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THE SCOTTS COMPANY
1996 STOCK OPTION PLAN
(REFLECTS AMENDMENTS THROUGH MAY 15, 2000)
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THE SCOTTS COMPANY
1996 STOCK OPTION PLAN
(REFLECTS AMENDMENTS THROUGH MAY 15, 2000)
SECTION 1.
PURPOSE
The purpose of the Plan is to foster and promote the long-term
financial success of the Company and materially increase shareholder value by
(a) encouraging and providing for the acquisition of an ownership interest in
the Company by Employees and Eligible Directors, and (b) enabling the Company to
attract and retain the services of an outstanding management team upon whose
judgment, interest, and special effort the successful conduct of its operations
is largely dependent.
SECTION 2.
DEFINITIONS
2.1 Definitions. Whenever used herein, the following terms shall have
the respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Annual Meeting" means the annual meeting of the shareholders of
the Company.
(c) "Annual Retainer" means the annual retainer fee, established by the
Board, paid to an Eligible Director for services on the Board.
(d) "Award" means any Option or Stock Unit.
(e) "Board" means the Board of Directors of the Company.
(f) "Cause" means (i) the willful failure by a Participant to perform
substantially the Participant's duties as an Employee of the Company (other than
due to physical or mental illness) after reasonable notice to the Participant of
such failure, (ii) the Participant's engaging in serious misconduct that is
injurious to the Company or any Subsidiary, (iii) the Participant's having been
convicted of, or entered a plea of nolo contendere to, a crime that constitutes
a felony or (iv) the breach by the Participant of any written covenant or
agreement with the Company or any Subsidiary not to disclose any information
pertaining to the Company or any Subsidiary or not to compete or interfere with
the Company or any Subsidiary.
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(g) "Change in Control" means the occurrence of any of the following
events:
(i) the members of the Board at the beginning of any
consecutive twenty-four calendar month period (the "Incumbent
Directors") cease for any reason other than due to death to constitute
at least a majority of the members of the Board, provided that any
director whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
members of the Board then still in office who were members of the Board
at the beginning of such twenty-four calendar month period, shall be
treated as an Incumbent Director; or
(ii) any "person," including a "group" (as such terms are used
in Sections 13(d) and 14(d)(2) of the Act, but excluding the Company,
any of its Subsidiaries, or any employee benefit plan of the Company or
of any of its Subsidiaries) is or becomes the "beneficial owner" (as
defined in Rule 13(d)(3) under the Act), directly or indirectly, of
securities of the Company representing more than 49% of the combined
voting power of the Company's then outstanding securities; or
(iii) the shareholders of the Company shall approve a
definitive agreement (1) for the merger or other business combination
of the Company with or into another corporation, a majority of the
directors of which were not directors of the Company immediately prior
to the merger and in which the shareholders of the Company immediately
prior to the effective date of such merger own less than 50% of the
voting power in such corporation; or (2) for the sale or other
disposition of all or substantially all of the assets of the Company;
or
(iv) the purchase of Stock pursuant to any tender or exchange
offer made by any "person," including a "group" (as such terms are used
in Sections 13(d) and 14(d)(2) of the Act), other than the Company, any
of its Subsidiaries, or an employee benefit plan of the Company or of
any of its Subsidiaries, for more than 49% of the Stock of the Company.
(h) "Change in Control Price" means the highest price per share of
Stock offered in conjunction with any transaction resulting in a Change in
Control (as determined in good faith by the Committee if any part of the offered
price is payable other than in cash) or, in the case of a Change in Control
occurring solely by reason of a change in the composition of the Board, the
highest Fair Market Value of the Stock on any of the 30 trading days immediately
preceding the date on which a Change in Control occurs.
(i) "Code" means the Internal Revenue Code of 1986, as amended.
(j) "Committee" means the Compensation and Organization Committee of
the Board which shall have the meaning ascribed to a "compensation committee" in
Section 1.162-27(c)(4) of the final regulations promulgated under Section 162(m)
of the Code and
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which shall consist of three or more members, each of whom shall be (i) a person
from time to time permitted by the rules promulgated under Section 16 of the Act
in order for grants of Awards to be exempt transactions under said Section 16
and (ii) receiving remuneration in no other capacity than as a director, except
as permitted under Section 1.162-27(e)(3) of the final regulations promulgated
under Section 162(m) of the Code and the rulings thereunder.
(k) "Company" means The Scotts Company, an Ohio corporation, and any
successor thereto.
(l) "Director Option" means a "nonstatutory stock option" ("NSO")
granted to each Eligible Director pursuant to Section 6.6 without any action by
the Board or the Committee.
(m) "Disability" means the inability of the Participant to perform the
Participant's duties for a period of at least six months due to a physical or
medical infirmity. Notwithstanding the foregoing, with respect to Incentive
Stock Options, the term "Disability" shall be defined as such term is defined in
Section 22(e)(3) of the Code.
(n) "Eligible Director" means, on any date, a person who is serving as
a member of the Board and who is not an Employee.
(o) "Employee" means any officer or other key executive and management
employee of the Company or of any of its Subsidiaries.
(p) "Fair Market Value" means, on any date, the closing price of the
Stock as reported on the New York Stock Exchange (or on such other recognized
market or quotation system on which the trading prices of the Stock are traded
or quoted at the relevant time) on such date. In the event that there are no
Stock transactions reported on the New York Stock Exchange (or such other market
or system) on such date, Fair Market Value shall mean the closing price on the
immediately preceding date on which Stock transactions were so reported.
(q) "Option" means the right to purchase Stock at a stated price for a
specified period of time. For purposes of the Plan, an Option may be either (i)
an "Incentive Stock Option" (ISO) within the meaning of Section 422 of the Code
or (ii) an NSO which does not qualify for treatment as an "Incentive Stock
Option."
(r) "Participant" means any Employee designated by the Committee to
participate in the Plan.
(s) "Plan" means The Scotts Company 1996 Stock Option Plan, as in
effect from time to time.
(t) "Retirement" means termination of a Participant's employment on or
after the normal retirement date or, with the Committee's approval, on or after
any early
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retirement date established under any retirement plan maintained by the Company
or a Subsidiary in which the Participant participates.
(u) "Stock" means the Common Shares, without par value, of the Company.
(v) "Stock Unit" means a right to receive payment, in accordance with
the provisions hereof, of the Fair Market Value of a share of Stock.
(w) "Subsidiary" means any corporation or partnership in which the
Company owns, directly or indirectly, 50% or more of the total combined voting
power of all classes of stock of such corporation or of the capital interest or
profits interest of such partnership.
2.2 Gender and Number. Except when otherwise indicated by the context,
words in the masculine gender used in the Plan shall include the feminine
gender, the singular shall include the plural, and the plural shall include the
singular.
SECTION 3.
ELIGIBILITY AND PARTICIPATION
Except as otherwise provided in Sections 6.6 and 6.7, the only persons
eligible to participate in the Plan shall be those Employees selected by the
Committee as Participants.
SECTION 4.
POWERS OF THE COMMITTEE
4.1 Power to Grant. The Committee shall determine the Participants to
whom Options shall be granted, the type or types of Options to be granted and
the terms and conditions of any and all such Options. The Committee may
establish different terms and conditions for different types of Options, for
different Participants receiving the same type of Option and for the same
Participant for each Option such Participant may receive, whether or not granted
at different times.
4.2 Administration. The Committee shall be responsible for the
administration of the Plan. The Committee, by majority action thereof, is
authorized to prescribe, amend, and rescind rules and regulations relating to
the Plan, to provide for conditions deemed necessary or advisable to protect the
interests of the Company, and to make all other determinations (including,
without limitation, whether a Participant has incurred a Disability) necessary
or advisable for the administration and interpretation of the Plan in order to
carry out its provisions and purposes. Determinations, interpretations, or other
actions made or taken by the Committee pursuant to the provisions of the Plan
shall be final, binding, and conclusive for all purposes and upon all persons.
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SECTION 5.
STOCK SUBJECT TO PLAN
5.1 Number. Subject to the provisions of Section 5.3, the number of
shares of Stock subject to Awards under the Plan may not exceed 5,500,000 shares
of Stock. Subject to the provisions of Section 5.3, no Participant shall receive
Options for more than 150,000 shares of Stock over any one-year period. For this
purpose, to the extent that any Option is canceled (as described in Section
1.162-27(e)(2)(vi)(B) of the final regulations promulgated under Section 162(m)
of the Code), such canceled Option shall continue to be counted against the
maximum number of shares of Stock for which Options may be granted to a
Participant under the Plan. The shares of Stock to be delivered under the Plan
may consist, in whole or in part, of treasury Stock or authorized but unissued
Stock, not reserved for any other purpose.
5.2 Canceled, Terminated, or Forfeited Awards. Except as provided in
Section 5.1, any shares of Stock subject to an Award which for any reason is
canceled, terminated or otherwise settled without the issuance of any Stock
shall again be available for Awards under the Plan.
5.3 Adjustment in Capitalization. In the event of any Stock dividend or
Stock split, recapitalization (including, without limitation, the payment of an
extraordinary dividend), merger, consolidation, combination, spin-off,
distribution of assets to shareholders, exchange of shares, or other similar
corporate change, the aggregate number of shares of Stock available for Awards
under Section 5.1 or subject to outstanding Awards and the respective prices
and/or limitations applicable to outstanding Awards shall be appropriately
adjusted by the Committee, whose determination shall be conclusive. A
corresponding adjustment shall be made to the number of shares subject to
outstanding Director Options and Stock Units, and a corresponding adjustment
shall also be made to the number of shares subject to each Director Option and
each Stock Unit thereafter granted pursuant to Section 6.6 or Section 6.7.
SECTION 6.
OPTIONS AND STOCK UNITS
6.1 Grant of Options. Options may be granted to Participants at such
time or times as shall be determined by the Committee. Options granted under the
Plan may be of two types: (i) Incentive Stock Options and (ii) NSOs. The
Committee shall have complete discretion in determining the number of Options,
if any, to be granted to a Participant. Without limiting the foregoing, the
Committee may grant Options containing provisions for the issuance to the
Participant, upon exercise of such Option and payment of the exercise price
therefor with previously owned shares of Stock, of an additional Option for the
number of shares so delivered, having such other terms and conditions not
inconsistent with the Plan as the Committee shall determine. Each Option shall
be evidenced by an Option
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agreement that shall specify the type of Option granted, the exercise price, the
duration of the Option, the number of shares of Stock to which the Option
pertains, and such other terms and conditions not inconsistent with the Plan as
the Committee shall determine.
6.2 Option Price. NSOs and Incentive Stock Options granted pursuant to
the Plan shall have an exercise price which is not less than the Fair Market
Value of the Stock on the date the Option is granted. To the extent that an
Incentive Stock Option is granted to a Participant who owns (actually or
constructively under the provisions of Section 424(d) of the Code) Stock
possessing more than 10% of the total combined voting power of all classes of
Stock of the Company or of any Subsidiary, such Incentive Stock Option shall
have an exercise price which is not less than 110% of the Fair Market Value on
the date the Option is granted.
6.3 Exercise of Options. Options granted to a Participant under the
Plan shall be exercisable at such times and shall be subject to such
restrictions and conditions including the performance of a minimum period of
service, as the Committee may impose, either at or after the time of grant of
such Options; provided, however, that if the Committee does not specify another
exercise schedule at the time of grant, each Option shall become exercisable on
the third anniversary of the date of grant, subject to the Committee's right to
accelerate the exercisability of such Option in its discretion. Notwithstanding
the foregoing, no Option shall be exercisable for more than ten years after the
date on which it is granted; provided, however, in the case of an Incentive
Stock Option granted to a Participant who owns (actually or constructively under
the provisions of Section 424(d) of the Code) Stock possessing more than 10% of
total combined voting power of all classes of Stock of the Company or any
Subsidiary, such Incentive Stock Option shall not be exercisable for more than
five years after the date on which it is granted.
6.4 Payment. The Committee shall establish procedures governing the
exercise of Options, which shall require that written notice of exercise be
given and that the Option price be paid in full in cash or equivalents,
including by personal check, at the time of exercise or pursuant to any
arrangement that the Committee shall approve. The Committee may, in its
discretion, permit a Participant or an Eligible Director to tender Stock already
owned by the Participant or the Eligible Director, either by actual delivery of
the shares of Stock or by attestation, valued at its Fair Market Value on the
date of exercise, as partial or full payment of the exercise price. As soon as
practicable after receipt of a written exercise notice and full payment of the
exercise price, the Company shall deliver to the Participant or the Eligible
Director a certificate or certificates representing the acquired shares of
Stock.
6.5 Incentive Stock Options. Notwithstanding anything in the Plan to
the contrary, no term of this Plan relating to Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be so exercised, so as to disqualify the Plan under Section 422
of the Code, or, without the consent of any Participant affected thereby, to
cause any Incentive Stock Option previously granted to fail to qualify for the
Federal income tax treatment afforded under Section 421 of the Code. Further,
the aggregate Fair Market Value (determined as of the time an Incentive Stock
Option is
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granted) of the Stock with respect to which Incentive Stock Options are
exercisable for the first time by any Participant during any calendar year
(under all option plans of the Company and all Subsidiaries of the Company)
shall not exceed $100,000.
6.6 Director Options. Notwithstanding anything else contained herein to
the contrary, on the first business day following the date of each annual
meeting of shareholders during the term of the Plan, each Eligible Director
shall receive a Director Option to purchase 5,000 shares of Stock at an exercise
price per share equal to the Fair Market Value of the Stock on the date of
grant. An Eligible Director who is a member of one or more Board committees,
shall receive an additional grant covering 500 shares of Stock for each
committee of which the Eligible Director is a member. An Eligible Director who
chairs one or more Board committees shall receive (over and above that
additional grant covering 500 shares for each committee membership) an
additional grant covering 1,000 shares of Stock for each committee the Eligible
Director chairs. Each Director Option shall be exercisable six months after the
date of grant and shall remain exercisable until the earlier to occur of (a) the
tenth anniversary of the date of grant or (b) the first anniversary of the date
the Eligible Director ceases to be a member of the Board, except that (i) if the
Eligible Director ceases to be a member of the Board after having been convicted
of, or pled guilty or nolo contendere to, a felony, the Eligible Director's
Director Options shall be canceled on the date the Eligible Director ceases to
be a director, or (ii) if the Eligible Director ceases to be a member of the
Board due to a Director Retirement, any Director Options granted to such
Eligible Director which are then outstanding (whether or not exercisable prior
to the date of such Director Retirement), may be exercised at any time prior to
the expiration of the term of the Director Options or within five years
following the Director Retirement, whichever period is shorter. For the purposes
of this Section 6.6, "Director Retirement" means the retirement of an Eligible
Director from service on the Board after having served at least ten years as a
member of the Board and after having attained the age of 55, unless the Board
specifies a shorter period of required service. An Eligible Director may
exercise a Director Option in the manner described in Section 6.4.
6.7 Stock Units. Effective beginning in the calendar year 2000, each
Eligible Director shall be provided with the opportunity to elect to receive all
or a portion, in 25% increments, of the Eligible Director's Annual Retainer: (a)
in cash or (b) in Stock Units. An Eligible Director's first such election shall
be made on a form provided by the Committee at least two weeks in advance of the
2000 Annual Meeting. Such election shall be effective until the next Annual
Meeting. Elections for annual periods thereafter shall be made on an annual
basis, at least two weeks in advance of the applicable Annual Meeting. In the
event no election is received from an Eligible Director for an applicable
period, the Eligible Director shall be deemed to have elected payment of the
Eligible Director's Annual Retainer in cash. Any portion of an Eligible
Director's Annual Retainer which is elected to be paid in cash shall be paid in
accordance with the Company's regular practice for such payments. To the extent
that the Eligible Director elects to receive Stock Units in lieu of all or a
portion of the Eligible Director's Annual Retainer, the Eligible Director shall
receive a number of Stock Units (including fractional Stock Units) determined by
dividing the dollar amount of Annual Retainer elected by the Fair Market Value
of a share of Stock on the next
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business day following the date of the Annual Meeting; provided that for the
calendar year 2000, the Fair Market Value as of March 31, 2000 shall be the
value used. All payments in respect of Stock Units shall be settled as soon as
practicable after the earlier of (a) the occurrence of a Change in Control or
(b) the Eligible Director's cessation of service on the Board; provided,
however, that if the Eligible Director has elected on a form provided by the
Committee at least one year prior to the commencement of payment of the value of
the Eligible Director's Stock Units, payment thereof shall be made over a period
of up to ten years, as elected by the Eligible Director. All such payments to
the Eligible Director shall be made in cash or in Stock, as elected by the
Eligible Director on the deferral form provided by the Committee. If
distributions are made in cash pursuant to such Eligible Director's election,
distribution shall be made at Fair Market Value determined as of the date
immediately preceding the date of distribution. Upon the death of an Eligible
Director, the value of any unpaid Stock Units shall be paid in a lump sum in
cash in accordance with the provisions of Section 10.2.
SECTION 7.
TERMINATION OF EMPLOYMENT
7.1 Termination of Employment Due to Retirement. Unless otherwise
determined by the Committee at the time of grant, in the event a Participant's
employment terminates by reason of Retirement, any Options granted to such
Participant which are then outstanding (whether or not exercisable prior to the
date of such termination) may be exercised at any time prior to the expiration
of the term of the Options or within five years (or such shorter period as the
Committee shall determine at the time of grant) following the Participant's
termination of employment, whichever period is shorter. Notwithstanding any
provision contained herein, with respect to any Incentive Stock Option, a
Participant who terminates the Participant's employment by reason of Retirement
may exercise such Incentive Stock Option at any time prior to the expiration of
the term of the Option or within three months following the Participant's
termination of employment, whichever period is shorter.
7.2 Termination of Employment Due to Death or Disability. Unless
otherwise determined by the Committee at the time of grant, in the event a
Participant's employment terminates by reason of death or Disability, any
Options granted to such Participant which are then outstanding (whether or not
exercisable prior to the date of such termination) may be exercised by the
Participant or the Participant's designated beneficiary, and if none is named,
in accordance with Section 10.2, at any time prior to the expiration date of the
term of the Options or within five years (or such shorter period as the
Committee shall determine at the time of grant) following the Participant's
termination of employment, whichever period is shorter. Notwithstanding any
provision contained herein, with respect to any Incentive Stock Option, a
Participant whose employment terminates by reason of death or Disability may
exercise (or the Participant's designated beneficiary may exercise, in the case
of death) such Incentive Stock Option at any time prior to the expiration of the
term of the Option or within one year following the Participant's termination of
employment, whichever period is shorter.
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7.3 Termination of Employment For Cause. Unless otherwise determined by
the Committee at the time of grant, in the event a Participant's employment is
terminated for Cause, any Options granted to such Participant which are then
outstanding (whether or not exercisable prior to the date of such termination)
shall be forfeited.
7.4 Termination of Employment for Any Other Reason. Unless otherwise
determined by the Committee at or after the time of grant, in the event the
employment of the Participant shall terminate for any reason other than one
described in Section 7.1, 7.2 or 7.3, any Options granted to such Participant
which are exercisable at the date of the Participant's termination of
employment, or on such accelerated basis as the Committee may have determined in
its discretion, shall remain exercisable until the earlier to occur of (a) the
expiration of the term of such Options or (b) the ninetieth day following the
Participant's termination of employment, whichever period is shorter.
7.5 Limitations on Exercisability Following Termination of Employment.
No Options shall be exercisable after termination of employment unless the
Participant shall have, during the time period in which the Options are
exercisable, (a) refrained from serving as an officer, director or employee of
any individual, partnership or corporation, or the owner of a business, or a
member of a partnership which conducts business in competition with the Company
or renders any service (including, without limitation, advertising agencies and
business consultants) to competitors with any portion of the business of the
Company, (b) been available, if so requested by the Company, at reasonable times
and upon a reasonable basis, to consult with, supply information to, and
otherwise cooperate with, the Company, and (c) refrained from engaging in a
deliberate action which has been determined by the Committee to cause
substantial harm to the interests of the Company. If any of these conditions is
not fulfilled, the Committee may require the Participant to forfeit all rights
to any Options which have not been exercised prior to the date of the breach of
the condition.
SECTION 8.
CHANGE IN CONTROL
8.1 Accelerated Vesting and Payment. Subject to the provisions of
Section 8.2 below, in the event of a Change in Control, each Participant shall
be permitted, in the Participant's discretion, to surrender any Option
(excluding any Director Option) or portion thereof in exchange for a payment in
cash of an amount equal to the excess of the Change in Control Price over the
exercise price of the Option. Such right to surrender an Option in exchange for
a payment in cash shall remain in effect only during the fifteen-day period
commencing with the day following the date of a Change in Control. Thereafter,
the Option shall only be exercisable in accordance with the terms and conditions
of the Stock Option Agreement and the provisions of the Plan.
8.2 Alternative Awards. Notwithstanding Section 8.l, no cancellation or
cash settlement or other payment shall occur with respect to any Option or any
class of Options if
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the Committee reasonably determines in good faith prior to the occurrence of a
Change in Control that such Option or Options shall be honored or assumed, or
new rights substituted therefor (such honored, assumed or substituted award
hereinafter called an "Alternative Award"), by a Participant's employer (or the
parent or a subsidiary of such employer) immediately following the Change in
Control, provided that any such Alternative Award must:
(a) be based on stock which is traded on an established securities
market, or which will be so traded within 60 days of the Change in Control;
(b) provide such Participant (or each Participant in a class of
Participants) with rights and entitlements substantially equivalent to or better
than the rights, terms and conditions applicable under such Option, including,
but not limited to, an identical or better exercise or vesting schedule and
identical or better timing and methods of payment;
(c) have substantially equivalent economic value to such Option
(determined at the time of the Change in Control); and
(d) have terms and conditions which provide that in the event that the
Participant's employment is involuntarily terminated or constructively
terminated, any conditions on a Participant's rights under, or any restrictions
on transfer or exercisability applicable to, each such Alternative Award shall
be waived or shall lapse, as the case may be.
For this purpose, a constructive termination shall mean a termination
by a Participant following a material reduction in the Participant's
compensation, a material reduction in the Participant's responsibilities or the
relocation of the Participant's principal place of employment to another
location, in each case without the Participant's written consent.
8.3 Director Options and Stock Units. Upon a Change in Control, each
Director Option granted to an Eligible Director and all Stock Units credited to
an Eligible Director shall be canceled in exchange for a payment in cash. The
amount of cash exchanged for each Director Option shall be the excess of the
Change in Control Price over the exercise price for such Director Option unless
(a) the Stock remains traded on an established securities market following the
Change in Control and (b) such Eligible Director remains on the Board following
the Change in Control. The amount of cash exchanged for each Stock Unit shall be
the Change in Control Price.
8.4 Options Granted Within Six Months of the Change in Control. If any
Option (including a Director Option) granted within six months of the date on
which a Change in Control occurs (a) is held by a person subject to the
reporting requirements of Section 16(a) of the Act and (b) is to be cashed out
pursuant to Section 8.1 or 8.3, such cash out shall not occur unless and until,
in the opinion of the Company's counsel, such cash out could occur without such
reporting person being potentially subject to liability under Section 16(b) of
the Act by reason of such cash out.
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SECTION 9.
AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN
The Board or the Committee may at any time terminate or suspend the
Plan, and from time to time may amend or modify the Plan. Any such amendment,
termination or suspension may be made without the approval of the shareholders
of the Company except as such shareholder approval may be required (a) to
satisfy the requirements of Rule 16b-3 under the Act, or any successor rule or
regulation, (b) to satisfy applicable requirements of the Code or (c) to satisfy
applicable requirements of any securities exchange on which are listed any of
the Company's equity securities. No amendment of the Plan shall result in any
loss of a Committee member's status as a "non-employee director" as defined in
Rule 16b-3 under the Act, or any successor rule or regulation, with respect to
any employee benefit plan of the Company or result in the Plan losing its status
as a plan satisfying the requirements of said Rule 16b-3. No amendment,
modification, or termination of the Plan shall in any manner adversely affect
any Award theretofore made under the Plan, without the consent of the
Participant.
SECTION 10.
MISCELLANEOUS PROVISIONS
10.1 Assignability. With the permission of the Committee, a Participant
or a specified group of Participants who has or have been granted an NSO under
the Plan, may transfer such Option to a revocable inter vivos trust as to which
the Participant is the settlor or may transfer such Option to a "Permissible
Transferee." A Permissible Transferee shall be defined as any member of the
immediate family of the Participant, any trust, whether revocable or
irrevocable, solely for the benefit of members of the Participant's immediate
family, or any partnership or limited liability company whose only partners or
members are members of the Participant's immediate family. Any such transferee
of an NSO shall remain subject to all of the terms and conditions applicable to
such NSO and subject to the rules and regulations prescribed by the Committee.
An NSO may not be retransferred by a Permissible Transferee except by will or
the laws of descent and distribution and then only to another Permissible
Transferee. Other than as described above, an Option granted under the Plan may
not be transferred except by will or the laws of descent and distribution and,
during the lifetime of the Participant to whom granted, may be exercised only by
the Participant, the Participant's guardian or legal representative.
With the permission of the Committee, an Eligible Director who has been
granted a Director Option or has received a Stock Unit under the Plan, may
transfer such Director Option or Stock Unit to a revocable inter vivos trust as
to which the Eligible Director is the settlor or may transfer such Director
Option or Stock Unit to a "Permissible Transferee." A Permissible Transferee
shall be defined as any member of the immediate family of the Eligible Director,
any trust, whether revocable or irrevocable, solely for the benefit of
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members of the Eligible Director's immediate family, or any partnership or
limited liability company whose only partners or members are members of the
Eligible Director's immediate family. Any such transferee shall remain subject
to all of the terms and conditions applicable to such Director Option or Stock
Unit and subject to the rules and regulations prescribed by the Committee. A
Director Option or Stock Unit may not be retransferred by a Permissible
Transferee except by will or the laws of descent and distribution and then only
to another Permissible Transferee. Other than as described above, a Director
Option granted or Stock Unit received under the Plan may not be transferred
except by will or the laws of descent and distribution and, during the lifetime
of the Eligible Director to whom granted or by whom received, may be exercised
only by the Eligible Director or the Eligible Director's guardian or legal
representative.
10.2 Beneficiary Designation. Each Participant and each Eligible
Director may from time to time name a beneficiary or beneficiaries (who may be
named contingently or successively) to whom any benefit under the Plan is to be
paid or by whom any right under the Plan is to be exercised in case of the
Participant's or Eligible Director's death. Each designation shall revoke all
prior designations by the same Participant or Eligible Director, shall be in a
form prescribed by the Committee, and shall be effective only when filed in
writing with the Committee. In the absence of any such designation, benefits
remaining unpaid at the Participant's or Eligible Director's death shall be paid
to the Participant or Eligible Director's surviving spouse, if any, or otherwise
to the Participant's or Eligible Director's estate and Options outstanding at
the Eligible Director's death shall be exercised by the Participant or Eligible
Director's surviving spouse, if any, or otherwise by the Participant's or
Eligible Director's estate.
10.3 No Guarantee of Employment or Participation. Nothing in the Plan
shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Company or any
Subsidiary. No Employee shall have a right to be selected as a Participant, or,
having been so selected, to receive any future Awards. Nothing in the Plan shall
confer upon an Eligible Director a right to continue to serve on the Board or to
be nominated for reelection to the Board.
10.4 Tax Withholding. The Company shall have the power to withhold, or
require a Participant or Eligible Director to remit to the Company, an amount
sufficient to satisfy Federal, state, and local withholding tax requirements on
any Award under the Plan, and the Company may defer payment of cash or issuance
of Stock until such requirements are satisfied. The Committee may, in its
discretion, permit a Participant or an Eligible Director to elect, subject to
such conditions as the Committee shall impose, (a) to have shares of Stock
otherwise issuable under the Plan withheld by the Company or (b) to deliver to
the Company previously acquired shares of Stock having a Fair Market Value
sufficient to satisfy all or part of the Participant's or the Eligible
Director's estimated total Federal, state, and local tax obligation associated
with the transaction.
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10.5 Indemnification. Each person who is or shall have been a member of
the Committee or of the Board shall be indemnified and held harmless by the
Company against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by such person in connection with or
resulting from any claim, action, suit, or proceeding to which such person may
be made a party or in which such person may be involved by reason of any action
taken or failure to act under the Plan and against and from any and all amounts
paid by such person in settlement thereof, with the Company's approval, or paid
by such person in satisfaction of any judgment in any such action, suit, or
proceeding against such person provided such person shall give the Company an
opportunity, at its own expense, to handle and defend the same before such
person undertakes to handle and defend it on such person's own behalf. The
foregoing right of indemnification shall not be exclusive and shall be
independent of any other rights of indemnification to which such persons may be
entitled under the Company's articles of incorporation or code of regulations,
by contract, as a matter of law, or otherwise.
10.6 No Limitation on Compensation. Nothing in the Plan shall be
construed to limit the right of the Company to establish other plans or to pay
compensation to its Employees or directors, in cash or property, in a manner
which is not expressly authorized under the Plan.
10.7 International Employees. It is the Company's desire to provide the
same motivation to materially increase shareholder value and to enable the
Company to attract and retain the services of outstanding managers in the
international locations where the Company maintains facilities and employs
people. To this end, the Company will adopt incentives in its foreign locations
that provide as closely as possible the same motivational effect as Options
provide to domestic Participants. The Committee may grant Options to employees
who are subject to the tax laws of nations other than the United States, which
Options may have terms and conditions that differ from other Options granted
under the Plan for the purposes of complying with foreign tax laws.
10.8 Requirements of Law. The making of Awards and the issuance of
shares of Stock shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required. Notwithstanding the foregoing, no Stock shall be
issued under the Plan unless the Company is satisfied that such issuance will be
in compliance with applicable federal and state securities laws. Certificates
for Stock delivered under the Plan may be subject to such stock transfer orders
and other restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Stock is then listed or traded, the Nasdaq
National Market or any applicable federal or state securities law. The Committee
may cause a legend or legends to be placed on any such certificates to make
appropriate reference to such restrictions.
10.9 Term of Plan. The Plan shall be effective upon its adoption by the
Committee, subject to approval by the Board and approval by the affirmative vote
of the holders of a majority of the shares of voting stock present in person or
represented by proxy at the 1996
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Annual Meeting. The Plan shall continue in effect, unless sooner terminated
pursuant to Section 9, until the tenth anniversary of the date on which it is
adopted by the Board.
10.10 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Ohio.
10.11 No Impact On Benefits. Plan Awards are not compensation for
purposes of calculating an Employee's rights under any employee benefit plan.
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