Exhibit 10.2



 




Exhibit 10.2




The Scotts Miracle-Gro Company




2006 Long-Term Incentive Plan




Effective January 26, 2006











 




Contents




	 	 	 	 	 
	
    
    Article 1.

    	 	
    Establishment, Purpose, and Duration	 	
    1
	
    
    Article 2.

    	 	
    Definitions	 	
    1
	
    
    Article 3.

    	 	
    Administration	 	
    5
	
    
    Article 4.

    	 	
    Shares Subject to this Plan and Maximum Awards	 	
    6
	
    
    Article 5.

    	 	
    Eligibility and Participation	 	
    7
	
    
    Article 6.

    	 	
    Stock Options	 	
    7
	
    
    Article 7.

    	 	
    Stock Appreciation Rights	 	
    9
	
    
    Article 8.

    	 	
    Restricted Stock and Restricted Stock Units	 	
    10
	
    
    Article 9.

    	 	
    Performance Units/ Performance Shares	 	
    11
	
    
    Article 10.

    	 	
    Cash-Based Awards and Other Stock-Based Awards	 	
    11
	
    
    Article 11.

    	 	
    Transferability of Awards	 	
    12
	
    
    Article 12.

    	 	
    Performance Measures	 	
    12
	
    
    Article 13.

    	 	
    Nonemployee Director Awards	 	
    14
	
    
    Article 14.

    	 	
    Dividend Equivalents	 	
    14
	
    
    Article 15.

    	 	
    Beneficiary Designation	 	
    14
	
    
    Article 16.

    	 	
    Rights of Participants	 	
    14
	
    
    Article 17.

    	 	
    Change of Control	 	
    15
	
    
    Article 18.

    	 	
    Amendment, Modification, Suspension, and Termination	 	
    16
	
    
    Article 19.

    	 	
    Withholding	 	
    17
	
    
    Article 20.

    	 	
    Successors	 	
    17
	
    
    Article 21.

    	 	
    General Provisions	 	
    17




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THE SCOTTS MIRACLE-GRO COMPANY




2006 LONG-TERM INCENTIVE PLAN




Article 1.




Establishment, Purpose, and Duration



     
1.1 Establishment. The Scotts Miracle-Gro Company,
an Ohio corporation (hereinafter referred to as the
“Company”), establishes an incentive compensation plan
to be known as The Scotts Miracle-Gro Company 2006 Long-Term
Incentive Plan (hereinafter referred to as the
“Plan”), as set forth in this document.



     
This Plan permits the grant of Nonqualified Stock Options,
Incentive Stock Options, Stock Appreciation Rights, Restricted
Stock, Restricted Stock Units, Performance Shares, Performance
Units, Cash-Based Awards, and Other Stock-Based Awards.



     
This Plan shall become effective upon shareholder approval (the
“Effective Date”) and shall remain in effect as
provided in Section 1.3 hereof.



     
1.2 Purpose of this Plan. The purpose of this Plan
is to provide a means whereby Employees, Directors, and Third
Party Service Providers develop a sense of proprietorship and
personal involvement in the development and financial success of
the Company, and to encourage them to devote their best efforts
to the business of the Company, thereby advancing the interests
of the Company and its shareholders. A further purpose of this
Plan is to provide a means through which the Company may attract
able individuals to become Employees or serve as Directors or
Third Party Service Providers and to provide a means whereby
those individuals upon whom the responsibilities of the
successful administration and management of the Company are of
importance, can acquire and maintain stock ownership, thereby
strengthening their concern for the welfare of the Company.



     
1.3 Duration of this Plan. Unless sooner terminated
as provided herein, this Plan shall terminate ten
(10) years from the Effective Date, e.g. on the day before
the tenth (10th) anniversary of the Effective Date. After this
Plan is terminated, no Awards may be granted but Awards
previously granted shall remain outstanding in accordance with
their applicable terms and conditions and this Plan’s terms
and conditions. Notwithstanding the foregoing, no Incentive
Stock Options may be granted more than ten (10) years after
the earlier of (a) adoption of this Plan by the Board, or
(b) the Effective Date.




Article 2.




Definitions



     
Whenever used in this Plan, the following terms shall have the
meanings set forth below, and when the meaning is intended, the
initial letter of the word shall be capitalized.



     
2.1 “Affiliate” shall mean any corporation
or other entity (including, but not limited to, a partnership or
a limited liability company), that is affiliated with the
Company through stock or equity ownership or otherwise, and is
designated as an Affiliate for purposes of this Plan by the
Committee.



     
2.2 “Annual Award Limit” or
“Annual Award Limits” have the meaning set
forth in Section 4.3.



     
2.3 “Award” means, individually or
collectively, a grant under this Plan of Nonqualified Stock
Options, Incentive Stock Options, SARs, Restricted Stock,
Restricted Stock Units, Performance Shares, Performance Units,
Cash-Based Awards, or Other Stock-Based Awards, in each case
subject to the terms of this Plan.



     
2.4 “Award Agreement” means either
(i) a written agreement entered into by the Company and a
Participant setting forth the terms and provisions applicable to
an Award granted under this Plan, or (ii) a written or
electronic statement issued by the Company to a Participant
describing the terms and provisions of such Award, including in
each case any amendment or modification thereof. The Committee
may provide for the use of electronic, internet or other
non-paper Award Agreements, and the use of electronic, internet
or other non-paper means for the acceptance thereof and actions
thereunder by a Participant.



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2.5 “Beneficial Owner” or
“Beneficial Ownership” shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules
and Regulations under the Exchange Act.



     
2.6 “Board” or “Board of
Directors” means the Board of Directors of the Company.



     
2.7 “Cash-Based Award” means an Award,
denominated in cash, granted to a Participant as described in
Article 10.



     
2.8 “Cause” means, unless otherwise
specified in an Award Agreement or in an applicable employment
agreement between the Company and a Participant, with respect to
any Participant:






		
	 	     
    (a) Willful failure to substantially perform his or her
    duties as an Employee (for reasons other than physical or mental
    illness) or director after reasonable notice to the Participant
    of that failure;
	 
	 	     
    (b) Misconduct that materially injures the Company or any
    Subsidiary or Affiliate;
	 
	 	     
    (c) Conviction of, or entering into a plea of nolo
    contendere to, a felony; or
	 
	 	     
    (d) Breach of any written covenant or agreement with the
    Company or any Subsidiary or Affiliate.



     
2.9 “Change in Control” means any of the
following events:






		
	 	     
    (a) The members of the Board on the Effective Date
    (“Incumbent Directors”) cease for any reason other
    than death to constitute at least a majority of the members of
    the Board, provided that any director whose election, or
    nomination for election by the Company’s shareholders, was
    approved by a vote of at least a majority of the then Incumbent
    Directors also will be treated as an Incumbent Director; or
	 
	 	     
    (b) Any “person,” including a “group”
    [as such terms are used in Exchange Act Sections 13(d) and
    14(d)(2), but excluding the Company, any of its Subsidiaries,
    any employee benefit plan of the Company or any of its
    Subsidiaries or Hagedorn Partnership, L.P. or any party related
    to Hagedorn Partnership, L.P. as determined by the Committee] is
    or becomes the Beneficial Owner, directly or indirectly, of
    securities of the Company representing more than thirty percent
    (30%) of the combined voting power of the Company’s then
    outstanding securities; or
	 
	 	     
    (c) The adoption or authorization by the shareholders of
    the Company of a definitive agreement or a series of related
    agreements (a) for the merger or other business combination
    of the Company with or into another entity in which the
    shareholders of the Company immediately before the effective
    date of such merger or other business combination own less than
    fifty percent (50%) of the voting power in such entity; or
    (b) for the sale or other disposition of all or
    substantially all of the assets of the Company; or
	 
	 	     
    (d) The adoption by the shareholders of the Company of a
    plan relating to the liquidation or dissolution of the Company;
    or
	 
	 	     
    (e) For any reason, Hagedorn Partnership, L.P. or any party
    related to Hagedorn Partnership, L.P. as determined by the
    Committee becomes the Beneficial Owner, directly or indirectly,
    of securities of the Company representing more than forty-nine
    percent (49%) of the combined voting power of the Company’s
    then outstanding securities.



     
2.10 “Change in Control Price” means the
highest price per Share offered in conjunction with any
transaction resulting in a Change in Control (as determined in
good faith by the Committee if any part of the offered price is
payable other than in cash) or, in the case of a Change in
Control occurring solely by reason of events not related to a
transfer of Shares, the highest Fair Market Value of a Share on
any of the thirty (30) consecutive trading days ending on
the last trading day before the Change in Control occurs.



     
2.11 “Code” means the U.S. Internal
Revenue Code of 1986, as amended from time to time. For purposes
of this Plan, references to sections of the Code shall be deemed
to include references to any applicable regulations thereunder
and any successor or similar provision, as well as any
applicable interpretative guidance issued related thereto.



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2.12 “Committee” means the Compensation
and Organization Committee of the Board or a subcommittee
thereof, or any other committee designated by the Board to
administer this Plan. The members of the Committee shall be
appointed from time to time by and shall serve at the discretion
of the Board. If the Committee does not exist or cannot function
for any reason, the Board may take any action under the Plan
that would otherwise be the responsibility of the Committee.



     
2.13 “Company” means The Scotts
Miracle-Gro Company, an Ohio corporation, and any successor
thereto as provided in Article 20 herein.



     
2.14 “Covered Employee” means any key
Employee who is or may become a “Covered Employee,” as
defined in Code Section 162(m), and who is designated,
either as an individual Employee or class of Employees, by the
Committee within the shorter of (i) ninety (90) days
after the beginning of the Performance Period, or
(ii) twenty-five percent (25%) of the Performance Period
has elapsed, as a “Covered Employee” under this Plan
for such applicable Performance Period.



     
2.15 “Director” means any individual who
is a member of the Board of Directors of the Company.



     
2.16 “Effective Date” has the meaning set
forth in Section 1.1.



     
2.17 “Employee” means any individual who
performs services for and is designated as an employee of the
Company, its Affiliates, and/or its Subsidiaries on the payroll
records thereof. An Employee shall not include any individual
during any period he or she is classified or treated by the
Company, Affiliate, and/or Subsidiary as an independent
contractor, a consultant, or any employee of an employment,
consulting, or temporary agency or any other entity other than
the Company, Affiliate, and/or Subsidiary, without regard to
whether such individual is subsequently determined to have been,
or is subsequently retroactively reclassified as a common-law
employee of the Company, Affiliate, and/or Subsidiary during
such period.



     
2.18 “Exchange Act” means the Securities
Exchange Act of 1934, as amended from time to time, or any
successor act thereto.



     
2.19 “Fair Market Value” or
“FMV” means a price that is based on the
opening, closing, actual, high, low, or average selling prices
of a Share reported on the New York Stock Exchange
(“NYSE”) or other established stock exchange (or
exchanges) on the applicable date, the preceding trading day,
the next succeeding trading day, or an average of trading days,
as determined by the Committee in its discretion. Unless the
Committee determines otherwise, Fair Market Value shall be
deemed to be equal to the closing price of a Share on the most
recent date on which Shares were publicly traded. In the event
Shares are not publicly traded at the time a determination of
their value is required to be made hereunder, the determination
of their Fair Market Value shall be made by the Committee in
such manner as it deems appropriate. Such definition(s) of FMV
shall be specified in each Award Agreement and may differ
depending on whether FMV is in reference to the grant, exercise,
vesting, settlement, or payout of an Award.



     
2.20 “Full Value Award” means an Award
other than in the form of an ISO, NQSO, or SAR, and which is
settled by the issuance of Shares.



     
2.21 “Grant Date” means the date an Award
is granted to a Participant pursuant to the Plan.



     
2.22 “Grant Price” means the price
established at the time of grant of a SAR pursuant to
Article 7, used to determine whether there is any payment
due upon exercise of the SAR.



     
2.23 “Incentive Stock Option” or
“ISO” means an Option to purchase Shares
granted under Article 6 to an Employee and that is
designated as an Incentive Stock Option and that is intended to
meet the requirements of Code Section 422, or any successor
provision.



     
2.24 “Insider” shall mean an individual
who is, on the relevant date, an officer or Director of the
Company, or a more than ten percent (10%) Beneficial Owner of
any class of the Company’s equity securities that is
registered pursuant to Section 12 of the Exchange Act, as
determined by the Board or Committee in accordance with
Section 16 of the Exchange Act.



     
2.25 “Nonemployee Director” means a
Director who is not an Employee on the Grant Date.



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2.26 “Nonemployee Director Award” means
any NQSO, SAR, or Full Value Award granted, whether singly, in
combination, or in tandem, to a Participant who is a Nonemployee
Director pursuant to such applicable terms, conditions, and
limitations as the Board or Committee may establish in
accordance with this Plan.



     
2.27 “Nonqualified Stock Option” or
“NQSO” means an Option that is not intended to
meet the requirements of Code Section 422, or that
otherwise does not meet such requirements.



     
2.28 “Option” means an Incentive Stock
Option or a Nonqualified Stock Option, as described in
Article 6.



     
2.29 “Option Price” means the price at
which a Share may be purchased by a Participant pursuant to an
Option.



     
2.30 “Other Stock-Based Award” means an
equity-based or equity-related Award not otherwise described by
the terms of this Plan, granted pursuant to Article 10.



     
2.31 “Participant” means any eligible
individual as set forth in Article 5 to whom an Award is
granted.



     
2.32 “Performance-Based Compensation”
means compensation under an Award that is intended to
satisfy the requirements of Code Section 162(m) for certain
performance-based compensation paid to Covered Employees.
Notwithstanding the foregoing, nothing in this Plan shall be
construed to mean that an Award which does not satisfy the
requirements for performance-based compensation under Code
Section 162(m) does not constitute performance-based
compensation for other purposes, including Code
Section 409A.



     
2.33 “Performance Measures” means measures
as described in Article 12 on which the performance goals
are based and which are approved by the Company’s
shareholders pursuant to this Plan in order to qualify Awards as
Performance-Based Compensation.



     
2.34 “Performance Period” means the period
of time during which the performance goals must be met in order
to determine the degree of payout and/or vesting with respect to
an Award.



     
2.35 “Performance Share” means an Award
under Article 9 herein and subject to the terms of this
Plan, denominated in Shares, the value of which at the time it
is payable is determined as a function of the extent to which
corresponding performance criteria or Performance Measure(s), as
applicable, have been achieved.



     
2.36 “Performance Unit” means an Award
under Article 9 herein and subject to the terms of this
Plan, denominated in units, the value of which at the time it is
payable is determined as a function of the extent to which
corresponding performance criteria or Performance Measure(s), as
applicable, have been achieved.



     
2.37 “Period of Restriction” means the
period when Restricted Stock or Restricted Stock Units are
subject to a substantial risk of forfeiture (based on the
passage of time, the achievement of performance goals, or the
occurrence of other events as determined by the Committee, in
its discretion), as provided in Article 8.



     
2.38 “Person” shall have the meaning
ascribed to such term in Section 3(a)(9) of the Exchange
Act and used in Sections 13(d) and 14(d) thereof, including
a “group” as defined in Section 13(d) thereof.



     
2.39 “Plan” means The Scotts Miracle-Gro
Company 2006 Long-Term Incentive Plan.



     
2.40     “Plan Year”
means the Company’s fiscal year.



     
2.41     “Prior Plans”
means The Scotts Miracle-Gro Company 2003 Stock Option and
Incentive Equity Plan, as amended, and The Scotts Miracle-Gro
Company 1996 Stock Option Plan, as amended.



     
2.42     “Restricted
Stock” means an Award granted to a Participant pursuant
to Article 8.



     
2.43     “Restricted Stock
Unit” means an Award granted to a Participant pursuant
to Article 8, except no Shares are actually awarded to the
Participant on the Grant Date.



     
2.44     “Share” means
a common share of the Company, without par value per share.



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2.45     “Stock Appreciation
Right” or “SAR” means an Award,
designated as a SAR, pursuant to the terms of Article 7
herein.



     
2.46     “Subsidiary”
means any corporation or other entity, whether domestic or
foreign, in which the Company has or obtains, directly or
indirectly, a proprietary interest of more than fifty percent
(50%) by reason of stock ownership or otherwise.



     
2.47     “Third Party Service
Provider” means any consultant, agent, advisor, or
independent contractor who renders services to the Company, a
Subsidiary, or an Affiliate that (a) are not in connection
with the offer or sale of the Company’s securities in a
capital raising transaction, and (b) do not directly or
indirectly promote or maintain a market for the Company’s
securities.




Article 3.




Administration



     
3.1     General. The Committee
shall be responsible for administering this Plan, subject to
this Article 3 and the other provisions of this Plan. The
Committee may employ attorneys, consultants, accountants,
agents, and other individuals, any of whom may be an Employee,
and the Committee, the Company, and its officers and Directors
shall be entitled to rely upon the advice, opinions, or
valuations of any such individuals. All actions taken and all
interpretations and determinations made by the Committee shall
be final and binding upon the Participants, the Company, and all
other interested individuals.



     
3.2     Authority of the
Committee. The Committee shall have full and exclusive
discretionary power to interpret the terms and the intent of
this Plan and any Award Agreement or other agreement or document
ancillary to or in connection with this Plan, to determine
eligibility for Awards and to adopt such rules, regulations,
forms, instruments, and guidelines for administering this Plan
as the Committee may deem necessary or proper. Such authority
shall include, but not be limited to, selecting Award
recipients, establishing all Award terms and conditions,
including the terms and conditions set forth in Award
Agreements, granting Awards as an alternative to or as the form
of payment for grants or rights earned or due under compensation
plans or arrangements of the Company, construing any provision
of the Plan or any Award Agreement, and, subject to
Article 18, adopting modifications and amendments to this
Plan or any Award Agreement, including without limitation, any
that are necessary to comply with the laws of the countries and
other jurisdictions in which the Company, its Affiliates, and/or
its Subsidiaries operate.



     
3.3     Delegation. The
Committee may delegate to one or more of its members or to one
or more officers of the Company, and/or its Subsidiaries and
Affiliates or to one or more agents or advisors such
administrative duties or powers as it may deem advisable, and
the Committee or any individuals to whom it has delegated duties
or powers as aforesaid may employ one or more individuals to
render advice with respect to any responsibility the Committee
or such individuals may have under this Plan. The Committee may,
by resolution, authorize one or more officers of the Company to
do one or both of the following on the same basis as can the
Committee: (a) designate Employees to be recipients of
Awards; (b) determine the size of any such Awards;
provided, however, (i) the Committee shall not delegate
such responsibilities to any such officer for Awards granted to
an Employee who is considered an Insider; (ii) the
resolution providing such authorization sets forth the total
number of Awards such officer(s) may grant; and (iii) the
officer(s) shall report periodically to the Committee regarding
the nature and scope of the Awards granted pursuant to the
authority delegated.



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Article 4.




Shares Subject to this Plan and Maximum Awards



     
4.1     Number of Shares Available
for Awards.






		
	 	     
    (a) Subject to adjustment as provided in Section 4.4
    herein, the maximum number of Shares available for grant to
    Participants under this Plan (the “Share
    Authorization”) shall be:






		
	 	     
    (i) Four million nine hundred twenty-seven thousand three
    hundred seventy-eight (4,927,378) newly authorized Shares, plus
	 
	 	     
    (ii) (A) One million seventy-two thousand six hundred
    twenty-two (1,072,622) Shares not granted or subject to
    outstanding awards under the Company’s Prior Plans as of
    September 30, 2005 (on a split-adjusted basis to reflect
    the 2-for-1 stock split on November 9, 2005) and
    (B) any Shares subject to the six million six hundred
    thirteen thousand nine hundred thirty-four (6,613,934)
    outstanding awards as of September 30, 2005 (on a
    split-adjusted basis to reflect the 2-for-1 stock split on
    November 9, 2005) under the Prior Plans that on or after
    September 30, 2005 cease for any reason to be subject to
    such awards (other than by reason of exercise or settlement of
    the awards to the extent they are exercised for or settled in
    vested and nonforfeitable Shares), up to an aggregate maximum of
    six million six hundred thirteen thousand nine hundred
    thirty-four (6,613,934) Shares.






		
	 	     
    (b) No more than three million (3,000,000) Shares of the
    Share Authorization may be granted as Full Value Awards.
	 
	 	     
    (c) The maximum number of Shares of the Share Authorization
    that may be issued pursuant to ISOs under this Plan shall be six
    million (6,000,000) Shares.
	 
	 	     
    (d) The maximum number of Shares of the Share Authorization
    that may be granted to Nonemployee Directors shall be one
    million (1,000,000) Shares.



     
4.2     Share Usage. Shares
covered by an Award shall only be counted as used to the extent
they are actually issued; however, the full number of Stock
Appreciation Rights granted that are to be settled by the
issuance of Shares shall be counted against the number of Shares
available for award under the Plan, regardless of the number of
Shares actually issued upon settlement of such Stock
Appreciation Rights. Any Shares related to Awards which
terminate by expiration, forfeiture, cancellation, or otherwise
without the issuance of such Shares, are settled in cash in lieu
of Shares, or are exchanged with the Committee’s
permission, prior to the issuance of Shares, for Awards not
involving Shares, shall be available again for grant under this
Plan. The Shares available for issuance under this Plan may be
authorized and unissued Shares or treasury Shares.



     
4.3     Annual Award Limits.
Unless and until the Committee determines that an Award to a
Covered Employee shall not be designed to qualify as
Performance-Based Compensation, the following limits (each an
“Annual Award Limit” and, collectively, “Annual
Award Limits”) shall apply to grants of such Awards under
this Plan:






		
	 	     
    (a) Options: The maximum aggregate number of Shares
    subject to Options granted in any one Plan Year to any one
    Participant shall be two hundred thousand (200,000), as adjusted
    pursuant to Sections 4.4 and/or 18.2.
	 
	 	     
    (b) SARs: The maximum number of Shares subject to
    Stock Appreciation Rights granted in any one Plan Year to any
    one Participant shall be two hundred thousand (200,000), as
    adjusted pursuant to Sections 4.4 and/or 18.2.
	 
	 	     
    (c) Restricted Stock or Restricted Stock Units: The
    maximum aggregate grant with respect to Awards of Restricted
    Stock or Restricted Stock Units in any one Plan Year to any one
    Participant shall be one hundred thousand (100,000), as adjusted
    pursuant to Sections 4.4 and/or 18.2.
	 
	 	     
    (d) Performance Units or Performance Shares: The
    maximum aggregate Award of Performance Units or Performance
    Shares that a Participant may receive in any one Plan Year shall
    be one hundred thousand (100,000) Shares, as adjusted pursuant
    to Sections 4.4 and/or 18.2, or



6







 


		
	 	
    equal to the value of one hundred thousand (100,000) Shares, as
    adjusted pursuant to Sections 4.4 and/or 18.2, determined
    as of the date of vesting or payout, as applicable.
	 
	 	     
    (e) Cash-Based Awards: The maximum aggregate amount
    awarded or credited with respect to Cash-Based Awards to any one
    Participant in any one Plan Year may not exceed the greater of
    the value of three million dollars ($3,000,000) or one hundred
    thousand (100,000) Shares, as adjusted pursuant to
    Sections 4.4 and/or 18.2, determined as of the date of
    vesting or payout, as applicable.
	 
	 	     
    (f) Other Stock-Based Awards. The maximum aggregate
    grant with respect to Other Stock-Based Awards pursuant to
    Section 10.2 in any one Plan Year to any one Participant
    shall be one hundred fifty thousand (150,000) Shares, as
    adjusted pursuant to Sections 4.4 and/or 18.2.




     
4.4     Adjustments in Authorized
Shares. In the event of any corporate event or transaction
(including, but not limited to, a change in the Shares of the
Company or the capitalization of the Company) such as a merger,
consolidation, reorganization, recapitalization, separation,
partial or complete liquidation, stock dividend, stock split,
reverse stock split, split up, spin-off, or other distribution
of stock or property of the Company, combination of Shares,
exchange of Shares, dividend in kind, or other like change in
capital structure, number of outstanding Shares or distribution
(other than normal cash dividends) to shareholders of the
Company, or any similar corporate event or transaction, the
Committee, in its sole discretion, in order to prevent dilution
or enlargement of Participants’ rights under this Plan,
shall substitute or adjust, as applicable, the number and kind
of Shares that may be issued under this Plan or under particular
forms of Awards, the number and kind of Shares subject to
outstanding Awards, the Option Price or Grant Price applicable
to outstanding Awards, the Annual Award Limits, and other value
determinations applicable to outstanding Awards.



     
The Committee, in its sole discretion, may also make appropriate
adjustments in the terms of any Awards under this Plan to
reflect or related to such changes or distributions and to
modify any other terms of outstanding Awards, including
modifications of performance goals and changes in the length of
Performance Periods. The determination of the Committee as to
the foregoing adjustments, if any, shall be conclusive and
binding on Participants under this Plan.



     
Subject to the provisions of Article 18 and notwithstanding
anything else herein to the contrary, without affecting the
number of Shares reserved or available hereunder, the Committee
may authorize the issuance or assumption of benefits under this
Plan in connection with any merger, consolidation, acquisition
of property or stock, or reorganization upon such terms and
conditions as it may deem appropriate (including, but not
limited to, a conversion of equity awards into Awards under this
Plan in a manner consistent with paragraph 53 of FASB
Interpretation No. 44), subject to compliance with the
rules under Code Sections 422 and 424, as and where
applicable.




Article 5.




Eligibility and Participation



     
5.1     Eligibility. Individuals
eligible to participate in this Plan include all Employees,
Directors, and Third Party Service Providers.



     
5.2     Actual Participation.
Subject to the provisions of this Plan, the Committee may, from
time to time, select from all eligible individuals, those
individuals to whom Awards shall be granted and shall determine,
in its sole discretion, the nature of, any and all terms
permissible by law, and the amount of each Award.




Article 6.




Stock Options



     
6.1     Grant of Options.
Subject to the terms and provisions of this Plan, Options may be
granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the
Committee, in its sole discretion; provided that ISOs may be
granted only to eligible



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Employees of the Company or of any parent or subsidiary
corporation (as permitted under Code Sections 422 and 424).



     
6.2     Award Agreement. Each
Option grant shall be evidenced by an Award Agreement that shall
specify the Option Price, the maximum duration of the Option,
the number of Shares to which the Option pertains, the
conditions upon which an Option shall become vested and
exercisable, and such other provisions as the Committee shall
determine which are not inconsistent with the terms of this
Plan. The Award Agreement also shall specify whether the Option
is intended to be an ISO or a NQSO.



     
6.3     Option Price. The Option
Price for each grant of an Option under this Plan shall be
determined by the Committee in its sole discretion and shall be
specified in the Award Agreement; provided, however, the Option
Price must be at least equal to one hundred percent (100%) of
the FMV of the Shares as determined on the Grant Date.



     
6.4     Term of Options. Each
Option granted to a Participant shall expire at such time as the
Committee shall determine at the time of grant; provided,
however, no Option shall be exercisable later than the day
before the tenth (10th) anniversary date of its grant.
Notwithstanding the foregoing, for Nonqualified Stock Options
granted to Participants outside the United States, the Committee
has the authority to grant Nonqualified Stock Options that have
a term greater than ten (10) years.



     
6.5     Exercise of Options.
Options granted under this Article 6 shall be exercisable
at such times and be subject to such restrictions and conditions
as the Committee shall in each instance approve, which terms and
restrictions need not be the same for each grant or for each
Participant.



     
6.6     Payment. Options granted
under this Article 6 shall be exercised by the delivery of
a notice of exercise to the Company or an agent designated by
the Company in a form specified or accepted by the Committee, or
by complying with any alternative procedures which may be
authorized by the Committee, setting forth the number of Shares
with respect to which the Option is to be exercised, accompanied
by full payment for the Shares.



     
A condition of the issuance of the Shares as to which an Option
shall be exercised shall be the payment of the Option Price. The
Option Price of any Option shall be payable to the Company in
full either: (a) in cash or its equivalent; (b) by
tendering (either by actual delivery or attestation) previously
acquired Shares having an aggregate Fair Market Value at the
time of exercise equal to the Option Price (provided that except
as otherwise determined by the Committee, the Shares that are
tendered must have been held by the Participant for at least six
(6) months (or such other period, if any, as the Committee
may permit) prior to their tender to satisfy the Option Price if
acquired under this Plan or any other compensation plan
maintained by the Company or have been purchased on the open
market); (c) by a cashless (broker-assisted) exercise;
(d) by a combination of (a), (b) and/or (c); or
(e) any other method approved or accepted by the Committee
in its sole discretion.



     
Subject to any governing rules or regulations, as soon as
practicable after receipt of written notification of exercise
and full payment (including satisfaction of any applicable tax
withholding), the Company shall deliver to the Participant
evidence of book entry Shares, or upon the Participant’s
request, Share certificates in an appropriate amount based upon
the number of Shares purchased under the Option(s).



     
Unless otherwise determined by the Committee, all payments under
all of the methods indicated above shall be paid in United
States dollars.



     
6.7     Restrictions on Share
Transferability. The Committee may impose such restrictions
on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable,
including, without limitation, minimum holding period
requirements, restrictions under applicable federal securities
laws, under the requirements of any stock exchange or market
upon which such Shares are then listed and/or traded, or under
any blue sky or state securities laws applicable to such Shares.



     
6.8     Termination of
Employment. Each Participant’s Award Agreement shall
set forth the extent to which the Participant shall have the
right to exercise the Option following termination of the
Participant’s



8







 




employment or provision of services to the Company, its
Affiliates, and/or its Subsidiaries, as the case may be. Such
provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into
with each Participant, need not be uniform among all Options
issued pursuant to this Article 6, and may reflect
distinctions based on the reasons for termination.



     
6.9     Notification of
Disqualifying Disposition. If any Participant shall make any
disposition of Shares issued pursuant to the exercise of an ISO
under the circumstances described in Code Section 421(b)
(relating to certain disqualifying dispositions), such
Participant shall notify the Company of such disposition within
ten (10) calendar days thereof.




Article 7.




Stock Appreciation Rights



     
7.1     Grant of SARs. Subject
to the terms and conditions of this Plan, SARs may be granted to
Participants at any time and from time to time as shall be
determined by the Committee.



     
Subject to the terms and conditions of this Plan, the Committee
shall have complete discretion in determining the number of SARs
granted to each Participant and, consistent with the provisions
of this Plan, in determining the terms and conditions pertaining
to such SARs.



     
The Grant Price for each grant of a SAR shall be determined by
the Committee and shall be specified in the Award Agreement;
provided, however, the Grant Price on the Grant Date must be at
least equal to one hundred percent (100%) of the FMV of the
Shares as determined on the Grant Date.



     
7.2     SAR Agreement. Each SAR
Award shall be evidenced by an Award Agreement that shall
specify the Grant Price, the term of the SAR, and such other
provisions as the Committee shall determine.



     
7.3     Term of SAR. The term of
a SAR granted under this Plan shall be determined by the
Committee, in its sole discretion, and except as determined
otherwise by the Committee and specified in the SAR Award
Agreement, no SAR shall be exercisable later than the tenth
(10th) anniversary date of its grant. Notwithstanding the
foregoing, for SARs granted to Participants outside the United
States, the Committee has the authority to grant SARs that have
a term greater than ten (10) years.



     
7.4     Exercise of SARs. SARs
may be exercised upon whatever terms and conditions the
Committee, in its sole discretion, imposes.



     
7.5     Settlement of SARs. Upon
the exercise of a SAR, a Participant shall be entitled to
receive payment from the Company in an amount determined by
multiplying:






		
	 	     
    (a) The excess of the Fair Market Value of a Share on the
    date of exercise over the Grant Price; by
	 
	 	     
    (b) The number of Shares with respect to which the SAR is
    exercised.



     
At the discretion of the Committee, the payment upon SAR
exercise may be in cash, Shares, or any combination thereof, or
in any other manner approved by the Committee in its sole
discretion. The Committee’s determination regarding the
form of SAR payout shall be set forth in the Award Agreement
pertaining to the grant of the SAR.



     
7.6     Termination of
Employment. Each Award Agreement shall set forth the extent
to which the Participant shall have the right to exercise the
SAR following termination of the Participant’s employment
with or provision of services to the Company, its Affiliates,
and/or its Subsidiaries, as the case may be. Such provisions
shall be determined in the sole discretion of the Committee,
shall be included in the Award Agreement entered into with
Participants, need not be uniform among all SARs issued pursuant
to this Plan, and may reflect distinctions based on the reasons
for termination.



     
7.7     Other Restrictions. The
Committee shall impose such other conditions and/or restrictions
on any Shares received upon exercise of a SAR granted pursuant
to this Plan as it may deem advisable or desirable. These
restrictions may include, but shall not be limited to, a
requirement that the Participant hold the Shares received upon
exercise of a SAR for a specified period of time.



9







 




Article 8.




Restricted Stock and Restricted Stock Units



     
8.1     Grant of Restricted Stock or
Restricted Stock Units. Subject to the terms and provisions
of this Plan or an Award Agreement, the Committee, at any time
and from time to time, may grant Shares of Restricted Stock
and/or Restricted Stock Units to Participants in such amounts as
the Committee shall determine. Restricted Stock Units shall be
similar to Restricted Stock except that no Shares are actually
awarded to the Participant on the Grant Date.



     
8.2     Restricted Stock or
Restricted Stock Unit Agreement. Each Restricted Stock
and/or Restricted Stock Unit grant shall be evidenced by an
Award Agreement that shall specify the Period(s) of Restriction,
the number of Shares of Restricted Stock or the number of
Restricted Stock Units granted, and such other provisions as the
Committee shall determine.



     
8.3     Other Restrictions. The
Committee shall impose such other conditions and/or restrictions
on any Shares of Restricted Stock or Restricted Stock Units
granted pursuant to this Plan as it may deem advisable
including, without limitation, a requirement that Participants
pay a stipulated purchase price for each Share of Restricted
Stock or each Restricted Stock Unit, restrictions based upon the
achievement of specific performance goals, time-based
restrictions on vesting following the attainment of the
performance goals, time-based restrictions, and/or restrictions
under applicable laws or under the requirements of any stock
exchange or market upon which such Shares are listed or traded,
or holding requirements or sale restrictions placed on the
Shares by the Company upon vesting of such Restricted Stock or
Restricted Stock Units.



     
To the extent deemed appropriate by the Committee, the Company
may retain the certificates representing Shares of Restricted
Stock in the Company’s possession until such time as all
conditions and/or restrictions applicable to such Shares have
been satisfied or lapse.



     
Except as otherwise provided in this Article 8, Shares of
Restricted Stock covered by each Restricted Stock Award shall
become freely transferable by the Participant after all
conditions and restrictions applicable to such Shares have been
satisfied or lapse (including satisfaction of any applicable tax
withholding obligations), and Restricted Stock Units shall be
paid in cash, Shares, or a combination of cash and Shares as the
Committee, in its sole discretion shall determine.



     
8.4     Certificate Legend. In
addition to any legends placed on certificates pursuant to
Section 8.3, each certificate representing Shares of
Restricted Stock granted pursuant to this Plan may bear a legend
such as the following or as otherwise determined by the
Committee in its sole discretion:



     
The sale or transfer of the common shares of The Scotts
Miracle-Gro Company represented by this certificate, whether
voluntary, involuntary, or by operation of law, is subject to
certain restrictions on transfer as set forth in The Scotts
Miracle-Gro Company 2006 Long-Term Incentive Plan, and in the
associated Award Agreement. A copy of this Plan and such Award
Agreement will be provided by The Scotts Miracle-Gro Company,
without charge, within five (5) days after receipt of a
written request therefor.



     
8.5     Voting Rights. Unless
otherwise determined by the Committee and set forth in a
Participant’s Award Agreement, to the extent permitted or
required by law, as determined by the Committee, Participants
holding Shares of Restricted Stock granted hereunder may be
granted the right to exercise full voting rights with respect to
those Shares during the Period of Restriction. A Participant
shall have no voting rights with respect to any Restricted Stock
Units granted hereunder.



     
8.6     Termination of
Employment. Each Award Agreement shall set forth the extent
to which the Participant shall have the right to retain
Restricted Stock and/or Restricted Stock Units following
termination of the Participant’s employment with or
provision of services to the Company, its Affiliates, and/or its
Subsidiaries, as the case may be. Such provisions shall be
determined in the sole discretion of the Committee, shall be
included in the Award Agreement entered into with each
Participant, need not be uniform among all Shares of Restricted
Stock or Restricted Stock Units issued pursuant to this Plan,
and may reflect distinctions based on the reasons for
termination.



10







 



     
8.7     Section 83(b)
Election. The Committee may provide in an Award Agreement
that the Award of Restricted Stock is conditioned upon the
Participant making or refraining from making an election with
respect to the Award under Code Section 83(b). If a
Participant makes an election pursuant to Code
Section 83(b) concerning a Restricted Stock Award, the
Participant shall be required to file promptly a copy of such
election with the Company.




Article 9.




Performance Units/ Performance Shares



     
9.1     Grant of Performance Units/
Performance Shares. Subject to the terms and provisions of
this Plan, the Committee, at any time and from time to time, may
grant Performance Units and/or Performance Shares to
Participants in such amounts and upon such terms as the
Committee shall determine.



     
9.2     Value of Performance Units/
Performance Shares. Each Performance Unit shall have an
initial value that is established by the Committee at the time
of grant. Each Performance Share shall have an initial value
equal to the Fair Market Value of a Share on the Grant Date. The
Committee shall set performance goals in its discretion which,
depending on the extent to which they are met, will determine
the value and/or number of Performance Units/ Performance Shares
that will be paid out to the Participant.



     
9.3     Earning of Performance
Units/ Performance Shares. Subject to the terms of this
Plan, after the applicable Performance Period has ended, the
holder of Performance Units/ Performance Shares shall be
entitled to receive payout on the value and number of
Performance Units/ Performance Shares earned by the Participant
over the Performance Period, to be determined as a function of
the extent to which the corresponding performance goals have
been achieved.



     
9.4     Form and Timing of Payment
of Performance Units/ Performance Shares. Payment of earned
Performance Units/ Performance Shares shall be as determined by
the Committee and as evidenced in the Award Agreement. Subject
to the terms of this Plan, the Committee, in its sole
discretion, may pay earned Performance Units/ Performance Shares
in the form of cash or in Shares (or in a combination thereof)
equal to the value of the earned Performance Units/ Performance
Shares at the close of the applicable Performance Period, or as
soon as practicable after the end of the Performance Period. Any
Shares may be granted subject to any restrictions deemed
appropriate by the Committee. The determination of the Committee
with respect to the form of payout of such Awards shall be set
forth in the Award Agreement pertaining to the grant of the
Award.



     
9.5     Termination of
Employment. Each Award Agreement shall set forth the extent
to which the Participant shall have the right to retain
Performance Units and/or Performance Shares following
termination of the Participant’s employment with or
provision of services to the Company, its Affiliates, and/or its
Subsidiaries, as the case may be. Such provisions shall be
determined in the sole discretion of the Committee, shall be
included in the Award Agreement entered into with each
Participant, need not be uniform among all Awards of Performance
Units or Performance Shares issued pursuant to this Plan, and
may reflect distinctions based on the reasons for termination.




Article 10.




Cash-Based Awards and Other Stock-Based Awards



     
10.1     Grant of Cash-Based
Awards. Subject to the terms and provisions of the Plan, the
Committee, at any time and from time to time, may grant
Cash-Based Awards to Participants in such amounts and upon such
terms as the Committee may determine.



     
10.2     Other Stock-Based
Awards. The Committee may grant other types of equity-based
or equity-related Awards not otherwise described by the terms of
this Plan (including the grant or offer for sale of unrestricted
Shares) in such amounts and subject to such terms and
conditions, as the Committee shall determine. Such Awards may
involve the transfer of actual Shares to Participants, or
payment in cash or



11







 




otherwise of amounts based on the value of Shares and may
include, without limitation, Awards designed to comply with or
take advantage of the applicable local laws of jurisdictions
other than the United States.



     
10.3     Value of Cash-Based and
Other Stock-Based Awards. Each Cash-Based Award shall
specify a payment amount or payment range as determined by the
Committee. Each Other Stock-Based Award shall be expressed in
terms of Shares or units based on Shares, as determined by the
Committee. The Committee may establish performance goals in its
discretion. If the Committee exercises its discretion to
establish performance goals, the number and/or value of
Cash-Based Awards or Other Stock-Based Awards that will be paid
out to the Participant will depend on the extent to which the
performance goals are met.



     
10.4     Payment of Cash-Based
Awards and Other Stock-Based Awards. Payment, if any, with
respect to a Cash-Based Award or an Other Stock-Based Award
shall be made in accordance with the terms of the Award, in cash
or Shares as the Committee determines.



     
10.5     Termination of
Employment. The Committee shall determine the extent to
which the Participant shall have the right to receive Cash-Based
Awards or Other Stock-Based Awards following termination of the
Participant’s employment with or provision of services to
the Company, its Affiliates, and/or its Subsidiaries, as the
case may be. Such provisions shall be determined in the sole
discretion of the Committee, such provisions may be included in
an agreement entered into with each Participant, but need not be
uniform among all Awards of Cash-Based Awards or Other
Stock-Based Awards issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination.




Article 11.




Transferability of Awards



     
11.1     Transferability. Except
as provided in Section 11.2 below, during a
Participant’s lifetime, his or her Awards shall be
exercisable only by the Participant or the Participant’s
legal representative. Awards shall not be transferable other
than by will or the laws of descent and distribution; no Awards
shall be subject, in whole or in part, to attachment, execution,
or levy of any kind; and any purported transfer in violation
hereof shall be null and void. The Committee may establish such
procedures as it deems appropriate for a Participant to
designate a beneficiary to whom any amounts payable or Shares
deliverable in the event of, or following, the
Participant’s death, may be provided.



     
11.2     Committee Action. The
Committee may, in its discretion, determine that notwithstanding
Section 11.1, any or all Awards (other than ISOs) shall be
transferable to and exercisable by such transferees, and subject
to such terms and conditions, as the Committee may deem
appropriate; provided, however, no Award may be transferred for
value (as defined in the General Instructions to Form S-8).




Article 12.




Performance Measures



     
12.1     Performance Measures.
The performance goals upon which the payment or vesting of an
Award to a Covered Employee that is intended to qualify as
Performance-Based Compensation shall be limited to the following
Performance Measures:






		
	 	     
    (a) Net earnings or net income (before or after taxes);
	 
	 	     
    (b) Earnings per share (basic or diluted);
	 
	 	     
    (c) Net sales or revenue growth;
	 
	 	     
    (d) Net operating profit;
	 
	 	     
    (e) Return measures (including, but not limited to, return
    on assets, capital, invested capital, equity, sales, or revenue);
	 
	 	     
    (f) Cash flow (including, but not limited to, operating
    cash flow, free cash flow, cash flow return on equity, and cash
    flow return on investment);



12







 






		
	 	     
    (g) Earnings before or after taxes, interest, depreciation,
    and/or amortization;
	 
	 	     
    (h) Gross or operating margins;
	 
	 	     
    (i) Productivity ratios;
	 
	 	     
    (j) Share price (including, but not limited to, growth
    measures and total shareholder return);
	 
	 	     
    (k) Expense targets;
	 
	 	     
    (l) Margins;
	 
	 	     
    (m) Operating efficiency;
	 
	 	     
    (n) Market share;
	 
	 	     
    (o) Customer satisfaction;
	 
	 	     
    (p) Working capital targets;
	 
	 	     
    (q) Economic value added or EVA® (net operating profit
    after tax minus the sum of capital multiplied by the cost of
    capital);
	 
	 	     
    (r) Developing new products and lines of revenue;
	 
	 	     
    (s) Reducing operating expenses;
	 
	 	     
    (t) Developing new markets;
	 
	 	     
    (u) Meeting completion schedules
	 
	 	     
    (v) Developing and managing relationships with regulatory
    and other governmental agencies;
	 
	 	     
    (w) Managing cash;
	 
	 	     
    (x) Managing claims against the Company, including
    litigation;
	 
	 	     
    (y) Identifying and completing strategic
    acquisitions; and



     
Any Performance Measure(s) may be used to measure the
performance of the Company, Subsidiary, and/or Affiliate as a
whole or any business unit of the Company, Subsidiary, and/or
Affiliate or any combination thereof, as the Committee may deem
appropriate, or any of the above Performance Measures as
compared to the performance of a group of comparator companies,
or published or special index that the Committee, in its sole
discretion, deems appropriate, or the Committee may select
Performance Measure (j) above as compared to various stock
market indices. The Committee also has the authority to provide
for accelerated vesting of any Award based on the achievement of
performance goals pursuant to the Performance Measures specified
in this Article 12.



     
12.2     Evaluation of
Performance. The Committee may provide in any such Award
that any evaluation of performance may include or exclude any of
the following events that occurs during a Performance Period:
(a) asset write-downs, (b) litigation or claim
judgments or settlements, (c) the effect of changes in tax
laws, accounting principles, or other laws or provisions
affecting reported results, (d) any reorganization and
restructuring programs, (e) extraordinary nonrecurring
items as described in Accounting Principles Board Opinion
No. 30 and/or in management’s discussion and analysis
of financial condition and results of operations appearing in
the Company’s annual report to shareholders for the
applicable year, (f) acquisitions or divestitures, and
(g) foreign exchange gains and losses. To the extent such
inclusions or exclusions affect Awards to Covered Employees,
they shall be prescribed in a form that meets the requirements
of Code Section 162(m) for deductibility.



     
12.3     Adjustment of
Performance-Based Compensation. Awards that are intended to
qualify as Performance-Based Compensation may not be adjusted
upward. The Committee shall retain the discretion to adjust such
Awards downward, either on a formula or discretionary basis or
any combination, as the Committee determines.



     
12.4     Committee Discretion.
In the event that applicable tax and/or securities laws change
to permit Committee discretion to alter the governing
Performance Measures without obtaining shareholder approval of
such changes, the Committee shall have sole discretion to make
such changes without obtaining



13







 




shareholder approval. In addition, in the event that the
Committee determines that it is advisable to grant Awards that
shall not qualify as Performance-Based Compensation, the
Committee may make such grants without satisfying the
requirements of Code Section 162(m) and base vesting on
Performance Measures other than those set forth in
Section 12.1.




Article 13.




Nonemployee Director Awards



     
The Board shall determine all Awards to Nonemployee Directors.
The terms and conditions of any grant to any such Nonemployee
Director shall be set forth in an Award Agreement.




Article 14.




Dividend Equivalents



     
Any Participant selected by the Committee may be granted
dividend equivalents based on the dividends declared on Shares
that are subject to any Award, to be credited as of dividend
payment dates, during the period between the date the Award is
granted and the date the Award is exercised, vests or expires,
as determined by the Committee. Such dividend equivalents shall
be converted to cash or additional Shares by such formula and at
such time and subject to such limitations as may be determined
by the Committee.




Article 15.




Beneficiary Designation



     
Each Participant under this Plan may, from time to time, name
any beneficiary or beneficiaries (who may be named contingently
or successively) to whom any benefit under this Plan is to be
paid in case of his death before he receives any or all of such
benefit. Each such designation shall revoke all prior
designations by the same Participant, shall be in a form
prescribed by the Committee, and will be effective only when
filed by the Participant in writing with the Company during the
Participant’s lifetime. In the absence of any such
beneficiary designation, benefits remaining unpaid or rights
remaining unexercised at the Participant’s death shall be
paid to or exercised by the Participant’s spouse, executor,
administrator, or legal representative.




Article 16.




Rights of Participants



     
16.1     Employment. Nothing in
this Plan or an Award Agreement shall interfere with or limit in
any way the right of the Company, its Affiliates, and/or its
Subsidiaries, to terminate any Participant’s employment or
service on the Board or to the Company at any time or for any
reason not prohibited by law, nor confer upon any Participant
any right to continue his employment or service as a Director or
Third Party Service Provider for any specified period of time.



     
Neither an Award nor any benefits arising under this Plan shall
constitute an employment contract with the Company, its
Affiliates, and/or its Subsidiaries and, accordingly, subject to
Articles 3 and 18, this Plan and the benefits
hereunder may be terminated at any time in the sole and
exclusive discretion of the Committee without giving rise to any
liability on the part of the Company, its Affiliates, and/or its
Subsidiaries.



     
16.2     Participation. No
individual shall have the right to be selected to receive an
Award under this Plan, or, having been so selected, to be
selected to receive a future Award.



     
16.3     Rights as a
Shareholder. Except as otherwise provided herein, a
Participant shall have none of the rights of a shareholder with
respect to Shares covered by any Award until the Participant
becomes the record holder of such Shares.



14







 




Article 17.




Change of Control



     
17.1     Accelerated Vesting and
Settlement. Subject to Section 17.2, on the date of any
Change in Control:






		
	 	     
    (a) Each Option and SAR (other than Options and SARs of
    Nonemployee Directors) outstanding on the date of a Change in
    Control (whether or not exercisable) will be cancelled in
    exchange (i) for cash equal to the excess of the Change in
    Control Price over the Exercise Price or Grant Price, as
    applicable, associated with the cancelled Option or SAR or,
    (ii) at the Committee’s discretion, for whole Shares
    with a Fair Market Value equal to the excess of the Change in
    Control Price over the Exercise Price or Grant Price, as
    applicable, associated with the cancelled Option or SAR and the
    Fair Market Value of any fractional Share will be distributed in
    cash. However, the Committee, in its sole discretion, may offer
    the holders of the Options or SARs to be cancelled a reasonable
    opportunity (not longer than 15 days beginning on the date
    of the Change in Control) to exercise all their outstanding
    Options and SARs (whether or not otherwise then exercisable);
	 
	 	     
    (b) All performance goals associated with Awards for which
    performance goals have been established will be deemed to have
    been met on the date of the Change in Control, all Performance
    Periods accelerated to the date of the Change in Control and all
    outstanding Awards for which performance goals have been
    established (including those subject to the acceleration
    described in this subsection) will be distributed in a single
    lump sum cash payment; and
	 
	 	     
    (c) All other then-outstanding Awards whose exercisability
    depends merely on the satisfaction of a service obligation by a
    Participant to the Company, Subsidiary, or Affiliate
    (“Service Award”) shall vest in full and be free of
    restrictions related to the vesting of such Awards. All Service
    Awards whose vesting is so accelerated will be distributed, if
    not already held by a Participant, (i) in a single lump-sum
    cash payment based on the Change in Control Price or,
    (ii) at the Committee’s discretion, in the form of
    whole Shares based on the Change in Control Price.



     
17.2     Alternative Awards.
Section 17.1 will not apply to the extent that the
Committee reasonably concludes in good faith before the Change
in Control occurs that Awards will be honored or assumed or new
rights substituted for the Award (collectively,
“Alternative Awards”) by the Employee’s employer
(or the parent or a subsidiary of that employer) immediately
after the Change in Control, provided that any Alternative Award
must:






		
	 	     
    (a) Be based on stock that is (or, within 60 days of
    the Change in Control, will be) traded on an established
    securities market;
	 
	 	     
    (b) Provide the Employee rights and entitlements
    substantially equivalent to or better than the rights, terms and
    conditions of each Award for which it is substituted, including
    an identical or better exercise or vesting schedule and
    identical or better timing and methods of payment;
	 
	 	     
    (c) Have substantially equivalent economic value to the
    Award (determined at the time of the Change in Control) for
    which it is substituted; and
	 
	 	     
    (d) Provide that, if the Employee’s employment is
    involuntarily terminated without cause or constructively
    terminated by the Employee, any conditions on the
    Employee’s rights under, or any restrictions on transfer or
    exercisability applicable to, each Alternative Award will be
    waived or lapse.



     
For purposes of this section, a constructive termination means a
termination by an Employee following a material reduction in the
Employee’s compensation or job responsibilities (when
compared to the Employee’s compensation and job
responsibilities on the date of the Change in Control) or the
relocation of the Employee’s principal place of employment
to a location at least fifty (50) miles from his or her
principal place of employment on the date of the Change in
Control (or other location to which the Employee has been
reassigned with his or her written consent), in each case
without the Employee’s written consent.



15







 



     
17.3     Nonemployee Directors’
Awards. Upon a Change in Control, each outstanding:






		
	 	     
    (a) Option or SAR held by a Nonemployee Director will be
    cancelled unless (a) the Shares continue to be traded on an
    established securities market after the Change in Control, or
    (b) the Nonemployee Director continues to be a Board member
    after the Change in Control. In the situations just described,
    the Options or SARs held by a Nonemployee Director will be
    unaffected by a Change in Control. Any Options and SARs held by
    a Nonemployee Director to be cancelled under the next preceding
    sentence will be exchanged (c) for cash equal to the excess
    of the Change in Control Price over the Exercise Price or Grant
    Price, as applicable, associated with the cancelled Option or
    SAR held by a Nonemployee Director, or (d) at the
    Board’s discretion, for whole Shares with a Fair Market
    Value equal to the excess of the Change in Control Price over
    the Exercise Price associated with the cancelled Option or SAR
    held by a Nonemployee Director and the Fair Market Value of any
    fractional Share will be distributed in cash. However, the
    Board, in its sole discretion, may offer Nonemployee Directors
    holding Options or SARs to be cancelled a reasonable opportunity
    (not longer than 15 days beginning on the date of the
    Change in Control) to exercise all their outstanding Options and
    SARs (whether or not otherwise then exercisable).
	 
	 	     
    (b) Restricted Stock or Restricted Stock Unit held by a
    Nonemployee Director will be settled for a lump sum cash payment
    equal to the Change in Control Price.
	 
	 	     
    (c) All other types of Awards held by Nonemployee Directors
    will be settled for a lump sum cash payment equal to the Change
    in Control Price less any amount a Nonemployee Director would be
    required to pay in order for the Award to be exercised or
    settled, other than any such amount related to taxes.




Article 18.




Amendment, Modification, Suspension, and Termination



     
18.1     Amendment, Modification,
Suspension, and Termination. Subject to Section 18.3,
the Committee may, at any time and from time to time, alter,
amend, modify, suspend, or terminate this Plan and any Award
Agreement in whole or in part; provided, however, that, without
the prior approval of the Company’s shareholders and except
as provided in Section 4.4, Options or SARs issued under
this Plan will not be repriced, replaced, or regranted through
cancellation, or by lowering the Option Price of a previously
granted Option or the Grant Price of a previously granted SAR,
and no material amendment of this Plan shall be made without
shareholder approval if shareholder approval is required by law,
regulation, or stock exchange rule.



     
18.2     Adjustment of Awards Upon
the Occurrence of Certain Unusual or Nonrecurring Events.
The Committee may make adjustments in the terms and conditions
of, and the criteria included in, Awards in recognition of
unusual or nonrecurring events (including, without limitation,
the events described in Section 4.4 hereof) affecting the
Company or the financial statements of the Company or of changes
in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are
appropriate in order to prevent unintended dilution or
enlargement of the benefits or potential benefits intended to be
made available under this Plan. The determination of the
Committee as to the foregoing adjustments, if any, shall be
conclusive and binding on Participants under this Plan.



     
18.3     Awards Previously
Granted. Notwithstanding any other provision of this Plan to
the contrary (other than Section 18.4), no termination,
amendment, suspension, or modification of this Plan or an Award
Agreement shall adversely affect in any material way any Award
previously granted under this Plan, without the written consent
of the Participant holding such Award.



     
18.4     Amendment to Conform to
Law. Notwithstanding any other provision of this Plan to the
contrary, the Board may amend the Plan or an Award Agreement, to
take effect retroactively or otherwise, as deemed necessary or
advisable for the purpose of conforming the Plan or an Award
Agreement to any present or future law relating to plans of this
or similar nature (including, but not limited to, Code
Section 409A), and to the administrative regulations and
rulings promulgated thereunder. By accepting an



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Award under this Plan, each Participant agrees to any amendment
made pursuant to this Section 18.4 to any Award granted
under the Plan without further consideration or action.




Article 19.




Withholding



     
19.1     Tax Withholding. The
Company shall have the power and the right to deduct or
withhold, or require a Participant to remit to the Company, the
minimum statutory amount to satisfy federal, state, and local
taxes, domestic or foreign, required by law or regulation to be
withheld with respect to any taxable event arising as a result
of this Plan.



     
19.2     Share Withholding. With
respect to withholding required upon the exercise of Options or
SARs, upon the lapse of restrictions on Restricted Stock and
Restricted Stock Units, or upon the achievement of performance
goals related to Performance Shares, or any other taxable event
arising as a result of an Award granted hereunder, Participants
may elect, subject to the approval of the Committee, to satisfy
the withholding requirement, in whole or in part, by having the
Company withhold Shares having a Fair Market Value on the date
the tax is to be determined equal to the minimum statutory total
tax that could be imposed on the transaction. All such elections
shall be irrevocable, made in writing, and signed by the
Participant, and shall be subject to any restrictions or
limitations that the Committee, in its sole discretion, deems
appropriate.




Article 20.




Successors



     
All obligations of the Company under this Plan with respect to
Awards granted hereunder shall be binding on any successor to
the Company, whether the existence of such successor is the
result of a direct or indirect purchase, merger, consolidation,
or otherwise, of all or substantially all of the business and/or
assets of the Company.




Article 21.




General Provisions



     
21.1     Forfeiture Events.






		
	 	     
    (a) The Committee may specify in an Award Agreement that
    the Participant’s rights, payments, and benefits with
    respect to an Award shall be subject to reduction, cancellation,
    forfeiture, or recoupment upon the occurrence of certain
    specified events, in addition to any otherwise applicable
    vesting or performance conditions of an Award. Such events may
    include, but shall not be limited to, termination of employment
    for cause, termination of the Participant’s provision of
    services to the Company, Affiliate, and/or Subsidiary, violation
    of material Company, Affiliate, and/or Subsidiary policies,
    breach of noncompetition, confidentiality, or other restrictive
    covenants that may apply to the Participant, or other conduct by
    the Participant that is detrimental to the business or
    reputation of the Company, its Affiliates, and/or its
    Subsidiaries.
	 
	 	     
    (b) If the Company is required to prepare an accounting
    restatement due to the material noncompliance of the Company, as
    a result of misconduct, with any financial reporting requirement
    under the securities laws, if the Participant knowingly or
    grossly negligently engaged in the misconduct, or knowingly or
    grossly negligently failed to prevent the misconduct, or if the
    Participant is one of the individuals subject to automatic
    forfeiture under Section 304 of the Sarbanes-Oxley Act of
    2002, the Participant shall reimburse the Company the amount of
    any payment in settlement of an Award earned or accrued during
    the twelve- (12-) month period following the first public
    issuance or filing with the United States Securities and
    Exchange Commission (whichever just occurred) of the financial
    document embodying such financial reporting requirement.



     
21.2     Legend. The
certificates for Shares may include any legend which the
Committee deems appropriate to reflect any restrictions on
transfer of such Shares.



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21.3     Gender and Number.
Except where otherwise indicated by the context, any masculine
term used herein also shall include the feminine, the plural
shall include the singular, and the singular shall include the
plural.



     
21.4     Severability. In the
event any provision of this Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of this Plan, and this Plan shall be
construed and enforced as if the illegal or invalid provision
had not been included.



     
21.5     Requirements of Law.
The granting of Awards and the issuance of Shares under this
Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies
or stock exchange as may be required.



     
21.6     Delivery of Title. The
Company shall have no obligation to issue or deliver evidence of
title for Shares issued under this Plan prior to:






		
	 	     
    (a) Obtaining any approvals from governmental agencies that
    the Company determines are necessary or advisable; and
	 
	 	     
    (b) Completion of any registration or other qualification
    of the Shares under any applicable national or foreign law or
    ruling of any governmental body that the Company determines to
    be necessary or advisable.



     
21.7     Inability to Obtain
Authority. The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary to the
lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue
or sell such Shares as to which such requisite authority shall
not have been obtained.



     
21.8     Investment
Representations. The Committee may require any individual
receiving Shares pursuant to an Award under this Plan to
represent and warrant in writing that the individual is
acquiring the Shares for investment and without any present
intention to sell or distribute such Shares.



     
21.9     Employees Based Outside of
the United States. Notwithstanding any provision of this
Plan to the contrary, in order to comply with the laws in other
countries in which the Company, its Affiliates, and/or its
Subsidiaries operate or have Employees, Directors, or Third
Party Service Providers, the Committee, in its sole discretion,
shall have the power and authority to:






		
	 	     
    (a) Determine which Affiliates and Subsidiaries shall be
    covered by this Plan;
	 
	 	     
    (b) Determine which Employees, Directors, and/or Third
    Party Service Providers outside the United States are eligible
    to participate in this Plan;
	 
	 	     
    (c) Modify the terms and conditions of any Award granted to
    Employees and/or Third Party Service Providers outside the
    United States to comply with applicable foreign laws;
	 
	 	     
    (d) Establish subplans and modify exercise procedures and
    other terms and procedures, to the extent such actions may be
    necessary or advisable. Any subplans and modifications to Plan
    terms and procedures established under this Section 21.9 by
    the Committee shall be attached to this Plan document as
    appendices; and
	 
	 	     
    (e) Take any action, before or after an Award is made, that
    it deems advisable to obtain approval or comply with any
    necessary local government regulatory exemptions or approvals.



     
Notwithstanding the above, the Committee may not take any
actions hereunder, and no Awards shall be granted, that would
violate applicable law.



     
21.10     Uncertificated Shares.
To the extent that this Plan provides for issuance of
certificates to reflect the transfer of Shares, the transfer of
such Shares may be effected on a noncertificated basis, to the
extent not prohibited by applicable law or the rules of any
stock exchange.



     
21.11     Unfunded Plan.
Participants shall have no right, title, or interest whatsoever
in or to any investments that the Company, and/or its
Subsidiaries, and/or its Affiliates may make to aid it in
meeting its obligations under this Plan. Nothing contained in
this Plan, and no action taken pursuant to its



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provisions, shall create or be construed to create a trust of
any kind, or a fiduciary relationship between the Company and
any Participant, beneficiary, legal representative, or any other
individual. To the extent that any individual acquires a right
to receive payments from the Company, its Subsidiaries, and/or
its Affiliates under this Plan, such right shall be no greater
than the right of an unsecured general creditor of the Company,
a Subsidiary, or an Affiliate, as the case may be. All payments
to be made hereunder shall be paid from the general funds of the
Company, a Subsidiary, or an Affiliate, as the case may be and
no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such
amounts except as expressly set forth in this Plan.



     
21.12     No Fractional Shares.
No fractional Shares shall be issued or delivered pursuant to
this Plan or any Award. The Committee shall determine whether
cash, Awards, or other property shall be issued or paid in lieu
of fractional Shares or whether such fractional Shares or any
rights thereto shall be forfeited or otherwise eliminated.



     
21.13     Retirement and Welfare
Plans. Neither Awards made under this Plan nor Shares or
cash paid pursuant to such Awards may be included as
“compensation” for purposes of computing the benefits
payable to any Participant under the Company’s or any
Subsidiary’s or Affiliate’s retirement plans (both
qualified and non-qualified) or welfare benefit plans unless
such other plan expressly provides that such compensation shall
be taken into account in computing a Participant’s benefit.



     
21.14     Deferred Compensation.
No deferral of compensation (as defined under Code
Section 409A or guidance thereto) is intended under this
Plan. Notwithstanding this intent, if any Award would be
considered deferred compensation as defined under Code
Section 409A and if this Plan fails to meet the
requirements of Code Section 409A with respect to such
Award, then such Award shall be null and void. However, the
Committee may permit deferrals of compensation pursuant to the
terms of a Participant’s Award Agreement, a separate plan
or a subplan which meets the requirements of Code
Section 409A and any related guidance. Additionally, to the
extent any Award is subject to Code Section 409A,
notwithstanding any provision herein to the contrary, the Plan
does not permit the acceleration or delay of the time or
schedule of any distribution related to such Award, except as
permitted by Code Section 409A, the regulations thereunder,
and/or the Secretary of the United States Treasury.



     
21.15     Nonexclusivity of this
Plan. The adoption of this Plan shall not be construed as
creating any limitations on the power of the Board or Committee
to adopt such other compensation arrangements as it may deem
desirable for any Participant.



     
21.16     No Constraint on Corporate
Action. Nothing in this Plan shall be construed to:
(i) limit, impair, or otherwise affect the Company’s
or a Subsidiary’s or an Affiliate’s right or power to
make adjustments, reclassifications, reorganizations, or changes
of its capital or business structure, or to merge or
consolidate, or dissolve, liquidate, sell, or transfer all or
any part of its business or assets; or, (ii) limit the
right or power of the Company or a Subsidiary or an Affiliate to
take any action which such entity deems to be necessary or
appropriate.



     
21.17     Governing Law. The
Plan and each Award Agreement shall be governed by the laws of
the State of Ohio, excluding any conflicts or choice of law rule
or principle that might otherwise refer construction or
interpretation of this Plan to the substantive law of another
jurisdiction. Unless otherwise provided in the Award Agreement,
recipients of an Award under this Plan are deemed to submit to
the exclusive jurisdiction and venue of the federal or state
courts of Ohio, to resolve any and all issues that may arise out
of or relate to this Plan or any related Award Agreement.



     
21.18     Indemnification.
Subject to requirements of Ohio law, each individual who is or
shall have been a member of the Board, or a Committee appointed
by the Board, or an officer of the Company to whom authority was
delegated in accordance with Article 3, shall be
indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which
he or she may be a party or in which he or she may be involved
by reason of any action taken or failure to act under this Plan
and against and from any and all amounts paid by him or her in
settlement thereof, with the Company’s approval, or paid by
him or her in satisfaction of any judgment in any such action,



19







 




suit, or proceeding against him or her, provided he or she shall
give the Company an opportunity, at its own expense, to handle
and defend the same before he or she undertakes to handle and
defend it on his/her own behalf, unless such loss, cost,
liability, or expense is a result of his/her own willful
misconduct or except as expressly provided by statute.



     
The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such individuals
may be entitled under the Company’s Articles of
Incorporation or Code of Regulations, as a matter of law, or
otherwise, or any power that the Company may have to indemnify
them or hold them harmless.



20