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INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.     )

  Filed by the Registrant   þ
  Filed by a Party other than the Registrant   o
 
  Check the appropriate box:

  o   Preliminary Proxy Statement
  o   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  þ   Definitive Proxy Statement
  o   Definitive Additional Materials
  o   Soliciting Material Pursuant to §240.14a-12

The Scotts Miracle-Gro Company

(Name of Registrant as Specified In Its Charter)


(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

      Payment of Filing Fee (Check the appropriate box):

  þ   No fee required.
  o   Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

        1) Title of each class of securities to which transaction applies:
 

        2) Aggregate number of securities to which transaction applies:
 

        3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 

        4) Proposed maximum aggregate value of transaction:
 

        5) Total fee paid:
 

        o   Fee paid previously with preliminary materials.

        o   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

        1) Amount Previously Paid:
 

        2) Form, Schedule or Registration Statement No.:
 

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        4) Date Filed:
 


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(SCOTTS MIRACLE-GRO LOGO)
 
The Scotts Miracle-Gro Company
Proxy Statement for 2011 Annual Meeting of Shareholders
 


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(THE SCOTTS MIRACLE-GRO COMPANY LOGO)
 
14111 Scottslawn Road
Marysville, Ohio 43041
 
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held Thursday, January 20, 2011
 
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of The Scotts Miracle-Gro Company (the “Company”) will be held at The Berger Learning Center, 14111 Scottslawn Road, Marysville, Ohio 43041, on Thursday, January 20, 2011, at 9:00 A.M. Eastern Time (the “Annual Meeting”), for the following purposes:
 
1. To elect four directors, each to serve for a term of three years expiring at the 2014 Annual Meeting of Shareholders.
 
2. To ratify the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2011.
 
3. To consider and vote upon a proposal to approve material terms of the performance criteria under The Scotts Miracle-Gro Company Amended and Restated 2006 Long-Term Incentive Plan.
 
4. To consider and vote upon a proposal to approve material terms of the performance criteria under The Scotts Company LLC Amended and Restated Executive Incentive Plan.
 
5. To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
 
The Proxy Statement accompanying this Notice of Annual Meeting of Shareholders describes each of these items in detail. The Company has not received notice of any other matters that may be properly presented at the Annual Meeting.
 
Only shareholders of record at the close of business on Wednesday, November 24, 2010, the date established by the Company’s Board of Directors as the record date, are entitled to receive notice of, and to vote at, the Annual Meeting.
 
On or about December 10, 2010, the Company is first mailing to shareholders either: (1) a copy of the accompanying Proxy Statement, a form of proxy and the Company’s 2010 Annual Report or (2) a Notice of Internet Availability of Proxy Materials, which indicates how to access the Company’s proxy materials on the Internet.
 
Your vote is very important. Please vote as soon as possible even if you plan to attend the Annual Meeting.
 
By Order of the Board of Directors,
 
-s- James Hagedorn
James Hagedorn
Chief Executive Officer
and Chairman of the Board
 
December 10, 2010


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Proxy Statement for the
Annual Meeting of Shareholders of

THE SCOTTS MIRACLE-GRO COMPANY

To Be Held on Thursday, January 20, 2011
 
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(THE SCOTTS MIRACLE-GRO COMPANY LOGO)
 
14111 Scottslawn Road
Marysville, Ohio 43041
 
PROXY STATEMENT
 
for
Annual Meeting of Shareholders
to be held on Thursday, January 20, 2011
 
GENERAL INFORMATION ABOUT VOTING
 
This Proxy Statement, along with the form of proxy, are being furnished in connection with the solicitation of proxies on behalf of the Board of Directors (the “Board”) of The Scotts Miracle-Gro Company (together with its corporate predecessors, as appropriate, the “Company”) for use at the Annual Meeting of Shareholders of the Company (the “Annual Meeting”) to be held at The Berger Learning Center, 14111 Scottslawn Road, Marysville, Ohio 43041, on Thursday, January 20, 2011, at 9:00 A.M. Eastern Time, and at any adjournment or postponement thereof. Our telephone number is (937) 644-0011 should you wish to obtain directions to our corporate offices in order to attend the Annual Meeting and vote in person. Directions to our corporate offices can also be found on the outside back cover page of this Proxy Statement.
 
Only holders of record of the Company’s common shares, without par value (the “Common Shares”), at the close of business on Wednesday, November 24, 2010 (the “Record Date”) are entitled to receive notice of and to vote at the Annual Meeting. As of the Record Date, there were 66,557,295 Common Shares outstanding. Holders of Common Shares as of the Record Date are entitled to one vote for each Common Share held. There are no cumulative voting rights.
 
Again this year, the Company is furnishing proxy materials over the Internet to a number of its shareholders as permitted under the rules of the Securities and Exchange Commission (the “SEC”). Under these rules, many of the Company’s shareholders will receive a Notice of Internet Availability of Proxy Materials instead of a paper copy of the Notice of Annual Meeting of Shareholders, this Proxy Statement and the Company’s 2010 Annual Report. The Notice of Internet Availability of Proxy Materials contains instructions on how to access those documents over the Internet and how shareholders can receive a paper copy of the Company’s proxy materials, including the Notice of Annual Meeting of Shareholders, this Proxy Statement, the Company’s 2010 Annual Report and a form of proxy. All shareholders who do not receive a Notice of Internet Availability of Proxy Materials will receive a paper copy of the proxy materials by mail. The Company believes this process will conserve natural resources and reduce the costs of printing and distributing proxy materials. Shareholders who receive a Notice of Internet Availability of Proxy Materials are reminded that the Notice is not itself a proxy card.
 
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to Be Held on January 20, 2011: The Notice of Annual Meeting of Shareholders, Proxy Statement and 2010 Annual Report are available at www.proxyvote.com. At www.proxyvote.com, shareholders can view the proxy materials, cast their vote and request to receive proxy materials in printed form by mail or electronically by e-mail on an ongoing basis.
 
If you received a paper copy of the proxy materials by mail, a form of proxy for use at the Annual Meeting is included. You may ensure your representation at the Annual Meeting by completing, signing, dating and promptly returning the form of proxy. A return envelope, which requires no postage if mailed in the United States, has been provided for your use. Alternatively, shareholders may transmit their voting instructions electronically via the Internet or by using the toll-free telephone number stated on the form of proxy or the Notice of Internet Availability of Proxy Materials. The deadline for transmitting voting


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instructions electronically via the Internet or telephonically is 11:59 P.M. Eastern Time on January 19, 2011. The Internet and telephone voting procedures are designed to authenticate shareholders’ identities, allow shareholders to give their voting instructions and confirm that such voting instructions have been properly recorded.
 
If you are a registered shareholder, you may revoke your proxy at any time before it is actually voted at the Annual Meeting by giving written notice of revocation to the Corporate Secretary of the Company, by revoking via the Internet site, by using the toll-free telephone number stated on the form of proxy or the Notice of Internet Availability of Proxy Materials and electing revocation as instructed or by attending the Annual Meeting and giving notice of revocation in person. You may also change your vote by choosing one of the following options: (1) executing and returning to the Company a later-dated form of proxy; (2) voting in person at the Annual Meeting; (3) submitting a later-dated electronic vote through the Internet site; or (4) voting by telephone at a later date by using the toll-free telephone number stated on the form of proxy or the Notice of Internet Availability of Proxy Materials. Attending the Annual Meeting will not, in and of itself, constitute revocation of a previously-appointed proxy.
 
If you hold your Common Shares in “street name” with a broker/dealer, financial institution or other nominee or holder of record, you are urged to carefully review the information provided to you by the holder of record. This information will describe the procedures you must follow in order to instruct the holder of record how to vote the “street name” Common Shares and how to revoke any previously-given voting instructions. If you hold your Common Shares in “street name” and do not provide voting instructions to your broker/dealer within the required time frame before the Annual Meeting, your Common Shares will not be voted by the broker/dealer on the proposals relating to the election of directors or other non-routine maters, such as approval of materials terms of the performance criteria under The Scotts Miracle-Gro Company Amended and Restated 2006 Long-Term Incentive Plan and The Scotts Company LLC Amended and Restated Executive Incentive Plan, but the broker/dealer will have discretion to vote your Common Shares on routine matters, such as the ratification of the selection of the Company’s independent registered public accounting firm.
 
The Company will bear the costs of soliciting proxies on behalf of the Board and tabulating your votes. The Company has retained Broadridge Financial Solutions, Inc. to assist in distributing these proxy materials. Directors, officers and regular employees of the Company may solicit your votes personally, by telephone, by e-mail or otherwise, in each case without additional compensation. If you provide voting instructions through the Internet, you may incur costs associated with electronic access, such as usage charges from Internet access providers and telephone companies, which the Company will not reimburse. The Company will reimburse its transfer agent, Wells Fargo Shareholder Services, as well as broker/dealers, financial institutions and other custodians, nominees and fiduciaries for forwarding proxy materials to shareholders, according to certain regulatory fee schedules.
 
If you participate in The Scotts Company LLC Retirement Savings Plan (the “RSP”) and Common Shares have been allocated to your account in the RSP, you will be entitled to instruct the trustee of the RSP how to vote such Common Shares. You may receive your form of proxy with respect to your RSP Common Shares separately. If you do not give the trustee of the RSP voting instructions, the trustee will not vote such Common Shares at the Annual Meeting.
 
If you participate in The Scotts Miracle-Gro Company Discounted Stock Purchase Plan (the “Discounted Stock Purchase Plan”), you will be entitled to vote the number of Common Shares credited to your custodial account (including any fractional Common Shares) on any matter submitted to the Company’s shareholders for consideration at the Annual Meeting. If you do not vote or grant a valid proxy with respect to the Common Shares credited to your custodial account, those Common Shares will be voted by the custodian under the Discounted Stock Purchase Plan in accordance with any stock exchange or other rules governing the custodian in the voting of Common Shares held for customer accounts.
 
Under the Company’s Code of Regulations, the presence, in person or by proxy, of the holders of a majority of the outstanding Common Shares entitled to vote is necessary to constitute a quorum for the transaction of business at the Annual Meeting. Proxies reflecting abstentions are counted for the purpose of


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determining the presence or absence of a quorum. Broker non-votes, where broker/dealers who hold their customers’ Common Shares in “street name” sign and submit proxies for such Common Shares but fail to vote on non-routine matters because they were not given instructions from their customers, are also counted for the purpose of establishing a quorum.
 
The results of shareholder voting at the Annual Meeting will be tabulated by or under the direction of the inspector of election appointed by the Board for the Annual Meeting. Common Shares represented by properly executed forms of proxy returned to the Company prior to the Annual Meeting or represented by properly authenticated voting instructions timely recorded through the Internet or by telephone will be counted toward the establishment of a quorum for the Annual Meeting even though they are marked “For All,” “Withhold All,” “For All Except,” “For,” “Against” or “Abstain” or are not marked at all.
 
Those Common Shares represented by properly executed forms of proxy, or properly authenticated voting instructions recorded through the Internet or by telephone, which are timely received prior to the Annual Meeting and not revoked will be voted as specified by the shareholder. The Common Shares represented by valid proxies timely received prior to the Annual Meeting which do not specify how the Common Shares should be voted will, to the extent permitted by applicable law, be voted FOR the election as directors of the Company of each of the four nominees of the Board listed below under the caption “PROPOSAL NUMBER 1 — ELECTION OF DIRECTORS”; FOR the ratification of the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2011 as described below under the caption “PROPOSAL NUMBER 2 — RATIFICATION OF THE SELECTION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM”; FOR approval of the material terms of the performance criteria under The Scotts Miracle-Gro Company Amended and Restated 2006 Long-Term Incentive Plan described below under the caption “PROPOSAL NUMBER 3 — APPROVAL OF MATERIAL TERMS OF THE PERFORMANCE CRITERIA UNDER THE SCOTTS MIRACLE-GRO COMPANY AMENDED AND RESTATED 2006 LONG-TERM INCENTIVE PLAN”; and FOR approval of the material terms of the performance criteria under The Scotts Company LLC Amended and Restated Executive Incentive Plan described below under the caption “PROPOSAL NUMBER 4 — APPROVAL OF MATERIAL TERMS OF THE PERFORMANCE CRITERIA UNDER THE SCOTTS COMPANY LLC AMENDED AND RESTATED EXECUTIVE INCENTIVE PLAN.” No appraisal rights exist for any action proposed to be taken at the Annual Meeting.
 
THE BOARD OF DIRECTORS
 
Current Composition
 
There are currently 12 individuals serving on the Board, which is divided into three staggered classes, with each class serving three-year terms. The Class I directors hold office for terms expiring at the Annual Meeting, the Class II directors hold office for terms expiring in 2012 and the Class III directors hold office for terms expiring in 2013.
 
Diversity
 
The Board believes that diversity is one of many important considerations in board composition. When considering candidates for the Board, the Governance and Nominating Committee (the “Governance Committee”) evaluates the entirety of each candidate’s credentials, including factors such as diversity of background, experience, skill, age, race and gender, as well as each candidate’s judgment, strength of character and specialized knowledge. Although the Board does not have a specific diversity policy, the Governance Committee evaluates the current composition of the Board to ensure that the directors reflect a diverse mix of skills, experiences, backgrounds and opinions. Depending on the current composition of the Board, the Governance Committee may weigh certain factors, including those relating to diversity, more or less heavily when evaluating a potential candidate.
 
The Governance Committee believes that the Board, as a group, reflects the diverse mix of skills, experiences, backgrounds and opinions that the Board and the Governance Committee consider necessary to


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foster an effective decision-making environment and promote the Company’s culture. Board member experiences cover a wide range of industries, including consumer products, manufacturing, technology, financial services, media, insurance, regulatory and consulting. Three of the twelve current directors are women, including two of the four candidates for election as Class I directors. Each of these female directors chairs one of the Board’s standing committees — the Audit Committee (Stephanie M. Shern) the Finance Committee (Nancy G. Mistretta) and the Innovation & Technology Committee (Katherine Hagedorn Littlefield).
 
Experiences, Skills and Qualifications
 
The Company has a standing Governance Committee that has responsibility for, among other things, providing oversight on the broad range of issues surrounding the composition and operation of the Board, including identifying candidates qualified to become directors and recommending director nominees to the Board. As noted above, when considering candidates for the Board, the Governance Committee evaluates the entirety of each candidate’s credentials and does not have any specific eligibility requirements or minimum qualifications that candidates must meet. In general, as the Company’s Corporate Governance Guidelines indicate, directors are expected to have the education, business experience and current insight necessary to contribute to the Board’s performance of its functions, the interest and time available to be adequately involved with the Company over a period of years, and the functional skills, corporate leadership, diversity, international experience and other attributes which the Board believes will contribute to the development and expansion of the Board’s knowledge and capabilities.
 
Set forth below is a general description of the types of experiences the Board and the Governance Committee believe to be particularly relevant to the Company:
 
Leadership Experience — Directors who have demonstrated significant leadership experience over an extended period of time, especially current and former chief executive officers, provide the Company with valuable insights that can only be gained through years of managing complex organizations. These individuals understand both the day-to-day operational responsibilities facing senior management and the role directors play in overseeing the affairs of large organizations. Eight of the twelve members of the Board are current or former chief executive officers, and nearly every current director has significant leadership experience.
 
Innovation and Technology Experience — Given the Company’s continued focus on driving innovation, directors with significant innovation and technology experience add significant value to the Company. As one of the few companies with an Innovation & Technology Committee, this is particularly important to the Company’s overall success.
 
International Experience — Directors with experience in markets outside the United States bring valuable knowledge to the Company as it expands its footprint in international markets.
 
Marketing/Consumer Industry Experience — Directors with experience identifying, developing and marketing new and existing consumer products bring valuable skills that can have a positive impact on the Company’s operational results. Directors with experience dealing with consumers understand consumer needs and wants, recognize products and marketing/advertising campaigns that are most likely to resonate with consumers and are able to identify potential changes in consumer trends and buying habits.
 
Retail Experience — Directors with significant retail experience bring valuable insights that can greatly assist the Company in managing its relationships with its largest retail customers.
 
Financial Experience — Directors with an understanding of accounting, finance and financial reporting processes, particularly as they relate to a large, complex business, are critical to the Company. Accurate financial reporting is a cornerstone of the Company’s success, and directors with financial expertise help to provide effective oversight of the Company’s financial measures and processes.


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A description of the most relevant experiences, skills, attributes and qualifications that qualify each director to serve as a member of the Board is included in his or her biography.
 
Leadership Structure
 
The Company’s governance documents provide the Board with flexibility to select the leadership structure that is most appropriate for the Company and its shareholders. The Board regularly considers the appropriate leadership structure for the Company and has concluded that the Company and its shareholders are best served by not having a formal policy regarding whether the same individual should serve as both Chairman of the Board and Chief Executive Officer (“CEO”). This approach allows the Board to elect the most qualified director as Chairman of the Board, while maintaining the ability to separate the Chairman of the Board and CEO roles when necessary.
 
Currently, the Company is led by James Hagedorn, who has served as CEO since May 2001 and as Chairman of the Board since January 2003. The Board believes that combining the roles of Chairman of the Board and CEO is in the best interests of the Company and its shareholders at this time as it takes advantage of the talent and experience of Mr. Hagedorn. The Board’s decision to appoint Mr. Hagedorn to lead the Company is supported by the Company’s success and track record of innovation since the time of Mr. Hagedorn’s appointment.
 
In addition to Mr. Hagedorn, the Board is comprised of eleven non-management directors, ten of whom also qualify as independent. In accordance with the Company’s Corporate Governance Guidelines and applicable sections of the New York Stock Exchange (“NYSE”) Listed Company Manual (the “NYSE Rules”), the non-management directors of the Company regularly meet in executive session. These meetings allow non-management directors to discuss issues of importance to the Company, including the business and affairs of the Company as well as matters concerning management, without any member of management present. In addition, the independent directors of the Company meet in executive session as matters appropriate for their consideration arise but, in any event, at least once a year.
 
The directors elected Carl F. Kohrt, Ph.D. to serve as the Lead Independent Director on January 22, 2009 and again on January 21, 2010. Dr. Kohrt serves in this capacity at the pleasure of the Board and will continue to so serve until his successor is elected and qualified. As Lead Independent Director, Dr. Kohrt:
 
  •  has the ability to call meetings of independent and/or non-management directors;
 
  •  presides at all meetings of non-management directors;
 
  •  presides at all meetings of independent directors;
 
  •  consults with the Chairman of the Board and CEO with respect to appropriate agenda items for meetings of the Board;
 
  •  serves as a liaison between the Chairman of the Board and the independent directors;
 
  •  approves the retention of outside advisors and consultants who report directly to the Board on critical issues;
 
  •  can be contacted directly by shareholders; and
 
  •  performs such other duties as the Board may from time to time delegate.
 
Finally, the Board has established five standing committees to assist with its oversight responsibilities: (1) the Audit Committee; (2) the Compensation and Organization Committee (the “Compensation Committee”); (3) the Finance Committee; (4) the Governance Committee; and (5) the Innovation & Technology Committee. Each of the Audit, Compensation and Governance Committees is comprised entirely of independent directors, and all of the Board’s committees, with the exception of the Innovation & Technology Committee, are chaired by independent directors.
 
The Board believes that its current leadership structure — including a combined Chairman of the Board and CEO role, 10 out of 12 independent directors, a Lead Independent Director, key committees comprised


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solely of independent directors and committees chaired primarily by independent directors — provides an appropriate balance among strategy development, operational execution and independent oversight and is therefore in the best interests of the Company and its shareholders.
 
Board Role in Risk Oversight
 
It is management’s responsibility to develop and implement the Company’s strategic plans and to identify, evaluate, manage and mitigate the risks inherent in those plans. It is the Board’s responsibility to understand and oversee the Company’s strategic plans and the associated risks and to ensure that management is taking appropriate action to identify, manage and mitigate those risks. The Board administers its risk oversight responsibilities both through active review and discussion of enterprise-wide risks and by delegating certain risk oversight responsibilities to various Board committees for further consideration and evaluation. The decision to administer the Board’s oversight responsibilities in this manner has a key effect on the Board’s leadership and committee structure.
 
Because the roles of Chairman of the Board and CEO are currently combined, to ensure proper oversight of management and the potential risks that face the Company, the directors annually elect a Lead Independent Director. In addition, the Board is comprised of predominantly independent directors and all members of the Board’s key committees — the Audit, Compensation and Governance Committees — are independent. This system of checks and balances helps to ensure that key decisions made by the Company’s most senior management, up to and including the CEO, are reviewed and overseen by independent directors of the Board.
 
In some cases, risk oversight is addressed by the full Board as part of its engagement with the CEO and other members of senior management. For example, the full Board conducts a comprehensive annual review of the Company’s overall strategic plan and the plans for each of the Company’s business units, including the risks associated with those strategic plans. To that end, management provides periodic reports regarding the significant risks facing the Company and how the Company is seeking to control or mitigate those risks, if and when appropriate. The Board also has overall responsibility for leadership succession for the Company’s most senior officers and conducts an annual review of succession planning.
 
In other cases, the Board has delegated risk management oversight responsibilities to certain Board committees, each of which reports regularly to the full Board. The Audit Committee oversees the Company’s compliance with legal and regulatory requirements and its overall risk management process. It also regularly receives reports regarding the Company’s most significant internal controls and compliance risks from the Company’s Chief Financial Officer as well as its internal auditors. Representatives of the Company’s independent registered public accounting firm attend Audit Committee meetings, regularly make presentations to the Audit Committee and comment on management presentations. In addition, the Company’s Chief Financial Officer and internal auditors, as well as representatives of the Company’s independent registered public accounting firm, individually meet in private session with the Audit Committee on a regular basis, affording ample opportunity to raise any concerns with respect to the Company’s risk management practices.
 
As discussed in more detail in the section captioned “Our Compensation Practices — Role of Outside Consultants” within the Compensation Discussion and Analysis, the Compensation Committee employs an independent compensation consultant who does no work for management. Among other tasks, the compensation consultant reviews the Company’s compensation programs, including the potential risks created by and other impacts of these programs.
 
Finally, the Governance Committee oversees issues related to the Company’s governance structure and other corporate governance matters and processes, as well as non-financial risks and compliance matters. In addition, the Governance Committee is charged with overseeing compliance with the Company’s Related Person Transaction Policy. The Governance Committee regularly reviews the Company’s key corporate governance documents, including the Corporate Governance Guidelines, the Related Person Transaction Policy and the Insider Trading Policy, to ensure they remain in compliance with the changing legal and regulatory environment and appropriately enable the Board to fulfill its oversight responsibilities.


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PROPOSAL NUMBER 1
 
ELECTION OF DIRECTORS
 
At the Annual Meeting, four Class I directors will be elected. The four individuals currently serving as Class I directors — James Hagedorn, William G. Jurgensen, Nancy G. Mistretta and Stephanie M. Shern — have been nominated by the Board for election as directors of the Company at the Annual Meeting. The nomination of each individual was recommended to the Board by the Governance Committee.
 
The individuals elected as Class I directors at the Annual Meeting will hold office for a three-year term expiring at the 2014 Annual Meeting of Shareholders and until their respective successors are duly elected and qualified, or until their earlier death, resignation or removal. The individuals named as proxy holders in the form of proxy solicited by the Board intend to vote the Common Shares represented by the proxies received under this solicitation for the Board’s nominees, unless otherwise instructed on the form of proxy or through the telephone or Internet voting procedures. The Board has no reason to believe that any of the nominees will be unable or unwilling to serve as a director of the Company if elected. If any nominee who would have otherwise received the required number of votes becomes unable to serve or for good cause will not serve as a candidate for election as a director, the individuals designated as proxy holders reserve full discretion to vote the Common Shares represented by the proxies they hold for the election of the remaining nominees and for the election of any substitute nominee designated by the Board following recommendation by the Governance Committee. The individuals designated as proxy holders cannot vote for more than four nominees for election as Class I directors at the Annual Meeting.
 
The following information, as of November 24, 2010, with respect to the age, principal occupation or employment, other affiliations and business experience of each director or nominee for election as a director has been furnished to the Company by each such director or nominee.
 
Nominees Standing for Election to the Board of Directors
 
Class I — Terms to Expire at the 2014 Annual Meeting
 
     
     
[JAMES HAGEDORN PHOTO]  
James Hagedorn, age 55, Director of the Company since 1995 and Chairman of the Board since January 2003

     Mr. Hagedorn has served as CEO of the Company since May 2001. He served as President of the Company from November 2006 until October 2008, and from May 2001 until December 2005. Mr. Hagedorn is the brother of Katherine Hagedorn Littlefield, a director of the Company.

     Having joined both the Company and the Board in 1995, and having served as CEO for nearly a decade, Mr. Hagedorn has more working knowledge of the Company and its products than any other individual, making him a key advisor to the Board on a wide range of issues. His presence in the boardroom also ensures efficient communication between the Board and management of the Company. Throughout his extensive career at the Company, Mr. Hagedorn has developed valuable leadership, international, and marketing/consumer industry experience.

Committee Memberships: None at this time


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[WILLIAM G. JURGENSEN PHOTO]  
William G. Jurgensen, age 59, Director of the Company since May 2009

     On May 6, 2009, the Board, upon the recommendation of the Governance Committee, appointed Mr. Jurgensen as a member of the Board to fill an existing vacancy in Class I. He was recommended by Carl F. Kohrt, Ph.D., a non-management director of the Company, who knew Mr. Jurgensen from his business and civic activities. From 2000 until February 2009, Mr. Jurgensen served as a director for and Chief Executive Officer of Nationwide Mutual Insurance Company and Nationwide Financial Services, Inc. (collectively, “Nationwide”), leading providers of diversified insurance and financial services. During that time, he also served as a director for and Chief Executive Officer of several other companies within the Nationwide enterprise, which is comprised of Nationwide Financial Services, Inc., Nationwide Mutual Insurance Company, Nationwide Mutual Fire and all of their respective subsidiaries and affiliates. He currently serves as a member of the Human Resources and Nominating and Governance Committees of ConAgra Foods, Inc., where he has been a director since August 2002.

     As the former Chief Executive Officer of Nationwide, Mr. Jurgensen has extensive leadership and financial experience, particularly in the areas of risk assessment and strategic development. His knowledge of Ohio business, civic and government affairs has also proven valuable to the Board.

     Committee Memberships: Audit; Governance
     
[NANCY G. MISTRETTA PHOTO]  
Nancy G. Mistretta, age 56, Director of the Company since 2007

     Ms. Mistretta is a retired partner of Russell Reynolds Associates, an executive search firm (“Russell Reynolds”), where she served as a partner from February 2005 until June 2009. She was a member of Russell Reynolds’ Not-For-Profit Sector and was responsible for managing executive officer searches for many large philanthropies, with a special focus on educational searches for presidents, deans and financial officers. Based in New York, New York, she was also active in the CEO/Board Services Practice of Russell Reynolds. Prior to joining Russell Reynolds, Ms. Mistretta was with JPMorgan Chase & Co. and its heritage institutions (collectively, “JPMorgan”) for 29 years and served as a Managing Director in Investment Banking from 1991 to 2005. She also serves on the New York Advisory Board of The Posse Foundation, Inc.

Throughout her nearly 30-year career at JPMorgan, including roles as Managing Director responsible for Investment Bank Marketing and Communications, industry head responsible for the Global Diversified Industries group and, prior to Chase Manhattan Corporation’s merger with J.P. Morgan & Co. in 2000, industry head responsible for Chase’s Diversified, Consumer Products and Retail Industries group, Ms. Mistretta has demonstrated a broad base of leadership, international, marketing/consumer industry, retail and financial experience. Her financial experience is particularly valuable to the Board in her position as Chair of the Finance Committee.

     Committee Memberships: Compensation; Finance (Chair)

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[STEPHANIE M. SHERN PHOTO]  
Stephanie M. Shern, age 62, Director of the Company since 2003

     Mrs. Shern is the founder of Shern Associates LLC, a retail consulting and business advisory firm formed in February 2002. From May 2001 to February 2002, Mrs. Shern served as the Senior Vice President and Global Managing Director of Retail and Consumer Products at Kurt Salmon Associates, a management consulting firm specializing in retail and consumer products. From 1995 to April 2001, Mrs. Shern was the Vice Chairman and Global Director of Retail and Consumer Products for Ernst & Young LLP. Mrs. Shern is a CPA and a member of the American Institute of CPAs and the New York State Society of CPAs. Mrs. Shern is currently a director and member of the Audit and Remuneration Committees of Koninklijke Ahold N.V. (Royal Ahold) and a director and Chair of the Audit Committee of GameStop Corp., where she also serves as the lead independent director. During the past five years, Mrs. Shern has served as a director of CenturyLink, Inc.; Embarq Corporation; Sprint Nextel Corporation; and Nextel Communications, Inc.

As the founder of Shern Associates LLC, and having spent a significant portion of her nearly 40-year career focused on retail and consumer industries in both the United States and abroad, Mrs. Shern has vast leadership, international, marketing/consumer industry and retail experience. In addition, as a CPA and member of the Audit Committee of both GameStop Corp. (where she serves as Chair) and Koninklijke Ahold N.V. (Royal Ahold), Mrs. Shern has extensive financial experience, which has proven valuable to the Board, where Mrs. Shern serves as the Chair of the Audit Committee and as the “audit committee financial expert” as that term is defined in the applicable rules and regulations of the SEC.

     Committee Membership: Audit (Chair)
 
Directors Continuing in Office
Class II — Terms to Expire at the 2012 Annual Meeting
 
     
     
[ALAN H. BARRY PHOTO]  
Alan H. Barry, age 67, Director of the Company since April 2009

     Mr. Barry is the former President and Chief Operating Officer of Masco Corporation (“Masco”), a manufacturer, distributor and installer of home improvement and building products, a position which he held from April 2003 until his retirement in December 2007. Mr. Barry began his career at Masco in 1972. Mr. Barry serves as a director of two privately-held companies: IPS Corporation and H.W. Kaufman Financial Group, Inc.

As the former President and Chief Operating Officer of Masco, Mr. Barry brings significant leadership and marketing experience to the Board. His more than 35 years of experience at Masco, which emphasizes brand name products and services holding leadership positions in their markets, enable him to advise the Board on key brand-related strategies and initiatives. His current service as a director of H.W. Kaufman Financial Group, Inc. also provides him with extensive financial experience.

Committee Memberships: Audit; Finance

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[THOMAS N. KELLY PHOTO]  
Thomas N. Kelly Jr., age 63, Director of the Company since 2006

     Mr. Kelly served as Executive Vice President, Transition Integration of Sprint Nextel Corporation, a global communications company, from December 2005 until April 2006. He served as the Chief Strategy Officer of Sprint Nextel Corporation from August 2005 until December 2005. He served as the Executive Vice President and Chief Operating Officer of Nextel Communications, which became Sprint Nextel Corporation, from February 2003 until August 2005, and as Executive Vice President and Chief Marketing Officer of Nextel Communications from 1996 until February 2003. Mr. Kelly serves as a director of ChaCha Search, Inc., a privately-held company located in Indianapolis, Indiana, and as a director of the Weston Playhouse Theatre Company, a not-for-profit regional theater located in Weston, Vermont. Mr. Kelly also volunteers for several school and youth athletic organizations in Northern Virginia.

Having served at various times as Chief Strategy Officer, Chief Operating Officer and Chief Marketing Officer of large communications companies, Mr. Kelly brings an extensive skill set to the boardroom. His blend of leadership, innovation and technology, international, marketing/consumer industry and financial experience make him a key advisor to the Board on a full range of consumer and strategy-related matters.

Committee Membership: Compensation (Chair)
     
[CARL F. KOHRT PHOTO]  
Carl F. Kohrt, Ph.D., age 66, Director of the Company since 2008


     Dr. Kohrt served as President and Chief Executive Officer of Battelle Memorial Institute (“Battelle”), a non-profit charitable trust headquartered in Columbus, Ohio, from October 15, 2001 until his retirement on December 31, 2008. Battelle is an international science and technology enterprise that explores emerging areas of science, develops and commercializes technology and manages laboratories for customers. Dr. Kohrt serves as a director of one other public company, Kinetic Concepts, Inc., and two privately-held companies: Pharos, LLC and Levitronix, Inc. He also has served as a director of numerous non-profit entities and is currently a Trustee of Furman University and of the Woodrow Wilson Foundation.

Given the Company’s continued focus on driving innovation, Dr. Kohrt’s considerable innovation and technology experience, developed during his tenure as Chief Executive Officer of Battelle, his more than 29 years at Eastman Kodak Company (where he last served as Chief Technical Officer), and as a lifelong research scientist, has proven extremely valuable to the Board. Dr. Kohrt’s leadership experience has also proven valuable in his role as the Company’s Lead Independent Director.

Committee Memberships: Compensation; Innovation & Technology

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[JOHN S. SHIELY PHOTO]   John S. Shiely, age 58, Director of the Company since 2007

     Mr. Shiely served as Chief Executive Officer of Briggs & Stratton Corporation (“Briggs & Stratton”), a manufacturer of small, air-cooled engines for lawn and garden and other outdoor power equipment and a producer of lawn mowers, generators and pressure washers in the United States, from July 1, 2001 until his retirement from that position on December 31, 2009. He was appointed as a director of Briggs & Stratton in 1994, and served as Chairman of the Board from 2003 through October 20, 2010. Mr. Shiely serves as a director of two other public companies, Marshall & Ilsley Corporation, and Quad/Graphics, Inc., as well as numerous privately-held and charitable companies, including Cleveland Rock and Roll, Inc. (the corporate board of the Rock and Roll Hall of Fame and Museum) and Children’s Hospital and Health System, Inc.

As the former Chief Executive Officer and Chairman of the Board of Briggs & Stratton, Mr. Shiely brings substantial leadership, marketing/consumer industry and financial experience to the Board. His extensive experience managing a large manufacturing and marketing company makes him a particularly valuable advisor to the Board in those areas, as well as in the area of corporate governance, which he recently studied in the graduate program at Harvard Law School.

Committee Memberships: Audit; Governance (Chair)
 
Class III — Terms to Expire at the 2013 Annual Meeting
 
     
     
[JOSEPH P. FLANNERY PHOTO]  
Joseph P. Flannery, age 78, Director of the Company since 1987

     Mr. Flannery has served as President, Chief Executive Officer and Chairman of the Board of Directors of Uniroyal Holding, Inc., an investment management company, since 1986. He served as a director of ArvinMeritor, Inc. from 1991 — 2007.

As Chief Executive Officer and Chairman of the Board of Directors at Uniroyal Holding, Inc., Mr. Flannery brings extensive leadership and financial experience to the Board. Having served on the Board for more than 20 years, Mr. Flannery also has significant marketing/consumer industry experience and is able to advise the Board on a variety of strategic and business matters.

Committee Memberships: Compensation; Governance
     
[ADAM HANFT PHOTO]   Adam Hanft, age 60, Director of the Company since 2010

     
Mr. Hanft is the founder and Chief Executive Officer of Hanft Projects LLC, a strategic consultancy that provides marketing intelligence and insight to leading consumer and business-to-business companies such as The Procter & Gamble Company, Sony Corporation, Bic Corporation and The Sherwin-Williams Company, as well as many leading digital brands. He writes broadly about the consumer culture for places like Salon, Slate, The Daily Beast, Fast Company and the Wall Street Journal. Mr. Hanft is also a frequent commentator on marketing and branding issues and is the co-author of “Dictionary of the Future.” Prior to starting Hanft Projects LLC, Mr. Hanft served as founder and Chief Executive Officer of Hanft Unlimited, Inc., a marketing organization created in 2004 that included an advertising agency, strategic consultancy and custom-publishing operation.

As the Chief Executive Officer of Hanft Projects LLC, Mr. Hanft brings his extensive leadership, marketing/consumer industry and innovation and technology experience to the Board. His knowledge of the consumer marketplace, media and current branding initiatives has proven particularly valuable.

Committee Memberships: Governance; Innovation & Technology

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[STEPHEN L. JOHNSON PHOTO]  
Stephen L. Johnson, age 59, Director of the Company since 2010

     On November 11, 2010, the Board, upon the recommendation of the Governance Committee, appointed Mr. Johnson as a member of the Board to fill the vacancy in Class III created by the resignation of Mark R. Baker. Mr. Johnson was recommended by several non-management directors of the Company who knew Mr. Johnson from his work on the Company’s Innovation & Technology Advisory Board. Mr. Johnson is the President and Chief Executive Officer of Stephen L. Johnson and Associates Strategic Consulting, LLC (“Johnson and Associates”), a strategic provider of business, research and financial management and consulting services formed in 2009. Prior to forming Johnson and Associates, Mr. Johnson worked for the U.S. Environmental Protection Agency for 30 years, where he became the first career employee and scientist to serve as Administrator, a position he held from January 2005 through January 2009. Mr. Johnson serves as a director of FlexEnergy LLC, a privately-held company, and as a Trustee of Taylor University.

As President and Chief Executive Officer of Johnson and Associates and as the former Administrator of the U.S. Environmental Protection Agency, as well as a lifelong scientist, Mr. Johnson brings considerable leadership and innovation and technology experience to the Board. His appointment also fills a need for both regulatory and environmental expertise that was identified by the Governance Committee.

Committee Memberships: Governance; Innovation & Technology
     
[KATHERINE HAGEDORN PHOTO]   Katherine Hagedorn Littlefield, age 55, Director of the Company since 2000

     Ms. Littlefield is the Chair of Hagedorn Partnership, L.P. She also serves on the boards for Hagedorn Family Foundation, Inc., a charitable organization, and Adelphi University. She is the sister of James Hagedorn, the Company’s CEO and Chairman of the Board.

As the Chair of Hagedorn Partnership, L.P., the Company’s largest shareholder, Ms. Littlefield brings a strong shareholder voice to the boardroom. She also has significant innovation and technology experience, having served on the Company’s Innovation & Technology Committee since its formation in May 2004.

Committee Memberships: Finance; Innovation & Technology (Chair)
 
Effective October 28, 2010, Mark R. Baker resigned as the Company’s President and Chief Operating Officer and as a Class III member of the Board. Patrick J. Norton’s term as a Class III director expired at the Annual Meeting of Shareholders held on January 21, 2010.
 
Recommendation and Vote
 
Under Ohio law and the Company’s Code of Regulations, the four nominees for election as Class I directors receiving the greatest number of votes FOR election will be elected as directors of the Company. Common Shares represented by properly executed and returned forms of proxy or properly authenticated voting instructions recorded through the Internet or by telephone will be voted FOR the election of the Board’s nominees unless authority to vote for one or more of the nominees is withheld. Common Shares as to which the authority to vote is withheld and Common Shares represented by broker non-votes will not be counted toward the election of directors or toward the election of the individual nominees of the Board, as applicable. The individuals designated as proxy holders cannot vote for more than four nominees for election as Class I directors at the Annual Meeting.
 
YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION OF ALL OF THE ABOVE-NAMED CLASS I DIRECTOR NOMINEES.

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MEETINGS AND COMMITTEES OF THE BOARD
 
Meetings of the Board and Board Member Attendance at Annual Meeting of Shareholders
 
The Board held six regularly scheduled or special meetings during the Company’s fiscal year ended September 30, 2010 (the “2010 fiscal year”). Each incumbent member of the Board attended at least 75% of the aggregate of the total number of meetings of the Board and the total number of meetings held by the committee(s) of the Board on which he or she served, in each case during the period of the 2010 fiscal year that such individual served as a director.
 
Although the Company does not have a formal policy requiring members of the Board to attend annual meetings of the shareholders, the Company encourages all directors to attend each such annual meeting. All then-current directors, other than William G. Jurgensen, attended the Company’s last Annual Meeting of Shareholders held on January 21, 2010.
 
Committees of the Board
 
The Board has established five standing committees to assist with its oversight responsibilities: (1) the Audit Committee; (2) the Compensation and Organization Committee; (3) the Finance Committee; (4) the Governance and Nominating Committee; and (5) the Innovation & Technology Committee.
 
Audit Committee
 
The Audit Committee, which was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is organized and conducts its business pursuant to a written charter adopted by the Board. A copy of the Audit Committee charter is posted under the “Corporate Governance” link on the Company’s Internet website at http://investor.scotts.com. At least annually, in consultation with the Governance Committee, the Audit Committee evaluates its performance, reviews and assesses the adequacy of its charter and recommends to the Board any proposed changes thereto as may be necessary or desirable.
 
The Audit Committee is responsible for: (1) overseeing the accounting and financial reporting processes of the Company, including the audits of the Company’s consolidated financial statements, (2) appointing, compensating and overseeing the work of the independent registered public accounting firm employed by the Company, (3) establishing procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, auditing matters or other compliance matters, (4) assisting the Board in its oversight of: (a) the integrity of the Company’s consolidated financial statements; (b) the Company’s compliance with applicable laws, rules and regulations, including applicable NYSE Rules; (c) the independent registered public accounting firm’s qualifications and independence; and (d) the performance of the Company’s internal audit function, and (5) undertaking the other matters required by applicable SEC Rules and NYSE Rules. Pursuant to its charter, the Audit Committee has the authority to engage and compensate such independent counsel and other advisors as the Audit Committee deems necessary to carry out its duties.
 
The Board has determined that each member of the Audit Committee satisfies the applicable independence requirements set forth in the NYSE Rules and under Rule 10A-3 promulgated by the SEC under the Exchange Act. The Board believes each member of the Audit Committee is qualified to discharge his or her duties on behalf of the Company and its subsidiaries and satisfies the financial literacy requirement of the NYSE Rules. The Board has determined that Stephanie M. Shern qualifies as an “audit committee financial expert” as that term is defined in the applicable SEC Rules. None of the members of the Audit Committee serves on the audit committee of more than two other public companies.
 
The Audit Committee met 14 times during the 2010 fiscal year.
 
The Audit Committee report relating to the Company’s 2010 fiscal year begins on page 75.


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Compensation and Organization Committee
 
The Compensation Committee is organized and conducts its business pursuant to a written charter adopted by the Board. A copy of the Compensation Committee charter is posted under the “Corporate Governance” link on the Company’s Internet website located at http://investor.scotts.com. At least annually, in consultation with the Governance Committee, the Compensation Committee evaluates its performance, reviews and assesses the adequacy of its charter and recommends to the Board any proposed changes thereto as may be necessary or desirable.
 
The Compensation Committee reviews, considers and acts upon matters concerning salary and other compensation and benefits of all executive officers and other key employees of the Company and its subsidiaries, including the executive officers named in the Summary Compensation Table for 2010 Fiscal Year (the “NEOs”). As part of this process, the Compensation Committee determines the general compensation philosophy applicable to these individuals. In addition, the Compensation Committee advises the Board regarding executive officer organizational issues and succession plans. The Compensation Committee also acts upon all matters concerning, and exercises such authority as is delegated to it under the provisions of, any benefit or retirement plan maintained by the Company, and serves as the committee administering The Scotts Miracle-Gro Company Amended and Restated 1996 Stock Option Plan (the “1996 Plan”), The Scotts Miracle-Gro Company Amended and Restated 2003 Stock Option and Incentive Equity Plan (the “2003 Plan”), The Scotts Miracle-Gro Company Amended and Restated 2006 Long-Term Incentive Plan (the “2006 Plan”), The Scotts Company LLC Amended and Restated Executive Incentive Plan (the “EIP”) and the Discounted Stock Purchase Plan.
 
Pursuant to its charter, the Compensation Committee has the authority to retain special counsel, compensation consultants and other experts or consultants as it deems appropriate to carry out its functions and to approve the fees and other retention terms of any such counsel, consultants or experts. During the 2010 fiscal year, the Compensation Committee engaged an independent consultant from Frederic W. Cook & Co. (“Fred Cook & Co.”) to advise the Compensation Committee with respect to market practices and competitive trends in the area of executive compensation, as well as ongoing legal and regulatory considerations. The consultant provided guidance to assist the Compensation Committee in its evaluation of the compensation recommendations submitted by management with respect to the CEO, the other NEOs and other key management employees. Fred Cook & Co. did not provide consulting services directly to management. The role of Fred Cook & Co. is further described in the section captioned “Our Compensation Practices — Role of Outside Consultants” within the Compensation Discussion and Analysis.
 
The Board has determined that each member of the Compensation Committee satisfies the applicable independence requirements set forth in the NYSE Rules and qualifies as an outside director for purposes of IRC § 162(m) and as a non-employee director for purposes of Rule 16b-3 under the Exchange Act.
 
The Compensation Committee met 10 times during the 2010 fiscal year.
 
The Compensation Discussion and Analysis regarding executive compensation for the 2010 fiscal year begins on page 22. The Compensation Committee Report relating to the Company’s 2010 fiscal year appears on page 39.
 
Finance Committee
 
The Finance Committee is organized and conducts its business pursuant to a written charter adopted by the Board. A copy of the Finance Committee charter is posted under the “Corporate Governance” link on the Company’s Internet website located at http://investor.scotts.com. At least annually, in consultation with the Governance Committee, the Finance Committee evaluates its performance, reviews and assesses the adequacy of its charter and recommends to the Board any proposed changes thereto as may be necessary or desirable.
 
The Finance Committee oversees the financial strategies and policies of the Company and its subsidiaries. In discharging its duties, the Finance Committee: (1) reviews investments, stock repurchase programs and dividend payments; (2) oversees cash management and corporate financing matters; and (3) oversees the Company’s acquisition and divestiture strategies and the financing arrangements related thereto.


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The Finance Committee met six times during the 2010 fiscal year.
 
Governance and Nominating Committee
 
The Governance Committee is organized and conducts its business pursuant to a written charter adopted by the Board. A copy of the Governance Committee charter is posted under the “Corporate Governance” link on the Company’s Internet website located at http://investor.scotts.com. At least annually, the Governance Committee evaluates its performance, reviews and assesses the adequacy of its charter and recommends to the Board any proposed changes thereto as may be necessary or desirable.
 
The Governance Committee recommends nominees for membership on the Board and policies regarding the composition of the Board generally. The Governance Committee also makes recommendations to the Board regarding committee selection, including committee chairs and rotation practices, the overall effectiveness of the Board and of management (in the areas of Board relations and corporate governance), director compensation and developments in corporate governance practices. The Governance Committee is responsible for developing a policy with regard to the consideration of candidates for election or appointment to the Board recommended by shareholders of the Company and procedures to be followed by shareholders in submitting such recommendations, consistent with any shareholder nomination requirements which may be set forth in the Company’s Code of Regulations and applicable laws, rules and regulations. In considering potential nominees for election or appointment to the Board, the Governance Committee conducts its own search for available, qualified nominees and will consider candidates from any reasonable source, including shareholder recommendations. The Governance Committee is also responsible for developing and recommending to the Board corporate governance guidelines applicable to the Company and overseeing the evaluation of the Board and management.
 
The Board has determined that each member of the Governance Committee satisfies the applicable independence requirements set forth in the NYSE Rules.
 
The Governance Committee met four times during the 2010 fiscal year.
 
Innovation & Technology Committee
 
The Innovation & Technology Committee is organized and conducts its business pursuant to a written charter adopted by the Board. A copy of the Innovation & Technology Committee charter is posted under the “Corporate Governance” link on the Company’s Internet website located at http://investor.scotts.com.
 
The Innovation & Technology Committee assists the Board in providing counsel to the Company’s senior management regarding strategic management of global science, technology and innovation issues and acts as the Board’s liaison to the Company’s Innovation & Technology Advisory Board, a board of experts which assists in carrying out the work of the Innovation & Technology Committee.
 
The Innovation & Technology Committee met one time during the 2010 fiscal year.
 
Compensation and Organization Committee Interlocks and Insider Participation
 
The Compensation Committee is currently comprised of Thomas N. Kelly Jr., Joseph P. Flannery, Carl F. Kohrt, Ph.D. and Nancy G. Mistretta. With respect to the 2010 fiscal year and from October 1, 2010 through the date of this Proxy Statement, there were no interlocking relationships between any executive officer of the Company and any entity, one of whose executive officers served on the Company’s Compensation Committee or Board, or any other relationship required to be disclosed in this section under the applicable SEC Rules.
 
CORPORATE GOVERNANCE
 
Corporate Governance Guidelines
 
In accordance with applicable sections of the NYSE Rules, the Board has adopted Corporate Governance Guidelines to promote the effective functioning of the Board and its committees. The Board, with the assistance of the Governance Committee, periodically reviews the Corporate Governance Guidelines to ensure


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they are in compliance with all applicable requirements and address evolving corporate governance issues. The Corporate Governance Guidelines are posted under the “Corporate Governance” link on the Company’s Internet website located at http://investor.scotts.com.
 
Director Independence
 
In consultation with the Governance Committee, the Board has reviewed, considered and discussed the relationships, both direct and indirect, of each current director or nominee for election as a director with the Company and its subsidiaries, including those listed under “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,” and the compensation and other payments each director and each nominee has, both directly and indirectly, received from or made to the Company and its subsidiaries, in order to determine whether such director or nominee satisfies the applicable independence requirements set forth in the NYSE Rules and the rules and regulations of the SEC (the “SEC Rules”). Based upon the recommendation of the Governance Committee and its own review, consideration and discussion, the Board has determined that the following current members of the Board satisfy such independence requirements and are, therefore, “independent” directors:
 
     
(1) Alan H. Barry
  (6) Thomas N. Kelly Jr.
(2) Joseph P. Flannery
  (7) Carl F. Kohrt, Ph.D.
(3) Adam Hanft
  (8) Nancy G. Mistretta
(4) Stephen L. Johnson
  (9) Stephanie M. Shern
(5) William G. Jurgensen
  (10) John S. Shiely
 
In determining that Mr. Hanft qualifies as an independent director, the Board considered that, during the 2010 fiscal year, the Company paid Mr. Hanft or companies controlled by him $20,000 for consulting services he provided as a member of the Company’s Innovation & Technology Advisory Board prior to his election as a Class III director on January 21, 2010. Since his election to the Board, Mr. Hanft has not received any compensation from the Company beyond the compensation he receives for services as a director. In determining that Mr. Johnson qualifies as an independent director, the Board considered that, during the 2010 fiscal year, the Company paid Mr. Johnson or companies controlled by him $89,266 for consulting services he provided as a member of the Company’s Innovation & Technology Advisory Board as well as other consulting services he provided to the Company, in each case prior to his appointment as a Class III director on November 11, 2010. Since his appointment to the Board, Mr. Johnson has not received any compensation from the Company beyond the compensation he receives for services as a director.
 
The Board determined that: (a) James Hagedorn is not independent because he is the Company’s CEO and beneficially owns more than 5% of the outstanding Common Shares and (b) Katherine Hagedorn Littlefield is not independent because she beneficially owns more than 5% of the outstanding Common Shares and is the sister of James Hagedorn.
 
Nominations of Directors
 
The Board, taking into account the recommendations of the Governance Committee, selects nominees to stand for election to the Board. The Governance Committee considers candidates for the Board from any reasonable source, including current director, management and shareholder recommendations, and does not evaluate candidates differently based on the source of the recommendation. Pursuant to its written charter, the Governance Committee has the authority to retain consultants and search firms to assist in the process of identifying and evaluating director candidates and to approve the fees and other retention terms of any such consultant or search firm.
 
Shareholders may recommend director candidates for consideration by the Governance Committee by giving written notice of the recommendation to the Corporate Secretary of the Company. The recommendation must include the candidate’s name, age, business address and principal occupation or employment, as well as a description of the candidate’s qualifications, attributes and other skills. A written statement from the candidate consenting to serve as a director, if so elected, must accompany any such recommendation.


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While the Corporate Governance Guidelines indicate that, in general, a director should not stand for re-election once he or she has reached the age of 72, the Governance Committee and the Board will review individual circumstances and may from time to time choose to renominate a director who is 72 or older. Although he was older than 72, the Board chose to nominate Joseph P. Flannery for re-election to the Board at the Company’s Annual Meeting of Shareholders held on January 21, 2010 because his expertise and knowledge made him a valuable candidate.
 
Communications with the Board
 
The Board believes it is important for shareholders of the Company and other interested persons to have a process pursuant to which they can send communications to the Board and its individual members, including the Lead Independent Director. Accordingly, shareholders and other interested persons who wish to communicate with the Board, the Lead Independent Director, the non-management directors as a group, the independent directors as a group or any particular director may do so by addressing such correspondence to the name(s) of the specific director(s), to the “Lead Independent Director,” to the “Non-Management Directors” as a group, to the “Independent Directors” as a group or to the “Board of Directors” as a whole, and sending it in care of the Company to the Company’s principal corporate offices at 14111 Scottslawn Road, Marysville, Ohio 43041. All such correspondence should identify the author as a shareholder or other interested person, explain such person’s interest and clearly indicate to whom the correspondence is directed. Correspondence marked “personal and confidential” will be delivered to the intended recipient(s) without opening. Copies of all correspondence will be circulated to the appropriate director or directors. There is no screening process in respect of communications from shareholders and other interested persons.
 
Code of Business Conduct and Ethics
 
In accordance with applicable NYSE Rules and SEC Rules, the Board has adopted The Scotts Miracle-Gro Company Code of Business Conduct and Ethics, which is available under the “Corporate Governance” link on the Company’s Internet website located at http://investor.scotts.com.
 
All of the employees of the Company and its subsidiaries, including executive officers, and all directors of the Company are required to comply with the Company’s Code of Business Conduct and Ethics. The Sarbanes-Oxley Act of 2002 and the SEC Rules promulgated thereunder require companies to have procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters and to allow for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. The Company’s procedures for addressing these matters are set forth in the Code of Business Conduct and Ethics.
 
Preferred Stock — “Declawing” Preferred Stock
 
The Company’s Articles of Incorporation, as amended, authorize the Board to issue up to 195,000 preferred shares, without par value (the “Preferred Shares”), and to adopt amendments to the Articles of Incorporation in respect of any unissued Preferred Shares in order to fix or change, among other things, the division of the Preferred Shares into series, the dividend or distribution rights associated with the Preferred Shares, the liquidation rights, preferences and price of the Preferred Shares, and the redemption rights, voting rights, pre-emptive rights and conversation rights associated with the Preferred Shares. Although the Articles of Incorporation do not limit the purposes for which the Preferred Shares may be issued or used, the Board represents that it will not, without prior shareholder approval, issue or use the Preferred Shares for any defensive or anti-takeover purpose, for the purpose of implementing any shareholder rights plan, or with features intended to make any attempted acquisition of the Company more difficult or costly. Within these limits, the Board may issue Preferred Shares for capital raising transactions, acquisitions, joint ventures or other corporate purposes that have the effect of making an acquisition of the Company more difficult or costly.


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NON-EMPLOYEE DIRECTOR COMPENSATION
 
Benchmarking Board of Director Compensation
 
The Board believes that non-employee director compensation levels should be competitive with similarly situated companies and should encourage high levels of ownership of the Company’s Common Shares. Accordingly, at the direction of the Board, the Company engaged a third-party consultant from Towers Watson (formerly Towers Perrin) to conduct a benchmark study of the compensation structure for the Company’s non-employee directors for the 2008 calendar year (the “2008 Study”). For purposes of the 2008 Study, Towers Watson compared each element of the non-employee directors’ compensation against two groups of similarly situated companies:
 
  •  18 consumer products-oriented companies with annual revenues ranging from $1.3 billion to $9.0 billion; and
 
  •  100 S&P Mid Cap companies with annual revenues between $2.0 billion to $4.0 billion.
 
The survey information was compiled from definitive proxy statement filings for the respective companies. Based on the 2008 Study, the average compensation level for the Company’s non-employee directors (including both the cash and equity-based compensation elements) was above the 75th percentile when compared to the above-mentioned groups of companies. The Board determined to maintain the same compensation structure for the 2010 calendar year, as described below, and the 2008 Study was not updated for the 2010 calendar year.
 
Structure of Non-Employee Director Compensation
 
The compensation structure for non-employee directors is established on a calendar year basis. Based on the findings of the 2008 Study discussed above, the Board established the non-employee director compensation for the 2010 calendar year to reflect a combination of annual cash retainers and equity-based compensation granted in the form of deferred stock units (“DSUs”), as follows:
 
                 
    Annual Retainers
    Value of
 
    Paid in Cash(1)     DSUs Granted  
 
Board Membership
  $ 100,000     $ 70,000  
Lead Independent Director
  $ 15,000     $ 35,000  
Additional Compensation for Committee Chairs:
               
•   Audit
  $     $ 25,000  
•   Compensation and Organization
  $     $ 25,000  
•   Finance
  $     $ 25,000  
•   Governance and Nominating
  $     $ 25,000  
•   Innovation & Technology
  $     $ 25,000  
Additional Compensation for Committee Membership:
               
•   Audit
  $     $ 17,500  
•   Compensation and Organization
  $     $ 12,500  
•   Finance
  $     $ 12,500  
•   Governance and Nominating
  $     $ 12,500  
•   Innovation & Technology
  $     $ 12,500  
 
 
(1) The annual cash-based retainer is paid in quarterly installments.
 
In addition to the above compensation elements, non-employee directors also receive reimbursement of all reasonable travel and other expenses for attending Board meetings or other Company-related travel.


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Equity-Based Compensation
 
For the 2010 calendar year, the equity-based compensation for non-employee directors was granted in the form of DSUs. Each whole DSU represents a contingent right to receive one full Common Share.
 
Vesting and Settlement
 
DSU grants for non-employee directors are typically approved by the Board at a meeting held on the date of the annual meeting of shareholders. The grant date is established as the first business day after the Board approves the grant. For the 2010 calendar year, DSUs were granted to the non-employee directors on January 22, 2010. In general, the DSUs granted to non-employee directors in the 2010 calendar year, including dividend equivalents converted to DSUs, vest on the third anniversary of the grant date, but are subject to earlier vesting or forfeiture, as the case may be, in the event of death, disability or retirement. Subject to the terms of the 2006 Plan, whole vested DSUs will be settled in Common Shares and fractional DSUs will be settled in cash as soon as administratively practicable, but in no event later than 90 days, following the earliest to occur of: (i) termination; (ii) death; (iii) disability; or (iv) the fifth anniversary of the grant date. Upon a change in control of the Company, each non-employee director’s outstanding DSUs will vest on the date of the change in control and settle as described above. Until the DSUs are settled, a non-employee director has none of the rights of a shareholder with respect to the Common Shares underlying the DSUs other than with respect to the dividend equivalents.
 
Dividend Equivalents
 
Each DSU (including dividend equivalents converted to DSUs) is granted with a related dividend equivalent, which represents the right to receive additional DSUs in respect of dividends that are declared and paid in cash in respect of the Common Shares underlying the DSUs, during the period beginning on the grant date and ending on the settlement date. Such cash dividends are converted to DSUs based on the fair market value of Common Shares on the date the dividend is paid. Dividends declared and paid in the form of Common Shares are converted to DSUs in proportion to the dividends paid per Common Share.
 
Deferral of Cash-Based Retainers
 
For the 2010 calendar year, the non-employee directors had the option to elect, in advance, to receive up to 100% of their quarterly cash retainers in cash or fully-vested DSUs. If DSUs are elected, the non-employee director receives a grant equal to the number determined by dividing the chosen dollar amount by the closing price of the Common Shares on the applicable grant date. Subject to the terms of the 2006 Plan, whole vested DSUs will be settled in Common Shares and fractional DSUs will be settled in cash as soon as administratively practicable, but no later than 90 days, following the earliest to occur of: (i) termination; (ii) death; (iii) disability; or (iv) the fifth anniversary of the grant date. Upon a change in control of the Company, each non-employee director’s outstanding DSUs will settle as described above. Until the DSUs are settled, a non-employee director has none of the rights of a shareholder with respect to the Common Shares underlying the DSUs other than with respect to the dividend equivalents. For the 2010 calendar year, Mr. Hanft made an election to receive 50% of his quarterly retainers in fully vested DSUs. None of the other non-employee directors elected to defer any portion of their 2010 calendar year cash retainer.


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Non-Employee Director Compensation Table
 
The following table sets forth the compensation awarded to, or earned by, each of the non-employee directors of the Company for the 2010 fiscal year. Neither Mr. Hagedorn, the Company’s Chairman of the Board and CEO, nor Mr. Baker, the Company’s President and Chief Operating Officer, received any additional compensation for their services as a director. Accordingly, Mr. Hagedorn’s and Mr. Baker’s compensation is reported in the section captioned “EXECUTIVE COMPENSATION” and is not included in the table below. Mr. Johnson was not a director of the Company during the 2010 fiscal year. Therefore, the table below does not include the 320 DSUs awarded to Mr. Johnson on November 12, 2010.
 
Non-Employee Director Compensation Table for 2010 Fiscal Year
 
                                         
    Fees
                         
    Earned or
    Stock
    Option
    All Other
       
    Paid in
    Awards
    Awards
    Compensation
       
Name
  Cash ($)(1)     ($)(5)(6)     ($)(7)     ($)(8)     Total ($)  
 
Alan H. Barry
    100,000       100,031             2,775       202,806  
Joseph P. Flannery
    100,000       95,025             5,032       200,057  
Adam Hanft
    75,000 (2)     95,025             1,282       171,307  
William G. Jurgensen
    100,000       100,031             2,551       202,582  
Thomas N. Kelly Jr. 
    100,000       107,540             5,294       212,834  
Carl F. Kohrt, Ph.D. 
    115,000 (3)     130,024             6,107       251,131  
Katherine Hagedorn Littlefield
    100,000       120,013             5,351       225,364  
Nancy G. Mistretta
    100,000       120,013             5,525       225,538  
Patrick J. Norton (retired)
    25,000 (4)                 622       25,622  
Stephanie M. Shern
    100,000       112,504             5,652       218,156  
John S. Shiely
    100,000       125,018             5,070       230,088  
 
 
(1) Reflects the cash-based retainer earned for services rendered during the 2010 fiscal year. The calendar year fees were paid at a rate of $25,000 per quarter, and are prorated for partial service. Consistent with Mr. Hanft’s election to defer 50% of his cash retainer, the amount reported in this column includes a total of $37,500 in cash fees that were deferred and awarded in the form of fully vested DSUs. The deferred fees include $12,500 that was awarded in the form of DSUs on each of January 22, 2010, April 1, 2010 and July 1, 2010, respectively. None of the other non-employee directors elected to defer their cash-based retainers for the 2010 calendar year and there are no outstanding DSUs as of September 30, 2010 attributed to non-employee directors who had elected to defer all or a portion of their cash-based retainers for previous calendar years.
 
(2) The calendar year fees have been prorated to reflect Mr. Hanft’s service during the 2010 fiscal year beginning January 21, 2010, and the prorated amount is shown in this column.
 
(3) Dr. Kohrt received an additional cash-based retainer of $15,000 in respect of his service as the Company’s Lead Independent Director.
 
(4) Mr. Norton, who retired from the Board effective January 21, 2010, received cash-based retainers totaling $100,000 for the 2009 calendar year. The 2009 calendar year fees have been prorated to reflect his service during the 2010 fiscal year and the prorated amount is shown in this column. Mr. Norton did not receive any cash-based retainers in respect of the 2010 calendar year.
 
(5) The amounts in this column reflect the aggregate grant date fair value of the DSUs granted to the non-employee directors during the 2010 fiscal year. The value of each DSU is determined using the fair market value of the underlying Common Share on January 22, 2010, the date of the grant, and were calculated in accordance with the equity compensation accounting provisions of FASB ASC Topic 718, without respect to forfeiture assumptions.


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(6) The aggregate number of Common Shares subject to DSUs (including DSUs granted as a result of converting dividend equivalents), outstanding as of September 30, 2010 were as follows:
 
         
    Aggregate Number of
    Common Shares
    Subject to Stock
    Awards Outstanding
Name
  as of September 30, 2010*
 
Alan H. Barry
    4,949  
Joseph P. Flannery
    8,580  
Adam Hanft
    3,199  
William G. Jurgensen
    4,562  
Thomas N. Kelly Jr. 
    9,178  
Carl F. Kohrt, Ph.D. 
    10,421  
Katherine Hagedorn Littlefield
    9,196  
Nancy G. Mistretta
    9,532  
Patrick J. Norton (retired)
     
Stephanie M. Shern
    9,636  
John S. Shiely
    8,841  
 
  All fractional Common Shares have been rounded to the nearest whole Common Share.
 
(7) While there were no options granted to non-employee directors during the 2010 fiscal year, the aggregate number of Common Shares subject to option awards outstanding as of September 30, 2010 were as follows:
 
         
    Aggregate Number of
    Common Shares Subject to
    Option Awards Outstanding
Name
  as of September 30, 2010
 
Alan H. Barry
     
Joseph P. Flannery
    74,975  
Adam Hanft
     
William G. Jurgensen
     
Thomas N. Kelly Jr. 
    21,442  
Carl F. Kohrt, Ph.D. 
     
Katherine Hagedorn Littlefield
    85,683  
Nancy G. Mistretta
     
Patrick J. Norton (retired)
    26,197  
Stephanie M. Shern
    72,599  
John S. Shiely
    14,300  
 
 
(8) Reflects the value of the cash dividends declared and paid by the Company during the 2010 fiscal year.


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EXECUTIVE COMPENSATION
 
COMPENSATION DISCUSSION AND ANALYSIS
 
The purpose of this Compensation Discussion and Analysis (the “CD&A”) is to provide insight to our shareholders regarding our executive compensation philosophy and objectives, guiding principles, policies and practices.
 
Overview
 
Our compensation programs are intended to align our NEO’s interests with those of our shareholders by rewarding performance that meets or exceeds the goals the Compensation Committee establishes with the objective of increasing shareholder value. In structuring our compensation programs, the Compensation Committee strives to ensure that our executive compensation levels are competitive with companies of a like nature. The summary below highlights (i) our belief in performance-based pay, (ii) the tie between 2010 executive compensation and our strong financial performance, and (iii) key market practices reflected in the design of our compensation programs.
 
We Believe in Performance-Based Pay
 
The design of our compensation programs include the following measures to ensure that the compensation granted to our NEOs is based on the Company’s performance:
 
  •  Our annual incentive compensation programs include funding triggers (namely, the credit facility compliance and corporate profitability targets). Failure to meet such funding triggers would jeopardize the eligibility of our NEOs to receive annual incentive awards.
 
  •  In addition to the funding triggers, the annual incentive payouts are subject to a reduction based on a sliding scale of measures comprising our “Quality of Earnings” governors. For example, should the Company’s cash flows for a given year fall below a certain threshold, the payout to our NEOs will be reduced by a certain percentage.
 
The funding triggers and quality of earnings governors described above are intended to mitigate the potential risk associated with short-term decisions by our NEOs that may not be in the best interest of the Company or its key stakeholders.
 
  •  The grants of our long-term equity-based incentive awards are targeted at the 50th percentile of our Compensation Peer Group; however, the grant value is subject to adjustment (up or down) based on achievement of individual performance goals set at the beginning of each performance cycle.
 
Executive Compensation Reflects Strong Financial Performance
 
Consistent with our compensation program design, our compensation program results for the fiscal year ended September 30, 2010 reflected the strong financial results that we delivered during the 2010 fiscal year despite the challenging economic environment:
 
  •  Our net sales on a consolidated basis increased by 5.3% compared to the fiscal year ended September 30, 2009; and
 
  •  Our adjusted EBITDA on a consolidated basis increased by 25.6% compared to the fiscal year ended September 30, 2009.
 
Performance with respect to each of these metrics was above target (as described below) and resulted in annual incentive awards considerably over 100% of the target for our NEOs. Despite our strong financial results, in light of recent economic conditions, the Compensation Committee decided not to award any base pay increases to the NEOs (including our CEO) for the 2010 fiscal year.


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Compensation Design Reflects Key Market Practices
 
We are committed to periodically making adjustments to our compensation practices to further align our executive compensation design with our shareholders’ interests and current market practices, including:
 
  •  Elimination of Gross-Ups:  We have eliminated the gross-up payments that we previously provided to our NEOs, other than those relating to relocation-related benefits.
 
  •  Double-Trigger Change in Control Provisions:  Our plans currently include “double-trigger” change in control provisions, which preclude acceleration of vesting of outstanding cash and equity-based awards upon a change in control if such awards are assumed or substituted. In these instances, our plans preclude acceleration of vesting unless an employee is terminated.
 
  •  Clawback Provisions:  All of our equity-based awards and annual incentive awards contain provisions designed to recoup such awards for violation of non-compete covenants or engaging in conduct that is detrimental to the Company. In addition, on September 22, 2010, the Compensation Committee approved the Executive Compensation Recovery Policy, which allows the Company to recover annual incentive award payments and equity award distributions in the event of a required accounting restatement due to material non-compliance with any financial reporting requirement.
 
  •  Stock Ownership Guidelines:  Our stock ownership guidelines are designed to align the interests of each NEO with the long-term interests of the shareholders by ensuring that a material amount of each NEO’s accumulated wealth is maintained in the form of Common Shares. The ownership guideline for the CEO is effectively 10 times base salary.
 
  •  No Excess Benefit Retirement Plan:  Our excess benefit plan was frozen effective December 31, 1997, and the only NEO who was enrolled in this plan prior to this date is Mr. Hagedorn.
 
  •  Independent Consultants:  Our Compensation Committee engages an independent consultant to advise with respect to executive compensation levels and practices. The consultant provides no services to management and had no prior relationship with any of our NEOs.
 
  •  Tally Sheets:  Our Compensation Committee uses tally sheets in order to obtain a perspective on the overall level of executive compensation and wealth accumulation, the relationship between short-term and long-term compensation elements, and how each element relates to our compensation philosophy and guiding principles.
 
Our Compensation Philosophy and Objectives
 
The culture of our Company is based on a strong bias for action aimed at delivering sustainable results. We value and recognize high performance and our compensation programs are structured to promote an accountability and performance-based culture with significant emphasis on variable pay in the form of both short-term and long-term incentives.
 
Our compensation programs are designed to achieve the following objectives:
 
  •  Attracting and retaining the leadership talent to sustain and expand upon our competencies and capabilities;
 
  •  Driving performance that generates long-term profitable growth;
 
  •  Promoting behaviors that reinforce our business strategy and desired culture;
 
  •  Encouraging teamwork across business units and functional areas; and
 
  •  Connecting rewards to shareholder value creation.


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The Company has adopted guiding principles as a framework for making compensation decisions while preserving the flexibility needed to respond to the competitive market for executive talent. Our guiding principles for compensation are as follows:
 
  •  Structure total compensation levels around the 50th percentile of the Compensation Peer Group (as defined herein) for achieving target levels of performance and above the 50th percentile of the Compensation Peer Group for achieving higher levels of performance;
 
  •  Place greater emphasis on variable pay (i.e., incentive compensation) versus fixed pay (i.e., base salary);
 
  •  Emphasize pay-for-performance to motivate both short-term and long-term performance for the benefit of shareholders; and
 
  •  Provide the opportunity for meaningful wealth accumulation over time, tied directly to shareholder value creation.
 
Elements of Executive Compensation
 
To best promote the objectives of our executive compensation program, the Company relies on a mix of five principal short-term and long-term compensation elements. For the 2010 fiscal year, the elements of executive compensation were as follows:
 
  •  Base salary;
 
  •  Annual cash incentive compensation plan;
 
  •  Long-term equity-based incentive awards;
 
  •  Executive perquisites and other benefits; and
 
  •  Retirement plans and deferred compensation benefits.
 
The Compensation Committee has oversight responsibility for all elements of compensation granted to Mr. Hagedorn, our CEO, and other key management employees, including the other NEOs listed in the Summary Compensation Table for 2010 Fiscal Year. For each NEO, the Compensation Committee reviews each element of compensation, as well as the relative mix or weighting of elements, on an annual basis.
 
Base Salary (short-term compensation element)
 
Consistent with the Company’s performance-based pay philosophy, base salary is not intended to deliver the majority of the total compensation to any of the NEOs or other key management employees. However, base salary, which is the primary fixed element of total compensation, serves as the foundation of the total compensation structure since most of the variable compensation elements are linked directly or indirectly to the base salary level.
 
Base salaries of the NEOs are reviewed on an annual basis and compared against the median salaries of similar positions, based on survey data provided by the Company’s compensation consultants. Individual base salaries may be higher or lower than the benchmark based on a subjective assessment of organizational and individual qualities and characteristics, including the strategic importance of the individual’s job function to the Company as well as an NEO’s experience, competency, skill level, overall contribution to the success of our business and potential to make significant contributions to the Company in the future. In light of recent economic conditions, the Compensation Committee decided not to award any base pay increases to the NEOs for the 2010 fiscal year.


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Annual Cash Incentive Compensation Plan (short-term compensation element)
 
The focus of our annual executive incentive plan, the EIP, is to promote profitable top line growth and quality of earnings. The EIP design is grounded by the following set of core guiding principles which are reflective of our compensation philosophy and are intended to support a sustainable plan design:
 
  •  Accountability — plans are heavily weighted to individual business unit performance;
 
  •  Focus — pick a few things and do them well;
 
  •  Alignment — plans are aligned with overall business strategy and growth objectives;
 
  •  Simplicity — plans are easy to understand and communicate; and
 
  •  Differentiation — recognize the unique aspects of regions and business units, as well as individual performance.
 
The EIP provides annual cash incentive compensation opportunities based on various performance metrics related to the financial performance of the Company and its business units. An incentive target is established for each NEO as a percentage of base salary, which is generally intended to approximate the market median for similar positions within the Compensation Peer Group. For the 2010 fiscal year, the incentive targets for Mr. Hagedorn, Mr. Baker and all other NEOs were set at 100%, 75% and 55% of base salary, respectively. The Compensation Committee believes the incentive targets compare favorably with those of our Compensation Peer Group for similar positions.
 
Funding Triggers:  The EIP design includes two funding triggers that are intended to ensure alignment between management and key stakeholders.
 
  •  Credit facility compliance — Payouts under the EIP are subject to the Company maintaining compliance with the quarterly debt/EBITDA ratio (“Leverage Ratio”) requirement under its senior secured credit facilities. The Compensation Committee believes this feature ensures that management continues to be aligned with the interests of all key stakeholders, including the Company’s creditors. The Company was in compliance with the Leverage Ratio requirement under its senior credit facilities throughout the 2010 fiscal year.
 
  •  Corporate profitability — If the Company fails to achieve a specified level of Corporate Adjusted EBITA for the full fiscal year, all payouts calculated under the EIP are reduced by 50%. The Compensation Committee believes this feature ensures that management delivers growth to the shareholders before significant bonuses can be earned. For the 2010 fiscal year the funding trigger was established at a Corporate Adjusted EBITA (as defined below) target of $369 million, which approximated the actual results for the prior year after adjusting for non-recurring items and applying a growth factor. The Company’s actual performance of $427.5 million substantially exceeded the funding trigger for the 2010 fiscal year.
 
Payouts Subject to Quality of Earnings Governors:  The EIP design encourages alignment within the senior leadership team around the goal of improving the “Quality of Earnings” as well as the overall level of earnings. In addition to the funding triggers, the total incentive payouts calculated under the EIP, based on the achievement of the performance metrics, were subject to reduction based on the following “Quality of Earnings” measurements, each of which is calculated at the consolidated Company level:
 
  •  Gross Margin Rate Expansion:  If the Global Consumer gross margin rate for the 2010 fiscal year is less than 37.3%, payouts reduced up to 10%.
 
  •  Cash Flow Generation:  If the free cash flow generation for the 2010 fiscal year is less than $175 million, payouts reduced up to 10%.
 
  •  SG&A Control:  If the total SG&A expenses for the 2010 fiscal year, excluding media expenses and incentive payouts in excess of target, are greater than $600.8 million, payouts reduced up to 10%.


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For the 2010 fiscal year the Company exceeded the performance targets for each of the quality of earnings governors so no reductions were applied to the calculated payouts.
 
Individual Discretionary Component:  The EIP also includes a discretionary component to further distinguish individual performance. The Compensation Committee may exercise its discretion to adjust the total weighted incentive award calculated under the EIP for each plan participant based on various business factors, including individual performance. As a result, an individual participant could receive a total incentive payout that differs from the payout that would be calculated based solely on achievement of the performance metrics under this plan.
 
For the 2010 fiscal year, 80% of the total weighted payout (the non-discretionary portion) for plan participants was determined based directly on achievement of the pre-defined performance metrics, with the remaining 20% (the discretionary portion) awarded at the discretion of the Compensation Committee based on each NEO’s performance during the fiscal year. For further discussion of the discretionary incentive amounts awarded to the NEOs for the 2010 fiscal year, see the Summary Compensation Table for 2010 Fiscal Year.
 
Tax Deductibility:  The design and administration of the EIP are generally intended to qualify the underlying payouts as performance-based compensation for purposes of IRC § 162(m) in order to maximize the tax deductibility of such compensation for the Company. Accordingly, the Compensation Committee oversees the operation of the EIP, including approval of the plan design, performance objectives and payout targets for each fiscal year.
 
The EIP Performance Metrics:  For the 2010 fiscal year, the incentive awards for all NEOs were based on the following performance measures, each of which is calculated at the consolidated Company level:
 
  •  Net Sales Growth* — a measurement of net sales growth, including Roundup® net sales.
 
  •  Adjusted EBITA — earnings before interest, taxes and amortization, adjusted to exclude discontinued operations, charges related to registration and recall matters, impairment and other non-cash charges.
 
  For reporting purposes in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”), the Company includes the commission relating to the Roundup® Marketing Agreement and associated cost reimbursements in net sales; as a result, there is a difference between the Company’s reported net sales and the net sales used for purposes of calculating incentive payouts under the EIP.
 
The Compensation Committee believes these measures reflect key value drivers of the business and align management with shareholder interests. As reflected in the table below, for each performance measure, achievement of pre-defined minimum, target and maximum performance goals resulted in compensation payouts of 50%, 100% and 200% of the NEO’s target incentive opportunity, respectively. Actual payouts for performance results between the pre-defined performance goals were calculated on a straight-line basis.
 
The target performance goals chosen for the NEOs were based on the Company’s operating plan for the 2010 fiscal year. The minimum performance goals were established based on the 2009 actual results, with pro forma adjustments for discontinued operations, incentive payments in excess of target and non-cash items. The target performance goals, which establish the performance criteria to achieve a payout of 100%, were based on achieving the operating budget for the 2010 fiscal year and the maximum performance goals were set at a level thought to reflect aggressive, but attainable growth. The consolidated Company level performance goals and actual performance results for the 2010 fiscal year (with dollars in millions) were:
 
                                                 
    Metric
  Payout Level   Actual
  Calculated
Metric
  Weighting   50%   100%   200%   Results   Payout %
 
Net Sales Growth
    25 %   $ 3,318.4     $ 3,402.6     $ 3,589.9     $ 3,446.4       123.4 %
Adjusted EBITA
    75 %   $ 387.0     $ 403.2     $ 435.2     $ 427.5       175.9 %
Weighted Payout %
    162.8 %
 
Note: The Compensation Committee believes that the performance metrics should not be influenced by currency fluctuations and, therefore, where applicable, the EIP metrics reflect currency translation based on budgeted exchange rates, which is in contrast to actual exchange rates employed for currency conversions used


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for U.S. GAAP reporting. As a result, there could be a difference between the Company’s reported financial results and the amounts used for purposes of calculating incentive payouts under the EIP.
 
Long-Term Equity-Based Incentive Awards (long-term compensation element)
 
Long-term incentive compensation is an integral part of total compensation for Company executives and directly ties rewards to performance that is intended to create and enhance shareholder value. The Compensation Committee targets the grant value (equity award value) of long-term equity-based incentive awards at the 50th percentile of the Compensation Peer Group. The target award value may be delivered in any combination of options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance shares or other equity-based awards. Consistent with the Company’s performance-based pay philosophy, the targeted grant value of individual equity-based incentive awards may be adjusted upward or downward from the 50th percentile based on factors such as the overall performance level of the individual, the overall contribution of the individual to the success of the business, years of service and the potential of the individual to make significant contributions to the Company in the future.
 
For the 2010 fiscal year, approximately 50% of the target equity award value granted to NEOs was in the form of non-qualified stock options (“NSOs”), with the remaining 50% granted in the form of RSUs. The decision to use a combination of NSOs and RSUs reflected competitive pay practices as compared to the Compensation Peer Group and allowed the Company to deliver the intended equity award value with fewer Common Shares underlying the awards granted. The specific numbers of Common Shares subject to NSOs and RSUs awarded were determined as follows:
 
Target Option Award value / Black-Scholes value per NSO = number of Common Shares subject to NSOs awarded; and
 
Target Stock Award value / fair market value per share = number of Common Shares underlying RSUs awarded.
 
All NSOs and RSUs awarded to the NEOs in the 2010 fiscal year were awarded subject to a three-year, time-based cliff vesting provision. The RSU grants did not qualify as performance-based compensation for purposes of IRC § 162(m). As a result, the Company’s ability to deduct the full value of these awards at the time of vesting may be limited. Information regarding our equity grant practices, including the determination of exercise price, can be found in the section captioned “Other Executive Compensation Policies, Practices and Guidelines — Practices Regarding Equity-Based Awards” below.
 
Executive Retention Awards (long-term compensation element)
 
In the 2008 fiscal year, the Company was facing a number of challenging circumstances, including rising commodity costs and a sharp decline in the market value of its Common Shares. As a result, the majority of the Company’s outstanding NSOs decreased significantly in value. In response to these circumstances, the Company commenced a strategy to retain key executive talent. In furtherance of this strategy, the Compensation Committee authorized grants of discretionary retention awards to Mr. Evans and Mr. Sanders on November 4, 2008, each of which had a grant date value of $1.0 million, in the form of deferred compensation under The Scotts Company LLC Executive Retirement Plan (the “ERP”). A similar retention award with an equal value was approved with respect to Mr. Lopez and is more fully described below.
 
Mr. Evans and Mr. Sanders had the right to elect an investment fund, including a Company stock fund, against which the retention award will be benchmarked, and both elected the Company stock fund. The retention awards are generally subject to cliff vesting on November 4, 2011, with limited exceptions that provide for accelerated or pro rata vesting. Each retention award is subject to forfeiture if Mr. Evans or Mr. Sanders is terminated for cause at any time or if they engage in certain actions prohibited by the retention award agreement within 180 days before or 730 days after their employment is terminated for any reason.
 
The value of the retention awards, which have not vested as of the end of the 2010 fiscal year, are reflected in the Non-Qualified Deferred Compensation Table For 2010 Fiscal Year. Provided the vesting


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provisions are met, the Company will distribute one-fourth of the vested retention award account balance on each of November 4, 2011 and November 4, 2012 and the remaining account balance will be distributed on November 4, 2013.
 
On November 4, 2008, the Compensation Committee also granted a discretionary retention award to Mr. Lopez in the form of 36,400 RSUs. Mr. Lopez’ retention award is governed by the terms of the Company’s 2006 Plan and the applicable award agreement that contains terms and conditions substantially similar to the form of retention award agreement approved by the Compensation Committee for Mr. Evans and Mr. Sanders.
 
Executive Perquisites and Other Benefits (short-term compensation element)
 
The Company maintains traditional health and welfare benefit plans and the RSP, a qualified 401(k) plan, that are generally offered to all employees (subject to basic plan eligibility requirements) and are consistent with the types of benefits offered by other similar corporations. In addition to these traditional benefits, the Company offers certain executive level perquisites to key executives which are designed to be competitive with the compensation practices of corporations in the Compensation Peer Group, including comprehensive annual physical examinations, a car allowance of $1,000 per month (except for Mr. Baker who received a car allowance of $1,167 per month) and annual financial planning services valued at approximately $4,000 per year.
 
For safety and security reasons, the Board approved CEO/COO Travel Guidelines (the “Travel Guidelines”) for the 2010 fiscal year which provide that Mr. Hagedorn and Mr. Baker may use either personal aircraft or Company aircraft for commuting purposes. With respect to Mr. Hagedorn, and in lieu of further increasing his cash-based compensation to compensate him for his prior commuting perquisite, the Compensation Committee approved a compensatory monthly commuting allowance of $20,000, beginning in the 2010 fiscal year. The commuting allowance is intended to offset the annual costs associated with Mr. Hagedorn’s compliance with the Travel Guidelines.
 
With respect to Mr. Baker, the Compensation Committee approved a compensatory monthly commuting allowance of $35,000, beginning in the 2010 fiscal year. The commuting allowance is intended to offset the annual costs associated with Mr. Baker’s compliance with the Travel Guidelines. In an effort to mitigate the cost increase to the Company associated with providing the commuting allowance, Mr. Baker agreed to restructure his total compensation package to reduce the minimum grant date value of his long-term equity-based compensation by $240,000 per year, beginning in the 2010 fiscal year. The Compensation Committee believes that the approved approach is fair and equitable to the Company and Mr. Baker.
 
Mr. Hagedorn and Mr. Baker are also entitled to limited personal use of Company aircraft at their own expense. Specifically, Mr. Hagedorn has an option to purchase up to 100 flight hours per year for personal use and Mr. Baker has an option to purchase up to 50 flight hours per year for personal use. Both Mr. Hagedorn and Mr. Baker purchase their respective flight hours at the Company’s incremental direct operating cost per flight hour so there is no incremental cost to the Company associated with providing this perquisite other than the partial loss of a tax deduction of certain aircraft-related costs as a result of any personal use of Company aircraft. Since Company aircraft are used primarily for business travel, the determination of the direct operating cost per flight hour excludes the fixed costs which do not change based on usage, such as pilots’ salaries, the purchase cost of Company aircraft and the cost of maintenance not related to personal trips. As an additional perquisite, Mr. Hagedorn and Mr. Baker have access to the services of the Company’s aviation mechanics and pilots in circumstances involving commuting flights on personal aircraft. Since the Company’s aviation mechanics and pilots are paid on a salary basis, there is no incremental cost to the Company for providing this perquisite. For further discussion see section captioned “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.”


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Retirement Plans and Deferred Compensation Benefits (long-term compensation element)
 
ERP
 
The ERP is a non-qualified deferred compensation plan which provides executives the opportunity to: (1) defer compensation above the specified statutory limits applicable to the RSP and (2) defer compensation with respect to any Performance Award (as defined in the ERP). The ERP is an unfunded plan and is subject to the claims of the Company’s general creditors. During the 2010 fiscal year, the ERP consisted of five parts:
 
  •  Compensation Deferral, which allows continued deferral of salary and amounts received in lieu of salary;
 
  •  Performance Award Deferral, which allows the deferral of up to 100% of any cash incentive compensation earned under the EIP;
 
  •  Retention Awards, which reflect the Company’s contribution to the ERP in respect of the retention awards described above;
 
  •  Crediting of Company Matching Contributions on qualifying deferrals that could not be made to the RSP due to certain statutory limits; and
 
  •  Retirement contributions (referred to as “Base Retirement Contributions”), which were made by the Company to the ERP once the statutory compensation cap was reached in the RSP and with respect to any qualifying deferrals to the ERP. A Base Retirement Contribution was made to the ERP regardless of whether Compensation Deferral or Performance Award Deferral elections were made under the ERP.
 
The Company Matching Contributions and Base Retirement Contributions to the ERP were based on the same contribution formulae as those used for the RSP. Specifically, the Company matched the Compensation Deferral at 100% for the first 3% of eligible earnings contributed to the ERP and 50% for the next 2% of eligible earnings contributed to the ERP. Performance Award Deferrals to the ERP are not eligible for Company Matching Contributions. The Company also made a Base Retirement Contribution in an amount equal to 2% of eligible earnings for all eligible executive officers, regardless of whether they made deferral elections under the ERP. This amount increased to 4% once an executive officer’s eligible earnings reached 50% of the Social Security wage base. Base Retirement Contributions were made to the ERP once an executive officer exceeded the maximum statutory compensation allowable under the RSP and with respect to all qualifying deferrals to the ERP.
 
All accounts under the ERP are bookkeeping accounts and do not represent claims against specific assets of the Company. Each participant directs the portion of future credits to the participant’s ERP accounts that will be, as well as the existing balance of the participant’s ERP accounts that is, credited to one or more benchmarked investment funds, including a Company stock fund and mutual fund investments, which are substantially consistent with the investment options permitted under the RSP. Accordingly, there were no above-market or preferential earnings on investments associated with the ERP for any of the NEOs for the 2010 fiscal year.
 
Other Retirement and Deferred Compensation Plans
 
The Scotts Company LLC Excess Benefit Plan for Non Grandfathered Associates (the “Excess Pension Plan”) is an unfunded plan that provides benefits which cannot be provided under The Scotts Company LLC Associates’ Pension Plan (the “Associates’ Pension Plan”) due to specified statutory limits. The Associates’ Pension Plan was frozen effective December 31, 1997 and, therefore, no additional benefits have accrued after that date under the Excess Pension Plan. Continued service taken into account for vesting purposes under the Associates’ Pension Plan is, however, recognized with respect to the entitlement to, and the calculation of, subsidized early retirement benefits under the Excess Pension Plan. Based on his tenure, Mr. Hagedorn is the only NEO who participates in the Excess Pension Plan. For further details regarding the Excess Pension Plan, see Pension Benefits Table.


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Our Compensation Practices
 
Oversight of Executive Officer Compensation
 
The Compensation Committee has oversight responsibility for all elements of executive compensation for our CEO and other key executives. As part of its responsibility, the Compensation Committee is responsible for evaluating the CEO’s performance and setting the CEO’s annual compensation. In setting the CEO’s compensation, the Compensation Committee considers:
 
  •  The specific performance of the CEO;
 
  •  The performance of the Company against pre-determined performance goals;
 
  •  Management’s recommendations with respect to the CEO’s compensation; and
 
  •  The competitive level of the CEO’s compensation as benchmarked against similar positions with the Compensation Peer Group.
 
In addition to setting the compensation of the CEO and approving the compensation recommendations for other key executives, the Compensation Committee is also responsible for administering or overseeing all equity-based incentive plans to achieve the objectives of the compensation program within the framework approved by our shareholders. Under the terms of these plans, the Compensation Committee has sole discretion and authority to determine the size and type of all equity-based awards, as well as the period of vesting and all other key terms and conditions of the awards.
 
With respect to the annual incentive compensation plans the Compensation Committee has responsibility for approving the overall plan design, as well as the performance metrics, performance goals and payout levels proposed by management.
 
Role of Outside Consultants
 
During the 2010 fiscal year, the Compensation Committee engaged an independent consultant from Fred Cook & Co. to advise the Compensation Committee with respect to best practices and competitive trends in the area of executive compensation, as well as ongoing regulatory considerations. The consultant provided guidance to assist the Compensation Committee in its evaluation of the recommendations submitted by management with respect to executive compensation. Fred Cook & Co. did not provide any consulting services directly to management.
 
During the 2010 fiscal year, the Company engaged consultants from Towers Watson and Hewitt Associates, Inc. These firms worked directly with management to advise the Company on best practices and competitive trends, as well as ongoing regulatory considerations with respect to executive compensation. Neither firm provided consulting services directly to the Compensation Committee.


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Compensation Peer Group
 
For the purpose of enabling the Company to benchmark our compensation practices, as well as the total compensation packages of the CEO and other key executives, the Company uses a customized Compensation Peer Group, which was developed in cooperation with the Committee’s consultant. For the 2010 fiscal year the Compensation Committee approved changes to the Compensation Peer Group, expanding it from 15 companies to 24 companies, which is reflective of best practice and helps to ensure the statistical quality of the benchmark data. The Compensation Committee believes that the companies chosen for the Compensation Peer Group (listed below) reflect the types of highly regarded consumer products-oriented companies that the Company typically competes with to attract and retain executive talent.
 
             
ACCO Brands Corporation
  Alberto-Culver Company   American Greetings Corporation   Blyth, Inc.
Central Garden & Pet Company 
  Church & Dwight Co., Inc.   The Clorox Company   Del Monte Foods Company
Elizabeth Arden, Inc. 
  Energizer Holdings, Inc.   FMC Corporation   Fortune Brands, Inc.
The Hershey Company
  Jarden Corporation   The Estée Lauder Companies Inc.   Masco Corporation
McCormick & Company, Inc. 
  Newell Rubbermaid Inc.   Nu Skin Enterprises   Revlon, Inc.
The J. M. Smucker Company 
  Stanley Black & Decker, Inc.   The Toro Company   Tupperware Brands Corporation
 
The Compensation Committee believes this Compensation Peer Group reflects the pay practices of the broader consumer products industry and is reflective of the size and complexity of the Company. In general, the Compensation Peer Group reflects companies that range between $1.0 billion and $7.8 billion of annual revenues, with a median annual revenue slightly above the Company’s revenue for the 2010 fiscal year.
 
Use of Tally Sheets
 
On an annual basis, management prepares and furnishes to the Compensation Committee a comprehensive statement, known as a “Tally Sheet,” reflecting the value of each element of compensation for the current fiscal year as well as executive perquisites and other benefits provided to the NEOs.
 
The Tally Sheets provide perspective to the Compensation Committee on the overall level of executive compensation and wealth accumulation, as well as the relationship between short-term and long-term compensation elements, and how each element relates to our compensation philosophy and guiding principles. The Tally Sheets are instructive for the Compensation Committee when compensation decisions are being evaluated, particularly as it relates to compensation decisions made in connection with promotions, special retention issues and separations from the Company.
 
Role of Management in Compensation Decisions
 
The CEO is responsible for conducting annual performance reviews and establishing performance objectives for all of the other NEOs, who in turn are responsible for conducting reviews and establishing performance objectives for other key management employees. As mentioned above, the Compensation Committee establishes the annual performance objectives for the CEO and completes an annual assessment of his performance. The Compensation Committee believes that the performance evaluation and goal-setting process is critical to the overall compensation-setting process, because the personal performance level of each NEO is one of the most heavily weighted factors considered by the Compensation Committee when making compensation decisions.
 
In conjunction with the Company’s outside consultants from Towers Watson and Hewitt Associates, Inc., management conducts annual market surveys of the base salary levels, short-term incentives and long-term incentives for the CEO and each of the other NEOs. The benchmark compensation data provided by Towers Watson and Hewitt reflects approximately 200 general industry companies ranging between $1.0 and $9.0 billion of annual revenue. To account for the wide range of companies included in the surveys, the data is statistically adjusted by the Company’s compensation consultants to more closely reflect the relative size of the Company, based on revenue. Management’s goal in conducting these surveys is to better understand competitive compensation programs and trends, as well as the level and mix of compensation elements. The Compensation Committee considers the survey information to help ensure that executive compensation levels remain competitive with the Company’s Compensation Peer Group, which facilitates our ability to retain and motivate key executive talent.


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The CEO and the Executive Vice President, Global Human Resources make specific recommendations to the Compensation Committee with respect to each element of executive compensation for each of the NEOs, other than the CEO. These recommendations are based on their assessment of the competitive market trends, as referenced by the benchmark compensation data, and the performance level of the individual NEO. The Compensation Committee, with the assistance of its compensation consultant, independently evaluates these recommendations taking into account the competitive market data, the overall performance level of each NEO and our compensation guiding principles.
 
Setting Compensation Levels for CEO
 
Consistent with our performance-oriented pay philosophy, the compensation structure for the CEO is designed to deliver approximately 20% of the annual compensation opportunity in the form of fixed pay (i.e., base salary) and the remaining 80% in the form of variable pay (i.e., annual incentive compensation and long-term equity-based compensation). Once a year, the Compensation Committee completes an evaluation of the CEO’s performance with respect to the Company’s goals and objectives and makes its report to the Board. Based on this assessment, the Compensation Committee set the CEO’s annual compensation for the 2010 fiscal year, including base salary, annual incentive compensation, long-term equity-based compensation and perquisites and other benefits. When evaluating Mr. Hagedorn’s total level of compensation for the 2010 fiscal year, the Compensation Committee considered information including:
 
  •  Mr. Hagedorn’s personal performance against pre-established goals and objectives;
 
  •  The Company’s performance and relative shareholder return; and
 
  •  The compensation of CEOs at companies within our Compensation Peer Group.
 
Base Salary
 
Mr. Hagedorn receives an annual base salary of $1.0 million, which is reviewed annually by the Compensation Committee. In light of recent economic conditions the Compensation Committee did not award a base salary increase to Mr. Hagedorn for the 2010 fiscal year. Mr. Hagedorn’s base salary for the 2010 fiscal year was slightly above the median of his peers as reflected in the compensation benchmark data.
 
Short-Term Cash-Based Incentive Compensation
 
For purposes of his participation in the EIP, Mr. Hagedorn’s target incentive opportunity was equal to 100% of his base salary for the 2010 fiscal year, which remained unchanged from the prior year. Based on the benchmark compensation data, Mr. Hagedorn’s target incentive opportunity, expressed as a percentage of base salary, approximated the market median of his peers.
 
For the 2010 fiscal year, Mr. Hagedorn’s target incentive opportunity under the EIP was directly attributable to attainment of annual performance measures established at the consolidated Company level and approved by the Compensation Committee. Under the EIP, the measures used to determine Mr. Hagedorn’s incentive compensation for the 2010 fiscal year, which were the same measures used for all other NEOs, were Net Sales (25% weighting) and Adjusted EBITA (75% weighting). A description of the specific performance goals and the payout levels associated with each performance measure is included above in the section captioned “Elements of Executive Compensation — Annual Cash Incentive Compensation Plan (short-term compensation element).
 
Equity-Based Compensation
 
For the 2010 fiscal year, the Compensation Committee maintained the grant value for Mr. Hagedorn’s equity-based compensation at approximately $3.0 million, representing 60% of his total direct compensation (salary, annual cash-based incentive compensation and long-term equity-based compensation) based on target levels of performance. This positions his long-term compensation at approximately 19% above the market median when compared to the benchmark compensation data, a level that is viewed by the Compensation Committee as “competitive” and reflects Mr. Hagedorn’s personal performance as well as the overall


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performance of the Company. Mr. Hagedorn’s total direct compensation, based on target levels of performance, was approximately 15% above the market median of the benchmark compensation data.
 
Of the long-term compensation value, approximately 50% of the grant value of Mr. Hagedorn’s long-term equity-based compensation was awarded in the form of NSOs and the remaining 50% was awarded in the form of RSUs. Both the NSOs and the RSUs are subject to three-year, time-based cliff vesting. The Compensation Committee’s decision to award a mix of NSOs and RSUs reflects a balance between rewarding Mr. Hagedorn for future share price appreciation while attempting to mitigate dilution to existing shareholders since a grant of RSUs requires considerably fewer Common Shares than a grant of NSOs, while delivering the same grant value.
 
Setting Compensation Levels for Other NEOs
 
The Compensation Committee strives to deliver a competitive level of total compensation to each of the NEOs by evaluating and balancing the following objectives:
 
  •  The strategic importance of the position within our executive ranks;
 
  •  The overall performance level of the individual and the potential to make significant contributions to the Company in the future;
 
  •  The value of the job in the marketplace;
 
  •  Internal pay equity; and
 
  •  Our executive compensation structure and philosophy.
 
Consistent with our performance-oriented pay philosophy, the compensation structure for Mr. Baker was designed to deliver approximately 20% of the annual compensation opportunity in the form of fixed pay (i.e., base salary) and the remaining 80% in the form of variable pay (i.e., annual incentive compensation and long-term equity-based compensation). With respect to the other NEOs, the compensation structure is designed to deliver approximately one-third of the annual compensation opportunity in the form of fixed pay and the remaining two-thirds in the form of variable pay. The Compensation Committee believes that this pay mix is generally in line with the pay mix for similar positions within our Compensation Peer Group.
 
Based on their assessment of the individual performance of each NEO, the CEO and the Executive Vice President, Global Human Resources submit compensation recommendations to the Compensation Committee for each NEO. These recommendations address all elements of compensation, including base salary, annual incentive compensation, long-term equity-based compensation and perquisites and other benefits. In evaluating these compensation recommendations, the Compensation Committee considers information such as the Company’s financial performance as well as the compensation of similarly situated executive officers as determined by reference to the benchmark compensation data.
 
Base Salary
 
Mr. Baker received an annual base salary of $900,000, which is reviewed annually by the Compensation Committee. The decision by the Compensation Committee to set Mr. Baker’s base salary at this level was based on an assessment of the magnitude of his responsibility in the organization and an attempt to position his pay level between that of our CEO and Mr. Baker’s direct reports.
 
In light of recent on economic conditions, the Compensation Committee did not award base salary increases to Mr. Baker or any of the other NEOs for the 2010 fiscal year. Based on the benchmark compensation data, the base salary level of Mr. Baker compared above the 75% percentile of the benchmark compensation data. The base salary levels of Mr. Evans and Mr. Sanders remained within a competitive range of plus or minus 10% compared to the market median of the benchmark compensation data. We determine compensation levels for executives who are based outside the U.S., such as Mr. Lopez, based on local market competitive practices.


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Short-Term Cash-Based Incentive Compensation
 
For purposes of the EIP, the target incentive opportunity for Mr. Baker was equal to 75% of base salary for the 2010 fiscal year, which approximated the market median of the benchmark compensation data. The target incentive for the other NEOs, was equal to 55% of base salary for the 2010 fiscal year, which put less of their total pay at risk than that of Mr. Hagedorn and Mr. Baker, and was generally lower than the comparable percentage of short-term cash-based incentives offered to similarly situated executive officers as reflected in the benchmark compensation data.
 
For the 2010 fiscal year, the target incentive compensation opportunity under the EIP was directly attributable to attainment of annual performance measures which were approved by the Compensation Committee. Under the EIP, the measures used to determine the incentive compensation for the 2010 fiscal year, which were the same measures used for all other NEOs, were Net Sales (25% weighting) and Adjusted EBITA (75% weighting). A description of the specific performance goals and the payout levels associated with each performance measure is included above in the section captioned “Elements of Executive Compensation — Annual Cash Incentive Compensation Plan (short-term compensation element).
 
Equity-Based Compensation
 
The Company supports a compensation philosophy of strongly linking rewards to shareholder value creation and to motivating long-term performance. As a result, approximately 60% of the value of Mr. Baker’s annual compensation opportunity was delivered in the form of equity-based compensation. Per the terms of his employment agreement, Mr. Baker was entitled to receive long-term equity-based compensation awards for the 2010 fiscal year valued at approximately $2.46 million on the date of grant. This positions his long-term compensation above the 75th percentile when compared to his peers reflected in the benchmark compensation data.
 
For the 2010 fiscal year, the target value of the equity-based compensation for each of the NEOs as a percentage of base salary was as follows: Mr. Baker (274%), Mr. Evans (147%), Mr. Sanders (147%) and Mr. Lopez (119%). The specific equity-based award granted to each NEO was determined based on a subjective assessment of the NEO’s overall performance level as well as the NEO’s expected contributions to the business. The grant value of the equity-based compensation awarded to the NEOs for the 2010 fiscal year reflected competitive grants levels, ranging between 8% to 26% above the market median of the benchmark compensation data. The Compensation Committee believes the grant values are reflective of competitive practice and recognize the personal performance of each of the NEOs.
 
Approximately 50% of the grant value of the long-term equity-based compensation awarded to the NEOs was in the form of NSOs and the remaining 50% in the form of RSUs. Both the NSOs and the RSUs are subject to three-year, time-based cliff vesting. The Compensation Committee’s decision to award a mix of NSOs and RSUs reflects a balance between rewarding the NEOs for future share price appreciation while attempting to mitigate the dilution to existing shareholders since a grant of RSUs requires considerably fewer Common Shares than a grant of NSOs while delivering the same grant value.
 
Total Direct Compensation
 
Mr. Baker’s total direct compensation (based upon target levels of performance), which exceeds the 75th percentile of the peers reflected in the benchmark compensation data, evidences the overall compensation level that the Compensation Committee deemed appropriate. The total direct compensation (based upon target levels of performance) for each of Mr. Evans and Mr. Sanders was below the median of peers reflected in the benchmark compensation data. We determine compensation levels for executives who are based outside the U.S., such as Mr. Lopez, based on local market competitive practices.
 
Performance Shares
 
On October 30, 2007, in recognition of Mr. Sanders’ ongoing commitment to the Company, the Compensation Committee approved the award of up to 40,000 performance shares in the aggregate, which included up to 10,000 performance shares for the 2008 fiscal year performance period, up to 10,000 performance


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shares for the 2009 fiscal year performance period and up to 20,000 performance shares for the 2010 fiscal year performance period. Each performance share represents the right to receive one full Common Share if the applicable performance goals are satisfied. Based on performance criteria established by the Compensation Committee, Mr. Sanders previously earned 5,038 of a possible 10,000 performance shares with respect to the 2008 fiscal year, and 10,000 of a possible 10,000 shares with respect to the 2009 fiscal year.
 
The Compensation Committee established the performance goal for the 2010 fiscal year performance period based upon the results of the U.S. portion of our Global Consumer business segment (the “U.S. Consumer”) business, which reflected Mr. Sanders’ primary responsibility for the 2010 fiscal year. The performance criteria provided for performance shares to be earned ratably — 10,000 performance shares (threshold) would be earned if the EBITDA achievement for the 2010 fiscal year for the U.S. Consumer business was at least $439.2 million (100% of the actual EBITDA results achieved in the 2009 fiscal year) and 20,000 performance shares (maximum) would be earned for achieving EBITDA performance of at least $473.9 million (the budget for the 2010 fiscal year). Based on the U.S. Consumer business achieving an actual EBITDA performance of $497.4 million, representing more than 100% of the budget, Mr. Sanders earned the full 20,000 performance shares possible for the 2010 fiscal year performance period.
 
Other Executive Compensation Policies, Practices and Guidelines
 
Practices Regarding Equity-Based Awards
 
In general, all employees are eligible to receive grants of equity-based awards; however, the Compensation Committee typically limits participation to the CEO, the NEOs and other key management employees. The decision to include certain key management employees in the annual equity-based awards is reflective of competitive market practice and serves to reward those individuals for their past and future positive impact on our business results.
 
Grants of equity-based awards are typically approved on an annual basis at a regularly scheduled meeting of the Compensation Committee. The grant date is established as the date of the Compensation Committee action. The Company’s practice is to grant equity-based awards at the January Compensation Committee meeting. Other than this practice, the Company does not have any program, plan or practice to coordinate the timing of annual equity-based awards to our executive officers with the release of material, non-public information.
 
The exercise price for each NSO is equal to the closing price of the Common Shares on the grant date, as reported on NYSE. If the grant date is not a trading day on NYSE, the exercise price is equal to the closing price on the next succeeding trading day.
 
Stock Ownership Guidelines
 
The Compensation Committee has established stock ownership guidelines, which vary by position, for the CEO and the other NEOs. The purpose of these guidelines is to align the interests of each NEO with the long-term interests of the shareholders by ensuring that a material amount of each NEO’s accumulated wealth is maintained in the form of Common Shares. The minimum target levels of stock ownership established by position are as follows:
 
     
CEO
  5 times the sum of base salary plus target EIP opportunity*
Other NEOs
  3 times the sum of base salary plus target EIP opportunity
 
 
* The ownership guideline for the CEO is effectively 10 times base salary since his incentive target is equal to his base salary.
 
The Compensation Committee believes that these stock ownership guidelines are generally more stringent than the practices of our Compensation Peer Group since we include the annual target EIP opportunity (in addition to base salary) when establishing the minimum amount of stock ownership desired, while most of the


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other members of our Compensation Peer Group look only at multiples of base salary. For purposes of achieving the desired level of stock ownership, the following forms of equity-based holdings are included:
 
  •  Common Shares held directly or indirectly in personal or brokerage accounts;
 
  •  Common Shares reflecting amounts credited to the benchmark Company stock fund under the ERP;
 
  •  Common Shares held in an account under the RSP;
 
  •  Restricted stock and RSU grants;
 
  •  Performance share and performance unit grants; and
 
  •  Grants of NSOs and SARs, both vested and unvested, based on the Black-Scholes value at the time of grant.
 
According to the Company’s stock ownership guidelines, each NEO has five years from the date of hire or promotion to fully reach the appropriate ownership guideline for his or her position.
 
Recoupment/Clawback Policies
 
To protect the interests of the Company and its shareholders, subject to applicable law, all equity-based awards and all amounts paid under the EIP contain recoupment provisions (known as clawback provisions) designed to enable the Company to recoup Common Shares or other amounts earned or received under the terms of an equity-based award or the EIP based on subsequent events, such as violation of non-compete covenants or engaging in conduct that is deemed to be detrimental to the Company (as outlined in the underlying plan and/or award agreement).
 
Consistent with the terms of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Compensation Committee approved the Executive Compensation Recovery Policy (the “Recovery Policy”) on September 22, 2010, which is intended to supplement the existing recoupment provisions contained within the equity award agreements and the EIP. The Recovery Policy allows the Company to recover incentive award payments and equity award distributions made to covered executives in the event of a required accounting restatement of a financial statement of the Company due to material non-compliance of the Company with any financial reporting requirement under U.S. securities laws. The Recovery Policy provides for the mandatory recovery of incentive amounts in excess of what would have been paid under the restated financial statements.
 
The Recovery Policy is applicable to all current and former incentive eligible executive officers, within a qualifying three year look-back period, and applies to all incentive awards paid or distributed in 2010 or thereafter, except to the extent required by regulations to be issued by the SEC.
 
Guidelines with Respect to Tax Deductibility and Accounting Treatment
 
The Company’s ability to deduct certain elements of compensation paid to each of the NEOs is generally limited to $1.0 million annually under IRC § 162(m). This non-deductibility is generally limited to amounts that do not meet certain requirements to be classified as “performance-based” compensation. To ensure the maximum tax deduction allowable, the Company attempts to structure its cash-based incentive program to qualify as performance-based compensation under IRC § 162(m). For the 2010 fiscal year, Mr. Hagedorn and Mr. Baker had non-performance-based compensation in excess of $1.0 million, attributed to their base salary levels, the value of commuting allowances and the income associated with the vesting of restricted stock awards that were granted in prior years. None of the other NEOs had non-performance-based compensation in excess of $1.0 million.
 
The Company accounts for equity-based compensation, including option awards and stock awards, in accordance with U.S. GAAP. Prior to making decisions to grant equity-based awards, the Compensation Committee reviews pro forma expense estimates for the awards as well as an analysis of the potential dilutive effect such awards could have on existing shareholders. Where appropriate, the proposed level of the equity-based awards may be adjusted to balance these objectives.
 
Decisions regarding the design, structure and operation of the Company’s incentive plans, including the EIP and the equity-based incentive plans, contemplate an appropriate balance between the underlying objectives of each plan and the resulting accounting and tax implications to the Company. While we view


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preserving the tax deductibility of executive compensation as an important objective, there are instances where the Compensation Committee has approved design elements that may not be fully tax-deductible, but are accepted as trade-offs that support the achievement of other compensation objectives.
 
For the 2010 fiscal year, the Company awarded approximately 50% of the target grant value of equity-based long-term compensation in the form of NSOs, with the remaining 50% in the form of RSUs. While the RSUs do not qualify as performance-based compensation for purposes of IRC § 162(m) because they vest without regard to performance, the decision to use a combination of NSOs and RSUs reflected competitive pay practices and allowed the Company to deliver the intended grant value with fewer Common Shares underlying the awards granted and to balance the overall market risk associated with the equity-based compensation for each NEO.
 
Risk Assessment in Compensation Programs
 
Consistent with new SEC disclosure requirements, management has assessed the Company’s compensation programs and has concluded that the Company’s compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. In reaching its conclusion, the Company has based its assessment on an evaluation of the compensation plans and arrangements that represent material sources of variable pay. In particular:
 
  •  Annual cash incentive compensation plans — The Company believes the design of the program, which incorporates funding triggers and quality of earnings governors intended to mitigate the potential risk associated with plan participants making short-term decisions that may not be in the best interest of the Company or its key stakeholders; and
 
  •  Equity-based compensation plans — The Company utilizes a mix of NSOs and full-value equity awards, which helps ensure that management maintains a responsible level of sensitivity to the impact of decision making on share price. Since the equity-based awards are subject to three-year, time-based cliff vesting, the Company believes the risks of focusing on short-term share price increases rather than long-term value creation are mitigated.
 
Based on the foregoing, we believe that our compensation policies and practices do not create inappropriate or unintended significant risk to the Company as a whole and are supported by the oversight and administration of the Compensation Committee with regard to executive compensation programs.
 
Recent Developments
 
In October 2010, Mr. Hagedorn announced that he had reconsidered his decision to retire and, with the support of the Board, intends to continue to serve as both Chairman of the Board and CEO. In light of Mr. Hagedorn’s decision, Mr. Baker resigned as the Company’s President and Chief Operating Officer effective October 28, 2010, and on November 3, 2010, Scotts LLC executed a Separation Agreement and Release of All Claims (the “Separation Agreement”) with Mr. Baker. The Separation Agreement, which supersedes Mr. Baker’s employment agreement, addresses the payments and benefits to which Mr. Baker is entitled in connection with his resignation. Pursuant to the terms of the Separation Agreement, Scotts LLC provided Mr. Baker with a lump sum payment of $5,025,000 (less applicable taxes) on November 24, 2010. In addition, the vesting date for the 103,700 stock options granted to Mr. Baker on October 8, 2008, which were scheduled to vest on September 30, 2011, was changed to October 28, 2010. All other equity awards which had not vested as of October 28, 2010 were forfeited. The Separation Agreement did not supersede or nullify the Employee Confidentiality, Noncompetition, Nonsolicitation Agreement previously executed by Mr. Baker on September 29, 2008, which agreement remains in full force and effect as modified by the Separation Agreement.
 
The Compensation Committee believes that the separation benefits approved for Mr. Baker are appropriate given the circumstances surrounding Mr. Baker’s employment and his subsequent resignation.
 
On October 29, 2010, the Company announced that Mr. Sanders had been elected to serve as President of the Company. In his new role, Mr. Sanders will oversee all business unit and operating functions of the Company. In connection with his election as President, the Compensation Committee approved an increase to Mr. Sanders’ compensation package, effective November 1, 2010. Specifically, Mr. Sanders’ base salary has


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been increased from $475,000 to $600,000, and his target incentive opportunity has been increased from 55% of base salary to 70% of base salary.
 
For discussion of Mr. Lopez’ U.S. employment agreement, which was effective October 1, 2010, see section captioned ‘‘EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS — Employment Agreements.”


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COMPENSATION COMMITTEE REPORT
 
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of SEC Regulation S-K with management and, based on such review and discussion, the Compensation Committee recommended to the Board of Directors (and the Board of Directors approved) that the Compensation Discussion and Analysis be included in this Proxy Statement.
 
Submitted by the Compensation Committee of the Board of Directors of the Company:
 
Thomas N. Kelly Jr., Chair
Joseph P. Flannery
Carl F. Kohrt, Ph.D.
Nancy G. Mistretta


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EXECUTIVE COMPENSATION TABLES
 
For the 2010 fiscal year, the Company had the following NEOs that are subject to this disclosure:
 
  •  James Hagedorn, who served as CEO throughout the 2010, 2009 and 2008 fiscal years;
 
  •  Mark R. Baker, who was appointed as an executive officer on October 1, 2008 and served as President and Chief Operating Officer throughout the 2010 and 2009 fiscal years. Mr. Baker subsequently resigned effective October 28, 2010;
 
  •  David C. Evans, who served as Chief Financial Officer throughout the 2010, 2009 and 2008 fiscal years;
 
  •  Barry W. Sanders, who served as Executive Vice President, Global Consumer (formerly EVP, North America) throughout the 2010, 2009 and 2008 fiscal years; and
 
  •  Claude L. Lopez, who served as Executive Vice President, International throughout the 2010, 2009 and 2008 fiscal years.
 
Each of Mr. Hagedorn, Mr. Baker, Mr. Evans, Mr. Sanders and Mr. Lopez served pursuant to an employment agreement as described below in the section captioned “EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS — Employment Agreements.”
 
Summary Compensation Table
 
The following table summarizes the total compensation paid to, awarded to or earned by each of the NEOs of the Company with respect to the 2010, 2009 and 2008 fiscal years, as applicable. The amounts shown include all forms of compensation provided to the NEOs by the Company, including amounts which may have been deferred. Since the table includes equity-based compensation costs and changes in the actuarial present value of the NEOs’ accumulated pension benefits, the total compensation amounts may be greater than the compensation that actually was paid to the NEOs during each of the fiscal years.
 
Summary Compensation Table for 2010 Fiscal Year
 
                                                                         
                            Change in
       
                            Pension Value
       
                            and
       
                            Non-Qualified
       
                        Non-Equity
  Deferred
       
                Stock
  Option
  Incentive Plan
  Compensation
  All Other
   
Name and Principal
      Salary
  Bonus
  Awards
  Awards
  Compensation
  Earnings
  Compensation
  Total
Position
  Year   ($)(1)   ($)   ($)(7)   ($)(9)   ($)   ($)(13)   ($)(16)   ($)
 
James Hagedorn
    2010       1,000,000       350,000 (3)     1,560,750       1,042,589       1,302,400 (10)     25,251 (14)     766,420       6,047,410  
Chief Executive
    2009       1,000,000             1,379,105       1,570,000       2,338,000 (11)     37,811 (14)     409,186       6,734,102  
Officer and Chairman of the Board
    2008       600,000             1,266,075       1,577,221       293,340 (12)     (14)     1,011,657       4,748,293  
                                                                         
Mark R. Baker
    2010       900,000       134,066 (3)     1,281,896       855,129       879,120 (10)           574,682       4,624,893  
President and Chief Operating Officer
    2009       900,000       850,000 (4)     1,194,950       814,045       1,572,075 (11)           738,615       6,069,685  
                                                                         
David C. Evans
    2010       475,000       85,063 (3)     362,094       243,956       340,252 (10)     2,810 (15)     139,666       1,648,841  
Executive Vice President
    2009       475,000             129,900       274,750       666,330 (11)     4,096 (15)     92,871       1,642,947  
and Chief Financial
Officer
    2008       440,000             232,560       309,499       138,182 (12)     (15)     57,361       1,177,602  
                                                                         
Barry W. Sanders
    2010       475,000       104,627 (3)     362,094 (8)     243,956       340,252 (10)           147,419       1,673,348  
Executive Vice President,
    2009       475,000             980,125 (8)     219,800       694,545 (11)           119,190       2,488,660  
Global Consumer
    2008       400,000       125,000 (5)     643,900 (8)     247,599       125,620 (12)           49,337       1,591,456  
                                                                         
Claude L. Lopez
    2010       407,552 (2)     86,122 (3)     208,100       141,237       344,487 (10)           339,491       1,526,989  
Executive Vice President,
    2009       437,881 (2)     31,002 (6)     1,087,600       157,000       722,036 (11)           115,652       2,551,171  
International
    2008       420,802 (2)           116,280       185,699       154,395 (12)           155,571       1,032,747  
 
 
(1) Reflects the amount of base salary received by each NEO for the fiscal year.


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(2) Mr. Lopez, a French citizen, is paid in Euros. The amounts shown reflect the base salary amount received with respect to each fiscal year, converted to U.S. Dollars at the same exchange rate used for financial accounting purposes as of the end of each respective fiscal year. The applicable exchange rates were 1.3626 USD per Euro with respect to the 2010 fiscal year, 1.464 USD per Euro with respect to the 2009 fiscal year and 1.4069 USD per Euro with respect to the 2008 fiscal year.
 
(3) Reflects the “discretionary” portion of the 2010 fiscal year EIP payout for each NEO. This amount was based on an assessment of their individual performance for the 2010 fiscal year. For Mr. Baker, Mr. Evans, Mr. Sanders and Mr. Lopez, this amount was awarded at the discretion of Mr. Hagedorn, in his capacity as the CEO, subject to approval by the Compensation Committee. Mr. Hagedorn had no discretionary authority with respect to his own annual incentive payout under the EIP — only the Compensation Committee could award a discretionary EIP payout to Mr. Hagedorn. For the 2010 fiscal year, 80% of the total weighted payout for the key management team that reports to the CEO was determined based directly on achievement of the performance metrics under the EIP, with the remaining 20% placed into a pool to be awarded as described above. Each NEO could earn more or less than 20% of the total weighted payout based on the NEO’s individual performance for the 2010 fiscal year. The maximum discretionary amount that could be awarded to the NEOs in the aggregate, however, was limited by the size of the discretionary pool.
 
(4) Reflects the one-time transition bonus that was paid to Mr. Baker as contemplated by the terms of his employment agreement.
 
(5) Reflects a special discretionary bonus award approved by the Compensation Committee for retention purposes and in recognition of Mr. Sanders’ service during the 2008 fiscal year.
 
(6) Reflects lump-sum bonus payment of 21,176 Euros received by Mr. Lopez in lieu of a merit increase for the 2009 fiscal year. This amount was converted to U.S. Dollars at an exchange rate of 1.464 USD per Euro, which is the same exchange rate used for financial reporting purposes as of September 30, 2009.
 
(7) Except with respect to Mr. Sanders, reflects the aggregate grant date value of restricted stock awards or RSUs granted to each NEO during the 2010, 2009 and 2008 fiscal years. The value of the restricted stock awards or RSUs is determined using the fair market value of the underlying Common Shares on the date of the grant, computed in accordance with the equity compensation accounting provisions of FASB ASC Topic 718. Pursuant to applicable SEC Rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions.
 
(8) Reflects the aggregate grant date value of restricted stock awards, RSUs or performance share awards granted to Mr. Sanders during the 2010, 2009 and 2008 fiscal years. The value of the restricted stock awards or RSUs is determined using the fair market value of the underlying Common Shares on the date of the grant, computed in accordance with the equity compensation accounting provisions of FASB ASC Topic 718. Pursuant to applicable SEC Rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. The value of the performance share award with respect to the 2009 and 2010 fiscal year performance periods (10,000 and 20,000 shares respectively) is determined using the fair market value of the underlying Common Shares on December 22, 2008, the date the Compensation Committee approved the performance criteria with respect to the 2009 and 2010 fiscal year performance periods. The value of the performance share awards with respect to the 2008 fiscal year performance period (10,000 shares) is determined using the fair market value of the underlying common shares on October 30, 2007, the date the Compensation Committee approved performance criteria with respect to the 2008 performance period.
 
(9) Reflects the aggregate grant date value of with respect to NSOs granted to each NEO during the 2010, 2009 and 2008 fiscal years. The value of the NSO awards is determined using a binomial option valuation on the date of the grant, computed in accordance with the equity compensation accounting provisions of FASB ASC Topic 718. Pursuant to applicable SEC Rules, the amount shown excludes the impact of estimated forfeitures related to service-based vesting conditions. Assumptions used in the calculation of the amounts shown are included in Note 12 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the 2010 fiscal year, in Note 12 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the 2009


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fiscal year and in Note 12 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the 2008 fiscal year.
 
(10) Reflects the “non-discretionary” portion of the 2010 fiscal year EIP payout for each NEO. This amount represents 80% of the total weighted payout calculated based on the performance results under the EIP for the 2010 fiscal year. The amount shown for Mr. Lopez, who is paid in Euros, is converted to U.S. Dollars at an exchange rate of 1.3626 USD per Euro, which is the same exchange rate used for financial accounting purposes as of September 30, 2010.
 
(11) Reflects the EIP payout calculated for the 2009 fiscal year for each NEO. The amount shown for Mr. Lopez, who is paid in Euros, is converted to U.S. Dollars at an exchange rate of 1.464 USD per Euro, which is the same exchange rate used for financial accounting purposes as of September 30, 2009.
 
(12) Reflects the Supplemental Incentive Plan (SIP) payout calculated for the 2008 fiscal year for each NEO. The amount shown for Mr. Lopez, who is paid in Euros, is converted to U.S. Dollars at an exchange rate of 1.4069 USD per Euro, which is the same exchange rate used for financial accounting purposes as of September 30, 2008. The SIP was the annual short-term incentive plan for the 2008 fiscal year.
 
(13) Participant account balances in the ERP, a non-qualified deferred compensation plan, are credited to one or more benchmarked funds which are substantially consistent with the investment options permitted under the RSP. Accordingly, there were no above-market or preferential earnings on amounts deferred under the ERP for any of the NEOs for the 2010, 2009 or 2008 fiscal years.
 
(14) For Mr. Hagedorn, the actuarial present value of the accumulated benefit under both the Associates’ Pension Plan and the Excess Pension Plan increased by $25,251 with respect to the 2010 fiscal year, 37,811 with respect to the 2009 fiscal year, and decreased by $28,906 with respect to the 2008 fiscal year (and therefore is not reflected in this column for the 2008 fiscal year pursuant to SEC Rules). Both plans were frozen as of December 31, 1997; therefore, no service credits have been earned since that date by Mr. Hagedorn.
 
(15) For Mr. Evans, the actuarial present value of the accumulated benefit under the Associates’ Pension Plan increased by $2,810 with respect to the 2010 fiscal year, increased by $4,096 with respect to the 2009 fiscal year, and decreased by $3,567 with respect to the 2008 fiscal year (and therefore is not reflected in this column for the 2008 fiscal year pursuant to SEC Rules). The Associates’ Pension Plan was frozen as of December 31, 1997; therefore, no service credits have been earned since that date by Mr. Evans.
 
(16) The amounts reported in this column consist of amounts provided to each NEO with respect to: (a) automobile perquisites, (b) amounts contributed by the Company to defined contribution and non-qualified deferred compensation plans, (c) tax gross-ups, (d) Common Shares purchased under the Discounted Stock Purchase Plan, (e) annual financial planning services, (f) commuting and other personal use of Company aircraft, (g) deferred dividends on restricted stock/RSUs, (h) physical examinations and (i) other miscellaneous perquisites, all of which are detailed in the table captioned “All Other Compensation (Supplements Summary Compensation Table)” set forth below.


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All Other Compensation Table (Supplements Summary Compensation Table)
 
The following table shows the detail for the column captioned “All Other Compensation” of the Summary Compensation Table for 2010 Fiscal Year:
 
All Other Compensation (Supplements Summary Compensation Table)
 
                                                         
        Auto
  Defined
  Deferred
           
        Perquisites
  Contribution
  Compensation
  Tax Gross-up
       
Name
  Year   ($)(1)   Plans ($)(3)   Plans ($)(4)   Payments ($)   Other ($)   Total ($)
 
James Hagedorn
    2010       12,000       18,532       153,650             582,238 (8)     766,420  
      2009       12,000       18,532       72,134       4,696 (6)     301,824 (9)     409,186  
      2008       12,000       17,380       34,548       132,770 (6)     814,959 (10)     1,011,657  
Mark R. Baker
    2010       14,000       18,532       104,133             438,017 (11)     574,682  
      2009       14,000       26,712       51,000       18,060 (6)     628,843 (12)     738,615  
David C. Evans
    2010       12,000       16,500       45,353             65,813 (13)     139,666  
      2009       12,000       18,232       23,927 (5)           38,712 (14)     92,871  
      2008       12,000       17,080       19,533       1,160 (7)     7,588 (15)     57,361  
Barry W. Sanders
    2010       12,000       16,649       48,065             70,705 (16)     147,419  
      2009       12,000       15,732       30,308 (5)     1,540 (6)     59,610 (17)     119,190  
      2008       12,000       16,180       16,879             4,278 (18)     49,337  
Claude L. Lopez
    2010       6,365 (2)                       333,126 (19)     339,491  
      2009       6,838 (2)                       108,814 (20)     115,652  
      2008       6,466 (2)                       149,105 (21)     155,571  
 
 
(1) Except with respect to Mr. Lopez, reflects the monthly automobile allowance provided to each of the NEOs for the 2010, 2009 and 2008 fiscal years, as appropriate.
 
(2) Reflects the annual lease value of a Company-owned vehicle made available to Mr. Lopez for the 2010, 2009 and 2008 fiscal years for both business and personal usage. The amount was determined in Euros and converted to U.S. dollars at an exchange rate of 1.3626 USD per Euro with respect to the 2010 fiscal year, 1.464 USD per Euro with respect to the 2009 fiscal year and 1.4069 USD per Euro with respect to the 2008 fiscal year, which are the same exchange rates used for financial accounting purposes as of the last day of the respective fiscal years.
 
(3) Reflects the Company matching and base retirement contributions made in the 2010, 2009, and 2008 fiscal years, as appropriate, under the RSP on behalf of each NEO. Eligible participants may contribute up to 75% of eligible earnings on a before-tax and/or after-tax basis through payroll deductions up to the specified statutory limits under the IRC. The Company matches the total contributions at 100% for the first 3% of eligible earnings that is contributed to the RSP and 50% for the next 2% of eligible earnings contributed to the RSP (within the specified statutory limitations). The matching contributions, and any earnings on them, are immediately 100% vested. Mr. Lopez, a French citizen, does not participate in the RSP.
 
The Company also makes a base retirement contribution in an amount equal to 2% of eligible earnings for all eligible associates, whether or not they choose to contribute to the RSP. This amount increases to 4% once an associate’s eligible earnings reach 50% of the Social Security wage base. The base retirement contributions, and any earnings on them, vest once an associate has reached three years of service with the Company.
 
(4) Reflects the amounts of all Company contributions into the ERP for each NEO. The ERP provides executives, including the NEOs, the opportunity to: (a) defer compensation above the specified statutory limits applicable to the RSP and (b) defer compensation with respect to any Performance Award (as defined in the ERP) or other bonus awarded to such executives. Additional details with respect to non-qualified deferred compensation provided for under the ERP are shown in the table captioned “Non-Qualified Deferred Compensation for 2010 Fiscal Year” and the accompanying narrative. Mr. Lopez, a French citizen, does not participate in the ERP.


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(5) The amounts reported in this column for Mr. Evans and Mr. Sanders do not include the $1.0 million Company contribution made to the ERP in respect of the retention awards granted on November 4, 2008. As contemplated by applicable SEC Rules, since the retention awards are subject to a three-year vesting period, the Company’s contribution to the ERP in respect of each retention award will not be included in the Summary Compensation Table or the table captioned “All Other Compensation (Supplements Summary Compensation Table)” until the year in which the retention award is earned (i.e., until the award is vested).
 
(6) For Mr. Hagedorn, reflects estimated tax gross-up payments with respect to aircraft usage and commuting expenses for the 2009 and 2008 fiscal years, as appropriate. Reflects gross-up amount of $17,048 for Mr. Baker associated with the Company-paid commuting perquisite that was provided in connection with his relocation. Also reflects tax gross-up for Mr. Baker and Mr. Sanders of $1,012 and $1,540, respectively, in connection with a Company-sponsored promotional activity. The Company no longer provides gross-up payments to the NEOs with respect to perquisites.
 
(7) Reflects tax gross-up payments with respect to Company-paid financial-planning services. The Company no longer provides gross-up payments to the NEOs with respect to perquisites.
 
(8) Mr. Hagedorn realized additional compensation for the 2010 fiscal year of $4,000 as a result of his election to receive an opt-out payment in lieu of receiving Company-paid financial planning services; $1,560 associated with the value of a Company-paid physical examination; and $2,665 as a result of purchasing Common Shares at a 10% discount from the then current market price through his participation in the Discounted Stock Purchase Plan. Mr. Hagedorn also received a deferred dividend of $334,013 (including $19,563 in interest) related to an award covering 33,100 shares of restricted stock which was granted on October 11, 2006 and vested on October 11, 2009.
 
Amount also reflects the compensatory commuting allowance of $240,000 which was provided to Mr. Hagedorn in equal monthly installments during the 2010 fiscal year. For safety and security reasons, the Board-approved CEO/COO Travel Guidelines (the “Travel Guidelines”) provide that Mr. Hagedorn may use either personal aircraft or Company aircraft for commuting purposes and the commuting allowance is intended to offset the annual costs associated with their compliance with the Travel Guidelines. During the 2010 fiscal year, certain members of Mr. Hagedorn’s family were passengers on a business-related flight on Company aircraft. There was no incremental cost to the Company associated with this perquisite. Accordingly, there was no reportable perquisite amount.
 
(9) As a result of his participation in the Discounted Stock Purchase Plan for the 2009 fiscal year, Mr. Hagedorn realized additional compensation of $2,665, associated with purchasing Common Shares at a 10% discount from the then current market price. Mr. Hagedorn also elected to receive an opt-out payment in lieu of receiving Company-paid financial planning services, which increased his compensation by $8,000. Of this amount, $4,000 was attributable to the 2008 calendar year and $4,000 was attributable to the 2009 calendar year. Both payments were received by Mr. Hagedorn in the 2009 fiscal year. Mr. Hagedorn also received a deferred dividend of $284,166 (including $12,466 in interest) related to an award covering 28,600 shares of restricted stock which was granted on October 12, 2005 and vested on October 12, 2008.
 
The amount shown also includes $2,268 representing the cost of Mr. Hagedorn’s personal use of Company aircraft, excluding the cost of commuting, as well as $4,725 for the costs of commuting on Company aircraft. Amounts were calculated according to applicable SEC guidance which measures the aggregate incremental cost to the Company of personal use. The reported aggregate incremental cost of commuting on Company aircraft was based on the direct operating costs associated with operating a flight from origination to destination, such as fuel, oil, landing fees, crew hotels and meals, on-board catering, trip-related maintenance, and trip-related hangar/parking costs. Since Company aircraft are used primarily for business travel, the calculation method excludes the fixed costs which do not change based on usage, such as pilots’ salaries, the purchase cost of Company aircraft and the cost of maintenance not related to trips. The limited commuting perquisite was approved by the Compensation Committee for the 2009 fiscal year for certain commuting flights that Mr. Hagedorn incurred on Company aircraft prior to executing the time sharing agreement in December 2008.


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(10) As a result of his participation in the Discounted Stock Purchase Plan for the 2008 fiscal year, Mr. Hagedorn realized additional compensation of $2,667, associated with purchasing Common Shares at a 10% discount from the then current market price. Mr. Hagedorn also received a Company-paid physical examination which increased his compensation by $4,703 for the 2008 fiscal year. Mr. Hagedorn also received a deferred dividend of $252,381 (including $6,331 in interest) related to an award covering 26,600 shares of restricted stock which was granted on December 1, 2004 and vested on December 1, 2007.
 
The amount shown also includes $162,587 representing the cost of Mr. Hagedorn’s personal use of Company aircraft, excluding the cost of commuting as well as $76,506 for the costs of commuting on Company aircraft. Amounts were calculated according to applicable SEC guidance which measures the aggregate incremental cost to the Company of personal use as described in footnote (9) above. This amount also includes $316,115 reimbursable directly to Mr. Hagedorn for a portion of the direct operating costs associated with commuting in his personal aircraft.
 
(11) Reflects the compensatory commuting allowance of $420,000 which was provided to Mr. Baker in equal monthly installments during the 2010 fiscal year. For safety and security reasons, the Travel Guidelines provide that Mr. Baker may use either personal aircraft or Company aircraft for commuting purposes and the commuting allowance is intended to offset the annual costs associated with his compliance with the Travel Guidelines. During the 2010 fiscal year, certain members of Mr. Baker’s family were passengers on a business-related flight on Company aircraft. There was no incremental cost to the Company associated with this perquisite. Accordingly, there was no reportable perquisite amount.
 
Mr. Baker realized additional compensation for the 2010 fiscal year of $4,000 as a result of his election to receive an opt-out payment in lieu of receiving Company-paid financial planning services. Mr. Baker also received a deferred dividend of $13,613 (including $113 in interest) related to 12,000 shares of restricted stock that vested on September 30, 2010. Mr. Baker also received a Company-paid physical examination which increased his compensation by $404.
 
(12) Reflects a one-time lump-sum relocation bonus of $500,000 paid to Mr. Baker in connection with his relocation to the Central Ohio area as contemplated by his employment agreement. Mr. Baker elected to receive the opt-out payment in lieu of receiving Company-paid financial planning services, which increased his compensation by $8,000 for the 2009 fiscal year. Of this amount, $4,000 was attributable to the opt-out payment for the 2008 calendar year and $4,000 was attributable to the opt-out payment for the 2009 calendar year. Both payments were received by Mr. Baker during the 2009 fiscal year. Mr. Baker also received a deferred dividend of $6,038 (including $38 in interest) related to 12,000 shares of restricted stock that vested on September 30, 2009.
 
Amount also reflects $114,805 for the costs of commuting on Company aircraft, calculated according to applicable SEC guidance which measures the aggregate incremental cost to the Company of personal use as described in footnote (9) above. The limited commuting perquisite was approved by the Compensation Committee for the 2009 fiscal year as part of the terms of Mr. Baker’s employment agreement.
 
(13) The value of Company-paid financial planning services paid for Mr. Evans in the 2009 calendar year increased his compensation by $4,179 for the 2010 fiscal year. In addition, Mr. Evans realized additional compensation for the 2010 fiscal year of $4,000 as a result of his election to receive an opt-out payment in lieu of receiving Company-paid financial planning services and $1,125 associated with the value of a Company-paid physical examination. Mr. Evans also received a deferred dividend of $56,509 (including $3,309 in interest) related to an award covering 5,600 shares of restricted stock which was granted on October 11, 2006 and vested on October 11, 2009. During the 2010 fiscal year, certain members of Mr. Evans’ family were passengers on a business-related flight on Company aircraft. There was no incremental cost to the Company associated with this perquisite. Accordingly, there was no reportable perquisite amount.
 
(14) The value of Company-paid financial planning services for Mr. Evans increased his compensation by $8,904 for the 2009 fiscal year. Mr. Evans also received a deferred dividend of $29,808 (including $1,308 in interest) related to an award covering 3,000 shares of restricted stock which was granted on October 12, 2005 and vested on October 12, 2008. During the 2009 fiscal year, certain members of


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Mr. Evans’ family were passengers on a business-related flight on Company aircraft. There was no incremental cost to the Company associated with this perquisite. Accordingly, there was no reportable perquisite amount.
 
(15) The value of Company-paid financial planning services for Mr. Evans increased his compensation by $7,588 for the 2008 fiscal year.
 
(16) Mr. Sanders realized additional compensation for the 2010 fiscal year of $4,000 as a result of his election to receive an opt-out payment in lieu of receiving Company-paid financial planning services and $333 as a result of purchasing Common Shares at a 10% discount from the then current market price through his participation in the Discounted Stock Purchase Plan. Mr. Sanders also received a deferred dividend of $33,300 (including $1,950 in interest) related to an award covering 3,300 shares of restricted stock which was granted on October 11, 2006 and vested on October 11, 2009 and a deferred dividend of $33,072 (including $572 in interest) related to the performance share award for the 2010 fiscal year covering 20,000 performance shares which were granted on October 30, 2007 and vested on September 30, 2010.
 
(17) As a result of his participation in the Discounted Stock Purchase Plan for the 2009 fiscal year, Mr. Sanders realized additional compensation of $333, associated with purchasing Common Shares at a 10% discount from the then current market price. Mr. Sanders also elected to receive the opt-out payment in lieu of receiving Company-paid financial planning services, which increased his compensation by $4,000 for the 2009 fiscal year. Mr. Sanders also received a deferred dividend of $41,731 (including $1,831 in interest) related to an award covering 4,200 shares of restricted stock which was granted on October 12, 2005 and vested on October 12, 2008 and a deferred dividend of $10,190 (including $190 in interest) related to the performance share award for the 2009 fiscal year covering 10,000 performance shares which were granted on October 30, 2007 and vested on September 30, 2009. Amount also reflects $3,356 in connection with the cost of a Company-sponsored promotional activity.
 
(18) As a result of his participation in the Discounted Stock Purchase Plan for the 2008 fiscal year, Mr. Sanders realized additional compensation of $278, associated with purchasing Common Shares at a 10% discount from the then current market price. Mr. Sanders also elected to receive the opt-out payment in lieu of receiving Company-paid financial planning services, which increased his compensation by $4,000 for the 2008 fiscal year.
 
(19) Reflects an “expatriation bonus” of 53,838 Euros and 3,260 Euros received by Mr. Lopez in lieu of Company-paid financial planning services. Since Mr. Lopez’ French employment contract was replaced and superseded by a U.S. employment agreement on October 1, 2010, the Company made a lump sum payment of 168,125 Euros to Mr. Lopez representing the accrued but untaken holiday/vacation entitlement that remained under his French employment contract. All amounts were paid to Mr. Lopez in Euros and have been converted to U.S. dollars at an exchange rate of 1.3626 USD per Euro, which is the same exchange rate used for financial accounting purposes as of September 30, 2010. Mr. Lopez also received a deferred dividend of $26,237 (including $1,537 in interest) related to an award covering 2,600 shares of restricted stock which was granted on October 11, 2006 and vested on October 11, 2009. During the 2010 fiscal year, certain members of Mr. Lopez’ family were passengers on a business-related flight on Company aircraft. There was no incremental cost to the Company associated with this perquisite. Accordingly, there was no reportable perquisite amount.
 
(20) Reflects an “expatriation bonus” of 53,838 Euros and 2,843 Euros received by Mr. Lopez in lieu of Company-paid financial planning services. All amounts were paid to Mr. Lopez in Euros and have been converted to U.S. dollars at an exchange rate of 1.464 USD per Euro, which is the same exchange rate used for financial accounting purposes as of September 30, 2009. Mr. Lopez also received a deferred dividend of $25,833 (including $1,133 in interest) related to an award covering 2,600 shares of restricted stock which was granted on October 12, 2005 and vested on October 12, 2008.
 
(21) Reflects an “expatriation bonus” of 53,838 Euros, a holidays buy back bonus of 49,300 Euros and 2,843 Euros received by Mr. Lopez in lieu of Company-paid financial planning services. All amounts were paid to Mr. Lopez in Euros and have been converted to U.S. dollars at an exchange rate of 1.4069 USD per Euro, which is the same exchange rate used for financial accounting purposes as of September 30, 2008.


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Grants of Plan-Based Awards Table
 
The following table sets forth information concerning equity-based awards made to the NEOs during the 2010 fiscal year as well as the range of potential payouts under the EIP, a non-equity incentive plan, with respect to performance goals for the 2010 fiscal year.
 
Grants of Plan-Based Awards for 2010 Fiscal Year
 
                                                                                 
                            All Other
  All Other
       
                            Stock
  Option
       
                            Awards:
  Awards:
  Exercise
  Grant
                            Number of
  Number of
  or Base
  Date Fair
        Estimated Future Payouts Under
  Estimated Future Payouts Under
  Shares of
  Securities
  Price of
  Value of
        Non-Equity Incentive Plan Awards(1)   Equity Incentive Plan Awards   Stock or
  Underlying
  Option
  Stock and
    Grant
  Threshold
  Target
  Maximum
  Threshold
  Maximum
  Units
  Options
  Awards
  Option
Name
  Date   ($)   ($)   ($)   (Common Shares)   (Common Shares)   (#)(2)   (#)(3)   ($/Sh)   Awards(4)
 
James Hagedorn
    1/20/2010                                               37,500                       1,560,750  
      1/20/2010                                                       81,200       41.62       1,042,590  
              500,000       1,000,000       2,000,000                                              
Mark R. Baker
    1/20/2010                                               30,800                       1,281,896  
      1/20/2010                                                       66,600       41.62       855,129  
              337,500       675,000       1,350,000                                              
David C. Evans
    1/20/2010                                               8,700                       362,094  
      1/20/2010                                                       19,000       41.62       243,956  
              130,625       261,250       522,500                                              
Barry W. Sanders
    1/20/2010                                               8,700                       362,094  
      1/20/2010                                                       19,000       41.62       243,956  
              130,625       261,250       522,500                                              
Claude L. Lopez
    1/20/2010                                               5,000                       208,100  
      1/20/2010                                                       11,000       41.62       141,238  
              132,251       264,502       529,004                                              
 
 
(1) These amounts are the estimated potential threshold (minimum), target and maximum incentive award payouts that each of the NEOs was eligible to receive based on performance goals set pursuant to the EIP for the 2010 fiscal year. A detailed description of the performance goals and potential incentive award payouts under the EIP for threshold (minimum), target and maximum performance levels are discussed in the section captioned “Elements of Executive Compensation — Annual Cash Incentive Compensation Plan (short-term compensation element)” within the CD&A.
 
(2) Reflects the number of RSUs awarded under the 2006 Plan on January 20, 2010 to each of the NEOs. In general, the RSUs, including cash-based dividend equivalents, vest on the third anniversary of the grant date, but are subject to earlier vesting in the event of death or disability of the NEO or a change in control of the Company in certain circumstances (as further explained below under “PROPOSAL NUMBER 3 — APPROVAL OF MATERIAL TERMS OF THE PERFORMANCE CRITERIA UNDER THE SCOTTS MIRACLE-GRO COMPANY AMENDED AND RESTATED 2006 LONG-TERM INCENTIVE PLAN — Summary of Operation of the Plan — Change in Control”), the RSUs are otherwise subject to forfeiture in the event of termination prior to the third anniversary of the grant. Subject to the terms of the 2006 Plan, whole vested RSUs will be settled in Common Shares and fractional RSUs will be settled in cash as soon as administratively practicable, but in no event later than 90 days, following the earliest to occur of: (i) termination; (ii) death; (iii) disability; or (iv) the third anniversary of the grant date. Until the RSUs are settled, the NEO has none of the rights of a shareholder with respect to the Common Shares underlying the RSUs other than with respect to the dividend equivalents.
 
(3) Reflects the number of NSOs granted on January 20, 2010 to each of the NEOs, that are subject to a three-year cliff vesting schedule and have a ten-year term. Each NSO is subject to earlier vesting in the event of death, disability or a change in control of the Company in certain circumstances (as further explained below under “PROPOSAL NUMBER 3 — APPROVAL OF MATERIAL TERMS OF THE PERFORMANCE CRITERIA UNDER THE SCOTTS MIRACLE-GRO COMPANY AMENDED AND RESTATED 2006 LONG-TERM INCENTIVE PLAN — Summary of Operation of the Plan — Change in


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Control”). All grants were made pursuant to the 2006 Plan. The 2006 Plan, which was approved by the Company’s shareholders, provides that the exercise price will be the closing price of a Common Share on NYSE on the date of the grant.
 
(4) Reflects the grant date fair value, computed in accordance with FASB ASC Topic 718, for the RSU grants and NSO grants identified in this table.
 
Outstanding Equity Awards Table
 
The following table provides information regarding outstanding equity-based awards held by the NEOs as of September 30, 2010.
 
Outstanding Equity Awards at 2010 Fiscal Year-End
 
                                                                         
          Option Awards     Stock Awards  
                                                    Equity
 
                                                    Incentive
 
                                              Equity
    Plan
 
                                              Incentive
    Awards:
 
                                              Plan
    Market or
 
                                              Awards:
    Payout
 
                                              Number of
    Value
 
                                              Unearned
    of Unearned
 
                                        Market
    Shares,
    Shares,
 
          Number of
    Number of
                Number of
    Value of
    Units or
    Units, or
 
          Securities
    Securities
                Shares or
    Shares or
    Other
    Other
 
          Underlying
    Underlying
    Option
          Units of
    Units of
    Rights
    Rights
 
          Unexercised
    Unexercised
    Exercise
    Option
    Stock
    Stock That
    That
    That Have
 
          Options/SARs (#)
    Options/SARs (#)
    Price (2)
    Expiration
    That Have
    Have Not
    Have Not
    Not
 
Name
  Grant Date     Exercisable(1)     Unexercisable(1)     ($)     Date     Not Vested (#)     Vested ($)(6)     Vested (#)     Vested ($)  
 
James Hagedorn
    10/23/2001       148,715             16.80       10/21/2011                                  
      1/30/2003       297,386 *           21.23       1/29/2013                                  
      11/19/2003       214,120 *           24.45       11/18/2013                                  
      12/1/2004       196,553             29.01       12/1/2014                                  
      10/12/2005       182,067             35.74       10/12/2015                                  
      10/11/2006       153,690             38.58       10/11/2016                                  
      11/8/2007             129,100       38.25       11/7/2017                                  
      10/8/2008             200,000       21.65       10/5/2018                                  
      1/20/2010             81,200       41.62       1/17/2020                                  
                                              134,300 (3)     6,947,339              
Mark R. Baker
    1/26/2007       16,683             44.69       1/26/2017                                  
      10/8/2008             103,700       21.65       10/5/2018                                  
      1/20/2010             66,600       41.62       1/17/2020                                  
                                              62,617 (4)     3,239,177              
David C. Evans
    10/12/2005       18,801             35.74       10/12/2015                                  
      10/11/2006       26,190             38.58       10/11/2016                                  
      11/7/2007             25,000       38.76       11/6/2017                                  
      10/8/2008             35,000       21.65       10/5/2018                                  
      1/20/2010             19,000       41.62       1/17/2010                                  
                                              20,700 (5)     1,070,811              
Barry W. Sanders
    10/12/2005       26,893             35.74       10/12/2015                                  
      10/11/2006       15,476             38.58       10/11/2016                                  
      11/7/2007             20,000       38.76       11/6/2017                                  
      10/8/2008             28,000       21.65       10/5/2018                                  
      1/20/2010             19,000       41.62       1/17/2020                                  
                                              40,200 (5)     2,079,546              
Claude L. Lopez
    12/1/2004       23,795             29.01       12/1/2014                                  
      10/12/2005       16,183             35.74       10/12/2015                                  
      10/11/2006       15,476             38.58       10/11/2016                                  
      11/7/2007             15,000       38.76       11/6/2017                                  
      10/8/20008             20,000       21.65       10/5/2018                                  
      1/20/2010             11,000       41.62       1/17/2020                                  
                                              48,400 (5)     2,503,732              
 
 
(1) Those awards shown with an asterisk (*) are SARs. All of the NSOs/SARs shown in these two columns have a vesting date that is the third anniversary of the grant date shown in the column captioned “Grant Date,” with the exception of the October 8, 2008 grant to Mr. Baker that were scheduled to vest on


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September 30, 2011 but subsequently vested on October 28, 2010 in connection with Mr. Baker’s resignation and an expiration date that is 10 years from the date of grant.
 
(2) Each NSO or SAR was granted with an exercise price equal to the closing price of one Common Share on NYSE on the date of grant. The amounts in this column show the applicable exercise prices.
 
(3) Reflects 33,100 shares of restricted stock granted on November 8, 2007 that vested on November 8, 2010; 63,700 RSUs granted on October 8, 2008, that are subject to vesting on October 8, 2011 and 37,500 RSUs granted on January 20, 2010 that are subject to vesting on January 20, 2013.
 
(4) Reflects 12,000 shares of restricted stock granted on October 1, 2008 that are subject to vesting on September 30, 2011; 16,600 unvested RSUs granted on October 8, 2008 that are subject to vesting on September 30, 2011; 30,800 unvested RSUs granted on January 20, 2010 that are subject to vesting on January 20, 2013 and 3,217 DSUs (granted in respect of Mr. Baker’s service as a non-employee director in prior years) that were scheduled to vest on February 4, 2011 but subsequently vested on October 28, 2010 in connection with Mr. Baker’s resignation.
 
(5) Reflects the aggregate number of shares of restricted stock or RSUs for each NEO other than Mr. Hagedorn and Mr. Baker that have not vested as of September 30, 2010. All such shares were to vest on November 7, 2010 (and subsequently vested), October 8, 2011 or January 20, 2013, based on the original grant date of the respective award. The amount shown for Mr. Sanders includes 20,000 performance shares that were earned with respect to the 2010 fiscal year but were not settled until November 10, 2010.
 
(6) Reflects the market value of the shares of restricted stock or RSUs that had not vested as of September 30, 2010. The market value is calculated by multiplying the number of unvested shares of restricted stock or RSUs by $51.73, which was the closing price of the Common Shares on September 30, 2010, the last trading day of the 2010 fiscal year.
 
Option Exercises and Stock Vested Table
 
The following table provides information concerning the aggregate amounts realized or received in connection with the exercise or vesting of equity-based awards for each NEO during the 2010 fiscal year.
 
Option Exercises and Stock Vested for 2010 Fiscal Year
 
                                 
    Option Awards     Stock Awards  
    Number of Shares
    Value Realized
    Number of Shares
       
    Acquired on
    on Exercise
    Acquired on
    Value Realized
 
Name
  Exercise (#)(1)     ($)(2)     Vesting (#)     on Vesting ($)  
 
James Hagedorn
    291,466       7,522,504       33,100 (3)     1,416,349 (5)
Mark R. Baker
    16,659       90,911       12,000 (3)     620,760 (5)
David C. Evans
    37,344       772,599       5,600 (3)     239,624 (5)
Barry W. Sanders
    52,344       1,162,771       23,300 (4)     1,147,607 (6)
Claude L. Lopez
                2,600 (3)     111,254 (5)
 
 
 
(1) Reflects the number of Common Shares acquired upon exercise of NSOs during the 2010 fiscal year.
 
(2) Reflects the value realized upon exercise of NSOs and/or SARs during the 2010 fiscal year, calculated based on the excess of the closing price of one Common Share on NYSE on the date of exercise over the exercise price of the NSO, multiplied by the number of Common Shares acquired upon exercise. The amounts reported for Mr. Baker relate to NSOs granted on January 27, 2006 when Mr. Baker served in the capacity as a non-employee director.
 
(3) Reflects the number of Common Shares acquired upon vesting of shares of restricted stock during the 2009 fiscal year.
 
(4) Reflects 3,300 Common Shares acquired upon vesting of shares of restricted stock during the 2010 fiscal year, plus 20,000 performance shares earned with respect to the 2010 fiscal year. A detailed description of the performance shares and the performance criteria for the 2010 fiscal year is provided in the section


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captioned “Our Compensation Practices — Setting Compensation Levels for Other NEOs — Performance Shares” within the CD&A.
 
(5) Reflects the value realized upon the vesting of shares of restricted stock during the 2010 fiscal year, calculated by multiplying the number of Common Shares underlying the vested shares of restricted stock by the closing price of the underlying Common Shares on NYSE on the vesting date.
 
(6) Reflects the value realized upon the vesting of shares of restricted stock during the 2010 fiscal year, calculated by multiplying the number of Common Shares underlying the vested 3,300 shares of restricted stock by the closing price of the Common Shares on NYSE on the vesting date. Also reflects the value realized upon the settlement of 20,000 performance shares attributed to the 2010 fiscal year, calculated by multiplying the number of Common Shares underlying the settled performance shares by the closing price of the underlying Common Shares on NYSE on the November 10, 2010 settlement date.
 
Pension Benefits Table
 
Scotts LLC maintains the Associates’ Pension Plan, a tax-qualified, non-contributory defined benefit pension plan. Eligibility for and accruals under the Associates’ Pension Plan were frozen as of December 31, 1997. Monthly benefits under the Associates’ Pension Plan upon normal retirement (age 65) are determined under the following formula:
 
(a)(i) 1.5% of the individual’s highest average annual compensation for 60 consecutive months during the ten-year period ending December 31, 1997; times
 
   (ii) years of benefit service through December 31, 1997; reduced by
 
(b)(i) 1.25% of the individual’s primary Social Security benefit (as of December 31, 1997); times
 
 (ii) years of benefit service through December 31, 1997
 
Compensation includes all gross earnings plus 401(k) contributions and salary reduction contributions for welfare benefits (such as medical, dental, vision and flexible spending accounts), but does not include earnings in connection with foreign service, the value of a Company car or separation or other special allowances. An individual’s primary Social Security benefit is based on the Social Security Act as in effect on December 31, 1997, and assumes constant compensation through age 65 and that the individual will not retire earlier than age 65. No more than 40 years of benefit service are taken into account.
 
Benefits under the Associates’ Pension Plan are supplemented by benefits under the Excess Pension Plan for Mr. Hagedorn. The Excess Pension Plan was established October 1, 1993 and was frozen as of December 31, 1997. The Excess Pension Plan provides additional benefits to participants in the Associates’ Pension Plan whose benefits are reduced by limitations imposed under IRC § 415 and § 401(a)(17). Under the Excess Pension Plan, executive officers and certain key employees participating in the Excess Pension Plan will receive, at the time and in the same form as benefits are paid under the Associates’ Pension Plan, additional monthly benefits in an amount which, when added to the benefits paid to each participant under the Associates’ Pension Plan, will equal the benefit amount such participant would have earned but for the limitations imposed by the IRC.


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The following table shows information related to the participation in the Associates’ Pension Plan and the Excess Pension Plan by James Hagedorn and David C. Evans, the only two NEOs who participate in either of the plans. Since both the Associates’ Pension Plan and the Excess Pension Plan were frozen as of December 31, 1997, no further years of credited service have been or may be earned after that date.
 
Pension Benefits at 2010 Fiscal Year-End
 
                     
        Number of
    Present Value
 
        Years Credited
    of Accumulated
 
Name
  Plan Name   Service (#)(1)     Benefit ($)(2)  
 
James Hagedorn
  The Scotts Company LLC Associates’ Pension Plan     9.9167       148,571  
    The Scotts Company LLC Excess Benefit Plan For Non Grandfathered Associates     2.0000       28,358  
    Total             176,929  
Mark R. Baker
  n/a     n/a       n/a  
David C. Evans
  The Scotts Company LLC Associates’ Pension Plan     3.0833       15,927  
Barry W. Sanders
  n/a     n/a       n/a  
Claude L. Lopez*
  n/a     n/a       n/a  
 
 
* During the 2010 fiscal year, the Company did not contribute to a private or any other supplementary pension plan on behalf of Mr. Lopez. However, he is entitled to certain benefits as provided under French law and/or inter-professional, national collective agreement.
 
(1) The number of years of credited service shown for each participant is the service earned under the respective plan. Both plans were frozen as of December 31, 1997; therefore, no service credit may be earned after that date. Mr. Hagedorn entered the Excess Pension Plan on January 1, 1996.
 
(2) Assumptions used in the calculation of these amounts are included in Note 9 to the Consolidated Financial Statements, included in the Company’s Annual Report on Form 10-K for the 2010 fiscal year.
 
Non-Qualified Deferred Compensation Table
 
The ERP is a non-qualified deferred compensation plan. The ERP provides executives, including the NEOs, the opportunity to: (1) defer compensation above the specified statutory limits applicable to the RSP and (2) defer compensation with respect to any Performance Award (as defined in the ERP) or other bonus awarded to such executives. The ERP is an unfunded plan and is subject to the claims of the Company’s general creditors. During the 2010 fiscal year, the ERP consisted of five parts:
 
  •  Compensation Deferral, which allows continued deferral of salary and amounts received in lieu of salary (including, but not limited to, paid time off, vacation pay, salary continuation and short-term disability benefits);
 
  •  Performance Award Deferral, which allows the deferral of up to 100% of any cash incentive compensation earned under the EIP or any other compensation plan or arrangement which constitutes performance-based compensation for purposes of IRC § 409A;
 
  •  Retention Awards, which reflect the Company’s contribution to the ERP in respect of the retention awards described in the section captioned “Elements of Executive Compensation  — Executive Retention Awards (long-term compensation element)” within the CD&A;
 
  •  Crediting of Company Matching Contributions on qualifying deferrals that could not be made to the RSP due to certain statutory limits; and
 
  •  Base Retirement Contributions which were made by the Company to the ERP once the statutory compensation cap was reached in the RSP and with respect to any qualifying deferrals to the ERP. A Base Retirement Contribution was made to the ERP regardless of whether Compensation Deferral or Performance Award Deferral elections were made under the ERP.


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Non-Qualified Deferred Compensation for 2010 Fiscal Year
 
                                         
    Executive
  Company
  Aggregate
      Aggregate
    Contributions
  Contributions
  Earnings
  Aggregate
  Balance at
    in Last Fiscal
  in Last Fiscal
  in Last Fiscal
  Withdrawals/
  Last Fiscal
Name
  Year ($)(2)   Year ($)(3)   Year ($)(5)   Distributions ($)   Year End ($)(7)(8)
 
James Hagedorn
    52,850       153,650       237,524             1,328,310  
Mark R. Baker
    17,200       104,133       12,513             196,040  
David C. Evans
    11,875       45,353 (4)     369,141 (6)           2,153,133  
Barry W. Sanders
    13,854       48,065 (4)     372,283 (6)           2,175,573  
Claude L. Lopez(1)
    n/a       n/a       n/a       n/a       n/a  
 
 
(1) Mr. Lopez is a French citizen and therefore not eligible to participate in the ERP.
 
(2) This column includes contributions to the ERP made by Mr. Hagedorn, Mr. Baker, Mr. Evans and Mr. Sanders, respectively. These amounts are also included in the “Salary” column numbers reported in the Summary Compensation Table for 2010 Fiscal Year.
 
(3) With the exception noted in footnote (4) below, these contributions are also included in the “Deferred Compensation Plans” column numbers reported in the table captioned “All Other Compensation (Supplements Summary Compensation Table).”
 
(4) The amount includes the Company’s contribution of $1.0 million on November 4, 2008 to the ERP in respect of the retention awards described in the section captioned “Elements of Executive Compensation — Executive Retention Awards (long-term compensation element)” within the CD&A. As contemplated by applicable SEC Rules, since the retention awards are subject to a three-year vesting period, the Company’s contribution to the ERP in respect of the retention awards will not be included in the Summary Compensation Table or the table captioned “All Other Compensation (Supplements Summary Compensation Table)” until the year in which the retention award is earned (i.e., until the award is vested).
 
(5) This amount represents the aggregate earnings for the 2010 fiscal year credited to each NEO’s account in accordance with the ERP. Under the terms of the ERP, each participant has the right to elect an investment fund(s) against which amounts allocated to such participant’s account under the ERP will be benchmarked. The benchmarked funds which may be chosen by a participant include a Company stock fund and mutual fund investments that are substantially consistent with the investment options permitted under the RSP. Because there are no preferential earnings, these amounts were not reflected in the Summary Compensation Table for 2009 Fiscal Year. A participant may elect to change the benchmark funds at any time; however, if the Company stock fund is elected, the participant cannot move out of that benchmark fund until the account balance is distributed.
 
(6) The amount also includes the aggregate earnings of $352,383 in respect of the retention awards attributed to the change in the value of the Company stock fund, which Mr. Evans and Mr. Sanders elected as the applicable benchmark fund. These amounts are not reflected in the Summary Compensation Table for 2010 Fiscal Year.
 
(7) This amount represents the account balance as of the end of the 2010 fiscal year. The account balances for Mr. Evans and Mr. Sanders each include $1,942,933 in respect of their retention awards that are subject to a three-year vesting period. Only the vested portion of the account balance is eligible for distribution. Distributions of vested account balances from the ERP generally begin after six months have elapsed from the earliest to occur of: (a) a participant’s separation from service, (b) death, (c) disability or (d) a specific date selected by the participant and are normally paid in either a lump sum or in annual installments over 5, 10 or 15 years, whichever the participant has elected. Distributions from the Company stock fund are made in the form of whole Common Shares, with the value of fractional Common Shares distributed in cash. Distributions from one of the mutual fund investments are made in cash in an amount equal to the number of mutual fund shares credited to the participant multiplied by the market value of those mutual fund shares.
 
(8) Includes amounts reported as compensation in the Summary Compensation Table for previous fiscal years as follows: (a) Mr. Hagedorn, $106,672; (b) Mr. Baker, $51,000; (c) Mr. Evans, $43,460; and (d) Mr. Sanders, $47,137.


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EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
 
Employment Agreements
 
In connection with the transactions contemplated by the Miracle-Gro Merger Agreement described on page 74, The Scotts Company entered into an employment agreement with James Hagedorn, the Company’s current CEO and Chairman of the Board (as amended effective October 1, 2008, the “Hagedorn Agreement”), which was subsequently assumed by Scotts LLC on March 18, 2005 as part of a corporate restructuring. The Hagedorn Agreement provides a rolling two-year term, unless either party notifies the other of its desire not to renew at least 30 days prior to the end of the first year of such two-year term. The Hagedorn Agreement provides for a minimum annual base salary of $200,000 (Mr. Hagedorn’s annual base salary was $1,000,000 for the 2010 fiscal year) and participation in the various benefit plans available to senior executive officers of the Company. Upon termination of employment by Mr. Hagedorn for “good reason” or by the Company for any reason other than “cause” (as such terms are defined in the Hagedorn Agreement), Mr. Hagedorn will be entitled to receive certain severance benefits, including a payment equal to three times the sum of his base salary then in effect plus his highest annual bonus in any of the three preceding years (which would have been three times the sum of: (a) $1,000,000 and (b) $2,338,000 based on his annual base salary as of September 30, 2010 and his annual bonuses for the fiscal years ended September 30, 2010, 2009 and 2008). Mr. Hagedorn will also be entitled to receive certain health and welfare benefits for a period of three years following such termination. Upon termination of employment for any other reason, Mr. Hagedorn or his beneficiary will be entitled to receive all unpaid amounts of base salary and benefits under the executive benefit plans in which he participated. The Hagedorn Agreement also contains confidentiality and noncompetition provisions which prevent Mr. Hagedorn from disclosing confidential information about the Company and from competing with the Company during the term of his employment therewith and, upon termination for cause or due to disability, or in the event Mr. Hagedorn terminates his employment without good reason, for an additional three years thereafter.
 
On September 10, 2008, Scotts LLC executed an employment agreement with Mark R. Baker (as amended on December 10, 2009, the “Baker Agreement”). Mr. Baker served as the Company’s President and Chief Operating Officer from October 1, 2008 until his resignation effective October 28, 2010. The Baker Agreement had an initial term of three years, commencing as of October 1, 2008. Pursuant to the terms of the Baker Agreement, Mr. Baker received an annual base salary of $900,000 and was entitled to a target annual bonus award of not less than 75% of his base salary, depending on actual business results. In addition, Mr. Baker received long-term incentive awards in both 2009 and 2010 which on the dates of grant had target values of approximately $1,200,000 and $2,460,000, respectively, and was entitled to receive a long-term incentive award in 2011 which would have had a target value of approximately $3,060,000 on the date of grant.
 
Pursuant to the Baker Agreement, Mr. Baker received a one-time transition bonus of $850,000 (less applicable taxes) and 36,000 restricted Common Shares which were granted on October 1, 2008 and were to ratably vest on September 30, 2009 (which subsequently vested), September 30, 2010 (which also subsequently vested) and September 30, 2011. Mr. Baker also received a lump-sum relocation benefit of $500,000 (less applicable taxes) and was entitled to receive an annual commuting allowance of $420,000. The Baker Agreement provided Mr. Baker with all retirement and employee benefits which Scotts LLC made available to its other executives and employees, subject to the applicable eligibility requirements of the underlying benefit arrangements, as well as an annual automobile allowance and an annual allowance for personal financial planning.
 
The Baker Agreement contained provisions for termination in the event of death or disability, which entitled Mr. Baker to: (1) his base salary (subject to an offset, in the case of disability, for any disability payments) through the effective date of termination, (2) a prorated target annual bonus award based on his target bonus opportunity for the year in which termination occurred (subject to Mr. Baker or his estate, as applicable, signing and not revoking a release within 60 days of termination) and (3) all other rights and benefits to which he had a vested right under Scotts LLC’s other plans and programs.


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The Baker Agreement also provided that in the event Mr. Baker voluntarily terminated his employment without “good reason” or was terminated for “cause” (as such terms are defined in the Baker Agreement): (1) he was entitled to receive his accrued but unpaid base salary through the effective date of termination, (2) he was entitled to receive all other benefits to which he had a vested right under Scotts LLC’s other plans and programs and (3) he would forfeit all other rights and benefits (other than vested benefits) he would otherwise have been entitled to receive under the Baker Agreement.
 
Finally, the Baker Agreement contained provisions providing relief to Mr. Baker in the event of termination by Scotts LLC without cause or voluntary termination by Mr. Baker for good reason, which generally entitled Mr. Baker to a severance payment equal to three times the sum of his annual base salary and his average bonus received over the previous three years, a prorated bonus award, a lump sum payment representing Scotts LLC’s portion of the monthly cost of his medical and dental insurance benefits as of the effective date of termination multiplied by 12, and all other benefits as to which he had a vested right. For termination by Scotts LLC without cause or voluntary termination by Mr. Baker with good reason, in each case following a change in control (as such term is defined in the Baker Agreement), the Baker Agreement provided that Mr. Baker would have received a severance payment equal to two times the sum of his annual base salary and the target bonus for the fiscal year of termination, a prorated target bonus award for the fiscal year of termination, a lump sum equivalent to 18 months of health care premiums, and all other benefits as to which he had achieved a vested right.
 
As described in more detail under the section captioned “EXECUTIVE COMPENSATION — COMPENSATION DISCUSSION AND ANALYSIS — Recent Developments,” Mr. Baker resigned as the Company’s President and Chief Operating Officer effective October 28, 2010, and on November 3, 2010, Scotts LLC executed a Separation Agreement and Release of All Claims (the “Separation Agreement”) with Mr. Baker. The Separation Agreement, which supersedes the Baker Agreement, addresses the payments and benefits to which Mr. Baker is entitled in connection with his resignation. Pursuant to the terms of the Separation Agreement, Scotts LLC provided Mr. Baker with a lump sum payment of $5,025,000 (less applicable taxes) on November 24, 2010. In addition, the vesting date for the 103,700 stock options granted to Mr. Baker on October 8, 2008, which were scheduled to vest on September 30, 2011, was changed to October 28, 2010. All other equity awards which had not vested as of October 28, 2010 were forfeited. The Separation Agreement did not supersede or nullify the Employee Confidentiality, Noncompetition, Nonsolicitation Agreement previously executed by Mr. Baker on September 29, 2008, which agreement remains in full force and effect as modified by the Separation Agreement.
 
On November 19, 2007, Scotts LLC executed employment agreements with Barry W. Sanders and David C. Evans to reflect the terms and conditions of their employment with Scotts LLC. Mr. Sanders executed an amendment to his employment agreement on January 14, 2009.
 
The initial term of Mr. Evans’ employment agreement extended from October 1, 2007 through September 30, 2010, and was automatically extended for an additional year pursuant to the terms of the employment agreement, as described in more detail below. The initial term of Mr. Sanders’ employment agreement as amended extends from October 1, 2007 through September 30, 2011. After the expiration of the initial term, each employment agreement automatically extends for successive one-year terms unless either Scotts LLC or the applicable executive officer provides written notice to the other party at least 60 days prior to the end of the then current term that such party does not wish to extend the employment agreement. If a change in control occurs (as such term is defined in the applicable employment agreement), then the term of the applicable employment agreement will automatically extend through the later of: (1) the remainder of the initial term or (2) two years beyond the month in which such change in control occurs.
 
The employment agreements provide for an annual base salary of $400,000 and $440,000 for Mr. Sanders and Mr. Evans, respectively. The Compensation Committee reviews the base salaries at least annually to determine whether and to what extent they will be adjusted. The base salary for each of Mr. Sanders and Mr. Evans was $475,000 for the 2010 fiscal year. In connection with his election as President of the Company, Mr. Sanders’ base salary was increased to $600,000 effective November 1, 2010.


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Under the employment agreements, Mr. Sanders and Mr. Evans are eligible to receive an annual incentive compensation (bonus) award and long-term incentive awards based upon performance targets and award levels determined by the Compensation Committee in accordance with the terms of the annual and long-term incentive compensation plans for executives, respectively. The employment agreements also provide Mr. Sanders and Mr. Evans with all retirement and employee benefits which Scotts LLC makes available to its other executives and employees, subject to the applicable eligibility requirements of the underlying benefit arrangements, as well as an annual automobile allowance and an annual allowance for personal financial planning.
 
If Mr. Sanders’ or Mr. Evans’ employment is terminated due to his death or disability, then Scotts LLC will pay the applicable executive officer: (1) his base salary (subject to an offset, in the case of disability, for any disability payments) through the effective date of termination, (2) a prorated target annual bonus award based on his respective target bonus opportunity for the year in which termination occurs (subject to the individual or his estate, as applicable, signing and not revoking a release within 60 days of termination) and (3) all other rights and benefits as to which the individual is vested under Scotts LLC’s other plans and programs.
 
In the event Mr. Sanders or Mr. Evans voluntarily terminates his employment without “good reason” or is terminated for “cause” (as such terms are defined in the applicable employment agreement), then Scotts LLC will pay to the applicable executive officer (1) his accrued but unpaid base salary through the effective date of termination and (2) all other benefits to which such individual has a vested right as of the effective date of termination under Scotts LLC’s other plans and programs, and the applicable executive officer will forfeit all other rights and benefits (other than vested benefits) which he would otherwise be entitled to receive under the applicable employment agreement.
 
In the event that Mr. Evans is terminated by Scotts LLC without cause or he terminates his employment with good reason, in each case unrelated to a change in control, he will be entitled to receive: (1) all accrued and unpaid base salary through the effective date of termination, (2) a lump sum payment equal to two times his base salary then in effect, (3) a lump sum payment equal to his target annual bonus award then in effect, (4) a lump sum payment representing Scotts LLC’s portion of the monthly cost of his medical and dental insurance benefits as of the effective date of termination multiplied by 12 and (5) all other benefits to which he has a vested right as of the effective date of termination under Scotts LLC’s other plans and programs. The lump sum payments described above are subject to Mr. Evans signing and not revoking a release within 60 days following his termination. The same provisions apply to Mr. Sanders, except that payment of the annual bonus portion of his severance (item (3) above) is limited to a lump sum payment equal to the annual bonus payment that he would have received had he remained, prorated based on the actual base salary paid to Mr. Sanders.
 
In the event that, within two years following a change in control, Mr. Sanders or Mr. Evans terminates his employment for good reason or Scotts LLC terminates the applicable executive officer for any reason other than death, disability or cause, then Scotts LLC will pay: (1) the individual’s accrued but unpaid base salary through the effective date of termination, (2) a lump sum payment equal to two times his annual base salary then in effect, (3) a lump sum payment equal to two times his target annual bonus award then in effect, (4) a lump sum payment equal to a prorated target annual bonus award based on his target bonus opportunity for the fiscal year in which the termination occurs, (5) a lump sum payment representing Scotts LLC’s portion of the monthly cost of his medical and dental insurance benefits as of the effective date of termination multiplied by 24 and (6) all other benefits to which the individual has a vested right as of the effective date of termination under Scotts LLC’s other plans and programs.
 
The employment agreements do not supersede or nullify the existing Employee Confidentiality, Noncompetition, Nonsolicitation Agreements between Scotts LLC and Mr. Sanders or Mr. Evans, as applicable, which agreements remain in full force and effect.
 
On July 1, 2001, Scotts France SAS entered into an employment agreement with Claude L. Lopez (the “Previous Lopez Agreement”). The Previous Lopez Agreement had no fixed term and was terminable by either party upon due observance of the applicable notice period set forth in the Chemical Industries National


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Collective Agreement, Amendment III (the “CINC Agreement”). Throughout this Proxy Statement, all amounts paid to Mr. Lopez, who was paid in Euros during the 2010 fiscal year, have been converted to U.S. Dollars at an exchange rate of $1.3626 USD per Euro, which is the same exchange rate used for financial accounting purposes as of September 30, 2010.
 
Pursuant to the Previous Lopez Agreement, Mr. Lopez was entitled to an annual base compensation, which for fiscal year 2010 was equivalent to $480,911 (including a base salary equivalent to $407,552 and an “expatriation bonus” equivalent to $73,359). The “expatriation bonus,” which was equal to 18% of Mr. Lopez’ annual base salary, was a tax-advantaged supplement frequently paid to executives in France who routinely travel outside of France for business. In addition, Mr. Lopez was eligible to receive an annual incentive (bonus) award and long-term incentive awards based upon performance targets and award levels determined by the Compensation Committee in accordance with the terms of the annual and long-term incentive compensation plans for executives, respectively.
 
Under the Previous Lopez Agreement, Scotts France SAS provided Mr. Lopez with all retirement and employee benefits that Scotts France SAS makes available to its other executives and employees in France, subject to the applicable eligibility requirements of the underlying benefit arrangements. In addition, Scotts France SAS provided Mr. Lopez with an annual allowance for personal financial planning which was valued at $4,442 and with a Company-paid automobile, the personal use of which was valued at $6,364 for the 2010 fiscal year.
 
Under French law, Mr. Lopez would have been entitled to certain benefits if Scotts France SAS had terminated his employment for any reason other than serious misconduct. Given that the application of French labor laws and customs is influenced by the facts and circumstances surrounding the termination of employment, it was difficult to ascertain the actual amount of benefits to which Mr. Lopez would have been entitled in the event of termination. At a minimum, the CINC Agreement provided that if Mr. Lopez was dismissed for any reason other than for serious misconduct, he would have been entitled to a lump sum severance payment equal to a specified percentage (40% as of September 30, 2010) of his monthly salary plus his annual incentive award, multiplied by his years of service with Scotts France SAS and any of its affiliates (approximately nine and one-half years as of September 30, 2010). The amount of the payment would have been based on the following three factors at the time of his dismissal: his position with Scotts France SAS, his seniority and his age. The severance payment could not have exceeded an amount equal to 20 months of salary.
 
While certain provisions of French law provided for benefits in the event of earlier voluntary retirement, if Mr. Lopez had voluntarily retired on or after age 65, the CINC Agreement provided that he would have been entitled to a lump sum payment equal to a specified number of months of salary (two months as of September 30, 2010) based on his years of service with Scotts France SAS and any of its affiliates (approximately nine and one-half years as of September 30, 2010).
 
On May 28, 2010, Scotts LLC and Mr. Lopez executed a new employment agreement (the “Current Lopez Agreement”), with an effective date of October 1, 2010, to reflect the terms and conditions of Mr. Lopez’ new role as President, Global Sales of Scotts LLC, a non-executive officer role, which Mr. Lopez assumed October 1, 2010. The Current Lopez Agreement, which supersedes the Previous Lopez Agreement, has a term of three years and reflects the fact that Mr. Lopez’ new assignment is based in the United States.
 
Mr. Lopez’ annual base salary under the Current Employment Agreement was initially set at $475,000. That amount was determined by converting the salary set forth in the Previous Lopez Agreement (€352,937) into United States dollars at an exchange rate of about 1.35 United States dollars to 1.0 Euros, which was approximately the exchange rate in effect at the time Scotts LLC and Mr. Lopez entered a non-binding term sheet addressing the essential terms that would be included in the Current Lopez Agreement. In addition to his base salary, Mr. Lopez also has a target annual incentive compensation (bonus) opportunity equal to 55% of his annual base salary, depending upon actual business results, in accordance with the terms of the annual incentive compensation plan for executives of Scotts LLC. Mr. Lopez will also be eligible to receive long-term equity-based incentive awards based upon performance targets and award levels determined by the Compensation Committee in accordance with the 2006 Plan.


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In addition to the health and welfare and retirement benefits made available to other employees in the United States for which Mr. Lopez is eligible, the Current Lopez Agreement provides that Scotts LLC will make voluntary contributions on behalf of Scotts LLC and Mr. Lopez in order to maintain all state-provided health and welfare, unemployment and retirement benefits made available to Mr. Lopez in France under the Previous Lopez Agreement. Scotts LLC will pay up to $6,000 per month to cover Mr. Lopez, housing/living costs in the United States and will pay for up to ten roundtrip commercial airline tickets per year for trips to and from France, to be allocated between Mr. Lopez and his immediate family members. The Current Lopez Agreement further provides for a lump-sum payment of $100,000 (net of applicable taxes) to cover costs associated with establishing a residence in the United States and other non-recurring costs associated with the new U.S.-based assignment, as well as a cash payment to buy out any accrued but untaken vacation to which Mr. Lopez would have been entitled under the Previous Lopez Agreement as of October 1, 2010 (for which Mr. Lopez subsequently received a lump-sum payment equivalent to $229,087 (168,125 Euros converted to USD at a rate of 1.3626 USD per Euro)) Mr. Lopez will receive other perquisites consistent with those provided to other senior executives of Scotts LLC based in the United States.
 
The Current Lopez Agreement contemplates that Mr. Lopez is entitled to receive tax equalization benefits designed to maintain his approximate after-tax compensation at the level he would have received under the Previous Lopez Agreement. In connection with the tax equalization benefits, Scotts LLC will provide for the annual preparation of Mr. Lopez’ United States and French tax returns by an independent preparer.
 
Mr. Lopez also received a one-time grant of performance units on October 1, 2010 with an approximate grant date value of $600,000, which reflects the approximate difference between the value of Mr. Lopez’ severance benefits under the Previous Lopez Agreement and the value of his severance benefits under the Current Lopez Agreement. The performance units will be earned upon the satisfaction of both a three-year service requirement and performance criteria based on the compound annual growth rate of the Company’s Global Consumer net sales over the three-year period from October 1, 2010 to September 30, 2013. The cliff vesting requirement will be accelerated in the event of Mr. Lopez’ death or disability, involuntary termination of Mr. Lopez employment by Scotts LLC without “cause” or voluntary termination of employment by Mr. Lopez for “good reason” (as such terms are defined in the Current Lopez Agreement).
 
The Current Lopez Agreement contains normal and customary provisions for voluntary termination by Mr. Lopez or termination for cause. If Mr. Lopez’ employment is terminated due to his death or disability, Scotts LLC will pay to Mr. Lopez or his beneficiary (a) a Prorated Target Annual Bonus Award (as such term is defined in the Current Lopez Agreement), prorated based on the date of his termination and (b) all other benefits as to which he has achieved a vested right. If Mr. Lopez’ employment is involuntarily terminated by Scotts LLC without cause or voluntarily terminated by Mr. Lopez for good reason, Scotts LLC will pay to Mr. Lopez (a) an amount equal to two times his annual base salary at the rate in effect on the date of termination, (b) a Prorated Annual Bonus Award (as such term is defined in the Current Lopez Agreement), prorated based on the date of his termination and (c) all other benefits as to which he has achieved a vested right. If Mr. Lopez’ employment is involuntarily terminated by Scotts LLC without cause or voluntarily terminated by Mr. Lopez for good reason, each following a change in control, Scotts LLC will pay to Mr. Lopez (a) an amount equal to two times the sum of his annual base salary (at the rate in effect on the date of termination) and his Target Annual Bonus Award for the fiscal year of termination (as such term is defined in the Current Lopez Agreement), (b) a Prorated Target Annual Bonus Award (prorated based on the date of his termination) and (c) all other benefits as to which he has achieved a vested right.
 
Mr. Lopez executed an Employee Confidentiality, Noncompetition, Nonsolicitation Agreement effective October 1, 2010.


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PAYMENTS ON TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
 
The Company and its subsidiaries have entered into certain agreements and maintain certain plans that may provide compensation to the NEOs in the event of a termination of employment or a change in control of the Company. For a definition of Change in Control under the 2006 Plan, see “PROPOSAL NUMBER 3 — APPROVAL OF MATERIAL TERMS OF THE PERFORMANCE CRITERIA UNDER THE SCOTTS MIRACLE-GRO COMPANY AMENDED AND RESTATED 2006 LONG-TERM INCENTIVE PLAN — Summary of Operation of the Plan — Change in Control.”
 
Employment Agreements:  Scotts LLC has entered into employment agreements with Mr. Hagedorn, Mr. Baker, Mr. Evans, Mr. Sanders and, effective October 1, 2010 with Mr. Lopez, upon expiration of the Previous Lopez Agreement. Under the terms of the employment agreements with Scotts LLC, described above in the section captioned “EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS — Employment Agreements,” each NEO may be eligible for severance and continued compensation and benefit eligibility as summarized in the table below.
 
             
Termination Due to:
 
Base Salary*
 
Annual Incentive
 
Welfare Benefits
 
             
Death
  No additional payments   Prorated Target Annual Bonus Award   Per terms of applicable plans and programs
             
Disability
  No additional payments   Prorated Target Annual Bonus Award   Per terms of applicable plans and programs
             
Voluntary by Executive Officer
  No additional payments   No payment   Per terms of applicable plans and programs
             
Without Cause or by Executive Officer with Good Reason
  Lump sum equal to two times base salary**   One times Target Annual Bonus Award**   Lump sum equivalent to 12 months of health care premiums.**** Other benefits per terms of applicable plans and programs
             
For Cause
  No additional payments   No payment   Per terms of applicable plans and programs
             
Within Two Years Subsequent to Change in Control without Cause or by Executive Officer with Good Reason
  Lump sum equal to two times base salary***   (a) Lump sum equal to two times Target Annual Bonus Award; plus (b) Prorated Target Annual Bonus for the year of termination***   Lump sum equivalent to 24 months of health care premiums.**** Other benefits per terms of applicable plans and programs
 
 
* In each circumstance surrounding a separation of employment from Scotts LLC, base salary payments discontinue after the effective date of termination.
 
** Mr. Hagedorn is entitled to a lump-sum payment equal to three times the sum of: (i) his then current base salary and (ii) the highest annual bonus paid to him in the three years preceding the date of termination. Mr. Baker is entitled to a lump-sum payment equal to three times the sum of: (i) his then current base salary and (ii) his average annual bonus award over the preceding three completed fiscal years. Mr. Sanders and Mr. Lopez are entitled to a prorated annual bonus award, with such proration based on the date of termination.
 
*** Mr. Hagedorn is entitled to a lump-sum payment equal to three times the sum of: (i) his then current base salary and (ii) the highest annual bonus paid to him in the three years preceding the date of termination.
 
**** Mr. Baker is entitled to a lump sum equivalent to 18 months of health care premiums. Mr. Hagedorn is entitled to continuation of his then-current health and welfare benefits for a period of three years following the date of termination. Not applicable to Mr. Lopez.


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The specific obligations to each of the NEOs are detailed in separate tables that follow.
 
Equity-Based Compensation Plans:  As previously mentioned, grants of NSOs/SARs and restricted stock/RSUs are typically subject to three-year, time-based vesting. However, our equity-based compensation plans generally provide for accelerated vesting or forfeiture in certain situations, as indicated in the following table. These acceleration and forfeiture provisions apply to all participants under the equity-based compensation plans.
 
             
Termination Due to:
 
Unvested NSOs/SARs/RSUs
 
Unvested Restricted Stock
 
Unvested Performance Shares/Units
 
Retirement
  Vest on date of termination   Forfeited on date of termination   Forfeited on date of termination
             
Death or Disability
  Vest on date of termination   Forfeited on date of termination   Forfeited on date of termination
             
For Cause
  Forfeited on date of termination   Forfeited on date of termination   Forfeited on date of termination
             
Any Other Reason
  Forfeited on date of termination   Forfeited on date of termination   Forfeited on date of termination
             
Subsequent to Change in Control
  Generally vest   Generally vest   Generally vest
 
Retirement:  A voluntary termination after a participant reaches age 62, or reaches age 55 with 10 years of service.
 
Disability:  A participant’s inability to perform his or her normal duties for a period of at least six months due to a physical or mental infirmity.
 
Upon a change in control of the Company, outstanding options and SARs will be cancelled and the applicable NEO will receive cash in the amount of, or Common Shares having a fair market value equal to, the difference between the change in control price per Common Share and the exercise price per Common Share associated with the cancelled option or SAR; provided, however, such cancellation may not take affect if either: (a) the Compensation Committee determines prior to the change in control that immediately after the change in control, the options and SARs will be honored or assumed, or new awards with substantially equivalent value substituted, or (b) the NEO exercises, with the permission of the Compensation Committee, the NEO’s outstanding options and SARs within 15 days of the date of the change in control.


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Termination of Employment and Change in Control — James Hagedorn
 
The following table describes the approximate payments that would be made to Mr. Hagedorn pursuant to his employment agreement or other plans or individual award agreements in the event of his termination of employment under the circumstances described below or in the event of a change in control of the Company, assuming such termination of employment or change in control took place on September 30, 2010, the last day of the 2010 fiscal year. For further information concerning the outstanding equity-based awards held by Mr. Hagedorn as of September 30, 2010, see the table captioned “Outstanding Equity Awards at 2010 Fiscal Year-End.”
 
                                 
    Involuntarily Without
          Involuntarily Without
       
Executive Benefits and
  Cause or Good Reason
          Cause or Good Reason
       
Payments Upon Termination
  Termination     CIC Only     Termination (CIC)     Death or Disability  
 
Compensation:
                               
Base Salary(1)
  $ 3,000,000           $ 3,000,000        
EIP(2)
    7,014,000             7,014,000        
EIP — Pro Rata Payout
                       
Long-term Incentives
                       
Stock Options:
                               
Unvested and accelerated(3)
    8,577,200     $ 8,577,200       8,577,200     $ 8,577,200  
Restricted Stock:
                               
Unvested and Accelerated(4)
          1,712,263       1,712,263        
Accrued Dividends(5)
          53,788       53,788        
RSUs:
                               
Unvested and Accelerated(4)
    5,235,076       5,235,076       5,235,076       5,235,076  
Dividend Equivalents(5)
    90,413       90,413       90,413       90,413  
Benefits and Perquisites:
                               
Continuation of Health & Welfare Benefits(6)
    40,953             40,953        
Accrued Retirement Benefits:
                               
Assoc. Pension Plan(7)
    148,571             148,571       148,571  
Excess Benefit Plan(8)
    28,358             28,358       28,358  
RSP(9)
    1,587,768             1,587,768       1,587,768  
ERP(9)
    1,328,310             1,328,310       1,328,310  
ERP-Retention Award
                       
Total:
  $ 27,050,649     $ 15,668,740     $ 28,816,700     $ 16,995,696  
 
 
(1) Lump-sum payment of cash severance benefit in an amount equal to three times base salary.
 
(2) Lump-sum payment of cash severance benefit in an amount equal to three times the EIP payout for the 2009 fiscal year, the highest annual bonus paid in the three years preceding September 30, 2010.
 
(3) Immediate vesting of all outstanding and unvested stock options, valued based on the difference between $51.73, the Common Share price as of September 30, 2010, and the respective exercise prices. Since Mr. Hagedorn is retirement eligible, all NSOs and RSUs are subject to accelerated vesting upon termination for any reason other than for cause.
 
(4) Immediate vesting of all unvested shares of restricted stock and RSUs, valued based on the Common Share price as of September 30, 2010. Since Mr. Hagedorn is retirement eligible, all deferred cash dividends are subject to accelerated vesting upon termination for any reason other than for cause.
 
(5) Immediate vesting of all deferred cash dividends associated with the unvested shares of restricted stock and deferred dividend equivalents associated with the unvested RSUs. Since Mr. Hagedorn is retirement eligible, all NSOs and RSUs are subject to accelerated vesting upon termination for any reason other than for cause.
 
(6) Continuation of certain medical and dental benefits for a period of three years following the date of termination.


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(7) Lump-sum payment of cash equal to accrued benefits under the Associates’ Pension Plan.
 
(8) Lump-sum payment of cash equal to accrued benefits under the Excess Pension Plan.
 
(9) Reflects respective account balances as of September 30, 2010.
 
Termination of Employment and Change in Control — Mark R. Baker
 
Pursuant to the terms of the Separation Agreement, Scotts LLC provided Mr. Baker with a lump sum payment of $5,025,000 (less applicable taxes) on November 24, 2010. In addition, the vesting date for the 103,700 stock options granted to Mr. Baker on October 8, 2008, which were scheduled to vest on September 30, 2011, was changed to October 28, 2010. All other equity awards which had not vested as of October 28, 2010 were forfeited.
 
The following table describes the approximate payments that would be made to Mr. Baker pursuant to the Baker Agreement or other plans or individual award agreements in the event of his termination of employment under the circumstances described below or in the event of a change in control of the Company, assuming such termination of employment or change in control took place on September 30, 2010, the last day of the 2010 fiscal year. For further information concerning the outstanding equity-based awards held by Mr. Baker as of September 30, 2010, see the table captioned “Outstanding Equity Awards at 2010 Fiscal Year-End.”
 
                                 
    Involuntarily Without
      Involuntarily Without
   
Executive Benefits and
  Cause or Good Reason
      Cause or Good Reason
   
Payments Upon Termination
  Termination   CIC Only   Termination (CIC)   Death or Disability
 
Compensation:
                               
Base Salary
  $ 2,700,000 (1)         $ 1,800,000 (2)      
EIP
    3,877,893 (3)           1,350,000 (4)      
EIP — Pro Rata Payout
    675,000 (5)           675,000 (5)   $ 675,000 (5)
Long-term Incentives
                       
Stock Options:
                               
Unvested and Accelerated(6)
        $ 3,792,622       3,792,622       3,792,622  
Restricted Stock:
                               
Unvested and Accelerated(7)
          620,760       620,760        
Accrued Dividends(8)
          13,500       13,500        
RSUs:
                               
Unvested and Accelerated(7)
          2,452,002       2,452,002       2,452,002  
Accrued Dividend Equivalents(8)
          34,075       34,075       34,075  
Deferred Stock Units:
                               
Unvested and Accelerated(9)
          159,639       159,639       159,639  
Dividend Equivalents(10)
          6,777       6,777       6,777  
Benefits and Perquisites:
                               
Continuation of Health & Welfare Benefits(11)
    12,188             18,282        
Accrued Retirement Benefits:
                               
Assoc. Pension Plan
                       
Excess Benefit Plan
                       
RSP(12)
    83,277             83,277       83,277  
ERP(12)
    196,040             196,040       196,040  
ERP-Retention Award
                       
Total:
  $ 7,544,398     $ 7,079,374     $ 11,201,973     $ 7,399,431  


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(1) Lump-sum payment of cash severance benefit in an amount equal to three times base salary.
 
(2) Lump-sum payment of cash severance benefit in an amount equal to two times base salary.
 
(3) Lump-sum payment of cash severance benefit in an amount equal to three times the average actual annual bonus award paid for the three completed fiscal years preceding the date of termination (or the actual number of completed fiscal years preceding the date of termination if less than three).
 
(4) Lump-sum payment of cash in an amount equal to two times target annual bonus award.
 
(5) Lump-sum payment of cash in an amount equal to target annual bonus award, prorated through the date of termination (assuming Mr. Baker was employed throughout the entire 2010 fiscal year).
 
(6) Immediate vesting of all outstanding and unvested stock options, valued based on the difference between $51.73, the Common Share price as of September 30, 2010, and the respective exercise prices.
 
(7) Immediate vesting of all unvested shares of restricted stock and RSUs, valued based on the Common Share price as of September 30, 2010.
 
(8) Immediate vesting of all deferred cash dividends associated with the unvested shares of restricted stock and deferred dividend equivalents associated with the unvested RSUs.
 
(9) Immediate vesting of all unvested DSUs, valued based on the Common Share price as of September 30, 2010.
 
(10) Immediate vesting of all unvested dividend equivalents, valued based on the Common Share price as of September 30, 2010.
 
(11) Lump-sum payment of cash equal to one or one and one-half times the annual premiums for COBRA continuation coverage of medical and dental benefits.
 
(12) Reflects respective account balances as of September 30, 2010.
 
Termination of Employment and Change in Control — David C. Evans
 
The following table describes the approximate payments that would be made to Mr. Evans pursuant to his employment agreement or other plans or individual award agreements in the event of his termination of employment under the circumstances described below or in the event of a change in control of the Company, assuming such termination of employment or change in control took place on September 30, 2010, the last day of the 2010 fiscal year. For further information concerning the outstanding equity-based awards held by Mr. Evans as of September 30, 2010, see the table captioned “Outstanding Equity Awards at 2010 Fiscal Year-End.”
 
                                 
    Involuntarily Without
          Involuntarily Without
       
Executive Benefits and Payments
  Cause or Good Reason
          Cause or Good Reason
       
Upon Termination
  Termination     CIC Only     Termination (CIC)     Death or Disability  
 
Compensation:
                               
Base Salary
  $ 950,000 (1)         $ 950,000 (1)      
EIP
    285,000 (2)           570,000 (3)      
EIP — Pro Rata Payout
                285,000 (4)   $ 285,000 (4)
Long-term Incentives
                       
Stock Options:
                               
Unvested and Accelerated(5)
        $ 1,569,140       1,569,140       1,569,140  
Restricted Stock:
                               
Unvested and Accelerated(6)
          620,760       620,760        
Accrued Dividends(7)
          16,500       16,500        
RSUs:
                               
Unvested and Accelerated(6)
          450,051       450,051       450,051  
Dividend Equivalents(7)
          4,350       4,350       4,350  


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    Involuntarily Without
          Involuntarily Without
       
Executive Benefits and Payments
  Cause or Good Reason
          Cause or Good Reason
       
Upon Termination
  Termination     CIC Only     Termination (CIC)     Death or Disability  
 
Benefits and Perquisites:
                               
Continuation of Health & Welfare Benefits(8)
    13,651             27,302        
Accrued Retirement Benefits:
                               
Assoc. Pension Plan(9)
    15,927             15,927       15,927  
Excess Benefit Plan
                       
RSP(10)
    482,773             482,773       482,773  
ERP(10)
    210,201             210,201       210,201  
ERP-Retention Award
    1,241,318 (11)           1,942,933 (12)     1,241,318 (11)
Total:
  $ 3,198,870     $ 2,660,801     $ 7,144,937     $ 4,258,760  
 
 
(1) Lump-sum payment of cash severance benefit in an amount equal to two times base salary.
 
(2) Lump-sum payment of cash severance benefit in an amount equal to one times target annual bonus award.
 
(3) Lump-sum payment of cash severance benefit in an amount equal to two times target annual bonus award.
 
(4) Lump-sum payment of cash in an amount equal to target annual bonus award, prorated through the date of termination (assuming Mr. Evans was employed throughout the entire 2010 fiscal year).
 
(5) Immediate vesting of all outstanding and unvested stock options, valued based on the difference between $51.73, the Common Share price as of September 30, 2010, and the respective exercise prices.
 
(6) Immediate vesting of all unvested shares of restricted stock, valued based on the Common Share price as of September 30, 2010.
 
(7) Immediate vesting of all deferred cash dividends associated with the unvested shares of restricted stock.
 
(8) Lump-sum payment of cash equal to one or two times the Company’s annual portion of the cost of medical and dental benefits.
 
(9) Lump-sum payment of cash equal to accrued benefits under the Associates’ Pension Plan.
 
(10) Reflects respective account balances as of September 30, 2010.
 
(11) Reflects the fair market value of the retention award account in the ERP as of September 30, 2010, prorated by 23/36. The numerator reflects the number of months between the award date and September 30, 2010 and the denominator reflects the vesting period of the retention award.
 
(12) Immediate vesting in full of retention award account in ERP, valued as of September 30, 2010.

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Termination of Employment and Change in Control — Barry W. Sanders
 
The following table describes the approximate payments that would be made to Mr. Sanders pursuant to his employment agreement or other plans or individual award agreements in the event of his termination of employment under the circumstances described below or in the event of a change in control of the Company, assuming such termination of employment or change in control took place on September 30, 2010, the last day of the 2010 fiscal year. For further information concerning the outstanding equity-based awards held by Mr. Sanders as of September 30, 2010, see the table captioned “Outstanding Equity Awards at 2010 Fiscal Year-End.”
 
                                 
    Involuntarily Without
          Involuntarily Without
       
Executive Benefits and Payments
  Cause or Good Reason
          Cause or Good Reason
    Death or
 
Upon Termination
  Termination     CIC Only     Termination (CIC)     Disability  
 
Compensation:
                               
Base Salary
  $ 950,000 (1)         $ 950,000 (1)      
EIP
    285,000 (2)           570,000 (3)      
EIP — Pro Rata Payout
                285,000 (4)   $ 285,000 (4)
Long-term Incentives
                       
Stock Options:
                               
Unvested and Accelerated(5)
        $ 1,293,730       1,293,730       1,293,730  
Restricted Stock:
                               
Unvested and Accelerated(6)
          594,895       594,895        
Accrued Dividends(7)
          15,438       15,438        
RSUs:
                               
Unvested and Accelerated(6)
          450,051       450,051       450,051  
Dividend Equivalents(7)
          4,350       4,350       4,350  
Performance Shares:
                               
Unvested and Accelerated
                       
Accrued Dividends
                       
Benefits and Perquisites:
                               
Continuation of Health & Welfare Benefits(8)
    13,651             27,302        
Accrued Retirement Benefits:
                               
Assoc. Pension Plan
                       
Excess Benefit Plan
                       
RSP(9)
    344,580             344,580       344,580  
ERP(9)
    232,641             232,641       232,641  
ERP-Retention Award
    1,241,318 (10)           1,942,933 (12)     1,241,318 (10)
Total:
  $ 3,067,190     $ 2,358,464     $ 6,710,920     $ 3,851,670  
 
 
(1) Lump-sum payment of cash severance benefit in an amount equal to two times base salary.
 
(2) Lump-sum payment of cash severance benefit in an amount equal to a prorated annual bonus award, with such proration based upon the date of termination.
 
(3) Lump-sum payment of cash severance benefit in an amount equal to two times target annual bonus award.
 
(4) Lump-sum payment of cash in an amount equal to target annual bonus award, prorated through the date of termination (assuming Mr. Sanders was employed throughout the entire 2010 fiscal year).
 
(5) Immediate vesting of all outstanding and unvested stock options, valued based on the difference between $51.73, the Common Share price as of September 30, 2010, and the respective exercise prices.
 
(6) Immediate vesting of all unvested shares of restricted stock and/or RSUs, valued based on the Common Share price as of September 30, 2010.


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(7) Immediate vesting of all deferred cash dividends associated with the unvested shares of restricted stock and/or RSUs.
 
(8) Lump-sum payment of cash equal to one or two times the Company’s annual portion of the cost of medical and dental benefits.
 
(9) Reflects respective account balances as of September 30, 2010.
 
(10) Reflects the fair market value of the retention award account in the ERP as of September 30, 2010, prorated by 23/36. The numerator reflects the number of months between the award date and September 30, 2010 and the denominator reflects the vesting period of the retention award.
 
(11) Immediate vesting in full of retention award account in ERP, valued as of September 30, 2010.
 
Termination of Employment and Change in Control — Claude L. Lopez
 
The following table describes the approximate payments that would be made to Mr. Lopez pursuant to his employment agreement or other plans or individual award agreements in the event of his termination of employment under the circumstances described below or in the event of a change in control of the Company, assuming such termination of employment or change in control took place on September 30, 2010, the last day of the 2010 fiscal year (and further assuming that the Current Lopez Agreement, which was not in effect until October 1, 2010, was in effect as of September 30, 2010). For further information concerning the outstanding equity-based awards held by Mr. Lopez as of September 30, 2010, see the table captioned “Outstanding Equity Awards at 2010 Fiscal Year-End.”
 
                                 
    Involuntarily Without
          Involuntarily Without
       
Executive Benefits and Payments
  Cause or Good Reason
          Cause or Good Reason
       
Upon Termination
  Termination     CIC Only     Termination (CIC)     Death or Disability  
 
Compensation:
                               
Base Salary(1)
  $ 950,000           $ 950,000        
EIP
    261,250 (2)           522,500 (3)      
EIP — Pro Rata Payout
              $ 261,250 (4)   $ 261,250 (4)
Long-term Incentives
                       
Stock Options:
                               
Unvested and Accelerated(5)
  $     $ 907,360       907,360     $ 907,360  
Restricted Stock:
                               
Unvested and Accelerated(6)
          155,190       155,190        
Accrued Dividends(6)
          4,875       4,875        
RSUs:
                               
Unvested and Accelerated(6)
          465,570       465,570       465,570  
Dividend Equivalents(7)
          47,950       47,950       47,950  
Benefits and Perquisites:
                               
Continuation of Health & Welfare Benefits(8)
                       
Accrued Retirement Benefits:
                               
Assoc. Pension Plan
                         
Excess Benefit Plan
                       
RSP
                         
ERP
                         
Retention Award
          1,882,972 (9)     1,882,972 (9)     1,203,010 (10)
Total:
  $ 1,211,250     $ 3,463,917     $ 5,197,667     $ 2,885,140  
 
 
(1) Lump-sum payment of cash severance benefit in an amount equal to two times base salary.
 
(2) Lump-sum payment of cash severance benefit in an amount equal to a prorated annual bonus award, with such proration based upon the date of termination.
 
(3) Lump-sum payment of cash severance benefit in an amount equal to two times target annual bonus award.


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(4) Lump-sum payment of cash in an amount equal to target annual bonus award, prorated through the date of termination (assuming Mr. Lopez was employed throughout the entire 2010 fiscal year).
 
(5) Immediate vesting of all outstanding and unvested stock options, valued based on the difference between $51.73, the Common Share price as of September 30, 2010, and the respective exercise prices.
 
(6) Immediate vesting of all unvested shares of restricted stock or RSUs, valued based on the Common Share price as of September 30, 2010.
 
(7) Immediate vesting of all deferred cash dividends associated with the unvested shares of restricted stock or deferred dividend equivalents associated with unvested RSUs, including the deferred dividend equivalents in respect of the retention award.
 
(8) Mr. Lopez is not eligible for any benefit or perquisite payments because of his current age and provisions applicable to him as a French executive for the 2010 fiscal year.
 
(9) Immediate vesting of retention award, which consists of 36,400 RSUs granted on November 4, 2008 and subject to a three-year vesting period. The RSUs are valued based on the Common Share price as of September 30, 2010.
 
(10) Reflects the fair market value of the retention award, valued based on the Common Share price as of September 30, 2010, prorated by 23/36. The numerator reflects the number of months between the award date and September 30, 2010 and the denominator reflects the vesting period of the retention award.
 
Employee Confidentiality, Noncompetition, Nonsolicitation Agreements
 
Mr. Baker, Mr. Sanders, Mr. Evans and Mr. Lopez (effective October 1, 2010) are each parties to an employee confidentiality, noncompetition, nonsolicitation agreement with Scotts LLC, pursuant to which each executive officer agrees to maintain the confidentiality of any “confidential information” (as that term is defined in the employee confidentiality, noncompetition, nonsolicitation agreement) of Scotts LLC and its affiliates and not to directly or indirectly disclose or reveal confidential information to any person or use confidential information for the individual’s own personal benefit or for the benefit of any person other than Scotts LLC and its affiliates. The employee confidentiality, noncompetition, nonsolicitation agreement also contains provisions which prevent the individual party to it from engaging in specified competitive and solicitation activities during his employment with Scotts LLC and its affiliates, and for an additional two years thereafter. Failure to abide by the terms of the confidentiality, noncompetition, nonsolicitation agreement will result in forfeiture of any future payment under the EIP and will oblige the individual to return to Scotts LLC any monies paid to him under the EIP within the three years prior to breach.
 
Mr. Hagedorn’s employment agreement with Scotts LLC subjects him to confidentiality, noncompetition and nonsolicitation obligations that are similar to those set forth in the employee confidentiality, noncompetition, nonsolicitation agreements.
 
EQUITY COMPENSATION PLAN INFORMATION
 
There are five equity compensation plans under which the Common Shares are authorized for issuance to eligible directors, officers, employees or third-party service providers:
 
  •  the 1996 Plan;
 
  •  the 2003 Plan;
 
  •  the 2006 Plan;
 
  •  the Discounted Stock Purchase Plan; and
 
  •  the ERP.
 
The following table summarizes equity compensation plan information for the 1996 Plan, the 2003 Plan, the 2006 Plan and the Discounted Stock Purchase Plan, all of which are shareholder approved, as a group and for the ERP, which is not subject to shareholder approval, in each case as of September 30, 2010. No


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disclosure is included in respect of the RSP as it is intended to meet the qualification requirements of IRC § 401(a). The information is shown with adjustments for: (i) the 2-for-1 stock split of the Common Shares distributed on November 9, 2005 to shareholders of record at the close of business on November 2, 2005 and (ii) the special cash dividend of $8.00 per Common Share approved by the Board on February 16, 2007 and paid on March 5, 2007 (the “Special Dividend”).
 
                         
                (c)
 
    (a)
    (b)
    Number of Common Shares
 
    Number of Common
    Weighted-Average
    Remaining Available for
 
    Shares to be Issued
    Exercise Price of
    Future Issuance Under
 
    Upon Exercise of
    Outstanding Options,
    Equity Compensation Plans
 
    Outstanding Options,
    Warrants and
    (Excluding Common Shares
 
Plan Category
  Warrants and Rights     Rights     Reflected In Column(a))  
 
Equity compensation plans approved by shareholders
    5,449,447 (1)   $ 34.92 (2)     1,232,537 (3)
Equity compensation plans not approved by shareholders
    231,765 (4)     n/a (5)     n/a (5)
Total
    5,681,212     $ 34.92 (2)     1,232,537  
 
 
(1) Includes 403,999 Common Shares issuable upon exercise of NSOs granted under the 1996 Plan, 1,552,398 Common Shares issuable upon exercise of NSOs and SARs granted under the 2003 Plan, 2,626,973 Common Shares issuable upon exercise of NSOs granted under the 2006 Plan, 308,800 Common Shares issuable upon vesting of restricted stock granted under the 2006 Plan, 450,315 Common Shares issuable upon vesting of RSUs granted under the 2006 Plan, 81,311 Common Shares issuable upon vesting of DSUs granted under the 2006 Plan and 24,200 Common Shares representing the maximum number of performance shares granted under the 2006 Plan which may be earned if the applicable performance goals are satisfied (which includes 20,000 Performance Shares that were earned as of September 30, 2010 and issued on November 10, 2010). Also includes 1,451 Common Shares attributable to stock units received by non-employee directors in lieu of their annual cash retainer and held in their accounts under the 2003 Plan. The terms of the DSUs and the stock units are described in the section captioned “NON-EMPLOYEE DIRECTOR COMPENSATION.” The terms of the performance shares are described in the section captioned “Our Compensation Practices — Setting Compensation Levels for Other NEOs  — Performance Shares” within the CD&A.
 
(2) Represents the weighted-average exercise price of outstanding NSOs granted under the 1996 Plan, of outstanding NSOs and SARs granted under the 2003 Plan and of outstanding NSOs granted under the 2006 Plan, together with the weighted-average price of outstanding stock units held in the accounts of non-employee directors under the 2003 Plan. Also see the discussion in note (1) above with respect to DSUs and performance share awards granted under the 2006 Plan. The weighted-average exercise price does not take the DSUs and performance share awards into account.
 
(3) Includes 1,101,525 Common Shares authorized and remaining available for issuance under the 2006 Plan, as well as 131,012 Common Shares remaining available for issuance under the Discounted Stock Purchase Plan. Of these 131,012 Common Shares, 1,211 Common Shares were subject to purchase rights as of September 30, 2010 and were purchased on October 5, 2010.
 
(4) Includes Common Shares credited to the benchmark Company stock fund within the respective bookkeeping accounts of participants in the ERP. This number has been rounded to the nearest whole Common Share.
 
(5) The terms of the ERP do not provide for a specified limit on the number of Common Shares which may be credited to participants’ bookkeeping accounts. Please see the description of the ERP in the section captioned “Elements of Executive Compensation — Retirement Plans and Deferred Compensation Benefits (long-term compensation element) — ERP” within the CD&A. Participant account balances in the ERP may be credited to one or more benchmarked investment funds, including a Company stock fund and mutual fund investments, which are substantially consistent with the investment options permitted under the RSP. The amount credited to the benchmark Company stock fund is recorded as Common Shares. The weighted-average price of amounts credited to the benchmark Company stock fund within participants’


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bookkeeping accounts under the ERP is not readily calculable. The amount credited to one of the benchmark mutual fund investments is recorded as mutual fund shares.
 
Distributions from the ERP generally begin after six months have elapsed from the earliest to occur of: (a) a participant’s separation from service, (b) death, (c) disability or (d) a specific date selected by the participant and normally are paid in either a lump sum or in substantially equal annual installments over a period of 5, 10 or 15 years, whichever the participant has elected. Distributions from accounts benchmarked against the Company stock fund are made in the form of whole Common Shares and the value of fractional Common Shares is distributed in cash. Distributions from accounts benchmarked against the mutual fund investments are made in cash equal to the number of mutual fund shares credited to the participant multiplied by the market value of those mutual fund shares.
 
Discounted Stock Purchase Plan
 
The Company currently maintains a Discounted Stock Purchase Plan, which provides a means for employees of the Company and any subsidiary of the Company designated for participation in the Discounted Stock Purchase Plan to authorize payroll deductions on a voluntary basis to be used for the periodic purchase of Common Shares. All employees participating in the Discounted Stock Purchase Plan have equal rights and privileges which entitle eligible employees to purchase Common Shares at a price (the “DSPP Purchase Price”) equal to at least 90% of the fair market value of the Common Shares at the end of the applicable offering period.
 
The Discounted Stock Purchase Plan is administered by a committee (the “Committee”) appointed by the Board. The Committee establishes the number of Common Shares that may be acquired during each offering period and administers procedures through which eligible employees may enroll in the Discounted Stock Purchase Plan. The Discounted Stock Purchase Plan provides that each offering period will consist of one calendar month, unless a different period is established by the Committee and announced to eligible employees before the beginning of the applicable offering period.
 
Any U.S.-based full-time or permanent part-time employee of the Company, or a designated subsidiary of the Company, who has reached age 18, is not a seasonal employee (as determined by the Committee), has been an employee for at least 15 days before the first day of the applicable offering period and agrees to comply with the terms of the Discounted Stock Purchase Plan is eligible to participate in the Discounted Stock Purchase Plan. Any non-U.S.-based employee of the Company, or a designated subsidiary of the Company, who meets the eligibility criteria established by the Committee and agrees to comply with the terms of the Discounted Stock Purchase Plan is also eligible to participate in the Discounted Stock Purchase Plan. Upon enrollment, a participant must elect the rate at which the participant will make payroll contributions for the purchase of Common Shares. Elections may be in an amount of not less than $10 per offering period or more than $24,000 per plan year, unless the Committee specifies different minimum and/or maximum amounts at the beginning of the offering period. The contribution rate elected by a participant will continue in effect until modified by the participant.
 
A participant’s contributions are credited to the plan account maintained on the participant’s behalf. As of the last day of each offering period, the value of each participant’s plan account is divided by the DSPP Purchase Price established for that offering period. Each participant is deemed to have purchased the number of whole and fractional Common Shares produced by this calculation. As promptly as practicable after the end of each offering period, the Company issues or transfers the Common Shares purchased by a participant during that offering period to the custodian for the Discounted Stock Purchase Plan for transfer into that participant’s custodial account.
 
Common Shares acquired through the Discounted Stock Purchase Plan are held in a participant’s custodial account (and may not be sold) until the earliest of: (1) the beginning of the offering period following the date the participant terminates employment with the Company and its subsidiaries, (2) 12 full calendar months beginning after the end of the offering period in which the Common Shares were purchased or (3) the date on which a change in control affecting the Company occurs. Upon any such event, all whole Common Shares and cash held in a participant’s custodial account will be made available to the participant under


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procedures developed by the custodian for the Discounted Stock Purchase Plan. Any fractional Common Shares that are to be withdrawn from a custodial account will be distributed in cash equal to the fair market value of the fractional Common Share on the termination date.
 
Participants are entitled to vote the number of whole and fractional Common Shares credited to their respective custodial accounts.
 
BENEFICIAL OWNERSHIP OF SECURITIES OF THE COMPANY
 
The Common Shares are the only outstanding class of voting securities of the Company. The following table furnishes certain information regarding the beneficial ownership of the Common Shares as of November 24, 2010 (unless otherwise indicated below) by each of the current directors of the Company, by each nominee for election as a director of the Company, by each of the individuals named in the Summary Compensation Table for 2010 Fiscal Year and by all current directors and executive officers of the Company as a group, as well as by persons known to the Company to beneficially own more than 5% of the Company’s outstanding Common Shares.
 
                                                     
    Amount and Nature of Beneficial Ownership(1)(2)        
        Common Share
               
        Equivalents
               
        Presently Held(3)                
        Distributable in Common
               
        Shares                
            Unvested
           
        Vested or
  and Not
           
    Common
  Scheduled
  Scheduled
           
    Shares
  to Vest
  to Vest
           
    Presently
  Within
  Within
          Percent of
Name of Beneficial Owner
  Held   60 Days   60 Days   Options/SARs(4)   Total(5)   Class(3)(6)
 
Mark R. Baker(7)(8)
    3,217 (9)                 103,700       106,917       (10)    
Alan H. Barry
                4,949 (11)                 (10)    
David C. Evans(7)
    12,600 (12)           46,259 (13)     51,190       63,790       (10)    
Joseph P. Flannery
    4,000       8,580 (14)           74,975       87,555       (10)    
James Hagedorn(7)(15)
    19,967,468 (16)     25,907 (17)     101,200 (18)     1,321,631       21,315,006       31.39 %    
Adam Hanft
          1,099 (19)     2,341 (20)           1,099       (10)    
Stephen L. Johnson
                320 (21)                 (10)    
William G. Jurgensen(15)
                4,562 (22)                 (10)    
Thomas N. Kelly Jr. 
                9,178 (23)     21,442       21,442       (10)    
Carl F. Kohrt, Ph.D. 
    760             10,421 (24)           760       (10)    
Katherine Hagedorn Littlefield
    19,893,216 (25)     9,196 (26)           85,683       19,988,095       29.99 %    
Claude L. Lopez(7)
    5,600             45,400 (27)     55,454       61,054       (10)    
Nancy G. Mistretta(15)
                9,532 (28)                 (10)    
Barry W. Sanders(7)
    6,805 (29)           46,259 (30)     35,476       42,281       (10)    
Stephanie M. Shern(15)
    2,000       9,636 (31)           72,599       84,235       (10)    
John S. Shiely
    2,000             8,841 (32)     14,300       16,300       (10)    
All current directors and executive officers as a group (16 individuals)
    20,003,954 (33)     54,844 (34)     333,980 (35)     1,788,103       21,846,901       32.94 %    
Hagedorn Partnership, L.P. 
    19,893,216 (36)                       19,893,216       29.89 %    
800 Port Washington Blvd., Port Washington, NY 11050
                                                   
Prudential plc(37)
    3,592,680 (38)                       3,592,680       5.40 %    
M&G Investment
  Management Limited
Laurence Pountney Hill,
London, England, EC4R OHH
                                                   
 
 
(1) Unless otherwise indicated, the beneficial owner has sole voting and dispositive power as to all Common Shares reflected in the table. All fractional Common Shares have been rounded to the nearest whole


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Common Share. The mailing address of each of the current executive officers and directors of the Company is 14111 Scottslawn Road, Marysville, Ohio 43041.
 
(2) All Common Share amounts have been adjusted to account for the Special Dividend paid on March 5, 2007.
 
(3) “Common Share Equivalents Presently Held” figures include: (a) Common Shares represented by amounts credited to the benchmark Company stock fund within the named individual’s bookkeeping account under the ERP; (b) Common Shares subject to DSUs granted to the named director (together with related dividend equivalents) under the 2006 Plan; and (c) Common Shares which are the subject of RSUs granted to the named individual (together with related dividend equivalents) under the 2006 Plan. Under the terms of each of the ERP, the 1996 Plan, the 2003 Plan and the 2006 Plan, the named individual has no voting or dispositive power with respect to the Common Shares attributable to the individual’s bookkeeping account under the ERP or the Common Shares subject to stock units, DSUs or RSUs granted to the individual until settlement.
 
Distributions in respect of Common Shares represented by amounts credited to the benchmark Company stock fund within the named individual’s bookkeeping account under the ERP are to be made in Common Shares. To the extent that Common Shares represented by amounts credited to the benchmark Company stock fund may be acquired by the named individual within 60 days of November 24, 2010 (i.e., upon termination without the need to satisfy additional vesting requirements), the related “Common Share Equivalents” are included in the figures in the “Total” column and in the computation of the “Percent of Class” figures in the table. The vesting schedule associated with the retention awards granted under the ERP is discussed in the section captioned “Elements of Executive Compensation — Executive Retention Awards (long-term compensation element)” within the CD&A.
 
Each whole DSU represents a contingent right to receive one Common Share. Each dividend equivalent represents the right to receive additional DSUs in respect of dividends that are declared and paid during the period beginning on the grant date and ending on the settlement date with respect to the Common Share represented by the related DSU. The DSUs will vest in accordance with the terms of each director’s award agreement, subject to earlier forfeiture in accordance with the terms of the award agreement. Subject to the terms of the 2006 Plan, vested DSUs will be settled in a lump sum as soon as administratively practicable, but not later than 90 days, following the earliest to occur of: (i) the individual’s cessation of service as a director of the Company; (ii) the individual’s death; (iii) the individual’s disability; or (iv) the fifth anniversary of the grant date. To the extent that the DSUs vest within 60 days of November 24, 2010, the “Common Share Equivalents” represented by the DSUs are included in the figures in the “Total” column and in the computation of the “Percent of Class” figures in the table.
 
Each whole RSU represents a contingent right to receive one Common Share. Each dividend equivalent represents the right to receive a cash amount equal to the dividends that are declared and paid during the period beginning on the grant date and ending on the settlement date with respect to the Common Share represented by the related RSU. The RSUs will vest in accordance with the terms of each individual’s award agreement, subject to earlier forfeiture in accordance with the terms of the award agreement. Subject to the terms of the 2006 Plan, vested RSUs will be settled in a lump sum as soon as administratively practicable, but not later than 90 days, following the earliest to occur of: (i) the individual’s death; (ii) the individual’s disability; or (iii) the vesting date. Given the vesting schedules with respect to the RSUs, the “Common Share Equivalents” represented by the RSUs are not included in the figures in the “Total” column or in the computation of the “Percent of Class” figures in the table.
 
(4) Amounts represent Common Shares which can be acquired upon exercise of options and SARs which are currently exercisable or will first become exercisable within 60 days of November 24, 2010.
 
(5) Amounts represent the total of all Common Shares presently held, all “Common Share Equivalents” presently held which are distributable in Common Shares and which have vested or are scheduled to vest within 60 days of November 24, 2010, and all Common Shares which can be acquired upon exercise of options and SARs which are currently exercisable or will first become exercisable within 60 days of November 24, 2010.


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(6) The “Percent of Class” computation is based upon the sum of: (a) 66,557,295 Common Shares outstanding on November 24, 2010, (b) the number of Common Shares, if any, attributable to the named individual’s or group’s “Common Share Equivalents” which may be settled in Common Shares within 60 days of November 24, 2010 as described in note (3) above and (c) the number of Common Shares, if any, as to which the named individual or group has the right to acquire beneficial ownership upon the exercise of options and SARs which are currently exercisable or will first become exercisable within 60 days of November 24, 2010.
 
(7) Individual named in the Summary Compensation Table for 2010 Fiscal Year.
 
(8) Mr. Baker resigned effective October 28, 2010.
 
(9) Represents Common Shares which are held directly.
 
(10) Represents ownership of less than 1% of the outstanding Common Shares.
 
(11) Represents the aggregate of: (a) 2,484 Common Shares which are the subject of DSUs granted to Mr. Barry on May 7, 2009 and will vest on May 7, 2012; and (b) 2,465 Common Shares which are the subject of DSUs granted to Mr. Barry on January 22, 2010 and will vest on January 22, 2013, in each case subject to earlier vesting or forfeiture in accordance with the terms of the applicable award agreement. Given the vesting schedules of the DSUs, the related 4,949 “Common Share Equivalents” are not included in the figures in the “Total” column or in the computation of the “Percent of Class” figures in the table.
 
(12) Represents the aggregate of: (a) 6,600 Common Shares held by Mr. Evans directly; and (b) 6,000 Common Shares which are the subject of a restricted stock grant made to him on October 8, 2008 as to which the restriction period will lapse on October 8, 2011.
 
(13) Represents the aggregate of: (a) 37,559 Common Shares credited to the benchmark Company stock fund within Mr. Evans’ bookkeeping account under the ERP as a result of his election in respect of the retention award granted to him on November 4, 2008; and (b) 8,700 Common Shares which are the subject of RSUs granted to Mr. Evans on January 20, 2010 and will vest on January 20, 2013, subject to earlier vesting or forfeiture in accordance with the terms of his award agreement. Given the vesting schedules associated with Mr. Evans’ interest in the retention award and the RSUs, the related 46,259 “Common Share Equivalents” are not included in the figures in the “Total” column or in the computation of the “Percent of Class” figures in the table.
 
(14) Represents the aggregate of: (a) 2,547 Common Shares which are the subject of DSUs granted to Mr. Flannery on February 4, 2008; (b) 3,692 Common Shares which are the subject of DSUs granted to Mr. Flannery on January 23, 2009; and (c) 2,341 Common Shares which are the subject of DSUs granted to Mr. Flannery on January 22, 2010. Based on the terms of his award agreements, the DSUs granted to Mr. Flannery are not subject to risk of forfeiture because he has completed at least two terms of continuous service on the Board and has reached age 50, making him retirement eligible under his award agreements.
 
(15) Nominee for election as a director of the Company.
 
(16) Mr. Hagedorn is a general partner of Hagedorn Partnership, L.P. (the “Hagedorn Partnership”), and has shared voting and dispositive power with respect to the Common Shares held by the Hagedorn Partnership. See note (36) below for additional disclosures regarding the Hagedorn Partnership. Includes, in addition to those Common Shares described in note (36) below, (a) 39,605 Common Shares held by Mr. Hagedorn directly; (b) 30,691 Common Shares which are allocated to his account and held by the trustee under the RSP; and (c) 3,956 Common Shares held in a custodial account under the Discounted Stock Purchase Plan.
 
Mr. Hagedorn also owns 4,975 shares, or 0.05% of the outstanding shares, of Scotts Italia S.r.l., an indirect subsidiary of the Company. Mr. Hagedorn is a nominee shareholder in order to satisfy the two shareholder requirement for an Italian corporation. The remaining 94,525 shares of Scotts Italia S.r.l. are held by OM Scott International Investments Ltd., an indirect subsidiary of the Company.
 
(17) Represents Common Shares credited to the benchmark Company stock fund within Mr. Hagedorn’s bookkeeping account under the ERP.


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(18) Represents the aggregate of: (a) 63,700 Common Shares which are the subject of RSUs granted to Mr. Hagedorn on October 8, 2008 and will vest on October 8, 2011; and (b) 37,500 Common Shares which are the subject of RSUs granted to Mr. Hagedorn on January 20, 2010 and will vest on January 20, 2013, in each case subject to earlier vesting or forfeiture in accordance with the terms of the applicable award agreement. Given the vesting schedules associated with the RSUs, the related 101,200 “Common Share Equivalents” are not included in the figures in the “Total” column or in the computation of the “Percent of Class” figures in the table.
 
(19) Represents Common Shares which are the subject of DSUs granted to Mr. Hanft on January 22, 2010, April 1, 2010, July 1, 2010 and October 1, 2010. The DSUs are 100% vested upon grant and shall be distributed in shares as soon as practicable following the earliest to occur of: (i) cessation of service as a director of the Company; (ii) death; (iii) disability; or (iv) January 31, 2015.
 
(20) Represents Common Shares which are the subject of DSUs granted to Mr. Hanft on January 22, 2010 and will vest on January 22, 2013, subject to earlier vesting or forfeiture in accordance with the terms of his award agreement. Given the vesting schedule of the DSUs, the related 2,341 “Common Share Equivalents” are not included in the figures in the “Total” column or in the computation of the “Percent of Class” figures in the table.
 
(21) Represents Common Shares which are the subject of DSUs granted to Mr. Johnson on November 12, 2010 and will vest on November 12, 2013, subject to earlier vesting or forfeiture in accordance with the terms of his award agreement. Given the vesting schedule of the DSUs, the related 320 “Common Share Equivalents” are not included in the figures in the “Total” column or in the computation of the “Percent of Class” figures in the table.
 
(22) Represents the aggregate of: (a) 2,097 Common Shares which are the subject of DSUs granted to Mr. Jurgensen on May 7, 2009 and will vest on May 7, 2012; and (b) 2,465 Common Shares which are the subject of DSUs granted to Mr. Jurgensen on January 22, 2010 and will vest on January 22, 2013, in each case subject to earlier vesting or forfeiture in accordance with the terms of the applicable award agreement. Given the vesting schedules of the DSUs, the related 4,562 “Common Share Equivalents” are not included in the figures in the “Total” column or in the computation of the “Percent of Class” figures in the table.
 
(23) Represents the aggregate of: (a) 2,683 Common Shares which are the subject of DSUs granted to Mr. Kelly on February 4, 2008 and will vest on February 4, 2011; (b) 3,846 Common Shares which are the subject of DSUs granted to Mr. Kelly on January 23, 2009 and will vest on January 23, 2012; and (c) 2,649 Common Shares which are the subject of DSUs granted to Mr. Kelly on January 22, 2010 and will vest on January 22, 2013, in each case subject to earlier vesting or forfeiture in accordance with the terms of the applicable award agreement. Given the vesting schedules of the DSUs, the related 9,178 “Common Share Equivalents” are not included in the figures in the “Total” column or in the computation of the “Percent of Class” figures in the table.
 
(24) Represents the aggregate of: (a) 3,217 Common Shares which are the subject of DSUs granted to Dr. Kohrt on February 4, 2008 and will vest on February 4, 2011; (b) 4,000 Common Shares which are the subject of DSUs granted to Dr. Kohrt on January 23, 2009 and will vest on January 23, 2012; and (c) 3,204 Common Shares which are the subject of DSUs granted to Dr. Kohrt on January 22, 2010 and will vest on January 22, 2013, in each case subject to earlier vesting or forfeiture in accordance with the terms of the applicable award agreement. Given the vesting schedules of the DSUs, the related 10,421 “Common Share Equivalents” are not included in the figures in the “Total” column or in the computation of the “Percent of Class” figures in the table.
 
(25) Ms. Littlefield is a general partner and the Chair of the Hagedorn Partnership and has shared voting and dispositive power with respect to the Common Shares held by the Hagedorn Partnership. See note (36) below for additional disclosures regarding the Hagedorn Partnership.
 
(26) Represents the aggregate of: (a) 2,547 Common Shares which are the subject of DSUs granted to Ms. Littlefield on February 4, 2008; (b) 3,692 Common Shares which are the subject of DSUs granted to Ms. Littlefield on January 23, 2009; and (c) 2,957 Common Shares which are the subject of DSUs granted to Ms. Littlefield on January 22, 2010. Based on the terms of her award agreements, the DSUs


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granted to Ms. Littlefield are not subject to risk of forfeiture because she has completed at least two terms of continuous service on the Board and has reached age 50, making her retirement eligible under her award agreements.
 
(27) Represents the aggregate of: (a) 4,000 Common Shares which are the subject of RSUs granted to Mr. Lopez on October 8, 2008 and will vest on October 8, 2011; (b) 36,400 Common Shares which are the subject of RSUs granted to Mr. Lopez on November 4, 2008 and will vest on November 4, 2011; and (c) 5,000 Common Shares which are the subject of RSUs granted to Mr. Lopez on January 20, 2010 and will vest on January 20, 2013, in each case subject to earlier vesting or forfeiture in accordance with the terms of the applicable award agreement. Given the vesting schedules associated with the RSUs, the related 45,400 “Common Share Equivalents” are not included in the figures in the “Total” column or in the computation of the “Percent of Class” figures in the table.
 
(28) Represents the aggregate of: (a) 2,883 Common Shares which are the subject of DSUs granted to Ms. Mistretta on February 4, 2008 and will vest on February 4, 2011; (b) 3,692 Common Shares which are the subject of DSUs granted to Ms. Mistretta on January 23, 2009 and will vest on January 23, 2012; and (c) 2,957 Common Shares which are the subject of DSUs granted to Ms. Mistretta on January 22, 2010 and will vest on January 22, 2013, in each case subject to earlier vesting or forfeiture in accordance with the terms of the applicable award agreement. Given the vesting schedules of the DSUs, the related 9,532 “Common Share Equivalents” are not included in the figures in the “Total” column or in the computation of the “Percent of Class” figures in the table.
 
(29) Represents the aggregate of: (a) 6,500 Common Shares which are the subject of a restricted stock grant made to Mr. Sanders on October 8, 2008 as to which the restriction period will lapse on October 8, 2011; and (b) 305 Common Shares held in a custodial account under the Discounted Stock Purchase Plan.
 
(30) Represents the aggregate of: (a) 37,559 Common Shares credited to the benchmark Company stock fund within Mr. Sanders’ bookkeeping account under the ERP as a result of his election in respect of the retention award granted to him on November 4, 2008; and (b) 8,700 Common Shares which are the subject of RSUs granted to Mr. Sanders on January 20, 2010 and will vest on January 20, 2013, subject to earlier vesting or forfeiture in accordance with the terms of his award agreement. Given the vesting schedules associated with Mr. Sanders’ interest in the retention award and the RSUs, the related 46,259 “Common Share Equivalents” are not included in the figures in the “Total” column or in the computation of the “Percent of Class” figures in the table.
 
(31) Represents the aggregate of: (a) 3,017 Common Shares which are the subject of DSUs granted to Mrs. Shern on February 4, 2008 and will vest on January 20, 2011; (b) 3,846 Common Shares which are the subject of DSUs granted to Mrs. Shern on January 23, 2009 and will vest on January 20, 2011; and (c) 2,773 Common Shares which are the subject of DSUs granted to Mrs. Shern on January 22, 2010 and will vest on January 20, 2011, in each case subject to earlier vesting or forfeiture in accordance with the terms of the applicable award agreement.
 
(32) Represents the aggregate of: (a) 2,683 Common Shares which are the subject of DSUs granted to Mr. Shiely on February 4, 2008 and will vest on February 4, 2011; (b) 3,078 Common Shares which are the subject of DSUs granted to Mr. Shiely on January 23, 2009 and will vest on January 23, 2012; and (c) 3,080 Common Shares which are the subject of DSUs granted to Mr. Shiely on January 22, 2010 and will vest on January 22, 2013, in each case subject to earlier vesting or forfeiture in accordance with the terms of the applicable award agreement. Given the vesting schedules of the DSUs, the related 8,841 “Common Share Equivalents” are not included in the figures in the “Total” column or in the computation of the “Percent of Class” figures in the table.
 
(33) See notes (12), (16), (25) and (29) above and note (36) below.
 
(34) See notes (14), (17), (19), (26) and (31) above.
 
(35) See notes (11), (13), (18), (20) through (24), (28), (30) and (32) above.
 
(36) The Hagedorn Partnership is the record owner of 19,893,216 Common Shares. Of those Common Shares, 3,500,000 are pledged as security for a line of credit with a bank. James Hagedorn, Katherine Hagedorn Littlefield, Paul Hagedorn, Peter Hagedorn, Robert Hagedorn and Susan Hagedorn are siblings, general


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partners of the Hagedorn Partnership and former shareholders of Stern’s Miracle-Gro Products, Inc. (“Miracle-Gro Products”). The general partners share voting and dispositive power with respect to the securities held by the Hagedorn Partnership. James Hagedorn and Katherine Hagedorn Littlefield are directors of the Company. Community Funds, Inc., a New York not-for-profit corporation (“Community Funds”), is a limited partner of the Hagedorn Partnership.
 
The Amended and Restated Agreement and Plan of Merger, dated as of May 19, 1995 (the “Miracle-Gro Merger Agreement”), among The Scotts Company, ZYX Corporation, Miracle-Gro Products, Stern’s Nurseries, Inc., Miracle-Gro Lawn Products Inc., Miracle-Gro Products Limited, the Hagedorn Partnership, the general partners of the Hagedorn Partnership, Horace Hagedorn, Community Funds and John Kenlon, as amended by the First Amendment to Amended and Restated Agreement and Plan of Merger, made and entered into as of October 1, 1999 (the “First Amendment”), limits the ability of the Hagedorn Partnership, Community Funds, Horace Hagedorn and John Kenlon (the “Miracle-Gro Shareholders”) to acquire additional voting securities of the Company. Under the terms of the Merger Agreement, as amended by the First Amendment, the Miracle-Gro Shareholders may not collectively acquire, directly or indirectly, beneficial ownership of Voting Stock (defined in the Miracle-Gro Merger Agreement, as amended by the First Amendment, to mean the Common Shares and any other securities issued by the Company which are entitled to vote generally for the election of directors of the Company) representing more than 49% of the total voting power of the outstanding Voting Stock, except pursuant to a tender offer for 100% of that total voting power, which tender offer is made at a price per share which is not less than the market price per share on the last trading day before the announcement of the tender offer and is conditioned upon the receipt of at least 50% of the Voting Stock beneficially owned by shareholders of the Company other than the Miracle-Gro Shareholders and their affiliates and associates.
 
(37) All information presented in this table regarding Prudential plc (“Prudential”) and M&G Investment Management Limited (“M&G”), other than the “Percent of Class” figures, was derived from the Form 13F Holdings Report for the quarter ended September 30, 2010 (the “Prudential Form 13F”), filed by Prudential with the SEC on October 28, 2010 to report Common Shares as to which investment discretion was exercised by M&G as of September 30, 2010.
 
(38) In the Prudential Form 13F, Prudential reported that M&G had shared investment discretion and sole voting authority with respect to 3,592,680 Common Shares.


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PROPOSAL NUMBER 2
 
RATIFICATION OF THE SELECTION OF THE
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
Deloitte & Touche LLP (“Deloitte”) has served as the Company’s independent registered public accounting firm since fiscal year 2005 and audited the Company’s consolidated financial statements as of and for the fiscal year ended September 30, 2010, and the Company’s internal control over financial reporting as of September 30, 2010. The Audit Committee is directly responsible for the selection of the Company’s independent registered public accounting firm and has selected Deloitte to audit the Company’s consolidated financial statements for the fiscal year ending September 30, 2011. Although it is not required to do so, the Board has determined to submit the Audit Committee’s selection of the independent registered public accounting firm to the Company’s shareholders for ratification as a matter of good corporate governance. In the event that the Audit Committee’s selection of Deloitte as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2011 is not ratified by the holders of a majority of the Common Shares represented at the Annual Meeting (with an abstention being treated the same as a vote “AGAINST”), the Audit Committee will evaluate such shareholder vote when considering the selection of an independent registered public accounting firm for the fiscal year ending September 30, 2012. Even if the selection of Deloitte is ratified, the Audit Committee, in its discretion, could decide to terminate the engagement of Deloitte and to engage another independent registered public accounting firm if the Audit Committee determines such action is necessary or desirable.
 
Representatives of Deloitte are expected to be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
 
YOUR BOARD OF DIRECTORS AND THE AUDIT COMMITTEE RECOMMEND THAT SHAREHOLDERS VOTE FOR THE RATIFICATION OF THE AUDIT COMMITTEE’S SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2011.
 
AUDIT COMMITTEE MATTERS
 
In accordance with applicable SEC Rules, the Audit Committee has issued the following report:
 
Report of the Audit Committee for the 2010 Fiscal Year
 
Role of the Audit Committee, Independent Registered Public Accounting Firm and Management
 
The Audit Committee consists of four directors, each of whom satisfies the applicable independence requirements set forth in the NYSE Rules and under SEC Rule 10A-3, and operates under a written charter adopted by the Board. A copy of the Audit Committee charter is posted under the “Corporate Governance” link on the Company’s Internet website at http://investor.scotts.com. The Audit Committee is responsible for the appointment, compensation and oversight of the work of the Company’s independent registered public accounting firm. Deloitte was appointed to serve as the Company’s independent registered public accounting firm for the 2010 fiscal year.
 
Management has the primary responsibility for the preparation, presentation and integrity of the Company’s consolidated financial statements, for the appropriateness of the accounting principles and reporting policies that are used by the Company and its subsidiaries, for the accounting and financial reporting processes of the Company, including the establishment and maintenance of adequate systems of disclosure controls and procedures and internal control over financial reporting, and for the preparation of the annual report on management’s assessment of the effectiveness of the Company’s internal control over financial reporting. The Company’s independent registered public accounting firm is responsible for performing an audit of the Company’s annual consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and issuing its report thereon based on such audit, for issuing an attestation report on the Company’s internal control over financial reporting and for reviewing the Company’s unaudited interim consolidated financial statements. The Audit Committee’s responsibility is to provide independent, objective oversight of these processes.


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In discharging its oversight responsibilities, the Audit Committee regularly met with management of the Company, Deloitte and the Company’s internal auditors. The Audit Committee often met with each of these groups in executive sessions. Throughout the relevant period, the Audit Committee had full access to management, Deloitte and the internal auditors for the Company. To fulfill its responsibilities, the Audit Committee did, among other things, the following:
 
  •  reviewed the work performed by the Company’s internal auditors;
 
  •  monitored the progress and results of the testing of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, reviewed a report from management and the Company’s internal auditors regarding the design, operation and effectiveness of internal control over financial reporting and reviewed an attestation report from Deloitte regarding the Company’s internal control over financial reporting;
 
  •  reviewed the audit plan and scope of the audit with Deloitte and discussed with Deloitte the matters required to be discussed by auditing standards generally accepted in the United States, including those described in Statement on Auditing Standards No. 114, The Auditor’s Communication With Those Charged With Governance, as amended;
 
  •  reviewed and discussed with management and Deloitte the Company’s consolidated financial statements for the 2010 fiscal year;
 
  •  reviewed management’s representations that those consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States and fairly present the consolidated results of operations and financial position of the Company and its subsidiaries;
 
  •  received the written disclosures and the letter from Deloitte required by applicable requirements of the Public Company Accounting Oversight Board regarding Deloitte’s communications with the Audit Committee concerning independence, and discussed with Deloitte its independence;
 
  •  reviewed all audit and non-audit services performed for the Company and its subsidiaries by Deloitte and considered whether the provision of non-audit services was compatible with maintaining Deloitte’s independence from the Company and its subsidiaries;