EX-10.R.2



 





Exhibit 10
(r)(2)




The Scotts Miracle-Gro Company




Amended and Restated




2006 Long-Term Incentive Plan




Effective as of October 30, 2007




 









 








Contents




	 	 	 	 	 	 	 
	Article 1.

	 	Establishment, Purpose, and Duration
	 	 	1	 
	Article 2.

	 	Definitions
	 	 	1	 
	Article 3.

	 	Administration
	 	 	8	 
	Article 4.

	 	Shares Subject to this Plan and Maximum Awards
	 	 	9	 
	Article 5.

	 	Eligibility and Participation
	 	 	11	 
	Article 6.

	 	Stock Options
	 	 	12	 
	Article 7.

	 	Stock Appreciation Rights
	 	 	14	 
	Article 8.

	 	Restricted Stock and Restricted Stock Units
	 	 	15	 
	Article 9.

	 	Performance Units/Performance Shares
	 	 	17	 
	Article 10.

	 	Cash-Based Awards and Other Stock-Based Awards
	 	 	18	 
	Article 11.

	 	Transferability of Awards
	 	 	18	 
	Article 12.

	 	Performance Measures
	 	 	19	 
	Article 13.

	 	Nonemployee Director Awards
	 	 	21	 
	Article 14.

	 	Dividend Equivalents
	 	 	21	 
	Article 15.

	 	Beneficiary Designation
	 	 	21	 
	Article 16.

	 	Rights of Participants
	 	 	22	 
	Article 17.

	 	Change of Control
	 	 	22	 
	Article 18.

	 	Amendment, Modification, Suspension, and Termination
	 	 	25	 
	Article 19.

	 	Withholding
	 	 	26	 
	Article 20.

	 	Successors
	 	 	26	 
	Article 21.

	 	General Provisions
	 	 	26	 






 









 





THE SCOTTS MIRACLE-GRO COMPANY

AMENDED AND RESTATED

2006 LONG-TERM INCENTIVE PLAN

(EFFECTIVE AS OF OCTOBER 30, 2007)




Article 1.




Establishment, Purpose, and Duration



1.1 Establishment. This Plan, an incentive compensation plan, was established by The Scotts
Miracle-Gro Company. This Plan was originally effective on January 26, 2006 (the “Effective
Date”), and is hereby amended and restated effective as of October 30, 2007, as set forth in this
document. This Plan shall remain in effect as provided in Section 1.3 hereof.




     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.



     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 on January 25, 2016. 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 after November 1, 2015.



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.



     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.



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     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 Sections 13(d) and
14(d)(2) of the Exchange Act, 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]
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 (i) 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 (ii) 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.




Notwithstanding the foregoing, an Award that is subject to Code Section 409A will not be
paid or settled upon a Change in Control unless the Change in Control also constitutes a
“change in control event” under Code Section 409A and Treasury Regulation Section
1.409A-3(i)(5).



     2.10 “Change in Control Price” means the price per Share paid 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.



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     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.



     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 having 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.



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     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 relevant date if it is a trading day or, if such date
is not a trading day, on the next trading day. In the event Shares are not publicly traded at the
time a determination of their value is required to be made hereunder (a) with respect to NQSOs,
SARs and Awards that are subject to Code Section 409A, “Fair Market Value” shall mean the value as
determined by the Committee through the reasonable application of a reasonable valuation method,
taking into account all information material to the value of the Company, within the meaning of
Code Section 409A and (b) with respect to all other Awards, the determination of “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 an 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 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.



     2.26 “Nonemployee Director Award” means any NQSO, SAR, or Full Value Award granted to a
Participant who is a Nonemployee Director pursuant to such applicable



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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 the exercise of 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



6









 




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 Amended and Restated 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 Amended and Restated 2003 Stock Option
and Incentive Equity Plan, as amended, and The Scotts Miracle-Gro Company Amended and Restated 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.



     2.45 “Stock Appreciation Right” or “SAR” means an Award, designated as an 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 “Termination” or “Terminate” means: (a) if a Participant is an Employee, cessation of the
employee-employer relationship between a Participant and the Company and all Affiliates and
Subsidiaries for any reason; (b) if a Participant is a Nonemployee Director, termination of the
Nonemployee Director’s service on the Board for any reason; and (c) if a Participant is a Third
Party Service Provider, termination of the Third Party Service Provider’s service relationship with
the Company and all Affiliates and Subsidiaries for any reason. Notwithstanding the foregoing,
with respect to any Award subject to Code Section 409A, any such cessation or termination also must
constitute a “separation from service” as defined under Treasury Regulation Section 1.409A-1(h).



     2.48 “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.



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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.



9









 





     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 aggregate 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 Awards of
Restricted Stock or Restricted Stock Units in any one Plan Year to any one Participant
shall be one hundred thousand (100,000) Shares, as adjusted pursuant to Sections 4.4 and/or
18.2.




     (d) Performance Units or Performance Shares: The maximum aggregate Awards 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 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 grants 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



10









 




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.



     Notwithstanding anything to the contrary in this Section 4.4, an adjustment to an Option or
SAR shall be made only to the extent such adjustment complies with the requirements of Code Section
409A.




     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 409A, 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



11









 




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 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 the 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; provided, further, however, that the Option Price
must be at least equal to one hundred and ten percent (110%) of the FMV of a Share on the Grant
Date with respect to any ISO issued to a Participant who, on the Grant Date, owns (as defined in
Code §424(d)) stock possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or of its subsidiary corporation (as defined in Code §424(f))
(a “10% Shareholder”).




     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; provided, further,
however, that no ISO granted to a 10% Shareholder shall be exercisable later than the day before
the fifth (5th) anniversary of its Grant Date. 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.
Notwithstanding anything in this Plan to the contrary, to the extent that



12









 




the aggregate FMV of the Shares (determined as of the Grant Date of the applicable ISO) with
respect to which ISOs are exercisable for the first time by a Participant during any calendar year
(under all plans of the Company and its subsidiary corporations (as defined in Code §424(f))
exceeds $100,000, such Options shall be treated as Nonqualified Stock Options.




     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 or Service. Each Participant’s Award Agreement shall set forth
the extent to which the Participant shall have the right to exercise the Option following the
Participant’s Termination. 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.



13









 





     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 an 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 an 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 an 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.



14









 





     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 or Service. Each Award Agreement shall set forth the extent to
which the Participant shall have the right to exercise the SAR following the Participant’s
Termination. 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 an 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 an SAR for a specified period of
time.



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.



15









 





     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 Amended and Restated 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 or Service. 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 the Participant’s Termination. 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.



     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.



16









 





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 or Service. 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 the Participant’s Termination. 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.



17









 





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 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 and as specified in the Award Agreement.



     10.5 Termination of Employment or Service. 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 the Participant’s Termination. Such provisions shall be determined in the sole discretion
of the Committee, shall be included in an agreement entered into with each Participant, 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



18









 




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);
	 
	 	(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;




19









 






	 	(o)	 	Customer satisfaction;
	 
	 	(p)	 	Working capital targets;
	 
	 	(q)	 	Economic value added or EVA(R) (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;
and
	 
	 	(y)	 	Identifying and completing strategic acquisitions.





     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 Company 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



20









 




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 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 (other than Options or SARs), to be
credited as of dividend payment dates, during the period between the Grant Date and the date the
Award 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



21









 




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 or Service. 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 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.



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 Option 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 Option 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);



22









 






     (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 within thirty (30) days following such Change in Control; and




     (c) All other then-outstanding Awards whose exercisability or vesting 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 and to the extent applicable, (i) in a
single lump-sum cash payment within thirty (30) days following such Change in Control 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 Third Party Service Provider’s employer (or the parent or a subsidiary of
such employers) 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 with the 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, in the case
of an Award that is not subject to Section 409A of the Code, 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 is involuntarily Terminated without Cause or the
Employee constructively Terminates, 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



23









 




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.




     Notwithstanding anything herein to the contrary, no Alternative Award shall be made with
respect to an Option or SAR if it would cause the Option or SAR to fail to comply with the
requirements of Code Section 409A.



     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 (i) the
Shares continues to be traded on an established securities market after the Change in
Control or (ii) 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
(iii) for cash equal to the excess of the Change in Control Price over the Option Price or
Grant Price, as applicable, associated with the cancelled Option or SAR held by a
Nonemployee Director or, (iv) 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 Option Price or
Grant Price, as applicable, 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 within thirty (30) days following such Change in Control for a lump sum cash
payment equal to the Change in Control Price.




     (c) All other types of Awards held by a Nonemployee Director will be settled within
thirty (30) days following such Change in Control for a lump sum cash payment equal to the
Change in Control Price less any amount the Nonemployee



24









 






     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. Notwithstanding anything to the contrary in this Section
18.2, an adjustment to an Option or SAR shall be made only to the extent such adjustment complies
with the requirements of Code Section 409A.



     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 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.



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Article 19.




Withholding




     19.1 Tax Withholding. The Company shall have the power and the right to deduct or withhold at
the time amounts under the Plan are distributed, 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, a Participant 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; provided that such Shares
would otherwise be distributable to the Participant at the time of the withholding. 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



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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 first occurs) 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.



     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; 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.



     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.



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     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 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,



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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. 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, other than with
respect to Options and SARs, the Committee (or, with respect to Nonemployee Directors, the Board)
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 Treasury 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



29









 




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, 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.



     21.19 Controlling Language. Unless otherwise specified herein, in the event of a conflict
between the terms of the Plan and the terms of an Award Agreement, the terms of the Plan shall
control.




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