DEF 14A 1 d858318ddef14a.htm FORM DEF 14A Form DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

Filed by the Registrant  þ

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

¨ Preliminary Proxy Statement
¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
¨ Definitive Additional Materials
¨ Soliciting Material Pursuant to Rule 14a-12

SCRIPPS NETWORKS INTERACTIVE, INC.

 

(Name of Registrant as Specified in Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

þ No fee required.

 

¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11

 

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¨ 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.

 

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LOGO

SCRIPPS NETWORKS INTERACTIVE, INC.

9721 Sherrill Blvd.

Knoxville, TN 37932

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD MAY 12, 2015

TO THE SHAREHOLDERS OF SCRIPPS NETWORKS INTERACTIVE, INC.

The Annual Meeting of the Shareholders of Scripps Networks Interactive, Inc. (the “Company”) will be held at the Company’s headquarters, 9721 Sherrill Blvd., Knoxville, Tennessee 37932, on Tuesday, May 12, 2015, at 4:00 p.m., local time, for the following purposes:

 

  1. to elect 12 directors;

 

  2. to approve the 2015 Long-Term Incentive Plan;

 

  3. to approve the Amended and Restated Executive Annual Incentive Plan; and

 

  4. to transact such other business as may properly come before the meeting.

The board of directors has set the close of business on March 19, 2015 as the record date for the determination of shareholders who are entitled to notice of and to vote at the meeting and any adjournment thereof.

If you plan to attend the meeting and need special assistance because of a disability, please contact the corporate secretary’s office.

We are furnishing our proxy materials to you under Securities and Exchange Commission rules that allow companies to deliver proxy materials to their shareholders on the Internet. On or about April 1, 2015, we began mailing a Notice of Internet Availability of Proxy Materials (“Notice”) and provided access to our proxy materials on the Internet. The proxy materials include the 2014 Annual Report to Shareholders and the Proxy Statement.

We encourage you to attend the Annual Meeting. However, it is important that your shares be represented whether or not you are personally able to attend. Even if you plan to attend the Annual Meeting, please vote as instructed in the Notice, via the Internet or the telephone as promptly as possible to ensure that your vote is recorded. Alternatively, you may follow the procedures outlined in the Notice to request a paper proxy card to submit your vote by mail. If you attend the meeting and your shares are registered in your name, you may withdraw your proxy at that time and vote your shares in person.

Your proxy is being solicited by the board of directors.

 

LOGO

MARY E. TALBOTT

Senior Vice President,

Deputy General Counsel and Corporate Secretary

April 1, 2015

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 12, 2015.

The Proxy Statement and Annual Report to Shareholders are available

without charge at http://www.proxyvote.com


LOGO

SCRIPPS NETWORKS INTERACTIVE, INC.

9721 Sherrill Blvd.

Knoxville, TN 37932

PROXY STATEMENT

2015 ANNUAL MEETING

May 12, 2015

This Proxy Statement is being furnished in connection with the solicitation of proxies by the board of directors of Scripps Networks Interactive, Inc., an Ohio corporation (the “Company”), for use at the Company’s Annual Meeting of Shareholders (the “Annual Meeting”), which will be held on Tuesday, May 12, 2015, at the Company’s headquarters, 9721 Sherrill Blvd., Knoxville, Tennessee, at 4 p.m. local time.

The close of business on March 19, 2015, has been set as the record date for the determination of shareholders entitled to notice of and to vote at the meeting.

INTERNET AVAILABILITY OF PROXY MATERIALS

We are furnishing proxy materials to our shareholders primarily via the Internet under rules adopted by the U.S. Securities and Exchange Commission, instead of mailing printed copies of those materials to each shareholder. On April 1, 2015, we mailed to our shareholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy materials, including our Proxy Statement and our Annual Report to Shareholders. The Notice of Internet Availability of Proxy Materials also instructs you on how to access your proxy card or to vote via the Internet or by telephone.

This process is designed to expedite the shareholders receipt of proxy materials, lower the cost of the Annual Meeting and help conserve natural resources. Shareholders who would prefer to continue to receive printed proxy materials should follow the instructions included in the Notice of Internet Availability of Proxy Materials.

VOTING PROCEDURES

On March 19, 2015, the Company had outstanding 94,047,448 Class A Common Shares, $.01 par value per share (“Class A Common Shares”), and 34,317,171 Common Voting Shares, $.01 par value per share (“Common Voting Shares”). Holders of Class A Common Shares are entitled to elect the greater of three or one-third of the directors of the Company but are not entitled to vote on any other matters except as required by Ohio law. Holders of Common Voting Shares are entitled to elect all remaining directors and to vote on all other matters requiring a vote of shareholders. Each Class A Common Share and Common Voting Share is entitled to one vote upon matters on which such class of shares is entitled to vote. Holders of Class A Common Shares and Common Voting Shares do not have cumulative voting.

A quorum of shareholders is necessary to hold a valid meeting. The presence, in person or by proxy, of the holders of a majority of the outstanding Class A Common Shares is necessary for the election of the four directors to be elected by the holders of the Class A Common Shares and the presence, in person or by proxy, of the holders of a majority of the outstanding Common Voting Shares is necessary for any other action to be taken at the meeting.

The presence of any shareholder at the meeting will not operate to revoke his or her proxy. A proxy may be revoked at any time, insofar as it has not been exercised, by giving written notice to the Company or in open meeting.

Abstentions will be treated as present at the meeting for purposes of establishing a quorum for the meeting and for purposes of the vote on the particular matter (other than the election of directors) and, therefore, will have the same effect as a vote against the matter.

Broker non-votes also will be treated as present at the meeting for purposes of establishing a quorum for the meeting, but will not be treated as shares present for purposes of the vote on the particular matter. Accordingly,


broker non-votes will have no effect on the matter unless the matter must be approved by a specified percentage of the outstanding shares or the outstanding shares of a particular class (in which event broker non-votes will have the same effect as a vote against the matter). A broker “non-vote” occurs when a broker or other nominee does not vote shares on a particular matter because the broker or nominee does not have discretionary voting power for the particular matter and has not received voting instructions from the beneficial owner of the shares.

If you are a shareholder of record (i.e., if your shares are registered directly in your name in the records of our transfer agent, Wells Fargo), you can vote using one of the methods described below. If you are a beneficial owner (i.e., you indirectly hold your shares through a nominee such as a bank or broker), you can vote using the methods provided by your nominee.

 

VOTE BY INTERNET

 

http://www.proxyvote.com

 

Have your 16-Digit Control Number (printed in the box marked by the arrow on the notice or proxy card) and follow the instructions.

 

VOTE BY PHONE

 

1-800-690-6903

 

Use any touch-tone telephone to transmit your voting instructions.

 

TO REQUEST A PAPER OR E-MAIL COPY

 

If you want to receive a paper or email copy of these documents, you must request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request:

 

1) BY INTERNET: www.proxyvote.com

2) BY TELEPHONE: 1-800-579-1639

3) BY EMAIL*: sendmaterial@proxyvote.com

*  If requesting materials by email, please send a blank email with your 16-Digit Control Number in the subject line (your Control Number can be found in the box marked by the arrow on the notice or proxy card). Requests, instructions and other inquiries sent to this email address will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before April 28, 2015 to facilitate timely delivery.

 

REPORT ON THE NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS

The following table sets forth certain information as to each of the nominees for election to the board of directors.

 

Name

   Age      Director
Since
    

Principal Occupation or Occupation/Business

Experience for Past Five Years

Nominees for Election by Holders of Class A Common Shares

Jarl Mohn(1)

     63         2008       CEO of NPR since July 2014; Trustee of the Mohn Family Trust since September 1991, Interim CEO at MobiTV (converged media platform) from May 2007 to October 2007; President and Chief Executive Officer of Liberty Digital, Inc. (a media company) from January 1999 to March 2002; President and CEO of E! Entertainment Television (a network with programming dedicated to the world of entertainment) from January 1990 to December 1998.
         Mr. Mohn brings more than forty years’ experience in the media industry through his prior positions as Chief Executive Officer of several major media companies. Additionally, he has 25 years’ experience in the cable TV industry. He is known for his vast and extensive industry knowledge, innovative thinking and expertise as well as a thorough understanding of the challenges and

 

2


Name

   Age      Director
Since
    

Principal Occupation or Occupation/Business

Experience for Past Five Years

         opportunities faced by the Company. Additionally, he served as a director of The E. W. Scripps Company, which provided him with institutional knowledge of the Company.

Nicholas B. Paumgarten

     70         2008       Chairman, Corsair Capital LLC (an investment firm) since March 2006; Managing Director of J.P. Morgan Chase and Chairman of J.P. Morgan Corsair II Capital Partners L.P. (an investment banking firm and an investment fund) from February 1992 to March 2006.
         Mr. Paumgarten has extensive financial industry experience and brings both financial services and corporate governance perspective to the Company as the current Chairman of Corsair Capital, a former Managing Director of J.P. Morgan Chase, and the former Chairman of J.P. Morgan Corsair II Capital Partners L.P. His prior service as a director of The E. W. Scripps Company provided him with institutional knowledge and expertise in the media industry.

Jeffrey Sagansky(2)

     63         2008       President of Silver Eagle Acquisition Corp. since July 2013; Chairman of Hemisphere Media Capital (a private film and TV finance company) since 2011; Former President of Global Eagle Acquisition Corp. (a special purpose acquisition company) from 2011 to February 2013; former Chairman of RHI Entertainment, LLC (a producer and distributor of long-form television content) from February 2009 to December 2010; Former Chairman of Elm Tree Partners, LLC (a capital project fund and financing company) from January 2007 to December 2010.
         Mr. Sagansky brings more than thirty-five years of experience managing television operations and investing in television distribution and production companies, which enables him to provide critical insights into the media industry and how best to position the Company for success. He also holds an MBA from Harvard Business School. From his long-term experience in the media industry, he brings expertise and industry knowledge to the board. Also, as a former director of The E. W. Scripps Company, he brings historical knowledge of the Company and its strengths, challenges and opportunities.

Ronald W. Tysoe(3)

     62         2008       Senior Advisor of Perella Weinberg Partners LP (a global, independent advisory and asset management firm) from October 2006 to September 2007; Vice Chairman of Federated Department Stores, Inc. (now Macy’s Inc., a

 

3


Name

   Age      Director
Since
    

Principal Occupation or Occupation/Business

Experience for Past Five Years

         retail organization operating stores and Internet websites) from April 1990 to October 2006.
         Mr. Tysoe brings significant experience in accounting and finance, including serving on a number of audit committees of public companies and as a former Chief Financial Officer of a large public company. Mr. Tysoe is an audit committee financial expert as defined in the SEC rules adopted under the Sarbanes-Oxley Act. Additionally, he served as a director of The E. W. Scripps Company, which provided him with institutional knowledge and insight into the challenges and opportunities of the Company.
Nominees for Election by Holders of Common Voting Shares

Gina L. Bianchini

     42         2012       Founder and CEO of Mighty Software, Inc. (provider of social software solutions) since September 2010. CEO of Ning, Inc. (platform for creating social websites) from 2004 to March 2010. Co-Founder and President of Harmonic Communications (an advertising tracking, measurement, and optimization software company) from March 2000 to July 2003.
         Ms. Bianchini’s expertise, vision and creativity in the rapidly evolving world of social networking make her uniquely qualified to serve the Company. Her valuable insight and guidance will benefit the Company as it develops new interactive businesses and explores opportunities to create and deliver our brand of lifestyle content on innovative digital platforms.

Michael R. Costa

     57         2009       Former Head of Mergers and Acquisitions and Vice Chairman of Investment Banking, Cowen and Company (a diversified financial services firm) from 2010–2011. Former Managing Director, Global Markets and Investment Banking/Mergers and Acquisitions of Merrill Lynch & Co. (provider of wealth management, securities trading and sales, corporate finance and investment banking services) from 1989 through 2008.
         Mr. Costa brings more than twenty-five years of finance/investment banking experience to the board of directors. He also holds a law degree. His prior work experience includes serving as a financial advisor to numerous corporations/boards of directors in the media and communications industries in connection with mergers, acquisitions and corporate restructurings.

 

4


Name

   Age      Director
Since
    

Principal Occupation or Occupation/Business

Experience for Past Five Years

David A. Galloway(4)

     71         2008       President and Chief Executive Officer of Torstar Corporation (a media company listed on the Toronto Stock Exchange) from 1988 until his retirement in May 2002.
         Mr. Galloway brings over twenty years of media industry experience to the Company. His previous role as Chief Executive Officer provides him with knowledge, experience and insight into various budget issues as well as oversight, governance and management of large organizations. He holds an MBA from Harvard Business School and has extensive business experience and leadership skills. Additionally, he served on the board of directors of The E. W. Scripps Company, which provided him with institutional knowledge and insight into the challenges and opportunities of the Company.

Kenneth W. Lowe

     65         2008       Chairman, President and Chief Executive Officer of the Company since July 2008. President and Chief Executive Officer of The E. W. Scripps Company (a media company) from October 2000 to June 2008. President and Chief Operating Officer from January 2000 to September 2000 of The E. W. Scripps Company.
         From his service as the current Chairman, President and Chief Executive Officer of the Company and his prior service as President and Chief Executive Officer and Chief Operating Officer of The E. W. Scripps Company, Mr. Lowe brings deep institutional knowledge and perspective regarding the Company’s strengths, challenges and opportunities. He possesses extensive public company and media industry experience.

Donald E. Meihaus

     60          Secretary and Treasurer of The Edward W. Scripps Trust from 1990 until his retirement in 2013. President of Miramar Services, Inc. (the Scripps family office) from 2002 to 2012. The Company’s Board of Directors designated Mr. Meihaus as a nonvoting board observer in November, 2014 so that he could become familiar with the Company’s business before assuming the responsibility of serving as a regular director.
         Mr. Meihaus brings institutional knowledge to the Company from his service as the former President of the Scripps family office and as Secretary and Treasurer of The Edward W. Scripps Trust.

 

5


Name

   Age      Director
Since
    

Principal Occupation or Occupation/Business

Experience for Past Five Years

Richelle P. Parham

     47         2012       Former Chief Marketing Officer of eBay Marketplaces, North America (Ecommerce company) from 2010 to February 2015. Head of Global Marketing Innovation and Head of Global Marketing Services for Visa, Inc. (credit card company) from 2008 to 2010. Senior Vice President and General Manager of Digitas (an integrated advertising agency) from 1994 to 2007.
         Ms. Parham has more than 20 years of global marketing experience. Her experience developing strategies that deliver strong return on marketing investments becomes increasingly important as we create lifestyle content services for consumers on emerging interactive media platforms.

Mary McCabe Peirce(5)(6)

     66         2008       Mrs. Peirce brings institutional knowledge to the Company through her service as a former trustee of The Edward W. Scripps Trust and as a director of The E. W. Scripps Company. As a result of her service, she has a thorough understanding of the Company’s history and vision.

Wesley W. Scripps(6)

     32         2014       Founder and owner of Forlio Designs LLC (a web design firm) since 2008.
         Mr. Scripps’ experience in owning and operating a web design firm provides real-time, valuable insight and guidance to the Company as it develops new interactive businesses and promotes its brands on various platforms.

 

 

(1) Mr. Mohn is a director of Rubicon Project (a private web real time ad trading company) and Playdek (a mobile game developer). He was previously a director of CNET and XM Satellite Radio Holdings, Inc.

 

(2) Mr. Sagansky is a managing partner in Hemisphere Media Capital (a private film and TV finance company), a director of Global Eagle Entertainment, Inc. (an airline supplier of entertainment and connectivity to the worldwide airline business) and a director of Starz (a pay cable operator). He was previously a director of RHI Entertainment and American Media.

 

(3) Mr. Tysoe is a director of Canadian Imperial Bank of Commerce, Cintas Corporation (a company providing specialized services, including uniform programs and other products, to businesses), J. C. Penney Company, Inc. (an apparel and home furnishing retailer) and Taubman Centers, Inc. (a real estate company that owns and operates regional shopping centers). He was previously a director of NRDC Acquisition Corporation, Ohio Casualty Corporation and Pzena Investment Management, Inc.

 

(4) Mr. Galloway is a director of Toromont Industries (a Caterpillar machinery dealer). He was previously chair of Bank of Montreal and a director of Shell Canada, Cognos Inc. and Abitibi Consolidated. He was chair of Hospital for Sick Children in Toronto from 2002-2005 and on the board for thirteen years.

 

(5) Mrs. Peirce is a director of The E. W. Scripps Company (a media company with interests in television stations, newspapers and local news and information Web sites).

 

(6) Mr. Wesley W. Scripps is a first cousin once removed of Mrs. Peirce.

 

6


REPORT ON THE SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth certain information with respect to persons known to management to be the beneficial owners, as of January 31, 2015, unless indicated otherwise in the footnotes below, of more than 5 percent of the Company’s outstanding Class A Common Shares or Common Voting Shares. Unless otherwise indicated, the persons named in the table have sole voting and investment power with respect to all shares shown therein as being beneficially owned by them.

 

     Total Shares to be
Beneficially Owned
     Percentage of Total(1)  

Name and Address of Beneficial Owner

   Class A
Common
Shares
     Common
Voting
Shares
     Class A
Common
Shares
    Common
Voting
Shares
 

GREATER THAN FIVE PERCENT SHAREHOLDERS

          

Signatories to Scripps Family Agreement(2)

             31,533,112                91.9

c/o Bruce W. Sanford, Esq.

Baker & Hostetler LP

Washington Square, Suite 1100

1050 Connecticut Avenue, NW

Washington, DC 20036-5304

          

Southeastern Asset Management, Inc.(3)

     12,675,845                 12.3       

6410 Poplar Ave., Suite 900

Memphis, TN 38119

          

Miramar Fiduciary Corporation(4)

     6,538,930                 6.4       

100 West Liberty Street, 10th Floor

Reno, Nevada 89501

          

The Vanguard Group(5)

     6,387,550                 6.2       

100 Vanguard Blvd.

Malvern, Pennsylvania 19355

          

BlackRock, Inc.(6)

     5,161,684                 5.0       

55 East 52nd Street

New York, NY 10022

          

 

 

(1) Percentage of class is based on 100,623,461 Class A Common Shares and 34,317,171 Common Voting Shares outstanding as of January 31, 2015. Subject to the Scripps Family Agreement, each Common Voting Share is convertible at no cost and at any time into one Class A Common Share.

 

(2) Certain descendants of Robert P. Scripps, descendants of John P. Scripps, certain trusts of which descendants of John P. Scripps or Robert P. Scripps are trustees or beneficiaries and an estate of a descendent of Robert P. Scripps are signatories to the Scripps Family Agreement, which governs the transfer and voting of all Common Voting Shares held by such signatories. The information in the table and this footnote is based on Amendment No. 6 to a Schedule 13D filed with the SEC on January 14, 2015 by the signatories to the Scripps Family Agreement. The signatories to the Scripps Family Agreement report shared voting power with each other with respect to the Common Voting Shares shown in the table because such shares will be voted as instructed by a vote conducted in accordance with the procedures set forth in the Scripps Family Agreement. The shares shown in the table do not include 1,604,000 Common Voting Shares held by two signatories to the Scripps Family Agreement as co-guardians for a minor which are not subject to the Scripps Family Agreement or 801,999 Common Voting Shares which may be deemed to be beneficially owned by another signatory to the Scripps Family Agreement as advisor to minors trusts, which also are not subject to the Scripps Family Agreement.

 

7


The signatories to the Scripps Family Agreement also report that they individually beneficially own, in the aggregate, an additional 16,881,240 Class A Common Shares (16.8% of the outstanding Class A Common Shares), including an additional 33,029 Class A Common Shares, 45,881 Class A Common Shares, 25,704 Class A Common Shares and 25,704 Class A Common Shares, respectively, that Mary McCabe Peirce and Nackey Scagliotti (each of whom is a director of the Company), Edward W. Scripps, Jr. and Paul K. Scripps have the right to acquire within 60 days pursuant to outstanding stock options. Also includes 1,638,108 Class A Common Shares which may be deemed to be beneficially owned by two signatories to the Scripps Family Agreement in their capacity as co-guardians for a minor and 801,999 Class A Common Shares which may be deemed to be beneficially owned by another signatory to the Scripps Family Agreement in her capacity as an advisor to minors trusts. None of the Class A Common Shares are subject to the Scripps Family Agreement.

If the Scripps Family Agreement is not considered, none of the signatories to the Scripps Family Agreement currently beneficially owns more than 5% of the Company’s outstanding Class A Common Shares or Common Voting Shares, other than: (i) Virginia S. Vasquez and Rebecca Scripps Brickner, who beneficially own 2,405,997 and 2,406,000 Common Voting Shares, respectively (7% of the outstanding Common Voting Shares), including shares held by the Estate of Robert P. Scripps, Jr., of which they are co-executors (all of which are subject to the Scripps Family Agreement), (ii) Mary McCabe Peirce, who beneficially owns 2,404,000 Common Voting Shares (7% of the outstanding Common Voting Shares), including 1,604,000 Common Voting Shares as to which she and Elizabeth A. Logan may be deemed to share beneficial ownership as co-guardians on behalf of a minor (which are not subject to the Scripps Family Agreement), (iii) Charles Kyne McCabe, who beneficially owns 2,269,000 Common Voting Shares (6.6% of the outstanding Common Voting Shares), and (iv) Elizabeth A. Logan, who beneficially owns 1,740,998 Common Voting Shares (5.1% of outstanding Common Voting Shares), including 1,604,000 Common Voting Shares as to which she and Mary McCabe Pierce may be deemed to share beneficial ownership as co-guardians on behalf of a minor (which are not subject to the Scripps Family Agreement).

The signatories to the Scripps Family Agreement filing the Amendment No. 6 to Schedule 13D were Virginia S. Vasquez, Rebecca Scripps Brickner, Estate of Robert P. Scripps, Jr., Edward W. Scripps, Jr., Corina S. Granado, Jimmy R. Scripps, Mary Ann S. Sanchez, Margaret Scripps Klenzing, William H. Scripps, Marilyn S. Wade, Adam R. Scripps, William A. Scripps, Gerald J. Scripps, Charles E. Scripps, Jr., Eli W. Scripps, Jonathan L. Scripps, Peter M. Scripps, Barbara Victoria Scripps Evans, Molly E. McCabe, John P. Scripps Trust FBO Peter M. Scripps U/A dated 2/10/77, John P. Scripps Trust FBO Paul K. Scripps U/A dated 2/10/77, John P. Scripps Trust Exempt Trust U/A dated 2/10/77, John P. Scripps Trust FBO Barbara Scripps Evans U/A dated 2/10/77, The Marital Trust of the La Dow Family Trust, Anne M. La Dow Trust U/A dated 10/27/2011, The La Dow Family Trust U/A dated 6/29/2004, John Peter Scripps 2013 Revocable Trust dated 12/20/2013, John P. Scripps Trust FBO Ellen McRae Scripps U/A dated 12/28/84, John P. Scripps Trust FBO Douglas A. Evans U/A dated 12/24/84, Douglas A. Evans 1983 Trust, Ellen M. Scripps Kaheny Revocable Trust dated 4/17/14, Victoria S. Evans Trust U/A dated 5/19/2004, Peter M. Scripps Trust U/A Dated 11/13/2002, Paul K. Scripps Family Revocable Trust, Thomas S. Evans Irrevocable Trust U/A dated 11/13/2012, Scripps Family 1992 Revocable Trust dated 06/09/92, Thomas S. Evans, Douglas A. Evans, Julia Scripps Heidt, Paul K. Scripps, Charles Kyne McCabe, Peter R. La Dow, J. Sebastian Scripps, Anne M. La Dow, Wendy E. Scripps, Nackey E. Scagliotti, Cynthia J. Scripps, Elizabeth A. Logan, Mary Peirce, John P. Scripps, Eva Scripps Attal, Megan Scripps Tagliaferri, Eaton M. Scripps, Kathy Scripps, Ellen M. Scripps Kaheny, Wesley W. Scripps, Careen Cardin, Cody Dubuc, R. Michael Scagliotti, Sam D. F. Scripps, Welland H. Scripps, William A. Scripps, Jr., Kendall S. Barmonde, Charles L. Barmonde, Manuel E. Granado, Geraldine Scripps Granado, Raymundo H. Granado, Jr., Anthony S. Granado, Ellen B. Granado, Crystal Vasquez Lozano, Elizabeth Scripps, James Bryce Vasquez, John Patrick Scripps, Keon Korey Vasquez, Peggy Scripps Evans, Samuel Joseph Logan and Maxwell Christopher Logan. Since Amendment No. 6 to Schedule 13D was filed with the SEC, to the knowledge of the Company, the following transferees of Common Voting Shares from signatories to the Scripps Family Agreement also have become parties to the Scripps Family Agreement: Samantha Brickner, Monica Holcomb and Savannah Brickner.

 

8


(3) This information is based on a Schedule 13G filed with the SEC by Southeastern Asset Management, Inc. on February 13, 2015. According to the filing, Southeastern Asset Management, Inc. holds sole voting power with respect to 4,635,445 Class A Common Shares, shared voting power with respect to 7,145,800 Class A Common Shares, sole dispositive power with respect to 5,530,045 Class A Common Shares and shared dispositive power with respect to 7,145,800 Class A Common Shares.

 

(4) This information is based on a Schedule 13G filed with the SEC by Miramar Fiduciary Corporation on February 13, 2015. According to the filing, Miramar Fiduciary Corporation has sole voting and dispositive power with respect to these Class A Common Shares, which are held by several grantor retained annuity trusts of which it serves as independent trustee.

 

(5) This information is based on a Schedule 13G filed with the SEC by The Vanguard Group on February 10, 2015. According to the filing, The Vanguard Group holds sole voting power with respect to 169,332 Class A Common Shares, sole dispositive power with respect to 6,223,415 Class A Common Shares and shared dispositive power with respect to 164,135 Class A Common Shares.

 

(6) This information is based on a Schedule 13G filed with the SEC by BlackRock, Inc. on February 3, 2015. According to the filing, BlackRock, Inc. holds sole voting power with respect to 4,383,978 Class A Common Shares and sole dispositive power with respect to 5,161,684 Class A Common Shares.

The Scripps Family Agreement

General.    The Edward W. Scripps Trust (the “Trust”), the former controlling shareholder of the Company, ended on October 18, 2012 upon the death of Robert P. Scripps, a grandson of the founder. He was the last of Edward W. Scripps’ grandchildren upon whom the duration of the Trust was based.

Certain beneficiaries of the Trust and their descendants and certain members of the John P. Scripps family and trusts for their benefit are signatories to the Scripps Family Agreement that governs the transfer and voting of Common Voting Shares. On January 28, 2013, the Company filed with the SEC a Report on Form 8-K reporting a change in control of the Company as a result of an order issued by the Court of Common Pleas, Probate Division, Butler County, Ohio directing that the trustees of the Trust vote the Common Voting Shares held by the Trust prior to distribution as instructed by a vote conducted in accordance with the Scripps Family Agreement.

On March 14, 2013, the Trust distributed to the beneficiaries of the Trust, other than three beneficiaries who are minors, 31,943,106 Class A Common Shares and 31,277,999 Voting Common Shares held by the Trust pursuant to the terms of the Trust for no consideration. The remaining 819,091 Class A Common Shares and 801,999 Voting Common Shares held by the Trust (other than 37 Class A Common Shares that were sold in the market so that no fractional shares were distributed) were distributed on September 20, 2013 to trusts established for the purpose of holding the shares on behalf of the three minor beneficiaries of the Trust. One of the signatories to the Scripps Family Agreement was appointed as a trust advisor with respect to the transfer and voting of such shares.

Since March 14, 2013, the provisions of the Scripps Family Agreement fully govern the transfer and voting of the Common Voting Shares held by the signatories to the Scripps Family Agreement. The three minors’ trusts are not parties to the Scripps Family Agreement, and they may or may not become a party in the future. The signatory to the Scripps Family Agreement who was appointed as trust advisor with respect to the shares to be held by the minors’ trusts may be deemed to have beneficial ownership of those shares, but unless the minor’s trust becomes a party, it will not be bound by the Scripps Family Agreement with respect to those shares.

Voting Provisions of the Scripps Family Agreement.    Section 9 of the Scripps Family Agreement provides that the Company will call a meeting of the signatories to the agreement prior to each annual or special meeting of the shareholders of the Company. At each of these meetings, the Company will discuss with the signatories to the agreement, each matter, including election of directors, that the Company will submit to the holders of Common Shares at the annual meeting or special meeting with respect to which the meeting under the agreement has been called. Each signatory to the agreement is entitled, either in person or by proxy, to cast one vote for each Common Voting Share owned of record or beneficially by the signatory on each matter brought for a vote at the meeting. Each signatory to the agreement is bound by the decision reached by majority vote with respect to

 

9


each such matter, and at the related annual or special meeting of the shareholders of the Company each signatory to the agreement is required to vote the signatory’s Common Voting Shares in accordance with the decisions reached at the meeting of the signatories.

The signatories to the Scripps Family Agreement have informed the Company that at a March 13, 2015 meeting of the signatories held pursuant to the Scripps Family Agreement, the signatories approved election of the eight director nominees to be voted on by the holders of Common Voting Shares and approved Proposals 2 and 3. Accordingly, based on such approval, the signatories have informed the Company that they will vote the Common Voting Shares held of record by them in favor of such nominees and for Proposals 2 and 3 at the annual meeting of shareholders.

Transfer Restrictions of the Scripps Family Agreement.    No signatory to the Scripps Family Agreement is permitted to dispose of any Common Voting Shares (except as otherwise summarized below) without first giving other signatories and the Company the opportunity to purchase the shares. Signatories are not able to convert Common Voting Shares into Class A Common Shares except for a limited period of time after giving other signatories and the Company the opportunity to purchase and except in certain other limited circumstances.

Signatories are permitted to transfer Common Voting Shares to their lineal descendants or trusts for the benefit of such descendants, or to any trust for the benefit of the spouse of such descendant or any other person or entity. Descendants to whom the shares are sold or transferred outright, and trustees of trusts into which such shares are transferred, must become parties to the Scripps Family Agreement or the shares will be deemed to be offered for sale pursuant to the Scripps Family Agreement. Signatories also are permitted to transfer Common Voting Shares by testamentary transfer to their spouses provided the shares are converted to Class A Common Shares and to pledge the shares as collateral security provided that the pledgee agrees to be bound by the terms of the Scripps Family Agreement. If title to any such shares subject to any trust is transferred to anyone other than a descendant of Robert P. Scripps or John P. Scripps, or if a person who is a descendant of Robert P. Scripps or John P. Scripps acquires outright any such shares held in trust but is not or does not become a party to the Scripps Family Agreement, such shares will be deemed to be offered for sale pursuant to the Scripps Family Agreement. Any valid transfer of Common Voting Shares made by signatories to the agreement without compliance with the agreement will result in automatic conversion of such shares to Class A Common Shares.

Duration of the Scripps Family Agreement.    The provisions restricting transfer of Common Voting Shares under the Scripps Family Agreement will continue until 21 years after the death of the last survivor of the descendants of Robert P. Scripps and John P. Scripps alive when the Trust terminated. The provisions of the Scripps Family Agreement governing the voting of Common Voting Shares will be effective for a 10-year period after termination of the Trust and may be renewed for additional 10-year periods.

 

10


Beneficial Ownership by Executive Officers and Directors

The following table sets forth certain information with respect to the beneficial ownership of Class A Common Shares and Common Voting Shares by the Company’s executive officers and directors as of January 31, 2015.*

 

Name of Beneficial Owner:

  Class A
Common
Shares(1)
    Exercisable
Options(2)
    Vested
Restricted
Stock
Units(3)
    Total Class A
Common Shares(4)
    Common
Voting
Shares(1)
    Percentage of
Total(1)
 
            Class A
Common
Shares
    Common
Voting
Shares
 

Gina L. Bianchini

    2,638        13,309        999        16,946        0        *        *   

Michael R. Costa

    5,963        22,834        999        29,796        0        *        *   

David A. Galloway

    3,138        37,405        999        41,542        0        *        *   

Cynthia L. Gibson

    16,453        24,528        3,102        44,083        0        *        *   

Mark S. Hale

    9,891        91,298        6,080        107,269        0        *        *   

Lori A. Hickok

    5,776        43,495        3,175        52,446         

Burton F. Jablin

    7,578        24,258        4,156        35,992        0        *        *   

Kenneth W. Lowe

    224,717        519,079        33,659        777,455        0        *        *   

Jarl Mohn(5)

    21,300        37,405        999        59,704        0        *        *   

Joseph G. NeCastro

    185        155,475        53,685        209,345        0        *        *   

Richelle P. Parham

    2,638        13,309        999        16,946        0        *        *   

Nicholas B. Paumgarten(6)

    20,669        54,964        999        76,632        0        *        *   

Mary M. Peirce(7)

    1,764,043        37,405        999        1,802,447        33,137,112        1.76     96.6

Nello-John Pesci, Jr.

    908        1,840        947        3,695        0        *        *   

Jeffrey Sagansky

    12,718        13,309        999        27,026        0        *        *   

Nackey E. Scagliotti(7)

    597,257        50,257        999        648,513        31,533,112        *        91.9

Wesley W. Scripps

    0        4,376        999        5,375        1        *        *   

Ronald W. Tysoe

    2,638        22,834        999        26,471        0        *        *   

All directors & executive

    2,698,510        1,167,380        115,793        3,981,683        33,137,112        2.68     96.6

officers as a group (18 persons)

             

 

 

* Shares owned represent less than 1% of the outstanding shares of such class of stock.

 

(1) The shares listed for each of the officers and directors represent his or her direct or indirect beneficial ownership of Class A Common Shares and Common Voting Shares. None of the shares listed for any officer or director is pledged as security for any obligation, such as pursuant to a loan arrangement or agreement or pursuant to any margin account agreement.

 

(2) The shares listed for each of the executive officers and directors include Class A Common Shares underlying exercisable options at January 31, 2015 and options that will be exercisable within 60 days after January 31, 2015 and options that will vest upon retirement.

 

(3) The shares listed for each of the executive officers and directors includes Class A Common Shares underlying restricted stock units at January 31, 2015 and restricted stock units that will be vested within 60 days of January 31, 2015 and restricted stock units that will vest upon retirement.

 

(4) The shares listed do not include any phantom share units held by a director in a phantom share account under the 2008 Deferred Compensation Plan for Directors. The following directors have been credited with the following number of phantom share units in such accounts as of December 31, 2014: Mr. Galloway — 21,588.29; Mr. Paumgarten — 15,543.75 and Mr. Tysoe — 27,403.93. The directors do not have voting or investment power with respect to any of these phantom share units.

 

(5) The shares for Mr. Mohn include 100 shares held in an S corporation that is 100 percent controlled by The Mohn Family Trust.

 

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(6) The shares listed for Mr. Paumgarten include 1,700 shares owned by his wife. Mr. Paumgarten disclaims beneficial ownership of such shares.

 

(7) The shares listed for Mrs. Peirce include 1,638,108 Class A Shares and 1,604,000 Common Voting Shares held as co-guardian on behalf of a minor trust beneficiary. Mrs. Peirce and Mrs. Scagliotti are signatories to the Scripps Family Agreement. See “The Scripps Family Agreement” and footnote (2) to the preceding table.

REPORT ON THE BOARD OF DIRECTORS AND ITS COMMITTEES

2014 Board Meetings

During 2014, the board of directors held four regularly scheduled meetings and three special meetings. All directors attended at least 75 percent of the meetings of the board and of the committees on which they served during the year ended December 31, 2014.

Executive Sessions of Directors

Executive sessions of non-management directors are held regularly. A lead director selected by the board of directors or another non-management director selected by the board of directors at the time of the meeting presides at each of these meetings. Nicholas B. Paumgarten currently is serving as the lead director.

Committee Charters

The charters of the audit, compensation and nominating and governance committees are available for review on the Company’s website at www.scrippsnetworksinteractive.com by first clicking on “Investors,” and then “Corporate Governance,” and then on each committee’s name. Copies are available in print to any shareholder who requests a copy by contacting the corporate secretary at 9721 Sherrill Blvd., Knoxville, Tennessee 37932.

Committees of the Board of Directors

Executive Committee.    Kenneth W. Lowe, Chair, Nicholas B. Paumgarten and Nackey E. Scagliotti are the members of the executive committee. The board of directors may delegate authority to the executive committee to exercise certain powers of the board of directors in the management of the business and affairs of the Company between board of directors meetings.

Audit Committee.    Ronald W. Tysoe, Chair, Michael R. Costa, Richelle P. Parham and Jeffrey Sagansky are the members of the audit committee. The purpose of the committee is to assist the board of directors in fulfilling its oversight responsibility relating to: (1) the integrity of the Company’s financial statements and financial reporting process and the Company’s systems of internal accounting and financial controls; (2) the performance of the internal audit services function; (3) the annual independent audit of the Company’s financial statements, the engagement of the independent auditors and the evaluation of the independent auditors’ qualifications, independence, performance and fees; (4) the compliance by the Company with legal and regulatory requirements, including the Company’s disclosure controls and procedures; (5) the evaluation of enterprise risk issues; and (6) the fulfillment of all other responsibilities as outlined in its charter. The internal and independent auditors have unrestricted access to the audit committee. The committee meets privately with each of the independent auditors, the internal auditors and management. During 2014, the audit committee held seven meetings. Each member of the audit committee is financially literate, under applicable Securities and Exchange Commission (“SEC”) and New York Stock Exchange (“NYSE”) standards. In addition, Mr. Tysoe and Mr. Costa each is an “audit committee financial expert,” as defined under SEC regulations. No member of the committee may receive any compensation, consulting, advisory or other fee from the Company, other than the board of directors compensation described elsewhere in this proxy statement, as determined in accordance with applicable SEC and NYSE rules.

The Company does not limit the number of other audit committees on which the members serve; however, in each case, the board of directors evaluates and determines whether commitments to serve on other audit

 

12


committees impairs such member’s effective service to the Company. Messrs. Tysoe and Sagansky currently serve on the audit committees of two public companies, in addition to service on the audit committee of the Company. The Company’s board of directors reviewed this service commitment and determined that such simultaneous service does not impair their ability to effectively serve on the Company’s audit committee.

Compensation Committee.    Jarl Mohn, Chair, Gina L. Bianchini, David A. Galloway, Nackey E. Scagliotti and Ronald W. Tysoe are the members of the compensation committee. The committee is appointed by the board of directors to discharge the board of director’s responsibilities relating to compensation of the Company’s officers. The committee reviews and approves the Company’s goals and objectives relevant to compensation of senior management and evaluates the performance of senior management in light of those goals and objectives. With respect to the senior managers, the committee establishes base compensation levels, the terms of incentive compensation plans and equity-based plans and post-service arrangements. The committee approves all awards under the Company’s Long-Term Incentive Plan and approves awards under the Company’s Executive Annual Incentive Plan. The committee reviews all of the components of the chief executive officer’s compensation, including goals and objectives, and makes recommendations to the board of directors.

With respect to any funded employee benefit plans, the committee appoints and monitors named fiduciaries. On an annual basis, the committee reviews the operation of the Company’s compensation program to evaluate its coordination and execution and reviews any management perquisites. The committee reviews succession planning relating to positions held by senior officers and makes recommendations with respect thereto to the board of directors. The committee has the authority to engage outside consultants to assist in determining appropriate compensation levels for the chief executive officer, other senior managers and directors. The committee is also responsible for producing an annual report for inclusion in the Company’s proxy statement and for reviewing and approving the Compensation Discussion and Analysis and related compensation disclosure included in the Company’s proxy statement. During 2014, the compensation committee held four meetings.

Nominating and Governance Committee.    Jeffrey Sagansky, Chair, Nicholas B. Paumgarten, Mary McCabe Peirce and Wesley W. Scripps are the members of the nominating and governance committee. The purpose of the committee is: (1) to assist the board of directors by identifying individuals qualified to become board members and to recommend director nominees to the board of directors; (2) to recommend to the board the Corporate Governance Guidelines applicable to the Company; (3) to lead the board of directors in its annual review of the board of directors’ performance; (4) to recommend to the board of directors nominees for each committee of the board of directors; and (5) to review and make recommendations with respect to director compensation to the board of directors. During 2014, the nominating and governance committee held four meetings.

Pricing Committee.    Ronald W. Tysoe, Jarl Mohn and Michael R. Costa are the members of a special pricing committee appointed by the board of directors to review affiliate agreements. The pricing committee held three telephonic meetings in 2014.

Digital Advisory Committee.    Gina L. Bianchini, Chair, Jarl Mohn, Richelle P. Parham and Wesley W. Scripps are the members of the digital advisory committee appointed by the board of directors in November 2012 to further the Company’s on-going commitment to create viable, profitable and growing interactive content strategies and businesses. The digital advisory committee met four times in 2014.

Special Committee.    A special committee of the board of directors, consisting of Jarl Mohn, Nicholas B. Paumgarten, Jeffrey Sagansky and Ronald W. Tysoe (each of the directors elected by the holders of the Class A Common Shares), was appointed by the board in December 2014 to review and approve the purchase by the Company pursuant to the Company’s ongoing share repurchase program of Class A Common Shares offered for sale by certain signatories to the Scripps Family Agreement. The special committee met two times in 2014.

 

13


CORPORATE GOVERNANCE

The board of directors is committed to good corporate governance, good business practices and transparency in financial reporting. The nominating and governance committee annually reviews the Company’s corporate governance principles, a copy of which is available on the Company’s website by clicking on “Investors,” then “Corporate Governance,” and “Governance Highlights.” Copies are available in print to any shareholder who requests a copy by contacting the corporate secretary at 9721 Sherrill Blvd., Knoxville, Tennessee 37932.

Code of Ethics

The Company demonstrates its commitment to operate at the highest ethical standards by enforcing the principles in its Code of Ethics which is applicable to all employees. The Company’s corporate ethics program director is responsible for implementation and oversight of the ethics program. Additionally, the Company has in place a Code of Business Conduct and Ethics for the Chief Executive Officer and the Senior Financial and Accounting Officers. It is the responsibility of the audit committee and the chief financial officer to make sure that this policy is operative and has effective reporting and enforcement mechanisms. The Code of Business Conduct and Ethics for the Chief Executive Officer and Senior Financial Officers is available for review on the Company’s website and to any shareholder who requests a printed copy. Amendments to the policies and waivers of provisions applicable to executive officers or directors may only be made by the board of directors or an authorized committee of the board of directors. Any such amendment or waiver will be promptly disclosed on the Company’s website within four business days.

The Company believes it has an obligation to provide employees with the guidance and support needed to ensure that the best, most ethical choices are made at work. To support this commitment, the Company established a means for employees to submit confidential and anonymous reports of suspected or actual violations of the Company’s Code of Ethics relating, among other things, to: accounting and auditing matters; antitrust activity; confidentiality and misappropriation; conflicts of interest, discrimination or harassment; diverting of product or business activity; embezzlement; falsification of contracts, reports or records; gifts or entertainment; improper supplier or contractor activity; securities violations; sexual harassment; substance abuse; theft; or unsafe working conditions. To submit a report, an employee may call a toll-free number that is answered by a trained professional of EthicsPoint, an independent firm. This number (888-258-3507) is operational 24 hours a day, seven days a week. Employees may also raise questions online through the Internet (www.ethicspoint.com).

Charitable Contributions

The Company has not made any charitable contributions, where the amount has exceeded $1 million or 2 percent of such charity’s consolidated gross revenues, to any charitable organization of which a director is an executive officer.

Board Leadership Structure

Kenneth W. Lowe serves as both the chairman of the Company’s board of directors and as its president and chief executive officer. The board of directors has also appointed a lead director, Nicholas B. Paumgarten, who presides at all meetings of the board of directors at which the chairman is not present, including executive sessions of the independent directors. The lead director also serves as a liaison between the chairman, president and chief executive officer and the independent directors, which includes sharing with the chairman, president and chief executive officer such observations, comments or concerns as he and the other independent directors deem appropriate, reviews with the chairman, president and chief executive officer matters to be presented to the board of directors, including meeting agendas, and has the authority to call meetings of the independent directors. The Company’s enterprise risk issues are reviewed by the audit committee, which reports on such issues to the board of directors based on periodic reports from management. The chairman, president and chief executive officer’s performance is reviewed annually by the compensation committee, which reports such determinations to the board of directors. The Company deems this leadership structure appropriate as it promotes efficiency in communications between the chairman, president and chief executive officer and the board of directors while monitoring effective independent board oversight over the chief executive officer.

 

14


Communications with the Board of Directors

Shareholders and other interested parties wishing to communicate with the independent directors as a group or with any individual director (including the lead director) may do so by addressing a letter to the independent directors or to the individual director and sending it to them in care of the corporate secretary at 9721 Sherrill Blvd., Knoxville, Tennessee 37932. For those who wish to send such communications via e-mail, they can do so to mtalbott@scrippsnetworks.com. A majority of the independent directors have instructed the corporate secretary to review all communications so received, and to forward directly to the independent directors or the individual director all such communications, except for communications unrelated to the function of the board of directors. Any communications not forwarded will be retained for one year, and any independent director may request the corporate secretary to forward to the independent director any such communication. The corporate secretary will not share direct communications to the independent directors or an individual director with any other member of management unless instructed to do so by the lead director or the independent director to whom the communication was addressed.

Director Attendance at Annual Meetings of Shareholders

The Company does not have a policy with regard to attendance by the directors at the Annual Meeting of Shareholders. Directors are strongly encouraged to attend the Annual Meeting of Shareholders. At last year’s Annual Meeting, all directors were present.

Director Education

New directors attend a training session that introduces them to the Company’s operations and to the members of management. Thereafter, directors are informed on a regular basis of various director educational programs offered by governance and director organizations. The Company pays for the continuing education of its directors. The director orientation policy is reviewed by the nominating and governance committee annually.

Director Independence — Audit Committee

The board of directors of the Company has determined that none of the current members of the audit committee has any relationship with the Company that could interfere with his or her exercise of independence from management and the Company. Each of the members satisfies the definitions of independence set forth in the rules promulgated under the Sarbanes-Oxley Act and in the listing standards of the NYSE.

Director Independence — Controlled Company Status

The NYSE requires listed companies to have a majority of independent directors on their board of directors and to ensure that their compensation committee and governance committee are composed solely of independent directors as well. A company that qualifies as a “controlled company” does not have to comply with these requirements so long as it discloses to shareholders that the company qualifies as a “controlled company” and is relying on this exemption in not having a majority of independent directors on the board or solely independent directors on either of the aforementioned committees. A “controlled company” is a listed company of which more than 50 percent of the voting power is held by an individual, a group, or another company. Signatories to the Scripps Family Agreement hold a majority of the Company’s outstanding Common Voting Shares and as such the Company qualifies as a “controlled company” and may rely on the NYSE exemption. The Company is not relying at present on that exemption.

Director Independence

The Company has determined that all of the directors, other than Kenneth W. Lowe, have no material relationship with the Company and are independent under the criteria set forth in applicable rules of the SEC, the NYSE Corporate Governance Standards and the Company’s Corporate Governance Principles. Additionally, all of the members of the audit committee, nominating and governance committee and the compensation committee are independent under such standards.

 

15


Nominations for Directors

The nominating and governance committee will review any candidate recommended by a shareholder of the Company in light of the committee’s criteria for selection of new directors. If a shareholder wishes to recommend a candidate, he or she should send the recommendation, with a description of the candidate’s qualifications, to: Chair, Nominating and Governance Committee, c/o Mrs. Mary E. Talbott, Scripps Networks Interactive, Inc., 9721 Sherrill Blvd., Knoxville, TN 37932.

In the past, the committee has hired an independent consultant to assist with the identification and evaluation of director nominees and may do so in the future.

Nomination for Directors — Qualification Standards

When selecting new director nominees, the nominating and governance committee considers requirements of applicable law and listing standards, as well as the director qualification standards highlighted in the Company’s corporate governance principles. The committee seeks diversity on the board of directors in terms of skills and experience and other factors. The committee is responsible for reviewing with the board of directors the experience, qualifications, attributes and skills of nominees as well as the diversity and composition of the board of directors as a whole. A person considered for nomination to the board of directors must be a person of high integrity. Other factors considered are independence, age, skills, and experience in the context of the needs of the board of directors. The nominating and governance committee makes recommendations to the board of directors regarding the selection of director nominees. The committee is required to review annually the effectiveness of the Company’s corporate governance principles, including the provisions regarding director qualifications (including diversity) that are part of the corporate governance principles.

Compensation Discussion and Analysis

The purpose of the Compensation Discussion and Analysis (“CD&A”) section is to provide material information about the compensation objectives and policies for our named executive officers (“NEOs”) and to put in perspective the quantitative and narrative disclosures that follow the CD&A. Our named executive officers for Fiscal 2014 were:

 

Kenneth W. Lowe

   Chairman, President & Chief Executive Officer;

Joseph G. NeCastro

   Chief Financial & Administrative Officer;

Burton F. Jablin

   President, Scripps Networks;

Mark S. Hale1

   Executive Vice President, Global Operations & Chief Technology Officer;

Cynthia L. Gibson2

   Executive Vice President, Chief Legal Officer;

Dennis W. Shuler3

   Former Executive Vice President & Chief Human Resources Officer.

 

 

1

Prior to November 13, 2014, Mr. Hale’s title was Executive Vice President, Operations & Chief Technology Officer.

 

2 

Prior to November 13, 2014, Ms. Gibson’s title was Executive Vice President, Chief Legal Officer & Corporate Secretary.

 

3 

Mr. Shuler terminated his employment on May 16, 2014.

The CD&A also describes the following:

 

   

A summary of our business results and the alignment between executive pay and Company performance;

 

   

Our decision making process on compensation design and pay levels including our compensation governance approach;

 

   

Our compensation philosophy and objectives; and

 

   

A detailed description of the elements of the Company’s executive compensation program.

 

16


Fiscal 2014 Business Review

Scripps Networks Interactive is one of the leading developers of lifestyle-oriented content for linear and interactive video platforms, including television and the internet, with respected, high-profile brands. Our businesses engage audiences and efficiently serve advertisers by delivering entertaining and highly useful content that focuses on specifically defined topics of interest.

Our operations include our six national television networks, HGTV, Food Network, Travel Channel, DIY Network, Cooking Channel and Great American Country, and the websites that are associated with the aforementioned television brands, as well as other internet-based businesses serving home, food and travel related categories.

We have also established lifestyle media brands internationally. Our lifestyle-oriented channels are available in the United Kingdom, other European markets, the Middle East and Africa, Asia-Pacific and Latin America. We currently broadcast 20 channels reaching approximately 130 million subscribers under the HGTV, DIY, Food Network, Fine Living and Travel Channel brands. The growth of our international business, both organically and through acquisitions and joint ventures, has been, and continues to be, a strategic priority of the Company.

Our businesses earn revenue from advertising sales, affiliate fees and ancillary sales, including the sale and licensing of content and consumer products. Programming expenses, employee costs and sales and marketing expenses are our primary operating costs.

We seek to engage audiences that are highly desirable to advertisers with entertaining and informative lifestyle content that is produced for television, the internet and any other media platforms consumers choose. We intend to expand and enhance our lifestyle brands through creating popular new programming and content, distributing on various platforms, such as mobile phones, tablets and video-on-demand, licensing of content and branded consumer products and increasing our international footprint.

In 2014, the Company’s consolidated operating revenue was $2.7 billion, up 5.3 percent from the prior year. Advertising revenue was $1.8 billion, up 5.7 percent from the prior year. Affiliate fee revenue was $799 million, up 5.4 percent from the prior year.

Improved advertising revenue was primarily attributed to higher pricing from advertising units sold and reflects the highly desirable audience that the Company’s national lifestyle television networks attract.

Total segment profit for the Company in 2014 increased to $1.122 billion, up 1.8 percent from the prior year.

Segment profit excludes interest, income taxes, depreciation and amortization, divested operating units, investment results and certain other items that are included in net income determined in accordance with accounting principles generally accepted in the United States of America (GAAP). The Company’s chief operating decision maker uses segment profit to evaluate the operating performance of business segments and make decisions about the allocation of resources to our reportable segments. Items excluded from segment profit generally result from decisions made in prior periods or from decisions made by corporate executives rather than the managers of the business segments. A reconciliation of segment profit to operating income determined in accordance with GAAP is provided for on page F-9 of the Company’s 2014 Annual Report on Form 10-K.

For the full-year, equity in earnings of affiliates were $85.6 million, up 7.5 percent. Equity in earnings of affiliates includes the Company’s business partnerships in the United Kingdom and Canada, as well as HGTV and Food Network magazines in the U.S.

Net income attributable to Scripps Networks Interactive was $545 million, or $3.83 per diluted share, compared with $505 million, or $3.40 per diluted share in 2013.

 

17


Key Fiscal 2014 Compensation Decisions

Key decisions made in 2014 are recapped below, and discussed in greater detail in the remainder of the CD&A.

 

Base Salary

   All six NEOs received base salary increases effective January 1, 2014, ranging from 2.9 percent to 20.0 percent based on individual contributions to overall corporate results and salary level relative to market.

Annual Incentives

   Our financial goals, segment profit and revenue, were achieved at 98.1 percent and 98.8 percent of target respectively, resulting in a payout of 96.7 percent of target. These achievements represent 4.2 percent growth in segment profit and 5.6 percent growth in revenues over 2013.

Long-term Incentives

   For the 2013 Performance-Based Restricted Share Unit (“PBRSU”) grant, the Company’s Total Shareholder Return (“TSR”) was at the 34th percentile as compared to the S&P 500 for the two-year period ending December 31, 2014, resulting in a final payout of 56%.

Employment Arrangements

  

We extended Mr. Lowe’s employment agreement to December 31, 2016.

 

We entered into a new employment contract with Mr. Hale, effective January 1, 2015.

 

We entered into a separation agreement with Mr. Shuler in connection with his departure from the Company.

Clawback Policy

   In February 2014, we adopted a clawback policy under which the independent members of the board of directors may require executive officers to repay or forfeit certain performance-based compensation where the payment, granting or vesting of the compensation is based on restated financial results.

Business Results’ Impact on Compensation

We establish target compensation at the beginning of the performance period. An executive’s actual pay will be above or below the target level based on individual, organizational and stock performance. A substantial portion of each NEO’s compensation is in the form of equity so that as the stock price rises or falls, so does the NEO’s actual compensation.

 

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We employ a variety of quantitative criteria to assess the performance of our executives. Our objectives include achieving certain segment profit and revenue targets and exceeding the median total shareholder return of our peers. The charts below illustrate the relationship between performance and our Chief Executive Officer’s (“CEO”) compensation.

 

LOGO   LOGO

 

* Earned stock options, time-based Restricted Share Units (“RSUs”) and PBRSUs represent value of awards granted in 2011, 2012 and 2013 that vested in 2014 and PBRSU awards granted in 2013 and earned in 2014. All equity awards are valued at SNI share price on December 31, 2014.

Compensation Process Overview

Below we highlight certain executive compensation practices that we consider instrumental in driving Company performance while mitigating risk, as well as practices that we avoid because we do not believe they would serve the interests of our shareholders.

 

What We Do

Benchmark pay based on the size-adjusted median of companies with which we compete for business and for talent
Maintain a pay mix that is heavily performance-based
Fully disclose the financial performance drivers used in our incentives, in numeric terms
Use different performance metrics in the annual incentive and long-term incentive plan, to avoid heavy reliance on one definition of success
Require double trigger vesting for cash severance payments for termination following a change in control
Maintain stock ownership guidelines for executives
Retain an independent compensation consultant engaged by, and reporting directly to, the compensation committee
Maintain a clawback policy to permit repayment or forfeitures of compensation based on restated financial results
What We Don’t Do
Backdate stock options or reprice without shareholder approval
Pay dividends on unearned PBRSU awards
Permit hedging transactions or short sales by executives or directors
Permit pledging or holding Company stock in a margin account by executives or directors
Extend excise tax gross-up provisions to new executives

 

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Role of the Compensation Committee

The compensation committee is responsible for reviewing and approving the Company’s executive compensation policies, plan designs and the compensation of our senior officers, including our NEOs. The compensation committee considers various factors in making compensation determinations, including the officer’s responsibilities and performance, the effectiveness of our programs in supporting the Company’s short-term and long-term strategic objectives, and the Company’s overall financial performance. Additionally, the compensation committee coordinates the full board of directors’ annual review of the CEO’s performance and considers the board of directors’ assessment in its compensation decisions related to the CEO.

To this end, the compensation committee conducts an annual review of executive officer pay levels, reviews market data provided by the independent consultant, approves changes to program designs, including post-termination arrangements, based on an assessment of competitive market practice and emerging trends. Additionally, the compensation committee recommends succession plans to the board of directors, and evaluates the risks associated with the Company’s executive compensation programs.

Role of the Compensation Consultant

In 2014 the compensation committee engaged Meridian Compensation Partners, LLC (“Meridian”) to provide executive compensation consulting services. Meridian’s services to the compensation committee and the nominating and governance committee have included updates on best practices and market trends in executive and director compensation, recommendations regarding executive and director compensation and an independent review of compensation proposals by the Company’s senior management. Meridian attended compensation committee meetings at the committee’s request and was available to provide guidance to the compensation committee as questions and issues arose. Meridian provides no other services to the Company other than independent compensation advisory services. The compensation committee determined that Meridian is independent after consideration of the SEC independence factors.

Role of Executive Officers in Compensation Decisions

At the request of the compensation committee, the CEO presents individual pay recommendations for each of the NEOs, other than himself. In forming his recommendations, he is advised by information provided by human resource management (executive vice president, human resources and senior vice president, human resources) and the independent compensation consultant, assessments of individual contributions, achievement of performance objectives and other qualitative factors. The compensation committee considers these recommendations in approving the pay levels of each NEO. The CEO does not make recommendations concerning his own compensation.

The CEO and members of human resource management regularly attend compensation committee meetings. Human resources management typically presents recommendations for change to program design and individual pay levels for executive officers, taking into consideration individual performance of each incumbent, appropriate benchmarking information and issues that may arise from an accounting, legal or tax perspective.

Compensation Program Overview

The Company’s executive compensation program is designed to meet the following three objectives that align with and support our strategic business goals:

 

   

Attract and retain executives who lead the Company’s efforts to build long-term value for shareholders.

 

   

Reward achievement of annual operating performance goals and sustained increases in shareholder value.

 

   

Emphasize the variable performance-based components of the compensation program more heavily than the fixed components.

 

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The key elements of the Company’s executive compensation program are base salary, annual incentives, long-term incentives consisting of stock options, time-based restricted share units and performance-based restricted share units, and retirement benefits. The compensation program also includes certain perquisites, but these perquisites are not a significant element of compensation. Each element of compensation is designed to fulfill the objectives discussed above.

 

Program

 

Form

 

Fixed or

Variable

  

Objectives

Base Salary

  Cash   Fixed   

•      Serves as attraction and retention incentive

•      Rewards individual performance

Annual Incentive

  Cash   Variable   

•      Rewards annual operating results

•      Emphasizes variable performance-based compensation

Long-term Incentive, which includes:

      

•      Emphasizes variable performance-based compensation

•      Serves as attraction and retention incentive

•      Aligns interests with shareholders

Stock Options

  Equity   Variable   

•      Rewards for increasing stock price and enhancing long-term value

RSUs

  Equity   Fixed   

•      Rewards for maintaining and increasing stock price and enhancing long-term value

PBRSUs

  Equity   Variable   

•      Rewards for total shareholder returns

•      Rewards for maintaining and increasing stock price and enhancing long-term value

Retirement Benefits

  Cash   Fixed   

•      Serves as attraction and retention incentive

Pay Mix

The compensation committee has not established a specific formula for the allocation of “fixed” and “variable” compensation components and instead retains the discretion to modify the allocation from year to year. A majority of Mr. Lowe’s total direct compensation is variable. The compensation committee believes this approach directly aligns the CEO with shareholder interests.

As illustrated to the right, for the 2014 annual program elements, approximately 68 percent of the total direct compensation opportunity (i.e., the sum of base salary, annual incentives, variable equity at target and fixed equity) for the Company’s NEOs employed on the last day of 2014 (other than the CEO) was weighted — assuming payout at target levels — toward variable and equity components. The total direct compensation opportunity for the CEO was approximately 87 percent weighted toward variable and equity components.

 

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A significant portion of the compensation program for the NEOs is “variable” or “at risk.” This means that it is contingent upon achieving specific results that are essential to the Company’s long-term success and growth in shareholder value. As described above, the variable components of the 2014 compensation program include annual incentives, stock options, and PBRSUs.

 

LOGO

To assist in reviewing the levels of compensation in 2014, the compensation committee’s independent consultant, Meridian, collected and analyzed comprehensive market data, including base salary, target short-term incentives and long-term incentive opportunities for each of the NEOs from the following published and proprietary sources:

Primary Data Source: Proxy data from a peer group of 11 publicly-traded companies in the media industry, including:

 

AMC Networks Inc.

  Lions Gate Entertainment Corp./CN/      Twenty-First Century Fox Inc.

CBS Corp.

  Sirius XM Holdings Inc.      Viacom, Inc.

Discovery Communications, Inc.

  Starz      Walt Disney Co.

Liberty Global, PLC

  Time Warner Inc.     

The companies in this peer group represent those companies with which we compete for business and for talent. All pay opportunities were compared with the size-adjusted median of the market using regression analysis based on revenues to reflect pay of similarly-situated executives in comparable positions.

Secondary Data Sources: To obtain a broader understanding of market pay levels and practices, the compensation committee also reviewed survey data from the following sources:

 

   

The Cable and Telecommunications Human Resources Association (CTHRA) Cable Programmers, Broadcast Networks Compensation Survey; and

 

   

Towers Watson Executive Compensation Database: General Industry and Media Surveys.

Market data provides an important reference point by indicating what an executive could expect to earn at a similar peer company and what the Company might expect to pay if it should have to recruit from the outside. However, market data is one of the many factors that the compensation committee considers in assessing the reasonableness of pay opportunities provided to the Company’s executive officers. The compensation committee

 

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also considers other relevant factors in setting an executive officer’s pay opportunity, such as the incumbent’s experience, tenure in position, talent supply and demand, cost constraints of the Company and internal equity considerations.

Tally Sheets

In determining executive compensation, the compensation committee also reviews tally sheets for each NEO designed to provide:

 

   

A history of targeted pay for the last five years;

 

   

The value of outstanding equity awards at various stock price levels;

 

   

Present value of accrued benefits under each retirement plan and current level of perquisites provided;

 

   

Cumulative stock exercises and stock vesting over time; and

 

   

An update on stock ownership levels.

Analysis of Each Compensation Element

Following is a brief summary of each element of the 2014 compensation program for the NEOs.

Base Salary

After discussing the individual performance, experience, scope of responsibilities, and Mr. Lowe’s recommendations for the other NEOs, the compensation committee established the base salaries for each NEO. In general, the increases are intended to align base salary levels with the market and to reflect the individual performance and scope of responsibilities of each NEO. For Mr. Lowe, the increase was also tied to his agreement to extend his Employment Agreement for an additional two years. For Ms. Gibson, the increase was in recognition of the increased responsibility for the business affairs which her predecessor did not have, in order to ensure both internal and external pay equity.

 

NEO

   2014 Base  Salary
Percentage Increase
 

Mr. Lowe

     10.3

Mr. NeCastro

     2.9

Mr. Jablin

     5.9

Mr. Hale

     6.7

Ms. Gibson

     20.0

Mr. Shuler

     3.0

Please refer to the Salary column of the Summary Compensation Table for the 2014 base salaries of the NEOs.

Annual Incentive

The annual incentive payout for the NEOs is based on the extent to which certain pre-established performance goals are achieved during the year. The annual incentive program is consistent with the Company’s pay for performance philosophy and is also “at risk” because the Company must achieve certain performance goals established by the compensation committee for the NEOs to receive an annual incentive payout.

 

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Target Incentive Opportunities

The NEOs had the opportunity to earn targeted incentive cash payments that were expressed as a percentage of each executive’s annual base salary. The target incentive opportunities were established by the committee, according to each executive’s position and level of responsibility. The compensation committee took into consideration the overall performance of each NEO, market data as well as Mr. Lowe’s recommendations. The following table shows the 2014 target annual incentive opportunity (expressed as a percentage of base salary) for each NEO, which are the same as in 2013.

 

NEO

   2014 Target Incentive as
a Percent of Base Salary
 

Mr. Lowe

     130

Mr. NeCastro

     80

Mr. Jablin

     80

Mr. Hale

     50

Ms. Gibson

     50

Mr. Shuler

     50

Performance Goals and Actual Results for 2014

The target incentive opportunities are earned based on the extent to which certain performance goals are achieved. The compensation committee established two performance goals for the 2014 annual performance period: segment profit and revenue. These performance goals were used because:

 

Segment Profit

   Segment profit is the measure by which the Company evaluates the operating performance of each business segment and the measure of performance most frequently used by investors to determine the value of the enterprise. Segment profit is defined as net income determined in accordance with U.S. GAAP excluding interest, income taxes, depreciation and amortization, divested operating units, restructuring activities, investment results and certain other items. The segment profit goal was based on the consolidated performance of the Company.

Revenue

   Revenue growth is primarily achieved through growth in advertising sales and affiliate fee revenues from our national television networks. Continued growth in revenues allows us to invest and grow our existing brands and allows us the flexibility to take advantage of promising opportunities in the global media marketplace. The revenue goal was based on the consolidated performance of the Company.

The above combination of a growth measure (revenue) and a profitability measure (segment profit) creates a balance between growing the Company and managing expenses.

The following table provides the weights of each metric, the range of performance and payout, and the actual achievement level for each performance goal along with the payout percentage for 2014. All amounts are shown in millions.

 

         Weights    
(% of Total)
    Threshold     Target     Maximum     Actual  

Segment Profit

     65 %   $ 960.3      $ 1,185.6      $ 1,422.7      $ 1,163.0

Revenue

     35 %   $ 2,184.3      $ 2,696.7      $ 3,236.0      $ 2,665.5   

Payout Percent of Target

       6     100     200     96.7

 

 

* The actual segment profit results include adjustments for one-time items that differ from the reported segment profit in the Company’s Annual Report on Form 10-K.

 

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For more information on the 2014 annual incentive opportunity for the NEOs, please refer to the “Grants of Plan-Based Awards” Table. The “Estimated Possible Payouts Under Non-Equity Incentive Plan Awards” column of that table provides the estimated payouts for the NEOs at threshold, target and maximum performance levels for 2014. Please refer to the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for the actual amounts earned by each NEO.

Long-Term Incentives

The Company’s long-term incentive awards are consistent with the Company’s pay for performance philosophy and are intended to create a direct correlation between the level of compensation paid to the NEOs and the Company’s financial performance and stock price. This approach:

 

   

Assists in increasing stock ownership of the NEOs so that their interests are more closely aligned with the long-term interest of the Company’s shareholders;

 

   

Rewards performance that delivers creation of sustainable shareholder value; and

 

   

Provides a long-term retention incentive for key employees based on the vesting period.

Long-Term Incentive Opportunities

Under the Company’s Long-Term Incentive Plan, the NEOs were granted equity awards as recommended by the CEO and approved by the compensation committee. The compensation committee approved the 2014 target value of the equity award as a percent of base salary for each NEO based on each NEO’s position and level of responsibility.

Decisions regarding long-term incentive grants were made based on role and competitive market data to reward value creation and meet retention objectives. The compensation committee determined that, to maintain internal equity among the NEOs, the long-term incentive award should increase to reflect increased levels of an NEO’s responsibility and authority in the Company. Therefore, in addition to the other factors cited, the targets reflect the compensation committee’s strategy to ensure proper internal alignment among the NEOs. The table to the right shows the 2014 long-term incentive opportunities (expressed as a percentage of base salary) for each NEO, which are the same as in 2013.

 

NEO

   2014 Long-Term Incentive as  a
Percent of Base Salary
 

Mr. Lowe

     275 %

Mr. NeCastro

     200 %

Mr. Jablin

     200 %

Mr. Hale

     125 %

Ms. Gibson

     125 %

Mr. Shuler

     125 %

During 2014 (as in 2013) we used three long-term incentive vehicles targeting the mix in the table below.

 

Form of Equity

   Percent of Target Long-Term
Incentive Award
 

Stock Options

     40

Restricted Share Units (RSUs)

     30

Performance-Based Restricted Share Units (PBRSUs)

     30

This combination of vehicles balances the need for retention with the focus on share price appreciation, both on an absolute basis and a relative basis.

 

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Stock Options

In 2014, we granted stock options to each NEO. Stock options only have a value when the Company’s stock price is greater than the options’ exercise price. This incentivizes NEOs to increase share price which benefits our shareholders. Therefore, stock options help to align the interests of NEOs with those of shareholders. In addition, stock options serve as an important retention device as they vest over three years and, if not vested, are forfeited if the employee voluntarily terminates before retirement.

The 2014 stock option grants have an exercise price equal to the fair market value of the underlying shares on the date of grant and have an eight-year term. These grants provide for accelerated vesting on a pro-rata basis for termination without cause or for good reason.

Time-Based Restricted Share Units

In 2014, we granted RSUs to each NEO. Each RSU corresponds in value to a single share of Company common stock. Therefore, as share price increases, RSUs become more valuable. This creates an incentive for our NEOs to increase share price which benefits our shareholders. Time-based RSUs also provide NEOs the opportunity to increase their stock ownership levels. This serves to help align the interests of the NEOs with those of our shareholders. In addition, RSUs serve as an effective retention incentive as they vest over three years and are forfeited if the employee voluntarily terminates before retirement. These grants provide for accelerated vesting on pro-rata basis for termination without cause or for good reason.

Performance-Based Restricted Share Units (2014 Grants)

In 2014, we granted PBRSUs to each NEO. The PBRSU awards provide NEOs with an opportunity to increase their own stock ownership levels and at the same time serve as retention incentives. The number of shares ultimately earned is dependent upon the level of the Company’s TSR as compared at those companies included in the S&P 500. TSR is determined by the change in fair market value of common stock of the Company and the target companies in the S&P 500 Index for the performance period. To mitigate the volatility in share price, TSR is calculated from the average closing price per share for the 10 trading day period beginning on the first trading day of the performance period and the average closing price per share for the 10 trading day period ending with the last trading day of the performance period.

The two-year performance period begins on January 1, 2014 and ends on December 31, 2015. Shares are earned if the Company’s TSR is at least at the 30th percentile of the peer group according to the schedule to the right, with straight-line interpolation between points.

The earned units, if any, vest 50 percent on each of March 15, 2016 and 2017. These grants provide for accelerated vesting in full for termination without cause or for good reason.

 

Performance Payout

 

below 30th percentile

   =       0%    

30th percentile

   =       50%    

50th percentile

   =       100%    

70th percentile

   =       150%    

90th percentile or higher

   =       200%    

Performance-Based Restricted Share Units (2013 Grants)

For the 2013 PBRSU grant, the Company’s TSR was at the 34th percentile as compared to companies in the S&P 500 for the two-year period ending December 31, 2014, resulting in a payout of 56 percent of target.

 

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The table below shows the targeted 2013 grants, the value at grant, the number of shares earned as a result of TSR performance, and the value of those earned awards as of December 31, 2014. The earned units vest 50 percent on each of March 15, 2015 and 2016.

 

NEO

   Target
PBRSUs
     Value at
Grant

(at Target)
     Earned
Awards
     Value  of
Earned
Awards
 

Mr. Lowe

     17,030       $ 1,062,161         9,537       $ 717,850   

Mr. NeCastro

     8,177       $ 509,999         4,579       $ 344,661   

Mr. Jablin

     2,438       $ 152,058         1,365       $ 102,744   

Mr. Hale

     3,157       $ 196,902         1,768       $ 133,077   

Ms. Gibson

     3,006       $ 187,484         1,683       $ 126,679   

Mr. Shuler

     0       $ 0         0       $ 0   

Additional Information

For more information on the equity awards granted to NEOs in 2014, please refer to the Grants of Plan-Based Awards Table. For information about the total number of stock options, RSUs and PBRSUs outstanding as of the end of 2014 with respect to each NEO, please refer to the Outstanding Equity Awards at Fiscal Year-End Table.

Retirement Plans

The Company provides savings and retirement benefits through the Scripps Networks Interactive Pension Plan and the Scripps Networks Interactive 401K Savings Plan, in which the NEOs participate.

The pension plan is closed to new participants and the credited service levels used for benefit calculation purposes are frozen; however, consideration of salary growth to calculate benefit levels continues for a ten-year transition period that ends December 31, 2019. Plan participants will continue to accrue service for vesting and early retirement eligibility.

The 401K Savings Plan includes a Company match of 50 percent of the employee’s contribution up to 6 percent of compensation, and a Company contribution based on a combination of age and service. This Company contribution, which went into effect on January 1, 2010, was intended to mirror some of the financial benefits available under the defined benefit plan that was frozen.

To attract and retain key executive talent, the Company has determined that it is important to provide the management team, including the NEOs, with retirement benefits that are in addition to those generally provided to its employees. These restorative plans listed below allow the NEOs to receive the same benefit as other plan participants:

 

   

The Company supplements the pension plan for all executives whose salary and contributions exceed the IRS limitations through the Company’s Supplemental Executive Retirement Plan (“SERP”). Consistent with the transitional freeze of the defined benefit plan, the SERP was also transitionally frozen, effective January 1, 2010.

 

   

The NEOs may also defer specified portions of their compensation under the Executive Deferred Compensation Plan, and receive matching contributions, in each case in excess of what they are able to defer under the 401K Savings Plan due to IRS limitations.

 

   

Due to legal restrictions for plan design, the transitional freeze of the defined benefit pension plan and accompanying transitional freeze of the Company’s SERP had a disproportionately negative impact on employees of the Company, including the NEOs (with the exception of Ms. Gibson and Mr. Shuler who were hired after the pension plan was frozen), whose income levels were above the IRS compensation limits for contributions to qualified retirement plans. In order to address this disproportionately negative impact, the Company added a Supplemental Contribution Plan (“SCP”), effective January 1, 2010 to

 

27


 

allow for Company contributions above the IRS contribution limits. During 2011, the SCP was merged into the Executive Deferred Compensation Plan for ease of administration. The changes to the Company’s plans also had a disproportionately negative impact on employees as their relative ages and length of service increased. To address this negative impact, the Company contribution to the Executive Deferred Compensation Plan was increased for a group of employees based on age and length of service, including the four NEOs who participate in the pension plan.

The Company believes that the SERP and the Executive Deferred Compensation Plan are important retention and recruitment tools, as many of the companies with which the Company competes for executive talent provide similar benefits to their senior executives.

Perquisites

The Company provides executives with benefits comparable to those they would receive at other companies within our industry and are necessary for us to remain competitive in the marketplace. Our compensation committee considers these arrangements to be fair and reasonable in light of the relatively low cost to the Company.

In 2014, the NEOs received a financial planning benefit pursuant to the terms of their employment agreements, plus an additional payment to cover the taxes associated with the compensation value of this benefit. They also received membership in luncheon and business clubs, and with respect to Mr. Lowe, a country club membership per his employment agreement.

The NEOs are also eligible for an executive physical. Typically, the majority of the cost associated with this benefit is covered under the healthcare plans offered to the Company’s employees; however, if certain tests or procedures are not covered, the Company will pay for the difference.

For more information about the perquisites provided in 2014 to each NEO, please refer to the “All Other Compensation” column of the Summary Compensation Table.

Other Plans and Agreements

Employment Agreements

The Company maintains employment agreements with each of the NEOs. These employment agreements enhance retention incentives for the NEOs and also protect the Company’s interests by imposing confidentiality, non-competition, non-solicitation and other restrictive covenants on the executives.

The company amended Mr. Lowe’s employment agreement to extend the term through December 31, 2016. The amendment also guarantees him a base salary of at least $1,420,000 annually. Mr. Lowe received a RSU grant valued at $4 million that will vest over the remaining two years of his agreement. The RSU grant vests 50% at the end of 2016 and the remaining 50% at the end of 2016. Both the base salary adjustment and the RSU grant were retention strategies to insure Mr. Lowe’s continued leadership of the Company through the end of 2016. No other terms or conditions were changed in this amendment.

The company entered into a new employment agreement with Mr. Hale in 2014 effective January 1, 2015. The term of Mr. Hale’s agreement extends through December 31, 2015. Mr. Hale’s contract provided for an increase to base salary to $560,000, target annual incentive opportunity of 50 percent and a cash bonus of $250,000 within 30 days of the execution of the agreement and a second cash bonus payable on January 1, 2016. The cash bonus structure was put in place as a retention vehicle in order to insure Mr. Hale’s continued leadership at the Company and in order to allow sufficient opportunity for succession planning.

In 2014, the Company entered in to a Separation Agreement with Mr. Shuler, effective May 16, 2014. As part of this agreement, Mr. Shuler was separated from the Company effective May 16, 2014, pursuant to which, among other things, the Company paid him the severance benefits due under the Executive Severance Plan (the “ESP”). In consideration for such benefits, Mr. Shuler was required to sign a Release of Claims, and remains obligated to comply with the confidentiality, non-competition, non-solicitation, and non-disparagement provisions of the ESP.

 

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Each NEO would be entitled to severance benefits under his/her employment agreement in the event of an involuntary termination of employment without “cause” or a termination by the executive for “good reason,” death or disability. Each NEO, other than Messrs. NeCastro and Jablin, would also be entitled to certain severance benefit upon a termination of employment following the expiration of the term. The severance benefits for each of the NEOs are generally determined based upon a multiple of base pay and annual incentive.

In exchange for the severance benefits, the NEOs agree not to disclose Company confidential information and agree not to compete against the Company or solicit its employees or customers for a period of time after termination. These provisions protect the Company’s interests and help to ensure its long-term success.

Executive Severance Plan

Effective January 1, 2011, the Company adopted the ESP that provides severance benefits to certain executives upon involuntary termination, death and disability. The ESP also provides benefits for termination for “good reason” for those executives with employment agreements. The severance benefits are generally based upon a multiple of base salary and annual incentive, depending upon the level of responsibility of the executive. The ESP was adopted to codify existing practices, to ensure consistency in benefits payable upon termination and to provide for protection of the Company through the inclusion of confidentiality, non-compete and noninterference obligations in exchange for the receipt of benefits.

Change in Control Plan

All NEOs are provided change in control protection under the Company’s Executive Change in Control Plan. Under this plan, a NEO would be entitled to certain severance benefits if a change in control were to occur and the Company terminated the executive’s employment without “cause” or the executive terminated his/her employment with the Company for “good reason” within a two-year period following the change in control. In addition to the benefits available under the Executive Change in Control Plan under these circumstances, Mr. Lowe is entitled to certain additional benefits under his employment agreement. The severance levels in the Change in Control Plan were adopted by the committee in 2008.

This plan was frozen to new participants beginning in 2012. A new plan, 2012 Executive Change in Control Plan, was added for new hires beginning in 2012 that is the same as the 2008 plan with the exception that it does not include a gross-up provision.

The Company believes that the occurrence, or potential occurrence, of a change in control transaction will create uncertainty regarding the continued employment of NEOs. The change in control protections allow NEOs to focus on the Company’s business and objectively evaluate the benefits to shareholders of proposed transactions without being distracted by potential job loss. It also enhances retention following a change in control, as the severance benefits are payable only if the executive incurs a qualifying termination within a certain period following a change in control, rather than merely as a result of the change in control. In addition, the Change in Control Plan conditions the severance benefits upon certain confidentiality, non-compete and non-solicitation obligations which further protects the continuity of the Company’s business following a change in control.

All equity awards held by SNI employees would immediately vest upon a change in control, under the Long-Term Incentive Plan. Unlike the cash severance described above, the vesting is not contingent upon a qualifying termination within a certain period following a change in control. This single trigger is appropriate because the equity of the Company will change and the Company believes NEOs, along with all participants, should have the same opportunity to realize value as common shareholders.

Additional Information

Please refer to the “Potential Payments Upon Termination or Change in Control” section of this proxy statement for information regarding potential payments and benefits, if any, that each NEO is entitled to receive under his/her employment agreement in connection with his termination of employment as well as in connection with a change in control.

 

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Other Governance Items

Equity Grant Practices

The committee grants annual equity awards at its February meeting. This meeting date is set typically two years in advance. The committee does not grant equity compensation awards in anticipation of the release of material nonpublic information. Similarly, the Company does not time the release of material nonpublic information based on equity award grant dates.

Stock Ownership Guidelines

Effective November 2011, the Company adopted stock ownership guidelines for all NEOs in addition to executive officers to encourage ownership in the Company for the executives who have a direct impact on the decisions that contribute to the long-term success of the Company.

The guidelines give the executive five years to attain the prescribed ownership levels which are established as a target multiple of base pay. The target multiples for the NEOs are on the table to the right.

 

NEO

   Multiple of
Salary
 

Mr. Lowe

     5.0x   

Mr. NeCastro

     3.0x   

Mr. Jablin

     3.0x   

Mr. Hale

     2.0x   

Ms. Gibson

     2.0x   

Shares owned outright as well as RSUs are included in the totals. As of December 31, 2014, all of the NEOs have met the target stock ownership levels.

Mandatory Retirement Policy

Effective January 1, 2011, the Company adopted a mandatory retirement policy pursuant to which all bona fide executives as defined under the Age Discrimination in Employment Act, will be required to retire at the age of 65, unless otherwise determined by the compensation committee. Each of the NEOs qualifies as a bona fide executive and will be subject to the policy. An amendment to Mr. Lowe’s employment agreement in 2014, which was approved by the compensation committee, extended his employment until December 31, 2016, which is approximately eight months after he turns 65.

Anti-hedging and Prohibition on Pledging Policy

Our policy on insider trading prohibits directors, officers and certain key employees from engaging in short sales, purchases of puts and calls and other speculative or hedging transactions with respect to Company stock, regardless of whether they hold material, non-public information. In addition, directors, officers and certain key employees are prohibited from holding Company stock in a margin account or pledging Company stock to secure a loan unless a prior approval is obtained.

Income Deduction Limitations

Section 162(m) of the Internal Revenue Code generally sets a limit of $1 million on the amount of non-performance-based compensation that the Company may deduct for federal income tax purposes in any given year with respect to the compensation of each of the NEOs other than the Chief Financial Officer. Qualifying performance-based compensation will not be subject to the deduction limit if certain requirements are met. The compensation committee intends to preserve the tax deductibility of compensation paid to our executive officers to the extent consistent with our overall program objectives and philosophy, but recognizes that doing so may not always be feasible. In light of the need to maintain flexibility in administering our executive compensation program, the committee retains discretion to recommend to the board of directors executive compensation that may not be deductible.

 

30


Compensation Risk Assessment

Members of management from the Company’s human resources, finance and legal groups assessed whether the Company’s compensation policies and practices encourage excessive or inappropriate risk taking by our employees, including employees other than our NEOs and reported the results to the committee.

Specifically, the review included a detailed analysis of the following risk factors related to compensation: pay mix, performance goals, performance metrics/target, market comparisons and checks and balances. The review also analyzed whether there was any link between the Company’s key business risks and its compensation programs.

Based upon the review, and in consultation with outside counsel, the committee determined that its compensation policies and practices did not create risks that are “reasonably likely to have a material adverse effect” on the Company.

EXECUTIVE COMPENSATION TABLES

Summary Compensation Table

The following table presents information concerning compensation paid to the NEOs in 2012, 2013, and 2014. The narrative following the table describes current employment agreements and employment terms with each of our NEOs.

Summary Compensation Table — 2012 to 2014

 

Name and

Principal Position

  Year     Salary
($)
    Bonus
($)(4)
    Stock
Awards
($)(5)
    Option
Awards

($)(6)
    Non-Equity
Incentive Plan
Compensation
($)(7)
    Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(8)
    All Other
Compensation
($)(9)
    Total
($)
 

Kenneth W. Lowe

    2014        1,420,000          6,398,643        1,566,013        1,785,174        212,433        455,752        11,838,015   

Chairman, President &

Chief Executive Officer

    2013        1,287,500          2,301,604        1,462,782        1,748,466          436,486        7,236,838   
    2012        1,250,000                7,435,504        1,353,105        1,748,988        2,005,860        441,155        14,234,612   

Joseph G. NeCastro

    2014        875,000          1,074,889        701,791        676,935        275,961        194,949        3,799,525   

Chief Financial &

Administrative Officer

    2013        850,000          4,605,128        702,346        710,355          197,223        7,065,052   
    2012        823,798                1,628,186        641,624        709,323        358,442        180,692        4,342,065   

Burton F. Jablin

    2014        900,000          1,105,662        721,848        696,276        522,776        219,613        4,166,175   

President, Scripps Networks

    2013        830,027                5,829,452        209,365        590,053                208,655        7,667,552   

Mark S. Hale1

    2014        560,000        250,000        429,989        280,724        270,774        258,511        118,313        2,168,311   

Executive Vice President,

Global Operations & Chief

    2013        525,000          426,668        271,131        274,218          115,447        1,612,464   
    2012        485,000          363,802        238,643        261,003        312,417        107,388        1,768,253   

Technology Officer

                                                                       

Cynthia L. Gibson2

    2014        600,000          460,762        300,762        290,115        0        88,985        1,740,624   

Executive Vice President,

Chief Legal Officer

    2013        500,000          406,261        258,212        261,160          76,077        1,501,710   
    2012        417,869        5,000        557,522        201,739        224,876                63,886        1,470,892   

Dennis W. Shuler3

    2014        211,079          434,980        283,986        98,361        0        1,438,551        2,466,957   

Former Executive Vice President & Chief Human Resources Officer

                 

 

 

(1) Prior to November 13, 2014, Mr. Hale’s title was Executive Vice President, Operations & Chief Technology Officer.

 

(2) Prior to November 13, 2014, Ms. Gibson’s title was Executive Vice President, Chief Legal Officer & Corporate Secretary.

 

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(3) Mr. Shuler terminated his employment on May 16, 2014. If his employment had continued to December 31, 2014, he would have been listed as a NEO based on his total compensation, and is therefore included as a NEO for 2014.

 

(4) Mr. Hale received a cash bonus related to his new employment agreement.

 

(5) Reflects the aggregate grant date fair value of the: (i) performance-based restricted share units granted to our NEOs (based on the probable outcome of the performance conditions as of the date of grant) and (ii) time-based restricted share units granted to our NEOs. The grant date fair value of the performance-based restricted share units granted in 2014, assuming that the highest level of performance would be achieved, is as follows: Mr. Lowe: $2,454,284; Mr. NeCastro: $1,099,832; Mr. Jablin: $1,131,319; Mr. Hale: $439,967; Ms. Gibson $471,455; and Mr. Shuler: $445,073.

 

   The aggregate grant date fair value was determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation  Stock Compensation (“FASB ASC Topic 718”). See Note 21 of the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2014 (“Annual Report”) for an explanation of the assumptions made in valuing these awards. For additional information about the equity awards granted in 2014, please refer to the Grants of Plan-Based Awards section of this proxy statement. For information on all outstanding equity awards as of December 31, 2014, please refer to the Outstanding Equity Awards at Fiscal Year-End table.

 

(6) Reflects the aggregate grant date fair value of the stock options granted to our NEOs. The aggregate grant date fair value was determined in accordance with FASB ASC Topic 718. See Note 21 of the Consolidated Financial Statements contained in our Annual Report on Form 10-K for an explanation of the assumptions made in valuing these awards.

 

(7) Reflects the annual incentive earned by each NEO under the Executive Annual Incentive Plan for the applicable calendar year. For additional information about the 2014 annual incentive opportunities, please refer to the Grants of Plan-Based Awards and CD&A sections of this proxy statement.

 

(8) Reflects the increase in the present value of the accumulated benefits under the pension plan and the SERP for the applicable calendar year. Ms. Gibson and Mr. Shuler are not eligible to participate in the pension plan or SERP. For information on these plans, please refer to the Pension Benefits table. The NEOs did not accrue any preferential or above-market earnings on non-qualified deferred compensation.

 

(9) Reflects the perquisites and other benefits outlined in the table below. For more information about these benefits, please refer to the CD&A.

 

32


All Other Compensation Table

 

Name

        Financial
Planning
($)(i)
    Legal  Fees
($)(ii)
    Club  Dues
($)(iii)
    Tax Gross-
Up
($)(iv)
    Matching
Contribution
($)(v)
    Company
Contribution
($)(vi)
    Senior
Executive
Physical
($)(vii)
    Charitable
Matching
Gift
($)(viii)
    Severance
Payment
($)(ix)
    Total
($)
 

Mr. Lowe

    2014        15,000        1,682        15,236        12,054        96,155        315,625              455,752   
    2013        15,000          15,655        10,840        91,079        298,912          5,000          436,486   
      2012        15,000        1,888        16,080        7,521        89,970        294,453        1,243        15,000                441,155   

Mr. NeCastro

    2014        11,080            3,562        46,558        128,749          5,000          194,949   
    2013        10,000        9,234          12,751        46,811        113,427          5,000          197,223   
      2012        10,000                1,080        5,385        45,972        110,903        2,352        5,000                180,692   

 

Mr. Jablin

    2014        10,000            7,227        47,888        154,498              219,613   
      2013        10,000        5,747                5,928        42,582        136,898                7,500                208,655   

Mr. Hale

    2014        10,000          1,713        3,765        24,923        77,912              118,313   
    2013        10,000          1,618        3,765        23,977        76,087              115,447   
      2012        10,000                1,602        3,853        22,380        69,053                500                107,388   

 

Ms. Gibson

    2014        10,000            7,227        26,703        40,055          5,000          88,985   
    2013        10,000            3,765        22,835        34,477          5,000          76,077   
      2012        10,000                                19,212        27,174                7,500                63,886   

Mr. Shuler

    2014        3,726          1,235        2,743        10,751        5,442        4,575          1,410,079        1,438,551   

 

 

(i) Represents the amount paid to our NEOs for financial planning services.

 

(ii) For 2014 represents the amount for legal services related to an amendment to Mr. Lowe’s employment agreement.

 

(iii) Represents the amount paid for dining, business and country clubs.

 

(iv) For 2014 represents reimbursement of taxes imposed on the financial planning benefit, with respect to Mr. Lowe’s legal fees, and Mr. Shuler’s executive physical.

 

(v) Represents the amount of all matching contributions earned under the Company’s 401(k) Plan and Deferred Compensation Plan.

 

(vi) Represents the amount of all age plus service contributions earned under the Company’s 401(k) Plan and Deferred Compensation Plan.

 

(vii) Represents the cost of the senior executive physical, if any, that is in excess of the cost of a physical covered under the Company’s general health plan.

 

(viii) Represents the amount of matching charitable contributions under the Company’s matching gift program.

 

(ix) Represents the amount of severance paid to Mr. Shuler upon his termination. The payment includes cash severance of $1,274,625, continued payment of health care premiums and gross up of $40,090, a cash payment in lieu of outplacement services of $25,000, relocation expenses and tax gross up of $27,997 and financial planning and tax gross up of $13,772. The payment also includes premiums for life insurance of $28,595 that was paid on Mr. Shuler’s behalf at the time of his termination.

Salary and Bonus in Proportion to Total Compensation

The NEOs generally receive 47 percent to 55 percent of their target total direct compensation in the form of base salary and cash incentive awards under the Executive Annual Incentive Plan. This excludes any non-recurring special equity grants. Please see the CD&A for a description of the objectives of the Company’s compensation program and overall compensation philosophy.

 

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Employment Agreements

Each of the NEOs has entered into an employment agreement with the Company. These employment agreements enhance retention of NEOs and also protect the Company’s interests by imposing confidentiality, non-competition, non-solicitation and other restrictive covenants on the executives. The employment agreements establish the minimum base salary and target annual incentive opportunity for the term of the agreement. Following is a brief summary of the employment agreements.

Employment Agreement for Mr. Lowe

Mr. Lowe serves as Chairman, President and Chief Executive Officer pursuant to an employment agreement that was most recently amended in 2014 and extends the term through December 31, 2016. During the term, Mr. Lowe is entitled to: (i) a base salary that is not less than $1,420,000 and an annual target bonus opportunity equal to no less than 130 percent of his salary; (ii) participate in all equity incentive, employee pension, and welfare benefit plans on a basis no less favorable than the most favorable basis provided other senior executives of the Company; (iii) payment of a lump sum equal to 3.0 times his base salary and 2.0 times his target annual incentive upon termination without “cause” or for “good reason”; and (iv) reimbursement for tax and financial planning up to maximum of $15,000 per year, the annual membership fees and other dues associated with one country club and one luncheon club, and the costs of an annual physical examination.

Employment Agreement for Mr. NeCastro

Mr. NeCastro serves as Chief Financial and Administrative Officer, pursuant to an employment agreement entered into in 2010 that was amended in 2012 extending the term through December 31, 2016. A 2013 amendment to Mr. NeCastro’s agreement provides for an additional equity grant in consideration for his waiver of certain severance benefits available to him. During the term, Mr. NeCastro is entitled to: (i) a base salary that is not less than $850,000 and an annual target bonus opportunity equal to no less than 80 percent of salary; (ii) participate in all equity incentive, employee pension, welfare benefit plans applicable to similarly situated executives of the Company; (iii) an additional equity grant upon each renewal of his term; (iv) payment of a lump sum equal to 2.5 times his base salary and 2.5 times his target annual incentive upon termination without “cause” or for “good reason” if prior to the end of the term, and (v) reimbursement for tax and financial planning up to a maximum of $15,000 per year, the annual membership fees and other dues associated with one luncheon club, and the costs of an annual physical examination.

Employment Agreement Mr. Jablin

Mr. Jablin serves as the President, Scripps Networks pursuant to an employment agreement entered into in 2013 that extends through December 31, 2017. During the term, Mr. Jablin is entitled to: (i) an annual base salary that is not less than $850,000 and a target annual incentive opportunity of 80 percent of his salary; (ii) participate in all equity incentive, employee pension, welfare benefit plans and fringe benefit programs applicable to similarly situated executives of the Company; (iii) payment of a lump sum equal to 2.5 times his base salary and target annual incentive upon termination without “cause” or for “good reason”; and (iv) reimbursement for tax and financial planning up to a maximum of $15,000 per year and the costs of an annual physical examination.

Employment Agreement Mr. Hale

Mr. Hale served as the Executive Vice President, Operations and Chief Technology Officer pursuant to an employment agreement entered into in 2011 that extends through December 31, 2014. In 2014, the Company entered into a new employment agreement that becomes effective as of January 1, 2015 and extends through December 31, 2015. His new title, effective November 13, 2014, is Executive Vice President, Global Operations and Chief Technology Officer. Under the 2011 employment agreement, Mr. Hale was entitled to: (i) an annual base salary that is not less than $468,000 and target annual incentive opportunity of 50 percent of his base salary; (ii) participate in all equity incentive plans, employee retirement, pension and welfare benefit plans available to similarly situated executives of the Company; (iii) payment of a lump sum equal to 1.5 times Mr. Hale’s base salary and target annual incentive upon termination without “cause” or for “good reason”; and

 

34


(iv) reimbursement for tax and financial planning up to a maximum of $10,000 per year and the cost of an annual physical examination. Under Mr. Hale’s new employment agreement, he received a bonus payment of $250,000 in 2014 for his execution of the new employment agreement. A second bonus payment of $250,000 will be paid on January 1, 2016. His new employment agreement also provides that he will be entitled to an annual base salary that is not less than $560,000.

Employment Agreement Ms. Gibson

Ms. Gibson serves as the Executive Vice President, Chief Legal Officer pursuant to an employment agreement entered into in 2012 that extends through December 31, 2016. During the term, Ms. Gibson is entitled to: (i) an annual base salary that is not less than $500,000 and a target annual incentive opportunity of 50 percent of her base salary; (ii) participate in all equity incentive plans, employee retirement, welfare benefit plans available to similarly situated executives of the Company; (iii) payment of a lump sum equal to 1.5 times base salary and annual incentive upon termination without “cause” or for “good reason”; and (iv) reimbursement for tax and financial planning up to a maximum of $10,000 per year, the annual membership fees and other dues associated with one luncheon club, and the costs of an annual physical examination.

Employment Agreement Mr. Shuler

Mr. Shuler separated from his position as the Executive Vice President and Chief Human Resources Officer effective May 16, 2014. In connection with his departure, the Company entered into a Separation Agreement with Mr. Shuler pursuant to which, among other things, the Company paid Mr. Shuler severance benefits under the Executive Severance Plan, which include (i) a lump sum payment equal to 1.5 times his base salary and target annual incentive; (ii) a pro-rated 2014 annual incentive; (iii) a lump sum payment equal to 18 months of COBRA continuation; (iv) a financial planning stipend of $10,000; and (v) a lump sum payment of $25,000 in lieu of outplacement services. The Separation Agreement also provides for confidentiality, noncompete, nonsolicitation and nondisparagement covenants in the Executive Severance Plan and provides for a release of claims in favor of the Company. For more information on Mr. Shuler’s severance payout, please refer to the “Potential Payments Upon Termination or Change in Control” section.

Please refer to the “Potential Payments Upon Termination or Change in Control” section for information regarding potential payments and benefits, if any, that each executive is entitled to receive under his/her employment agreement in connection with his/her termination of employment or change in control, along with a brief description of the applicable non-competition, non-solicitation, confidentiality and other restrictions applicable to each executive.

 

35


Grants of Plan-Based Awards

The following table sets forth information for each NEO regarding: (i) estimated payouts of the annual cash incentive opportunities granted by the Company in 2014; (ii) time-based and performance-based restricted share units granted in 2014; and (iii) stock options granted in 2014.

Grants of Plan-Based Awards 2014

 

Name

  Grant Date     Estimated Possible Payouts Under
Non-Equity Incentive Plan
Awards(1)
    Estimated Future Payouts
Under Equity Incentive Plan
Awards(2)
    All
Other
Stock
Awards:
Number
of Units
(#)(3)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options (#)
(4)
    Exercise
or Base
Price of
Option
Awards
($/SH)
(5)
    Grant
Date Fair
Value of
Stock and
Option
Awards
($)(6)
 
    Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
         

Mr. Lowe

    2014        110,760        1,846,000        3,692,000                 
    3/1/2014              7,210        14,420        28,840              1,227,142   
    3/1/2014                      80,185        81.24        1,566,013   
    3/1/2014                    14,420            1,171,481   
      3/3/2014                                                        49,444                        4,000,020   

Mr. NeCastro

    2014        42,000        700,000        1,400,000                 
    3/1/2014              3,231        6,462        12,924              549,916   
    3/1/2014                      35,934        81.24        701,791   
      3/1/2014                                                        6,462                        524,973   

Mr. Jablin

    2014        43,200        720,000        1,440,000                 
    3/1/2014              3,324        6,647        13,294              565,660   
    3/1/2014                      36,961        81.24        721,848   
      3/1/2014                                                        6,647                        540,002   

Mr. Hale

    2014        16,800        280,000        560,000                 
    3/1/2014              1,293        2,585        5,170              219,984   
    3/1/2014                      14,374        81.24        280,724   
      3/1/2014                                                        2,585                        210,005   

Ms. Gibson

    2014        18,000        300,000        600,000                 
    3/1/2014              1,385        2,770        5,540              235,727   
    3/1/2014                      15,400        81.24        300,762   
      3/1/2014                                                        2,770                        225,035   

Mr. Shuler

    2014        16,995        283,250        566,500                 
    3/1/2014              1,308        2,615        5,230              222,537   
    3/1/2014                      14,541        81.24        283,986   
    3/1/2014                    2,615            212,443   

 

 

(1) Reflects the incentive opportunities granted in 2014 under the Executive Annual Incentive Plan. The award had a performance period that commenced January 1, 2014 and ended December 31, 2014. The “Threshold,” “Target” and “Maximum” columns reflect the range of potential payouts under the plan when the performance goals were established. The threshold equals 6 percent of the target award and the maximum equals 200 percent of the target award. The actual 2014 annual incentive payouts are set forth in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table of this proxy statement. For information on the applicable performance goals for each award, please refer to the CD&A.

 

(2)

Reflects the performance-based restricted share units granted under the 2008 Long-Term Incentive Plan. The award has a performance period that commenced January 1, 2014 and will end on December 31, 2015 and a payout that ranges from 50 percent to 200 percent. The actual restricted share units credited to the NEOs after the end of the performance period vest 50 percent on each March 15, 2016 and March 15, 2017. Vesting accelerates in full upon the executive’s death, disability, retirement, termination without cause or for good reason or in the event of a change in control. The NEOs have no right to vote the share units until they are

 

36


  vested; but they receive dividend equivalents commencing after the end of the performance period as dividends are paid on the underlying shares during the time-based vesting period. For information on the applicable performance goals and performance period for the award, please refer to the CD&A.

 

(3) Reflects the time-based restricted share units granted under the 2008 Long-Term Incentive Plan on March 1, 2014. The units will vest in three annual installments beginning on the first anniversary of the date of grant for so long as the executive remains employed by the Company. Vesting accelerates in full upon the executive’s death, disability or retirement, or in the event of a change in control, and vesting accelerates on a prorated basis upon a termination without cause or for good reason. On March 3, 2014, Mr. Lowe was awarded 49,444 restricted share units which will vest 50% on December 31, 2015 and 50% on December 31, 2016. Vesting accelerates in full upon death, disability, or in the event of a change in control, termination without cause or for good reason. The NEOs have no right to vote the share units until they are vested; but they receive dividend equivalents as dividends are paid on the underlying shares during the vesting period.

 

(4) Reflects the number of shares that may be issued to the NEOs on exercise of stock options granted by the Company in 2014. These stock options vest in three annual installments beginning on the first anniversary of the date of grant. Vesting accelerates in full upon the executive’s death, disability, retirement, or in the event of a change in control, and vesting accelerates on a pro-rated basis upon a termination without cause or for good reason.

 

(5) Reflects the exercise price of each stock option reported in the table, which equaled the closing market price of the underlying option shares on the date of grant.

 

(6) Reflects the grant date fair value, as determined in accordance with FASB ASC Topic 718, of each equity award listed in the table. See Note 21 of the Consolidated Financial Statements contained in our Annual Report on Form 10-K for an explanation of the assumptions used in the valuation of these awards.

 

37


Outstanding Equity Awards at Fiscal Year End

The following table sets forth information for each NEO with respect to (i) each option to purchase Company shares that had not been exercised and remained outstanding as of December 31, 2014, (ii) each award of time-based restricted share units that had not vested and remained outstanding as of December 31, 2014, and (iii) each award of Company performance-based restricted share units that had not vested and remained outstanding as of December 31, 2014.

 

           Option Awards              Stock Awards  

Name

  Grant
Date
    Number of
Securities
Underlying
Unexercised
Options
(#)(1)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options
(#)(2)
Unexercisable
    Option
Exercise
Price
($)(3)
    Option
Expiration
Date
             Number of
Shares or
Units of
Stock
That Have
Not
Vested

(#)(4)
    Market
Value of
Shares or
Units of
Stock That
Have Not
Vested

($)(5)
    Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested

(#)(6)
    Equity
Incentive Plan
Awards:

Market or
Payout Value
of Unearned
Shares, Units
or Other

Rights That
Have Not
Vested

($)(5)
 

Mr. Lowe

    2/21/2008        83,875          39.80        2/20/2016                 
    2/18/2010        103,147          39.44        2/17/2018                 
    2/17/2011        79,090          53.17        2/16/2019                 
    2/16/2012        63,482        31,740        43.59        2/15/2020                 
    2/14/2013        25,854        51,706        62.37        2/13/2021                 
    3/1/2014          80,185        81.24        2/28/2022                 
   

 

 

   

 

 

             

 

 

   

 

 

   

 

 

   

 

 

 

Total

      355,448        163,631                  162,158        12,205,633        7,210        542,697   

Mr. NeCastro

    2/17/2011        37,148                53.17        2/16/2019                                         
    2/16/2012        30,102        15,051        43.59        2/15/2020                 
    2/14/2013        12,414        24,826        62.37        2/13/2021                 
    3/1/2014          35,934        81.24        2/28/2022                 
   

 

 

   

 

 

             

 

 

   

 

 

   

 

 

   

 

 

 

Total

      79,664        75,811                  119,957        9,029,163        4,918        370,178   

Mr. Jablin

    2/16/2012                4,536        43.59        2/15/2020                                         
    2/14/2013        3,701        7,400        62.37        2/13/2021                 
    3/1/2014          36,961        81.24        2/28/2022                 
   

 

 

   

 

 

             

 

 

   

 

 

   

 

 

   

 

 

 

Total

      3,701        48,897                  67,435        5,075,832        33,243        2,502,163   

Mr. Hale

    2/21/2008        13,387                39.80        2/20/2016                                         
    2/18/2010        18,346          39.44        2/17/2018                 
    2/17/2011        14,021          53.17        2/16/2019                 
    2/16/2012        11,196        5,598        43.59        2/15/2020                 
    2/14/2013        4,792        9,584        62.37        2/13/2021                 
    3/1/2014          14,374        81.24        2/28/2022                 
   

 

 

   

 

 

             

 

 

   

 

 

   

 

 

   

 

 

 

Total

      61,742        29,556                  11,290        849,798        1,293        97,324   

Ms. Gibson

    2/17/2011        5,534                53.17        2/16/2019                                         
    2/16/2012          4,732        43.59        2/15/2020                 
    2/14/2013        4,564        9,127        62.37        2/13/2021                 
    3/1/2014          15,400        81.24        2/28/2022                 
   

 

 

   

 

 

             

 

 

   

 

 

   

 

 

   

 

 

 

Total

      10,098        29,259                  11,949        899,401        1,385        104,249   

Mr. Shuler

    3/1/2014        1,875                81.24        5/15/2016                                         
   

 

 

   

 

 

             

 

 

   

 

 

   

 

 

   

 

 

 

Total

      1,875        0                  0        0        1,308        98,453   

 

(1) Reflects the number of shares underlying the outstanding stock options that have vested as of December 31, 2014.

 

38


(2) Reflects the number of shares underlying the outstanding stock options that have not vested as of December 31, 2014. The regular vesting dates for each unexercisable stock option award are as follows:

 

Name

   Grant Date      Total Number of
Unvested Stock
Options
Outstanding
    

Vesting Date

Mr. Lowe

     2/16/2012         31,740       31,740 on 2/16/2015
     2/14/2013         51,706       25,853 on 2/14/2015 and 2/14/2016
     3/1/2014         80,185       26,729 on 3/1/2015; 26,728 on 3/1/2016 and 3/1/2017
     

 

 

    
     Total         163,631      

Mr. NeCastro

     2/16/2012         15,051       15,051 on 2/16/2015
     2/14/2013         24,826       12,413 on 2/14/2015 and 2/14/2016
     3/1/2014         35,934       11,978 on 3/1/2015, 3/1/2016 and 3/1/2017
     

 

 

    
     Total         75,811      

Mr. Jablin

     2/16/2012         4,536       4,536 on 2/16/2015
     2/14/2013         7,400       3,700 on 2/14/2015 and 2/14/2016
     3/1/2014         36,961       12,321 on 3/1/2015; 12,320 on 3/1/2016 and 3/1/2017
     

 

 

    
     Total         48,897      

Mr. Hale

     2/16/2012         5,598       5,598 on 2/16/2015
     2/14/2013         9,584       4,792 on 2/14/2015 and 2/14/2016
     3/1/2014         14,374       4,792 on 3/1/2015; 4,791 on 3/1/2016 and 3/1/2017
     

 

 

    
     Total         29,556      

Ms. Gibson

     2/16/2012         4,732       4,732 on 2/16/2015
     2/14/2013         9,127       4,564 on 2/14/15; 4,563 on 2/14/2016
     3/1/2014         15,400       5,134 on 3/1/2015; 5,133 on 3/1/2016 and 3/1/2017
     

 

 

    
     Total         29,259      

Mr. Shuler

                      
     

 

 

    
     Total         0      

 

(3) The exercise price equaled the fair market value per share of the underlying option shares on the date of grant.

 

39


(4) Reflects the number of restricted share units outstanding as of December 31, 2014. The vesting dates for each outstanding restricted share unit award are as follows:

 

Name

   Grant Date      Total Number of
Restricted Share
Units
Outstanding
    

Vesting Date

Mr. Lowe

     2/16/2012         7,886       7,886 on 2/16/2015
     2/16/2012         19,518       19,518 on 3/15/2015
     8/1/2012         50,000       50,000 on 8/1/2015
     2/14/2013         11,353       5,677 on 2/14/2015 and 5,676 on 2/14/2016
     2/14/2013         9,537       4,769 on 3/15/2015 and 4,768 on 3/15/2016
     3/1/2014         14,420       4,807 on 3/1/2015 and 3/1/2016; 4,806 on 3/1/2017
     3/3/2014         49,444       24,722 on 12/31/2015 and 12/31/2016
     

 

 

    
     Total         162,158      

Mr. NeCastro

     3/29/2010         38,033       38,033 on 3/29/2015
     2/16/2012         3,739       3,739 on 2/16/2015
     2/16/2012         9,255       9,255 on 3/15/2015
     11/14/2012         6,746       6,746 on 12/31/2016
     2/14/2013         5,451       2,726 on 2/14/2015 and 2,725 on 2/14/2016
     2/14/2013         4,579       2,290 on 3/15/2015 and 2,289 on 3/15/2016
     11/13/2013         45,692       45,692 on 12/31/2016
     3/1/2014         6,462       2,154 on 3/1/2015, 3/1/2016 and 3/1/2017
     

 

 

    
     Total         119,957      

Mr. Jablin

     2/16/2012         1,127       1,127 on 2/16/2015
     2/16/2012         2,790       2,790 on 3/15/2015
     11/14/2012         8,190       8,190 on 3/15/2015
     2/14/2013         1,625       813 on 2/14/2015 and 812 on 2/14/2016
     2/14/2013         1,365       683 on 3/15/2015 and 682 on 3/15/2016
     11/13/2013         19,582       19,582 on 12/31/2017
     11/13/2013         26,109       13,055 on 12/31/2015 and 13,054 on 12/31/2016
     3/1/2014         6,647       2,216 on 3/1/2015 and 3/1/2016; 2,215 on 3/1/2017
     

 

 

    
     Total         67,435      

Mr. Hale

     2/16/2012         1,391       1,391 on 2/16/2015
     2/16/2012         3,442       3,442 on 3/15/2015
     2/14/2013         2,104       1,052 on 2/14/2015 and 2/14/2016
     2/14/2013         1,768       884 on 3/15/2015 and 3/15/2016
     3/1/2014         2,585       862 on 3/1/2015 and 3/1/2016; 861 on 3/1/2017
     

 

 

    
     Total         11,290      

Ms. Gibson

     2/16/2012         1,176       1,176 on 2/16/2015
     2/16/2012         2,911       2,911 on 3/15/2015
     11/14/2012         1,405       1,405 on 11/14/2015
     2/14/2013         2,004       1,002 on 2/14/2015 and 2/14/2016
     2/14/2013         1,683       842 on 3/15/2015 and 841 on 3/15/2016
     3/1/2014         2,770       924 on 3/1/2015; 923 on 3/1/2016 and 3/1/2017
     

 

 

    
     Total         11,949      

Mr. Shuler

                      
     

 

 

    
     Total         0      

 

40


(5) The value was calculated using the closing market price of our Class A Common Shares on December 31, 2014 ($75.27 per share).

 

(6) Reflects the number of performance-based restricted share units which are unearned or unvested and reported assuming threshold performance as of December 31, 2014. The award has a performance period that commenced January 1, 2014 and will end on December 31, 2015 and a payout that ranges from 50 percent to 200 percent. The actual restricted share units credited, if any, to the NEOs after the end of the performance period vest 50 percent on each March 15, 2016 and March 15, 2017.

Option Exercises and Stock Vested

The following table sets forth information for each NEO with respect to the exercise of stock options during 2014, and the vesting of restricted share unit awards during 2014.

Option Exercises and Stock Vested 2014

 

     Option Awards      Stock Awards  

Name

   Number of
Shares
Acquired on
Exercise (#)
     Value Realized
on Exercise
($)(1)
     Number of
Shares
Acquired on
Vesting

(#)
     Value
Realized on
Vesting
($)(2)
 

Mr. Lowe

     402,341         19,773,420         64,287         5,212,491   

Mr. NeCastro

     47,945         1,840,054         39,375         3,068,018   

Mr. Jablin

     9,074         323,132         26,242         2,025,340   

Mr. Hale

     0         0         6,988         558,174   

Ms. Gibson

     15,465         524,230         7,399         584,487   

Mr. Shuler

     0         0         3,908         292,015   

 

 

(1) Reflects the product of the number of options exercised and the difference between the exercise price and the option price on the day of exercise.

 

(2) Reflects the product of the number of restricted share units that vested and the closing price per share on the vesting date.

Pension Benefits

The following table sets forth information regarding the pension benefits for each NEO.

Pension Benefits Table — 2014

 

Name

  

Plan Name

     Number of
Years
Credited
Service
(#)(1)
     Present Value
of
Accumulated
Benefit
($)(1)
     Payments
During Last
Fiscal Year
($)
 

Mr. Lowe

     Scripps Pension Plan         29.67         1,154,671         0   
     SERP         29.67         13,211,421         0   

Mr. NeCastro

     Scripps Pension Plan         7.67         272,702         0   
     SERP         7.67         1,414,980         0   

Mr. Jablin

     Scripps Pension Plan         15.75         501,358         0   
     SERP         15.75         2,324,198         0   

Mr. Hale

     Scripps Pension Plan         15.75         520,252         0   
     SERP         15.75         1,125,027         0   

Ms. Gibson2

     Scripps Pension Plan         0.00         0         0   
     SERP         0.00         0         0   

Mr. Shuler2

     Scripps Pension Plan         0.00         0         0   
     SERP         0.00         0         0   

 

41


 

 

(1) The number of years of credited service was frozen as of December 31, 2009. The present value of accumulated benefits was calculated as of December 31, 2014 using the same assumptions included in the Annual Report, except that (i) no pre-retirement decrements were assumed and (ii) a retirement age of 62 (the earliest age for unreduced retirement) was assumed. The assumptions included in the Annual Report and these present values of accumulated benefits include the discount rates as of December 31, 2014 are 3.46 percent for the Pension Plan and 3.14 percent for the SERP. Similarly, the discount rates as of December 31, 2013 were 4.27 percent for the Pension Plan and 3.62 percent for SERP.

 

(2) Ms. Gibson and Mr. Shuler were hired after the pension plan was frozen.

Description of Retirement Plans

Pension Plan

The Company Pension Plan (the “Pension Plan”) as described below was in effect through December 31, 2014. The Pension Plan was a tax-qualified pension plan covering substantially all eligible employees. The Pension Plan was transitionally frozen effective December 31, 2009. The material terms and conditions of the Pension Plan as they pertained to the NEOs in 2014 included the following:

Benefit Formula:    Subject to applicable Internal Revenue Code limits on benefits, the monthly normal retirement benefit is equal to 1 percent of the participant’s average monthly compensation up to an integration level plus 1.25 percent of the participant’s average monthly compensation in excess of the integration level, multiplied by the participant’s years of service as of December 31, 2009. The integration level is the average of the Social Security taxable wage bases for the thirty-five years prior to the participant’s termination (or disability, if applicable). Average monthly compensation is the monthly average of the compensation earned during the five consecutive years in the eleven years before termination for which the participant’s compensation was the highest.

Compensation:    Subject to the applicable Internal Revenue Code limit ($260,000 for 2014), compensation includes salary, annual incentives, and amounts deferred pursuant to the SNI 401K Savings Plan and the Company Flex Plan.

Normal Retirement:    A participant is eligible for a normal retirement benefit based on the benefit formula described above if his employment terminates on or after age 65.

Early Retirement:    A participant is eligible for an early retirement benefit if his/her employment terminates on or after age 55 and he/she has completed 10 years of service. The early retirement benefit is equal to the normal retirement benefit described above, reduced by 0.4167 percent for each month the benefit commences before age 62. Messrs. Lowe, NeCastro and Hale are the only NEO’s currently eligible for an early retirement benefit. The Company does not grant extra years of service to any NEO under the Pension Plan.

Deferred Vested Benefits:    Each participant who ceases to be employed by the Company for any reason other than death, after his completion of at least five years of credited service, and who does not qualify to receive any other benefit under the plan, shall be eligible to receive a deferred vested benefit.

Form of Benefit Payment:    The benefit formula calculates the amount of benefit payable in the form of a monthly life annuity (which is the normal form of benefit for an unmarried participant). The normal form of payment for a married participant is a joint and 100 percent survivor annuity, which provides a reduced monthly amount for the participant’s life with the surviving spouse receiving the same monthly amount for life. Other optional forms of payment include a lump sum, joint and 50 percent or 100 percent survivor annuity (which provides a reduced monthly amount for the participant’s life with the survivor receiving 50 percent or 100 percent of the monthly amount for life), or a monthly life annuity with a 10-year certain or 5-year certain guarantee (which provides a reduced monthly amount for the participant’s life and, if the participant dies within 10 or 5 years of benefit commencement, equal payments to a designated beneficiary for the remainder of the 10-year or 5-year certain period, as applicable). All forms of benefit payment are the actuarially equivalent of the monthly life annuity form.

 

42


SERP

The SERP was intended to attract and retain executive talent by supplementing benefits payable under the Pension Plan. The SERP was amended effective January 1, 2010 in connection with the transitional freeze of the Pension Plan. The material terms and conditions of the SERP as they pertained to the NEOs in 2014 included the following:

Eligibility:    An executive generally is eligible to participate in the SERP if he/she qualifies for a Pension Plan benefit that was limited by application of the Internal Revenue Code limits on compensation and benefits.

Benefit Formula:    The SERP benefit is equal to the difference between the Pension Plan benefit calculated using the SERP definition of compensation and the actual Pension Plan benefit plus a 1.45 percent gross up for the employee Medicare tax. It may also include a 0.9 percent gross up for the additional Medicare Tax for High-Income Taxpayers if applicable. Compensation includes all compensation included under the Pension Plan (without application of the IRS limit described under the Pension Plan).

Benefit Entitlement:    A participant becomes entitled to a SERP benefit upon termination. The benefit is paid in a single lump sum in the 7th month following termination.

Nonqualified Deferred Compensation

The following table sets forth information regarding the nonqualified deferred compensation for each NEO as of December 31, 2014:

 

Name

   Executive
Contributions
in Last FY
($)(1)
     Registrant
Contributions
in Last FY
($)(2)
     Aggregate
Earnings in
Last FY
($)
     Aggregate
Withdrawals/
Distributions
($)
     Aggregate
Balance at
Last FYE
($)(3)(4)
 

Mr. Lowe

     176,710         384,411         -295,625         0         7,355,431   

Mr. NeCastro

     77,516         149,231         -116,531         0         2,129,072   

Mr. Jablin

     98,377         179,880         146,153         0         3,614,337   

Mr. Hale

     166,390         74,373         46,520         0         1,638,400   

Ms. Gibson

     49,412         47,726         9,413         0         329,609   

Mr. Shuler

     88,243         8,392         33         1,504         95,165   

 

 

(1) Represents the base salary and annual incentive deferred by each NEO during 2014. The deferrals are included in the amounts reflected in the Salary and Non-Equity Incentive Plan Compensation columns of the Summary Compensation Table.

 

(2) Represents the matching and age plus service contributions credited to each NEO during 2014. These contributions are included in the All Other Compensation column of the Summary Compensation Table.

 

(3) The aggregate balance as of December 31, 2014 for each NEO includes the following amounts that were previously earned and reported as compensation on the 2006 through 2013 Summary Compensation Tables:

 

Name

   Salary
Deferred
($)
     Annual
Incentive
Deferred
($)
     Matching
Contributions
($)
     Age + Service
($)
     Restricted
Share
Units

($)
 

Mr. Lowe

     447,208         407,644         427,427         1,222,221         394,200   

Mr. NeCastro

     368,249         262,593         192,138         393,262         0   

Mr. Jablin

     52,311         35,403         34,932         116,727         0   

Mr. Hale

     108,779         242,497         86,484         187,616         0   

Ms. Gibson

     24,632         48,604         26,897         39,572         0   

Mr. Shuler

     0         0         0         0         0   

 

43


Description of Executive Deferred Compensation Plan

Each NEO is eligible to defer up to 50 percent of his/her pre-tax base salary and up to 100 percent of his/her pre-tax annual incentive compensation under the terms of the Executive Deferred Compensation Plan. The plan is available to a select group of highly compensated employees and is informally funded. Each participant is also entitled to a 50 percent matching credit on base salary deferrals, up to 6 percent of base salary over the applicable Internal Revenue Code limit ($260,000 for 2014), and any annual incentive deferrals. Under the Deferred Compensation Plan, “excess” age and service credits are made on behalf of participants whose age and service contributions under the 401K Savings Plan are subject to limits imposed by the IRS. Payments from the Executive Deferred Compensation Plan are made in cash at certain future dates specified by participants or upon earlier termination of employment or death. In general, payments are made in the form of a lump sum or in monthly installments of 5, 10 or 15 years, as elected by the participants, and are automatically accelerated and paid in a lump sum in the event of a termination of employment within two years following a change in control of the Company. The “excess” age and service credits are paid in cash in a single lump sum. The deferred compensation is credited with earnings, gains and losses in accordance with deemed investment elections made by participants from among various crediting options established by the Company from time to time. Participants are permitted to change their deemed investment elections daily. For 2014, the investment options tracked returns under publicly available and externally managed investment funds such as mutual funds.

Description of Potential Payments Upon Termination or Change in Control

The Company has entered into certain agreements and maintains certain plans and arrangements that require it to pay or provide compensation and benefits to its NEOs in the event of certain terminations of employment or a change in control. The estimated amount payable or provided to each NEO in each situation is summarized below. These estimates are based on the assumption that the various triggering events occurred on the last day of 2014, along with other material assumptions noted below. The actual amounts that would be paid to a NEO upon termination or a change in control can only be determined at the time the actual triggering event occurs.

 

44


The estimated amount of compensation and benefits described below does not take into account compensation and benefits that a NEO has earned prior to the applicable triggering event, such as equity awards that had previously vested in accordance with their terms, or vested benefits otherwise payable under the retirement plans and programs (unless those benefits are enhanced or accelerated). As a result, it does not provide information on the payout of the 2014 annual incentive, as this award was earned as of December 31, 2014, in accordance with its terms, regardless of whether the executive terminated employment or a change in control occurred on that date. Please refer to the “Outstanding Equity Awards at Fiscal Year-End” table for a summary of each NEO’s vested equity awards, the “Pension Benefits” table for a summary of each NEO’s vested pension benefit, and the “Nonqualified Deferred Compensation” table for a summary of each NEO’s deferred compensation balance. Please see the “Summary Compensation” table for the annual incentive earned by the NEO in 2014.

 

Name and Type of
Termination

  Cash
Severance

$
    Restricted
Share
Units
(1)$
    Performance
Based
Restricted
Share Units
(2)$
    Unexercisable
Options
(3)$
    Health
&
Welfare
(4)$
    Retirement
(5)(7)$
    Legal
Expense

$
    Out-
placement

$
    Total
$
 

Mr. Lowe

                 

Due to Retirement

      4,720,483        1,085,393        1,672,531                7,478,407   

Due to Death

    4,686,000        12,205,633        1,085,393        1,672,531        13,132              19,662,689   

Due to Disability

    4,686,000        12,205,633        1,085,393        1,672,531        228,867              19,878,424   

Due to Change in Control
(Single Trigger)

      12,205,633        1,085,393        1,672,531                14,963,557   

Due to Change in Control
(Double Trigger)

    9,798,000              38,209        2,313,283        75,000        50,000        12,274,492   

Without Cause or for Good Reason(6)

    7,952,000        12,205,633        1,085,393        1,672,531        40,682              22,956,239   

Mr. NeCastro

                                                                       

Due to Retirement

      2,219,411        486,395        797,071                3,502,877   

Due to Death

    1,575,000        9,029,163        613,375        797,071        29,935              12,044,544   

Due to Disability

    1,575,000        9,029,163        613,375        797,071        29,935              12,044,544   

Due to Change in Control
(Single Trigger)

      9,029,163        613,375        797,071                10,439,609   

Due to Change in Control
(Double Trigger)

    3,963,388              57,228        782,282            4,802,898   

Without Cause or for Good Reason(6)

    3,937,500        9,029,163        613,375        797,071        51,124              14,428,233   

Mr. Jablin

                                                                       

Due to Retirement

                 

Due to Death

    4,050,000        5,075,832        2,752,323        239,160        19,007              12,136,322   

Due to Disability

    4,050,000        5,075,832        2,752,323        239,160        19,007        513,775            12,650,097   

Due to Change in Control
(Single Trigger)

      5,075,832        2,752,323        239,160                8,067,315   

Due to Change in Control
(Double Trigger)

    4,050,000              18,875        1,145,757            5,214,632   

Without Cause or for Good Reason(6)

    4,050,000        4,801,925        2,752,323        212,564        34,007        513,775          50,000        12,414,594   

Mr. Hale

                                                                       

Due to Retirement

      849,798        194,573        300,978                1,345,349   

Due to Death

    1,260,000        849,798        194,573        300,978        22,362              2,627,711   

Due to Disability

    1,260,000        849,798        194,573        300,978        22,362              2,627,711   

Due to Change in Control
(Single Trigger)

      849,798        194,573        300,978                1,345,349   

Due to Change in Control
(Double Trigger)

    1,680,000              29,633        529,842            2,239,475   

Without Cause or for Good Reason(6)

    1,260,000        849,798        194,573        300,978        32,362            25,000        2,662,711   

Ms. Gibson

                                                                       

Due to Retirement

                 

Due to Death

    1,350,000        899,401        208,498        267,648        30,764              2,756,311   

Due to Disability

    1,350,000        899,401        208,498        267,648        30,764              2,756,311   

Due to Change in Control
(Single Trigger)

      899,401        208,498        267,648                1,375,547   

Due to Change in Control
(Double Trigger)

    1,800,000              40,767        108,000            1,948,767   

Without Cause or for Good Reason(6)

    1,350,000        730,899        208,498        235,973        40,764            25,000        2,591,134   

 

45


 

 

(1) Represents the product of: (i) the number of restricted share unit awards outstanding as of December 31, 2014 that vest upon retirement, multiplied by (ii) $75.27 per share (the closing market price of the Class A Common Shares on December 31, 2014). These will vest on a pro-rated basis for Mr. Jablin and Ms. Gibson if terminated without Cause or for Good Reason.

 

(2) Represents the target number of performance-based restricted share unit awards granted in 2014. These will vest in full subject to actual performance results for the applicable period. For Messrs. NeCastro and Jablin, also includes the additional performance-based restricted share unit awards granted in 2012 and 2013, respectively.

 

(3) Represents for each option, the excess of the fair market value of the underlying shares on December 31, 2014 over the exercise price. These will vest on a pro-rated basis for Mr. Jablin and Ms. Gibson if terminated without Cause or for Good Reason.

 

(4) Represents premiums for continued medical, dental and life insurance coverage. For termination without Cause or for Good Reason, one year of financial planning is included.

 

(5) For Mr. Jablin, this represents the additional pay and vesting service in the SERP for the time from the date of termination through the date he would have attained age 55 with at least 10 years of service.

 

(6) For Mr. Hale and Ms. Gibson, the payment for termination as a result of non-renewal of their employment agreement is the same as for termination without Cause or for Good Reason. Mr. Lowe receives the full vesting of his outstanding equity awards, medical benefits, dental benefits, and life insurance for 24 months. Messrs. NeCastro and Jablin do not receive any severance benefits at the end of the term. Ms. Gibson and Messrs. Hale and Jablin would receive outplacement services for a period of 12 months.

 

(7) Represents the actuarial present value of continued pension and defined contribution benefits, calculated using the Pension Plan and SERP’s provisions for lump sum payments on December 31, 2014. The assumptions used to calculate the actuarial present value are included in the Annual Report on Form 10-K, except that no pre-retirement decrements were assumed. For Mr. Jablin, this amount includes the Defined Benefit (Pension and SERP) amounts for the time from the date of termination through the date he would have attained age 55 with at least 10 years of service.

Voluntary Termination for “Good Reason” or Involuntary Termination without “Cause”

Employment Agreement for Mr. Lowe

Under Mr. Lowe’s employment agreement, if the Company terminates the agreement without “cause” or the executive terminates it for “good reason” (other than within two years following a change in control), he is entitled to a lump sum payment equal to: (i) 3.0 times his annual salary and 2.0 times his target annual incentive; (ii) the pro-rated annual incentive opportunity for the year based on actual performance; (iii) 24 months of the COBRA premium in effect at the time of termination for continued medical coverage; (iv) full vesting of all equity awards, with the options remaining exercisable for the remainder of the original term, except that any outstanding performance-based restricted shares granted with a performance period commencing after January 1, 2009 will only become fully vested at the end of the applicable performance period, and then only to the extent that the Company achieved the applicable performance goals for that performance period; (v) continued life insurance coverage for 24 months following termination; and (vi) one year of financial planning benefits.

Other Employment Agreements

Under the employment agreements of Messrs. NeCastro and Jablin, if the Company terminates the agreement without “cause” or the executive terminates it for “good reason” (other than within two years following a change in control), each is entitled to a lump sum payment equal to: (i) 2.5 times the executive’s annual salary and target annual incentive; (ii) the pro-rated annual incentive opportunity for the year based on actual performance; (iii) for Mr. Jablin, the value of the additional accruals under the pension plan and SERP for the period from the date of termination through the date the executive would have reached age 55 with at least 10 years of service and additional non-elective contributions to the 401K Savings Plan and Deferred Compensation Plan for the same period; (iv) 18 months of the COBRA premium in effect at the time of termination for continued medical coverage; (v) full vesting of restricted stock awards; (vi) one year of financial planning benefits; and (vii) for

 

46


Mr. NeCastro continued life insurance coverage until the end of the term and for Mr. Jablin life insurance for 30 months following termination.

Under the employment agreements for Mr. Hale and Ms. Gibson, if the Company terminates the agreement without “cause” or the executive terminates it for “good reason” (other than within two years following a change in control), each of them is entitled to a lump sum payment equal to (i) 1.5 times the executive’s annual salary and target annual incentive; (ii) the pro-rated annual incentive opportunity for the year based on actual performance; (iii) 18 months of the COBRA premium in effect at the time of termination for continued medical coverage; (iv) continued life insurance coverage for 1.5 years following the date of termination; and (v) one year of financial planning benefits.

For purposes of each of these employment agreements, the term “cause” generally includes embezzlement, fraud or a felony; unauthorized disclosure of confidential information; a material breach of the agreement; gross misconduct or gross neglect of duties; failure to cooperate with an internal or regulatory investigation; or a violation of the Company’s written conduct policies or ethics code. The term “good reason” generally includes a material reduction in duties or compensation; relocation outside principal place of employment; or a material breach of the employment agreement by the Company.

In exchange for the benefits described above, each of the executives Messrs. Lowe and NeCastro agree not to (i) disclose the Company’s confidential information; (ii) compete against the Company for 6 months after termination (12 months if terminated for “cause”); (iii) solicit the Company’s employees or customers for 12 months after termination; or (iv) disparage the Company for 12 months after termination. With respect to Messrs. Jablin and Hale and Ms. Gibson, they agree not to (i) disclose the Company’s confidential information; (ii) compete against the Company for 12 months after termination (iii) solicit the Company’s employees or customers for 12 months after termination; or (iv) disparage the Company for 12 months after termination.

Death or Disability

Employment Agreement for Mr. Lowe

Under Mr. Lowe’s employment agreement, if he dies or suffers a “permanent disability,” the executive, his estate and/or his family become entitled to the following benefits:

 

   

A lump sum payment equal to 2.0 times annual salary (subject to reduction for any proceeds received under any life insurance policy or the Company’s disability plans).

 

   

Annual payments equal to 60 percent of his base salary, commencing within 30 days after the date of his permanent disability and ending at age 65.

 

   

Continued medical and dental benefits for two years (29 months in the case of permanent disability).

 

   

A lump sum payment equal to a pro-rated target annual incentive from January 1 of the year of death or permanent disability through the first anniversary of that event.

The term “permanent disability” has the meaning as defined under the Company’s disability plan.

Other Employment Agreements

Under the employment agreement for Mr. NeCastro, if the executive dies or becomes disabled (as defined under and covered by the Company disability plan), the executive (or his estate) would receive a lump sum payment equal to (i) 1.0 times the executive annual salary (ii) 18 months of COBRA for medical and dental as a lump sum grossed up for taxes, and (iii) a lump sum payment equal to a pro-rated target annual incentive from January 1 of the year of death or permanent disability through the first anniversary of that event.

Under the employment agreements for each of Messrs. Jablin and Hale and Ms. Gibson, if the executive dies or becomes disabled (as defined under and covered by the Company disability plan), the executive (or their estate) would receive the same benefits as if the Company had terminated the agreement without “cause” or if executive terminated for “good reason”.

 

47


Long-Term Incentive Plan

If a NEO dies or becomes disabled, any equity awards issued under the Company’s 2008 Long-Term Incentive plan will become fully vested, and in the case of stock options, be exercisable until their expiration date.

Change in Control

Upon a change in control, all outstanding equity awards held by the NEOs will vest, with the options remaining exercisable for the remainder of the original terms. A change in control generally means (i) the acquisition of a majority of the Company’s common voting shares by someone other than a party to the Scripps Family Agreement; (ii) the disposition assets accounting for 90 percent or more of the Company’s revenues, unless the parties to the Scripps Family Agreement have a direct or indirect controlling interest in the acquiring entity, or (iii) a change in the membership of the Company’s board of directors, such that the current incumbents and their approved successors no longer constitute a majority.

Qualifying Termination Following a Change in Control

Senior Executive Change in Control Plan

Each NEO participates in the Senior Executive Change in Control Plan. Under this plan, if the executive’s employment is terminated by the Company without “cause,” or if the executive resigns for “good reason,” within two years after a “change in control,” then the Company or its successor will be obligated to pay or provide the following benefits:

 

   

A lump sum payment equal to 3.0 times for Mr. Lowe, 2.5 times for Messrs. NeCastro and Jablin, 2.0 times for Mr. Hale and Ms. Gibson of the executive’s annual base salary and annual incentive. For this purpose, annual incentive generally means the greater of (i) target in the year of termination or (ii) the highest annual incentive earned in the prior three years.

 

   

Continued medical, dental, disability, life and accidental death insurance coverage for 36 months for Mr. Lowe, 30 months for Messrs. NeCastro and Jablin, and 24 months for Mr. Hale and Ms. Gibson.

 

   

A lump sum payment equal to the actuarial value of the additional benefits under the Company’s qualified and supplemental defined benefit plans and defined contribution plans the executive would have received if his/her age and years of service at the time of termination were increased by 3.0 years for Mr. Lowe, 2.5 years for Messrs. NeCastro and Jablin, and 2.0 years for Mr. Hale and Ms. Gibson (supplemental defined contribution plan only).

 

   

A tax gross-up for any excise taxes imposed on excess parachute payments.

Under the change in control plan, the terms “cause” generally includes a commission of a felony or an act that impairs the Company’s reputation; willful failure to perform duties; or breach of any material term, provision or condition of employment. The term “good reason” generally includes a reduction in compensation or duties; relocation outside of principal place of employment; or a material breach of the employment terms by the Company.

In addition to the benefits under the Executive Change in Control Plan, Mr. Lowe’s employment agreement provides that he is entitled to receive reasonable outplacement services for a period of 18 months as well as reimbursement for reasonable legal expenses (up to $75,000) if he is required to enforce the agreement in the event of a qualifying termination following a change in control.

In exchange for these benefits, the executives agree not to compete against the Company or its successors, or solicit their employees, customers, vendors or advertisers for a period of one year after termination.

 

48


Executive Annual Incentive Plan

Under the Executive Annual Incentive Plan, in the event that a participant’s employment terminates within one year of a change in control, the Company or its successor would be required to pay a lump sum amount to the participant equal to the target annual incentive opportunity for the performance period in which the termination occurs.

Retirement

Messrs. Lowe, NeCastro and Hale are eligible for retirement as of December 31, 2014. Under certain of their equity award agreements, if they voluntarily terminate employment with the Company, all outstanding equity awards granted pursuant to their employment agreement will vest with the options remaining exercisable for the remainder of the original terms. Their performance-based restricted share units will be earned subject to actual performance results for the applicable period.

Actual Termination Payments made to Mr. Shuler

The following table sets forth information regarding the payments made to Mr. Shuler upon his separation from the Company.

 

Mr. Shuler Termination Payments

   Separation
Payments &
Benefits
 

Cash Severance(1)

     1,274,625   

Other Benefits

  

Health & Welfare(2)

     40,090   

Outplacement(1)

     25,000   

Relocation(2)

     27,997   

Life Insurance(3)

     28,595   

Financial Planning(2)

     13,772   
  

 

 

 

Sub-Total

     135,454   
  

 

 

 

Severance (cash and benefits) Sub-Total

     1,410,079   
  

 

 

 

Equity

  

Restricted Share Units(4)

     292,015   

Performance Based Restricted Share Units(5)

     196,831   
  

 

 

 

Sub-Total

     488,846   
  

 

 

 

Total

     1,898,925   
  

 

 

 

 

(1) Paid in a single lump sum upon termination.

 

(2) Paid in a single lump sum upon termination (grossed up for taxes).

 

(3) Paid at termination on Mr. Shuler’s behalf.

 

(4) Vested upon Mr. Shuler’s termination and were paid within 60 calendar days after his termination date.

 

(5) Represents the product of (i) the target number of performance-based restricted share unit awards outstanding as of December 31, 2014 multiplied by (ii) $75.27 per share (the closing market price of the Class A Common Shares on December 31, 2014). The performance period will end on December 31, 2015. Any earned shares will be paid to Mr. Shuler, without proration, within 70 calendar days after the end of the performance period.

 

49


Equity Compensation Plan Information

The following table summarizes information, as of December 31, 2014, relating to equity compensation plans of the Company pursuant to which grants of options, restricted stock units or other rights to acquire shares of the Company’s common stock may be granted from time to time.

 

Plan Category

   Number of securities
to be issued upon
exercise of

outstanding options,
warrants and rights

(a)
    Weighted-average
exercise price of
outstanding
options, warrants
and rights

(b)
    Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))

(c)
 

Equity compensation plans approved by security holders(1)

     3,189,183 (2)    $ 52.81 (3)      3,877,549 (4) 

Equity compensation plans not approved by security holders

                     
  

 

 

   

 

 

   

 

 

 

Total

     3,189,183      $ 52.81        3,877,549   

 

(1) Includes the following plans: our 2008 Long-Term Incentive Plan, which encompasses the issuance of stock options, restricted shares, performance-based restricted share units, restricted stock units and employee stock purchase plan.

 

(2) Includes an aggregate of 965,798 restricted stock units and performance-based restricted stock units.

 

(3) Weighted average exercise price of outstanding options; excludes restricted stock units and performance-based restricted stock units.

 

(4) Includes 230,412 shares reserved for future issuance of shares related to the Employee Stock Purchase Plan and 37,868 shares reserved for the 2008 Deferred Compensation and Stock Plan for Directors.

DIRECTOR COMPENSATION

The following table sets forth information regarding the compensation earned in 2014 by our non-employee directors for services provided to the Company:

Director’s Compensation Table

 

Name

   Fees Earned
or Paid in
Cash

($)
     Option
Awards
($)(3)
     Stock
Awards

($)(3)
     All Other
Compensation
($)(4)
     Total($)  

Gina L. Bianchini

     90,500         75,005         75,085            240,590   

Michael R. Costa

     92,500         75,005         75,085         5,000         247,590   

David A. Galloway1

     85,500         75,005         75,085         5,000         240,590   

Jarl Mohn

     96,000         75,005         75,085            246,090   

Richelle P. Parham

     95,000         75,005         75,085            245,090   

Nicholas B. Paumgarten1

     75,500         75,005         75,085            225,590   

Mary M. Peirce

     75,500         75,005         75,085            225,590   

Jeffrey Sagansky

     103,000         75,005         75,085            253,090   

Nackey E. Scagliotti

     75,500         75,005         75,085            225,590   

Wesley W. Scripps

     51,500         75,005         75,085            201,590   

Ronald W. Tysoe

     120,500         75,005         75,085         2,500         273,090   

John H. Burlingame2

     30,250         0         0         5,000         35,250   

 

(1) Messrs. Galloway and Paumgarten deferred their 2014 fees into the Company’s Deferred Compensation and Stock Plan for Directors.

 

50


(2) Mr. Burlingame retired from the board of directors, effective May 12, 2014.

 

(3) Reflects the aggregate grant date fair value of the stock options and restricted share units granted our non-employee directors in 2014. The aggregate grant date fair value was determined in accordance with FASB ASC Topic 718. See Note 21 of the Consolidated Financial Statements contained in our Annual Report for an explanation of the assumptions made in valuing these awards. The following table reflects the number of Class A Common Shares subject to stock options held by the Company’s non-employee directors as of December 31, 2014.

 

(4) Matching charitable contributions through Company’s matching gift program.

 

Name

   Aggregate Number of
Company Shares
Underlying Stock
Options Award (#)
 

Gina L. Bianchini

     13,309   

John H. Burlingame

     33,029   

Michael R. Costa

     22,834   

David A. Galloway

     37,405   

Jarl Mohn

     37,405   

Richelle P. Parham

     13,309   

Nicholas B. Paumgarten

     54,964   

Mary M. Peirce

     37,405   

Jeffrey Sagansky

     13,309   

Nackey E. Scagliotti

     50,257   

Wesley W. Scripps

     4,376   

Ronald W. Tysoe

     22,834   

Description of Director Compensation Program

The Company’s director compensation program is designed to enhance its ability to attract and retain highly qualified directors and to align their interests with the long-term interests of its shareholders. The program includes a cash component, which is designed to compensate non-employee directors for their service on the board and an equity component, which is designed to align the interests of non-employee directors and shareholders. The Company also provides certain other benefits to non-employee directors, which are described below. Directors who are employees of the Company receive no additional compensation for their service on the board.

 

51


Cash Compensation

Each non-employee director is entitled to receive an annual cash retainer of $50,000. Committee chairs also receive an annual retainer as described in the table below. The retainers are paid in equal quarterly installments. Each non-employee director is also entitled to receive a fee for each board meeting and committee meeting attended, as follows:

 

Meeting Fees

  

Board per meeting fee

   $ 2,500   

Executive Committee per meeting fee

   $ 2,000   

Audit Committee per meeting fee

   $ 2,500   

Compensation Committee per meeting fee

   $ 2,000   

Nominating and Governance Committee per meeting fee

   $ 2,000   

Pricing Committee per meeting fee

   $ 2,500   

Digital Advisory Committee annual fee

   $ 10,000   

Executive Committee annual chair fee

   $ 3,000   

Audit Committee annual chair fee

   $ 20,000   

Compensation Committee annual chair fee

   $ 20,000   

Nominating & Governance Committee annual chair fee

   $ 10,000   

Digital Advisory Committee annual chair fee

   $ 15,000   

Equity Compensation

Each non-employee director is entitled to receive a stock option grant with a target value of $75,000 and a restricted share unit grant with a target value of $75,000. The stock options are exercisable one year from the date of grant, but may be forfeited upon removal from the board of directors for cause. The restricted share unit awards are payable on the first anniversary of the date of grant, but may be forfeited upon removal from the board for cause.

Other Benefits

In addition to the above compensation, the Company’s matching gift program, matches, on a dollar-for-dollar basis up to $5,000 annually, charitable contributions made by non-employee directors to qualifying organizations. Additional matching contributions are made for disaster relief contributions. This program is also available to all of the Company’s employees.

Deferred Compensation and Stock Plan for Directors

A non-employee director may elect to defer payment of a designated percentage of the cash compensation received as a director under the Company’s Deferred Compensation and Stock Plan for Directors. The director may allocate the deferrals between a phantom stock account that credits earnings including dividends, based on Class A Common Shares, or to a fixed income account that credits interest based on the twelve month average of the 10-year treasury rate (as of November of each year), plus 1 percent. The deferred amounts (as adjusted for earnings, interest and losses) are paid to the director at the time he or she ceases to serve as a director or upon a date predetermined by the director, either in a lump sum or annual installments over a specified number of years (not to exceed 15) as elected by the director. Payments generally are made in the form of cash, except that the director may elect to receive all or a portion of the amounts credited to his or her phantom stock account in the form of Class A Common Shares.

 

52


REPORT OF THE COMPENSATION COMMITTEE

The compensation committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with management. Based on the compensation committee’s review of and the discussions with management with respect to the Compensation Discussion and Analysis, the compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, for filing with the Securities and Exchange Commission.

Respectfully submitted,

Jarl Mohn, Chair

Gina L. Bianchini

David A. Galloway

Nackey E. Scagliotti

Ronald W. Tysoe

REPORT ON COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of the compensation committee was a current or former employee of the Company. None of our executive officers served as a member of the compensation committee or a director of another company where such company’s executive officers served on our board of directors or compensation committee. Nackey E. Scagliotti, a member of the compensation committee, is a signatory to the Scripps Family Agreement. See “The Scripps Family Agreement.”

 

53


PROPOSAL 2

APPROVAL OF THE 2015 LONG-TERM INCENTIVE PLAN

Introduction

The board of directors considers equity incentive compensation to be an essential tool to attract, motivate and retain officers and key employees and to align their interests with the interests of our shareholders. Consistent with this view, on February 19, 2015, the board of directors unanimously adopted, subject to the approval of the holders of the Common Voting Shares at the annual meeting of shareholders, the Scripps Networks Interactive, Inc. 2015 Long-Term Incentive Plan (the “Plan”). The Plan will help us maintain the flexibility that we need to keep pace with our competitors and effectively attract, motivate and retain the caliber of employees essential to our success.

If the Plan is approved by the holders of the Common Voting Shares, our prior plan, the Scripps Networks Interactive, Inc. 2008 Long-Term Incentive Plan, will be terminated effective immediately after the 2015 annual meeting of the shareholders. Once terminated, no new grants may be made under the plan, but any outstanding awards will remain outstanding in accordance with the terms of such awards. As of February 28, 2015, 3,612,462 Class A Common Shares remain available for issuance or delivery under the prior plan. Any Class A Common Shares remaining under the prior plan will not be carried over into the Plan. Under the Plan, the Company will be authorized to issue 8,000,000 Class A Common Shares as awards.

We believe the number of Class A Shares authorized under the Plan will be sufficient to grant awards for approximately 5 years from the date of shareholder approval of the Plan.

The Plan also is being proposed in order to help the Company preserve its federal income tax deductions. In particular, Section 162(m) of the Internal Revenue Code (the “Code)”) generally prevents a publicly-held corporation from claiming federal income tax deductions for compensation in excess of $1 million paid to certain of its senior executives. Compensation is exempt from this limitation, however, if it qualifies as “performance-based compensation.” In order to qualify as “performance-based compensation,” among other conditions, the shareholders must approve the material terms of the performance goals under the Plan every five years. The prior plan was last approved by the holders of the Common Voting Shares in April, 2010.

The Plan also authorizes the grant of incentive stock options (“ISOs”) within the meaning of Section 422 of the Code, which were not available under the prior plan.

The following is a summary of the Plan, and is qualified in its entirety by reference to the full text of the plan document, a copy of which is attached as Appendix I to this proxy statement.

 

54


Plan Highlights

Some of the key features of the Plan are highlighted below and are more fully described below under the heading “Summary of the Plan.”

 

Feature

  

Description

Limit on Shares Authorized    The Plan will authorize 8,000,000 Class A Common Shares for delivery under equity awards, which would represent approximately 9% of the Company’s issued and outstanding Class A Common Shares as of February 28, 2015.
Annual Limit on Awards to Directors    The Plan provides that no non-employee director may be granted, during any one calendar year, awards with a grant date fair value for financial accounting purposes of more than $300,000.
Minimum Vesting for Awards to Employees    The Plan provides that awards are generally subject to a minimum one-year vesting requirement.
Responsible Share Counting Provisions    The Plan does not permit “liberal share counting,” meaning that only awards that are forfeited, terminated, or which are settled in cash can be added back to the Plan’s share reserve.
No Discounted Stock Options or SARs    The Plan does not permit the use of “discounted” stock options or SARs in that such awards may not have an exercise or base price less than the fair market value of a Class A Common Share on the date of grant.
No Re-Pricing of Stock Options or SARs    The Plan does not permit, without shareholder approval, the “repricing” of stock options and SARs.
Clawback and Forfeiture Provisions    Awards granted under the Plan will be subject to forfeiture as provided by the compensation committee if a participant engages in “detrimental activity” (such as a breach of a non-compete, non-solicitation, or confidentiality covenant or a termination for “cause”). Awards granted under the Plan are also subject to recoupment under any compensation recovery policy adopted by the Company.
No Dividends or Dividend Equivalents on Unvested Performance Awards    Dividends or dividend equivalents paid with respect to awards that vest based on the achievement of performance goals will be accumulated until such award is earned, and the dividends or dividend equivalents shall not be paid if the performance goals are not satisfied.
Administered by an Independent Committee    The Plan will be administered by the compensation committee, each member of which qualifies as an “independent director” under the listing standards of the NYSE.

Summary of the Plan

Plan Limits

The maximum number of Class A Common Shares that may be issued or transferred with respect to awards under the Plan is 8,000,000, which may include authorized but unissued shares, treasury shares, or a combination of the foregoing. Shares covering awards that terminate or are forfeited will again be available for issuance under the Plan, and upon payment in cash of the benefit provided by any award granted under the Plan, any shares that were covered by that award will be available for issue or transfer under the Plan. Shares surrendered for the payment of the exercise price under stock options, repurchased by us with option proceeds, or withheld for taxes upon exercise or vesting of an award, will not again be available for issuance under the Plan. In addition, when a

 

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SAR is exercised and settled in Class A Common Shares, all of the shares underlying the SAR will be counted against the Plan limit regardless of the number of Class A Common Shares used to settle the SAR. In order to comply with the rules applicable to ISOs, the Plan provides that the aggregate number of Class A Common Shares actually issued or transferred upon the exercise of ISOs may not exceed 8,000,000 shares.

The Plan also imposes various individual sub-limits on the number of Class A Common Shares that may be issued or transferred under the Plan. In order to comply with the exemption from Section 162(m) of the Code relating to performance-based compensation, the Plan imposes the following additional individual sub-limits on awards intended to satisfy that exemption:

 

   

The maximum aggregate number of Class A Common Shares that may be subject to stock options or SARs granted in any calendar year to any one participant will be 1,500,000 shares;

 

   

The maximum aggregate number of restricted shares and shares subject to restricted share units, performance shares and other stock-based awards granted in any calendar year to any one participant will be 1,000,000 Class A Common Shares;

 

   

The maximum aggregate compensation that can be paid pursuant to performance units or other cash-based awards granted in any calendar year to any one participant will be $7,000,000 or a number of Class A Common Shares having an aggregate fair market value not in excess of such amount; and

 

   

The maximum dividend equivalents that may be paid in any calendar year to any one participant will be $700,000 or a number of Class A Common Shares having an aggregate fair market value not in excess of such amount.

Additionally, the Plan provides that no director may be granted, during any one calendar year, awards with a grant date fair value for financial accounting purposes of more than $300,000.

Administration

The Plan will be administered by our compensation committee or such other committee as our board of directors selects consisting of two or more directors, each of whom is intended to be a “non-employee director” within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as amended, an “outside director” under regulations promulgated under Section 162(m) of the Code, and an “independent director” under the NYSE rules. The committee will have full and final authority in its discretion to take all actions determined by the committee to be necessary in the administration of the Plan.

Our board of directors may reserve to itself any or all of the authority and responsibility of the committee under the Plan or may act as administrator of the Plan for any and all purposes. In addition, to the extent permitted by applicable laws, our board of directors or committee may expressly delegate to directors or employees any of the committee’s authority under the Plan.

Eligibility

The Plan provides that awards may be granted to our employees (including employees of our subsidiaries) and non-employee directors, except that ISOs may be granted only to employees. Approximately 11 non-employee directors and approximately 235 employees would currently be eligible to participate in the Plan.

Duration and Modification

The Plan will terminate on May 11, 2025, or such earlier date as our board of directors may determine. The Plan will remain in effect for outstanding awards until no awards remain outstanding. The board of directors may amend, suspend or terminate the Plan at any time but approval by the holders of the Common Voting Shares is required for any amendment to the extent necessary to comply with the NYSE rules or applicable laws. Currently, the NYSE rules would require shareholder approval for a material revision of the Plan, which would generally include a material increase in the number of shares available under the Plan, a material extension of the term of the Plan, an expansion of the class of participants eligible to participate in the Plan, an expansion of the types of awards provided under the Plan, a material change in the method of determining the exercise price of

 

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