Document:

Exhibit 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

NONQUALIFIED STOCK OPTION AWARD GRANTED 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 members of its Board of
Directors (“Directors”) 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.

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 Name] at [Contact Telephone Number] if you have any questions about
your Award. Or, you may send a written inquiry to 14111 Scottslawn Road, Marysville, Ohio
43041.

Also, no later than [Date: 30 days post Grant Date], you must return a signed copy of the Award
Agreement to:

[Contact Name]

Merrill Lynch

[Contact’s Street Address]

[Contact’s City, State and Zip Code]

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 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.

 

 

Description of Your Nonqualified Stock Options

You have been awarded Nonqualified Stock Options (or “NSOs”) to purchase [Number of NSOs Granted]
common shares of the Company. You may purchase one of the Company’s common shares for each NSO,
but only if you pay $[Exercise Price] (“Exercise Price”) for each common share you purchase, you
exercise the NSOs on or before [Expiration Date] (“Expiration Date”) and meet the terms and
conditions described in this Award Agreement and in the Plan and the Prospectus. You will be
solely responsible for any tax liability associated with this grant and its exercise.

No later than [Date: 30 days post Grant Date], you must return a signed copy of this Award
Agreement to:

[Contact Name]

Merrill Lynch

[Contact’s Street Address]

[Contact’s City, State and Zip Code]

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

Limits on Exercising Your NSOs

Normally, your NSOs will vest (and become exercisable) on [Date NSOs Vest] but only if you are then
actively serving as a Director and all other conditions described in this Award Agreement, the Plan
and the Prospectus are met. Once they become exercisable, your NSOs may be exercised anytime
before the earlier of the Expiration Date ([Expiration Date]) or one year after you stop being a
Director (five years after you stop being a Director after having served at least one full term as
a Director before leaving the board).

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
Merrill Lynch or by contacting [CONTACT NAME] at [Contact Telephone Number] or at the address shown
above.

You may use one of three methods to exercise your NSOs. 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.

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. 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 (in
cash, a cash equivalent or in common shares of the Company having a value equal to the
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

Normally, you may exercise your NSOs after they vest and before the Expiration Date ([Expiration
Date]). However, your NSOs will be cancelled on the date (if any) you cease to perform services
for the Company after having been convicted of, or pled guilty or nolo contendere to, a felony.

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.

Amendment/Termination. We may amend or terminate the Plan at any time.

 

 

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

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 [Contact Name] at
[Contact 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.

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).

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 [Contact Name] at [Contact Telephone Number] or at the address given below if you
have any questions about your Award or this Award Agreement.

Your Acknowledgment of Award Conditions

Note: You must sign and return a copy of this Award Agreement to [Contact Name] at the address
given below no later than [Date: 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 will consent (in my own behalf and in 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
not later than [Date: 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:	 	 
	 

	 	 	 	 
	(signature)
	 	 	 	 

	 	 	 	 	 	 	 
	Date signed:

	 	 	 	Date signed:	 	 
	 

	 	 
	 	 	 	 

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

[Contact Name]

Merrill Lynch

[Contact’s Street Address]

[Contact’s City, State and Zip Code]

[Contact 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.

 

 

*****

Committee’s Acknowledgment 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 NSOs 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.

 

 

THE SCOTTS MIRACLE-GRO COMPANY

2006 LONG-TERM INCENTIVE PLAN

NONQUALIFIED STOCK OPTION EXERCISE NOTICE

AFFECTING 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 [Contact Name]
at [Contact Telephone Number] or at the address given below.

By completing this Exercise Notice and returning it to [Contact Name] 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:                                         

Exercise Price: The Exercise Price due is $                                                            

     Note: This amount must be the product of $[Exercise Price] multiplied by the number of NSOs
being exercised.

Payment of Exercise Price: I have decided to pay the Exercise Price 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 related to this
exercise.
	 
	 	•	 	If you select either the Cashless Exercise and Sell or the Combination Exercise
methods of paying the Exercise Price, you should contact [Contact Name] at

 

 

[Contact Telephone Number] or 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.

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 [Contact Name] 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:

[Contact Name]

Merrill Lynch

[Contact’s Street Address]

[Contact’s City, State and Zip Code]

*****

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.

 

 

THE SCOTTS MIRACLE-GRO COMPANY

2006 LONG-TERM INCENTIVE PLAN

BENEFICIARY DESIGNATION FORM

RELATING TO NONQUALIFIED STOCK OPTION 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 [Contact Name] 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 [Contact Name] at [Contact 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:
	 	 	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	% 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 [Contact Name] 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 [Contact Name] at the address given below.

	 	 	 
	 
	 	 
	 

	 	 
	Date

	 	Signature

Return this signed Beneficiary Designation Form to [Contact Name] at the following address:

[Contact Name]

Merrill Lynch

[Contact’s Street Address]

[Contact’s City, State and Zip Code]

[Contact Telephone Number]

	 	 	 	 	 
	Received on:	 	 
	 

	 	 	 	 
	By:Exhibit 10.4

 

Exhibit 10.4

THE SCOTTS COMPANY LLC

EXECUTIVE/MANAGEMENT INCENTIVE PLAN (THE “PLAN” or “EMIP”)

TERMS AND CONDITIONS

	1.	 	Objectives

	 	1.1	 	Provide meaningful financial incentives consistent with and supportive of
Corporate strategies and objectives.
	 
	 	1.2	 	Encourage team effort toward achievement of corporate financial and strategic
goals aligned with our shareholders and customers.
	 
	 	1.3	 	Contribute toward a competitive compensation program for all Associates
participating in the Plan (“Participants”).

	2.	 	Participation

	 	2.1	 	All managers and more senior level employees of The Scotts Company LLC (the
“Company”) and all “Affiliates” and “Subsidiaries” (as defined in Internal Revenue Code
§414(b) and (c)) are eligible to participate upon recommendation by management and in
the case of covered employees (as defined in Internal Revenue Code §162(m)) approval by
the Compensation and Organization Committee of the Scotts Miracle-Gro Company (the
“Committee”).
	 
	 	2.2	 	Participants must be actively employed in an eligible job/position for at least
13 consecutive weeks during the Plan Year (fiscal year).
	 
	 	2.3	 	Participant eligibility is based on active status during the fiscal year.
Periods of inactive status such as short — term disability and other leaves will be
reflected in the eligible earnings and payout calculation.
	 
	 	2.4	 	Participants must be employed on the last day of the fiscal year to be eligible
for a payment.
	 
	 	2.5	 	Participants, whose employment terminates during the Plan Year, except in cases
of retirement, will not be eligible for an incentive payment, prorated or otherwise.
	 
	 	2.6	 	Participants who retire during the Plan Year will be eligible for a prorated
award.
	 
	 	2.7	 	Participants who hold an eligible position on a part — time basis are eligible
for the EMIP. All other terms and conditions apply.
	 
	 	2.8	 	Participants who move to a different EMIP eligible position or otherwise become
eligible for a different target percentage during the Plan Year will be pro — rated

 

 

	 	 	 	based on new metrics/target (if applicable) only if the move is for an eligible period
of at least 13 weeks in the fiscal year.
	 
	 	2.9	 	Participants who move to a non — EMIP eligible position during the Plan Year
will be eligible for a pro — rated payout (based on Plan Year earnings) providing other
eligibility requirements are met.
	 
	 	2.10	 	Participants shall not have any right with respect to any award until an award
shall, in fact, be paid to them.
	 
	 	2.11	 	The Plan confers no rights upon any associate to participate in the Plan or
remain in the employ of the Company. Neither the adoption of the Plan nor its operation
shall in any way affect the right of the associate or the Company to terminate the
employment relationship at any time.

	3.	 	Plan Design, Performance Measures, and Payouts

	 	3.1	 	The Plan is designed to recognize and reward performance against established
financial targets. The Plan is comprised of:

	 	(a)	 	A corporate net income “funding trigger” below which no
incentives will be paid to any participant;
	 
	 	(b)	 	Up to five standard Performance Measures from the list of
available Performance Measures, below;
	 
	 	(c)	 	An earnings “multiplier” that will reinforce the importance of
earnings by modifying the performance results against all of the other goals;
and
	 
	 	(d)	 	The ability to tailor incentive measure weights to each
particular group or unit reflecting the relative contribution that group or
unit can make to those results.

	 	3.2	 	Available Performance Measures under the Plan shall be measured over the period
established by the Committee and be limited to the following:

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

2

 

	 	(f)	 	Cash flow (including, but not limited to, operating cash flow,
free cash flow, cash flow return on equity, and cash flow return on
investment);
	 
	 	(g)	 	Earnings before or after taxes, interest, depreciation, and/or
amortization;
	 
	 	(h)	 	Gross or operating margins;
	 
	 	(i)	 	Productivity ratios;
	 
	 	(j)	 	Share price (including, but not limited to, growth measures and
total shareholder return);
	 
	 	(k)	 	Expense targets;
	 
	 	(l)	 	Margins;
	 
	 	(m)	 	Operating efficiency;
	 
	 	(n)	 	Market share;
	 
	 	(o)	 	Customer satisfaction/service;
	 
	 	(p)	 	Product Fill Rate percent (% of orders filled on first
delivery) or All-In Fill Rate percent (% calculated dollar fill based on
potential) times Inventory Turns;
	 
	 	(q)	 	Working capital targets;
	 
	 	(r)	 	Economic value added or EVA(R)(net operating profit after tax
minus the sum of capital multiplied by the cost of capital);
	 
	 	(s)	 	Developing new products and lines of revenue;
	 
	 	(t)	 	Reducing operating expenses;
	 
	 	(u)	 	Developing new markets;
	 
	 	(v)	 	Meeting completion schedules;
	 
	 	(w)	 	Developing and managing relationships with regulatory and other
governmental agencies;
	 
	 	(x)	 	Managing cash;
	 
	 	(y)	 	Managing claims against the Company, including litigation; and

3

 

	 	(z)	 	Identifying and completing strategic acquisitions.
	 
	 	(aa)	 	Any Performance Measure(s) may be used to measure the
performance of the Company, Subsidiary, and/or Affiliate as a whole or any
business unit of the Company, Subsidiary, and/or Affiliate or any combination
thereof, as the Committee may deem appropriate, or any of the above Performance
Measures as compared to the performance of a group of comparator companies, or
published or special index that the Committee, in its sole discretion, deems
appropriate.

	 	3.3	 	Performance above and below target performance goals will be incrementally
calculated so Participants will receive a payout calculated on a straight — line basis.
	 
	 	3.4	 	The maximum amount of compensation that could be paid to any Participant in any
Plan Year from this Plan is $2.5 million.
	 
	 	3.5	 	All payments under the Plan will be made by the 15th day of the third month
following the close of the applicable Plan Year.

	4.	 	Employee Agreement and Forfeiture of Payment

	 	4.1	 	Regardless of any other provision of this section and unless the Incentive
Review Committee specifies otherwise, in order to participate in the Plan, Participant
must execute an Employee Confidentiality, Noncompetition, Nonsolicitation Agreement.
	 
	 	4.2	 	Furthermore, regardless of any other provision of this section and unless the
Incentive Review Committee specifies otherwise, a Participant who breaches any part of
that Agreement will forfeit any future payment under the Plan and will also return to
the Company any monies paid out to Participant under this Plan within the three years
prior to said breach.
	 
	 	4.3	 	By Participating in this plan, a Participant hereby consents to a deduction
from any amount the Company may owe the Participant (including amounts owed to the
Participant as wages or other compensation, fringe benefits, or vacation pay as well as
any other amounts owed to the Participant by the Company), to the extent of the amounts
owed the Company under this section, whether or not the Company elects to make any
Set-Off in whole or in part. If the Company does not recover by means of set-off, the
full amount the Participant owes it, calculated as set forth above, the Participant
agree to pay immediately the unpaid balance to the Company.

4

 

	5.	 	Administration

	 	5.1	 	The Plan is to be administered by the Vice President, Global Total Rewards or
the Committee designee, who will be responsible for:

	 	(a)	 	Recommending changes in the Plan as appropriate;
	 
	 	(b)	 	Recommending payout targets; and
	 
	 	(c)	 	Recommending additions or deletions to the list of eligible
associates.

	 	5.2	 	The Incentive Review Committee (comprised of the Chief Executive Officer,
Executive Vice President, Human Resources and the Chief Financial Officer) is
responsible for:

	 	(a)	 	Approving the percentages by which financial measurements vary
from approved budgets and business unit financial performance results;
	 
	 	(b)	 	Adjudicating changes and adjustments; and
	 
	 	(c)	 	Recommending Plan payouts.

	 	5.3	 	The Committee approves:

	 	(a)	 	Changes in the Plan design;
	 
	 	(b)	 	The payout percentage;
	 
	 	(c)	 	Additions or deletions of eligible associates; and
	 
	 	(e)	 	Payouts to all Participants after written certification that
Performance Measures have been met.

	 	5.4	 	The Committee shall approve the Plan measures within 90 days of the beginning
of the performance period but no later than 25% of the performance period. Material
terms of the Plan, including the Plan measures, are disclosed to shareholders and,
before payout, are approved by a majority of the votes cast on the proposal to adopt
this Plan with abstentions counted as negative votes. The foregoing qualifies payments
under the Plan as performance based compensation under Internal Revenue Code §162(m).
	 
	 	5.5	 	The Committee shall review the operation of the Plan and (subject to
restrictions imposed in Section 162(m) of the Internal Revenue Code), if at any time
the continuation of the Plan or any of its provisions becomes inappropriate or
inadvisable, the Committee shall revise or modify Plan provisions or recommend to the
Board of Directors of the Scotts Miracle-Gro Company (the “Board”) that

5

 

	 	 	 	the Plan be
suspended or withdrawn. In addition, the Committee reserves the right to modify
incentive formulas to reflect unusual circumstances.
	 
	 	5.6	 	The Board reserves to itself the right to suspend the Plan, to withdraw the
Plan, and, to the extent allowed without shareholder approval, make alterations in Plan
concept.

6

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