8-KLeadership Changes

CHURCH & DWIGHT CO INC /DE/ 8-K Report, Executive Changes (Mar 18, 2010)

Filed March 18, 2010For Securities:CHD

Summary

This Form 8-K filing from Church & Dwight Co., Inc. (CHD) on March 18, 2010, details significant amendments to the Change in Control and Severance Agreements for its executive officers. The primary change is the elimination of the "Tax Gross-Up Payment," which previously ensured executives received their full severance pay regardless of excise taxes triggered by a change in control. Instead, under the new Amended Agreements, any parachute payments that would be subject to excise tax under Section 4999 of the Internal Revenue Code will be reduced. This reduction is calculated to provide the executive officer with a greater net after-tax benefit compared to receiving the full payment and then paying the excise tax. This amendment aims to reduce potential financial liabilities for the company related to excise tax gross-ups while maintaining a reasonable net benefit for the executives. The filing specifies that the Amended Agreements were entered into with key executives, including the CEO and CFO, between March 12 and March 16, 2010.

Key Highlights

  • 1Church & Dwight amended its Change in Control and Severance Agreements for executive officers, effective March 12, 2010.
  • 2The "Tax Gross-Up Payment" provision, which covered excise taxes on parachute payments, has been eliminated.
  • 3New agreements stipulate that parachute payments will be reduced if this results in a greater net after-tax benefit for the executive.
  • 4The reduction is designed to keep payments below the "excess parachute payments" threshold under Section 280G of the IRC.
  • 5The Amended Agreements were finalized with key executives including the CEO and CFO between March 12 and March 16, 2010.
  • 6These changes aim to mitigate the company's financial exposure to excise tax gross-ups in the event of a change in control.

Frequently Asked Questions

The main change is the elimination of the 'Tax Gross-Up Payment.' Previously, the company would pay additional amounts to executives to cover any excise taxes they owed on severance pay related to a change in control. This provision is now removed.

In place of the Tax Gross-Up Payment, the new agreements state that if a change in control triggers parachute payments subject to excise taxes, those payments will be reduced. This reduction is structured to ensure the executive receives a better net after-tax amount than if they received the full payment and paid the tax themselves.

These changes likely aim to reduce the company's financial risk and potential cost associated with excise taxes on executive severance packages. By reducing payments instead of grossing them up, the company limits its direct liability in a change-in-control scenario.

Not necessarily. The goal of the reduction mechanism is to provide the executive with the best possible net after-tax outcome. If reducing the payment below the excise tax threshold results in a higher net amount for the executive than receiving the full payment and paying the tax, the payment will be reduced. Otherwise, the executive would be responsible for the excise tax.