EXHIBIT 10.5(b)(i)
TRUST AGREEMENT
Between
 
THE SCOTTS COMPANY
And
FIDELITY MANAGEMENT TRUST COMPANY
 
THE SCOTTS COMPANY NONQUALIFIED DEFERRED COMPENSATION
TRUST
Dated as of January 1, 1998

 

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TABLE OF CONTENTS

          Section   Page
1 Trust
    2  
(a) Establishment
       
(b) Grantor Trust
       
(c) Trust Assets
       
(d) Non-Assignment
       
(e) Irrevocability
       
(f) Income
       
 
       
2 Payments to Sponsor
    3  
 
       
3 Disbursements
    3  
(a) Directions from Sponsor
       
(b) Plan Claims
       
(c) Limitations
       
 
       
4 Investment of Trust
    4  
(a) Selection of investment Options
       
(b) Available Investment Options
       
(c) Investment Directions
       
(d) Mutual Funds
       
(e) Sponsor Stock
       
(f) Trustee Powers
       
 
       
5 Recordkeeping and Administrative Services to Be Performed
    10  
(a) General
       
(b) Accounts
       
(c) Inspection and Audit
       
(d) Effect of Plan Amendment
       
(e) Returns, Reports and Information
       
 
       
6 Compensation and Expenses
    11  
 
       
7 Directions and Indemnification
    11  
(a) Identity of Administrator
       
(b) Directions from Administrator
       
(c) Directions from Participants
       
(d) Indemnification
       
(e) Survival
       
 
       
8 Resignation or Removal of Trustee
    12  
(a) Resignation
       
(b) Removal
       
(c) Transfer of Trust Assets
       
(d) Successor
       
 
       
9 Successor Trustee
    13  
(a) Appointment
       

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          Section   Page
9 Successor Trustee
       
(b) Acceptance
       
(c) Corporate Action
       
 
       
10 Termination
    13  
 
       
11 Resignation, Removal, and Termination Notices
    13  
 
       
12 Duration
    13  
 
       
13 Insolvency of Sponsor
    13  
 
       
14 Amendment or Modification
    15  
 
       
15 General
    15  
(a) Performance by Trustee, its Agents or Affiliates
       
(b) Entire Agreement
       
(c) Waiver
       
(d) Successors and Assigns
       
(e) Partial Invalidity
       
(f) Section Headings
       
 
       
16 Governing Law
    16  
(a) Massachusetts Controls
       
(b) Trust Agreement Controls
       
 
       
Schedules
       
 
       
A. Recordkeeping and Administrative Services
       
B. Fee Schedule
       
C. Administrator’s Authorization Letter
       
D. Telephone Exchange Guidelines
       
E. Operational Guidelines for Non-Fidelity Mutual Funds
       

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     TRUST AGREEMENT, dated as of the 1st day of January, 1998, between THE
SCOTTS COMPANY, a Delaware corporation, having an office at 14111 Scottslawn
Road, Marysville, OH 43041 (the “Sponsor”), and FIDELITY MANAGEMENT TRUST
COMPANY, a Massachusetts trust company, having an office at 82 Devonshire
Street, Boston, Massachusetts 02109 (the “Trustee”).
WITNESSETH:
     WHEREAS, the Sponsor is the sponsor of The Scotts Company Nonqualified
Deferred Compensation Plan (the “Plan”); and
     WHEREAS, the Sponsor desires to establish an irrevocable trust (the
“Trust”, as hereinafter defined) with the Trustee as trustee, and contribute to
the Trust assets that shall be held therein, subject to the claims of Sponsor’s
creditors in the event of Sponsor’s Insolvency, as herein defined, until paid to
Plan participants and their beneficiaries in such manner and at such times as
specified in the Plan; and
     WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974
(“ERISA”); and
     WHEREAS, it is the intention of the Sponsor to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plan; and
     WHEREAS, the Trustee is willing to hold and invest the aforesaid plan
assets in trust among several investment options selected by the Sponsor; and
     WHEREAS, the Sponsor wishes to have the Trustee perform certain ministerial
recordkeeping and administrative functions under the Trust; and
     WHEREAS, the Administrative Committee (the “Administrator”) is the
administrator of the Plan; and

 

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     WHEREAS, the Trustee is willing to perform recordkeeping and administrative
services for the Trust if the services are purely ministerial in nature and are
provided within a framework of provisions, guidelines and interpretations
conveyed in writing to the Trustee by the Administrator.
     NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements set forth below, the Sponsor and the Trustee agree as
follows:
Section 1. Trust.
     (a) Establishment. The Sponsor establishes The Scotts Company Nonqualified
Deferred Compensation Trust (the “Trust”), with the Trustee. The Trust shall
consist of an initial contribution of money made by the Sponsor which shall
become the principal of the Trust. The Trust shall also include any additional
sums of money as shall from time to time be delivered to the Trustee by the
Sponsor, all investments made therewith and proceeds thereof, and all earnings
and profits thereon, less the payments that are made by the Trustee as provided
herein, without distinction between principal and income. The Trustee hereby
accepts the Trust and agrees that it shall be held, administered and disposed of
by the Trustee as provided in this Trust Agreement. In accepting this Trust, the
Trustee shall be accountable for the assets received by it, subject to the terms
and conditions of this Trust Agreement.
     (b) Grantor Trust. The Trust is intended to be a grantor trust, of which
the Sponsor is the grantor, within the meaning of subpart E, part I, subchapter
J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and
shall be construed accordingly.
     (c) Trust Assets. The principal of the Trust, and any earnings thereon
shall be held separate and apart from other funds of the Sponsor and shall be
used exclusively for the uses and purposes of Plan participants and general
creditors as herein set forth. Plan participants and their beneficiaries shall
have no preferred claim on, or any beneficial ownership interest in, any assets
of the Trust. Any rights created under the Plan and this Trust Agreement shall
be mere unsecured contractual rights of Plan participants and their
beneficiaries against the Sponsor. Any assets held by the Trust will be subject
to the claims of the Sponsor’s general creditors under federal and state law in
the event of Insolvency, as defined in Section 13(a).
     (d) Non-Assignment. Benefits payable to Plan participants and their
beneficiaries under this Trust Agreement may not be anticipated, assigned
(either at law or in equity), alienated, pledged, encumbered, or subjected to
attachment, garnishment, levy, execution, or other legal or equitable process.

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     (e) Irrevocability. The Trust hereby established shall be irrevocable.
     (f) Income. During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and reinvested.
Section 2. Payments to Sponsor. Except as provided under Section 13, the Sponsor
shall have no right or power to direct the Trustee to return to the Sponsor or
to divert to others any of the Trust assets before all payment of benefits have
been made to Plan participants and their beneficiaries pursuant to the terms of
the Plan.
Section 3. Disbursements.
     (a) Directions from Sponsor. The Sponsor shall deliver to the Trustee a
schedule (the “Payment Schedule”) that indicates the amounts payable in respect
of each Plan participant (and his or her beneficiaries), that provides a formula
or other instructions acceptable to the Trustee for determining the amounts so
payable, the form in which such amount is to be paid (as provided for or
available under the Plan), and the time of commencement for payment of such
amounts. Except as otherwise provided herein, the Trustee shall make payments to
the Plan participants and their beneficiaries in accordance with such Payment
Schedule. The Trustee shall make provision for the reporting and withholding of
any federal, state or local taxes that may be required to be withheld with
respect to the payment of benefits pursuant to the terms of the Plan and shall
pay amounts withheld to the appropriate taxing authorities or determine that
such amounts have been reported, withheld and paid by the Sponsor. The Trustee
shall have no responsibility to ascertain any direction’s compliance with the
terms of the Plan or of any applicable law.
     (b) Plan Claims. The entitlement of a Plan participant or his or her
beneficiaries to benefits under the Plan shall be determined by the
Administrator and any claim for such benefits shall be considered and reviewed
under the procedures set out in the Plan.
     (c) Limitations. The Sponsor may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the terms of the
Plan. The Sponsor shall notify the Trustee of its decision to make payment of
benefits directly prior to the time amounts are payable to participants or their
beneficiaries. In addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in accordance with the
terms of the Plan, the Sponsor shall make the balance of each such payment as it
falls due. The

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Trustee shall notify the sponsor if principal and earnings are not sufficient.
The Trustee shall not be required to make any disbursement in cash unless the
Administrator has provided a written direction as to the assets to be converted
to cash for the purpose of making the disbursement.
Section 4. Investment of Trust.
     (a) Selection of investment Options. The Trustee shall have no
responsibility for the selection of investment options under the Trust and shall
not render investment advice to any person in connection with the selection of
such options.
     (b) Available Investment Options. The Sponsor shall direct the Trustee as
to what investment option(s) the Trust shall be invested in subject to the
following limitations. The Sponsor may determine to offer as investment options
only (i) publicly-traded common stock issued by the Sponsor (“Sponsor Stock”),
and (ii) securities issued by any investment companies advised by Fidelity
Management & Research Company and certain investment companies not advised by
Fidelity Management & Research Company (“Mutual Funds”) identified on Schedule
“A” attached hereto; provided, however, that the Trustee shall not be considered
a fiduciary with investment discretion. The Sponsor may add additional
investment options upon notification of the Trustee and upon amendment of this
Trust Agreement and the Schedules thereto to reflect such additions.
     (c) Investment Directions. In order to provide for an accumulation of
assets comparable to the contractual liabilities accruing under the Plan, the
Sponsor may direct the Trustee to invest the assets held in the Trust to
correspond to the hypothetical investments made for Participants under the Plan.
To the extent that the Sponsor elects to direct investments of the Trust in this
manner, directions regarding hypothetical Plan investments may be made by Plan
participants by use of the Telephone Exchange System (as described in Schedule
“D”) maintained for such purpose by the Trustee or its agent. In the event that
the Trustee fails to receive an investment direction, the assets in question
shall be invested in the Fidelity Retirement Money Market Fund until the Trustee
receives a direction.
     (d) Mutual Funds. The Sponsor hereby acknowledges that it has received from
the Trustee a copy of the prospectus for each Mutual Fund selected by the
Sponsor as a Plan investment option. Trust investments in Mutual Funds shall be
subject to the following limitations:

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          (i) Execution of Purchases and Sales. Purchases and sales of Mutual
Funds (other than for exchanges) shall be made on the date on which the Trustee
receives from the Sponsor in good order all information and documentation
necessary to accurately effect such purchases and sales (or in the case of a
purchase, the subsequent date on which the Trustee has received a wire transfer
of funds necessary to make such purchase). Exchanges of Mutual Funds shall be
made on the same business day that the Trustee receives a proper direction if
received before 4:00 p.m. eastern time; if the direction is received after 4:00
p.m. eastern time, the exchange shall be made the following day. Notwithstanding
any provision contained herein, transactions involving Mutual Funds not advised
by Fidelity Management & Research Company shall follow the procedures set forth
in Schedule “E” attached hereto.
          (ii) Voting. At the time of mailing of notice of each annual or
special stockholders’ meeting of any Mutual Fund, the Trustee shall send a copy
of the notice and all proxy solicitation materials to the Administrator,
together with a voting direction form for return to the Trustee or its designee.
The Administrator shall have the right to direct the Trustee as to the manner in
which the Trustee is to vote the shares held in the Trust. The Trustee shall
vote the shares held in the Trust in the same manner as directed by the
Administrator. The Trustee shall not vote shares for which it has received no
directions from the Administrator. With respect to all other rights regarding
the Mutual Funds held in the Trust, the Trustee shall follow the directions of
the Administrator. The Trustee shall have no additional duty to solicit
directions from the Administrator.
     (e) Sponsor Stock. Trust investments in Sponsor Stock shall be made via the
Sponsor Stock Fund (the “Stock Fund”). Investments in the Stock Fund shall
consist primarily of shares of Sponsor Stock. In order to satisfy daily
participant exchange or withdrawal requests for transfers and payments, the
Stock Fund shall also include cash or short-term liquid investments in
accordance with this paragraph. Such holdings will include Fidelity
Institutional Cash Portfolios: Money Market Portfolio: Class I or such other
Mutual Fund or commingled money market pool as agreed to by the Sponsor and
Trustee. The Named Fiduciary shall, after consultation with the Trustee,
establish and communicate to the Trustee in writing a target percentage and
drift allowance for such short-term liquid investments. The Trustee shall be
responsible for ensuring that the actual cash held in the Stock Fund falls
within the agreed upon range over time. Trust interests in the Stock Fund shall
be measured in units of participation, rather than shares of Sponsor Stock. Such
units shall represent a proportionate interest in all of the assets of the Stock
Fund, which includes shares of Sponsor Stock, short-temp investments and at
times, receivables for dividends and/or Sponsor Stock sold and payables for
Sponsor Stock purchased. The Trustee

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shall determine a daily net asset value (“NAV”) for each unit outstanding of the
Stock Fund. Valuation of the Stock Fund shall be based upon the 4:00 p.m. New
York Stock Exchange (“NYSE”) closing price of the stock, or if unavailable, the
latest available price as reported by the principal national securities exchange
on which the Sponsor Stock is traded. The NAV shall be adjusted by dividends
paid on the shares of Sponsor Stock held by the Stock Fund, gains or losses
realized on sales of Sponsor Stock, appreciation or depreciation in the market
price of those shares owned, and interest on the short-term investments held by
the Stock Fund, expenses that, pursuant to Sponsor direction, the Trustee
accrues from the Stock Fund, and commissions on purchases and sales of Sponsor
Stock. Trust investments in Sponsor Stock shall be subject to the following
limitations:
          (i) Acquisition Limit. The Trust shall be invested in Sponsor Stock to
the extent necessary to comply with investment directions under Section 4 of
this Agreement. The Sponsor shall have the responsibility to determine and
monitor the suitability of Sponsor Stock as an investment medium under the
Trust.
          (ii) Execution of Purchases and Sales.
               (A) Transactions. Purchases and sales of units in the Sponsor
Stock Fund shall be made on the date on which the Trustee receives from the
Sponsor in good order all information and documentation necessary to accurately
effect such purchases and sales (or, in the case of purchases, the subsequent
date on which the Trustee has received a wire transfer of the funds necessary to
make such purchases). Exchanges of units in the Stock Fund shall be made in
accordance with the Telephone Exchange Guidelines attached hereto as Schedule
“D”. Purchases and sales of Sponsor Stock for the Stock Fund shall be made on
the open market as necessary to maintain the target cash percentage and drift
allowances for the Stock Fund, unless the following applies:
                    (1) the Trustee is unable to determine the number of shares
required to be purchased or sold on such day; or
                    (2) If the Trustee is unable to purchase or sell the total
number of shares required to be purchased or sold on such day as a result of
market conditions; or

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                    (3) If the Trustee is prohibited by the Securities and
Exchange Commission, the New York Stock Exchange, or any other regulatory body
from purchasing or selling any or all of the shares required to be purchased or
sold on such days.
In the event of the occurrence of the circumstances described in (1), (2), or
(3) above, the Trustee shall purchase or sell such shares as soon as possible
thereafter. The Trustee may purchase and sell shares of Sponsor Stock wherever
Sponsor Stock is traded. The Trustee shall purchase and sell Sponsor Stock for
the Trust on such terms as to price, delivery and otherwise as the Trustee
determines in its sole discretion. Neither the Sponsor nor any of its
subsidiaries or affiliates nor the Administrator may exercise any control or
influence over the times when, or the prices at which, shares of Sponsor Stock
are purchased or sold by the Trustee, the amount of Sponsor Stock to be
purchased or sold, the manner in which purchases or sales are made or the
selection of the broker or dealer through, from or to whom the purchases or
sales are executed or made. It is the intent of the Sponsor and the Trustee that
the Trustee shall at all times qualify as an “agent independent of the issuer,”
as that term is used in Rule 10b-18 promulgated under the Securities Exchange
Act of 1934, as amended.
               (B) Use of an Affiliated Broker. The Sponsor hereby authorizes
the Trustee to use Fidelity Brokerage Services, Inc. (“FBSI”) to provide
brokerage services in connection with any purchase or sale of Sponsor Stock.
FBSI shall execute such directions directly or through its affiliate, National
Financial Services Company (“NFSC”). The provision of brokerage services shall
be subject to the following:
                    (i) To the extent such services are utilized, as
consideration for such brokerage services, the Sponsor agrees that FBSI shall be
entitled to remuneration under this authorization provision in the amount of
five cents ($.05) commission on each share of Sponsor Stock up to 10,000 shares
in a singular transaction, four cents ($.04) commission on each share of Sponsor
Stock from 10,001 to 20,000 shares in a singular transaction, and three and
one-half cents ($.035) commission on each share of Sponsor Stock in excess of
20,000 shares in a singular transaction. Any change in such remuneration may be
made only by a signed agreement between Sponsor and Trustee.
                    (ii) Any successor organization of FBSI, through
reorganization, consolidation, merger or similar transactions, shall, upon
consummation of such transaction, become the successor broker in accordance with
the terms of this authorization provision.

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                    (iii) The Trustee and FBSI shall continue to rely on this
authorization provision until notified to the contrary. The Sponsor reserves the
right to terminate this authorization upon sixty (60) days written notice to
FBSI (or its successor) and the Trustee.
          (iii) Securities Law Reports. The Sponsor shall be responsible for
filing all reports required under Federal or state securities laws with respect
to the Trust’s ownership of Sponsor Stock, including, without limitation, any
reports required under section 13 or 16 of the Securities Exchange Act of 1934,
and shall immediately notify the Trustee in writing of any requirement to stop
purchases or sales of Sponsor Stock pending the filing of any report. The
Sponsor shall be responsible for the registration of any Plan interests required
under Federal or state securities laws. The Trustee shall provide to the Sponsor
such information on the Trust’s ownership of Sponsor Stock as the Sponsor may
reasonably request in order to comply with Federal or state securities laws.
          (iv) Rights in Sponsor Stock. With respect to all rights including the
right to vote, the right to tender, and the right to withdraw shares previously
tendered, in the case of Sponsor Stock held by the Trust, the Trustee shall
follow the directions of the Administrator.
          (v) Conversion. All provisions in this Section 4(e) shall also apply
to any securities received as a result of a conversion of Sponsor Stock.
     (f) Trustee Powers and Responsibility. The Trustee shall have the following
powers and authority:
          (i) Subject to the preceding provisions of this Section 4, to sell,
exchange, convey, transfer, or otherwise dispose of any property held in the
Trust, by private contract or at public auction. No person dealing with the
Trustee shall be bound to see to the application of the purchase money or other
property delivered to the Trustee or to inquire into the validity, expediency,
or propriety of any such sale or other disposition.
          (ii) To cause any securities or other property held as part of the
Trust to be registered in the Trustee’s own name, in the name of one or more of
its nominees, or in the Trustee’s account with the Depository Trust Company of
New York and to hold any investments in bearer form, but the books and records
of the Trustee shall at all times show that all such investments are part of the
Trust.

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          (iii) To keep that portion of the Trust in cash or cash balances as
the Sponsor or Administrator may, from time to time, deem to be in the best
interest of the Trust.
          (iv) To make, execute, acknowledge, and deliver any and all documents
of transfer or conveyance and to carry out the powers herein granted.
          (v) With the prior written consent of the Sponsor, to settle,
compromise, or submit to arbitration any claims, debts, or damages due to or
arising from the Trust; to commence or defend suits or legal or administrative
proceedings; to represent the Trust in all suits and legal and administrative
hearings; and to pay all reasonable expenses arising from any such action, from
the Trust if not paid by the Sponsor.
          (vi) With the prior written consent of the Sponsor, to employ legal,
accounting, clerical, and other assistance as may be required in carrying out
the provisions of this Agreement and to pay their reasonable expenses and
compensation from the Trust if not paid by the Sponsor.
          (vii) To do all other acts although not specifically mentioned herein,
as the Trustee may deem necessary to carry out any of the foregoing powers and
the purposes of the Trust.
     Notwithstanding any powers granted to Trustee pursuant to this Trust
Agreement or to applicable law, Trustee shall not have any power that could give
this Trust the objective of carrying on a business and dividing the gains
therefrom, within the meaning of Section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
The determination regarding whether an annual fiduciary tax return should be
filed for the Trust shall rest solely with the Sponsor and the Trustee shall
incur no liability with respect to such determination.
     Notwithstanding any provision contained in this Trust Agreement, the
Sponsor shall have the right from time to time in its sole discretion to
substitute assets of equal fair market value for any asset held by the Trust.
This right is exercisable by the Sponsor in a nonfiduciary capacity without the
approval or consent of any person in a fiduciary capacity.

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Section 5. Recordkeeping and Administrative Services to Be Performed.
          (a) General. The Trustee shall perform those recordkeeping and
administrative functions described in Schedule “A” attached hereto. These
recordkeeping and administrative functions shall be performed within the
framework of the Administrator’s written directions regarding the Plan’s
provisions, guidelines and interpretations.
          (b) Accounts. The Trustee shall keep accurate accounts of all
investments, receipts, disbursements, and other transactions hereunder, and
shall report to the Administrator and individual participants the value of the
assets held in the Trust as of the last day of each fiscal quarter of the Plan
and, if not on the last day of a fiscal quarter, the date on which the Trustee
resigns or is removed as provided in Section 8 of this Agreement or is
terminated as provided in Section 10 (the “Reporting Date”). Within thirty
(30) days following each Reporting Date or within sixty (60) days in the case of
a Reporting Date caused by the resignation or removal of the Trustee, or the
termination of this Agreement, the Trustee shall file with the Administrator a
written account setting forth all investments, receipts, disbursements, and
other transactions effected by the Trustee between the Reporting Date and the
prior Reporting Date, and setting forth the value of the Trust as of the
Reporting Date. Except as otherwise required under applicable law and except in
the event of gross negligence of the Trustee, upon the expiration of six
(6) months from the date of filing such account with the Administrator, the
Trustee shall have no liability or further accountability to anyone with respect
to the propriety of its acts or transactions shown in such account, except with
respect to such acts or transactions as to which the Administrator shall within
such six (6) month period file with the Trustee written objections.
          (c) Inspection and Audit. All records generated by the Trustee in
accordance with paragraphs (a) and (b) shall be open to inspection and audit,
during the Trustee’s regular business hours prior to the termination of this
Agreement and within a reasonable period thereafter, by the Administrator or any
person designated by the Administrator. Upon the resignation or removal of the
Trustee or the termination of this Agreement, the Trustee shall, upon written
direction of the Sponsor, provide to the Administrator, at no expense to the
Sponsor, in the format regularly provided to the Administrator, a statement of
each participant’s accounts as of the resignation, removal, or termination, and
the Trustee shall, upon written direction of the Sponsor, provide to the
Administrator or the Plan’s new recordkeeper such further records as are
reasonable, at the Sponsor’s expense.

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          (d) Effect of Plan Amendment. The Sponsor shall deliver to the Trustee
a copy of any amendment to the Plan as soon as administratively feasible
following the amendment’s adoption, and the Administrator shall provide the
Trustee, on a timely basis, with all the information the Administrator deems
necessary for the Trustee to perform the recordkeeping and administrative
services and with such other information as the Trustee may reasonably request.
          (e) Returns, Reports and Information. The Administrator shall be
responsible for the preparation and filing of all returns, reports, and
information required of the Trust or Plan by law. The Trustee shall provide the
Administrator with such information as the Administrator may reasonably request
to make these filings. The Administrator shall also be responsible for making
any disclosures to participants required by law.
Section 6. Compensation and Expenses. Within thirty (30) days of receipt of the
Trustee’s bill, which shall be computed and billed in accordance with Schedule
“B” attached hereto and made a part hereof, as amended from time to time, the
Sponsor shall send to the Trustee a payment in such amount or the Sponsor may
direct the Trustee to deduct such amount from participants’ accounts. All
expenses of the Trustee relating directly to the acquisition and disposition of
investments constituting part of the Trust, any portion of the Trustee’s bill
not paid by the Sponsor, and all taxes of any kind whatsoever that may be levied
or assessed under existing or future laws upon or in respect of the Trust or the
income thereof, shall be a charge against and paid from the appropriate Plan
participants’ accounts.
Section 7. Directions and indemnification.
     (a) Identity of Administrator. The Trustee shall be fully protected in
relying on the fact that the Administrator under the Plan is the individual or
persons named as such above or such other individuals or persons as the Sponsor
may notify the Trustee, from time to time, in writing.
     (b) Directions from Administrator. Whenever the Administrator provides a
direction to the Trustee, the Trustee shall not be liable for any loss, or by
reason of any breach, arising from the direction if the direction is contained
in a writing (or is oral and immediately confirmed in a writing) signed by any
individual whose name and signature have been submitted (and not withdrawn) in
writing to the Trustee by the Administrator in the form attached hereto as
Schedule “C”, provided the Trustee reasonably believes the signature of the
individual to be genuine. Such direction may be made via EDT in accordance with
procedures agreed to by the Administrator and

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the Trustee; provided, however, that the Trustee shall be fully protected in
relying on such direction as if it were a direction made in writing by the
Administrator. Provided that the Trustee reasonably believes the signature on a
written direction to be genuine, the Trustee shall have no responsibility to
ascertain any direction’s (i) accuracy, (ii) compliance with the terms of the
Plan or any applicable law, or (iii) effect for tax purposes or otherwise.
     (c) Directions from Participants. The Trustee shall not be liable for any
loss which arises from any participant’s exercise or non-exercise of rights
under Section 4 hereof; provided that the Trustee shall have performed its
obligations hereunder with respect to the investment of trust assets.
     (d) Indemnification. The Sponsor shall indemnify the Trustee against, and
hold the Trustee harmless from, any and all loss, damage, penalty, liability,
cost, and expense, including without limitation, reasonable attorneys’ fees and
disbursements, that may be incurred by, imposed upon, or asserted against the
Trustee by reason of any claim, regulatory proceeding, or litigation arising
from any act done or omitted to be done by any individual or person with respect
to the Plan or Trust, excepting only any and all loss, etc., arising solely from
the negligence, gross negligence or willful misconduct of the Trustee or any of
its employees, agents or assigns.
     (e) Survival. The provisions of this Section 7 shall survive the
termination of this Agreement.
Section 8. Resignation or Removal of Trustee.
     (a) Resignation. The Trustee may resign at any time upon sixty (60) days’
notice in writing to the Sponsor, unless a shorter period of notice is agreed
upon by the Sponsor.
     (b) Removal. The Sponsor may remove the Trustee at any time upon sixty
(60) days’ notice in writing to the Trustee, unless a shorter period of notice
is agreed upon by the Trustee.
     (c) Transfer of Trust Assets. Upon resignation or removal of the Trustee
and appointment of a successor Trustee, all assets shall subsequently be
transferred to the successor Trustee. The transfer shall be completed within
sixty (60) days after receipt of notice of resignation, removal or transfer,
unless the Sponsor extends the time limit.

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     (d) Successor. If the trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 9 hereof, by the effective date of
resignation or removal under paragraph (a) or (b) of this section. If no such
appointment has been made, Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions. All expenses of
the Trustee in connection with the proceedings shall be allowed as
administrative expenses of the Trust.
Section 9. Successor Trustee.
     (a) Appointment. If the office of Trustee becomes vacant for any reason,
the Sponsor may in writing appoint a successor trustee under this Agreement. The
successor Trustee shall have all of the rights, powers, privileges, obligations,
duties, liabilities, and immunities granted to the Trustee under this Agreement.
The successor Trustee and predecessor Trustee shall not be liable for the acts
or omissions of the other with respect to the Trust.
     (b) Acceptance. When the successor Trustee accepts its appointment under
this Agreement, title to and possession of the Trust assets shall immediately
vest in the successor Trustee without any further action on the part of the
predecessor Trustee. The predecessor Trustee shall execute all instruments and
do all acts that reasonably may be necessary or reasonably may be requested in
writing by the Sponsor or the successor Trustee to vest title to all Trust
assets in the successor Trustee or to deliver all Trust assets to the successor
Trustee.
     (c) Corporate Action. Any successor of the Trustee or successor Trustee,
through sale or transfer of the business or trust department of the Trustee or
successor Trustee, or through reorganization, consolidation, or merger, or any
similar transaction, shall, upon consummation of the transaction, become the
successor Trustee under this Agreement and shall be subject to the terms of this
Trust Agreement.
Section 10. Termination. This Trust Agreement may be terminated at any time by
the Sponsor upon sixty (60) days’ notice in writing to the Trustee, provided
that the termination of the Trust shall not be effective until the date on which
Plan participants and their beneficiaries are no longer entitled to benefits
pursuant to the terms of the Plan. Upon termination of the Trust, any assets
remaining in the Trust shall be returned to the Sponsor. On the date of the
termination of this Trust Agreement, the Trustee shall comply with the
provisions of paragraph (c) of Section 8.

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Section 11. Resignation, Removal, and Termination Notices. All notices of
resignation, removal, or termination under this Trust Agreement must be in
writing and mailed to the party to which the notice is being given by certified
or registered mail, return receipt requested, to the Sponsor c/o Christina
Frenzer, The Scotts Company, 14111 Scottslawn Road, Marysville, OH 43011, and to
the Trustee c/o John M. Kimpel, Fidelity Investments, 82 Devonshire Street,
Boston, Massachusetts 02109, or to such other addresses as the parties have
notified each other of in the foregoing manner.
Section 12. Duration. This Trust shall continue in effect without limit as to
time, subject, however, to the provisions of this Trust Agreement relating to
amendment, modification, and termination thereof.
Section 13. Insolvency of Sponsor.
     (a) Trustee shall cease disbursement of funds for payment of benefits to
Plan participants and their beneficiaries if the Sponsor is insolvent. Sponsor
shall be considered “Insolvent” for purposes of this Trust Agreement if
(i) Sponsor is unable to pay its debts as they become due, or (ii) Sponsor is
subject to a pending proceeding as a debtor under the United States Bankruptcy
Code.
     (b) All times during the continuance of this Trust, the principal and
income of the Trust shall be subject to claims of general creditors of the
Sponsor under federal and state law as set forth below.
          (i) The Board of Directors and the Chief Executive Officer of the
Sponsor shall have the duty to inform Trustee in writing of Sponsor’s
Insolvency. If a person claiming to be a creditor of the Sponsor alleges in
writing to Trustee that Sponsor has become Insolvent, Trustee shall determine
whether Sponsor is Insolvent and, pending such determination, Trustee shall
discontinue disbursements for payment of benefits to Plan participants or their
beneficiaries.
          (ii) Unless Trustee has actual knowledge of Sponsor’s Insolvency, or
has received notice from Sponsor or a person claiming to be a creditor alleging
that Sponsor is Insolvent, Trustee shall have no duty to inquire whether Sponsor
is Insolvent. Trustee may in all events rely on such evidence concerning
Sponsor’s solvency as may be furnished to Trustee and

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that provides Trustee with a reasonable basis for making a determination
concerning Sponsor’s solvency.
          (iii) If any time Trustee has determined that Sponsor is Insolvent,
Trustee shall discontinue disbursements for payments to Plan participants or
their beneficiaries and shall hold the assets of the Trust for the benefit of
Sponsor’s general creditors. Nothing in this Trust Agreement shall in any way
diminish any rights of Plan participants or their beneficiaries to pursue their
rights as general creditors of Sponsor with respect to benefits due under the
Plan or otherwise.
          (iv) Trustee shall resume disbursement for the payment of benefits to
Plan participants or their beneficiaries in accordance with Section 3 of this
Trust Agreement only after Trustee has determined that Sponsor is not Insolvent
(or is no longer insolvent).
     (c) Provided that there are sufficient assets, if Trustee discontinues the
payment of benefits from the Trust pursuant to (a) hereof and subsequently
resumes such payments, the first payment following such discontinuance shall
include the aggregate amount of all payments due to Plan participants or their
beneficiaries under the terms of the Plan for the period of such discontinuance,
less the aggregate amount of any payments made to Plan participants or their
beneficiaries by Sponsor in lieu of the payments provided for hereunder during
any such period of discontinuance.
Section 14. Amendment or Modification. This Agreement may be amended or modified
at any time and from time to time only by an instrument executed by both the
Sponsor and the Trustee. Notwithstanding the foregoing, (a) no such amendment or
modification shall conflict with the terms of the Plan or shall make the Trust
revocable; and (b) to reflect increased operating costs; the Trustee may once
each calendar year, amend Schedule “B” without the Sponsor’s consent upon ninety
(90) days’ prior written notice to the Sponsor.
Section 15. General.
     (a) Performance by Trustee, its Agents or Affiliates. The Sponsor
acknowledges and authorizes that the services to be provided under this Trust
Agreement shall be provided by the Trustee, its agents or affiliates, including
Fidelity Investments Institutional Operations Company or its successor, and that
certain of such services may be provided pursuant to one or more other
contractual agreements or relationships.

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     (b) Entire Agreement. This Trust Agreement contains all of the terms agreed
upon between the parties with respect to the subject matter hereof.
     (c) Waiver. No waiver by either party of any failure or refusal to comply
with an obligation hereunder shall be deemed a waiver of any other or subsequent
failure or refusal to so comply.
     (d) Successors and Assigns. The stipulations in this Trust Agreement shall
inure to the benefit of, and shall bind, the successors and assigns of the
respective parties.
     (e) Partial Invalidity. If any term or provision of this Trust Agreement or
the application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Trust Agreement, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Trust Agreement shall be valid and
enforceable to the fullest extent permitted by law.
     (f) Section Headings. The headings of the various sections and subsections
of this Trust Agreement have been inserted only for the purposes of convenience
and are not part of this Trust Agreement and shall not be deemed in any manner
to modify, explain, expand or restrict any of the provisions of this Trust
Agreement.
Section 16. Governing Levy.
     (a) Massachusetts Law Controls. This Trust Agreement is being made in the
Commonwealth of Massachusetts, and the Trust shall be administered as a
Massachusetts trust. The validity, construction, effect, and administration of
this Trust Agreement shall be governed by and interpreted in accordance with the
laws of the Commonwealth of Massachusetts, except to the extent those laws are
superseded under section 514 of ERISA.
     (b) Trust Agreement Controls. The Trustee is not a party to the Plan, and,
with respect to the rights, duties and obligations of the Trustee, in the event
of any conflict between the provisions of the Plan and the provisions of this
Trust Agreement, the provisions of this Trust Agreement shall control.

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.

                          THE SCOTTS COMPANY    
 
               
Attest:
  /s/ Susan Duvall   By:   /s/ Rosemary L. Smith    
 
 
 
Witness      
 
Vice President    
 
                        FIDELITY MANAGEMENT TRUST             COMPANY    
 
               
Attest:
  /s/ Douglas O. Kent   By:   /s/ Joseph DiBenedetto    
 
 
 
Assistant Clerk      
 
Vice President    

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Schedule “A”
RECORDKEEPING AND ADMINISTRATIVE SERVICES
Administration

•   Establishment and maintenance of participant account and election
percentages.   •   Maintenance of 12 plan investment options:

  •   Fidelity Puritan     •   Fidelity Spartan US Equity Index     •   Fidelity
Blue Chip Growth     •   Fidelity Contrafund     •   Barron Asset Fund     •  
Fidelity World Wide     •   Scotts Stock Fund     •   Freedom Retirement Income
    •   Freedom 2000     •   Freedom 2010     •   Freedom 2020     •   Freedom
2030

•   Maintenance of 6 money classifications:

  •   Employee Pre-Tax     •   Employee After-Tax     •   Bonus Deferral     •  
Rollover     •   Employer Match     •   Retirement Contributions

•   Processing of mutual fund trades.   •   The Trustee will provide only the
recordkeeping and administrative services set forth on this Schedule “A” and no
others.

Processing

•   Monthly processing of contribution data.   •   Daily processing of transfers
and changes of future allocations.   •   Monthly processing of withdrawals.   •
  Monthly processing of transfers and changes of future allocations from stock
fund

Other

•   Prepare and mail to the participant, a confirmation of the transactions
(exchanges and changes to investment mix elections) within five (5) business
days of the participants instructions.

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•   Prepare, reconcile and deliver a monthly Trial Balance Report presenting all
money classes and investments. This report is based on the market value as of
the last business day of the month. The report will be delivered not later than
thirty (30) days after the end of each month in the absence of unusual
circumstances.   •   Prepare, reconcile and deliver a Quarterly Administrative
Report presenting both on a participant and a total plan basis all money
classes, investment positions and a summary of all activity of the participant
and plan as of the last business day of the quarter. The report will be
delivered not later that thirty (30) days after the end of each quarter in the
absence of unusual circumstances.   •   Prepare and distribute, either to the
Sponsor or to each plan participant directly, a quarterly detailed participant
statement reflecting all activity for the period. Statements will be delivered
not later than thirty (30) days after each quarter in the absence of unusual
circumstances.   •   Reconcile and process, on a quarterly basis, participant
withdrawal requests as approved and directed by the Sponsor.   •   Handle
Federal and State income tax reporting and withholding on benefit payments to
participants and their beneficiaries.   •   Issuance of a Form 1099-DIV and Form
1099-B to the Sponsor for each mutual fund for the calendar year end.   •  
Employee communications describing available investment options, including
multimedia informational materials and group presentations.

                      ADMINISTRATOR   FIDELITY MANAGEMENT TRUST                
COMPANY        
 
                   
By:
  /s/ Rosemary L. Smith   1/7/97   By:   /s/ Joseph DiBenedetto   1/23/98      
               
 
  Date       Vice President   Date    

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Schedule “B”
FEE SCHEDULE

         
•
  Annual Participant Fee   $5,000 per year*, billed and payable quarterly.
 
       
•
  Remote Access Fee (optional)   $1,000 per year, plus a monthly charge for
TYMNET usage. A one-time installation fee of $1,500 will also be charged to the
Sponsor in the first year.

•   This fee will be imposed pro rata for each calendar quarter, or any part
thereof, that it remains necessary to maintain a participant’s account(s) as
part of the Plan’s records, e.g., vested, deferred, forfeiture, top-heavy and
terminated participants who must remain on file through calendar year-end for
reporting purposes.

         
•
  Outside Mutual Funds   An annual administrative service fee shall be paid to
Fidelity by each mutual fund not advised by Fidelity Management & Research
Company equal to a percentage (currently 25 basis points) of the Plan assets
invested in that mutual fund.

Trustee Fees

•   An annual fee equal to .02 percent of the assets held in the Trust, subject
to a $2,500.00 minimum and a $5,000.00 maximum per year, billed and payable
quarterly.

                      ADMINISTRATOR   FIDELITY MANAGEMENT TRUST                
COMPANY        
 
                   
By:
  /s/ Rosemary L. Smith   1/7/97   By:   /s/ Joseph DiBenedetto   1/23/98      
               
 
  Date       Vice President   Date    

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[page intentionally omitted]

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Schedule “D”
TELEPHONE EXCHANGE GUIDELINES
The following telephone exchange procedures are currently employed by Fidelity
Institutional Retirement Services Company (FIRSCO), an affiliate of the Trustee.
Telephone exchange hours are 8:30 a.m. (ET) to 8:00 p.m. (ET) on each business
day. A “business day” is any day on which the New York Stock Exchange is open.
FIRSCO reserves the right to change these telephone exchange procedures at its
discretion.
Mutual Funds

    Exchanges Between Mutual Funds       Participants may call on any business
day to exchange between the mutual funds. If the request is received before 4:00
p.m. (ET), it will receive that day’s trade date. Calls received after 4:00 p.m.
(ET) will be processed on a next business day basis.

Sponsor Stock

I.   Exchanges from Mutual Funds Into Sponsor Stock       Sponsor Stock
exchanges are processed on a monthly cycle. Participants who wish to exchange
out of a mutual fund into Sponsor Stock may call at any time. However, such
requests shall be processed only between the 1st and the 15th of the month. No
calls will be accepted after 4:00 p.m. (ET) on the 15th (or previous business
day if the 15th is not a business day).       Mutual fund shares are sold on the
15th of the month (or the previous business day if the 15th is not a business
day) and the Sponsor Stock is purchased within two (2) business days after the
date on which the mutual fund shares are sold.   II.   Exchanges from Sponsor
Stock into Mutual Funds       Participants who wish to exchange out of Sponsor
Stock into mutual funds may call at any time. However, such requests shall be
processed only between the 1st and the 15th of the month. No calls will be
accepted after 4:00 p.m. (ET) on the 15th (or previous business day if the 15th
is not a business day).       The Sponsor Stock is sold on the 16th (or the next
business day if the 16th is not a business day) and the subsequent purchase into
mutual funds will take place three (3) business days later. This allows for
settlement of the stock trade at the custodian and the corresponding transfer to
Fidelity.

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Schedule “E”
OPERATIONAL GUIDELINES FOR NON-FIDELITY MUTUAL FUNDS
Pricing
By 7:00 p.m. Eastern Time (“ET”) each Business Day, the Non-Fidelity Mutual Fund
Vendor (Fund Vendor) will input the following information (“Price Information”)
into the Fidelity Participant Recordkeeping System (“FPRS”) via the remote
access price screen that Fidelity Investments Institutional Operations Company,
Inc. (“FIIOC”), an affiliate of the Trustee, has provided to the Fund Vendor:
(1) the net asset value for each Fund at the Close of Trading, (2) the change in
each Fund’s net asset value from the Close of Trading on the prior Business Day,
and (3) in the case of an income fund or funds, the daily accrual for interest
rate factor (“mil rate”). FIIOC must receive Price Information each Business Day
(a “Business Day” is any day the New York Stock Exchange is open). If on any
Business Day the Fund Vendor does not provide such Price Information to FIIOC,
FIIOC shall pend all associated transaction activity in the Fidelity Participant
Recordkeeping System (“FPRS”) until the relevant Price Information is made
available by Fund Vendor.
Trade Activity and Wire Transfers
By 7:00 a.m. ET each Business Day following Trade Date (“Trade Date plus One”),
FIIOC will provide, via facsimile, to the Fund Vendor a consolidated report of
net purchase or net redemption activity that occurred in each of the Funds up to
4:00 p.m. ET on the prior Business Day. The report will reflect the dollar
amount of assets and shares to be invested or withdrawn for each Fund. FIIOC
will transmit this report to the Fund Vendor each Business Day, regardless of
processing activity. In the event that data contained in the 7:00 a.m. ET
facsimile transmission represents estimated trade activity, FIIOC shall provide
a final facsimile to the Fund Vendor by no later than 9:00 a.m. ET. Any
resulting adjustments shall be processed by the Fund Vendor at the net asset
value for the prior Business Day.
The Fund Vendor shall send via regular mail to FIIOC transaction confirms for
all daily activity in each of the Funds. The Fund Vendor shall also send via
regular mail to FIIOC, by no later than the fifth Business Day following
calendar month close, a monthly statement for each Fund. FIIOC agrees to notify
the Fund Vendor of any balance discrepancies within twenty (20) Business Days of
receipt of the monthly statement.
For purposes of wire transfers, FIIOC shall transmit a daily wire for aggregate
purchase activity and the Fund Vendor shall transmit a daily wire for aggregate
redemption activity, in each case including all activity across all Funds
occurring on the same day.
Prospectus Delivery
FIIOC shall be responsible for the timely delivery of Fund prospectuses and
periodic Fund reports (“Required Materials”) to Plan participants, and shall
retain the services of a third-party vendor to handle such mailings. The Fund
Vendor shall be responsible for all materials and production costs, and hereby
agrees to provide the Required Materials to the third-party vendor

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selected by FIIOC. The Fund Vendor shall bear the costs of mailing annual Fund
reports to Plan participants. FIIOC shall bear the costs of mailing prospectuses
to Plan participants.
Proxies
The Fund Vendor shall be responsible for all costs associated with the
production of proxy materials. FIIOC shall retain the services of a third-party
vendor to handle proxy solicitation mailings and vote tabulation. Expenses
associated with such services shall be billed directly to the Fund Vendor by the
third-party vendor.
Participant Communications
The Fund Vendor shall provide internally-prepared fund descriptive information
approved by the Funds’ legal counsel for use by FIIOC in its written participant
communication materials. FIIOC shall utilize historical performance data
obtained from third-party vendors (currently Morningstar, Inc., FACTSET Research
Systems and Lipper Analytical Services) in telephone conversations with plan
participants and in quarterly participant statements. The Sponsor hereby
consents to FIIOC’s use of such materials and acknowledges that FIIOC is not
responsible for the accuracy of such third-party information. FIIOC shall seek
the approval of the Fund Vendor prior to retaining any other third-party vendor
to render such data or materials under this Agreement.
Compensation
FIIOC shall be entitled to fees as set forth in a separate agreement with the
Fund Vendor.
Indemnification
The Fund Vendor shall be responsible for compensating participants and/or FIIOC
in the event that losses occur as a result of (1) the Fund Vendor’s failure to
provide FIIOC with Price Information or (2) providing FIIOC with incorrect Price
Information.

24