8-KMaterial Agreements

CHURCH & DWIGHT CO INC /DE/ 8-K Report, Material Agreement (Mar 8, 2007)

Filed March 8, 2007For Securities:CHD

Summary

This 8-K filing from Church & Dwight Co., Inc. (CHD) on March 8, 2007, details significant changes to its executive compensation structure and stock award plan, approved by the Board of Directors on March 2, 2007. The primary focus is on the establishment of new criteria for annual incentive compensation for executive officers for 2007, including varying target percentages of base salary for different executive roles and a split between corporate and individual performance metrics. It also outlines specific performance measures such as consolidated net sales, operating margin, and free cash flow for corporate performance, with similar metrics for divisional performance where applicable. Furthermore, the filing announces an amendment to the 2003 Stock Award Plan designed to offer more favorable terms for stock option exercise for employees meeting specific age and service criteria upon voluntary termination. Lastly, the company is introducing a new Executive Deferred Compensation Plan (EDCP II) to comply with Section 409A of the Internal Revenue Code, which will govern deferrals made since January 1, 2005, and also amends the prior EDCP I. These changes reflect a strategic update to align executive incentives with company performance and ensure compliance with tax regulations.

Key Highlights

  • 1New annual incentive compensation criteria for 2007 approved for executive officers.
  • 2Incentive compensation can range from 0% to 200% of a target amount, with varying target percentages based on executive role (CEO, CFO, others).
  • 3Incentive compensation is based on a mix of corporate performance (net sales, operating margin, free cash flow) and individual performance, with a further split for divisional performance where applicable.
  • 4Amendment to the 2003 Stock Award Plan allows enhanced stock option exercise periods for eligible retiring employees (55+ years old with 5+ years of service, age+service >= 65) upon signing a separation agreement.
  • 5Introduction of a new Executive Deferred Compensation Plan (EDCP II) to comply with Section 409A of the Internal Revenue Code.
  • 6EDCP II allows deferral of up to 85% of salary and incentive compensation, with a restriction on investing more than 50% of ongoing deferrals into company stock.
  • 7Prior Executive Deferred Compensation Plan (EDCP I) is amended to facilitate transfers to EDCP II and confirm no further deferrals can be made under EDCP I after December 31, 2004.

Frequently Asked Questions

The company has established new criteria for annual incentive compensation for 2007. This includes setting target incentive percentages for the CEO (100% of base salary), CFO (55% of base salary), and other executive officers (50% of base salary). The compensation will be earned based on a combination of corporate performance metrics (net sales, operating margin, free cash flow) and individual performance, with divisional performance metrics also considered for executives responsible for specific divisions.

The amendment to the 2003 Stock Award Plan provides enhanced stock option exercise rights for employees who voluntarily terminate employment if they are at least 55 years old with 5 years of service, and their combined age and years of service equal or exceed 65. These eligible employees can exercise their stock options for up to three years from their termination date, provided they sign a separation agreement with non-compete and other clauses. This is more favorable than the previous definition of retirement under the plan.

The EDCP II is a new nonqualified deferred compensation plan established to comply with Section 409A of the Internal Revenue Code. It allows certain employees, including executive officers, to defer a significant portion of their salary and incentive compensation. The plan also governs all deferrals made by employees since January 1, 2005, and has specific rules regarding investment in company stock.

For corporate performance, the metrics are consolidated net sales (40% weighting), operating margin (40% weighting), and free cash flow (20% weighting). For executives responsible for specific divisions, 40% of their incentive compensation will be based on their division's net sales (50% weighting) and operating margin (50% weighting), with adjustments to reflect the impact of free cash flow on the corporate portion. Individual performance also plays a role, accounting for up to 20% of the total incentive compensation.