SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT /X/
FILED BY A PARTY OTHER THAN THE REGISTRANT / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
/X/ Definitive Proxy Statement Commission Only (as permitted by
/ / Definitive Additional Materials Rule 14a-6(e)(2))
/ / Soliciting Material Pursuant to
Rule 14a-12
EMERSON ELECTRIC CO.
(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):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / 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.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
[Emerson logo]
St. Louis, Missouri
TO THE STOCKHOLDERS OF December 8, 2004
EMERSON ELECTRIC CO.:
The Annual Meeting of the Stockholders of Emerson Electric Co. will be
held at the office of the Company, 8000 West Florissant Avenue, St. Louis,
Missouri on Tuesday, February 1, 2005, commencing at 10:00 a.m., at which
meeting only holders of the common stock of record at the close of business
on November 24, 2004, will be entitled to vote, for the following purposes:
1. To elect five Directors;
2. To approve the Emerson Electric Co. Restricted Stock Plan For
Non-Management Directors;
3. To re-approve the performance measures under the Emerson Electric
Co. Annual Incentive Plan;
4. To ratify the appointment of Independent Auditors;
5. To vote upon the stockholder proposal described in the accompanying
proxy statement, if properly presented at the meeting; and
6. To transact such other and further business, if any, as lawfully may
be brought before the meeting.
EMERSON ELECTRIC CO.
By /s/ David N Farr
Chairman of the Board and
Chief Executive Officer
/s/ W. W. Withers
Secretary
EVEN THOUGH YOU MAY PLAN TO ATTEND THE MEETING IN PERSON, PLEASE VOTE
BY TELEPHONE OR THE INTERNET, OR EXECUTE THE ENCLOSED PROXY CARD AND MAIL
IT PROMPTLY. A RETURN ENVELOPE (WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES) IS ENCLOSED FOR YOUR CONVENIENCE. TELEPHONE AND INTERNET
VOTING INFORMATION IS PROVIDED ON YOUR PROXY CARD. SHOULD YOU ATTEND THE
MEETING IN PERSON, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
IMPORTANT
PLEASE NOTE THAT A TICKET IS REQUIRED FOR ADMISSION TO THE MEETING. IF
YOU PLAN TO ATTEND IN PERSON AND ARE A STOCKHOLDER OF RECORD, PLEASE CHECK
THE BOX ON YOUR PROXY CARD AND BRING THE TEAR-OFF ADMISSION TICKET WITH YOU
TO THE MEETING. IF YOUR SHARES ARE HELD BY SOMEONE ELSE (SUCH AS A BROKER)
PLEASE BRING WITH YOU A LETTER FROM THAT FIRM OR AN ACCOUNT STATEMENT
SHOWING YOU WERE A BENEFICIAL HOLDER ON NOVEMBER 24, 2004.
EMERSON ELECTRIC CO.
8000 WEST FLORISSANT AVENUE, ST. LOUIS, MISSOURI 63136
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD FEBRUARY 1, 2005
This proxy statement is furnished to the stockholders of Emerson
Electric Co. in connection with the solicitation of proxies for use at the
Annual Meeting of Stockholders to be held February 1, 2005, and at all
adjournments thereof, for the purposes set forth in the accompanying Notice
of Annual Meeting of Stockholders. This proxy statement and the enclosed
form of proxy are first being mailed to stockholders on or about December
8, 2004.
If you plan to attend and have a disability which requires
accommodation at the meeting, please call 314-553-2197; requests must be
received by January 11, 2005.
REGISTERED STOCKHOLDERS CAN SIMPLIFY THEIR VOTING AND SAVE THE COMPANY
EXPENSE BY CALLING 1-800-435-6710 AND VOTING BY TELEPHONE, OR VOTING BY
INTERNET ON THE WEBSITE OF OUR TRANSFER AGENT AT www.eproxy.com/emr.
Telephone and Internet voting information is provided on your proxy card. A
Control Number, located on the proxy card, is designed to verify your
identity and allow you to vote your shares and confirm that your voting
instructions have been properly recorded.
If your shares are held in the name of a bank or broker, follow the
voting instructions on the form you receive from that firm. The
availability of telephone or Internet voting will depend on that firm's
voting processes.
IF YOU VOTE BY TELEPHONE OR INTERNET, IT IS NOT NECESSARY TO RETURN
YOUR PROXY CARD.
If you choose not to vote by telephone or Internet, please return your
proxy card, properly signed, and the shares represented will be voted in
accordance with your directions. You can specify your choices by marking
the appropriate boxes on the proxy card. If your proxy card is signed and
returned without specifying choices, the shares will be voted FOR the
nominees in Proposal 1, FOR Proposal 2, FOR Proposal 3, FOR Proposal 4,
AGAINST Proposal 5 and otherwise in the discretion of the proxies. The
Company knows of no reason why any of the nominees for Director named
herein would be unable to serve. In the event, however, that any nominee
named should, prior to the election, become unable to serve as a Director,
your proxy (unless designated to the contrary) will be voted for such other
person or persons as the Board of Directors of the Company may recommend.
You may revoke your proxy at any time before it is voted (in the case
of proxy cards) by giving notice to the Secretary of the Company or by
executing and mailing a later-dated proxy. To revoke a proxy or change your
vote by telephone or Internet, you must do so by telephone or Internet,
respectively (following the directions on your proxy card), by twelve
midnight Eastern time on January 31, 2005.
The close of business on November 24, 2004 was fixed by the Board of
Directors as the record date for the determination of stockholders entitled
to vote at the Annual Meeting of Stockholders. As of the record date, there
were outstanding and entitled to be voted at such meeting 419,726,796
shares of common stock. The holders of the common stock will be entitled on
each matter to one vote for each share of common stock held of record on
the record date.
A copy of the Company's Annual Report to Stockholders for the fiscal
year ended September 30, 2004 accompanies this proxy statement.
This proxy is solicited by the Board of Directors of the Company. The
solicitation will be by mail and the expense thereof will be paid by the
Company. The Company has retained Morrow & Co., Inc. to assist in the
solicitation of proxies at an estimated cost of $10,000 plus expenses. In
addition, solicitation of proxies may be made by telephone or telegram by
Directors, officers or regular employees of the Company.
2
I. ELECTION OF DIRECTORS
NOMINEES AND CONTINUING DIRECTORS
The Board of Directors is divided into three classes, with the terms of
office of each class ending in successive years. Five Directors of the
Company are to be elected for terms ending at the Annual Meeting in 2008,
or until their respective successors have been elected and have qualified.
Certain information with respect to the nominees for election as Directors
proposed by the Company, as well as the other Directors whose terms of
office as Directors will continue after the Annual Meeting, is set forth
below.
SHARES OF
EMERSON
SERVED AS COMMON STOCK
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR BENEFICIALLY
OR POSITION, OTHER DIRECTORSHIPS SINCE OWNED(1)(2)(3)
-------------------------------- --------- --------------
NOMINEES FOR TERMS ENDING IN 2008
D. N. Farr, 49.............................................. 2000 619,216(4)
Chairman of the Board and Chief Executive Officer of
Emerson
He is also a Director of Delphi Corp.
D. C. Farrell, 71........................................... 1989 20,829
Retired Chairman and Chief Executive Officer of The May
Department Stores Company
R. B. Horton, 65............................................ 1987 9,745
Chairman of The Sporting Exchange Ltd., Retired Chairman
of BP p.l.c. and Railtrack Group PLC and Former
Chairman of Chubb plc
C. A. Peters, 49............................................ 2000 253,795
Senior Executive Vice President of Emerson
J. W. Prueher, 62........................................... 2001 3,783
Retired Admiral, U.S. Navy, and Former U.S. Ambassador to
The People's Republic of China
He is also a Director of Merrill Lynch & Company, Inc.,
The New York Life Insurance Company, Long Shadows
Vintners, LLC and Fluor Corporation
TO CONTINUE IN OFFICE UNTIL 2007
C. Fernandez G., 38......................................... 2001 13,323
Vice Chairman and Chief Executive Officer of Grupo Modelo,
S. A. de C. V., brewer
He is also a Director of Anheuser-Busch Companies, Inc.
and Grupo Televisa, S.A.
W. J. Galvin, 58............................................ 2000 401,566(4)
Senior Executive Vice President and Chief Financial
Officer of Emerson
He is also a Director of Factory Mutual Insurance Company
G. A. Lodge, 72............................................. 1974 14,833
President of InnoCal Management, Inc., a venture capital
management company
R. L. Ridgway, 69........................................... 1995 8,343
Former Assistant Secretary of State for Europe and Canada
She is also a Director of The Boeing Company, Manpower,
Inc., New Perspective Fund, Inc., Sara Lee Corporation
and 3M Company
3
SHARES OF
EMERSON
SERVED AS COMMON STOCK
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR BENEFICIALLY
OR POSITION, OTHER DIRECTORSHIPS SINCE OWNED(1)(2)(3)
-------------------------------- --------- --------------
TO CONTINUE IN OFFICE UNTIL 2006
J. G. Berges, 57............................................ 1997 637,100(4)
President of Emerson
He is also a Director of PPG Industries, Inc. and MKS
Instruments, Inc.
A. A. Busch III, 67......................................... 1985 30,833(4)
Chairman of the Board of Anheuser-Busch Companies, Inc.,
brewery, container manufacturer and theme park operator
He is also a Director of SBC Communications Inc.
A. F. Golden, 58............................................ 2000 6,477
Partner of Davis Polk & Wardwell, lawyers
V. R. Loucks, Jr., 70....................................... 1979(5) 10,883
Retired Chairman and Chief Executive Officer of Baxter
International Inc.
J. B. Menzer, 53............................................ 2002 3,599
Executive Vice President of Wal-Mart Stores, Inc. and
President and Chief Executive Officer of Wal-Mart
International
He is also a Director of Wal-Mart de Mexico and The Seiyu,
Ltd. (a Japanese supermarket chain)
All Directors and Executive Officers as a Group
(17 persons).............................................. 2,318,009(6)(7)
-------
(1) Beneficial ownership of Emerson common stock is stated as of September
15, 2004, except in the case of Mr. Menzer, for whom ownership is
stated as of September 23, 2004. Under rules of the Securities and
Exchange Commission, persons who have power to vote or dispose of
securities, either alone or jointly with others, are deemed to be the
beneficial owners of such securities. Each person reflected in the
table has both sole voting power and sole investment power with respect
to the shares included in the table, except as described in the
footnotes below and except that with respect to the following shares,
the person named has no investment power: Mr. Farr-190,000;
Mr. Berges-140,000; Mr. Galvin-68,000; Mr. Peters-42,000; Mr. Withers
(who is also an executive officer of the Company named in the Summary
Compensation Table)-42,000; Mr. Fernandez-3,283; Mr. Golden-3,477;
Mr. Menzer 1,599; Mr. Prueher-2,883; each other non-management
Director-7,233; and all Directors and executive officers as a
group-569,973 shares.
(2) Includes the following shares which such persons have or will have
within 60 days after September 15, 2004 the right to acquire upon the
exercise of employee stock options: Mr. Farr-332,444;
Mr. Berges-330,526; Mr. Galvin-197,082; Mr. Peters-127,672; and
Mr. Withers-98,440.
(3) No person reflected in the table owns more than 0.5% of the outstanding
shares of Emerson common stock.
(4) Includes 33,646 shares held by the spouse and/or children of Mr. Farr;
38,998 shares held by the spouse and/or children of Mr. Berges; and
35,334 shares held by or in trust for the spouse and/or children of
Mr. Galvin, of which Mr. Galvin disclaims beneficial ownership as to
11,808 shares. Includes 55,139 shares and options exercisable with
respect to 57,258 of the shares referred to in footnote 2 held by the
Galvin Family Partnership. Includes 300 shares held by Mr. Busch as
co-trustee of a trust, as to which Mr. Busch shares voting and
investment power and disclaims beneficial ownership.
(5) Mr. Loucks previously served as a Director from April 1974 to December
1975.
(6) Includes 1,142,844 shares of common stock which executive officers
have, or will have within 60 days after September 15, 2004 the right to
acquire upon exercise of employee stock options. Shares owned as a
group represent 0.55% of the outstanding common stock of the Company.
The shares issuable upon exercise of options were deemed to be
outstanding for purposes of calculating the percentage of outstanding
shares.
(7) The total includes shares owned by W. W. Withers, the only executive
officer of the Company named in the Summary Compensation Table not
otherwise shown individually in this table, who beneficially owned
171,491 shares, and 112,193 shares beneficially owned by other
executive officers of the Company.
4
Each of the nominees and continuing Directors has had the same position
or other executive positions with the same employer during the past five
years, except as follows:
* Mr. Loucks relinquished the position of Chief Executive Officer of
Baxter International Inc. at the end of 1998 and retired as Chairman
at the end of 1999.
* Sir Robert Horton retired as Chairman of Railtrack Group PLC in July
1999. He was named Deputy Chairman of Chubb plc in September 2002 and
Chairman in December 2002 (both are non-executive positions), and
served as Chairman of Chubb plc, which was acquired by United
Technologies Corp., until November 2003.
* Admiral Prueher served as Ambassador to the People's Republic of
China from November 1999 to May 2001. Prior thereto he served as a
Consulting Professor and Senior Advisor to the Stanford-Harvard
Preventive Defense Program and a Senior Fellow at the Center for
Naval Analysis. Admiral Prueher completed 35 years of service in the
United States Navy in May 1999, and was Commander-in-Chief of the
U. S. Pacific Command from 1996 until his retirement.
CERTAIN BUSINESS RELATIONSHIPS AND TRANSACTIONS
Prior to December 31, 2003, G. A. Lodge was employed by InnoCal
Management, Inc. ("InnoCal Management I"), which managed a private venture
capital fund, InnoCal L.P. ("InnoCal Fund I"). InnoCal Management I ceased
operations effective December 31, 2003. The Company has committed to invest
$10 million in InnoCal II, L.P. ("InnoCal Fund II"), a separate $100
million private venture capital fund which is managed by ICAL2, Inc.
("ICAL"). Mr. Lodge is employed by ICAL with a compensation of $100,000 per
year. Mr. Lodge has an indirect interest of 0.175% in InnoCal Fund II, and
an interest in the investment gains of InnoCal Fund II of 3.5%.
Mr. Golden is a partner of the law firm of Davis Polk & Wardwell, which
firm the Company retained in fiscal 2004 and expects to retain in fiscal
2005.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors has determined that the following of its members
are independent, as that term is defined under the general independence
standards in the listing standards of the New York Stock Exchange: A. A.
Busch III, D. C. Farrell, C. Fernandez G., A. F. Golden, R. B. Horton,
G. A. Lodge, V. R. Loucks, Jr., J. B. Menzer, J. W. Prueher, R. L. Ridgway,
and E. E. Whitacre, Jr. Mr. Whitacre has submitted his resignation from the
Board, effective December 31, 2004. The Board has adopted its own
categorical standards to assist it in making determinations of director
independence. All Directors identified as independent in this proxy
statement meet these standards; a copy of these standards is attached as
Appendix A.
The members of the Board are elected to various committees. The
standing committees of the Board (and the respective chairmen) are:
Executive Committee (Farr), Audit Committee (Busch), Compensation and Human
Resources Committee (Loucks), Corporate Governance and Nominating Committee
(Farrell), Finance Committee (Horton), Pension Committee (Lodge) and Public
Policy Committee (Whitacre, to be replaced in February, 2005 after Mr.
Whitacre's resignation from the Board, effective December 31, 2004).
The Audit Committee met five times in fiscal 2004. The members of the
Audit Committee are A. A. Busch III, Chairman, C. Fernandez G., J. B.
Menzer and R. L. Ridgway, all of whom are independent. The functions of the
Audit Committee are described under "Report of the Audit Committee" at page 8
below. The Audit Committee operates under a written charter adopted by the
Board of Directors. The Board has determined that all of the Audit
Committee members are independent, as that term is defined under the
enhanced independence standards for audit committee members in the
Securities Exchange Act of 1934 (the "Exchange Act") and rules thereunder,
as incorporated into the listing standards of the New York Stock Exchange.
The Board has also determined that J. B. Menzer is an Audit Committee
Financial Expert as that term is defined in the rules issued pursuant to
the Sarbanes-Oxley Act of 2002. See the "Report of the Audit Committee" at
page 8 below.
The Compensation and Human Resources Committee discharges the Board's
responsibilities related to compensation of the Company's executives;
administration of the Company's stock option and incentive shares plans;
determining if necessary when service by officers and Directors with
another entity is eligible for indemnification under the Company's Bylaws;
authorizing Company contributions to benefit plans; and adopting and
terminating benefit plans not the prerogative of management. The Committee
met 5 times in fiscal 2004. The members of the
5
Committee are V. R. Loucks, Jr., Chairman, D. C. Farrell, and J. W.
Prueher, all of whom are independent. See the "Report of the Compensation
and Human Resources Committee on Executive Compensation" at page 9 below.
The Corporate Governance and Nominating Committee reviews the Company's
corporate governance principles and independence standards; oversees the
annual evaluation of the Board and its committees; discharges the Board's
responsibilities related to compensation of Directors; identifies and
evaluates individuals for Board and committee membership and chairs; makes
recommendations to the Board concerning the selection of Director nominees;
and makes recommendations as to the size and composition of the Board and
its committees. For a description of the process used by the Committee in
evaluating and recommending Director nominees, see "Nomination Process" at
page 7 below. The Corporate Governance and Nominating Committee met 5 times
in fiscal 2004 including 2 meetings of its predecessor, the Nominating
Committee. The members of the Corporate Governance and Nominating Committee
are D. C. Farrell, Chairman, A. F. Golden, G. A. Lodge and V. R. Loucks,
all of whom are independent.
The Company's Corporate Governance Principles and Practices and the
charters of all Board Committees are available on the Company's Web site at
www.gotoemerson.com, Investor Relations, Corporate Governance. The
foregoing documents are available in print to stockholders upon written
request delivered to Emerson Electric Co., 8000 West Florissant Avenue, St.
Louis, MO 63136, Attn: Secretary.
There were 8 meetings of the Board of Directors during fiscal 2004. All
of the Directors attended at least 75% of the meetings of the Board and
committees on which they served. Directors are strongly encouraged to
attend the Annual Meeting of Stockholders unless extenuating circumstances
prevent them from attending, although the Company has no formal, written
policy requiring such attendance. In 2004, all Directors attended the
Annual Meeting of Stockholders.
The Board of Directors has appointed a Discussion Leader who will chair
meetings of non-management Directors, as provided in the Company's
Corporate Governance Principles and Practices. The Discussion Leader
position will rotate annually among the chairs of each of the independent
Board Committees in the following order: Audit, Pension, Compensation and
Human Resources, Corporate Governance and Nominating, Finance and Public
Policy. Stockholders and other interested persons may contact the
Discussion Leader in writing c/o Emerson Electric Co., 8000 West Florissant
Avenue, St. Louis, MO 63136, Attn: Secretary. All such letters will be
forwarded promptly to the Discussion Leader.
Stockholders may communicate with any of our Directors by sending a
letter to the Director, c/o Emerson Electric Co., 8000 West Florissant
Avenue, St. Louis, MO 63136, Attn: Secretary. All such letters will be
forwarded promptly to the relevant Director.
DIRECTOR COMPENSATION
Directors who are employees of the Company do not receive any
compensation for service as Directors. Each non-management Director is
currently paid an annual retainer of $120,000 and fees of $1,500 plus
expenses for attendance at each Board meeting. Since 1994, it had been the
Company's policy to pay a portion of the annual retainer in stock and in
2003 the Company paid $75,000 of the $120,000 annual retainer in restricted
stock. The Company suspended this practice in 2004 as a result of new rules
of the New York Stock Exchange requiring stockholder approval of such plans
and, if stockholders approve the Restricted Stock Plan for Non-Management
Directors, $75,000 of the annual retainer for the 2005 fiscal year will
again be paid in the form of restricted stock. See "II. Proposal To Approve
The Restricted Stock Plan For Non-Management Directors" at page 16 below.
Each committee chairman is currently paid an annual retainer of $5,000,
except the chair of the Audit Committee who is paid an annual retainer of
$10,000, and each committee member is paid $1,250 plus expenses for
attendance at each committee meeting.
Directors may elect to defer all or a part of such cash compensation;
such deferred amounts are credited with interest quarterly at the prime
rate charged by Bank of America, N.A. In the alternative, Directors may
elect to have deferred fees converted into units equivalent to shares of
Emerson common stock and their accounts credited with additional units
representing dividend equivalents. All deferred fees are payable only in
cash.
C. F. Knight retired as an employee, Chairman of the Board and Director
of the Company on September 17, 2004. During fiscal 2004, Mr. Knight
received a salary of $800,000 under his employment agreement. Pursuant to
his
6
employment agreement, Mr. Knight has agreed not to compete with the Company
and to be available at management's request to consult with the Company up
to 30 days per year for which he will be entitled to receive a daily
consulting fee based on his salary at the time of his retirement. Mr.
Knight has indicated his intention not to seek such consulting fees for the
foreseeable future. He will continue to have access to Company facilities
and services on the same basis as during his employment, including the
Company's aircraft, car, driver, security, financial planning and club
memberships, the estimated annual value of which is less than $200,000.
The Company has eliminated its Continuing Compensation Plan for
Non-Management Directors who assumed office on or after June 4, 2002. A
non-employee Director who assumed office prior to June 4, 2002, and who
serves as a Director for at least five years will, after the later of
termination of service as a Director or age 72, receive for life a
percentage of the annual $30,000 cash retainer for Directors in effect on
June 4, 2002. Such percentage is 50% for five years' service and increases
by 10% for each additional year of service to 100% for ten years' or more
service. In the event that service as a covered Director terminates because
of death, the benefit will be paid to the surviving spouse for five years.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's Directors and executive officers are required, pursuant
to Section 16(a) of the Exchange Act, to file statements of beneficial
ownership and changes in beneficial ownership of common stock of the
Company with the Securities and Exchange Commission and the New York Stock
Exchange, and to furnish copies of such statements to the Company. Based
solely on a review of the copies of such statements furnished to the
Company and written representations that no other such statements were
required, the Company believes that during fiscal year 2004 its Directors
and executive officers complied with all such requirements.
CODE OF ETHICS
The Company has adopted a Code of Ethics that applies to the Company's
chief executive officer, chief financial officer, chief accounting officer,
and controller; has posted such Code of Ethics on its Web site; and intends
to satisfy the disclosure requirement under Item 10 of Form 8-K by posting
such information on its Web site at www.gotoemerson.com, Investor
Relations, Corporate Governance. The Company has adopted a Code of Business
Ethics for Directors, officers and employees, which is available at the
same location on the Company's Web site. The foregoing documents are
available in print to stockholders upon written request delivered to
Emerson Electric Co., 8000 West Florissant Avenue, St. Louis, MO 63136,
Attn: Secretary.
NOMINATION PROCESS
The Corporate Governance and Nominating Committee periodically reviews
the appropriate size and composition of the Board and anticipates future
vacancies and needs of the Board. In the event the Committee recommends an
increase in the size of the Board or a vacancy occurs, the Committee may
consider nominees from several sources, including current Board members,
management of the Company, director search firms, stockholders or other
persons.
In evaluating possible Director nominees, the Committee considers the
knowledge, experience, integrity and judgment of possible candidates, their
potential contribution to the diversity of backgrounds, experience and
skills of the Board, and their ability to devote sufficient time and effort
to their duties as Directors. The Company's Statement of Corporate
Governance Principles and Practices sets forth the minimum qualifications
for Director nominees which include, among other criteria determined by the
Board, senior management experience in business, government and/or other
relevant organizations. Important experience includes the field of
manufacturing, international exposure and Board membership with major
organizations. No Director may be elected, or re-elected, after attaining
the age of 72.
The Committee evaluates Director nominees at regular or special
Committee meetings pursuant to the criteria described above and reviews
qualified Director nominees with the Board. The Committee evaluates
candidates that meet the Director criteria, and the Committee selects
nominees that best suit the Board's current needs and recommends one or
more of such individuals for election to the Board.
The Committee will consider individuals recommended by stockholders for
membership on the Board of Directors provided the names of such nominees,
accompanied by relevant biographical information, are properly submitted in
writing to the Secretary of the Company in accordance with the manner
described for stockholder nominations in "VII. Stockholders' Proposals" at
page 19 below. The Corporate Secretary will send properly
7
submitted stockholder recommendations to the Committee. Individuals
recommended by stockholders in accordance with these procedures will receive
the same consideration received by individuals identified to the Committee
through other means.
In addition, the Company's Bylaws permit stockholders to nominate
Directors at an annual meeting of stockholders or at a special meeting at
which Directors are to be elected in accordance with the notice of meeting.
The procedures for making such nominations are discussed in "VII.
Stockholders' Proposals" at page 19 below.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee assists the Board in providing oversight of the
systems and procedures relating to the integrity of the Company's financial
statements, the Company's financial reporting process, its systems of
internal accounting and financial controls, the internal audit process, the
annual independent audit process of the Company's annual financial
statements, the Company's compliance with legal and regulatory requirements
and the qualification and independence of the Company's independent
auditors. Management has the responsibility for the implementation of these
activities. In fulfilling its oversight responsibilities, the Committee
reviewed the audited financial statements in the Annual Report on Form 10-K
with management, including a discussion of the quality and the
acceptability of the Company's financial reporting and controls.
The Committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with accounting principles generally accepted in the
United States of America, their judgments as to the quality and the
acceptability of the Company's financial reporting and such other matters
as are required to be discussed with the Committee under auditing standards
generally accepted in the United States of America. In addition, the
Committee has discussed with the independent auditors the auditors'
independence from management and the Company, including the impact of
non-audit-related services provided to the Company and the matters in the
auditors' written disclosures required by Standard No. 1 of the
Independence Standards Board.
The Committee also discussed with the Company's internal and
independent auditors in advance the overall scope and plans for their
respective audits. The Committee meets periodically with the internal and
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-K for the fiscal
year ended September 30, 2004 for filing with the Securities and Exchange
Commission. The Committee also reappointed the Company's independent
auditors for fiscal 2005.
Audit Committee
A. A. Busch III, Chairman
C. Fernandez G.
J. B. Menzer
R. L. Ridgway
FEES PAID TO KPMG LLP
The following fees were paid to KPMG LLP, the Company's independent
auditors, for services rendered in 2003 and 2004 ($ in Millions):
2003 2004
----- -----
Audit Fees.............................................. $11.0 $11.1
Audit Related Fees...................................... 1.9 2.5
Tax Fees................................................ 5.7 3.5
All Other Fees.......................................... 0 0
----- -----
Total KPMG LLP Fees................................. $18.6 $17.1
===== =====
8
Audit Fees primarily represent amounts expected to be paid for the
audit of the Company's annual financial statements, reviews of SEC Forms
10-Q and 10-K and statutory audit requirements at certain non-U.S.
locations.
Audit Related Fees are primarily related to audits of employee benefit
plans, acquisition/divestiture due diligence, internal control reviews and
certification of statutory filings.
Tax Fees are for tax compliance, tax consulting and expatriate tax
compliance.
The Audit Committee's pre-approval policies and procedures are included
within the Audit Committee Charter.
REPORT OF THE COMPENSATION AND HUMAN RESOURCES COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation and Human Resources Committee, composed of three
independent Directors, establishes and administers the executive
compensation program for the Company's top executives. The program supports
the Company's commitment to enhancing stockholder value. It is designed to
attract and retain high-quality executives, to encourage them to make
career commitments to the Company, and to accomplish the Company's short-
and long-term objectives. The executive compensation program has uniquely
served the Company's stockholders since 1977 by rewarding and motivating
executives for the accomplishment of the Company's objectives. The
executive compensation program is a focused, well-defined management tool
that reinforces the Company's culture and commitment to stockholders.
The Committee has historically viewed compensation as a total package
that includes base salary and variable short- and long-term
(performance-based) compensation. The total program is structured to
deliver a significant percentage of pay through at-risk pay programs which
reward executives if the performance of the Company warrants. Basic
principles underlying the pay programs are the following:
* Maximize stockholder value.
* Retain, reward and motivate key executives.
* Compensate for performance rather than create a sense of entitlement.
* Reward team results.
* Build executive ownership of Company stock.
COMPONENTS OF EXECUTIVE COMPENSATION
To determine the competitive level of total compensation (including
total annual cash and long-term incentives), the Committee sets the total
pay target in a competitive compensation range as benchmarked against
published survey data and data derived through special studies of
comparable industries, including those shown in the peer group performance
graph.
TOTAL ANNUAL CASH COMPENSATION: Cash compensation consists of base
salary and annual cash incentives (bonuses), with the sum of the two
referred to as "Total Cash Compensation." Currently, approximately 1,200
key executives participate in the Total Cash Compensation program. A Total
Cash Compensation target, including base salary and incentive, is
established for each executive officer position using benchmark survey
comparisons. Annual increases, if any, are based on individual merit and
Company affordability. The annual incentive (at-risk) opportunity
represents from 25% to 60% of Total Cash Compensation. Payment of the
annual cash incentive portion is based on the financial performance of the
Company against pre-established targets. The Committee each year
establishes and approves annual financial targets which are important to
the Company and its stockholders. Typical targets include sales, earnings
per share, pre-tax earnings and net profits, return on equity, and asset
management. The relative importance of each target is determined each year
by the Committee, and may vary depending upon the Company's financial
objectives for that year.
LONG-TERM COMPENSATION INCENTIVES: Long-term incentive awards,
consisting of performance shares, stock options and restricted stock, are a
substantial portion of the total compensation packages of certain key
senior executives and are specifically focused on the Company's longer-term
strategic objectives. Long-term programs are paid primarily in stock. The
Company's continuing philosophy is that executives are expected to hold
stock earned under the Company's programs. The value of current executive
stock holdings is significant, in absolute terms and in relation to base
pay, though the Company does not establish specific ownership targets.
Long-term plan participation
9
and size of awards are determined by the individual's potential to make
significant contributions to the Company's financial results, level of
management responsibility and individual performance and potential.
PERFORMANCE SHARES: The performance shares program reinforces the
Company's long-term objectives and rewards executives for achieving those
objectives. The Company has had an effective performance shares program
since 1977. Participation in this program is limited, and only executives
who can most directly influence the Company's long-term financial success
are included. Awards are denominated in share units with cash dividend-
equivalent payments on 40% of the share units awarded during the
performance period. The Committee approves the performance measures and
evaluates the performance of the Company against those measures.
Historically, the Company's plans have targeted earnings per share growth
objectives and other financial measures deemed appropriate to accomplish
the Company's performance targets. The final payout (paid primarily in
stock and partially in cash) can range from 0% to 100% of the target award,
depending upon the level of achievement of the established financial
targets.
STOCK OPTIONS: The stock option program provides the long-term focus
for a larger group of key employees. Currently, approximately 2,500 key
employees are eligible to be considered for participation in the stock
option program. Awards are intended to be made approximately every three
years and generally vest one-third each year. Options are granted at 100%
of the fair market value of the Company's common stock on the date of grant
and expire ten years from the date of grant. In fiscal 2003 the Company
began expensing stock options for grants awarded on or after October 1,
2002.
RESTRICTED STOCK: The restricted stock program is designed primarily to
retain key executives and potential top management of the Company while
building stock ownership, long-term equity and linking pay directly with
stockholder return. Participation has been highly selective and limited to
a very small group of executives. The Committee views this program as an
important management succession planning and retention tool. The
restriction period for awards is three to ten years.
The Company's incentive compensation programs are designed to reward
executives for achievement of the Company's performance objectives. The
plans, as approved by stockholders, are designed to comply with Internal
Revenue Code Section 162(m) to ensure tax deductibility. The Committee
considers it important to retain the flexibility to design compensation
programs that are in the best interest of the Company and the stockholders.
CEO COMPENSATION
Effective September 17, 2004, the Board of Directors elected D. N.
Farr, who has been Chief Executive Officer of the Company since October 11,
2000, as Chairman of the Board of Directors. The Committee considered his
additional responsibilities as Chairman and reviewed Mr. Farr's performance
in fiscal 2004. The Committee recognized his effectiveness in aligning the
entire organization with the strategic imperatives necessary to meet new
and growing global opportunities and achieve objectives. The Committee
determined that Mr. Farr and his management team have done an excellent
job, both in delivering solid results in fiscal 2004 and positioning the
Company for future growth by:
* Rebalancing assets to achieve superior cost positions
* Creating new levels of operating and capital efficiencies
* Improving Emerson's ability to further penetrate local and emerging
markets
* Investing in industry transforming technologies and bringing those
technologies to market more quickly
* Successfully expanding the Emerson brand and business platforms to
increase the Company's leadership position in key industries
In fiscal 2004, the Company reached a record sales level of more than
$15.6 billion, an 11.9 percent increase over fiscal 2003. Fiscal 2004
continuing operations earnings per share increased 23.7 percent over fiscal
2003 demonstrating the effectiveness of Emerson's repositioning actions in
recent years. Mr. Farr led the Company to its third consecutive year of
strong trade working capital performance, strengthening the balance sheet
and improving liquidity. The Committee noted that return on total capital
increased 1.5 points over fiscal 2003 to 14.2 percent in fiscal 2004, and
operating cash flow increased 28.0% over fiscal 2003 to $2.2 billion in
fiscal 2004.
As a result, the Committee awarded Mr. Farr a fiscal year 2004 bonus of
$1,500,000. He received a base salary of $1,000,000. As part of the normal
award cycle, the Committee awarded Mr. Farr 200,000 performance share units
in
10
the Company's long term Performance Shares Plan, which is described at page 10
and in the Long-Term Incentive Plan table at page 13 of this proxy statement.
The performance share award will be earned by Mr. Farr upon the achievement
of the Company's financial objectives at the end of fiscal year 2007. In
addition, on October 5, 2004 Mr. Farr was awarded 50,000 shares of
restricted stock in recognition of the Company's 2004 performance and his
election to Chairman, which award will vest five years from the date of
grant. Mr. Farr does not have an employment agreement with the Company.
Compensation and Human Resources Committee
V. R. Loucks, Jr., Chairman
D. C. Farrell
J. W. Prueher
EXECUTIVE COMPENSATION
The following information relates to compensation received or earned by
the Company's Chief Executive Officer and each of the other four most
highly compensated executive officers of the Company for the last fiscal
year of the Company and the compensation received or earned by them for the
two prior fiscal years.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION(1)
ANNUAL COMPENSATION AWARDS PAYOUT
---------------------------------------------------------------------------------------------------
SECURITIES LONG-
OTHER UNDERLYING TERM ALL
ANNUAL RESTRICTED OPTIONS/ INCENTIVE OTHER
NAME AND FISCAL COMPEN- STOCK SARS PLAN COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION($)(2) AWARD(S)($)(3) (#) PAYOUTS($)(4) SATION($)(5)
------------------ ------ --------- -------- ------------ -------------- ---------- ------------- ------------
D. N. Farr 2004 1,000,000 1,500,000 149,099 3,162,750 -- -- 50,409
Chairman of the Board and 2003 1,000,000 1,000,000 167,442 2,251,000 -- -- 37,755
Chief Executive Officer(6) 2002 925,000 500,000 123,116 929,600 125,000 1,867,335 36,915
J. G. Berges 2004 905,000 700,000 -- -- -- -- 37,118
President 2003 872,500 540,000 -- -- -- -- 34,715
2002 812,500 500,000 -- -- 100,000 2,347,485 34,382
W. J. Galvin 2004 600,000 560,000 -- -- -- -- 27,099
Senior Executive Vice 2003 568,750 432,000 -- 900,400 -- -- 24,723
President and Chief 2002 518,750 400,000 -- -- 85,000 2,082,735 24,184
Financial Officer
W. W. Withers 2004 465,000 420,000 -- -- -- -- 22,430
Executive Vice President, 2003 440,000 350,000 -- 500,000 -- -- 20,032
Secretary and General 2002 405,000 330,000 -- -- 50,000 1,153,145 19,719
Counsel
C. A. Peters 2004 450,000 410,000 -- -- -- -- 20,034
Senior Executive Vice 2003 418,750 335,000 -- -- -- -- 18,599
President 2002 387,500 315,000 -- -- 50,000 1,087,275 18,182
--------
(1) The Company's stock option plans, incentive shares plans and
supplemental executive retirement and savings investment plans
generally provide for acceleration of vesting in the event of a change
in control of the Company.
(2) Consistent with applicable regulations, certain non-cash compensation
need not be reported, the aggregate of which does not exceed the lesser
of $50,000 or 10% of any of the named executives' salary and bonus.
Pursuant to the Company's security program established by the Board of
Directors, the Chairman and Chief Executive Officer is required to use
Company aircraft for all travel. While these security procedures,
including personal use of Company aircraft, are required for the
benefit of the Company, the Company is voluntarily reporting the value
of the personal use of this benefit by the Chairman and Chief Executive
Officer in fiscal years 2004, 2003 and 2002 in the amounts of $65,949,
$81,742 and $51,080 and related tax gross-up of $45,829, $56,804 and
$40,135, respectively. No other component of Other Annual Compensation
exceeded 25% of the total amounts.
(3) The number of shares of restricted stock held by the named executive
officers at the end of fiscal 2004, and the aggregate value of such
shares, are as follows: D. N. Farr, 190,000 shares having a value of
$11,759,100;
11
J. G. Berges, 140,000 shares having a value of $8,664,600; W. J. Galvin,
68,000 shares having a value of $4,208,520; W. W. Withers, 42,000 shares
having a value of $2,599,380; and C. A. Peters, 42,000 shares having a
value of $2,599,380. In addition, in recognition of the Company's 2004
performance and Mr. Farr's election to Chairman of the Board of
Directors, on October 5, 2004 Mr. Farr was awarded 50,000 shares of
restricted stock, which award will vest five years from the date of
grant. The Company pays dividends on restricted stock. All restricted
stock awards have a restriction period and are earned over a period of
three to ten years and vest at the end of such period; the shares are
payable only if the executive is employed with the Company and in good
standing at the end of the restriction period. The amounts shown in the
table represent the dollar value based on the stock price per share at
award date and do not reflect any payment to the individual.
(4) Long-term performance awards paid in fiscal 2002 were based on
achievement of performance objectives over a five-year period.
(5) Includes for fiscal 2004: (a) no premiums were paid by the Company for
the named individuals in the Company's "split dollar" insurance
program; however, the value of the benefit to the named individuals
was: D. N. Farr-$409; J. G. Berges-$993; W. J. Galvin-$1,299; W. W.
Withers-$2,055 and C. A. Peters-$409; and (b) contributions by the
Company on behalf of the named individuals to the Company's matched
savings plan in the following amounts: D. N. Farr-$50,000; J. G.
Berges-$36,125; W. J. Galvin-$25,800; W. W. Withers-$20,375; and
C. A. Peters-$19,625.
(6) Mr. Farr was elected Chairman of the Board of Directors on September
17, 2004.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 0% ($) 5% ($) 10% ($)
---- ------------ ------------ ----------- ---------- ------ ------ -------
D. N. Farr............... 0 N/A N/A N/A N/A N/A N/A
J. G. Berges............. 0 N/A N/A N/A N/A N/A N/A
W. J. Galvin............. 0 N/A N/A N/A N/A N/A N/A
W. W. Withers............ 0 N/A N/A N/A N/A N/A N/A
C. A. Peters............. 0 N/A N/A N/A N/A N/A N/A
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END(#) AT FY-END($)(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ------------ ----------- ------------- ----------- -------------
D. N. Farr................ 8,552 225,847 290,768 41,676 2,103,779 378,835
J. G. Berges.............. 0 0 297,185 33,341 2,097,937 303,070
W. J. Galvin.............. 0 0 168,742 28,340 1,947,912 257,611
W. W. Withers............. 15,790 314,221 81,769 16,671 883,686 151,539
C. A. Peters.............. 8,448 232,605 111,001 16,671 1,040,394 151,539
-------
(1) The values represent the difference between the exercise price of the
options and the market price of the Company's common stock at fiscal
year-end.
12
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
ESTIMATED FUTURE
PAYOUTS UNDER
PERFORMANCE OR NON-STOCK
NUMBER OF OTHER PERIOD PRICE-BASED PLANS
PERFORMANCE UNTIL MATURATION TARGET/MAXIMUM
NAME UNITS(1) OR PAYOUT (# OF SHARES)(2)
---- ----------- ---------------- -----------------
D. N. Farr...................................... 200,000 2004-2007 200,000
J. G. Berges.................................... 105,000 2004-2007 105,000
W. J. Galvin.................................... 75,000 2004-2007 75,000
W. W. Withers................................... 35,000 2004-2007 35,000
C. A. Peters.................................... 40,000 2004-2007 40,000
-------
(1) Awards were made under the shareholder approved 1997 Incentive Shares
Plan for the achievement of financial targets for the performance
period ending September 30, 2007. The financial baseline was set at the
beginning of the performance period with the payout of awards
determined by the Company's financial results at the end of the
performance period versus the baseline. The principal financial measure
adopted by the Compensation and Human Resources Committee for the
current performance period is growth in earnings per share. In
addition, to ensure that the payout of the awards is consistent with
the financial objectives of the Company, the Committee also considers
the following: profitability, return on equity, asset management and
overall financial performance over the performance period. The award of
units represents the right to receive an equivalent number of shares of
the Company's common stock if the performance objectives are achieved.
(2) The maximum number of shares that can be earned under this award is
shown in the table. To the extent that the performance objectives are
not fully achieved the number of units earned may range from 0% to 100%
of the maximum, as determined by the Committee.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth aggregate information regarding the
Company's equity compensation plans as of September 30, 2004:
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
TO BE ISSUED UPON EXERCISE PRICE OF EQUITY COMPENSATION
EXERCISE OF OUTSTANDING PLANS (EXCLUDING
OUTSTANDING OPTIONS, OPTIONS, WARRANTS SECURITIES REFLECTED IN
PLAN CATEGORY WARRANTS AND RIGHTS AND RIGHTS COLUMN (a))
------------- ------------------- ----------------- -----------------------
(a) (b) (c)
Equity compensation plans approved by
security holders(1)..................... 12,531,574 $51.25 11,296,365
Equity compensation plans not approved by
security holders(2)..................... -- -- --
Total..................................... 12,531,574 $51.25 11,296,365
-------
(1) Includes the Company's Stock Option and Incentive Shares Plans.
Included in column (a) are 3,417,005 shares reserved for performance
share awards, which represent the right to receive common shares
contingent upon the Company achieving certain objectives by the end of
fiscal year 2007. As provided by the Company's Incentive Shares Plan,
performance share awards represent a commitment to issue such shares
without cash payment by the employee, contingent upon achievement of
such objectives and the performance of services by the employee. The
price in column (b) represents the weighted-average exercise price for
outstanding options. Included in column (c) are 1,131,411 shares
remaining available for award under the Incentive Shares Plans.
(2) Excludes 15,387 outstanding options assumed in connection with
acquisitions with a weighted-average exercise price of $34.49.
Information regarding stock option plans and incentive shares plans set
forth in Note 14 of Notes to Consolidated Financial Statements of the 2004
Annual Report is hereby incorporated by reference.
13
PENSION PLAN TABLE
The following table shows the annual benefits payable upon retirement
at age 65 for various compensation and years of service combinations under
the Emerson Electric Co. Retirement Plan and a related supplemental
executive retirement plan.
ANNUAL RETIREMENT BENEFIT AT AGE 65 AFTER
---------------------------------------------------------------------------------------
10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
AVERAGE ANNUAL OF OF OF OF OF OF
COMPENSATION SERVICE SERVICE SERVICE SERVICE SERVICE SERVICE
-------------- -------- -------- -------- -------- -------- --------
$ 600,000................. $ 87,686 $131,529 $175,372 $ 219,215 $ 263,057 $ 306,900
$ 900,000................. $132,686 $199,029 $265,372 $ 331,715 $ 398,057 $ 464,400
$1,200,000................. $177,686 $266,529 $355,372 $ 444,215 $ 533,057 $ 621,900
$1,500,000................. $222,686 $334,029 $445,372 $ 556,715 $ 668,057 $ 779,400
$1,800,000................. $267,686 $401,529 $535,372 $ 669,215 $ 803,057 $ 936,900
$2,100,000................. $312,686 $469,029 $625,372 $ 781,715 $ 938,057 $1,094,400
$2,400,000................. $357,686 $536,529 $715,372 $ 894,215 $1,073,057 $1,251,900
$2,700,000................. $402,686 $604,029 $805,372 $1,006,715 $1,208,057 $1,409,400
$3,000,000................. $447,686 $671,529 $895,372 $1,119,215 $1,343,057 $1,566,900
Retirement benefits under the plans are computed on the basis of an
annuity with five years certain, unless the participant elects another
method of payment. The benefit amounts in the Pension Plan Table above have
already been adjusted for Social Security (and any other benefits). The
dollar amounts in the salary and bonus columns of the Summary Compensation
Table above are substantially the same as the compensation covered by the
plans, but deferred bonuses may cause such amounts to vary from the amounts
shown in the Summary Compensation Table.
The credited years of service covered by the plans for each of the
persons named in the Summary Compensation Table above are as follows: D. N.
Farr, 24; J. G. Berges, 29; W. J. Galvin, 32; W. W. Withers, 15; and
C. A. Peters, 25. Payment of the specified retirement benefits is
contingent upon continuation of the plans in their present form until the
employee retires.
The benefits of certain employees may be reduced under the Emerson
Electric Co. Retirement Plan to meet the limits of the Internal Revenue
Code. An employee who is subject to a reduction of benefits under the Code
may be selected to participate in a non-qualified supplemental executive
retirement plan not subject to Code Limitations. Participation in the
supplemental plan is by award, subject to the sole approval by the
Compensation and Human Resources Committee. D. N. Farr, J. G. Berges, W. J.
Galvin and W. W. Withers have been selected to participate in the
supplemental plan. The estimated annual retirement benefits payable upon
retirement at age 65 to D. N. Farr, J. G. Berges, W. J. Galvin, W. W.
Withers, and C. A. Peters are 56%, 54%, 56%, 20%, and 16%, respectively, of
the dollar amounts shown in the salary and bonus columns of the Summary
Compensation Table for fiscal year 2004.
14
PERFORMANCE GRAPH
The following graph compares cumulative total returns (assuming
reinvestment of dividends) on the Company's common stock against the
Standard & Poor's Composite 500 Stock Index (S&P 500) and the Dow Jones
Electrical Components and Equipment Index (DJEE) for the five-year period
ended September 30, 2004 and the Compound Annual Growth Rate (CAGR).
[GRAPH]
*$100 invested on 9/30/99 in stock or index-including reinvestment of
dividends. Fiscal year ending September 30.
Copyright (C)2002, Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. All rights reserved.
www.researchdatagroup.com/S&P.htm
-------------------------------------------
1999 2000 2001 2002 2003 2004 CAGR
---- ---- ---- ---- ---- ---- ----
EMERSON $100 $109 $ 78 $ 75 $ 93 $112 2.3%
S&P 500 100 113 83 66 82 94 -1.3
DJEE 100 118 46 29 47 47 -13.9
-------------------------------------------
The information above in the Report of the Audit Committee, the Report
of the Compensation and Human Resources Committee on Executive
Compensation, and the Performance Graph shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission or subject to Regulation 14A or 14C or to the liabilities of
Section 18 of the Exchange Act, nor shall it be deemed to be incorporated
by reference into any filing under the Securities Act of 1933 or the
Exchange Act, except to the extent that the Company specifically
incorporates this information by reference.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The functions and members of the Compensation and Human Resources
Committee are set forth above under "Board of Directors and Committees."
All Committee members are independent and none of the Committee members has
served as an officer or employee of the Company or a subsidiary of the
Company.
Until December 2003, E. E. Whitacre, Jr., Chairman and Chief Executive
Officer of SBC Communications Inc., served as a member of the Compensation
and Human Resources Committee of the Company; and C. F. Knight, the former
Chairman of the Board of the Company, served as a Director of SBC
Communications Inc. during the last fiscal year. Mr. Whitacre has tendered
his resignation from the Board, effective December 31, 2004.
15
II. PROPOSAL TO APPROVE THE RESTRICTED STOCK PLAN FOR NON-MANAGEMENT DIRECTORS
The purpose of this proposal is to seek approval of the Company's
Restricted Stock Plan for Non-Management Directors. Since 1994, it had been
the Company's policy to pay a portion of the annual retainer paid to Non-
Management Directors in stock and in 2003 the Company paid $75,000 of the
$120,000 annual retainer in restricted stock. The Company suspended this
practice in 2004 as a result of new rules of the New York Stock Exchange
requiring stockholder approval of such plans. If approved, this proposal
will not increase or decrease the aggregate amount of the annual retainer
but will merely resume the practice of paying a portion of the annual
retainer in stock rather than cash. The following discussion sets forth the
material terms of the Plan. The discussion is qualified in its entirety by
reference to the complete text of the Plan document as set forth in
Appendix B.
GENERAL. The purpose of the Plan is to attract and retain the best
-------
qualified individuals to serve on the Board of Directors and to align their
compensation as members of the Board of Directors with the interest of
stockholders of the Company by compensating them with shares of Company
common stock subject to certain restrictions. The Plan enables the Company
to pay non-management Directors a portion of their annual retainer in the
form of restricted stock. As of the date hereof, there are eleven
non-management Directors of the Company who would be eligible to receive
grants under the Plan.
ADMINISTRATION. The plan will be administered by the Corporate
--------------
Governance and Nominating Committee of the Board of Directors, which has
broad authority to administer and interpret the Plan and its provisions as
it deems appropriate, subject to the express provisions of the Plan. All
decisions, determinations and interpretations of the Corporate Governance
and Nominating Committee with respect to the Plan are final and binding.
ELIGIBILITY. Any member of the Board of Directors who is not an
-----------
employee or officer of the Company or any subsidiary of the Company is
eligible to participate in the Plan.
RESTRICTED STOCK AWARDS. Non-management Directors who are elected or
-----------------------
re-elected by the stockholders of the Company at, or who continue in office
after, each annual meeting of the Company (on or after February 1, 2005)
will receive on the date of each annual meeting shares of Company common
stock with a fair market value equal to the percentage, from 0% to 100% as
determined by the Corporate Governance and Nominating Committee, of the
total annual retainer to be paid to non-management Directors. Shares
granted under the Plan are restricted and participants may not sell or
otherwise transfer shares granted under the Plan. Participants will receive
all dividends on, and will have all voting rights with respect to, such
shares. The restrictions will lapse at the end of a non-management
Director's tenure on the Board if the Director's tenure ends as a result of
death, disability, normal retirement or a change of control of the Company.
If a Director's tenure on the Board ends for any other reason, the
restrictions will lapse unless the Corporate Governance and Nominating
Committee determines that the participant has acted in a manner detrimental
to the Company or has failed to fulfill his or her responsibilities in a
satisfactory manner. If the restrictions on the shares do not lapse, such
shares will be forfeited to, and acquired at no cost by, the Company.
SHARES AVAILABLE. The maximum number of shares of the Company's common
----------------
stock that can be granted under the Plan is 250,000 shares. This number is
subject to appropriate adjustment in the event of any stock dividends,
stock splits, recapitalizations, mergers, consolidations, spin-offs,
split-offs, split-ups, combinations or exchanges of shares of the Company.
AMENDMENT AND TERMINATION. The Plan may be amended or terminated by the
-------------------------
Board of Directors at any time, provided that no material revision, as
defined in the rules of the New York Stock Exchange, may be made without
the approval of the stockholders of the Company.
INCOME TAX CONSEQUENCES. Awards made under the Plan will give rise to
-----------------------
the following tax events for U.S. citizens and residents under current U.S.
federal income tax law. Unless the participant makes an election under
Section 83(b) of the Internal Revenue Code, restricted stock will not be
taxable when awarded, and the Company will not be entitled to a deduction
at such time. Any dividends paid to the participant prior to the lapsing of
restrictions are taxable compensation income to the participant. When the
restrictions lapse, the participant will be treated as receiving taxable
compensation in the amount of the fair market value of the shares on such
date.
PLAN BENEFITS. Awards under the Plan will be based on the percentage of
-------------
the annual retainer that the Corporate Governance and Nominating Committee
determines to be paid in restricted stock under the Plan. For the 2005
fiscal year, the Corporate Governance and Nominating Committee has
determined that, subject to stockholder approval of the Plan, $75,000 of
the annual retainer of $120,000 will be paid in restricted stock. For
example, based on the fair
16
market value of the Company's common stock on November 15, 2004, each
non-management Director of the Company would be granted 1,100 shares of
restricted stock. The actual number of shares received will depend on the
fair market value of Emerson common stock on the date of grant, which is
anticipated to be February 1, 2005.
BOARD RECOMMENDATION. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
--------------------
VOTE FOR APPROVAL OF THE RESTRICTED STOCK PLAN FOR NON-MANAGEMENT
---
DIRECTORS.
III. RE-APPROVAL OF THE PERFORMANCE MEASURES
UNDER THE EMERSON ELECTRIC CO. ANNUAL INCENTIVE PLAN
The Company is asking stockholders to reaffirm the performance measures
for the Annual Incentive Plan ("Plan") set forth below, as previously
approved by the stockholders in both 1995 and 2000. No amendments to the
Plan are being requested. Your approval is necessary for the Company to
meet the requirements for tax deductibility under Section 162(m) of the
Internal Revenue Code.
ELIGIBILITY. Participants in the Plan are executive officers of the
-----------
Company designated by the Compensation and Human Resources Committee of the
Board of Directors (the "Committee"), which administers and interprets the
Plan. Currently, five persons are eligible to participate in the Plan.
PERFORMANCE OBJECTIVES. The Plan permits the Committee to structure
----------------------
annual cash incentive awards based on the attainment of specified
performance objectives. Awards payable under the Plan are based solely on
one or more of the following performance criteria: sales, earnings,
earnings per share, pre-tax earnings and net profits, return on equity, and
asset management. Performance objectives need not be the same in respect of
all participants and may be established separately for the Company as a
whole or for its various groups, subsidiaries and affiliates. Each of these
performance criteria must be specifically defined in advance by the
Committee, and may include or exclude specified items of an unusual or
nonrecurring nature. The maximum annual incentive award payable under the
Plan to a covered employee is not to exceed $6 million dollars for any
given fiscal year. The Committee may exercise its discretion to decrease or
eliminate, but not increase, the annual incentive award otherwise payable
for that year. Participants may defer receipt of their awards, which accrue
interest at the prime rate.
PLAN BENEFITS. Awards under the Plan will be based on the Company's
-------------
future performance and are therefore not presently determinable. The bonus
awards paid under the Plan for fiscal 2004 are set forth in the bonus
column of the Summary Compensation Table at page 11 above. There were no other
participants for fiscal year 2004.
If the material terms of the performance measures are not approved by
the stockholders, payments that would have been made pursuant to the Plan
will not be made. The Compensation and Human Resources Committee may
consider other terms for incentive compensation awards whether or not they
qualify for deduction under Section 162(m).
BOARD RECOMMENDATION. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
--------------------
VOTE FOR RE-APPROVAL OF THE PERFORMANCE MEASURES UNDER THE ANNUAL INCENTIVE
---
PLAN.
IV. RATIFICATION OF INDEPENDENT AUDITORS
In accordance with its charter, the Audit Committee has selected KPMG
LLP, independent auditors, to audit the Company's consolidated financial
statements for fiscal 2005. KPMG LLP served as the Company's independent
auditors for fiscal 2004. The Audit Committee is asking the stockholders to
ratify the appointment of KPMG LLP as the Company's independent auditors
for the fiscal year ending September 30, 2005.
In the event stockholders fail to ratify the appointment, the Audit
Committee may reconsider this appointment. Even if the appointment is
ratified, the Audit Committee, in its discretion, may direct the
appointment of a different independent accounting firm at any time during
the year if the Audit Committee determines that such a change would be in
the Company's and the stockholders' best interests.
The Audit Committee has approved in advance all services provided by
KPMG LLP. A member of KPMG LLP will be present at the meeting with the
opportunity to make a statement and/or respond to appropriate questions
from stockholders.
BOARD AND AUDIT COMMITTEE RECOMMENDATION. THE BOARD OF DIRECTORS AND
----------------------------------------
THE AUDIT COMMITTEE UNANIMOUSLY RECOMMEND A VOTE FOR THE RATIFICATION OF
---
THE APPOINTMENT OF KPMG LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
17
V. STOCKHOLDERS' PROPOSAL ON SEXUAL ORIENTATION
Two stockholders have informed the Company that they intend to present
jointly the following proposal at the meeting:
SEXUAL ORIENTATION POLICY
WHEREAS: our Company has pledged its commitment to principles of
non-discrimination, but has not in its company-wide, written equal
employment opportunity policy explicitly barred discrimination based on
sexual orientation;
WHEREAS: employment discrimination and the denial of equal benefits on
the basis of sexual orientation diminishes employee morale and
productivity;
WHEREAS: a National Gay and Lesbian Task Force study revealed that
between 16% and 44% of gay men and lesbians in twenty cities nationwide
have experienced some form of workplace harassment or discrimination
related to their sexual orientation;
WHEREAS: San Francisco, Atlanta and New York have adopted and other
jurisdictions are considering adopting legislation restricting business
with companies which do not guarantee equal treatment for lesbian and gay
employees;
WHEREAS: our Company has operations in and makes sales to public
institutions in states and cities, which prohibit discrimination on the
basis of sexual orientation;
WHEREAS: our Company has an interest in preventing discrimination and
resolving complaints internally to avoid costly litigation or damage to our
reputation as an equal opportunity employer;
WHEREAS: hundreds of major corporations have adopted sexual orientation
non-discrimination policies including General Electric, General Motors,
Ford, Chrysler, Boeing, Coca-Cola and Wal-Mart, leaving our Company behind;
WHEREAS: national polls have consistently found more than
three-quarters of Americans support equal rights in the workplace for gay
men, lesbians and bisexuals;
RESOLVED: The Shareholders request the Board of Directors to amend
Emerson's company-wide written equal employment opportunity policy to bar
discrimination on the basis of sexual orientation.
SUPPORTING STATEMENT: Sexual orientation discrimination is a morally
wrong and self-defeating business practice. By adopting and implementing a
clear and equitable policy, our Company will ensure a respectful and
supportive atmosphere for all employees and enhance its competitive edge by
joining the growing ranks of major companies guaranteeing equal opportunity
for all employees.
The Company will provide to stockholders the names and addresses of the
proponents and the number of shares of Emerson common stock held by them
promptly upon receiving an oral or written request therefor.
BOARD RECOMMENDATION. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
--------------------
VOTE AGAINST THIS PROPOSAL.
-------
Identical proposals were submitted at the Company's annual meetings in
2001, 2002 and 2003. In 2001 the number of shares voting AGAINST the
proposal (including abstentions) was more than 87%, in 2002 the number of
shares voting AGAINST the proposal (including abstentions) was more than
89%, and in 2003 the number of shares voting AGAINST the proposal
(including abstentions) was more than 90%.
The Board believes the Company's current policies and practices fully
achieve the objectives of this proposal and that this proposal is
unnecessary. In fact, in a letter to the Company dated July 28, 2004, an
organization sharing the proponents' position on Emerson prohibiting such
discrimination commended the Company for "specifically protecting employees
based on sexual orientation" indicating that the Company had "confirmed
that [its] personnel policy specifically included sexual orientation." This
supports the Board position that the action recommended by the proponent is
unnecessary.
The Company continues to believe that its written equal employment
opportunity policy should only enumerate the types of discrimination that
are prohibited by U.S. law in order to highlight that these particular
types of discrimination are illegal under federal law. This does not mean
that the Company does not share the proponents'
18
interest in preventing discrimination based on sexual orientation. The
Company fully shares their concern and does take affirmative action to
prevent such discrimination. The Board believes that adding to the
Company's written policy additional special categories which are not
prohibited by federal law undercuts the Company's objective of highlighting
federally prohibited activities.
The Company has an all-inclusive global policy so there can be no doubt
among employees, supervisors or contractors worldwide that any form of such
discrimination is prohibited. The Company maintains one consistent global
anti-discrimination policy, which makes management's expectations clear.
The Company's communication, training and monitoring programs are
continuously upgraded to prevent such discrimination. For example, each of
the Company's human resources managers receives extensive training on
acceptable employment policies and practices, including the Company's
policy that employment actions be based only on merit. Each human resources
manager is informed that the Company prohibits discrimination for any
reason, and provides as part of this annual training that discrimination
based on sexual orientation is specifically prohibited. In addition, the
Company's prohibition against discrimination, again specifically
referencing sexual orientation, is included as part of the Company's
employee ethics training program that all Company employees are required to
attend annually.
Finally, the Company has received no indication from its employees that
discrimination on the basis of sexual orientation is acceptable or
tolerated by the Company, nor has the Company received notice from any of
its employees, customers or suppliers that the Company's employment
policies or practices jeopardize its relationships with them.
FOR THESE REASONS, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
AGAINST APPROVAL OF THE STOCKHOLDERS' PROPOSAL ON SEXUAL ORIENTATION.
-------
VI. VOTING
Shares may be represented by proxy at the meeting by completing and
returning the proxy card or voting by telephone or by Internet. If a quorum
is present, the affirmative vote of a majority of the shares entitled to
vote which are present in person or represented by proxy at the 2005 Annual
Meeting is required to elect Directors, to approve the Company's Restricted
Stock Plan for Non-Management Directors, to re-approve the performance
measures for the Company's Annual Incentive Plan, to ratify the appointment
of KPMG LLP as the Company's independent auditors for fiscal 2005, to
approve the stockholder proposal, and to act on any other matters properly
brought before the meeting. Shares represented by proxies which are marked
or voted "withhold authority" with respect to the election of any one or
more nominees for election as Directors, proxies which are marked or voted
"abstain" on the proposals to approve the Company's Restricted Stock Plan
for Non-Management Directors, to re-approve the performance measures for
the Company's Annual Incentive Plan and to ratify the appointment of KPMG
LLP as the Company's independent auditors for fiscal 2005, or on the
stockholder proposal, and proxies which are marked or voted to deny
discretionary authority on other matters will be counted for the purpose of
determining the number of shares represented by proxy at the meeting. Such
proxies will thus have the same effect as if the shares represented thereby
were voted against such nominee or nominees, against the proposals to
approve the Company's Restricted Stock Plan for Non-Management Directors,
to re-approve the Annual Incentive Plan, and to ratify the appointment of
KPMG LLP as the Company's independent auditors for fiscal 2005, against the
stockholder proposal and against such other matters, respectively. If a
broker indicates on the proxy that it does not have discretionary authority
as to certain shares to vote on a particular matter, those shares will not
be considered as present and entitled to vote with respect to that matter.
The Company knows of no other matters to come before the meeting. If
any other matters properly come before the meeting, the proxies solicited
hereby will be voted on such matters in the discretion of the persons
voting such proxies, except proxies which are marked to deny discretionary
authority.
VII. STOCKHOLDERS' PROPOSALS
Proposals of stockholders intended to be presented at the 2006 Annual
Meeting scheduled to be held on February 7, 2006, must be received by the
Company by August 10, 2005 for inclusion in the Company's proxy statement
and proxy relating to that meeting. Upon receipt of any such proposal, the
Company will determine whether or not to include such proposal in the proxy
statement and proxy in accordance with regulations governing the
solicitation of proxies.
19
In order for a stockholder to nominate a candidate for Director, under
the Company's Bylaws timely notice of the nomination must be received by
the Company in advance of the meeting. Ordinarily, such notice must be
received not less than 90 nor more than 120 days before the meeting, i.e.,
between October 10 and November 9, 2005 for the 2006 Annual Meeting (but if
the Company gives less than 100 days' (1) notice of the meeting or (2)
prior public disclosure of the date of the meeting, then such notice must
be received within 10 days after notice of the meeting is mailed or other
public disclosure of the meeting is made). The stockholder filing the
notice of nomination must describe various matters regarding the nominee,
including, but not limited to, such information as name, address,
occupation and shares held.
In order for a stockholder to bring other business before a stockholder
meeting, timely notice must be received by the Company within the time
limits described in the preceding paragraph. Such notice must include a
description of the proposed business, the reasons therefor, and other
specified matters. These requirements are separate from the requirements a
stockholder must meet to have a proposal included in the Company's proxy
statement. The foregoing time limits also apply in determining whether
notice is timely for purposes of rules adopted by the Securities and
Exchange Commission relating to the exercise of discretionary voting
authority.
In each case the notice must be given to the Secretary of the Company,
whose address is 8000 West Florissant Avenue, St. Louis, Missouri 63136.
Any stockholder desiring a copy of the Company's Bylaws will be furnished
one without charge upon written request to the Secretary. A copy of the
amended Bylaws is available on the Company's Web site at
www.gotoemerson.com, Investor Relations, Corporate Governance, Bylaws.
VIII. MISCELLANEOUS
HOUSEHOLDING OF PROXIES
The Securities and Exchange Commission has adopted rules that permit
companies and intermediaries such as brokers to satisfy delivery
requirements for annual reports and proxy statements with respect to two or
more stockholders sharing the same address by delivering a single annual
report and/or proxy statement addressed to those stockholders. This
process, which is commonly referred to as "householding," potentially
provides extra convenience for stockholders and cost savings for companies.
The Company and some brokers household annual reports and proxy materials,
delivering a single annual report and/or proxy statement to multiple
stockholders sharing an address unless contrary instructions have been
received from the affected stockholders.
Once you have received notice from your broker or the Company that your
broker or the Company will be householding materials to your address,
householding will continue until you are notified otherwise or until you
revoke your consent. You may request to receive at any time a separate copy
of our annual report or proxy statement, by sending a written request to
Emerson Electric Co., 8000 West Florissant Avenue, St. Louis, Missouri
63136, Attn: Investor Relations, or by telephoning 314-553-2197 or by
visiting our website.
If, at any time, you no longer wish to participate in householding and
would prefer to receive a separate annual report and/or proxy statement in
the future, please notify your broker if your shares are held in a
brokerage account or the Company if you hold registered shares. You can
notify the Company by sending a written request to Emerson Electric Co.,
8000 West Florissant Avenue, St. Louis, Missouri 63136, Attn: Investor
Relations, or by telephoning 314-553-2197.
If, at any time, you and another stockholder sharing the same address
wish to participate in householding and prefer to receive a single copy of
the Company's annual report and/or proxy statement, please notify your
broker if your shares are held in a brokerage account or the Company if you
hold registered shares. You can notify the Company by sending a written
request to Emerson Electric Co., 8000 West Florissant Avenue, St. Louis,
Missouri 63136, Attn: Investor Relations, or by telephoning 314-553-2197.
ADDITIONAL FILINGS
The Company's Forms 10-K, 10-Q, 8-K and all amendments to those reports
are available without charge through the Company's Web site on the Internet
as soon as reasonably practicable after they are electronically filed with,
or furnished to, the Securities and Exchange Commission. They may be
accessed as follows: www.gotoemerson.com, Investor Relations, SEC filings.
20
APPENDIX A
EMERSON DIRECTOR INDEPENDENCE STANDARDS
In order to be considered independent under the rules of the New York
Stock Exchange, the Board must determine that a director does not have any
direct or indirect material relationship with Emerson Electric Co.
("Emerson"). The Board has established the following guidelines to assist
it in determining director independence under the NYSE rules. Any Director
who meets the following standards will be deemed independent by the Board:
1. The Director was not employed by Emerson, and no immediate family
member of the Director was employed by Emerson as an executive officer,
within the preceding three years;
2. The Director was not affiliated with or employed by Emerson's
independent auditor, and no immediate family member of the Director was
affiliated with or employed in a professional capacity by Emerson's
independent auditor, within the preceding three years;
3. The Director was not employed by, and no immediate family member of
the Director was employed as an officer by, any company for which any
Emerson executive officer served as a member of such company's compensation
committee within the preceding three years;
4. Neither the Director, nor any member of the Director's immediate
family received during any of Emerson's last three fiscal years direct
compensation in excess of $100,000 from Emerson other than regular director
compensation, pension and other deferred payments that are not in any way
contingent on continued service to Emerson, and compensation received by an
immediate family member for service as a non-executive officer of Emerson;
5. If the Director is an executive officer or an employee of, or if
any immediate family member is an executive officer of, another
organization that does business with Emerson, the annual sales to, or
purchases from, Emerson by such company in each of the last three fiscal
years were less than the greater of two percent of the annual revenues of
such company or $1,000,000;
6. If the Director is an executive officer of another organization
which is indebted to Emerson, or to which Emerson is indebted, the total
amount of either company's indebtedness to the other is less than two
percent of the total consolidated assets of the company the Director serves
as an executive officer;
7. If the Director is, or is a director, executive officer or greater
than 10% owner of an entity that is, a paid advisor, paid consultant or
paid provider of professional services to Emerson, any member of Emerson's
senior management or any immediate family member of a member of Emerson's
senior management, the amount of such payments is less than the greater of
2% of such firm's annual revenues or $1,000,000 during Emerson's current
fiscal year;
8. If the Director is a partner, principal or counsel in a law firm
that provides professional services to Emerson, the amount of payments for
such services is less than the greater of 2% of such law firm's annual
revenues or $1,000,000 during Emerson's current fiscal year;
9. If the Director serves as an officer, director or trustee of a
charitable organization to which Emerson makes contributions: (i) Emerson's
discretionary contributions to such organization are less than the greater
of two percent of such organization's total annual charitable receipts or
$1 million; (ii) Emerson's contributions are normal matching charitable
gifts and similar programs available to all employees and independent
directors; or (iii) the charitable donation goes through the normal
corporate charitable donation approval processes, and is not made "on
behalf of" a Director;
10. The Director's ownership of Emerson stock, direct or indirect, is
less than 1% of the total outstanding Emerson stock;
11. If the Director is affiliated with, or provides services to, an
entity in which Emerson has an ownership interest, such ownership interest
is less than 20%; and
12. Any other relationship between the Director and Emerson not covered
by the standards set forth above is an arrangement that is usually and
customarily offered to customers of Emerson.
If any relationship exists between Emerson and any Director that is not
addressed by the standards set forth above, the Directors meeting these
standards shall determine whether such relationship impairs the
independence of such Director.
A-1
APPENDIX B
EMERSON ELECTRIC CO.
RESTRICTED STOCK PLAN FOR NON-MANAGEMENT DIRECTORS
I. Purpose. The purpose of this Plan is to attract and retain the best
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qualified individuals to serve on the Board and to align their compensation
as members of the Board with the interests of stockholders of the Company
by compensating them with Shares subject to certain restrictions, as
described herein.
II. Definitions. As used in the Plan, the following terms shall have the
-----------
respective meanings:
A. "Annual Meeting" means the annual meeting of stockholders of the
Company.
B. "Board" means the Board of Directors of the Company.
C. "Change of Control" means:
(1) The purchase or other acquisition (other than from the
Company) by any person, entity or group of persons, within
the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")
(excluding, for this purpose, the Company or its subsidiaries
or any employee benefit plan of the Company or its
subsidiaries), of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more
of either the then-outstanding shares of common stock of the
Company or the combined voting power of the Company's
then-outstanding voting securities entitled to vote generally
in the election of directors; or
(2) Individuals who, as of the date hereof, constitute the Board
of the Company (as of the date hereof, the "Incumbent Board")
ceasing for any reason to constitute at least a majority of
the Board, provided that any person who becomes a director
subsequent to the date hereof whose election or nomination
for election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board (other than an individual whose initial
assumption of office is in connection with an actual or
threatened election contest relating to the election of
directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act)
shall be, for purposes of this section, considered as though
such person were a member of the Incumbent Board; or
(3) Approval by the stockholders of the Company of (i) a
reorganization, merger or consolidation, in each case with
respect to which persons who were the stockholders of the
Company immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than
50% of, respectively, the common stock and the combined
voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated
corporation's then-outstanding voting securities in
substantially the same proportions as their ownership of the
Company's voting securities immediately before such
reorganization, merger or consolidation, (ii) a liquidation
or dissolution of the Company or (iii) the sale of all or
substantially all of the assets of the Company.
D. "Committee" means the Corporate Governance and Nominating
Committee of the Board or any other committee composed entirely of
Non-Management Directors as designated by the Board.
E. "Company" means Emerson Electric Co., a Missouri corporation.
F. "Fair Market Value" as of any date means the average of the
highest and lowest price per Share as reported on the New York Stock
Exchange Composite Tape for such date (or, if the Shares are not traded on
such date, the next day on which the Shares are traded).
G. "Material Revision" shall have the meaning ascribed thereto by
the corporate governance standards of the New York Stock Exchange.
H. "Non-Management Director" means a member of the Board who is not
an employee or officer of the Company or any subsidiary of the Company.
I. "Plan" means this Emerson Electric Co. Restricted Stock Plan for
Non-Management Directors, as amended from time to time.
B-1
J. "Restricted Share Portion" shall mean that portion of the total
annual retainer paid to directors, as approved by the Committee or as
recommended by the Committee and approved by the Board. The Restricted
Share Portion may range from 0% to 100% of the total annual retainer, in
the sole discretion of the Board or the Committee.
K. "Shares" means shares of common stock of the Company, $0.50 par
value per share.
III. Eligibility. Only Non-Management Directors shall participate in the
-----------
Plan.
IV. Administration. The Plan shall be administered by the Committee. The
--------------
Committee may designate persons other than members of the Committee to
carry out its responsibilities, subject to applicable law. A majority of
the Committee shall constitute a quorum at any meeting of the Committee and
all determinations of the Committee shall be made by a majority of its
members. Any determination of the Committee under the Plan may be made
without notice of a meeting of the Committee by a written consent signed by
all members of the Committee. Subject to the express provisions of the
Plan, the Committee shall be authorized and empowered to do all things
necessary or desirable in connection with the administration of the Plan.
All decisions, determinations and interpretations by the Committee or the
Board regarding the Plan shall be final and binding on all current or
former Directors of the Company and their beneficiaries, heirs, successors
and assigns. The Committee or the Board, as applicable, shall consider such
factors as it deems relevant, in its sole and absolute discretion, to
making such decisions, determinations and interpretations. No member of the
Committee shall be personally liable for any action or determination made
in good faith with respect to the Plan or to any settlement of any dispute
between a Non-Management Director and the Company.
V. Restricted Stock Awards.
-----------------------
A. Effective as of February 1, 2005, each Non-Management Director
who is elected or re-elected by the stockholders of the Company at, or who
continues in office after, each Annual Meeting, shall, on the Annual
Meeting date, be awarded Shares (the "Awarded Shares") with a Fair Market
Value equal to the Restricted Share Portion as of such date.
Notwithstanding the foregoing, when a Non-Management Director joins the
Board prior to an Annual Meeting, such Non-Management Director may be
awarded Shares with a Fair Market Value not exceeding the amount provided
for in the preceding sentence, on a pro rata basis in the discretion of the
Committee.
B. The Awarded Shares shall be restricted and are subject to
forfeiture as provided below and may not be sold or otherwise transferred
except pursuant to the following provisions:
(i) The Awarded Shares shall be held for the benefit of the
Non-Management Director in book-entry form by the Company's
stock transfer agent until the restrictions lapse, or the
Shares are forfeited, in accordance with this Section V.B.
However, the Non-Management Director (or any trustee
referred to in Section IX.B. hereof) shall be entitled to
receive all dividends paid on the Awarded Shares and shall
possess all voting rights with respect to such Awarded
Shares as are possessed by other holders of common stock of
the Company in their respective Shares. The Non-Management
Director may reinvest the dividends received upon the
Awarded Shares upon the same terms available in any dividend
reinvestment plan providing for broad-based participation
among the Company's shareholders. Any Shares so purchased
will not be subject to restrictions hereunder.
(ii) No Awarded Shares may be sold, transferred, assigned or
otherwise alienated or hypothecated until the restrictions
lapse, or the Awarded Shares are forfeited, in accordance
with this Section V.B.
(iii) The restrictions in this Section V.B. will lapse, and the
Awarded Shares will vest, if the Non-Management Director's
tenure on the Board ends as a result of (a) death, (b)
disability, (c) retirement from the Board as provided in the
Company's Bylaws or (d) a Change of Control of the Company.
(iv) If the Non-Management Director's tenure on the Board ends
for any reason other than those set forth in Section
V.B.(iii), above, the restrictions in this Section V.B. will
lapse, and the Awarded Shares will vest, unless a majority
of the members of the Committee determine that the Non-
Management Director has acted in a manner that is
detrimental to the Company's interests or its reputation, or
has failed to fulfill his or her responsibilities in a
satisfactory manner. In such event, the Awarded Shares shall
be forfeited to the Company.
B-2
(v) Upon vesting, the Awarded Shares will be distributed to the
Non-Management Director, without tax withholding unless
required by law.
VI. Maximum Number of Shares. The maximum number of Shares which may be
------------------------
awarded pursuant to this Plan is 250,000. This number shall be
appropriately adjusted by the Committee in the event of any stock
dividends, stock splits, recapitalizations, mergers, consolidations,
spin-offs, split-offs, split-ups, combinations or exchanges of Shares. The
determination of the Committee regarding any such adjustment shall be
conclusive. Any Shares forfeited as provided in Section V.B.(iv) shall be
re-added to the Shares available for award.
VII. Amendment and Termination. The Plan may be amended or terminated by
-------------------------
the Board at any time, provided, however, that no Material Revision may be
made without the approval of the stockholders of the Company.
VIII. Effectiveness of the Plan. The Plan must be approved by both the
-------------------------
stockholders of the Company and the Board. It will become effective, and
grants may be made under this Plan, on the later of (i) the date of the
meeting at which stockholder approval is obtained, and (ii) the date of the
meeting at which Board approval is obtained.
IX. Miscellaneous.
-------------
A. Nothing contained herein shall entitle a Non-Management Director
to continue in office or limit the authority of the Committee to recommend
that any Non-Management Director should no longer serve as a member of the
Board.
B. Notwithstanding Section V.B.(ii), Awarded Shares may, with the
consent of the Company, be registered in the name of a personal, revocable
trust established by such Non-Management Director; provided, however, that
all of the terms of the Plan including, without limitation, the provisions
of Section V.B., shall be binding upon the trustee of any such trust.
C. The Shares awarded under the Plan shall be issued out of treasury
Shares or authorized but unissued Shares.
D. The Plan shall be construed and administered in accordance with
the laws of the State of Missouri without regard to the principles of
conflicts of law which might otherwise apply.
Approved by the Board of Directors on the 5th day of October, 2004, subject
to approval of the stockholders of the Company on the 1st day of February,
2005.
B-3
[EMERSON Logo]
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION Please / /
IS MADE, THIS PROXY WILL BE VOTED FOR THE NOMINEES IN Mark Here
PROPOSAL 1, FOR PROPOSAL 2, FOR PROPOSAL 3, FOR PROPOSAL 4 for Address
AND AGAINST PROPOSAL 5. Change or
Comments
SEE REVERSE SIDE
MANAGEMENT RECOMMENDS A VOTE FOR THE FOLLOWING:
---
1. ELECTION OF DIRECTORS
FOR all nominees WITHHOLD AUTHORITY
listed below to vote for the
(except as marked nominees
to the contrary) listed below
/ / / /
01 D. N. Farr 04 J. W. Prueher
02 C. A. Peters 05 R. B. Horton
03 D. C. Farrell
(INSTRUCTION: To withhold authority to vote I PLAN
for any individual nominee, strike a line through TO ATTEND THE
the nominee's name in the list above.) ANNUAL MEETING / /
MANAGEMENT RECOMMENDS A VOTE FOR THE FOLLOWING: FOR AGAINST ABSTAIN
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2. Approval of the Emerson Electric Co. Restricted
Stock Plan for Non-Management Directors / / / / / /
MANAGEMENT RECOMMENDS A VOTE FOR THE FOLLOWING: FOR AGAINST ABSTAIN
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3. Reapproval of Performance Measures under the
Emerson Electric Co. Annual Incentive Plan / / / / / /
MANAGEMENT RECOMMENDS A VOTE FOR THE FOLLOWING: FOR AGAINST ABSTAIN
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4. Ratification of Independent Auditors / / / / / /
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MANAGEMENT RECOMMENDS A VOTE AGAINST THE FOLLOWING: FOR AGAINST ABSTAIN
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5. The stockholder proposal on sexual
orientation described in the proxy statement / / / / / /
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The undersigned hereby acknowledges receipt of Notice of Annual Meeting and
accompanying Proxy Statement.
SIGNATURE SIGNATURE DATE
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NOTE: PLEASE SIGN AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN.
WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH.
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FOLD AND DETACH HERE
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11:59 PM EASTERN TIME
THE DAY PRIOR TO ANNUAL MEETING DAY.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR
SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
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INTERNET TELEPHONE MAIL
http://www.eproxy.com/emr 1-800-435-6710
Use the Internet to vote Use any touch-tone Mark, sign and date
your proxy. Have your OR telephone to vote your OR your proxy card
proxy card in hand when proxy. Have your proxy and
you access the web site. card in hand when you return it in the
call. enclosed postage-paid
envelope.
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IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
PLEASE ADMIT:
[EMERSON logo]
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned does hereby appoint D. N. FARR, W. W. WITHERS, and H. M.
SMITH, or any of them, with full powers of substitution, the true and lawful
attorneys in fact, agents and proxies of the undersigned to represent the
undersigned at the Annual Meeting of the Stockholders of EMERSON ELECTRIC
CO., to be held on February 1, 2005, commencing at 10:00 A.M., St. Louis
Time, at the headquarters of the Company at 8000 West Florissant Avenue,
St. Louis, Missouri, and at any and all adjournments of said meeting, and to
vote all the shares of Common Stock of the Company standing on the books of
the Company in the name of the undersigned as specified and in their
discretion on such other business as may properly come before the meeting.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
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ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
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FOLD AND DETACH HERE
[EMERSON logo]
ADMISSION TICKET
ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, FEBRUARY 1, 2005
10:00 A.M.
EMERSON ELECTRIC CO. HEADQUARTERS
8000 W. FLORISSANT AVENUE
ST. LOUIS, MO 63136
==========================
PLEASE PRESENT THIS
NON-TRANSFERABLE TICKET
AT THE REGISTRATION DESK
UPON ARRIVAL
==========================
APPENDIX
Page 15 of the proxy statement contains a Performance Graph. The
information contained within the graph is presented in a tabular format
immediately following the graph.
Appendix provided pursuant to Instruction 3 of Item 10 of Schedule 14A
EMERSON ELECTRIC CO.
ANNUAL INCENTIVE PLAN
I. PURPOSE
The purpose of the Emerson Electric Co. Annual Incentive Plan is to
provide an annual incentive program for selected key executives which is
based upon specific performance criteria established for a given Fiscal
Year. In particular, this program is designed to (a) provide an annual
incentive whereby a significant portion of such executives' Fiscal Year
compensation is based on their efforts in achieving the performance
objectives of the Company and/or its subsidiaries or divisions, and (b)
attract, motivate and retain key executives on a competitive basis in which
total compensation levels are closely linked to the accomplishment of the
Company's financial and strategic objectives.
II. DEFINITIONS
The following words shall have the following meanings unless the context
clearly requires otherwise:
A. "Annual Incentive Award" or "Award" means the amount of compensation
payable to a Participant under the Program.
B. "Board of Directors" means the Board of Directors of Emerson Electric
Co.
C. "Change of Control" means:
(1) The purchase or other acquisition (other than from Emerson
Electric Co.) by any person, entity or group of persons, within the meaning
of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (excluding, for this purpose, Emerson Electric Co. or
its subsidiaries or any employee benefit plan of Emerson Electric Co. or its
subsidiaries), of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either the
then-outstanding shares of common stock of Emerson Electric Co. or the
combined voting power of Emerson Electric Co.'s then-outstanding voting
securities entitled to vote generally in the election of directors; or
(2) Individuals who, as of the date hereof, constitute the Board of
Directors of Emerson Electric Co. (the "Board" and, as of the date hereof,
the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any person who becomes a director
subsequent to the date hereof whose election, or nomination for election by
Emerson Electric Co.'s shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
individual whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of directors
of Emerson Electric Co., as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) shall be, for purposes of this
section, considered as though such person were a member of the Incumbent
Board; or
(3) Approval by the stockholders of Emerson Electric Co. of a
reorganization, merger or consolidation, in each case with respect to which
persons who were the stockholders of Emerson Electric Co. immediately prior
to such reorganization, merger or consolidation do not, immediately
thereafter, own more than 50% of, respectively, the common stock and the
combined voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated corporation's
then-outstanding voting securities in substantially the same proportions as
their ownership of Emerson Electric Co.'s voting securities immediately
before such reorganization, merger or consolidation, or of a liquidation or
dissolution of Emerson Electric Co. or of the sale of all or substantially
all of the assets of Emerson Electric Co.
D. "Committee" means the subcommittee of the Compensation and Human
Resources Committee of the Board of Directors of Emerson Electric Co. which
is comprised of members who are (1) not eligible to participate in the
Program and (2) "outside directors" within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.
E. "Company" means Emerson Electric Co., a Missouri Corporation.
F. "Covered Employee" means any executive officer of the Company whom
the Committee designates as a Participant for a Fiscal Year.
G. "Executive Compensation Executive" means the Executive Compensation
Executive of Emerson Electric Co.
H. "Fiscal Year" means the Fiscal Year of the Company which is currently
the twelve-month period ending September 30.
I. "Participant" means an executive officer of the Company whom the
Committee designates to receive an Award for a Fiscal Year.
J. "Program" means this Emerson Electric Co. Annual Incentive Plan.
K. "Subsidiary" means any corporation more than 50% of whose stock is
owned directly or indirectly by the Company.
III. ELIGIBILITY
Participation in the Program shall be limited to those executive
officers of the Company as the Committee shall determine. Additions or
deletions to the Program during a Fiscal Year shall be made only in the
event of an unusual circumstance, such as a promotion or new hire.
IV. DETERMINATION OF ANNUAL INCENTIVE AWARDS
Annual Incentive Awards to Covered Employees shall be based upon the
accomplishment of specific performance objectives. The Committee shall
establish performance objectives based on the following criteria: sales,
earnings, earnings per share, pre-tax earnings and net profits, return on
equity, and asset management. Performance objectives need not be the same in
respect to all Participants and may be established separately for the
Company as a whole or for its various groups, divisions, subsidiaries and
affiliates. Each of the performance criteria is to be specifically defined
in advance by the Committee and may include or exclude specified items of an
unusual or non-recurring nature. No Award shall be paid to any Covered
Employee if the applicable performance objective(s) are not achieved or if
the Program is not approved by stockholders of the Company. In no event
shall the total amount of an Award paid to any Covered Employee in any
Fiscal Year exceed six million dollars.
As soon as practicable after the end of each fiscal year, Annual
Incentive Awards for each Participant for such Fiscal Year shall be
determined by the Committee. The Committee shall certify in writing the
achievement of the applicable performance objective(s) and the amount of any
Awards payable to Covered Employees. Annual Incentive Awards to such
Participants may be denied or adjusted downward by the Committee as, in the
Committee's sole judgment, is prudent based upon its assessment of the
Participant's performance and the Company's performance during the Fiscal
Year.
V. TIME FOR PAYMENTS
Annual Incentive Awards will normally be paid by November 30th following
the end of each Fiscal Year. However, each Participant shall have the right
to elect to defer all or part of his payment under the Award (a) until the
following January, (b) for a stated number of years, or (c) until his
termination of employment. Such election must be made no later than the
December 31st of the Fiscal Year with respect to which the Annual Incentive
Award is granted, by filing with the Executive Compensation Executive an
executed election form supplied by the Company. The election may be revoked
only by the filing with the Executive Compensation Executive of a written
revocation on or before the December 31st of such Fiscal Year.
The Committee may direct, upon a showing of an emergency beyond the
Participant's control which results in severe financial hardship, that a
Participant who has elected to defer payment until the following January,
for a stated number of years, or until his termination of employment,
receive so much of his payment prior to such time as will enable the
Participant to meet such emergency.
A Participant who elects to defer payment for a stated number of years
or until his termination of employment shall be paid interest on the
outstanding amount. Such interest shall be credited and compounded each
calendar quarter at the prime rate as of the first day of each calendar
quarter. Such interest shall accrue from the date the Annual Incentive Award
would otherwise have been paid had there been no deferral. For this purpose,
the term "prime rate" shall mean the prime rate publicly announced by Bank
of America for 90-day commercial loans.
VI. METHOD OF PAYMENT OF DEFERRED AMOUNTS
A Participant who has elected to defer payment of all or part of his
Annual Incentive Award for a stated number of years or until his termination
of employment may elect, on a form supplied by the Company, to receive
payment of his deferred amounts in a lump sum or in substantially equal
annual installments not exceeding ten years. Such election must be filed
with the Executive Compensation Executive at least 30 days prior to the time
the lump-sum payment would otherwise be made.
Payment of amounts deferred until termination of employment will
commence no later than 90 days after the end of the Fiscal Year in which the
Participant terminates his employment. Payment of all other deferred amounts
will commence as soon as practicable after the expiration of the deferral
period.
If a Participant dies prior to receiving the entire amounts due under
the Program, the remaining unpaid amounts will be paid in a lump sum to his
beneficiary within 90 days after the end of the Fiscal Year in which his
death occurs.
Each Participant shall have the right to designate a beneficiary, and to
change such beneficiary from time to time, by filing a request in writing
with the Executive Compensation Executive. In the event he shall not have so
designated a beneficiary, or in the event a beneficiary so designated shall
predecease him, the amounts otherwise payable to such beneficiary shall be
paid to the Participant's executors or administrators.
The share payable to any minor pursuant to the provisions hereof may be
paid to such adult or adults as, in the opinion of the Executive
Compensation Executive, have assumed the custody and principal support of
such minor.
Notwithstanding anything else contained in the Program, in the event of
a Change of Control, all payments deferred under the Program, and all unpaid
installments of benefits then being paid, shall be paid, at the
Participant's election made at the time he makes his initial deferral
election under Section V, either, (a) upon the Change of Control or (b) upon
the Participant's termination of employment occurring after the Change of
Control in a single lump sum. Provided, that a Participant may elect, at the
time he makes his method of payment election under Section VI, to have his
benefit paid in substantially equal annual installments not exceeding ten
years in accordance with the first paragraph of this Section VI. In the case
of a Participant who elected to defer payment of his awards for Fiscal Years
commencing prior to December, 1990, such Participant had a one-time election
under rules provided by the Committee, to have such awards paid in
installments in lieu of a lump sum upon a Change of Control.
VII. ADMINISTRATION OF THE PROGRAM
The overall administration and control of the Program, including final
determination of Annual Incentive Awards to each Participant, is the
responsibility of the Committee. The Executive Compensation Executive shall
be responsible for implementing the actions required under the Program.
VIII. VESTING
A Participant must be in the employ of the Company or a Subsidiary
through the last day of the Fiscal Year with respect to which an Annual
Incentive Award is granted in order to be considered for the grant of such
an Award by
the Committee. He must also (subject to specific Committee action to the
contrary as hereinafter set forth in this Section VIII) be an employee of
the Company or a Subsidiary (1) on the date the award is payable
pursuant to Section V hereof if payment is not deferred pursuant to such
Section, or (2) on January 15 following the end of such Fiscal Year, if
payment is deferred pursuant to Section V. The final determination as to
Awards to be granted, and if so, the amount of such Awards, shall be made by
the Committee. Subject to Section IV, and in accordance with this Section
VIII, in the event a Participant terminates or is terminated by the Company
or a Subsidiary, before or after the end of the Fiscal Year for any reason,
including, but not limited to, retirement, disability, or death, the
Committee shall have the sole discretion as to whether any such Award shall
be paid, and, if so, the amount of such payment.
IX. AMENDMENT OR TERMINATION
The Program may be amended or terminated at any time by action of the
Committee; provided, however, that unless the stockholders of Emerson
Electric Co. shall have first approved thereof, no amendment of the Program
shall be effective which would increase the maximum amount which can be paid
to a Covered Employee under the Program, which would change the specified
performance objectives for payment of Awards, or which would modify the
requirements as to eligibility for participation in the Program.
X. MISCELLANEOUS
A. All payments under the Program shall be made from the general assets
of the Company or a Subsidiary. To the extent any person acquires a right to
receive payments under the Program, such right shall be no greater than that
of an unsecured general creditor of the Company or Subsidiary.
B. Nothing contained in the Program and no action taken pursuant thereto
shall create or be construed to create a trust of any kind, or a fiduciary
relationship between the Company or a Subsidiary and any other person.
C. No amount payable under the Program shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge, either voluntary or involuntary, and any attempt to so alienate,
anticipate, sell, transfer, assign, pledge, encumber or charge the same
shall be null and void. No such amount shall be liable for or subject to the
debts, contracts, liabilities, engagements, or torts of any person to whom
such benefits or funds are or may be payable.
D. Nothing contained in the Program shall be construed as conferring
upon any Participant the right to continue in the employ of the Company or a
Subsidiary nor to limit the right of his employer to discharge him at any
time, with or without cause.
E. The Program shall be construed and administered in accordance with
the laws of the State of Missouri.
Approved by a subcommittee of the Compensation and Human Resources
Committee of the Board of Directors effective as of October 1, 1999.