Document:

EX-10.3

 

Exhibit 10.3

THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES

THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.

THE SCOTTS MIRACLE-GRO COMPANY

2006 LONG-TERM INCENTIVE PLAN

AWARD AGREEMENT FOR THIRD PARTY SERVICE PROVIDERS

[FORM OF AWARD] AWARDED TO [GRANTEE’S NAME] ON [GRANT DATE]

The Scotts Miracle-Gro Company (“Company”) and its shareholders believe that their business
interests are best served by ensuring that you have an opportunity to share in the Company’s
business success. To this end, the Company adopted and its shareholders approved The Scotts
Miracle-Gro Company 2006 Long-Term Incentive Plan (“Plan”) through which key service providers,
like you, may acquire (or share in the appreciation of) common shares of the Company.

We cannot guarantee that the value of your Award (or the value of the common shares you acquire
through an Award) will increase. This is because the value of the Company’s common shares is
affected by many factors. However, the Company believes that your efforts contribute to the value
of the Company’s common shares and that the Plan (and the Awards made through the Plan) is an
appropriate means of sharing with you the value of your contribution to the Company’s business
success.

Your participation in this plan does not alter your status as an independent contractor of the
Company and does not create any rights to any employee benefits offered by the Company to its
employees.

This Award Agreement describes the type of Award that you have been granted and the conditions that
must be met before you may receive the value associated with your Award. To ensure you fully
understand these terms and conditions, you should:

	 	•	 	Read the Plan and the Plan’s Prospectus carefully to ensure you understand how the Plan
works;
	 
	 	•	 	Read this Award Agreement carefully to ensure you understand the nature of your Award
and what you must do to earn it; and
	 
	 	•	 	Contact [Contact’s Name at Company], [Contact’s Title] at [Telephone Number] if you have
any questions about your Award. Or, you may send a written inquiry to the address shown
below:

The Scotts Miracle-Gro Company

Attention: [Contact’s Name at Company]

[Contact’s Title]

14111 Scottslawn Road

Marysville, Ohio 43041

Also, no later than [30 Days Post Grant Date], you must return a signed copy of this Award
Agreement to:

[Third Party Administrator]

Attention: [TPA Contact’s Name]

[Contact’s Address]

[TPA Telephone Number]

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If you do not do this, your Award will be forfeited and you will not be entitled to receive
anything on account of this Award.

Section 409A of the Internal Revenue Code (“Section 409A”) imposes substantial penalties on persons
who receive some forms of deferred compensation (see the Plan’s Prospectus for more information
about these penalties). Your Award has been designed to avoid these penalties. However, because
the Internal Revenue Service (“IRS”) has not yet issued final rules fully defining the effect of
Section 409A, it is possible that your Award Agreement must be revised after the IRS issues these
rules if you are to avoid these penalties. As a condition of accepting this Award, you must agree
to accept those revisions, without any further consideration, even if those revisions change the
terms of your Award and reduce its value or potential value.

2

 

Description of Your Restricted Stock Units

You have been awarded [Number Granted] Restricted Stock Units (or “RSUs”). If you satisfy the
conditions described in this Award Agreement, the Plan and the Prospectus, you will be issued
[Number Granted] common shares of the Company. You also must arrange to pay any taxes due on
settlement.

When Your RSUs Will Be Settled

Normally, on [Vesting Date] (“Settlement Date”), the Company will ascertain if you have satisfied
the conditions imposed on your RSUs. If you have not, your RSUs will be forfeited. If you have,
as soon as administratively practicable after [Vesting Date], [Number Granted] common shares will
be distributed to you.

The restrictions imposed on your RSUs normally will be met if you are actively engaged to perform
services for the
Company or any Affiliate or Subsidiary (as defined in the Plan) on [Vesting Date] and all other
conditions described in this Award Agreement, the Plan and the Prospectus are met.

Tax Treatment of Your RSUs

The federal income tax treatment of your RSUs is discussed in the Plan’s Prospectus.

*****

General Terms and Conditions

You Will Forfeit Your RSUs If Your Engagement For Service Ends

Normally, your RSUs will be settled on the date shown earlier in this Award Agreement. However,
the unvested portion of your RSUs will be forfeited if your engagement for service terminates
before [Vesting Date].

You May Forfeit Your RSUs if You Engage in Conduct That is Harmful to the Company (or any Affiliate
or Subsidiary)

You also will forfeit any outstanding RSUs and must return to the Company all common shares and
other amounts you have received through the Plan if, without our consent, you do any of the
following within 180 days before and 730 days after terminating your engagement for service:

[a] You serve (or agree to serve) as an officer, director, consultant or employee of any
proprietorship, partnership, corporation or other entity or become the owner of a business
or a member of a partnership that competes with any portion of the Company’s (or any
Affiliate’s or Subsidiary’s) business with which you have been involved any time within five
years before termination of your engagement for service or render any service (including,
without limitation, advertising or business consulting) to entities that compete with any
portion of the Company’s (or any Affiliate’s or Subsidiary’s) business with which you have
been involved any time within five years before termination of your engagement for service;

[b] You refuse or fail to consult with, supply information to or otherwise cooperate with
the Company or any Affiliate or Subsidiary after having been requested to do so;

3

 

[c] You deliberately engage in any action that the Company concludes has caused substantial
harm to the interests of the Company or any Affiliate or Subsidiary including but not
limited to a breach of the terms and conditions of your engagement with the Company;

[d] On your own behalf or on behalf of any other person, partnership, association,
corporation or other entity, you solicit or in any manner attempt to influence or induce any
employee of the Company or any Affiliate or Subsidiary to leave the Company’s or any
Affiliate’s or Subsidiary’s employment or use or disclose to any person, partnership,
association, corporation or other entity any information obtained while a service provider
for the Company or any Affiliate or Subsidiary concerning the names and addresses of the
Company’s and any Affiliate’s or Subsidiary’s employees;

[e] You disclose confidential and proprietary information relating to the Company’s or any
Affiliate’s or Subsidiary’s business affairs (“Trade Secrets”), including technical
information, product information and formulae, processes, business and marketing plans,
strategies, customer information and other information concerning the Company’s or any
Affiliate’s or Subsidiary’s products, promotions, development, financing, expansion plans,
business policies and practices, salaries and benefits and other forms of information
considered by the Company or any Affiliate or Subsidiary to be proprietary and confidential
and in the nature of Trade Secrets;

[f] You fail to return all property (other than personal property), including keys, notes,
memoranda, writings, lists, files, reports, customer lists, correspondence, tapes, disks,
cards, surveys, maps, logs, machines, technical data, formulae or any other tangible
property or document and any and all copies, duplicates or reproductions that you have
produced or received or have otherwise been submitted to you in the course of your
engagement with the Company or any Affiliate or Subsidiary; or

[g] You engaged in conduct that the Committee (as defined in the Plan) reasonably concludes
would have given rise to a termination of your engagement for “cause” (as defined in the
Plan) had it been discovered before you terminated service for the Company or any Affiliate
or Subsidiary.

Your RSUs May Vest Earlier Than Described Above. Normally, your RSUs will vest only in the
circumstances described above. However, if there is a “Change in Control” (as defined in the
Plan), your RSUs may vest earlier. You should read the Plan and the Prospectus carefully to ensure
that you understand how this may happen.

Rights Before Your RSUs Vest: You may not vote, or receive any dividends associated with the
common shares underlying your RSUs.

Beneficiary Designation: You may name a beneficiary or beneficiaries to receive any RSUs that are
settled after you die. This may be done only on the attached Beneficiary Designation Form and by
following the rules described in that Form. The Beneficiary Designation Form need not be completed
now and is not required as a condition of receiving your Award. If you die without completing a
Beneficiary Designation Form or if you do not complete that Form correctly, your beneficiary will
be your surviving spouse or, if you do not have a surviving spouse, your estate.

Transferring Your RSUs: Normally your RSUs may not be transferred to another person. However, you
may complete a Beneficiary Designation Form to name the person to receive any RSUs that are settled
after you die. Also, the Committee may allow you to place your RSUs into a trust established for

4

 

your benefit or the benefit of your family. Contact [Third Party Administrator] at [TPA Telephone
Number] or at the address given below if you are interested in doing this.

Governing Law: This Award Agreement will be construed in accordance with and governed by the laws
of the United States and of the State of Ohio (other than laws governing conflicts of laws).

Other Agreements: Also, your RSUs will be subject to the terms of any other written agreements
between you and the Company or any Affiliate or Subsidiary to the extent that those other
agreements do not directly conflict with the terms of the Plan or this Award Agreement. However,
the parties hereby agree and acknowledge that the terms of this Award Agreement and the Plan regarding
Noncompetition, Nonsolicitation and/or Confidentiality are intended to supplement and not conflict
with any written agreement that they may have or that they may enter regarding the same matters.

Adjustments to Your RSUs: Your RSUs will be adjusted, if appropriate, to reflect any change to the
Company’s capital structure (e.g., the number of your RSUs will be adjusted to reflect a stock
split).

Your Status as an Independent Contractor: This Award Agreement is not intended by either party to
alter your status as an independent contractor of the Company and you acknowledge and agree that
this Award Agreement shall in no way be interpreted as entitling you to any of the employee
benefits offered by the Company to its employees.

Other Rules: Your RSUs also are subject to more rules described in the Plan and in the Plan’s
Prospectus. You should read both of these documents carefully to ensure you fully understand all
the terms and conditions of the grant of RSUs made to you under this Award Agreement.

*****

You may contact [Third Party Administrator] at [TPA Telephone Number] or at the address given below
if you have any questions about your Award or this Award Agreement.

5

 

Your Acknowledgement of Award Conditions

Note: You must sign and return a copy of this Award Agreement to [Third Party Administrator] at
the address given below no later than [30 Days Post Grant Date].

By signing below, I acknowledge and agree that:

	 	•	 	A copy of the Plan has been made available to me;
	 
	 	•	 	I have received a copy of the Plan’s Prospectus;
	 
	 	•	 	I understand and accept the conditions placed on my RSUs and understand what I must
do to earn my RSUs;
	 
	 	•	 	I understand that my Award and the terms and conditions of my Award do not alter my
status as an independent contractor of the Company and do not entitle me to any
employee benefits that the Company may offer its employees;
	 
	 	•	 	I will consent (on my own behalf and on behalf of my beneficiaries and without any
further consideration) to any necessary change to my RSUs or this Award Agreement to
comply with any law and to avoid paying penalties under Section 409A of the Internal
Revenue Code, even if those changes affect the terms of my RSUs and reduce their value
or potential value; and
	 
	 	•	 	If I do not return a signed copy of this Award Agreement to the address shown below
on or before [30 Days Post Grant Date], my RSUs will be forfeited and I will not be
entitled to receive anything on account of this Award.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[Grantee’s Name]	 	 	 	THE SCOTTS MIRACLE-GRO COMPANY
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By: 

	 	 	 	 	 	 	 	By:	 	 	 	 	 	 
	 	 	 	 	 	

 

	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Date signed:	 	 	 	 	 	Name: 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Title:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Date signed:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	

 

	 	 	 

A signed copy of this Award Agreement must be sent to the following address no later than [30 Days
Post Grant Date]:

[Third Party Administrator]

Attention: [TPA Contact’s Name]

[Contact’s Address]

[TPA Telephone Number]

After it is received, The Scotts Miracle-Gro Company 2006 Long-Term Incentive Plan Committee will
acknowledge receipt of your signed Award Agreement.

6

 

Description of Your Performance Shares

You have been awarded [Number Granted] Performance Shares. If you satisfy the conditions described
in this Award Agreement, the Plan and the Prospectus, you will be issued [Number Granted] common
shares of the Company. Federal income tax rules apply to Performance Shares. You also must
arrange to pay any taxes due on settlement.

When Your Performance Shares Will Be Settled

Normally, on [Vesting Date], the Committee (as defined in the Plan) will ascertain if you have
satisfied the conditions imposed on your Performance Shares. If you have not, your Performance
Shares will be forfeited. If you have, as soon as administratively practicable after [Vesting
Date], these common shares will be distributed to you.

The restrictions imposed on your Performance Shares normally will be met only if you

Insert description of performance conditions based on the Performance Criteria enumerated in the
Plan.

Tax Treatment of Your Award

The federal income tax treatment of your Award is discussed in the Plan’s Prospectus.

*****

General Terms and Conditions

You Will Forfeit Your Performance Shares If Your Engagement For Service Ends

Normally, your Performance Shares will be settled on the date shown earlier in this Award
Agreement. However, the unvested portion of your Award will be forfeited if your engagement for
services terminates before [Vesting Date].

You May Forfeit Your Performance Shares if You Engage in Conduct That is Harmful to the Company (or
any Affiliate or Subsidiary)

You also will forfeit any outstanding Performance Shares and must return to the Company all common
shares and other amounts you have received through the Plan if, without our consent, you do any of
the following within 180 days before and 730 days after terminating service:

[a] You serve (or agree to serve) as an officer, director, consultant or employee of any
proprietorship, partnership, corporation or other entity or become the owner of a business
or a member of a partnership that competes with any portion of the Company’s (or any
Affiliate’s or Subsidiary’s) business with which you have been involved any time within five
years before termination of your engagement for service or render any service (including,
without limitation, advertising or business consulting) to entities that compete with any
portion of the Company’s (or any Affiliate’s or Subsidiary’s) business with which you have
been involved any time within five years before termination of the engagement of service;

[b] You refuse or fail to consult with, supply information to or otherwise cooperate with
the Company or any Affiliate or Subsidiary after having been requested to do so;

7

 

[c] You deliberately engage in any action that the Company concludes has caused substantial
harm to the interests of the Company or any Affiliate or Subsidiary including but not
limited to a breach of the terms and conditions of your engagement with the Company;

[d] On your own behalf or on behalf of any other person, partnership, association,
corporation or other entity, you solicit or in any manner attempt to influence or induce any
employee of the Company or any Affiliate or Subsidiary to leave the Company’s or
Subsidiary’s employment or use or disclose to any person, partnership, association,
corporation or other entity any information obtained while a service provider for the
Company or any Affiliate or Subsidiary concerning the names and addresses of the Company’s
and any Affiliate’s or Subsidiary’s employees;

[e] You disclose confidential and proprietary information relating to the Company’s or any
Affiliate’s or Subsidiary’s business affairs (“Trade Secrets”), including technical
information, product information and formulae, processes, business and marketing plans,
strategies, customer information and other information concerning the Company’s or any
Affiliate’s or Subsidiary’s products, promotions, development, financing, expansion plans,
business policies and practices, salaries and benefits and other forms of information
considered by the Company or any Affiliate or Subsidiary to be proprietary and confidential
and in the nature of Trade Secrets;

[f] You fail to return all property (other than personal property), including keys, notes,
memoranda, writings, lists, files, reports, customer lists, correspondence, tapes, disks,
cards, surveys, maps, logs, machines, technical data, formulae or any other tangible
property or document and any and all copies, duplicates or reproductions that you have
produced or received or have otherwise been submitted to you in the course of your
engagement with the Company or any Affiliate or Subsidiary; or

[g] You engaged in conduct that the Committee reasonably concludes would have given rise to
a termination of your engagement for “cause” (as defined in the Plan) had it been discovered
before you terminated service for the Company or any Affiliate or Subsidiary.

Your Performance Shares May Vest Earlier Than Described Above. Normally, your Performance Shares
will vest only in the circumstances described above. However, if there is a “Change in Control”
(as defined in the Plan), your Performance Shares may vest earlier. You should read the Plan and
the Prospectus carefully to ensure that you understand how this may happen.

Rights Before Your Performance Shares Vest: You may not vote, or receive any dividends associated
with, your Performance Shares.

Beneficiary Designation: You may name a beneficiary or beneficiaries to receive any Performance
Shares that are settled after you die. This may be done only on the attached Beneficiary
Designation Form and by following the rules described in that Form. The Beneficiary Designation
form need not be completed now and is not required as a condition of receiving your Award. If you
die without completing a Beneficiary Designation Form or if you do not complete that Form
correctly, your beneficiary will be your surviving spouse or, if you do not have a surviving
spouse, your estate.

Transferring Your Performance Shares: Normally your Performance Shares may not be transferred to
another person. However, you may complete a Beneficiary Designation Form to name the person to
receive any Performance Shares that are settled after you die. Also, the Committee may allow you
to place your Performance Shares into a trust established for your benefit or the benefit of your
family.

8

 

Contact [Third Party Administrator] at [TPA Telephone Number] or at the address given below if you
are interested in doing this.

Governing Law: This Award Agreement will be construed in accordance with and governed by the laws
of the United States and of the State of Ohio (other than laws governing conflicts of laws).

Other Agreements: Also, your Performance Shares will be subject to the terms of any other written
agreements between you and the Company or any Affiliate or Subsidiary to the extent that those
other agreements do not directly conflict with the terms of the Plan or this Award Agreement.
However, the parties hereby agree and acknowledge that the terms of this Award Agreement and the Plan
regarding Noncompetition, Nonsolicitation and/or Confidentiality are intended to supplement and not
conflict with any written agreement that they may have or that they may enter regarding the same
matters.

Adjustments to Your Performance Shares: Your Performance Shares will be adjusted, if appropriate,
to reflect any change to the Company’s capital structure (e.g., the number of your Performance
Shares will be adjusted to reflect a stock split).

Your Status as an Independent Contractor: This Award Agreement is not intended by either party to
alter your status as an independent contractor of the Company and you acknowledge and agree that
this Award Agreement shall in no way be interpreted as entitling you to any of the employee
benefits offered by the Company to its employees.

Other Rules: Your Performance Shares also are subject to more rules described in the Plan and in
the Plan’s Prospectus. You should read both of these documents carefully to ensure you fully
understand all the terms and conditions of the grant of Performance Shares made to you under this
Award.

*****

You may contact [Third Party Administrator] at [TPA Telephone Number] or at the address given below
if you have any questions about your Award or this Award Agreement.

9

 

Your Acknowledgement of Award Conditions

Note: You must sign and return a copy of this Award Agreement to [Third Party Administrator] at
the address given below no later than [30 Days Post Grant Date].

By signing below, I acknowledge and agree that:

	 	•	 	A copy of the Plan has been made available to me;
	 
	 	•	 	I have received a copy of the Plan’s Prospectus;
	 
	 	•	 	I understand and accept the conditions placed on my Performance Shares and
understand what I must do to earn my Performance Shares;
	 
	 	•	 	I understand that my Award and the terms and conditions of my Award do not alter my
status as an independent contractor of the Company and do not entitle me to any
employee benefits that the Company may offer its employees;
	 
	 	•	 	I will consent (on my own behalf and on behalf of my beneficiaries and without any
further consideration) to any necessary change to my Performance Shares or this Award
Agreement to comply with any law and to avoid paying penalties under Section 409A of
the Internal Revenue Code, even if those changes affect the terms of my Performance
Shares and reduce their value or potential value; and
	 
	 	•	 	If I do not return a signed copy of this Award Agreement to the address shown below
on or before [30 Days Post Grant Date], my Performance Shares will be forfeited and I
will not be entitled to receive anything on account of this Award.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[Grantee’s Name]	 	 	 	THE SCOTTS MIRACLE-GRO COMPANY
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By: 

	 	 	 	 	 	 	 	By:	 	 	 	 	 	 
	 	 	 	 	 	

 

	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Date signed:	 	 	 	 	 	Name: 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Title:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Date signed:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	

 

	 	 	 

A signed copy of this Award Agreement must be sent to the following address no later than [30 Days
Post Grant Date]:

[Third Party Administrator]

Attention: [TPA Contact’s Name]

[Contact’s Address]

[TPA Telephone Number]

After it is received, The Scotts Miracle-Gro Company 2006 Long-Term Incentive Plan Committee will
acknowledge receipt of your signed Award Agreement.

10

 

Description of Your Nonqualified Stock Options

You have been awarded Nonqualified Stock Options (or “NSOs”) to purchase [Number Granted] common
shares of the Company. You may purchase one of the Company’s common shares for each NSO, but only
if you pay $[Price] (“Exercise Price”) for each common share you purchase, you exercise the NSOs on
or before [Expiration Date] (“Expiration Date”) and you meet the terms and conditions described in
this Award Agreement, the Plan and the Prospectus. You also must arrange to pay any taxes due on
exercise using one of the procedures described later in this Award Agreement.

Limits on Exercising Your NSOs

Normally, your NSOs will vest (and become exercisable) on [Vesting Date] but only if you are
actively engaged to perform services for the Company or any Subsidiary or Affiliate (as defined in the Plan) on [Vesting
Date] and all other conditions described in this Award Agreement, the Plan and the Prospectus are
met.

This does not mean that you must exercise your NSOs on this date; this is merely the first date
that you may do so. However, your NSOs will expire unless they are exercised on or before the
Expiration Date ([Expiration Date]).

There are some special situations in which your NSOs may vest earlier. These are described later
in this Award Agreement.

At any one time, you may not exercise NSOs to buy fewer than 100 common shares of the Company (or,
if smaller, the number of your outstanding vested NSOs). Also, you may never exercise an NSO to
purchase a fractional common share of the Company; NSOs for fractional common shares will always be
redeemed for cash.

Exercising Your NSOs

After they vest, you may exercise your NSOs by completing an Exercise Notice. A copy of this
Exercise Notice is attached to this Award Agreement. Also, a copy of this Exercise Notice and a
description of the procedures that you must follow to exercise your NSOs are available from [Third
Party Administrator] at [TPA Telephone Number] or at the address shown below.

You may use one of three methods to exercise your NSOs and to pay any taxes related to that
exercise. You will decide on the method at the time of exercise.

Cashless Exercise and Sell: If you elect this alternative, you will be deemed to have
simultaneously exercised the NSOs and to have sold the common shares underlying those NSOs.
When the transaction is complete, you will receive cash (but no common shares of the
Company) equal to the difference between the aggregate value of the common shares deemed to
have been acquired through the exercise minus the NSOs’ aggregate exercise price and related
taxes.

Combination Exercise: If you elect this alternative, you will be deemed to have
simultaneously exercised the NSOs and to have sold a number of those common shares with a
value equal to the NSOs’ aggregate exercise price and related taxes. When the transaction
is complete, the balance of the common shares subject to the NSOs you exercised will be
transferred to you.

Exercise and Hold: If you elect this alternative, you must pay the full exercise price
plus related taxes (in cash, a cash equivalent or in common shares of the Company having a
value equal to the

11

 

exercise price and which you have owned for at least six months before the exercise
date). When the transaction is complete, you will receive one common share for each NSO
exercised.

Before choosing an exercise method, you should read the “Federal Income Tax” section of the
Prospectus to ensure you understand the federal income tax effect of exercising your NSOs and of
the exercise method you choose.

If you do not elect one of these methods, we will apply the Cashless Exercise and Sell method
described above.

Tax Treatment of Your NSOs

The federal income tax treatment of your NSOs is discussed in the Plan’s Prospectus.

*****

General Terms and Conditions

You May Forfeit Your NSOs If Your Engagement For Service Ends

Normally, you may exercise your NSOs after they vest and before the Expiration Date ([Expiration
Date]). However, your NSOs may be cancelled earlier than the Expiration Date if your engagement
for service terminates before [Vesting Date].

[a] If your engagement for service is terminated for “cause” (as defined in the Plan), the
NSOs will expire on the date your engagement for service ends; or

[b] If your engagement for service terminates because you [i] die or [ii] become disabled
(as defined in the Plan), the NSOs will expire on the earlier of the Expiration Date or 12
months after you terminate; or

[c] If your engagement for service terminates after reaching either [i] age 55 and
completing at least 10 years of service or [ii] age 62 regardless of your years of service,
the NSOs will expire on the earlier of the Expiration Date or 12 months after you terminate;
or

[d] If your engagement for service terminates for any other reason, your NSOs will expire on
the earlier of the Expiration Date or 90 days after you terminate.

Note, it is your responsibility to keep track of when your NSOs expire.

You May Forfeit Your NSOs if You Engage in Conduct That is Harmful to the Company (or any Affiliate
or Subsidiary)

You also will forfeit any outstanding NSOs and must return to the Company all common shares and
other amounts you have received through the Plan if, without our consent, you do any of the
following within 180 days before and 730 days after terminating service (as defined in the Plan)
with the Company or any Affiliate or Subsidiary:

[a] You serve (or agree to serve) as an officer, director, consultant or employee of any
proprietorship, partnership, corporation or other entity or become the owner of a business
or a member of a partnership that competes with any portion of the Company’s (or any
Affiliate’s or Subsidiary’s) business with which you have been involved any time within five
years before

12

 

termination of your engagement for service or render any service (including, without
limitation, advertising or business consulting) to entities that compete with any portion of
the Company’s (or any Affiliate’s or Subsidiary’s) business with which you have been
involved any time within five years before termination of your engagement for service;

[b] You refuse or fail to consult with, supply information to or otherwise cooperate with
the Company or any Affiliate or Subsidiary after having been requested to do so;

[c] You deliberately engage in any action that the Company concludes has caused substantial
harm to the interests of the Company or any Affiliate or Subsidiary including but not
limited to a breach of the terms and conditions of your engagement with the Company;

[d] On your own behalf or on behalf of any other person, partnership, association,
corporation or other entity, you solicit or in any manner attempt to influence or induce any
employee of the Company or any Affiliate or Subsidiary to leave the Company’s or any
Affiliate’s or Subsidiary’s employment or use or disclose to any person, partnership,
association, corporation or other entity any information obtained while a service provider
for the Company or any Affiliate or Subsidiary concerning the names and addresses of the
Company’s or any Affiliate’s or Subsidiary’s employees;

[e] You disclose confidential and proprietary information relating to the Company’s or any
Affiliate’s or Subsidiary’s business affairs (“Trade Secrets”), including technical
information, product information and formulae, processes, business and marketing plans,
strategies, customer information and other information concerning the Company’s or any
Affiliate’s or Subsidiary’s products, promotions, development, financing, expansion plans,
business policies and practices, salaries and benefits and other forms of information
considered by the Company or any Affiliate or Subsidiary to be proprietary and confidential
and in the nature of Trade Secrets;

[f] You fail to return all property (other than personal property), including keys, notes,
memoranda, writings, lists, files, reports, customer lists, correspondence, tapes, disks,
cards, surveys, maps, logs, machines, technical data, formulae or any other tangible
property or document and any and all copies, duplicates or reproductions that you have
produced or received or have otherwise been submitted to you in the course of your
engagement with the Company or any Affiliate or Subsidiary; or

[g] You engaged in conduct that the Committee (as defined in the Plan) reasonably concludes
would have given rise to a termination of your engagement for “cause” had it been discovered before you terminated service for the Company or any Affiliate
or Subsidiary.

Your NSOs May Vest Earlier Than Described Above. Normally, your NSOs will vest only in the
circumstances described above. However, if there is a “Change in Control” (as defined in the
Plan), your NSOs may vest earlier. You should read the Plan and the Prospectus carefully to ensure
that you understand how this may happen.

Rights Before Your NSOs Are Exercised: You may not vote, or receive any dividends associated with,
the common shares underlying your NSOs.

13

 

Beneficiary Designation: You may name a beneficiary or beneficiaries to receive or to exercise any
vested NSOs that are unexercised when you die. This may be done only on the attached Beneficiary
Designation Form and by following the rules described in that Form. The Beneficiary Designation
Form need not be completed now and is not required as a condition of receiving your Award. If you
die without completing a Beneficiary Designation Form or if you do not complete that Form
correctly, your beneficiary will be your surviving spouse or, if you do not have a surviving
spouse, your estate.

Transferring Your NSOs: Normally your NSOs may not be transferred to another person. However, you
may complete a Beneficiary Designation Form to name the person who may exercise your NSOs if you
die before their Expiration Date. Also, the Committee may allow you to place your NSOs into a
trust established for your benefit or for the benefit of your family. Contact [Third Party
Administrator] at [TPA Telephone Number] or at the address given below if you are interested in
doing this.

Governing Law: This Award Agreement will be construed in accordance with and governed by the laws
of the United States and of the State of Ohio (other than laws governing conflicts of laws).

Other Agreements: Also, your NSOs will be subject to the terms of any other written agreements
between you and the Company or any Affiliate or Subsidiary to the extent that those other
agreements do not directly conflict with the terms of the Plan or this Award Agreement. However,
the parties hereby agree and acknowledge that the terms of this Award Agreement and the Plan regarding
Noncompetition, Nonsolicitation and/or Confidentiality are intended to supplement and not conflict
with any written agreement that they may have or that they may enter regarding the same matters.

Adjustments to NSOs: Your NSOs will be adjusted, if appropriate, to reflect any change to the
Company’s capital structure (e.g., the number of your NSOs and the Exercise Price will be adjusted
to reflect a stock split).

Your Status as an Independent Contractor: This Award Agreement is not intended by either party to
alter your status as an independent contractor of the Company and you acknowledge and agree that
this Award Agreement shall in no way be interpreted as entitling you to any of the employee
benefits offered by the Company to its employees.

Other Rules: Your NSOs also are subject to more rules described in the Plan and in the Plan’s
Prospectus. You should read both of these documents carefully to ensure you fully understand all
the terms and conditions of the grant of NSOs made to you under this Award Agreement.

*****

You may contact [Third Party Administrator] at [TPA Telephone Number] or at the address given below
if you have any questions about your Award or this Award Agreement.

14

 

Your Acknowledgement of Award Conditions

Note: You must sign and return a copy of this Award Agreement to [Third Party Administrator] at
the address given below no later than [30 Days Post Grant Date].

By signing below, I acknowledge and agree that:

	 	•	 	A copy of the Plan has been made available to me;
	 
	 	•	 	I have received a copy of the Plan’s Prospectus;
	 
	 	•	 	I understand and accept the conditions placed on my NSOs and understand what I must
do to earn and exercise my NSOs;
	 
	 	•	 	I understand that my Award and the terms and conditions of my Award do not alter my
status as an independent contractor of the Company and do not entitle me to any
employee benefits that the Company may offer its employees;
	 
	 	•	 	I will consent (on my own behalf and on behalf of my beneficiaries and without any
further consideration) to any necessary change to my NSOs or this Award Agreement to
comply with any law and to avoid paying penalties under Section 409A of the Internal
Revenue Code, even if those changes affect the terms of my NSOs and reduce their value
or potential value; and
	 
	 	•	 	If I do not return a signed copy of this Award Agreement to the address shown below
on or before [30 Days Post Grant Date], my NSOs will be forfeited and I will not be
entitled to receive anything on account of this Award.

	 	 	 	 	 	 	 	 	 
	[Grantee’s Name]	 	THE SCOTTS MIRACLE-GRO COMPANY	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 	 	 
	

 

	 	 
	 	

 

	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Date signed:

	 	 	 	Name:	 	 	 	 
	
 
	 	 
	 	
 

	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	

 

	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Date signed:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

A signed copy of this Award Agreement must be sent to the following address no later than [30 Days
Post Grant Date]:

[Third Party Administrator]

Attention: [TPA Contact’s Name]

[Contact’s Address]

[TPA Telephone Number]

After it is received, The Scotts Miracle-Gro Company 2006 Long-Term Incentive Plan Committee will
acknowledge receipt of your signed Award Agreement.

15

 

THE SCOTTS MIRACLE-GRO COMPANY

2006 LONG-TERM INCENTIVE PLAN

NONQUALIFIED STOCK OPTION EXERCISE NOTICE

AFFECTING
[NUMBER GRANTED] NONQUALIFIED STOCK OPTIONS GRANTED TO

[GRANTEE’S NAME] ON [GRANT DATE]

Additional copies of this Nonqualified Stock Option Exercise Notice (and any further information
you may need about this Exercise Notice or exercising your NSOs) are available from [Third Party
Administrator] at the address given below.

By completing this Exercise Notice and returning it to [Third Party Administrator] at the address
given below, I elect to exercise the NSOs described below:

NOTE: You must complete a separate Nonqualified Stock Option Exercise Notice each time you exercise
NSOs granted under each Award Agreement (e.g., if you are exercising 200 NSOs granted January 1,
2007 and 100 NSOs granted January 1, 2008 under a separate award agreement, you must complete two
Nonqualified Stock Option Exercise Notices, one for each set of NSOs being exercised).

AFFECTED NSOS: This exercise relates to the following NSOs (fill in the blanks):

GRANT DATE: [GRANT DATE]

NUMBER
OF NSOS BEING EXERCISED WITH THIS EXERCISE NOTICE (AT LEAST 100
COMMON SHARES OF THE COMPANY (OR, IF SMALLER, THE NUMBER OF YOUR
OUTSTANDING VESTED NSOs)):

                                        

EXERCISE PRICE: The Exercise Price due is $                         
                         
                         
                    

NOTE: This amount must be the product of $[Price] multiplied by the number of NSOs being

exercised.

PAYMENT OF EXERCISE PRICE: I have decided to pay the Exercise Price and any

related taxes by (check one):

NOTE: These methods are described in the Award Agreement.

	 	 	 	 	 	 	 
	 

	 	 	 	Cashless Exercise and Sell.
	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Combination Exercise.	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Exercise and Hold.	 	 
	 

	 	 	 	 	 	 

Note:

	 	•	 	If you select the Exercise and Hold method of exercise, you must also follow the
procedures described in the Award Agreement to pay the Exercise Price and the taxes
related to this exercise. You should contact [Third Party Administrator] at the address
given below to find out the amount of the taxes due.
	 
	 	•	 	If you select either the Cashless Exercise and Sell or the Combination Exercise
methods of

16

 

	 	 	 	paying the Exercise Price, you should contact [Third Party Administrator] at the address
given below to be sure you understand how your choice of payment will affect the number
of common shares of the Company you will receive.

17

 

YOUR ACKNOWLEDGEMENT OF EFFECT OF EXERCISE

By signing below, I acknowledge and agree that:

	 	•	 	I fully understand the effect (including the investment effect) of exercising my
NSOs and buying common shares of the Company and understand that there is no guarantee
that the value of these common shares will appreciate or will not depreciate;
	 
	 	•	 	This Exercise Notice will have no effect if it is not returned to [Third Party
Administrator] at the address given below before the Expiration Date specified in the
Award Agreement under which these NSOs were granted; and
	 
	 	•	 	The common shares of the Company I am buying by completing and returning this
Exercise Notice will be issued to me as soon as administratively practicable.

[Grantee’s Name]

	 	 	 
	 
	 	 
	 

(signature)

	 	 
	 
	 	 
	
Date signed:

 

	 	 

A signed copy of this Nonqualified Stock Option Exercise Notice must be sent to the following
address no later than the Expiration Date:

[Third Party Administrator]

Attention: [TPA Contact’s Name]

[Contact’s Address]

[TPA Telephone Number]

*****

18

 

ACKNOWLEDGEMENT OF RECEIPT

A signed copy of this Nonqualified Stock Option Exercise Notice was received on:

                                        .

[Grantee’s Name]:

	 	 	 	 	 	 	 
	 

	 	 	 	Has effectively exercised the NSOs described in this Notice; or
	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Has not effectively exercised the NSOs described in this Notice	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	because

 

	 	 
	 

	 	 	 	                    describe deficiency	 	 

The Scotts Miracle-Gro Company 2006 Long-Term Incentive Plan Committee

	 	 	 	 	 
	By:

	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Date:
	 	 	 	 
	 

	 	 	 	 

Note: Keep a copy of this Exercise Notice as part of the Plan’s permanent records.

19

 

Description of Your Restricted Stock

You have been awarded [Number Granted] shares of Restricted Stock. If you satisfy the conditions
described in this Award Agreement, the Plan and the Prospectus, the restrictions imposed on your
Restricted Stock will be removed and you will own the underlying common shares. You also must
arrange to pay any taxes due on settlement.

When Your Restricted Stock Will Be Settled

Normally, on [Vesting Date], the Committee (as defined in the Plan) will ascertain if you have
satisfied the conditions imposed on your Restricted Stock. If you have not, your Restricted Stock
will be forfeited. If you have, as soon as administratively practicable after [Vesting Date],
these common shares will be distributed to you, free of any restrictions. Your Restricted Stock
will be held in escrow until it is settled or forfeited.

The restrictions imposed on your Restricted Stock normally will be met if you are actively engaged
to perform services for the Company or any Affiliate or Subsidiary (as defined in the Plan) on [Vesting
Date] and all other conditions described in this Award Agreement, the Plan and the Prospectus are
met.

Tax Treatment of Your Restricted Stock

The federal income tax treatment of your Restricted Stock is discussed in the Plan’s Prospectus.

*****

General Terms and Conditions

You Will Forfeit Your Restricted Stock If Your Engagement For Service Ends

Normally, your Restricted Stock will be settled on [Vesting Date]. However, the unvested portion
of your Restricted Stock will be forfeited if your service terminates before [Vesting Date].

You May Forfeit Your Restricted Stock if You Engage in Conduct That is Harmful to the Company (or
any Affiliate or Subsidiary)

You also will forfeit any outstanding Restricted Stock and must return to the Company all common
shares and other amounts you have received through the Plan if, without our consent, you do any of
the following within 180 days before and 730 days after
terminating your engagement for services:

[a] You serve (or agree to serve) as an officer, director, consultant or employee of any
proprietorship, partnership, corporation or other entity or become the owner of a business
or a member of a partnership that competes with any portion of the Company’s (or any
Affiliate’s or Subsidiary’s) business with which you have been involved any time within five
years before termination of your engagement for service or render any service (including,
without limitation, advertising or business consulting) to entities that compete with any
portion of the Company’s (or any Affiliate’s or Subsidiary’s) business with which you have
been involved any time within five years before termination of your engagement for service;

[b] You refuse or fail to consult with, supply information to or otherwise cooperate with
the Company or any Affiliate or Subsidiary after having been requested to do so;

20

 

[c] You deliberately engage in any action that the Company concludes has caused substantial
harm to the interests of the Company or any Affiliate or Subsidiary including but not
limited to a breach of the terms and conditions of your engagement with the Company;

[d] On your own behalf or on behalf of any other person, partnership, association,
corporation or other entity, you solicit or in any manner attempt to influence or induce any
employee of the Company or any Affiliate or Subsidiary to leave the Company’s or any
Affiliate’s or Subsidiary’s employment or use or disclose to any person, partnership,
association, corporation or other entity any information obtained while a service provider
for the Company or any Affiliate or Subsidiary concerning the names and addresses of the
Company’s or any Affiliate’s or Subsidiary’s employees;

[e] You disclose confidential and proprietary information relating to the Company’s or any
Affiliate’s or Subsidiary’s business affairs (“Trade Secrets”), including technical
information, product information and formulae, processes, business and marketing plans,
strategies, customer information and other information concerning the Company’s or any
Affiliate’s or Subsidiary’s products, promotions, development, financing, expansion plans,
business policies and practices, salaries and benefits and other forms of information
considered by the Company or any Affiliate or Subsidiary to be proprietary and confidential
and in the nature of Trade Secrets;

[f] You fail to return all property (other than personal property), including keys, notes,
memoranda, writings, lists, files, reports, customer lists, correspondence, tapes, disks,
cards, surveys, maps, logs, machines, technical data, formulae or any other tangible
property or document and any and all copies, duplicates or reproductions that you have
produced or received or have otherwise been submitted to you in the course of your
engagement with the Company or any Affiliate or Subsidiary; or

[g] You engaged in conduct that the Committee reasonably concludes would have given rise to
a termination of your engagement for “cause” (as defined in the Plan) had it been discovered
before you terminated service for the Company or any Affiliate or Subsidiary.

Your Restricted Stock May Vest Earlier Than Described Above. Normally, your Restricted Stock will
vest only in the circumstances described above. However, if there is a “Change in Control” (as
defined in the Plan), your Restricted Stock may vest earlier. You should read the Plan and the
Prospectus carefully to ensure that you understand how this may happen.

Rights Before Your Restricted Stock Vests: Even though your Restricted Stock is held in escrow
until it is settled or forfeited, you may exercise any voting rights associated with the common
shares underlying your Restricted Stock while it is held in escrow. You also will be entitled to
receive any dividends paid on these common shares during this period, although these dividends also
will be held in escrow until the Restricted Stock is settled and distributed to you (or forfeited)
depending on whether or not you have met the conditions described in this Award Agreement and in
the Plan and the Prospectus.

Beneficiary Designation: You may name a beneficiary or beneficiaries to receive any Restricted
Stock that is settled after you die. This may be done only on the attached Beneficiary Designation
Form and by following the rules described in that Form. The Beneficiary Designation Form need not
be completed now and is not required as a condition of receiving your Award. If you die without
completing a Beneficiary Designation Form or if you do not complete that Form correctly, your
beneficiary will be your surviving spouse or, if you do not have a surviving spouse, your estate.

21

 

Transferring Your Restricted Stock: Normally your Restricted Stock may not be transferred to
another person. However, you may complete a Beneficiary Designation Form to name the person to
receive any Restricted Stock that is settled after you die. Also, the Committee may allow you to
place your Restricted Stock into a trust established for your benefit or the benefit of your
family. Contact [Third Party Administrator] at [TPA Telephone Number] or the address given below
if you are interested in doing this.

Governing Law: This Award Agreement will be construed in accordance with and governed by the laws
of the United States and of the State of Ohio (other than laws governing conflicts of laws).

Other Agreements: Also, your Restricted Stock will be subject to the terms of any other written
agreements between you and the Company or any Affiliate or Subsidiary to the extent that those
other agreements do not directly conflict with the terms of the Plan or this Award Agreement.
However, the parties hereby agree and acknowledge that the terms of this Award Agreement and the Plan
regarding Noncompetition, Nonsolicitation and/or Confidentiality are intended to supplement and not
conflict with any written agreement that they may have or that they may enter regarding the same
matters.

Adjustments to Your Restricted Stock: Your Restricted Stock will be adjusted, if appropriate, to
reflect any change to the Company’s capital structure (e.g., the number of common shares underlying
your Restricted Stock will be adjusted to reflect a stock split).

Your Status as an Independent Contractor: This Award Agreement is not intended by either party to
alter your status as an independent contractor of the Company and you acknowledge and agree that
this Award Agreement shall in no way be interpreted as entitling you to any of the employee
benefits offered by the Company to its employees.

Other Rules: Your Restricted Stock also is subject to more rules described in the Plan and in the
Plan’s Prospectus. You should read both of these documents carefully to ensure you fully
understand all the terms and conditions of the grant of Restricted Stock under this Award
Agreement.

*****

You may contact [Third Party Administrator] at [TPA Telephone Number] or at the address given below
if you have any questions about your Award or this Award Agreement.

22

 

Your Acknowledgement of Award Conditions

Note: You must sign and return a copy of this Award Agreement to [Third Party Administrator] at
the address given below no later than [30 Days Post Grant Date].

By signing below, I acknowledge and agree that:

	 	•	 	A copy of the Plan has been made available to me;
	 
	 	•	 	I have received a copy of the Plan’s Prospectus;
	 
	 	•	 	I understand and accept the conditions placed on my Restricted Stock and understand what
I must do to earn my Restricted Stock;
	 
	 	•	 	I understand that my Award and the terms and conditions of my Award do not alter my
status as an independent contractor of the Company and do not entitle me to any employee
benefits that the Company may offer its employees;
	 
	 	•	 	I will consent (on my own behalf and on behalf of my beneficiaries and without any
further consideration) to any necessary change to my Restricted Stock or this Award
Agreement to comply with any law and to avoid paying penalties under Section 409A of the
Internal Revenue Code, even if those changes affect the terms of my Restricted Stock and
reduce their value or potential value; and
	 
	 	•	 	If I do not return a signed copy of this Award Agreement to the address shown below on
or before [30 Days Post Grant Date], my Restricted Stock will be forfeited and I will not
be entitled to receive anything on account of this Award.

	 	 	 	 	 	 	 	 	 
	[Grantee’s Name]	 	THE SCOTTS MIRACLE-GRO COMPANY	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 	 	 
	

 

	 	 
	 	

 

	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Date signed:

	 	 	 	Name:	 	 	 	 
	 

	 	 
	 	

 

	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	

 

	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Date signed:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

A signed copy of this Award Agreement must be sent to the following address no later than [30 Days
Post Grant Date]:

[Third Party Administrator]

Attention: [TPA Contact’s Name]

[Contact’s Address]

[TPA Telephone Number]

After it is received, The Scotts Miracle-Gro Company 2006 Long-Term Incentive Plan Committee will
acknowledge receipt of your signed Award Agreement.

23

 

ELECTION UNDER SECTION 83(b)

OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code, to
include in taxpayer’s gross income for the current taxable year, the amount of any income that may
be taxable to taxpayer in connection with taxpayer’s receipt of the property described below:

	1.	 	The name, address, taxpayer identification number and taxable year of the undersigned
are as follows:
	 
	 	 	NAME OF TAXPAYER:     [GRANTEE’S NAME]

	 	 	 	 	 	 	 
	 

	 	ADDRESS:
	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	IDENTIFICATION NUMBER OF TAXPAYER:

 

	 	 
	 
	 	 	 	 	 	 
	 	 	TAXABLE YEAR: Calendar year	 	 

	2.	 	The property with respect to which the election is made is:
	 
	 	 	[NUMBER GRANTED] common shares of The Scotts Miracle-Gro Company, an Ohio
corporation (“Company”).
	 
	3.	 	The date on which the property was transferred is: [GRANT DATE]
	 
	4.	 	The property is subject to the following restrictions:
	 
	 	 	Forfeiture of:
	 
	 	 	[NUMBER GRANTED] common shares in favor of the Company if your engagement for
service terminates before [Vesting Date].
	 
	5.	 	The fair market value at the time of transfer, determined without regard to any
restriction other than a restriction which by its terms will never lapse, of such
property is: $                    .
	 
	6.	 	The amount (if any) paid for such property: $00.00

The undersigned has submitted a copy of this statement to [Third Party Administrator]. The
transferee of such property is the person performing the services in connection with the transfer
of said property.

The undersigned understands that the foregoing election may not be revoked except with the consent
of the Commissioner of the Internal Revenue Service.

	 	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	 
	 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	[GRANTEE’S NAME]	 	 

24

 

Description of Your Cash Settled Stock Appreciation Rights

You have been awarded [Number Granted] Stock Appreciation Rights (or “SARs”). If you satisfy the
conditions described in this Award Agreement, the Plan and the Prospectus, you may exercise your
SARs on or before [Expiration Date] (“Expiration Date”). If you do this, you will receive cash
equal to the fair market value of one common share of the Company on the exercise date minus
$[Price] (“Exercise Price”), multiplied by the number of SARs you are exercising and minus any
related taxes. You also must arrange to pay any taxes due on exercise using one of the procedures
described later in this Award Agreement.

Limits on Exercising Your SARs

Normally, your SARs will vest (and become exercisable) on [Vesting Date] but only if you are
actively engaged to perform services for the Company or any Subsidiary or Affiliate (as defined in the Plan)
on [Vesting Date] and all other conditions described in this Award Agreement, the Plan and the
Prospectus are met.

This does not mean that you must exercise your SARs on this date; this is merely the first date
that you may do so. However, your SARs will expire unless they are exercised on or before the
Expiration Date ([Expiration Date]).

There are some special situations in which your SARs may vest earlier. These are described later
in this Award Agreement.

At any one time, you may not exercise fewer than 100 SARs (or, if smaller, the number of your
outstanding vested SARs).

Exercising Your SARs

After they vest, you may exercise your SARs by completing an Exercise Notice. A copy of this
Exercise Notice is attached to this Award Agreement. Also, a copy of this form and a description
of the procedures that you must follow to exercise your SARs, are available from [Third Party
Administrator] at [TPA Telephone Number] or at the address shown below.

When you exercise your SARs, you will receive cash equal to the fair market value of one common
share of the Company on the exercise date minus $[Price] (“Exercise Price”), multiplied by the
number of SARs you are exercising and minus any related taxes.

Before exercising your SARs, you should read the “Federal Income Tax” section of the Prospectus to
ensure you understand the federal income tax effect of exercising your SARs.

Tax Treatment of Your SARs

The federal income tax treatment of your SARs is discussed in the Plan’s Prospectus.

*****

25

 

General Terms and Conditions

You May Forfeit Your SARs If Your Engagement For Service Ends

Normally, you may exercise your SARs after they vest and before the Expiration Date ([Expiration
Date]). However, your SARs may be cancelled earlier than the Expiration Date if your engagement
for service terminates before [Vesting Date].

[a] If your engagement for service is terminated for “cause” (as defined in the Plan), the
SARs will expire on the date your engagement for service ends; or

[b] If your engagement for service terminates because you [i] die or [ii] become disabled
(as defined in the Company’s long-term disability plan), the SARs will expire on the earlier
of the Expiration Date or 12 months after you terminate; or

[c] If your engagement for service terminates after reaching either [i] age 55 and
completing at least 10 years of service or [ii] age 62 regardless of your years of service,
the SARs will expire on the earlier of the Expiration Date or 12 months after you terminate;
or

[d] If your engagement for service terminates for any other reason, your SARs will expire on
the earlier of the Expiration Date or 90 days after you terminate.

Note, it is your responsibility to keep track of when your SARs expire.

You May Forfeit Your SARs if You Engage in Conduct That is Harmful to the Company (or any Affiliate
or Subsidiary)

You also will forfeit any outstanding SARs and must return to the Company all amounts you have
received through the Plan if, without our consent, you do any of the following within 180 days
before and 730 days after your engagement for service terminates:

[a] You serve (or agree to serve) as an officer, director, consultant or employee of any
proprietorship, partnership, corporation or other entity or become the owner of a business
or any member of a partnership that competes with any portion of the Company’s (or any
Affiliate’s or Subsidiary’s) business with which you have been involved any time within five
years before termination of your engagement for service or render any service (including,
without limitation, advertising or business consulting) to entities that compete with any
portion of the Company’s (or any Affiliate’s or Subsidiary’s) business with which you have
been involved any time within five years before termination of your engagement for service;

[b] You refuse or fail to consult with, supply information to or otherwise cooperate with
the Company or any Affiliate or Subsidiary after having been requested to do so;

[c] You deliberately engage in any action that the Company concludes has caused substantial
harm to the interests of the Company or any Affiliate or Subsidiary including but not
limited to a breach of the terms and conditions of your engagement with the Company;

[d] On your own behalf or on behalf of any other person, partnership, association,
corporation or other entity, you solicit or in any manner attempt to influence or induce any
employee of the Company or any Affiliate or Subsidiary to leave the Company’s or any
Affiliate’s or Subsidiary’s employment or use or disclose to any person, partnership,
association,

26

 

corporation or other entity any information obtained while a service provider for the
Company or any Affiliate or Subsidiary concerning the names and addresses of the Company’s
or any Affiliate’s or Subsidiary’s employees;

[e] You disclose confidential and proprietary information relating to the Company’s or any
Affiliate’s or Subsidiary’s business affairs (“Trade Secrets”), including technical
information, product information and formulae, processes, business and marketing plans,
strategies, customer information and other information concerning the Company’s or any
Affiliate’s or Subsidiary’s products, promotions, development, financing, expansion plans,
business policies and practices, salaries and benefits and other forms of information
considered by the Company or any Affiliate or Subsidiary to be proprietary and confidential
and in the nature of Trade Secrets;

[f] You fail to return all property (other than personal property), including keys, notes,
memoranda, writings, lists, files, reports, customer lists, correspondence, tapes, disks,
cards, surveys, maps, logs, machines, technical data, formulae or any other tangible
property or document and any and all copies, duplicates or reproductions that you have
produced or received or have otherwise been submitted to you in the course of your
engagement with the Company or any Affiliate or Subsidiary;

[g] You engaged in conduct that the Committee (as defined in the Plan) reasonably concludes
would have given rise to a termination of your engagement for cause (as defined in the Plan)
had it been discovered before you terminated service for the Company or any Affiliate or
Subsidiary.

Your SARs May Vest Earlier Than Described Above. Normally, your SARs will vest only in the
circumstances described above. However, if there is a “Change in Control” (as defined in the
Plan), your SARs may vest earlier. You should read the Plan and the Prospectus carefully to ensure
that you understand how this may happen.

Rights Before Your SARs Are Exercised: You may not vote, or receive any dividends associated with,
the common shares underlying your SARs.

Beneficiary Designation: You may name a beneficiary or beneficiaries to receive or to exercise any
vested SARs that are unexercised when you die. This may be done only on the attached Beneficiary
Designation Form and by following the rules described in that Form. This Form need not be
completed now and is not required as a condition of receiving your Award. If you die without
completing a Beneficiary Designation Form or if you do not complete that Form correctly, your
beneficiary will be your surviving spouse or, if you do not have a surviving spouse, your estate.

Transferring Your SARs: Normally your SARs may not be transferred to another person. However, you
may complete a Beneficiary Designation Form to name the person who may exercise your SARs if you
die before their Expiration Date. Also, the Committee may allow you to place your SARs into a
trust established for your benefit or for the benefit of your family. Contact [Third Party
Administrator] at [TPA Telephone Number] or at the address given below if you are interested in
doing this.

Governing Law: This Award Agreement will be construed in accordance with and governed by the laws
of the United States and of the State of Ohio (other than laws governing conflicts of laws).

Other Agreements: Also, your SARs will be subject to the terms of any other written agreements
between you and the Company or any Affiliate or Subsidiary to the extent that those other
agreements do not directly conflict with the terms of the Plan or this Award Agreement. However,
the parties hereby agree

27

 

and acknowledge that the terms of this Award Agreement and the Plan regarding Noncompetition,
Nonsolicitation and/or Confidentiality are intended to supplement and not conflict with any written
agreement that they may have or that they may enter regarding the same matters.

Adjustments to SARs: Your SARs will be adjusted, if appropriate, to reflect any change to the
Company’s capital structure (e.g., the number of your SARs and the Exercise Price will be adjusted
to reflect a stock split).

Your Status as an Independent Contractor: This Award Agreement is not intended by either party to
alter your status as an independent contractor of the Company and you acknowledge and agree that
this Award Agreement shall in no way be interpreted as entitling you to any of the employee
benefits offered by the Company to its employees.

Other Rules: Your SARs also are subject to more rules described in the Plan and in the Plan’s
Prospectus. You should read both of these documents carefully to ensure you fully understand all
the terms and conditions on the grant of SARs made to you under this Award Agreement.

*****

You may contact [Third Party Administrator] at [TPA Telephone Number] or at the address given below
if you have any questions about your Award or this Award Agreement.

28

 

Your Acknowledgement of Award Conditions

Note: You must sign and return a copy of this Award Agreement to [Third Party Administrator] at
the address given below no later than [30 Days Post Grant Date].

By signing below, I acknowledge and agree that:

	 	•	 	A copy of the Plan has been made available to me;
	 
	 	•	 	I have received a copy of the Plan’s Prospectus;
	 
	 	•	 	I understand and accept the conditions placed on my SARs and understand what I must do
to earn my SARs;
	 
	 	•	 	I understand that my Award and the terms and conditions of my Award do not alter my
status as an independent contractor of the Company and do not entitle me to any employee
benefits that the Company may offer its employees;
	 
	 	•	 	I will consent (on my own behalf and on behalf of my beneficiaries and without any
further consideration) to any necessary change to my SARs or this Award Agreement to comply
with any law and to avoid paying penalties under Section 409A of the Internal Revenue Code,
even if those changes affect the terms of my SARs and reduce their value or potential
value; and
	 
	 	•	 	If I do not return a signed copy of this Award Agreement to the address shown below on
or before [30 Days Post Grant Date], my SARs will be forfeited and I will not be entitled
to receive anything on account of this Award.

	 	 	 	 	 	 	 	 	 
	[Grantee’s Name]	 	THE SCOTTS MIRACLE-GRO COMPANY	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 	 	 
	

 

	 	 
	 	

 

	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Date signed:

	 	 	 	Name:	 	 	 	 
	 

	 	 
	 	

 

	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	

 

	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Date signed:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

A signed copy of this Award Agreement must be sent to the following address no later than [30 Days
Post Grant Date]:

[Third Party Administrator]

Attention: [TPA Contact’s Name]

[Contact’s Address]

[TPA Telephone Number]

After it is received, The Scotts Miracle-Gro Company 2006 Long-Term Incentive Plan Committee will
acknowledge receipt of your signed Award Agreement.

29

 

THE SCOTTS MIRACLE-GRO COMPANY

2006 LONG-TERM INCENTIVE PLAN

CASH SETTLED STOCK APPRECIATION RIGHT EXERCISE NOTICE

AFFECTING
[NUMBER GRANTED] CASH SETTLED STOCK APPRECIATION RIGHTS GRANTED TO

[GRANTEE’S NAME] ON [GRANT DATE]

Additional copies of this Stock Appreciation Right Exercise Notice (and any further information you
may need about this Exercise Notice or exercising your SARs) are available from [Third Party
Administrator] at the address given below.

By completing this Exercise Notice and returning it to [Third Party Administrator] at the address
given below, I elect to exercise the SARs described below:

NOTE: You must complete a separate Stock Appreciation Right Exercise Notice each time you exercise
SARs granted under each Award Agreement (e.g., if you are exercising 200 SARs granted January 1,
2007 and 100 SARs granted January 1, 2008 under a separate award agreement, you must complete two
Stock Appreciation Right Exercise Notices, one for each set of SARs being exercised).

AFFECTED SARS: This exercise relates to the following SARs (fill in the blanks):

     GRANT DATE: [GRANT DATE]

     NUMBER
OF SARS BEING EXERCISED WITH THIS EXERCISE NOTICE (AT LEAST 100
COMMON SHARES OF THE COMPANY (OR, IF SMALLER, THE NUMBER OF YOUR
OUTSTANDING VESTED SARs)):

                                             

30

 

YOUR ACKNOWLEDGEMENT OF EFFECT OF EXERCISE

By signing below, I acknowledge and agree that:

	 	•	 	I fully understand the effect (including the investment effect) of exercising my
SARs; and
	 
	 	•	 	This Exercise Notice will have no effect if it is not returned to [Third Party
Administrator] at the address given below before the Expiration Date specified in the
Award Agreement under which these SARs were granted.

	 	 	 	 	 
	[Grantee’s Name]	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	 
	(signature)
	 	 	 	 
	 
	 	 	 	 
	Date signed:
	 	 	 	 
	 

	 	 

	 	 

A signed copy of this Stock Appreciation Right Exercise Notice must be sent to

the following address no later than the Expiration Date:

[Third Party Administrator]

Attention: [TPA Contact’s Name]

[Contact’s Address]

[TPA Telephone Number]

*****

31

 

ACKNOWLEDGEMENT OF RECEIPT

A signed
copy of this Stock Appreciation Right Exercise Notice was received
on:
                                        .

[Grantee’s Name]:

	 	 	 	 	 	 	 	 	 
	 	 	                    	 	Has effectively exercised the SARs described in this Exercise Notice; or	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	                    	 	Has not effectively exercised the SARs described in this Exercise Notice	 	 
	 

	 	 	 	because	 	 	 	 
	 

	 	 	 	 	 	 

                    describe deficiency
	 	 

The Scotts Miracle-Gro Company 2006 Long-Term Incentive Plan Committee

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	Date:
	 	 	 	 
	 

	 	 

	 	 

Note: Keep a copy of this Exercise Notice as part of the Plan’s permanent records.

32

 

Description of Your Stock Settled Stock Appreciation Rights

You have been awarded [Number Granted] Stock Appreciation Rights (or “SARs”). If you satisfy the
conditions described in this Award Agreement, the Plan and the Prospectus, you may exercise your
SARs on or before [Expiration Date] (“Expiration Date”). If you do this, you will receive common
shares of the Company. The number of common shares you will receive will equal the fair market
value of one common share of Company on the exercise date minus $[Price] (“Exercise Price”) divided
by the fair market value of one common share of the Company on the exercise date and multiplied by
the number of SARs you are exercising. You also must arrange to pay any taxes due on exercise
using one of the procedures described later in this Award Agreement.

Limits on Exercising Your SARs

Normally, your SARs will vest (and become exercisable) on [Vesting Date] but only if you are
actively engaged to perform services for the Company or any Subsidiary or Affiliate (as defined in the Plan)
on [Vesting Date] and all other conditions described in this Award Agreement, the Plan and the
Prospectus are met.

This does not mean that you must exercise your SARs on this date; this is merely the first date
that you may do so. However, your SARs will expire unless they are exercised on or before the
Expiration Date ([Expiration Date]).

There are some special situations in which your SARs may vest earlier. These are described later
in this Award Agreement.

At any one time, you may not exercise fewer than 100 SARs (or, if smaller, the number of your
outstanding vested SARs). Also, you may never exercise SARs with respect to a fractional common
share of the Company; SARs relating to fractional common shares will always be redeemed for cash.

Exercising Your SARs

After they vest, you may exercise your SARs by completing an Exercise Notice. A copy of this
Exercise Notice is attached to this Award Agreement. Also, a copy of this Exercise Notice, and a
description of the procedures that you must follow to exercise your SARs, are available from [Third
Party Administrator] at [TPA Telephone Number] or at the address shown below.

You may use one of two methods to pay the taxes related to your SAR exercise. You will decide on
the method at the time of exercise.

Combination Exercise: If you elect this alternative, you will be deemed to have
simultaneously exercised the SARs and to have sold a number of those common shares with a
value equal to the taxes due. When the transaction is complete, the balance of the common
shares will be transferred to you.

Exercise and Hold: If you elect this alternative, you must pay the related taxes (in cash,
a cash equivalent or in common shares of the Company having a value equal to the taxes due
and which you have owned for at least six months before the exercise date). When the
transaction is complete, you will receive whole common shares of the Company.

Before exercising your SARs, you should read the “Federal Income Tax” section of the Prospectus to
ensure you understand the federal income tax effect of exercising your SARs and of the exercise
method you choose.

33

 

If you do not elect one of these methods, we will apply the Combination Exercise method described
above.

Tax Treatment of Your SARs

The federal income tax treatment of your SARs is discussed in the Plan’s Prospectus.

*****

General Terms and Conditions

You May Forfeit Your SARs If Your Engagement For Service Ends

Normally, you may exercise your SARs after they vest and before the Expiration Date ([Expiration
Date]). However, your SARs may be cancelled earlier than the Expiration Date if your engagement
for service terminates before [Vesting Date].

[a] If your engagement for service is terminated for “cause” (as defined in the Plan), the
SARs will expire on the date your engagement for service ends; or

[b] If your engagement for service terminates because you [i] die or [ii] become disabled
(as defined in the Plan), the SARs will expire on the earlier of the Expiration Date or 12
months after you terminate; or

[c] If your engagement for service terminates after reaching either [i] age 55 and
completing at least 10 years of service or [ii] age 62 regardless of your years of service,
the SARs will expire on the earlier of the Expiration Date or 12 months after you terminate;
or

[d] If your engagement for service terminates for any other reason, your SARs will expire on
the earlier of the Expiration Date or 90 days after you terminate.

Note, it is your responsibility to keep track of when your SARs expire.

You May Forfeit Your SARs if You Engage in Conduct That is Harmful to the Company (or any Affiliate
or Subsidiary)

You also will forfeit any outstanding SARs and must return to the Company all common shares and
other amounts you have received through the Plan if, without our consent, you do any of the
following within 180 days before and 730 days after terminating your engagement for service:

[a] You serve (or agree to serve) as an officer, director, consultant or employee of any
proprietorship, partnership, corporation or other entity or become the owner of a business
or a member of a partnership that competes with any portion of the Company’s (or any
Affiliate’s or Subsidiary’s) business with which you have been involved any time within five
years before termination of your engagement for service or render any service (including,
without limitation, advertising or business consulting) to entities that compete with any
portion of the Company’s (or any Affiliate’s or Subsidiary’s) business with which you have
been involved any time within five years before termination of your engagement for service;

[b] You refuse or fail to consult with, supply information to or otherwise cooperate with
the Company or any Affiliate or Subsidiary after having been requested to do so;

34

 

[c] You deliberately engage in any action that the Company concludes has caused substantial
harm to the interests of the Company or any Affiliate or Subsidiary
including but not limited to a breach of the terms and conditions of
your engagement with the Company;

[d] On your own behalf or on behalf of any other person, partnership, association,
corporation or other entity, you solicit or in any manner attempt to influence or induce any
employee of the Company or any Affiliate or Subsidiary to leave the Company’s or any
Affiliate’s or Subsidiary’s employment or use or disclose to any person, partnership,
association, corporation or other entity any information obtained while a service provider
for the Company or any Affiliate or Subsidiary concerning the names and addresses of the
Company’s or any Affiliate’s or Subsidiary’s employees;

[e] You disclose confidential and proprietary information relating to the Company’s or any
Affiliate’s or Subsidiary’s business affairs (“Trade Secrets”), including technical
information, product information and formulae, processes, business and marketing plans,
strategies, customer information and other information concerning the Company’s or any
Affiliate’s or Subsidiary’s products, promotions, development, financing, expansion plans,
business policies and practices, salaries and benefits and other forms of information
considered by the Company or any Affiliate or Subsidiary to be proprietary and confidential
and in the nature of Trade Secrets;

[f] You fail to return all property (other than personal property), including keys, notes,
memoranda, writings, lists, files, reports, customer lists, correspondence, tapes, disks,
cards, surveys, maps, logs, machines, technical data, formulae or any other tangible
property or document and any and all copies, duplicates or reproductions that you have
produced or received or have otherwise been submitted to you in the course of your
engagement with the Company or any Affiliate or Subsidiary; or

[g] You engaged in conduct that the Committee (as defined in the Plan) reasonably concludes
would have given rise to a termination for “cause” had it been
discovered before you terminated service for the Company or any Affiliate or Subsidiary.

Your SARs May Vest Earlier Than Described Above. Normally, your SARs will vest only in the
circumstances described above. However, if there is a “Change in Control” (as defined in the
Plan), your SARs may vest earlier. You should read the Plan and the Prospectus carefully to ensure
that you understand how this may happen.

Rights Before Your SARs Are Exercised: You may not vote, or receive any dividends associated with,
the common shares underlying your SARs.

Beneficiary Designation: You may name a beneficiary or beneficiaries to receive or to exercise any
vested SARs that are unexercised when you die. This may be done only on the attached Beneficiary
Designation Form and by following the rules described in that Form. The Beneficiary Designation
Form need not be completed now and is not required as a condition of receiving your Award. If you
die without completing a Beneficiary Designation Form or if you do not complete that Form
correctly, your beneficiary will be your surviving spouse or, if you do not have a surviving
spouse, your estate.

Transferring Your SARs: Normally your SARs may not be transferred to another person. However, you
may complete a Beneficiary Designation Form to name the person who may exercise your SARs if you
die before their Expiration Date. Also, the Committee may allow you to place your SARs into a
trust established for your benefit or for the benefit of your family. Contact [Third Party
Administrator] at [TPA Telephone Number] or at the address given below if you are interested in
doing this.

35

 

Governing Law: This Award Agreement will be construed in accordance with and governed by the laws
of the United States and of the State of Ohio (other than laws governing conflicts of laws).

Other Agreements: Also, your SARs will be subject to the terms of any other written agreements
between you and the Company or any Affiliate or Subsidiary to the extent that those other
agreements do not directly conflict with the terms of the Plan or
this Award Agreement. However, the parties hereby agree and acknowledge that the terms of this Award Agreement and
the Plan regarding Noncompetition, Nonsolicitation and/or Confidentiality are intended to
supplement and not conflict with any written agreement that they may have or that they may enter
regarding the same matters.

Adjustments to SARs: Your SARs will be adjusted, if appropriate, to reflect any change to the
Company’s capital structure (e.g., the number of your SARs and the Exercise Price will be adjusted
to reflect a stock split).

Your Status as an Independent Contractor: This Award Agreement is not intended by either
party to alter your status as an independent contractor of the Company and you acknowledge and
agree that this Award Agreement shall in no way be interpreted as entitling you to any of the
employee benefits offered by the Company to its employees.

Other Rules: Your SARs also are subject to more rules described in the Plan and in the Plan’s
Prospectus. You should read both of these documents carefully to ensure you fully understand all
the terms and conditions of the grant of SARs made to you under this Award Agreement.

*****

You may contact [Third Party Administrator] at [TPA Telephone Number] or at the address given below
if you have any questions about your Award or this Award Agreement.

36

 

Your Acknowledgement of Award Conditions

Note: You must sign and return a copy of this Award Agreement to [Third Party Administrator] at
the address given below no later than [30 Days Post Grant Date].

By signing below, I acknowledge and agree that:

	 	•	 	A copy of the Plan has been made available to me;
	 
	 	•	 	I have received a copy of the Plan’s Prospectus;
	 
	 	•	 	I understand and accept the conditions placed on my SARs and understand what I must do
to earn my SARs;
	 
	 	•	 	I understand that my Award and the terms and conditions of my Award do not alter my
status as an independent contractor of the Company and do not entitle me to any employee
benefits that the Company may offer its employees;
	 
	 	•	 	I will consent (on my own behalf and on behalf of my beneficiaries and without any
further consideration) to any necessary change to my SARs or this Award Agreement to comply
with any law and to avoid paying penalties under Section 409A of the Internal Revenue Code,
even if those changes affect the terms of my SARs and reduce their value or potential
value; and
	 
	 	•	 	If I do not return a signed copy of this Award Agreement to the address shown below on
or before [30 Days Post Grant Date], my SARs will be forfeited and I will not be entitled
to receive anything on account of this Award.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	[Grantee’s Name]	 	 	 	THE SCOTTS MIRACLE-GRO COMPANY	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	 	 	By: 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Date signed: 	 	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 	 	 	 	 	 

	 	 
	 

	 	 	 	 	 	 	 	Title:	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 

	 	 
	 	 	 	 	 	 	 	 	Date
signed: 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 

A signed copy of this Award Agreement must be sent to the following address no later than [30 Days
Post Grant Date]:

[Third Party Administrator]

Attention: [TPA Contact’s Name]

[Contact’s Address]

[TPA Telephone Number]

After it is received, The Scotts Miracle-Gro Company 2006 Long-Term Incentive Plan Committee will
acknowledge receipt of your signed Award Agreement.

37

 

THE SCOTTS MIRACLE-GRO COMPANY

2006 LONG-TERM INCENTIVE PLAN

STOCK SETTLED STOCK APPRECIATION RIGHT EXERCISE NOTICE

AFFECTING
[NUMBER GRANTED] STOCK SETTLED STOCK APPRECIATION RIGHTS GRANTED TO

[GRANTEE’S NAME] ON [GRANT DATE]

Additional copies of this Stock Appreciation Right Exercise Notice (and any further information you
may need about this Exercise Notice or exercising your SARs) available from [Third Party
Administrator] at the address given below.

By completing this Exercise Notice and returning it to [Third Party Administrator] at the address
given below, I elect to exercise the SARs described below:

NOTE: You must complete a separate Stock Appreciation Right Exercise Notice each time you exercise
SARs granted under each Award Agreement (e.g., if you are exercising 200 SARs granted January 1,
2007 and 100 SARs granted January 1, 2008 under a separate award agreement, you must complete two
Stock Appreciation Right Exercise Notices, one for each set of SARs being exercised).

AFFECTED SARS: This exercise relates to the following SARs (fill in the blanks):

     GRANT DATE: [GRANT DATE]

     NUMBER
OF SARS BEING EXERCISED WITH THIS EXERCISE NOTICE (AT LEAST 100
COMMON SHARES OF THE COMPANY (OR, IF SMALLER, THE NUMBER OF YOUR
OUTSTANDING VESTED SARs)):

                                             

PAYMENT OF TAXES: I have decided to exercise my SARs (and to pay the taxes

related to this exercise) by (check one):

NOTE: These methods are described in the Award Agreement.

	 	 	 	 	 
	 

	 	                    
	 	Combination Exercise.
	 
	 	 	 	 
	 

	 	                    
	 	Exercise and Hold.

Note:

	 	•	 	If you select the Exercise and Hold method of exercise, you must also follow one of
the procedures described in the Award Agreement to pay the taxes related to this
exercise. You should contact [Third Party Administrator] at the address given below to
find out the amount of these taxes.
	 
	 	•	 	If you select the Combination Exercise method of exercise, you should contact [Third
Party Administrator] at the address given below to be sure you understand how your
choice will affect the number of common shares of the Company you will receive.

38

 

YOUR ACKNOWLEDGEMENT OF EFFECT OF EXERCISE

By signing below, I acknowledge and agree that:

	 	•	 	I fully understand the effect (including the investment effect) of exercising my
SARs and buying common shares of the Company and understand that there is no guarantee
that the value of these shares common will appreciate or will not depreciate;
	 
	 	•	 	This Exercise Notice will have no effect if it is not returned to [Third Party
Administrator] at the address given below before the Expiration Date specified in the
Award Agreement under which these SARs were granted; and
	 
	 	•	 	Any common shares of the Company I am acquiring by completing and returning this
Exercise Notice will be issued to me as soon as administratively practicable.

	 	 	 	 	 
	[Grantee’s Name]	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	 
	(signature)
	 	 	 	 
	 
	 	 	 	 
	Date signed:
	 	 	 	 
	 

	 	 

	 	 

A signed copy of this Stock Appreciation Right Exercise Notice must be sent to the following
address no later than the Expiration Date:

[Third Party Administrator]

Attention: [TPA Contact’s Name]

[Contact’s Address]

[TPA Telephone Number]

*****

39

 

ACKNOWLEDGEMENT OF RECEIPT

A signed copy of this Stock Appreciation Right Exercise Notice was received on:

                                        .

[Grantee’s Name]:

	 	 	 	 	 	 	 	 	 
	 	 	                    	 	Has effectively exercised the SARs described in this Notice; or	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	                    	 	Has not effectively exercised the SARs described in this Notice	 	 
	 

	 	 	 	because	 	 	 	 
	 

	 	 	 	 	 	 

                    describe deficiency
	 	 

The Scotts Miracle-Gro Company 2006 Long-Term Incentive Plan Committee

	 	 	 	 	 
	By: 
	 	 	 	 
	 

	 

	 	 
	Date:
	 	 	 
	 

	 	 

	 	 

Note: Keep a copy of this Exercise Notice as part of the Plan’s permanent records.

*****

40

 

Committee’s Acknowledgement of Receipt

A signed copy of this Award Agreement was received on                     .

By:                                         

[Grantee’s Name]

	 	 	 	 
	 

	 	  Has complied with the conditions imposed on the grant and the Award Agreement remains
in effect; or	 
	 
	 	 	 
	 

	 	  Has not complied with the
conditions imposed on the grant and the [Name of Award(s)]
are forfeited

	 
	 

	 	  because

 

	 
	 

	 	describe deficiency	 

The Scotts Miracle-Gro Company 2006 Long-Term Incentive Plan Committee

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Date:
	 	 	 	 
	 

	 	 

	 	 

Note: Send a copy of this completed Award Agreement to [Grantee’s Name] and keep a copy as part of
the Plan’s permanent records.

41

 

THE SCOTTS MIRACLE-GRO COMPANY

2006 LONG-TERM INCENTIVE PLAN

BENEFICIARY DESIGNATION FORM

RELATING TO [FORM OF AWARD] AWARD GRANTED TO

[GRANTEE’S NAME] ON [GRANT DATE]

1.00 Instructions for Completing This Beneficiary Designation Form

You may use this Beneficiary Designation Form to [1] name the person you want to receive any amount
due under The Scotts Miracle-Gro Company 2006 Long-Term Incentive Plan after your death or [2]
change the person who will receive these benefits.

There are several things you should know before you complete this Beneficiary Designation Form.

First, if you do not elect another beneficiary, any amount due to you under the Plan when you die
will be paid to your surviving spouse or, if you have no surviving spouse, to your estate.

Second, your election will not be effective (and will not be implemented) unless you complete all
applicable portions of this Beneficiary Designation Form and return it to [Third Party
Administrator] at the address given below.

Third, all elections will remain in effect until they are changed (or until all death benefits are
paid).

Fourth, if you designate your spouse as your beneficiary but are subsequently divorced from that
person (or your marriage is annulled), your beneficiary designation will be revoked automatically.

Fifth, if you have any questions about this Beneficiary Designation Form or if you need additional
copies of this Form, please contact [Third Party Administrator] at [TPA Telephone Number] or at the
address or number given below.

1.00 Designation of Beneficiary

1.01 Primary Beneficiary:

I designate the following person(s) as my Primary Beneficiary or Beneficiaries to receive any
amount due after my death under the terms of the Award Agreement described at the top of this
Beneficiary Designation Form. This benefit will be paid, in the proportion specified, to:

	 	 	 	 	 	 	 	 	 
	 	 	 % to 	 	 
	 
	 

	 	 	 	(Name)	 	(Relationship)	 
	 
	 
	 	 	 	 	 	 	 
	 	Address: 	 	 
	 
	 
	 	 	 	 	 	 	 
	 	 	 % to 	 	 
	 
	 

	 	 	 	(Name)	 	(Relationship)	 
	 
	 
	 	 	 	 	 	 	 
	 	Address: 	 	 
	 
	 
	 	 	 	 	 	 	 
	 	 	 % to 	 	 
	 
	 

	 	 	 	(Name)	 	(Relationship)	 
	 
	 
	 	 	 	 	 	 	 
	 	Address: 	 	 

42

 

	 	 	 	 	 	 	 	 	 
	 	 	 % to 	 	 
	 
	 

	 	 	 	(Name)	 	(Relationship)	 
	 
	 
	 	 	 	 	 	 	 
	 	Address: 	 	 
	 
	 
	 	 	 	 	 	 	 

1.02 Contingent Beneficiary

If one or more of my Primary Beneficiaries die before I die, I direct that any amount due after my
death under the terms of the Award described at the top of this Beneficiary Designation Form:

	 	 	 	 	 	 	 	 	 
	 	 	 Be paid to my other named Primary Beneficiaries in proportion to the allocation given
above (ignoring 
	 	the interest allocated to the deceased Primary Beneficiary); or
	 
	 	 	 Be distributed among the following Contingent Beneficiaries:
	 
	 	 	 % to 	 	 
	 
	 

	 	 	 	(Name)	 	(Relationship)	 
	 
	 
	 	 	 	 	 	 	 
	 	Address: 	 	 
	 
	 
	 	 	 	 	 	 	 
	 	 	 % to 	 	 
	 
	 

	 	 	 	(Name)	 	(Relationship)	 
	 
	 
	 	 	 	 	 	 	 
	 	Address: 	 	 
	 
	 
	 	 	 	 	 	 	 
	 	 	 % to 	 	 
	 
	 

	 	 	 	(Name)	 	(Relationship)	 
	 
	 
	 	 	 	 	 	 	 
	 	Address: 	 	 
	 
	 
	 	 	 	 	 	 	 
	 	 	 % to 	 	 
	 
	 

	 	 	 	(Name)	 	(Relationship)	 
	 
	 
	 	 	 	 	 	 	 
	 	Address: 	 	 

Elections made on this Beneficiary Designation Form will be effective only after this Form is
received by [Third Party Administrator] and only if it is fully and properly completed and signed.

	 	 	 	 	 	 	 
	[Grantee’s Name]	 	 
	 
	 	 	 	 	 	 
	Date of Birth:	 	 	 	 
	 

	 	 	 

	 	 
	Address:
	 	 	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	 

Sign and return this Beneficiary Designation Form to [Third Party Administrator] at the address
given below.

 

	 	 	 	 	 	 	 
	 

Date

	 	 	 	 

          Signature
	 	 

Return this signed Beneficiary Designation Form to [Third Party Administrator] at the following
address:

43

 

[Third Party Administrator]

Attention: [TPA Contact’s Name]

[Contact’s Address]

[TPA Telephone Number]

	 	 	 	 	 
	Received on:
	 	 	 	 
	 

	 	 

	 	 

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 

44EX-10.1

 

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

FOR

RODERICK H. DILLON, JR.

     This Agreement is entered into this 10th day of August, 2006, by and between
Diamond Hill Investment Group, Inc. (hereinafter referred to as the “Employer”) and Roderick H.
Dillon, Jr. (hereinafter referred to as the “Executive”).

     WHEREAS, the Executive is currently employed as the President and Chief Executive Officer
(“CEO”) of the Employer pursuant to the terms of an employment agreement, dated May 11, 2000 (the
“Prior Agreement”);

     WHEREAS, the Employer desires to continue to employ the Executive as its President and CEO;

     WHEREAS, it is the intention of the Employer that the Executive shall be a long term employee
with the Employer, and it is the intention of the Executive that he will be a long term employee
with the Employer; provided, however, that the employment relationship between the Employer and the
Executive shall be governed by the terms of this Agreement; and

     WHEREAS, the Executive desires to continue his employment with the Employer in such capacity
under the terms of this Agreement which shall supersede the terms of the Prior Agreement;

     NOW, THEREFORE, and in consideration of the mutual covenants herein contained and other
valuable consideration, the receipt and adequacy of which is agreed to by the parties, the Employer
and the Executive hereby mutually agree as follows:

     1. Employment and Duties. The Employer hereby employs the Executive, and the Executive hereby
accepts continued employment with the Employer upon the terms and conditions hereinafter set forth.
The Executive will continue to serve the Employer as its President and CEO. In such capacity, the
Executive will report directly to the Board of Directors of the Employer (the “Board”) and have all
powers, duties, and obligations as are normally associated with such positions. Subject to the
provisions of Paragraph 5 [“Termination of Employment"], the Executive will further perform such
other duties and hold such other positions related to the business of the Employer and its
Affiliates as may from time to time be reasonably requested of him by the Board; provided that the
Executive shall not be required to perform such services that involve a material decrease in the
level of responsibility currently maintained by the Executive. For purposes of this Agreement, an
“Affiliate” shall mean any corporation (including any non-profit corporation), general or limited
partnership, limited

 

 

liability company, joint venture, trust, association or organization which is, directly or
indirectly, controlled by, or under common control with, the Employer. Except as otherwise set
forth in this Agreement, the Executive will devote all of his skills and substantially all of his
time and attention to said positions and in furtherance of the business and interests of the
Employer and its Affiliates and will not directly or indirectly render any services of a business,
commercial or professional nature to any person or organization without the prior written consent
of the Board (which consent will not be unreasonably withheld or delayed); provided, however, that
the Executive will not be precluded from participation in community, civic, charitable or similar
activities which do not unreasonably interfere with his responsibilities hereunder.

     2. Term of Employment

          a. Original Term. This Agreement will be effective upon execution by both parties.
The term of employment will begin, or be deemed to have begun, on January 1, 2006 (the “Effective
Date”), and to the extent the Executive’s Compensation (as defined in Section 3, below) is
increased, retroactive payments will be made back to the Effective Date within 30 days of the
execution of this Agreement. The Agreement will continue through the five-year period ending on
the day before the fifth anniversary date of the Effective Date, subject, however, to prior
termination or to extension, as herein provided.

          b. Extension of Term. The Employer and the Executive agree that the Board will review
the Executive’s performance with the intent that, if the Executive’s performance so warrants, the
Employer may extend the term of this Agreement for additional time periods to be determined in the
discretion of the Board and as agreed upon by the Executive. By October 1, 2010, or, in the event
that this Agreement is extended as provided for in this Paragraph 2(b), within ninety (90) days
preceding the end of any extension period, the Chairman of the Board (the “Chairman”) will notify
the Executive of the Employer’s decision whether or not to grant an extension of this Agreement for
an additional time period. In the event that the Chairman fails to notify the Executive, on or
before the date described in the preceding sentence, of the decision regarding the extension of the
term of this Agreement, the term of this Agreement will automatically be extended for an additional
one-year period.

     3. Compensation.

          a. Salary. The Executive will receive an initial annual base salary of a minimum of
$360,000, which may be increased on an annual basis, but not decreased without the Executive’s
written consent, by the Board during the term of this Agreement. In the event that the Board
increases the Executive’s initial base salary, the amount of the initial base salary, together with
any increase(s) will be his base salary (hereinafter referred to as the “Base Salary”). Following
the end of each calendar year, and no later than March 15 of each year, the Board will review the
Executive’s Base Salary, and in the event that the Company has met profit and growth goals agreed
upon between the Board and the Executive, the Base Salary will be increased by a percentage
determined by the Board, based upon its review of objective information reflecting the base
salaries of executive officers of similarly sized entities in the same business as the

 

 

Employer. The Base Salary will be payable in accordance with the Employer’s regular payroll
payment practices.

          b. Bonus. Each calendar year during which the Employer has in effect a
performance-based compensation plan (the “Performance Plan”) in compliance with the provisions of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), the Executive will be
eligible for bonus compensation equal to a specified percentage of a bonus pool established for
employees of the Employer (the “Bonus”). Such bonus pool will be based upon the attainment of
goals and objectives which may include average assets under management, investment advisory revenue
and target operating profit margin for the relevant calendar year. The Executive’s percentage of
the bonus pool will be determined by the Compensation Committee of the Board, based upon his
satisfaction of certain performance criteria, including, but not limited to, investment performance
of client portfolios and his overall contribution to the investment team and to the firm. All
bonus payments to be made pursuant to this Paragraph 3(b) will be made pursuant to the terms and
conditions of the Performance Plan and will be paid to the Executive in either cash or equity
awards under the Employer’s Equity Incentive Plan no later than March 15th of the
calendar year following the calendar year for which such bonus is payable.

     4. Fringe Benefits and Expenses.

          a Fringe Benefits. The Employer will provide the Executive with all health and life
insurance coverages, disability programs, tax-qualified retirement plans, equity compensation
programs, paid holidays, paid vacation, perquisites, and such other fringe benefits of employment
as the Employer may provide from time to time to actively employed senior executives of the
Employer; and consistent with the foregoing the Executive shall be entitled to a minimum of the
following benefits during the term of this Agreement:

     (i) standard health insurance of such coverage and term as provided
by the Employer to actively employed senior executives of the Employer;

     (ii) a minimum of six (6) weeks paid vacation each year, based on
current year Base Salary;

     (iii) continued participation in the Employer’s 401(k) retirement
savings plan;

     (iv) participation in such other health, disability, insurance,
pension, profit sharing or other employee benefit plan that the Employer may
establish from time to time in which the Executive is otherwise eligible to
participate.

Notwithstanding any provision contained in this Agreement, the Employer may discontinue or
terminate at any time any employee benefit plan, policy or program, now existing or hereafter

 

 

adopted, to the extent permitted by the terms of such plan, policy or program and will not be
required to compensate the Executive for such discontinuance or termination.

          b. Expenses. The Employer shall reimburse the Executive for all reasonable travel,
industry, entertainment, and out-of-pocket and miscellaneous expenses incurred by the Executive in
connection with the performance of his business activities under this Agreement in accordance with
the existing policies and procedures of the Employer pertaining to reimbursement of such expenses
to senior executives. In addition, the Employer agrees to reimburse the Executive for reasonable
legal expenses in connection with the review and analysis of this Agreement by an attorney selected
by the Executive, in an amount not to exceed $10,000.

     5. Termination of Employment.

          a. Death of Executive. The Executive’s employment hereunder will terminate upon his
death and the Executive’s beneficiary (as designated by the Executive in writing with the Employer
prior to his death) will be entitled to the following payments and benefits:

               i. any Base Salary that is accrued but unpaid, the value of any vacation that is accrued but
unused (determined by dividing Base Salary by 365 and multiplying such amount by the number of
unused vacation days), and any business expenses that are unreimbursed—all, as of the date of
termination of employment; and

               ii. any rights and benefits (if any) provided under plans and programs of the Employer,
determined in accordance with the applicable terms and provisions of such plans and programs,
including but not limited to a pro rata portion of the Bonus payment specified in Paragraph 3(b),
above, and such payment shall be made no later than March 15th of the calendar year following the
calendar year for which such Bonus is payable.

     In the absence of a beneficiary designation by the Executive, or, if the Executive’s
designated beneficiary does not survive him, payments and benefits described in this subparagraph
will be paid to the Executive’s estate.

          b. Disability. The Executive’s employment hereunder may be terminated by the Employer
upon 45 days written notice from the Employer following the determination, as set forth immediately
below, that he suffers from a Permanent Disability. For purposes of this Agreement, “Permanent
Disability” means a disability that, in the opinion of the Employer, renders, or will render, the
Executive unable to perform his duties under this Agreement by reason of any medically determinable
impairment, which can be expected to result in death, or which has lasted or can be expected to
last, for a continuous period of at least twelve months. If the Executive disagrees with the
Employer’s decision that the Executive’s disability renders or will render him unable to perform
his duties under this Agreement, such dispute shall be resolved by a panel of three physicians: one
physician to be chosen by the Employer, one physician to be chosen by the Executive, and a third
physician to be chose by the first two physicians. Each

 

 

physician shall have the opportunity to examine the Executive and the decision of a majority
of the physicians on the panel shall be binding on the Employer and the Executive, and shall be
rendered within 45 days after the third physician is appointed to the panel. The cost of the
physicians shall be paid by the Employer. During any period that the Executive fails to perform
his duties hereunder as a result of a Permanent Disability (“Disability Period”), the Executive
will continue to receive his Base Salary at the rate then in effect for such period until his
employment is terminated pursuant to this subparagraph; provided, however, that payments of Base
Salary so made to the Executive will be reduced by the sum of the amounts, if any, that were
payable to the Executive at or before the time of any such salary payment under any disability
benefit plan or plans of the Employer and that were not previously applied to reduce any payment of
Base Salary. In the event that the Employer elects to terminate the Executive’s employment
pursuant to this subparagraph, the Executive will be entitled to the following payments and
benefits:

               i. any Base Salary that is accrued but unpaid, the value of any vacation that is accrued but
unused (determined by dividing Base Salary by 365 and multiplying such amount by the number of
unused vacation days), and any business expenses that are unreimbursed—all, as of the date of
termination of employment; and

               ii. any rights and benefits (if any) provided under plans and programs of the Employer,
determined in accordance with the applicable terms and provisions of such plans and programs,
including but not limited to a pro rata portion of the Bonus payment specified in Paragraph 3(b),
above, and such payment shall be made no later than March 15th of the calendar year
following the calendar year for which such Bonus is payable.

          c. Termination of Employment for Cause. The Employer may terminate the Executive’s
employment upon written notice at any time for “Cause” if such Cause is reasonably determined by
the Board (provided the Executive does not fully cure the effect of the event giving rise to
“Cause” to the Employer’s reasonable satisfaction within thirty (30) days following his receipt of
notice of termination from the Employer). For purposes of this Agreement, the term “Cause” means
that the Executive has:

               i. caused the Employer or any of its Affiliates, other than pursuant to the advice of the
Employer’s legal counsel, to violate a law which, in the opinion of the Employer’s legal counsel,
is reasonable grounds for civil penalties in excess of $250,000 or criminal penalties against the
Employer, an Affiliate or the Board;

               ii. engaged in conduct which constitutes a material violation of the established written
policies or procedures of the Employer regarding the conduct of its employees, including policies
regarding sexual harassment of employees and use of illegal drugs or substances in the course of
his employment with Employer;

               iii. committed fraud, or acted with willful misconduct or gross negligence, in carrying out
his duties under this Agreement;

 

 

               iv. been convicted of any crime involving moral turpitude or a violation of federal or state
securities or investment adviser laws; or

               vi. committed a breach of any material covenant, provision, term, condition, understanding or
undertaking set forth in this Agreement.

     In the event that the Employer terminates the Executive’s employment for Cause, the Executive
will be entitled to the following payments and benefits:

                    A. any Base Salary that is accrued but unpaid, the value of any vacation that is accrued but
unused (determined by dividing Base Salary by 365 and multiplying such amount by the number of
unused vacation days), and any business expenses that are unreimbursed—all, as of the date of
termination of employment; and

                    B. any rights and benefits (if any) provided under plans and programs of the Employer,
determined in accordance with the applicable terms and provisions of such plans and programs.

          d. Termination Without Cause. The Employer may terminate the Executive’s employment
for any reason upon ninety (90) days prior written notice to the Executive. If the Executive’s
employment is terminated by the Employer for any reason other than the reasons set forth in
subparagraphs b or c of this Paragraph 5, subject to the applicable provisions of Section 409A of
the Code, the Executive will be entitled to the following payments and benefits:

               i. any Base Salary that is accrued but unpaid, the value of any vacation that is accrued but
unused (determined by dividing Base Salary by 365 and multiplying such amount by the number of
unused vacation days), and any business expenses that are unreimbursed—all, as of the date of
termination of employment;

               ii. any rights and benefits (if any) provided under plans and programs of the Employer,
determined in accordance with the applicable terms and provisions of such plans and programs,
including but not limited to a pro rata portion of the Bonus payment specified in Paragraph 3(b),
above, and such payment shall be made no later than March 15th of the calendar year
following the calendar year for which such Bonus is payable.;

               iii. a single lump sum payment, payable within 15 days following the date of termination of
employment, equal to six (6) months of the Base Salary applicable to the Executive on the date of
termination of employment;

               iv. beginning on the first day of the seventh month following the date of termination of
employment, continuation of the Executive’s Base Salary in effect on the date of his termination of
employment for a period of six (6) months; provided, that these payments will be made in separate,
equal payments no less frequently than monthly over such six-month period; and

 

 

               v. a single lump sum payment, payable within fifteen (15) days following the date of
termination of employment, equal to the Bonus paid or payable to the Executive with respect to the
most recently completed fiscal year of the Employer.

          e. Voluntary Termination by Executive. The Executive may resign and terminate his
employment with the Employer for any reason whatsoever upon not less than ninety (90) days prior
written notice to the Employer. In the event that the Executive terminates his employment
voluntarily pursuant to this Paragraph 5(e), the Executive will be entitled to the following
payments and benefits:

               i. any Base Salary that is accrued but unpaid, the value of any vacation that is accrued but
unused (determined by dividing Base Salary by 365 and multiplying such amount by the number of
unused vacation days), and any business expenses that are unreimbursed—all, as of the date of
termination of employment; and

               ii. any rights and benefits (if any) provided under plans and programs of the Employer,
determined in accordance with the applicable terms and provisions of such plans and programs.

          f. Good Reason Termination. The Executive may resign and terminate his employment
with the Employer for “Good Reason” upon not less than thirty (30) days prior written notice to the
Employer. For purposes of this Agreement, the Executive will have “Good Reason” to terminate his
employment with the Employer if any of the following events occur (provided the Employer does not
fully cure the effect of such event to the Executive’s reasonable satisfaction within ten (10) days
following its receipt of notice of termination of employment from the Executive):

               i. the Executive’s Base Salary is reduced for any reason other than in connection with the
termination of his employment;

               ii. without the Executive’s consent, the percentage assigned to the Executive of any bonus
pool created by the Employer for its employees is less than 20%;

               iii. without his consent, the Employer permanently and/or consistently assigns the Executive
to duties that are materially inconsistent in any respect with his position (including, without
limitation, his status, office and title), authority, duties or responsibilities as set forth in
Paragraph 1 (but excluding any other duties related to the business of the Employer or its
Affiliates reasonably requested of him by the Board), or takes any other action that results in a
permanent and/or consistent material diminution in such position, authority, duties, or
responsibilities;

               iv. without his consent, the Employer changes the Executive’s reporting structure within the
organization so that the Executive no longer reports directly to the Board; or

 

 

               v. the Employer breaches any material covenant, provision, term, condition, understanding or
undertaking set forth in this Agreement.

     In the event that the Executive terminates his employment for Good Reason pursuant to this
Paragraph 5(f), subject to the applicable provisions of Section 409A of the Code, the Executive
will be entitled to the following payments and benefits:

                    A. any Base Salary that is accrued but unpaid, the value of any vacation that is accrued but
unused (determined by dividing Base Salary by 365 and multiplying such amount by the number of
unused vacation days), and any business expenses that are unreimbursed—all, as of the date of
termination of employment;

                    B. any rights and benefits (if any) provided under plans and programs of the Employer,
determined in accordance with the applicable terms and provisions of such plans and programs,
including but not limited to a pro rata portion of the Bonus payment specified in Paragraph 3(b),
above, and such payment shall be made no later than March 15th of the calendar year
following the calendar year for which such Bonus is payable;

                    C. a single lump sum payment, payable within 15 days following the date of termination of
employment, equal to six (6) months’ of the Base Salary applicable to the Executive on the date of
termination of employment;

                    D. beginning on the first day of the seventh month following the date of termination of
employment, continuation of the Executive’s Base Salary in effect on the date of his termination of
employment for a period of six (6) months; provided, that these payments will be made in separate,
equal payments no less frequently than monthly over such six-month period; and

                    E. a single lump sum payment, payable within fifteen (15) days following the date of
termination of employment, equal to the Bonus paid or payable to the Executive with respect to the
most recently completed fiscal year of the Employer.

          g. Failure to Extend Term of Agreement. If the Employer notifies the Executive that
the Employer will not extend the term of this Agreement under the provisions of Paragraph 2(b)
hereof, the Executive’s employment under this Agreement will terminate at the end of such term and
the Executive will be entitled to the following payments and benefits:

               i. any Base Salary that is accrued but unpaid, the value of any vacation that is accrued but
unused (determined by dividing Base Salary by 365 and multiplying such amount by the number of
unused vacation days), and any business expenses that are unreimbursed — all as of the date of
termination of employment; and

               ii. any rights and benefits (if any) provided under plans and programs of the Employer,
determined in accordance with the applicable terms and provisions of such plans and programs,
including but not limited to the Bonus payment specified in Paragraph 3(b),

 

 

above, and such payment shall be made no later than March 15th of the calendar year
following the calendar year for which such bonus is payable.

     6. Change In Control.

          a Occurrence of Change in Control. In the event that during the term of this
Agreement, a Change in Control [as defined under Section 409A of the Code and the regulations
thereunder] occurs and, within twenty-four (24) months following such Change in Control, the
Executive’s employment is terminated by the Employer or its successor for any reason other than the
reasons set forth in subparagraphs b or c of Paragraph 5 or is terminated by the Executive under
subparagraph f of Paragraph 5, then in addition to any other provision of Paragraph 5 of this
Agreement and subject to the applicable provisions of Section 409A of the Code, the Employer or its
successor will pay to the Executive the following payments and benefits:

               i. any Base Salary that is accrued but unpaid, the value of any vacation that is accrued but
unused, (determined by dividing Base Salary by 365 and multiplying such amount by the number of
unused vacation days), and any business expenses that are unreimbursed all, as of the date of
termination of employment;

               ii. any rights and benefits (if any) provided under plans and programs of the Employer,
determined in accordance with the applicable terms and provisions of such plans and programs;

               iii. a single lump sum payment, payable within 30 days following the date of termination of
employment, equal to the total annual Base Salary and Bonus paid or payable to the Executive with
respect to the most recently completed fiscal year of the Employer; and

               iv. a single lump sum payment, payable within 60 days following the date of termination of
employment, equal to twelve (12) months of the premium applicable to the Executive on the date of
termination of employment for the Executive and his family (provided the Executive had family
coverage on such date) under the Employer’s group health plan.

          b. Treatment of Taxes. If payments provided under this Agreement, when combined with
payments and benefits under all other plans and programs maintained by the Employer, constitute
“excess” parachute payments as defined in Section 280G(b) of the Code, the Employer or its
successor will reduce the Executive’s benefits under this Agreement and/or the other plans and
programs maintained by the Employer (in a manner to be mutually agreed upon between the Employer or
its successor and the Executive) so that the Executive’s total “parachute payment” as defined in
Code §280G(b)(2)(A) under this Agreement and all other plans and programs will be One Dollar ($1)
less than the amount that would be an “excess parachute payment.” Treatment of taxes under this
paragraph 6(b) will be made at the time and in the manner mutually agreed to by the parties to this
Agreement. In addition, in the event of

 

 

any subsequent inquiries regarding the treatment of tax payments under this Paragraph 6, the
parties will agree to the procedures to be followed in order to deal with such inquiries.

     7. Nonexclusivity of Rights. Nothing in this Agreement will prevent or limit the Executive’s
continuing or future participation in any incentive, fringe benefit, deferred compensation, or
other plan or program provided by the Employer and for which the Executive may qualify, nor will
anything herein limit or otherwise affect such rights as the Executive may have under any other
agreements with the Employer. Amounts that are vested benefits or that the Executive is otherwise
entitled to receive under any plan or program of the Employer at or after the date of termination
of employment, will be payable in accordance with such plan or program.

     8. Noncompetition Covenant. The Executive agrees that, during the term of this Agreement,
including any extension thereof, and for a period of one (1) year thereafter following his
termination of employment, he shall not:

          a. call upon or solicit, either for the Executive or for any other person or firm that engages
in competition with any business operation actively conducted by the Employer or any Affiliate
during the term of this Agreement, any customer with whom the Employer or any Affiliate directly
conducts business (including, solely by way of example, intermediaries and corporations that
purchase directly from the Employer or an Affiliate); or interfere with any relationship,
contractual or otherwise, between the Employer or any Affiliate and any customer with whom the
Employer or any Affiliate directly conducts business; or

          b. induce any person who is an employee, officer or agent of the Employer or any Affiliate to
terminate said relationship.

     Nothing in this Paragraph or this Agreement shall be interpreted to (i) limit or reduce the
Executive’s ownership rights in the Dillon Value Model (the “DVM”); (ii) prevent the Executive from
devoting his time and attention to the revision of the DVM; or (iii) limit or preclude the
Executive from licensing the use of the DVM to any individual or entity following his termination
of employment with the Employer.

     In the event of a breach by the Executive of any covenant set forth in this Paragraph 8, the
term of such covenant will be extended by the period of the duration of such breach and such
covenant will survive any termination of this Agreement but only for the limited period of such
extension.

     The restrictions on competition provided herein shall supersede any restrictions on
competition contained in any other agreement between the Employer and the Executive and may be
enforced by the Employer and/or any successor thereto, by an action to recover payments made under
this Agreement, an action for injunction, and/or an action for damages. The provisions of this
Paragraph 8 constitute an essential element of this Agreement, without which the Employer would not
have entered into this Agreement. Notwithstanding any other remedy available to the Employer at
law or at equity, the parties hereto agree that the Employer or any

 

 

successor thereto, will have the right, at any and all times, to seek injunctive relief in
order to enforce the terms and conditions of this Paragraph 8.

     If the scope of any restriction contained in this Paragraph 8 is too broad to permit
enforcement of such restriction to its fullest extent, then such restriction will be enforced to
the maximum extent permitted by law, and the Executive hereby consents and agrees that such scope
may be judicially modified accordingly in any proceeding brought to enforce such restriction.

     9. Confidential Information. The Executive will hold in a fiduciary capacity, for the benefit
of the Employer, all secret or confidential information, knowledge, and data relating to the
Employer and its Affiliates, that shall have been obtained by the Executive during his employment
with the Employer and that is not public knowledge (other than by acts by the Executive or his
representatives in violation of this Agreement). During and after termination of the Executive’s
employment with the Employer, the Executive will not, without the prior written consent of the
Board, communicate or divulge any such information, knowledge, or data to anyone other than the
Employer or those designated by it, unless the communication of such information, knowledge or data
is required pursuant to a compulsory proceeding in which the Executive’s failure to provide such
information, knowledge, or data would subject the Executive to criminal or civil sanctions and then
only with prior notice to the Employer.

     The restrictions imposed on the release of information described in this Paragraph 9 may be
enforced by the Employer and/or any successor thereto, by an action to recover payments made under
this Agreement, an action for injunction, and/or an action for damages. The provisions of this
Paragraph 9 constitute an essential element of this Agreement, without which the Employer would not
have entered into this Agreement. Notwithstanding any other remedy available to the Employer at
law or at equity, the parties hereto agree that the Employer or any successor thereto, will have
the right, at any and all times, to seek injunctive relief in order to enforce the terms and
conditions of this Paragraph 9.

     If the scope of any restriction contained in this Paragraph 9 is too broad to permit
enforcement of such restriction to its fullest extent, then such restriction will be enforced to
the maximum extent permitted by law, and the Executive hereby consents and agrees that such scope
may be judicially modified accordingly in any proceeding brought to enforce such restriction.

     10. Intellectual Property. The Executive agrees to communicate to the Employer, promptly and
fully, and to assign to the Employer all intellectual property developed or conceived solely by the
Executive, or jointly with others, during the term of his employment, which are within the scope of
either the Employer ‘s business or an Affiliate’s business, or which utilized Employer materials or
information. For purposes of this Agreement, “intellectual property” means inventions,
discoveries, business or technical innovations, creative or professional work product, or works of
authorship. The Executive further agrees to execute all necessary papers and otherwise to assist
the Employer, at the Employer ‘s sole expense, to obtain patents, copyrights or other legal
protection as the Employer deems fit. Any such intellectual property is to be the property of the
Employer whether or not patented, copyrighted or published.

 

 

Notwithstanding any provision contained herein or anywhere else in the Agreement, the
provisions of this Paragraph 10 shall not apply to the DVM.

     11. Assignment and Survivorship of Benefits. The rights and obligations of the Employer under
this Agreement will inure to the benefit of, and will be binding upon, the successors and assigns
of the Employer, if the Employer shall at any time be merged or consolidated into, or with, any
other company, or if substantially all of the assets of the Employer are transferred to another
company, then the provisions of this Agreement will be binding upon and inure to the benefit of the
company resulting from such merger or consolidation or to which such assets have been transferred,
and this provision will apply in the event of any subsequent merger, consolidation, or transfer.

     12. Notices. Any notice given to either party to this Agreement will be in writing, and will
be deemed to have been given when delivered personally or sent by certified mail, postage prepaid,
return receipt requested, duly addressed to the party concerned, at the address indicated below or
to such changed address as such party may subsequently give notice of:

	 	 	 
	If to Diamond Hill:

	 	Diamond Hill Investment Group, Inc.

325 John H. McConnell Blvd.

Suite 200

Columbus, Ohio 43215

	If to the Executive:

	 	Roderick H. Dillon, Jr.

At the last address on file

with the Employer

     13. Indemnification. The Executive shall be indemnified by the Employer to the extent
provided in the case of officers under the Employer’s Articles of Incorporation or Regulations, to
the maximum extent permitted under applicable law. The Employer shall use commercially reasonable
efforts to continue its Director and Officer Liability Insurance (“DOL Insurance") under
substantially similar terms and in substantially similar amounts as in existence prior to the
termination of employment. The DOL Insurance shall be maintained for at least seven (7) years from
termination of employment and without limiting the foregoing, the Executive shall not be excluded
from coverage under such DOL Insurance during such period.

     14. Taxes. Anything in this Agreement to the contrary notwithstanding, all payments required
to be made hereunder by the Employer to the Executive will be subject to withholding of such
amounts relating to taxes as the Employer may reasonably determine that it should withhold pursuant
to any applicable law or regulations. In lieu of withholding such amounts, in whole or in part,
however, the Employer may, in its sole discretion, accept other provision for payment of taxes,
provided that it is satisfied that all requirements of the law affecting its responsibilities to
withhold such taxes have been satisfied.

 

 

     15. Arbitration; Enforcement of Rights. Any controversy or claim arising out of, or relating
to this Agreement, or the breach thereof, except with respect to Paragraphs 8, 9 and 10, will be
settled by arbitration in the city of Columbus, Ohio, in accordance with the Rules of the American
Arbitration Association, and judgment upon the award rendered by the arbitrator or arbitrators may
be entered in any court having jurisdiction thereof.

     All legal and other fees and expenses, including, without limitation, any arbitration
expenses, incurred by the Executive in connection with seeking in good faith to obtain or enforce
any right or benefit provided for in this Agreement, or in otherwise pursuing any right or claim,
will be paid by the Employer, to the extent permitted by law, provided that the Executive is
successful in whole or in part as to such claims as the result of litigation, arbitration, or
settlement.

     In the event that the Employer refuses or otherwise fails to make a payment when due and is
ultimately decided that the Executive is entitled to such payment, such payment will be increased
to reflect an interest equivalent for the period of delay, compounded annually, equal to the prime
or base lending rate used by Bank of America, and in effect as of the date the payment was first
due.

     16. Governing Law/Captions/Severance. This Agreement will be construed in accordance with,
and pursuant to, the laws of the State of Ohio. The captions of this Agreement will not be part of
the provisions hereof, and will have no force or effect. The invalidity or unenforceability of any
provision of this Agreement will not affect the validity or enforceability of any other provision
of this Agreement. Except as otherwise specifically provided in this paragraph, the failure of
either party to insist in any instance on the strict performance of any provision of this Agreement
or to exercise any right hereunder will not constitute a waiver of such provision or right in any
other instance.

     17. Entire Agreement/Amendment. This instrument contains the entire agreement of the parties
relating to the subject matter hereof, and the parties have made no agreement, representations, or
warranties relating to the subject matter of this Agreement that are not set forth herein. This
Agreement may be amended only by mutual written agreement of the parties. However, by signing this
Agreement, the Executive agrees without any further consideration, to consent to any amendment
necessary to avoid penalties under Code §409A.

 

 

     IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written.

	 	 	 	 	 
	 	 	DIAMOND HILL INVESTMENT GROUP, INC.

	 

	 	By:
	 	/s/ David R. Meuse

David R. Meuse, Chairman

	 

	 	 	 	/s/ R. H. Dillon
	 

	 	 	 	 
	 

	 	 	 	Roderick H. Dillon, Jr.

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