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. )

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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)

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March 30, 2009

 

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 Tuesday, May 19, 2009 at 10:00 a.m., local time, at the Dallas/Plano Marriott at Legacy Town Center, 7120 Dallas Parkway, Plano, Texas.

 

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 and proxy statement.

 

This year, we are pleased to be using the new U.S. Securities and Exchange Commission rule that allows companies to furnish their proxy materials over the Internet. As a result, we are mailing to many of our stockholders a notice instead of a paper copy of this proxy statement and our 2008 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 this proxy statement, our 2008 Annual Report and a form of proxy card or voting instructions card. All 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

 

 

 

 

 

This notice of Annual Meeting and Proxy Statement and form of proxy are being distributed on or about April 3, 2009.

 

By Order of the Board of Directors

 

 

James L. Baldwin, Jr.
Corporate Secretary

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL STOCKHOLDERS’ MEETING TO BE HELD ON MAY 19, 2009

 

The Company’s Proxy Statement and Annual Report to Security Holders for the fiscal
year ended December 31, 2008 are available at www.proxyvote.com.

DR PEPPER SNAPPLE GROUP, INC.
5301 Legacy Drive
Plano, Texas 75024

PROXY STATEMENT

for

ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 19, 2009

 

GENERAL INFORMATION

 

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 20, 2009, 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 “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, 2009, at 10:00 a.m., Plano, Texas time, or at any adjournments thereof, for the purposes stated in the Notice of Annual Meeting.

 

Internet Availability of Proxy Materials

 

Under rules recently adopted by the Securities and Exchange Commission (“SEC”), we are now primarily furnishing 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, 2008, filed on March 26, 2009) 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 to our stockholders of record on the record date on or about April 3, 2009.

 

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:

 

 

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 cards. For example, if you hold your shares in more than one brokerage account, you may receive

a separate Notice or a separate voting instruction card 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 card 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 card 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 card for the shares represented by one or more of those Notices).

 

How may I obtain a copy of the Company’s 2008 Form 10-K and other financial information?

 

Stockholders may request a free copy of our 2008 Annual Report, which includes our 2008 Form 10-K, from:

 

Dr Pepper Snapple Group, Inc.
Attn: Investor Relations
5301 Legacy Drive
Plano, Texas 75024

 

Alternatively, stockholders can access the 2008 Annual Report, which includes our 2008 Form 10-K and other financial information, on our Investor Center website at:

 

www.drpeppersnapplegroup.com

 

The Company also will furnish any exhibit to the 2008 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:

 

 

We also will consider any other business that properly comes before the Annual Meeting.

 

How does the Board recommend that I vote?

 

Our Board recommends that you vote your shares FOR each of the nominees for election to the Board, FOR the approval and adoption of the Management Incentive Plan, FOR ratification of Deloitte & Touche as our independent registered public accounting firm for the 2009 fiscal year and FOR the approval and adoption of the Omnibus Stock Incentive Plan of 2009.

 

What shares can I vote at the Annual Meeting?

 

Our Board has fixed the close of business on March 20, 2009 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 outstanding 253,827,507 shares of common stock, $0.01 par value per share.

 

How can I vote my shares in person 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 meeting.

 

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 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 card by mail may submit proxies over the Internet by following the instructions on the proxy card or voting instruction card.

 

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 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 card by mail may vote by phone by calling the number specified on voting instruction card provided by their broker, trustee or nominee. Those stockholders should check the voting instruction card for telephone voting availability.

 

By Mail — Stockholders who have received a paper copy of a proxy card or voting instruction card by mail may submit proxies by completing, signing and dating their proxy card or voting instruction card 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, 2009. Votes cast by mail must be received in sufficient time to allow processing. Votes received by mail prior to the day of the meeting will be processed, but votes received the day of the meeting may not be processed depending on the time received. Shares represented by duly executed proxies in the accompanying form will be voted in accordance with the instructions indicated on such proxies or voter instruction forms, and, if no such instructions are indicated thereon, will be voted FOR each of the nominees for election to the Board, FOR the approval and adoption of the Management Incentive Plan, FOR ratification of Deloitte & Touche as our independent registered public accounting firm for the 2009 fiscal year and FOR the approval and adoption of the Omnibus Stock Incentive Plan of 2009.

 

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 or 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.

What is the voting requirement to approve each of the proposals?

 

Pursuant to our Bylaws, the 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 shall decide any proposal or question properly brought before the Annual Meeting. You may vote “FOR,” “AGAINST” or “ABSTAIN” on any proposal, including with respect to each nominee for election as a director. In tabulating the voting results for each proposal, including the election of directors, only “FOR” and “AGAINST” votes will be counted. Abstentions and broker non-votes will not be counted as votes cast “FOR” or “AGAINST” any proposal. Consequently, for each nominee for director to be elected and for each of the other proposals to be approved, it will require that more votes be cast “FOR” the nominee or proposal than “AGAINST” the nominee or proposal.

 

What if I want to change my vote?

 

If the enclosed proxy or voter instruction form is signed and returned, you may, nevertheless, revoke it at any time prior to the Annual Meeting, at your pleasure, 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 or voter instruction form dated subsequent to the date thereof to the addressee named in the enclosed proxy or voter instruction form.

 

How much will this solicitation cost, and who will pay for it?

 

The cost of preparing, assembling, printing and mailing this Proxy Statement and the enclosed proxy form and the cost of soliciting proxies related to the Annual Meeting will be borne by us. We will request banks and brokers to solicit their customers who are beneficial owners of shares of common stock listed of record in names of nominees, and will reimburse such banks and brokers 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, Larry D. Young, John O. Stewart and James L. Baldwin will have the discretion to vote your shares on any additional matters properly presented for a vote at the 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.

 

PROPOSALS

 

Proposal 1: ELECTION OF DIRECTORS

 

Our Board is divided into three classes serving three-year terms. This year’s nominees for re-election to the Board for a three-year term as Class I directors are {ages are as of the date of the Annual Meeting}:

 

Pamela H. Patsley

 

Ms. Patsley, age 52, has served as our director since April 2008. Ms. Patsley has served as Executive Chairman of the Board of MoneyGram International from January 2009 to present. (Ms. Patsley’s position with MoneyGram is not full time, but requires a commitment of approximately 50% of her time.) 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. In addition to her Chairman’s role at MoneyGram International, Ms. Patsley currently serves on the boards of directors of Molson Coors Brewing Company and Texas Instruments Incorporated.

 

M. Anne Szostak

 

Ms. Szostak, age 58, 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 Executive Vice President and Corporate Director - Human Resources and Diversity of FleetBoston Financial Corporation. She also served as Chairman and Chief Executive Officer of Fleet Bank — Rhode Island from 2001 to 2003. Ms. Szostak currently is a director of Belo Corp., Tupperware Brands Corporation and Spherion Corporation.

 

Michael F. Weinstein

 

Mr. Weinstein, age 60, has served as a director since February 2009. Mr. Weinstein has served as Chairman and was the co-founder of INOV8 Beverage Company 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 currently serves on the board of directors of H.J. Heinz Company.

 

THE BOARD RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES FOR DIRECTOR SET FORTH ABOVE.

 

 

On February 11, 2009, our Board approved the Management Incentive Plan (the “Management Incentive Plan”), subject to the approval of our stockholders. The Management Incentive Plan is designed to attract and retain our employees and the employees of our subsidiaries and to stimulate the active interest of such persons in the development and financial success of the Company and its subsidiaries through the making of cash awards under the Management Incentive Plan based on the achievement of certain performance goals.

 

Section 162(m) of the Internal Revenue Code of 1986, as amended (referred to in this Proxy Statement as the “Code”), limits our tax deduction for expense in connection with compensation for our chief executive officer and certain other most highly-compensated executive officers for any fiscal year to the extent that the remuneration of such person exceeds $1 million during such fiscal year, excluding remuneration that qualifies as “performance-based compensation.” Section 162(m) of the Code provides that in order for remuneration to be treated as qualified performance-based compensation, the material terms of the plan pursuant to which the performance-based compensation is paid must be disclosed to and approved by our stockholders. We intend that awards made under

the Management Incentive Plan to our executive officers will be eligible for treatment as performance-based compensation under Section 162(m) of the Code.

 

General Summary of Terms of the Management Incentive Plan

 

The following is a summary of the material terms of the Management Incentive Plan. The full text of the Management Incentive Plan is attached to this Proxy Statement as Appendix A. Please refer to Appendix A for a more complete description of the terms of the Management Incentive Plan.

 

Eligibility.  Employees included in the Management Incentive Plan are eligible for cash awards at the discretion of the Compensation Committee.

 

Administration.  The Management Incentive Plan shall be administered by the Compensation Committee. Subject to the limitations in the Management Incentive Plan, the Compensation Committee shall have the power to:

 

 

The Compensation Committee may also delegate its duties under the Management Incentive Plan to our chief executive officer and to other senior officers of the Company or to such other committee of the Board, except with respect to matters under Section 162(m) of the Code that are required to be determined or established by the Compensation Committee to provide Performance Cash Awards to executive officers as qualified “performance-based compensation.” The Compensation Committee may delegate its duties under the Management Incentive Plan pursuant to such conditions or limitations as the Compensation Committee may establish.

 

Performance Cash Awards — 162(m) of the Code.  Performance Cash Awards granted to executive officers that are intended to qualify as qualified performance-based compensation under Section 162(m) of the Code shall

be paid on account of the achievement of one or more pre-established, objective performance goals. The performance goals are established and administered by the Compensation Committee in accordance with Section 162(m) of the Code prior to the earlier to occur of (x) 90 days after the commencement of the period of service to which the performance goal relates or (y) the lapse of 25% of the period of service (as scheduled in good faith at the time the goal is established), and in any event while the outcome is substantially uncertain. A performance goal is objective if a third party having knowledge of the relevant facts could determine whether the goal is met. Such a performance goal may be based on one or more business criteria that apply to an executive officer, one or more business units, divisions or sectors of the Company, or the Company as a whole, and if so desired by the Compensation Committee, by comparison with a peer group of companies. A performance goal may include one or more of the following and need not be the same for each executive officer:

 

 

Unless otherwise stated, such a performance goal need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo, performance relative to a peer group determined by the Compensation Committee or limiting economic losses (measured, in each case, by reference to specific business criteria).

 

It is our intent that the Management Incentive Plan comply with Section 162(m) of the Code, including, without limitation, Treasury Regulation § 1.162-27(e)(2)(i), as to grants to executive officers and the Compensation Committee in establishing such goals and interpreting the Management Incentive Plan shall be guided by such provisions. Prior to the payment of any compensation based on the achievement of performance goals applicable to a qualified Performance Cash Award to an executive officer, the Compensation Committee must certify in writing that applicable performance goals and any of the material terms thereof were, in fact, satisfied. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any qualified Performance Cash Awards made to executive officers pursuant to the Management Incentive Plan shall be determined by the Compensation Committee to the extent permitted under Section 162(m) of the Code.

 

The Compensation Committee may adjust the performance goals (either up or down) and the level of the Performance Cash Award that a participant may earn under the Management Incentive Plan, to the extent permitted pursuant to Section 162(m) of the Code, if it determines that the occurrence of external changes or other unanticipated business conditions have materially affected the fairness of the performance goals and have unduly influenced our ability to meet them, including, without limitation, events such as material acquisitions, changes in the capital structure of the Company, and extraordinary accounting changes. In addition, performance goals and Performance Cash Awards shall be calculated without regard to any changes in accounting standards that may be required by the Financial Accounting Standards Board (referred to in this Proxy Statement as “FASB”) after such

performance goals are established. Further, in the event a period of service to which a performance goal relates is less than 12 months, the Compensation Committee shall have the right, in its sole discretion, to adjust the performance goals and the level of Performance Cash Award opportunity.

 

Cash Award Limitation.  The Management Incentive Plan limits the amount payable to any participant in respect of any one-year period to $5,000,000.

 

Amendment, Modification, Suspension or Termination.  Our Board or the Compensation Committee may amend, modify, suspend or terminate the Management Incentive Plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that (i) no amendment or alteration may be made that will materially adversely affect the rights of any participant under any Performance Cash Award previously granted to such participant without the consent of such participant and (ii) no amendment or alteration shall be effective prior to its approval by the stockholders of the Company to the extent stockholder approval is otherwise required by applicable legal requirements.

 

Adjustments.  In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Board may make such adjustments to Performance Cash Awards or other provisions for the disposition of awards as it deems equitable, and shall be authorized, in its sole discretion, (i) to provide for the substitution of a new Performance Cash Award or other arrangement (which, if applicable, may be exercisable for such property or stock as the Board determines) for a Performance Cash Award or the assumption of the Performance Cash Award, (ii) to provide, prior to the transaction, for the acceleration of the vesting of the Performance Cash Award or (iii) to cancel any such Performance Cash Awards and to deliver to the participants cash in an amount that the Board shall determine in its sole discretion.

 

Section 409A of the Code.  It is our intent that the payment of Performance Cash Awards under the Management Incentive Plan shall satisfy the short-term deferral exclusion from Section 409A of the Code, unless deferred, in which case the Performance Cash Award shall be subject to the terms of our Supplemental Savings Plan, which is designed to be in compliance with Section 409A of the Code.

 

Term.  The Management Incentive Plan will be effective upon approval by the stockholders and will continue in effect for a term of 10 years. However, the Board can take action to terminate the Management Incentive Plan prior to the end of the 10 year term.

 

The affirmative vote of the holders 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 approve the Management Incentive Plan.

 

THE BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF THE FISCAL YEAR MANAGEMENT INCENTIVE PLAN FOR OUR EXECUTIVE OFFICERS.

 

 

Deloitte & Touche has been selected by the Audit Committee as our independent registered public accounting firm for fiscal year 2009, subject to ratification by the stockholders. Deloitte & Touche was also our independent registered public accounting firm for fiscal year 2008. 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 Bylaws, 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 2009. 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 2009 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 Firm’s 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:

 

 

 

 

The Audit Committee has approved all of our independent registered public accounting firm’s engagements and fiscal year 2008 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, which is attached hereto as Appendix B.

 

THE BOARD RECOMMENDS A VOTE “FOR” THE RATIFICATION OF DELOITTE & TOUCHE AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2009.

 

Proposal 4: APPROVAL AND ADOPTION OF THE OMNIBUS STOCK INCENTIVE PLAN OF 2009

 

Our Board adopted the Omnibus Stock Incentive Plan of 2009 (the “2009 Stock Plan”) on February 11, 2009, subject to stockholder approval. The 2009 Stock Plan is intended to replace our Omnibus Stock Incentive Plan of 2008 (the “2008 Stock Plan”), which originally was approved by our stockholders in May 2008. At the time our Board approved the 2009 Stock Plan, the Board determined that, if the 2009 Stock Plan were approved by the stockholders, then no new grants would be made under the 2008 Stock Plan. Pursuant to the terms of the 2008 Stock Plan, any award already granted under the 2008 Stock Plan as of May 19, 2009, shall remain in full force and effect, as if the 2008 Stock Plan had not been amended or terminated. The 2009 Stock Plan is designed to attract and retain employees and consultants of the Company and its subsidiaries, to attract and retain qualified non-employee directors of the Company, to encourage the sense of proprietorship of such employees, consultants and non-employee directors and to stimulate the active interest of such persons in the development and financial success of the Company and its subsidiaries.

 

General Summary of Terms of the 2009 Stock Plan

 

The following is a summary of the material terms of the 2009 Stock Plan. The full text of the 2009 Stock Plan is attached to this Proxy Statement as Appendix C. Please refer to Appendix C for a more complete description of the terms of the 2009 Stock Plan.

 

Eligibility.  Any officers, employees, non-employee directors or consultants who perform services for us or our subsidiaries who are selected by our Compensation Committee may participate in the 2009 Stock Plan.

Shares Available for Awards.  Under the 2009 Stock Plan, there are an aggregate of 20,000,000 shares of our common stock available for awards (referred to in this Proposal 4 as “Award” or “Awards”). Up to 12,000,000 shares of the aggregate number of shares that are available for Awards may be issued as Awards that are not Options (as described below) or Stock Appreciation Rights (as described below). Up to 1,000,000 shares of the aggregate number of shares available for Awards may be granted as Incentive Options (as described below). The number of shares of common stock available for issuance under the 2009 Stock Plan shall be reduced by the number of shares applicable to an Award, unless the Award terms do not permit settlement in shares of our common stock. Shares tendered by a participant that are withheld as full or partial payment of withholding or other taxes or as payment for the exercise or conversion price of an Award shall not be added back to the number of shares available for issuance under the 2009 Stock Plan. Shares related to an Award (or portion thereof) that expires, is cancelled, is terminated, or is settled in cash (all without having been exercised or payment having been made in the form of shares of our common stock) shall be added back to the number of shares of our common stock available for issuance under the 2009 Stock Plan. Shares of our common stock underlying Awards granted through the assumption of, or in substitution for, outstanding Awards previously granted to individuals who become employees of the Company as a result of a merger, consolidation, acquisition or other corporate transaction involving the Company shall not, unless required by law or regulation, count against the reserve of shares available for issuance. Awards valued by reference to common stock that may be settled in equivalent cash value will count as shares of common stock delivered to the same extent as if the Award were settled in shares of common stock.

 

Administration.  The 2009 Stock Plan will be administered by the Compensation Committee, which will have full and final authority to select persons to receive Awards and establish the terms of such Awards, unless such authority is specifically reserved to our Board in the 2009 Stock Plan or such other committee of the Board as may be designated by the Board. Subject to that limitation and the other limitations in the 2009 Stock Plan, the Compensation Committee shall have the power to:

 

 

The Compensation Committee may also delegate its authority under the 2009 Stock Plan to the chief executive officer and to other senior officers of the Company or to such other committee of the Board, its duties under the 2009 Stock Plan pursuant to such conditions or limitations as the Compensation Committee may establish.

 

Prohibition on Repricing of Awards.  The terms of outstanding Awards may not be amended to reduce the exercise price of outstanding Options or Stock Appreciation Rights nor may outstanding Options or Stock Appreciation Rights be cancelled, exchanged, substituted, bought out or surrendered in exchange for cash, other

awards or Options or Stock Appreciation Rights with an exercise price that is less than the exercise price of the original Options or Stock Appreciation Rights, unless (i) approved by the stockholders or (ii) in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares).

 

Effective Date; Plan Termination.  The 2009 Stock Plan will become effective as of the date of approval by the stockholders. No Award may be granted under the 2009 Stock Plan more than 10 years after the date it becomes effective.

 

Awards.  Each Award shall be embodied in an Award agreement, which shall contain such terms, conditions and limitations as shall be determined by the Compensation Committee in its sole discretion. Under the 2009 Stock Plan, the following Awards may be granted:

 

Option.  An Option awarded pursuant to the 2009 Stock Plan may consist of an Incentive Option or a Nonqualified Option. Incentive Options may not be awarded to non-employee directors. The price at which shares of common stock may be purchased upon the exercise of an Option shall be not less than the fair market value of the common stock on the date of grant. The term of an Option shall not exceed ten years from the date of grant.

 

Stock Appreciation Right.  The strike price for a Stock Appreciation Right shall not be less than the fair market value of the common stock on the date on which the Stock Appreciation Right is granted. The term of a Stock Appreciation Right shall not exceed ten years from the date of grant.

 

Stock Award.  Any Stock Award which is not a Performance Award shall have a minimum restriction period of three years from the date of grant, provided that (i) the Compensation Committee may provide for earlier vesting following a change of control or other specified event involving the Company or upon an employee’s termination of employment by reason of death, disability or retirement, (ii) such three-year minimum restricted period shall not apply to a Stock Award that is granted in lieu of salary or bonus, and (iii) vesting of a Stock Award may occur incrementally over the three-year minimum restricted period; provided, that up to 1,200,000 shares of common stock shall be available for issuance as Stock Awards having a time-based restriction period of less than three years but not less than one year.

 

Performance Award.  The terms, conditions and limitations applicable to any Performance Awards granted to participants pursuant to the 2009 Stock Plan shall be determined by the Compensation Committee, subject to the limitations specified below. Any Stock Award which is a Performance Award shall have a minimum restriction period of one year from the date of grant; provided, that the Compensation Committee may provide for earlier vesting following a change of control or other specified event involving the Company, or upon a termination of employment by reason of death, disability or retirement, or termination of service subject to the limitations specified below. The Compensation Committee shall set performance goals in its sole discretion which, depending on the extent to which they are met, will determine the value and/or amount of Performance Awards that will be paid out to the participant and/or the portion of an Award that may be exercised.

 

Nonqualified Performance Awards.  Performance Awards granted to employees or non-employee directors that are not intended to qualify as qualified performance-based compensation under Section 162(m) of the Code shall be based on achievement of such performance goals and be subject to such terms, conditions and restrictions as the Compensation Committee or its delegate shall determine.

 

Qualified Performance Awards.  Performance Awards granted to executive officers under the 2009 Stock Plan that are intended to qualify as qualified performance-based compensation under Section 162(m) of the Code shall be paid, vested or otherwise deliverable solely on account of the achievement of one or more pre-established, objective performance goals. The performance goals are established and administered by the Compensation Committee in accordance with Section 162(m) of the Code prior to the earlier to occur of (i) 90 days after the commencement of the period of service to which the performance goal relates or (ii) the lapse of 25% of the period of service (as scheduled in good faith at the time the goal is established), and in any event, while the outcome is substantially uncertain. A performance goal is

objective if a third party having knowledge of the relevant facts could determine whether the goal is met. Such a performance goal may be based on one or more business criteria that apply to an executive officer, one or more business units, divisions or sectors of the Company, or the Company as a whole, and if so desired by the Compensation Committee, by comparison with a peer group of companies. A performance goal may include one or more of the following and need not be the same for each executive officer:

 

 

Unless otherwise stated, such a performance goal need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo, performance relative to a peer group determined by the Compensation Committee or limiting economic losses (measured, in each case, by reference to specific business criteria). In interpreting 2009 Stock Plan provisions applicable to performance goals and Qualified Performance Awards, it is the intent of the 2009 Stock Plan to conform with Section 162(m) of the Code, including, without limitation, Treasury Regulation § 1.162-27(e)(2)(i), as to grants to executive officers and the Compensation Committee in establishing such goals and interpreting the 2009 Stock Plan shall be guided by such provisions. Prior to the payment of any compensation based on the achievement of performance goals applicable to qualified Performance Awards, the Compensation Committee must certify in writing that applicable performance goals and any of the material terms thereof were, in fact, satisfied.

 

The Compensation Committee shall adjust the performance goals (either up or down) and the level of the Performance Award that a participant may earn under the 2009 Stock Plan, to the extent permitted pursuant to Section 162(m) of the Code, if it determines that the occurrence of external changes or other unanticipated business conditions have materially affected the fairness of the goals and have unduly influenced our ability to meet them, including without limitation, events such as material acquisitions, changes in the capital structure of the Company, and extraordinary accounting changes. In addition, performance goals and Performance Awards shall be calculated without regard to any changes in accounting standards that may be required by the FASB after such performance goals are established. Further, in the event a period of service to which a performance goal relates is less than twelve months, the Compensation Committee shall have the right, in its sole discretion, to adjust the performance goals and the level of Performance Award opportunity.

 

Stock-based Award Limitations.  Notwithstanding anything to the contrary contained in the 2009 Stock Plan, the following limitations shall apply to Awards: no participant may be granted, during any one-year period, Awards

consisting of Options or Stock Appreciation Rights that are exercisable for more than 3,000,000 shares of common stock; and no participant may be granted, during any one-year period, Stock Awards covering or relating to more than 1,000,000 shares of common stock. (Such limitations are referred to in this Proposal 4 as “Stock-based Award Limitations.”)

 

Taxes.  The Company shall have the right to deduct applicable taxes from any Award payment and withhold, at the time of delivery or vesting of cash or shares of common stock under the 2009 Stock Plan, an appropriate amount of cash or number of shares of common stock or a combination thereof for payment of taxes required by law or to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for withholding of such taxes. The Compensation Committee may also permit withholding to be satisfied by the transfer to the Company of shares of common stock theretofore owned by the holder of the Award with respect to which withholding is required. If shares of common stock are used to satisfy tax withholding, such shares shall be valued based on the fair market value when the tax withholding is required to be made.

 

Amendment, Modification, Suspension or Termination.  The Board or the Compensation Committee may amend, modify, suspend or terminate the 2009 Stock Plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that (i) no amendment or alteration that would materially adversely affect the rights of any participant under any Award previously granted to such participant shall be made without the consent of such participant and (ii) no amendment or alteration shall be effective prior to its approval by the stockholders of the Company to the extent stockholder approval is otherwise required by applicable legal requirements.

 

Adjustments.  The existence of outstanding Awards shall not effect in any manner the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the capital stock of the Company or its business or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock (whether or not such issue is prior to, on a parity with or junior to the common stock) or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding of any kind, whether or not of a character similar to that of the acts or proceedings enumerated in the 2009 Stock Plan. In the event of any subdivision or consolidation of outstanding shares of common stock, declaration of a dividend payable in shares of common stock or other stock split, then (i) the number of shares of common stock reserved under the 2009 Stock Plan, (ii) the number of shares of common stock covered by outstanding Awards in the form of common stock or units denominated in common stock, (iii) the exercise or other price in respect of such Awards, (iv) the Stock-based Award Limitations, (v) the number of shares of common stock covered by Awards to non-employee directors granted pursuant to the 2009 Stock Plan, and (vi) the appropriate fair market value and other price determinations for such Awards shall each be proportionately adjusted by the Board to reflect such transaction. In the event of any other recapitalization or capital reorganization of the Company, any consolidation or merger of the Company with another corporation or entity, the adoption by the Company of any plan of exchange affecting the common stock or any distribution to holders of common stock or securities or property (other than normal cash dividends or dividends payable in common stock), the Board shall make appropriate adjustments to (i) the number of shares of common stock covered by Awards in the form of common stock or units denominated in common stock, (ii) the exercise or other price in respect of such Awards, (iii) the appropriate fair market value and other price determinations for such Awards, (iv) the number of shares of common stock covered by Awards to non-employee directors automatically granted pursuant to the 2009 Stock Plan and (v) the Stock-based Award Limitations, to give effect to such transaction shall each be proportionately adjusted by the Board to reflect such transaction; provided that such adjustments shall only be such as are necessary to maintain the proportionate interest of the holders of the Awards and preserve, without exceeding, the value of such Awards.

 

In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Board may make such adjustments to Awards or other provisions for the disposition of Awards as it deems equitable, and shall be authorized, in its sole discretion, (i) to provide for the substitution of a new Award or other arrangement (which, if applicable, may be exercisable for such property or stock as the Board determines) for an Award or the assumption of the Award, regardless of whether in a transaction to which Section 424(a) of the Code applies, (ii) to provide, prior to the transaction, for the acceleration of the vesting and exercisability of, or lapse of restrictions with respect to, the Award and, if the transaction is a cash merger, provide for the termination of any

portion of the Award that remains unexercised at the time of such transaction or (iii) to cancel any such Awards and to deliver to the participants cash in an amount that the Board shall determine in its sole discretion is equal to the fair market value of such Awards on the date of such event, which in the case of Options or Stock Appreciation Rights shall be the excess of the fair market value of common stock on such date over the exercise price of an Award (for the avoidance of doubt, if the exercise price is less than fair market value, the Option or Stock Appreciation Right may be canceled for no consideration).

 

Section 409A of the Code.  All Awards under the 2009 Stock Plan are intended either to be exempt from, or to comply with the requirements of Section 409A of the Code, and the 2009 Stock Plan and all Awards shall be interpreted and operated in a manner consistent with that intention. Notwithstanding anything in the 2009 Stock Plan to the contrary, if any 2009 Stock Plan provision or Award under the 2009 Stock Plan would result in the imposition of an applicable tax under Section 409A of the Code, that 2009 Stock Plan provision or Award shall be reformed to avoid imposition of the applicable tax and no such action shall be deemed to adversely affect the participant’s rights to an Award.

 

Registration with the SEC

 

We intend to file a Registration Statement on Form S-8 relating to the issuance of our common stock under the 2009 Stock Plan with the SEC pursuant to the Securities Act of 1933, as amended, as soon as is practicable after approval of the 2009 Stock Plan by our stockholders.

 

The affirmative vote of the holders 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 approve the 2009 Stock Plan.

 

THE BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL AND ADOPTION OF THE OMNIBUS STOCK INCENTIVE PLAN OF 2009.

 

BOARD OF DIRECTORS

 

Biographical Information

 

In addition to the persons who are standing for re-election as Class I 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}:

 

Wayne R. Sanders, age 61, has served as our Chairman of our 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 currently serves on the boards of directors of Texas Instruments Incorporated and Belo Corp. 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.

 

Larry D. Young, President and Chief Executive Officer and Director, age 54, has served as a director since October 2007.  Mr. Young has served as our President and Chief Executive Officer since October 2007. Mr. Young joined Cadbury Schweppes Americas Beverages as President and Chief Operating Officer of the Bottling Group segment and Head of Supply Chain in 2006 after our acquisition of DPSUBG, where he had been President and Chief Executive Officer 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.

 

John L. Adams, age 64, 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

currently serves on the boards of directors of Trinity Industries, Inc. and Group 1 Automotive, Inc., where he has served as 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 66, 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. Since 2002, Mr. Martin has served on the board of directors of Del Monte Foods Company.

 

Ronald G. Rogers, age 60, 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.

 

Jack L. Stahl, age 56, 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 Company’s Americas Group and as Chief Financial Officer of The Coca-Cola Company. Mr. Stahl currently serves on the board of directors of Schering-Plough Corporation and Delhaize Group.

 

In addition to the above, Mr. John O. Stewart served on our Board from the date of incorporation, but is not standing for re-election at this meeting. Mr. Stewart continues to serve as our Chief Financial Officer and his biographical information is included on page 20 of this Proxy Statement, along with the other members of our executive leadership team.

 

Director’s Compensation

 

Non-employee directors receive compensation from us for their services on our Board or its committees. Executive directors do not receive compensation for their services as a director. In 2008 we compensated our non-employee directors as follows: an annual cash retainer of $100,000 and an annual equity grant of restricted stock units with a value of $100,000. In addition, the chairperson of the Audit Committee and the Compensation Committee received an annual equity grant of restricted stock units with a value of $30,000 and $25,000, respectively. All of the restricted stock units vest three years from the date of grant.

 

Mr. Sanders, as Chairman, was entitled to an annual cash retainer of $100,000. Mr. Sanders also received an annual equity grant of restricted stock units with a value of $200,000 which vests three years from the date of grant. In addition, in recognition of Mr. Sanders’ services to us in connection with the separation, he received a one-time founders’ equity grant of restricted stock units with a value of $900,000 which vests in equal amounts on each of the first, second and third anniversary of the date of grant.

Director Compensation paid in 2008 was as follows:

 

Director Compensation in 2008

 

 

 

 

At December 31, 2008 (i) Mr. Sanders held restricted stock units equal to 43,374 shares, of which 11,829 shares vest and are issuable on May 7, 2009, 11,829 shares vest and are issuable on May 7, 2010 and 19,716 shares vest and are issuable on May 7, 2011; (ii) Mr. Martin held restricted stock units equal to 5,126 shares, all of which vest and are issuable on May 7, 2011; (iii) Mr. Stahl held restricted stock units equal to 4,929 shares, all of which vest and are issuable on May 7, 2011; and (iv) each of Mr. Adams, Ms. Patsley, Mr. Rogers, and Ms. Szostak held restricted stock units equal to 3,943 shares, all of which vest and are issuable on May 7, 2011. Also, at December 31, 2008 Mr. Adams owned and held 20,000 shares of our common stock.

 

Based on a study performed by an independent consultant, the Compensation Committee has recommended and the Board has approved the same levels of compensation (other than the one-time founders’ equity grant of restricted stock units to Mr. Sanders) for our non-employee directors in fiscal year 2009.

 

Corporate Governance

 

Corporate Governance Guidelines

 

On February 10, 2009, our Board adopted revised Corporate Governance Guidelines. The Corporate Governance Guidelines include, among other things:

 

 

Our Corporate Governance Guidelines are attached hereto as Appendix D and are available on our website at www.drpeppersnapplegroup.com under the Investor Center and Corporate Governance captions. Our Corporate Governance Guidelines are also available free of charge to any stockholder upon written request to 5301 Legacy Drive, Plano, Texas 75024, Attention: James L. Baldwin, Jr., Corporate Secretary.

 

Director Independence

 

In connection with the adoption of the Corporate Governance Guidelines, our 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, Mr. Rogers, Mr. Stahl and Ms. Szostak are independent and have no material relationship with the Company.

 

Board Committees and Meetings

 

We have three standing committees of our Board, including the Audit Committee, the Compensation Committee, and the Corporate Governance and Nominating Committee. These Board committees were formed prior to our spin-off from Cadbury Schweppes, plc (“Cadbury”), which occurred on May 7, 2008. (See “Compensation Discussion and Analysis — Overview” on page 23 of this Proxy Statement.) The charters for each committee are available on our website at www.drpeppersnapplegroup.com under the Investor Center and Corporate Governance captions.

 

Audit Committee

 

Since its formation, the Audit Committee has 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. All of such Audit Committee members are independent as defined in the current New York Stock Exchange listing standards. Upon consideration of the attributes of an audit committee financial expert as set forth in Section 401(h) of Regulation S-K promulgated by the SEC, our Board determined that each of the members of the Audit Committee possess those attributes through their experience and each was designated as an Audit Committee Financial Expert and each is “independent” as that term is defined in Item 7(d)(3)(iv)(A) of Schedule 14A under the Securities Exchange Act of 1934.

 

The Audit Committee of our Board is responsible for:

 

 

The Audit Committee has selected Deloitte & Touche as our independent registered public accounting firm for fiscal year 2009, subject to ratification by our stockholders. The Audit Committee operates under a written charter that was adopted by our Board on April 24, 2008, a copy of which is attached hereto as Appendix B and is available on our website at www.drpeppersnapplegroup.com under the Investor Center and Corporate Governance captions. Our Audit Committee Charter is also available free of charge to any stockholder upon written request to 5301 Legacy Drive, Plano, Texas 75024, Attention: James L. Baldwin, Jr., Corporate Secretary. The Report of the Audit Committee for fiscal year 2008 is included in this Proxy Statement on page 45.

 

Compensation Committee

 

Since its formation, the Compensation Committee has consisted of three independent directors — Mr. Stahl (Chairman), Mr. Rogers and Ms. Szostak. Mr. Stahl served as the Chairman of the Compensation Committee since

its formation. All of such Compensation Committee members are independent as defined in the current New York Stock Exchange listing standards. The Compensation Committee is responsible for:

 

 

A copy of the restated Compensation Committee Charter was approved by our Board on April 24, 2008 and is available on our website at www.drpeppersnapplegroup.com under the Investor Center and Corporate Governance captions and is also attached to this Proxy Statement as Appendix E. Our Compensation Committee Charter is also available free of charge to any stockholder upon written request to 5301 Legacy Drive, Plano, Texas 75024, Attention: James L. Baldwin, Jr., Corporate Secretary. The Report of the Compensation Committee for fiscal year 2008 is included in this Proxy Statement beginning on page 29.

 

Corporate Governance and Nominating Committee

 

Since its formation, 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:

 

 

On April 24, 2008, our Board approved the 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 and is attached to this Proxy Statement as Appendix F. Our Corporate Governance and Nominating Committee Charter is also available free of charge to any stockholder upon written request to 5301 Legacy Drive, Plano, Texas 75024, Attention: James L. Baldwin, Jr., Corporate Secretary.

 

In fiscal year 2008, the Corporate Governance and Nominating Committee considered our current directors and other candidates to fill the slate of nominees for election to our Board. Based on an evaluation of the background, skills and areas of expertise represented by the various candidates against the qualifications for directors set forth in our Corporate Governance Guidelines and our current requirements, the Corporate Governance and Nominating Committee determined that the following persons possess the appropriate skill level, expertise and

qualifications and recommended that Ms. Patsley, Ms. Szostak and Mr. Weinstein be re-elected to our Board as Class I directors.

 

Fiscal Year 2008 Meetings

 

During the fiscal year ended December 31, 2008, there were seven (7) meetings of our Board. During the fiscal year, there were eight (8) meetings held by the Audit Committee and three (3) executive sessions of the Audit Committee to meet with our independent registered public accounting firm and the vice president of corporate audit, four (4) meetings held by the Compensation Committee, and two (2) meetings held by the Corporate Governance and Nominating 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 New York Stock Exchange, 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. Three (3) executive sessions were held in fiscal year 2008.

 

Attendance at Annual Meeting

 

It is our policy that all directors attend the Annual Meeting. We anticipate that all members of our Board will be present at the Annual Meeting.

 

BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS

 

Other than Mr. Young, who is a director and whose business experience is summarized in this Proxy Statement beginning on page 14, 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, Jr., Executive Vice President, General Counsel, age 48, has served as our Executive Vice President and General Counsel since July 2003. From June 2002 to July 2003, he served as Senior Vice President and General Counsel of Dr Pepper/Seven Up, Inc., and from August 1998 to June 2002 as General Counsel of Mott’s LLP.

 

Tina S. Barry, Senior Vice President, Corporate Affairs, age 52, has served as our Senior Vice President, Corporate Affairs since September 2008. 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, Bottling Group Sales and Finished Goods Sales, age 51, has served as our President of Bottling Group Sales and Finished Goods Sales since September 2008. Prior to that, Mr. Collins was our President of Sales for the Bottling Group, a position he had held since October 2007. He had previously served as Midwest Division President for the Bottling Group since January 2005. He also was Regional Vice President (North/East) at DPSUBG from October 2001 to December 2004.

 

Pedro Herrán Gacha, Executive Vice President, Strategy, and President, Mexico and the Caribbean, age 47, has served as our Executive Vice President, Strategy since August 2008 and our President of the Mexico and the Caribbean segment since March 2004. Prior to that, he was President of Cadbury Schweppes Beverages Mexico, a position he had held since January 2000.

 

Derry L. Hobson, Executive Vice President, Supply Chain, age 58, has served as our Executive Vice President of Supply Chain since October 2007. Mr. Hobson joined the business as Senior Vice President of Manufacturing in 2006 through our acquisition of Dr Pepper/Seven Up Bottling Group where he had been Executive Vice President since 1999.

 

James J. Johnston, Jr., President, Concentrate Sales, age 52, has served as our President of Concentrate Sales since September 2008. Prior to that, Mr. Johnston was our President of Finished Goods and Concentrate Sales, a position he had held since October 2007. From January 2005 to October 2007, he was Executive Vice President of Sales. From December 2003 to January 2005, he was first Senior Vice President, then Executive Vice President of Strategy. From October 1997 to December 2003, Mr. Johnston served as Senior Vice President of Licensing.

 

Lawrence N. Solomon, Executive Vice President, Human Resources, age 54, has served as our Executive Vice President of Human Resources since March 2004. From May 1999 to March 2004, he served as Senior Vice President of Human Resources for Dr Pepper/Seven Up, Inc. and prior to which he served on Cadbury’s global human resources team.

 

John O. Stewart, Executive Vice President, Chief Financial Officer, age 50, has served as our Executive Vice President and Chief Financial Officer since November 2006. Mr. Stewart served as one of our directors since October 2007 and will continue to serve through the Annual Meeting. From 1990 to 2004, Mr. Stewart worked for Diageo PLC and its subsidiaries, serving as Senior Vice President and Chief Financial Officer of Diageo North America from 2001 to 2004. From 2004 to 2005, Mr. Stewart was an independent consultant, providing mergers and acquisitions advice to Diageo PLC.

 

David J. Thomas, Ph.D., Senior Vice President, Research & Development, age 47, has served as our Senior Vice President, Research & Development since November 2006. Dr. Thomas served as Vice President — Global Product Development for Gerber Products from July 2005 until October 2006; as Vice President — Research and Development for Kerry Group from July 2004 to July 2005; and in various R&D management positions at Pillsbury/General Mills from June 1995 to June 2004. David 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 51, has served as our Executive Vice President, Marketing since September 2008. From February 2003 to September 2008, Mr. Trebilcock served as our Senior Vice President — Consumer Marketing. Prior to that time, Mr. Trebilcock held various positions at Dr Pepper/Seven-Up, Inc., which he joined in July 1987.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth, as of March 20, 2009, 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.

 

 

 

 

 

 

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Securities Exchange Act of 1934 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, all required forms were filed on time, except that Pedro Herran Gacha acquired 11,840 shares of common stock on May 7, 2008 in connection with the spin-off from Cadbury. The report of ownership was due on May 10, 2008, but was reported in Form 5 filed on January 20, 2009. Rodger L. Collins acquired 1,000 shares of common stock on August 22, 2008. The report of ownership was due on August 24, 2008, but was reported in Form 4 filed on September 22, 2008. David J. Thomas acquired 2,198 shares of the Employee Share Award converted from the International Share Award Plan of Cadbury. The report of ownership was due on December 10, 2008, but was reported in Form 4 filed on December 12, 2008.

 

Stockholder Communications

 

Stockholders may communicate with our Board, the presiding director of the executive sessions or the non-employee directors as a group by submitting an e-mail thru the Company’s 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.

 

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. Our 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 and senior financial officers, including our Chief Executive Officer, if any, by posting such information on our website at www.drpeppersnapplegroup.com under the Investor Center and Corporate Governance captions. Our Code of Business Conduct and Ethics is attached hereto as Appendix G and is also available free of charge to any stockholder upon written request to 5301 Legacy Drive, Plano, Texas 75024, Attention: James L. Baldwin, Jr., Corporate Secretary.

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Overview

 

We are a leading integrated brand owner, bottler and distributor of non-alcoholic beverages in the United States, Canada and Mexico with a diverse portfolio of flavored (non-cola) carbonated soft drinks and non-carbonated beverages, including ready-to-drink teas, juices, juice drinks and mixers. 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 have built our business over the last 25 years through a series of strategic acquisitions. In the 1980’s through the mid-1990’s, we began building on our then existing Schweppes business by adding brands such as Mott’s, Canada Dry and A&W and a license for Sunkist. We also acquired the Peñafiel business in Mexico. In 1995, we acquired Dr Pepper/Seven Up, Inc., having previously made minority investments in the company. In 1999, we acquired a 40%, interest in Dr Pepper/ Seven Up Bottling Group, Inc., (“DPSUBG”), which was then our largest independent bottler, and increased our interest to 45% in 2005. In 2000, we acquired Snapple and other brands, significantly increasing our share of the United States non-carbonated beverages market segment. In 2003, we created Cadbury Schweppes Americas Beverages by integrating the way we managed our four North American businesses (Mott’s, Snapple, Dr Pepper/Seven Up and Mexico). During 2006 and 2007, we acquired the remaining 55% of DPSUBG, Southeast-Atlantic Beverage Corporation and several smaller bottlers and integrated them as our Bottling Group operations, thereby expanding our geographic coverage.

 

On May 7, 2008, 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. The separation involved a number of steps, and as a result of these steps we became an independent publicly-traded company listed on the New York Stock Exchange under the symbol “DPS”. In return for the transfer of the Americas Beverages business, we distributed our common stock to our parent company stockholders. (This separation transaction is sometimes referred to in this Proxy Statement as the “spin-off’.)

 

Our portfolio includes some of the most recognized beverages in the Americas. More than 75% of our overall volume is from brands that are either #1 or #2 in their flavor categories.

 

Maintaining these industry leading positions requires a talented and motivated executive team. Our overall executive compensation program is, therefore, designed to be competitive with those companies in our industry, considering our size and scale, and also to be competitive with other leading consumer packaged goods companies of similar size and scale.

 

Objectives of Our Program

 

Through the date of the spin-off in 2008, the compensation of our key executives was governed by the philosophies and compensation structure of our former parent, Cadbury. Following the spin-off, we undertook a significant review of our entire compensation program to ensure that its design was compatible with our new position as a stand-alone, NYSE-listed company, which is included in the S&P 500.

 

As a result of this review, the following objectives were established:

 

 

 

As a result of the spin-off in May 2008, some of our program design reflects the objectives of our prior parent, Cadbury. However, a number of design features in the latter half of 2008 reflect our key philosophies, and these philosophies will continue to guide our programs in 2009 and beyond.

 

Role of the Compensation Committee

 

The Compensation Committee of the Board (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, with assistance from its executive compensation consultant — Mercer, reviews and determines the compensation (including salary, annual incentive, long-term incentives and other benefits) of our chief executive officer (“CEO”) and the key executive officers of the Company. References to “CEO” in this Compensation Discussion and Analysis are to Larry D. Young, our President and Chief Executive Officer.

 

For a more complete description of the responsibilities of the Compensation Committee, see “Board of Directors — Board Committees and Meetings — Compensation Committee” beginning on page 17 of this Proxy Statement and the charter for the Compensation Committee attached to this Proxy Statement as Appendix E and posted on our website at www.drpeppersnapplegroup.com under the Investor Center and Corporate Governance tabs.

 

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. Following its selection in July 2008, Mercer regularly attended Compensation Committee meetings, and reported directly to the Compensation Committee on matters relating to compensation for our executive officers, including our CEO.

 

During 2008, the Compensation Committee requested that Mercer:

 

 

Role of Company Management

 

Our management, including the CEO, develops preliminary recommendations regarding compensation matters with respect to all key executives other than the CEO and provides these recommendations to the Compensation Committee, which makes the final decisions. Separately, the Compensation Committee makes the final decisions on CEO compensation, with advice from Mercer, as appropriate. The management team is

responsible for the administration of the compensation programs once Compensation Committee decisions are finalized.

 

The Compensation Program

 

The key components of our current compensation program for our key executives are:

 

 

In 2008, 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.

 

The primary basis of our compensation structure at the time of the spin-off was a Comparator Group established by Cadbury. This Comparator Group consisted of the following 16 multinational consumer goods companies:

 

 

In addition to the Comparator Group, Cadbury also used relevant market data from two other survey sources to set compensation levels for key executives:

 

 

Given the size of the survey samples and the proprietary nature of these surveys, the actual participating companies cannot be named.

 

In the second half of 2008, our Compensation Committee, with the assistance of Mercer, reviewed potential peers in light of our new publicly-traded status. As a result, a revised set of peer companies was identified that will be used to calibrate our executive compensation program for 2009. These 18 companies represent leading consumer goods companies of similar size and scale to us, a number of which were in the prior Comparator Group:

 

 

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 executive’s 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 20% or less of the total compensation package for our CEO and key executive officers. This is consistent with our philosophy to have low fixed and high “at risk” compensation.

 

Annual Cash Incentive Compensation

 

Our annual cash incentive programs are 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 (as defined in the first paragraph of “Historical Executive Compensation Information” on page 29) of this Proxy Statement, these targets ranged from 65% to 100% 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 NEO’s actual time in each position, the NEO’s previous base salary and Annual Incentive Plan of 2008 (“Annual Incentive Plan”) percentage and new base salary and Annual Incentive Plan target percentage.

 

Due to the spin-off from Cadbury, the 2008 cash incentive programs for key executives consisted of two separate six-month programs, described below. The annual award opportunities were essentially divided by two in calculating the award opportunities for each six-month program.

 

1st Half of 2008

 

The CEO, other NEOs and other key executives were covered under the Annual Incentive Plan established by Cadbury. Awards under the Annual Incentive Plan were based on two key measures: (i) Net Sales Value (“NSV”) and (ii) Underlying Operating Profit (“UOP”). For this program, NSV was weighted 40% and UOP was weighted 60%. Net sales are gross sales net of costs associated with customer marketing programs and incentives, as well as sales taxes and other similar taxes. UOP represents a non-GAAP measure of income from operations. UOP is our total company income from operations on a U.S. GAAP basis, adjusted for: (1) restructuring costs, (2) non-cash compensation charges on stock option and restricted stock awards, (3) amortization and impairment of intangibles, (4) incremental pension costs, (5) total company corporate costs and other items, which relate primarily to general and administrative expenses not allocated to one of our segments and (6) equity in earnings of unconsolidated subsidiaries.

 

Performance standards were set for both NSV and UOP; however, no awards for NSV could be made if a threshold level of UOP performance was not achieved. The Annual Incentive Plan had an additional feature that allowed for higher NSV payouts if a certain operating margin was achieved (defined as UOP at a percent of NSV). This additional feature was called the “margin kicker” and allowed for a payout of 125% of target NSV if the operating margin was achieved.

 

For the first half of 2008, the overall weighted result was 77.1% versus target. This was due to NSV performance at 52.9% of target and UOP performance below target at 93.1%.

 

2nd Half of 2008

 

Following the spin-off, our Compensation Committee decided that the Company’s Annual Incentive Plan structure should be revised to be more consistent with our new stand-alone organization. The Compensation Committee established two measures: Gross Profit (weighted 40%), which measures our revenue minus the cost of making our product and Net Income (weighted 60%), which measures our gross profit less all operating, interest and tax expenses. No award for Gross Profit could be made if a threshold level of Net Income performance was not achieved.

 

Performance standards were set by the Compensation Committee for each measure for the last six months of 2008. In evaluating the achievement of the performance measures for the last six months of 2008, the Compensation Committee considered the Company’s performance and other unusual or non-recurring events and conditions that affected the Company’s performance. After consideration of those events and conditions, the Compensation Committee approved the adjustment of the actual performance for certain of those events and conditions. Included among the events and conditions for which the Compensation Committee made adjustment were unanticipated costs related to the spin-off, restructuring costs, impact of the loss of energy drink (Monster) distribution rights attributable to fiscal year 2008, accruals for assessments anticipated from governmental audits related to prior year

operations, and impairment charges. After adjusting for these items, the Compensation Committee determined that the overall weighted result was 36.8% versus the performance standard. This result was based solely on our achievement against the Net Income performance standard at 61.3% of target, as our performance against the Gross Profit performance standard was not at a sufficient level to result in any award.

 

Full year Result

 

After calculating the results for each half in 2008, it was determined that the overall weighted result for the fiscal year was 56.95% versus target. Annual Incentive Plan payment amounts, reflecting the total annual incentive amounts earned (1st half and 2nd half) for 2008 are shown in the “Non Equity Incentive Plan Compensation” column of the Summary Compensation Table, all of which will be paid in April 2009.

 

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 2008

 

Our incentive plans allow for the granting of performance share units, restricted stock and restricted stock units, and stock options, each linked to our stock price. For 2008, the Compensation Committee believed it was important to use equity vehicles to provide alignment with stockholders interest, particularly following the spin-off. To provide a balanced emphasis on performance through the use of stock options and on retention through the use of time-based restricted stock units, the Compensation Committee made grants in 2008 to our key executives consisting of 50% stock options and 50% time-based restricted stock units (weighted by value). 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:

 

 

Prior Awards under Cadbury

 

Prior to the spin-off, many of our executives participated in long-term incentive programs sponsored by Cadbury. In connection with the spin-off, and in accordance with the requirements of the Cadbury equity plans under which these awards were made, the Remuneration Committee of Cadbury approved equitable adjustments with respect to the stock options and other equity awards relating to Cadbury common stock held by our executives

and other employees. These equitable adjustments were intended to preserve the intrinsic value of the pre-spin-off awards.

 

The share awards were prorated for both year-to-date performance based on the pre-established performance hurdles and time earned under applicable performance periods and then each individual award was converted to our shares of common stock. At the date of the spin-off from Cadbury, the awards resulting from the conversion were transferred to one of three separate plans — Legacy International Share Award Plan, Legacy Long-Term Incentive Plan and Legacy Bonus Share Retention Plan. These awards vested on separation and are not forfeitable. However, the shares which are the subject of the awards will not be released until the original specified release dates in 2009 and 2010. Further detail on these awards is provided in the “Option Exercises and Stock Vested” table on page 33 of this Proxy Statement and in Note 16 to our Audited Consolidated Financial Statements for the fiscal year ended December 31, 2008.

 

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:

 

 

REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

 

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 incorporated in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, and our Proxy Statement to be filed in connection with our 2009 Annual Meeting.

 

Submitted by the
Compensation Committee of the Board

 

Jack L. Stahl, Chairman
Ronald G. Rogers
M. Anne Szostak

 

Historical Executive Compensation Information

 

The executive compensation disclosure contained in this section reflects compensation information for 2008. The following disclosure tables provide information for (1) Mr. Young, our President and Chief Executive Officer; (2) Mr. Stewart, our Chief Financial Officer; (3) Mr. Collins, our President Bottling Group Sales and Finished Goods Sales; (4) Mr. Johnston, our President Concentrate Sales; and (5) Mr. Solomon, our Executive Vice President Human Resources. These persons are sometimes hereinafter 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 2008. Compensation amounts shown in the table include amounts paid to our key executives for time periods prior to and after the spin-off from Cadbury.

 

Summary Compensation Table

 

 

 

 

 

 

 

 

 

 

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 2008.

 

Grants of Plan-Based Awards

 

 

 

 

 

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, 2008. All such awards relate to shares of our common stock.

Outstanding Equity Awards at Fiscal Year End

 

 

 

 

Option Exercises and Stock Vested

 

The following table sets forth information regarding shares of our common stock acquired in 2008 by each NEO upon the exercise of stock options and vesting of stock awards during 2008.

 

Options Exercises and Stock Vested