive employment agreements for Messrs. Young and
Hobson and are described in the section entitled Executive
Employment Agreements.
|
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|
|
To receive the benefits under the executive employment
agreements, Mr. Young and Mr. Hobson are each
respectively required to provide a general release of claims
against us and our affiliates. The benefits are also subject to
mitigation for new employment. In addition, if Mr. Young or
Mr. Hobson receives severance payments under his executive
employment agreement, he will not be entitled to receive any
severance benefits under our Severance Pay Plan.
|
|
|
|
The tables are as of December 31, 2010.
|
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Termination
|
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|
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|
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|
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|
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|
|
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Without
|
|
|
|
|
|
Termination
|
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|
|
|
|
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|
Termination
|
|
|
|
|
|
Cause or
|
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|
|
|
for Cause
|
|
|
|
|
|
|
|
|
Without Cause
|
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For Good
|
|
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|
or Not for
|
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|
|
|
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|
or for
|
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|
Change in
|
|
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Reason
|
|
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Good
|
|
|
|
|
|
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|
Good
|
|
|
Control
|
|
|
following
|
|
Name
|
|
Compensation Element
|
|
Reason
|
|
|
Death
|
|
|
Disability
|
|
|
Reason
|
|
|
(CIC)
|
|
|
CIC(8)
|
|
|
Larry Young
|
|
Salary Continuation Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,812,500
|
(1)
|
|
|
|
|
|
|
|
|
|
|
Lump Sum Cash Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,250,000
|
(2)
|
|
|
|
|
|
$
|
6,750,000
|
|
|
|
Lump Sum Target Award MIP Payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,562,500
|
(3)
|
|
|
|
|
|
|
|
|
|
|
Lump Sum 2010 MIP Payment
|
|
|
|
|
|
$
|
1,250,000
|
(4)
|
|
$
|
1,250,000
|
(4)
|
|
$
|
1,614,251
|
(4)
|
|
|
|
|
|
|
|
|
|
|
Medical, Dental and Vision Benefits Continuation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,614
|
(5)
|
|
|
|
|
|
$
|
37,473
|
|
|
|
Outplacement Services
|
|
|
|
|
|
|
|
|
|
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|
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|
$
|
75,000
|
|
|
|
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|
|
$
|
75,000
|
|
|
|
Accelerated Equity Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
RSUs(6)
|
|
|
|
|
|
$
|
13,909,859
|
|
|
$
|
8,164,292
|
|
|
$
|
8,164,292
|
|
|
$
|
13,909,859
|
|
|
$
|
13,909,859
|
|
|
|
Stock Options(7)
|
|
|
|
|
|
$
|
6,146,359
|
|
|
$
|
2,694,978
|
|
|
$
|
2,694,978
|
|
|
$
|
6,146,359
|
|
|
$
|
6,146,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
$
|
21,306,218
|
|
|
$
|
12,109,270
|
|
|
$
|
18,189,135
|
|
|
$
|
20,056,218
|
|
|
$
|
26,918,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Without
|
|
|
|
|
|
for Cause
|
|
|
|
|
|
|
|
|
Without Cause
|
|
|
|
|
|
Cause or
|
|
|
|
|
|
or Not for
|
|
|
|
|
|
|
|
|
or for
|
|
|
|
|
|
For Good
|
|
|
|
|
|
Good
|
|
|
|
|
|
|
|
|
Good
|
|
|
|
|
|
Reason
|
|
Name
|
|
Compensation Element
|
|
Reason
|
|
|
Death
|
|
|
Disability
|
|
|
Reason
|
|
|
CIC
|
|
|
following CIC(8)
|
|
|
Martin Ellen
|
|
Salary Continuation Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump Sum Cash Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,100,000
|
(2)
|
|
|
|
|
|
$
|
2,743,125
|
|
|
|
Lump Sum Target Award MIP Payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump Sum 2010 MIP Payment
|
|
|
|
|
|
$
|
472,500
|
(4)
|
|
$
|
472,500
|
(4)
|
|
$
|
459,715
|
(4)
|
|
|
|
|
|
|
|
|
|
|
Medical, Dental and Vision Benefits Continuation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
34,350
|
|
|
|
Outplacement Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,250
|
|
|
|
|
|
|
$
|
7,250
|
|
|
|
Accelerated Equity Payments RSUs(6)
|
|
|
|
|
|
$
|
3,558,930
|
|
|
$
|
889,733
|
|
|
$
|
889,733
|
|
|
$
|
3,558,930
|
|
|
$
|
3,558,930
|
|
|
|
Stock Options(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
$
|
4,031,430
|
|
|
$
|
1,362,233
|
|
|
$
|
3,456,698
|
|
|
$
|
3,558,930
|
|
|
$
|
6,343,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Without
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Cause or
|
|
|
|
|
|
for Cause
|
|
|
|
|
|
|
|
|
Without Cause
|
|
|
|
|
|
For Good
|
|
|
|
|
|
or Not for
|
|
|
|
|
|
|
|
|
or for
|
|
|
|
|
|
Reason
|
|
|
|
|
|
Good
|
|
|
|
|
|
|
|
|
Good
|
|
|
|
|
|
following
|
|
Name
|
|
Compensation Element
|
|
Reason
|
|
|
Death
|
|
|
Disability
|
|
|
Reason
|
|
|
CIC
|
|
|
CIC (8)
|
|
|
Jim Johnston
|
|
Salary Continuation Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump Sum Cash Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,820,000
|
(2)
|
|
|
|
|
|
$
|
2,340,000
|
|
|
|
Lump Sum Target Award MIP Payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump Sum 2010 MIP Payment
|
|
|
|
|
|
$
|
416,000
|
(4)
|
|
$
|
416,000
|
(4)
|
|
$
|
422,574
|
(4)
|
|
|
|
|
|
|
|
|
|
|
Medical, Dental and Vision Benefits Continuation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
43,678
|
|
|
|
Outplacement Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,250
|
|
|
|
|
|
|
$
|
7,250
|
|
|
|
Accelerated Equity Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs(6)
|
|
|
|
|
|
$
|
3,072,879
|
|
|
$
|
1,773,894
|
|
|
$
|
1,773,894
|
|
|
$
|
3,072,879
|
|
|
$
|
3,072,879
|
|
|
|
Stock Options(7)
|
|
|
|
|
|
$
|
1,425,960
|
|
|
$
|
612,635
|
|
|
$
|
612,635
|
|
|
$
|
1,425,960
|
|
|
$
|
1,425,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
$
|
4,914,839
|
|
|
$
|
2,802,529
|
|
|
$
|
4,636,353
|
|
|
$
|
4,498,839
|
|
|
$
|
6,889,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Without Cause
|
|
|
|
|
|
for Cause
|
|
|
|
|
|
|
|
|
Without Cause
|
|
|
|
|
|
or For Good
|
|
|
|
|
|
or Not for
|
|
|
|
|
|
|
|
|
or for
|
|
|
|
|
|
Reason
|
|
|
|
|
|
Good
|
|
|
|
|
|
|
|
|
Good
|
|
|
|
|
|
following
|
|
Name
|
|
Compensation Element
|
|
Reason
|
|
|
Death
|
|
|
Disability
|
|
|
Reason
|
|
|
CIC
|
|
|
CIC(8)
|
|
|
Rodger Collins
|
|
Salary Continuation Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump Sum Cash Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,820,000
|
(2)
|
|
|
|
|
|
$
|
2,339,999
|
|
|
|
Lump Sum Target Award MIP Payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump Sum 2010 MIP Payment
|
|
|
|
|
|
$
|
416,000
|
(4)
|
|
$
|
416,000
|
(4)
|
|
$
|
347,153
|
(4)
|
|
|
|
|
|
|
|
|
|
|
Medical, Dental and Vision Benefits Continuation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,888
|
|
|
|
Outplacement Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,250
|
|
|
|
|
|
|
$
|
7,250
|
|
|
|
Accelerated Equity Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs(6)
|
|
|
|
|
|
$
|
3,072,879
|
|
|
$
|
1,773,894
|
|
|
$
|
1,773,894
|
|
|
$
|
3,072,879
|
|
|
$
|
3,072,879
|
|
|
|
Stock Options(7)
|
|
|
|
|
|
$
|
1,425,960
|
|
|
$
|
612,635
|
|
|
$
|
612,635
|
|
|
$
|
1,425,960
|
|
|
$
|
1,425,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
$
|
4,914,839
|
|
|
$
|
2,802,529
|
|
|
$
|
4,560,932
|
|
|
$
|
4,498,839
|
|
|
$
|
6,874,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Without
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Cause or
|
|
|
|
|
|
for Cause
|
|
|
|
|
|
|
|
|
Without Cause
|
|
|
|
|
|
For Good
|
|
|
|
|
|
or Not for
|
|
|
|
|
|
|
|
|
or for
|
|
|
|
|
|
Reason
|
|
|
|
|
|
Good
|
|
|
|
|
|
|
|
|
Good
|
|
|
|
|
|
following
|
|
Name
|
|
Compensation Element
|
|
Reason
|
|
|
Death
|
|
|
Disability
|
|
|
Reason
|
|
|
CIC
|
|
|
CIC(8)
|
|
|
Derry Hobson
|
|
Salary Continuation Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
573,750
|
(1)
|
|
|
|
|
|
|
|
|
|
|
Lump Sum Cash Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
337,500
|
(2)
|
|
|
|
|
|
$
|
1,530,000
|
|
|
|
Lump Sum Target Award MIP Payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
236,250
|
(3)
|
|
|
|
|
|
|
|
|
|
|
Lump Sum 2010 MIP Payment
|
|
|
|
|
|
$
|
315,000
|
(4)
|
|
$
|
315,000
|
(4)
|
|
$
|
329,838
|
(4)
|
|
|
|
|
|
|
|
|
|
|
Medical, Dental and Vision Benefits Continuation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,198
|
(5)
|
|
|
|
|
|
$
|
21,862
|
|
|
|
Outplacement Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,250
|
|
|
|
|
|
|
$
|
7,250
|
|
|
|
Accelerated Equity Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs(6)
|
|
|
|
|
|
$
|
3,487,872
|
|
|
$
|
2,012,085
|
|
|
$
|
2,012,085
|
|
|
$
|
3,487,872
|
|
|
$
|
3,487,872
|
|
|
|
Stock Options(7)
|
|
|
|
|
|
$
|
1,260,291
|
|
|
$
|
545,094
|
|
|
$
|
545,094
|
|
|
$
|
1,260,291
|
|
|
$
|
1,260,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
$
|
5,063,163
|
|
|
$
|
2,872,179
|
|
|
$
|
4,049,965
|
|
|
$
|
4,748,163
|
|
|
$
|
6,307,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amounts shown represent salary continuation in an amount
equal to (x) annual base salary and (y) target award
under the MIP. The amounts shown represent 125% for
Mr. Young and 75% for Mr. Hobson, in each case,
according to the terms of their respective executive employment
agreements. |
|
(2) |
|
The amounts shown represent lump sum cash payments equal
(a) 125% of the annual base salary for Mr. Young and
75% of the annual base salary for Mr. Hobson under their
executive employment agreements and (b) 400%, 350% and 350%
of the annual base salary for each of Mr. Ellen,
Mr. Johnston and Mr. Collins, respectively, under the
Companys Severance Pay Plan. |
|
(3) |
|
The amounts shown represent lump sum payments under the MIP
equal to 125% of the target award for Mr. Young, and 75% of
the target award for Mr. Hobson under their respective
executive employment agreements. |
|
(4) |
|
The amounts shown under the Death and
Disability columns represent each NEOs target
award under the MIP, pro-rated through the assumed employment
termination date. The amounts shown under the Termination
Without Cause or for Good Reason column represent lump sum
cash payments equal to each NEOs 2010 MIP payment,
pro-rated through the assumed employment termination date and
based on the actual performance targets achieved for the year in
which such assumed termination of employment occurred. The
amounts are paid to Messrs. Young and Hobson under their
executive employment agreements and to Messrs. Ellen,
Johnston and Collins under the Companys Severance Pay Plan. |
|
(5) |
|
The amounts shown represent the combined cash value of benefits
continuation over the salary continuation period under the
executive employment agreements of Mr. Young and
Mr. Hobson. |
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(6) |
|
The amounts shown represent the value of unvested RSU awards and
dividend equivalent payments under the Omnibus Stock Incentive
Plan of 2008 and the Omnibus Stock Incentive Plan of 2009 that
vest under the occurrence of the specific event. |
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(7) |
|
The amounts shown represent the value of the unvested stock
options under the Omnibus Stock Incentive Plan of 2008 and the
Omnibus Stock Incentive Plan of 2009 that vest under the
occurrence of the specific event. These stock options remain
exercisable for 90 days from the employment termination
date. |
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(8) |
|
The amounts shown represent the value to be delivered to an
executive upon a termination without cause by the employer or a
termination for good reason by the employee within a
2-year
period following a CIC under the Change in Control Severance
Plan. The amounts shown in the lump sum cash payments row equal
300%, 275%, 250%, 250% and 200% of annual base salary and target
award under the MIP for Mr. Young, Mr. Ellen,
Mr. Johnston, Mr. Collins and Mr. Hobson,
respectively. The full acceleration value of equity awards is
also included due to the CIC event that preceded the termination
under this scenario. |
48
SECURITIES
AUTHORIZED FOR ISSUANCE UNDER
EQUITY COMPENSATION PLANS
The following table summarizes certain information related to
our equity award plans as of December 31, 2010.
Equity
Compensation Plan Information
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Number of
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Securities
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|
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Remaining
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|
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Number of
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|
|
|
|
Available for
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|
|
|
Securities to be
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|
|
|
|
|
Future Issuance
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|
|
|
Issued Upon
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|
|
|
|
|
under Equity
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|
|
|
Exercise of
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|
|
Weighted Average
|
|
|
Compensation
|
|
|
|
Outstanding
|
|
|
Exercise Price of
|
|
|
Plans (Excluding
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|
|
|
Options,
|
|
|
Outstanding
|
|
|
Securities
|
|
|
|
Warrants and
|
|
|
Options, Warrants
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|
|
Reflected in Initial
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Plan Category
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Rights
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and Rights
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Column)
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Equity Compensation Plans approved by stockholders
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Omnibus Stock Incentive Plan of 2009(1)
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1,783,976
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$
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15.03
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|
|
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18,210,024
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(3)
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Omnibus Stock Incentive Plan of 2008(2)
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4,279,903
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$
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7.90
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Equity Compensation Plans not approved by stockholders
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Total
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6,063,879
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$
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10.00
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18,210,024
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(1) |
|
Represents 956,066 RSUs that have been awarded and 827,910 stock
options that have been granted under the Omnibus Stock Incentive
Plan of 2009. The stock options have a weighted average exercise
price of $32.39 and weighted average contractual term of
9.2 years. |
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(2) |
|
Represents 2,487,409 RSUs that have been awarded and 1,792,494
stock options that have been granted under the Omnibus Stock
Incentive Plan of 2008. The stock options have a weighted
average exercise price of $18.87 and weighted average
contractual term of 7.8 years. |
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(3) |
|
Represents awards authorized for future grants under the Omnibus
Stock Incentive Plan of 2009. |
49
REPORT OF
THE AUDIT COMMITTEE
The Audit Committee of the Board was comprised of
Mr. Martin, Ms. Patsley and Mr. Adams during
2010. All of such Audit Committee members are independent as
defined in the current NYSE listing standards.
On May 19, 2010, the Board approved a revised Audit
Committee Charter, setting forth the duties and responsibilities
of the Audit Committee. In addition to the activities described
in this report, in 2010 the Audit Committee has performed the
duties set forth in its written charter, including, but not
limited to, regularly reviewing and discussing the
Companys activities with respect to risk assessment and
risk management, and receiving regular reports regarding the
Companys compliance program.
Management has primary responsibility for the financial
statements, financial reporting and the overall system of
internal control over financial reporting. The Audit Committee
has reviewed and discussed the Companys financial
statements with management and managements evaluation and
assessment of the effectiveness of internal control over
financial reporting.
Deloitte & Touche, our independent registered public
accounting firm for fiscal year 2010, is responsible for
auditing the financial statements and expressing an opinion on
the fairness of the financial statements and their conformity
with generally accepted accounting principles and for auditing
of internal control over financial reporting and expressing an
opinion on its effectiveness. The Audit Committee has discussed
with Deloitte & Touche, with and without management
present, the financial statement audit, its evaluation of
effectiveness of internal controls and the overall quality of
financial reporting. We have discussed with Deloitte &
Touche the matters that are required to be discussed by the
Public Company Accounting Oversight Board (PCAOB) in
Rule AU 380 (Communication with Audit Committees).
Deloitte & Touche has provided to the Audit Committee
the written disclosures and the letter regarding its
independence as set forth in the applicable requirements of the
PCAOB and the Audit Committee has discussed Deloitte &
Touches independence with Deloitte & Touche. The
Audit Committee also concluded that Deloitte &
Touches provision of non-audit services is compatible with
Deloitte & Touches independence.
Based on the considerations referred to above, the Audit
Committee recommended to the Board that the audited financial
statements be included in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010 and that
Deloitte & Touche be appointed our independent
registered public accounting firm for the fiscal year ending
December 31, 2011.
Submitted by the
Audit Committee of the Board:
Terence D. Martin (Chairman)
John L. Adams
Pamela H. Patsley
THE ABOVE REPORTS OF THE COMPENSATION COMMITTEE AND AUDIT
COMMITTEE WILL NOT BE DEEMED TO BE SOLICITING MATERIAL OR TO BE
FILED WITH OR INCORPORATED BY REFERENCE INTO ANY FILING BY US
UNDER THE SECURITIES ACT OF 1933 OR THE EXCHANGE ACT, EXCEPT TO
THE EXTENT THAT WE SPECIFICALLY INCORPORATE EITHER SUCH REPORT
BY REFERENCE.
50
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2010, the Compensation Committee was composed of Jack L.
Stahl, Ronald G. Rogers and M. Anne Szostak. No member of the
Compensation Committee was an officer or employee of ours or any
of our subsidiaries. None of our executive officers served on
the Board or on the compensation committee of any other entity,
for which any officers of such other entity served either on the
Board or on our Compensation Committee. For information on
insider participation, see Certain Transactions.
CERTAIN
TRANSACTIONS
All new or continuing related party transactions will be
reviewed by the Board, the Corporate Governance and Nominating
Committee or the Compensation Committee, as appropriate, to
ensure the transactions are fair to us.
Michael F. Weinstein is a co-founder of INOV8, owning in excess
of forty percent of the equity in INOV8. INOV8 owns a majority
of the equity in Hydrive Energy LLC (the LLC) which
has developed the energy drink HYDRIVE. The Company distributes
HYDRIVE and owns a minority interest in the LLC. In fiscal year
2010, the Company paid the LLC approximately $5.0 million
for product, which the Company resold. As a result of this
relationship, Mr. Weinstein is not an independent director
and will not serve on any committee which requires independent
directors.
DELIVERY
OF PROXY MATERIALS TO HOUSEHOLDS WITH MULTIPLE
STOCKHOLDERS
If you have consented to the delivery of only one Notice, Annual
Report or set of proxy materials, as applicable, to multiple Dr
Pepper Snapple Group, Inc. stockholders who share your address,
then only one Notice, Annual Report or set of proxy materials,
as applicable, is being delivered to your household unless we
have received contrary instructions from one or more of the
stockholders sharing your address. We will deliver promptly upon
oral or written request a separate copy of the Notice, Annual
Report or set of proxy materials, as applicable, to any
stockholder at your address. If you wish to receive a separate
copy of the Notice, Annual Report or set of proxy materials, as
applicable, you may call us at
(972) 673-7000
(please ask for Investor Relations) or write to us at
Dr Pepper Snapple Group, Inc., Attn: Investor Relations,
5301 Legacy Drive, Plano, Texas 75024. Stockholders sharing an
address who now receive multiple copies of the Notice, Annual
Report or set of proxy materials, as applicable, may request
delivery of a single copy by calling us at the above number or
writing to us at the above address.
STOCKHOLDERS
PROPOSALS FOR 2011 ANNUAL MEETING
We currently expect to hold our annual meeting after the year
ending December 31, 2011 (2011 Annual Meeting)
on or around May 17, 2012, and mail the Proxy Statement for
that meeting in March 2012, subject to any changes we may make.
If any of our stockholders intends to present a proposal for
consideration at the 2011 Annual Meeting, including the
nomination of directors, without inclusion of such proposal in
the proxy statement and form of proxy, such stockholder must
provide notice to us of such proposal.
Pursuant to
Rule 14a-8
of the Exchange Act, stockholder proposals will need to be
received by us not later than November 25, 2011, in order
to be eligible for inclusion in the proxy statement and form of
proxy distributed by the Board with respect to the 2011 Annual
Meeting. With respect to any notice of a proposal that a
stockholder intends to present for consideration at the 2011
Annual Meeting, without inclusion of such proposal in the proxy
statement and form of proxy, in accordance with Article II,
Section 6(c) or 7(b) of our By-laws, as applicable,
stockholder proposals will need to be received by us not sooner
than January 20, 2012, but not later than February 19,
2012, in
51
order to be presented at the 2011 Annual Meeting. Stockholder
proposals must be sent to our principal executive offices, 5301
Legacy Drive, Plano, Texas 75024, Attention: James L. Baldwin,
Corporate Secretary.
By Order of the Board of Directors
James L. Baldwin
Corporate Secretary
March 25, 2011
52
Dr Pepper Snapple Group, Inc.
5301 Legacy Drive
Plano, TX 75024
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on May 18, 2011. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE
- 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on May 18, 2011. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK
INK AS FOLLOWS: |
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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The Board of Directors
recommends you vote FOR the following: |
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1. Election of Directors |
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For |
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Against |
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Abstain |
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1a. Joyce M. Roché |
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o |
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o |
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o |
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1b. Wayne R. Sanders |
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o |
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o |
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o |
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1c. Jack L. Stahl |
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o |
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o |
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o |
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1d. Larry D. Young |
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o |
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o |
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o |
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The Board of Directors
recommends you vote FOR proposals 2 and 3. |
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For |
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Against |
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Abstain |
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2.
To ratify the appointment of Deloitte & Touche as the Companys
independent registered public accounting firm for fiscal year
2011.
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o |
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o |
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o |
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3. To
approve, on an advisory (non-binding) basis, the following resolution
regarding the compensation of the Companys Named Executive
Officers:
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o |
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o |
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o |
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RESOLVED, that
the compensation paid to the Companys Named Executive Officers,
as disclosed pursuant to the compensation disclosure rules and
regulations of the Securities and Exchange Commission, including
the Compensation Discussion and Analysis, compensation tables
and the narrative discussion is hereby APPROVED.
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The Board of Directors recommends you vote
1 YEAR on the following proposal:
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1
year |
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2
years |
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3
years |
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Abstain |
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4. |
To vote, on an advisory
(non-binding) basis, on the frequency of the advisory vote on
the compensation of the Companys Named Executive Officers.
Stockholders may choose to approve holding an advisory vote on
the compensation of our Named Executive Officers every year, every
two years or every three years or stockholders may abstain from voting.
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o
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o
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o
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o
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NOTE: Such other business
as may properly come before the meeting or any adjournment thereof.
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Please sign exactly
as your name(s) appear(s) hereon. When signing as attorney, executor,
administrator, or other fiduciary, please give full title as such.
Joint owners should each sign personally. All holders must sign.
If a corporation or partnership, please sign in full corporate or
partnership name, by authorized officer.
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Signature [PLEASE
SIGN WITHIN BOX]
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Date |
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Signature
(Joint Owners) |
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Date |
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ADMISSION TICKET |
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Annual Meeting of Stockholders |
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Thursday, May 19, 2011
10:00 a.m. (CDT) |
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Dallas/Plano Marriott at Legacy Town Center
7120 Dallas Parkway
Plano, Texas 75024 |
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If you wish to attend the Annual Meeting of Stockholders in person, please present this
admission ticket and a valid picture identification for admission. Cameras, recording equipment
and other electronic devices will not be permitted at the Annual Meeting. Directions to the
Annual Meeting are on our website at www.drpeppersnapplegroup.com under Investor Center and
Events & Presentations captions. |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, 10K Wrap is/are
available at www.proxyvote.com .
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DR PEPPER SNAPPLE GROUP, INC. |
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ANNUAL MEETING OF STOCKHOLDERSMAY 19, 2011 |
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS |
|
The undersigned hereby appoints Larry D. Young, Martin M. Ellen, and James L. Baldwin, or any
of them, as proxies for the undersigned, with full power of substitution, to act and to vote all
shares of common stock of Dr Pepper Snapple Group, Inc. held of record or in an applicable plan by
the undersigned at the close of business on March 21, 2011, at the Annual Meeting of Stockholders
to be held at the Dallas/Plano Marriott at Legacy Town Center, 7120 Dallas Parkway, Plano, Texas
75024, at 10:00 a.m., Central Daylight Time, on Thursday, May 19, 2011, or any postponement or
adjournment thereof.
In their discretion the proxies are authorized to vote upon such other business as may properly
come before the Annual Meeting of Stockholders or any postponement or adjournment thereof.
This proxy, when properly executed and returned, will be voted in the manner directed herein by the
undersigned stockholder. If this proxy is properly executed and returned but no direction is made,
this proxy will be voted for each of the nominees for Class III directors in proposal 1, for
ratification of Deloitte & Touche as the Companys independent registered public accounting firm
for fiscal year 2011 in proposal 2, for approval, on an advisory basis, of the compensation of the
Companys Named Executive Officers as set forth in Proposal 3, and for a frequency of every year
for future advisory votes on executive compensation of the Companys Named Executive Officers as
set forth in Proposal 4. Whether or not direction is made, this proxy, when properly executed,
will be voted in the discretion of the proxy holders upon such other business as may properly come
before the Annual Meeting of Stockholders or any adjournment or postponement thereof. The
undersigned hereby revokes all proxies previously given by the undersigned to vote at the Annual
Meeting of Stockholders or any adjournment or postponement thereof.
PLEASE REFER TO THE REVERSE SIDE FOR TELEPHONE AND INTERNET VOTING INSTRUCTIONS.
IMPORTANTTHIS PROXY CARD MUST BE SIGNED ON THE REVERSE SIDE.