UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C.  20549
                                    FORM 10-K
(Mark One)

     ( X )     ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE 
               SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

               For the fiscal year ended September 30, 1996

                                 OR

     (    )    TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
               THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

     For the transition period from                  to
                                    ----------------    --------------

     Commission file number  1-11593
                             -------

                             The Scotts Company
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               (Exact name of registrant as specified in its charter)

                 Ohio                                           31-1199481
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(State or other jurisdiction of incorporation or organization)    (I.R.S. 
                                                   Employer Identification No.)

  14111 Scottslawn Road, Marysville, Ohio                          43041
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       (Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code:              937-644-0011
                                                                 ------------
Securities registered pursuant to Section 12(b) of the Act:

   Title of Each Class                 Name of Each Exchange On Which Registered
   -------------------                 -----------------------------------------
9 7/8% Senior Subordinated Notes                      New York Stock Exchange
due August 1, 2004

Common Shares, Without Par Value (18,575,293
  Common Shares outstanding at December 2, 1996)      New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  None
                                                             ----
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes   X    No         
                                         ---       ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  (X)

The aggregate market value of the voting stock held by non-affiliates of the
registrant at December 2, 1996 was $ 330,616,046.20.
                                     --------------
                 DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR
ENDED SEPTEMBER 30, 1996 ARE INCORPORATED BY REFERENCE INTO PARTS I, II AND IV
HEREOF.  PORTIONS OF THE PROXY STATEMENT FOR REGISTRANT'S 1997 ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD MARCH 12, 1997, ARE INCORPORATED BY REFERENCE INTO PART
III HEREOF.

This report contains 304 pages of which this is Page 1.  The Index to Exhibits
begins at page 92.



                                       PART I

ITEM 1.  BUSINESS.

     The Scotts Company ("Scotts"), through its wholly-owned subsidiaries, 
Hyponex Corporation ("Hyponex"), Scotts-Sierra Horticultural Products Company 
("Sierra"), Republic Tool and Manufacturing Corp. ("Republic"), Scotts' 
Miracle-Gro Products, Inc. and their subsidiaries (collectively, the 
"Company"), is one of the oldest and most widely recognized manufacturers of 
products used to grow and maintain landscapes: lawns, gardens and golf 
courses. The Company's Scotts-Registered Trademark-and Turf 
Builder-Registered Trademark- (for consumer lawn care), 
Miracle-Gro-Registered Trademark- and Miracid-Registered Trademark- (for 
garden care), ProTurf-Registered Trademark- (for professional turf care) and 
Osmocote-Registered Trademark- (for consumer garden and professional 
horticulture) brands command market-leading shares more than double those of 
the next ranked competitors, in the referenced consumer or professional 
subgroup. 
 The Company's long history of technical innovation, its reputation for 
quality and service and its marketing tailored to the needs of 
do-it-yourselfers and professionals have enabled the Company to maintain 
leadership in its markets while delivering consistent growth in the Company's 
net sales.  Do-it-yourselfers and professionals purchase through different 
distribution channels and have different information and product needs.  
Accordingly, the Company has historically had two business groups, Consumer 
and Professional, to serve its domestic markets, as well as an International 
Group to serve its markets outside of North America.  For fiscal 1997, the 
Company has reorganized into six business groups comprised of Consumer Lawns, 
Consumer Gardens, Organics, Professional and International Groups, plus an 
Operations Group.

     On May 19, 1995, pursuant to the Amended and Restated Agreement and Plan of
Merger, dated as of May 19, 1995, amending and restating the original Agreement
and Plan of Merger, dated as of January 26, 1995 (as so amended and restated,
the "Merger Agreement"), the Company acquired Stern's Miracle-Gro Products, Inc.
("Miracle-Gro Products"), Miracle-Gro Products Limited ("Miracle-Gro UK"),
Miracle-Gro Lawn Products, Inc. ("Miracle-Gro Lawn Products") and the assets of
Stern's Nurseries, Inc. ("Nurseries") (collectively, the "Miracle-Gro
Companies").  The acquisition was structured as a merger of Scotts' wholly-owned
subsidiary, ZYX Corporation ("Merger Sub") into Miracle-Gro Products (the
"Merger"), with Miracle-Gro Products surviving, followed by stock transfers of
all of the outstanding capital stock of Miracle-Gro UK and Miracle-Gro Lawn
Products to Miracle-Gro Products (the "Subsequent Stock Transfers") and an asset
transfer of all of the assets, but none of the liabilities, of Nurseries to
Miracle-Gro Products (the "Asset Transfer" and, collectively with the Merger and
the Subsequent Stock Transfers, the "Merger Transactions").  Following the
Merger Transactions, Miracle-Gro Products was merged into its wholly-owned
subsidiary, Scotts' Miracle-Gro Products, Inc., which is the ultimate surviving
corporation of the Merger Transactions ("Scotts' Miracle-Gro").  Scotts'
Miracle-Gro markets the leading brands of garden plant foods, Miracle-Gro-
Registered Trademark- and Miracid-Registered Trademark-.

     By operation of the Merger, each share of capital stock of Merger Sub was
converted into one share of the voting common stock of Miracle-Gro Products, and
the outstanding capital stock of Miracle-Gro Products was converted into the
right to receive Scotts' Class A Convertible Preferred Stock (the "Convertible
Preferred Stock") and warrants to acquire common shares of Scotts (the
"Warrants"), as described below.  As a result of the Merger Transactions, Scotts
became the owner of all of the outstanding shares of common stock of the
surviving corporation, Miracle-Gro Products, and its wholly-owned subsidiaries,
Miracle-Gro UK and Miracle-Gro Lawn Products.

     Prior to the Merger Transactions, the Miracle-Gro Companies were privately
held by:  Horace Hagedorn, Chairman and Chief Executive Officer of Miracle-Gro
Products, individually; members of the Hagedorn family through Hagedorn
Partnership, L.P. (the "Hagedorn Partnership"); Community Funds, Inc., a New
York not-for-profit corporation (the "Charity"), as a result of a charitable
donation by Mr. Hagedorn on May 1, 1995; and John Kenlon, the President of
Scotts' Miracle-Gro.

     As consideration for the Merger Transactions, Mr. Hagedorn, the Hagedorn
Partnership, the Charity and Mr. Kenlon received, in the aggregate, $195,000,000
face amount of Convertible Preferred Stock, convertible at $19 per share
(subject to adjustment) into approximately 35% of the total voting power of
Scotts, and Warrants to purchase, at prices ranging from $21 to $29 per share,
an additional 

                                 Page 2


3,000,000 common shares of Scotts, which, if exercised, would enable them to 
exercise, together with the Convertible Preferred Stock, approximately 42% of 
the total voting power of Scotts.

CONSUMER BUSINESS GROUP

     PRODUCTS

     The Company's consumer products include lawn fertilizers and lawn
fertilizer/control combination products, garden and indoor plant care products,
garden tools, potting soils and other organic products, grass seed and lawn
spreaders.

     CONSUMER LAWNS PRODUCTS.   Among the Company's most important consumer 
products are lawn fertilizers, such as Scotts Turf Builder-Registered 
Trademark-, and combination fertilizer/control products, such as Scotts Turf 
Builder Plus 2-Registered Trademark- and Scotts Turf Builder Plus 
Halts-Registered Trademark-.  Typically, these are patented, homogeneous, 
controlled-release products which provide complete controlled feeding for 
consumers' lawns for up to two months without the risk of damage to the lawn 
presented by less expensive controlled and non-controlled-release products. 
Some of the Company's products are specially formulated for geographical 
differences and some, such as Bonus-Registered Trademark- S (to control weeds 
in Southern grasses), are distributed to limited areas.  The Company's lawn 
fertilizer and combination products are sold in dry, granular form.  In 1996, 
a granular lawn food product, along with a combination weed and feed lawn 
product, were sold by the Company under the Miracle-Gro-Registered Trademark- 
name nationwide.

     Management estimates that in fiscal 1996, the Company's share of the U.S.
do-it-yourself consumer lawn chemicals products market was approximately 51%
(includes Miracle-Gro lawn products), more than double that of the second
leading brand.

     The Company sells numerous varieties and blends of high quality grass seed,
many of them proprietary, designed for different uses and geographies. 
Management estimates that the Company's share of the U.S. consumer grass seed
market (includes PatchMaster-Registered Trademark- products) was approximately
32% in fiscal 1996.

     Because the Company's granular lawn care products perform best when applied
evenly and accurately, the Company sells a line of spreaders specifically
manufactured and developed for use with its products.  This line includes the
SpeedyGreen-Registered Trademark- and EasyGreen-Registered Trademark- rotary
spreaders, the PrecisionGreen-Registered Trademark- and AccuGreen-Registered
Trademark- drop spreaders, and the HandyGreen-Registered Trademark- hand-held
rotary spreader, all marketed under the Scotts-Registered Trademark- brand name.

     Since the acquisition of Republic in November 1992, the Company has
continued to market both its line of Scotts-Registered Trademark- spreaders and
Republic's E-Z line of spreaders and to integrate the manufacture of its
spreaders through Republic.  Management estimates that the Company's share of
the U.S. market for lawn spreaders and garden carts was approximately 56% in
fiscal 1996.

     The Company has a licensing agreement in place with Union Tools, Inc.
("Union") under which Union, in return for the payment of royalties, is granted
the right to produce and market a line of garden tools bearing the Scotts
trademark.  The Company also is a party to a licensing agreement with American
Lawn Mower Company ("American") under which American, in return for the payment
of royalties, is granted the right to produce and market a line of push-type
reel lawn mowers bearing the Scotts trademark. In management's estimation, the
Company did not have a material share of the markets for these products in
fiscal 1996.

     CONSUMER GARDENS PRODUCTS.  The Company sells a complete line of water
soluble fertilizers under the Miracle-Gro-Registered Trademark- brand name. 
These products are primarily used for garden fertilizer application.  The
Company also produces and sells a line of boxed Scotts-Registered Trademark-
Plant Foods, garden and landscape fertilizers, Osmocote-Registered Trademark-
controlled-release garden fertilizers, and hose-end feeders.

                                  Page 3


     Scotts' Miracle-Gro markets and distributes the leading line of water-
soluble plant foods.  These products are designed to be dissolved in water,
creating a dilute nutrient solution which is poured over plants and rapidly
absorbed by their roots and leaves.

     Miracle-Gro-Registered Trademark- All-Purpose Water-Soluble Plant Food is
the leading product in the Miracle-Gro line.  Other water-soluble plant foods in
the product line include Miracid-Registered Trademark- for acid loving plants,
Miracle-Gro-Registered Trademark- for Roses, and Miracle-Gro-Registered
Trademark- for Tomatoes.  Scotts' Miracle-Gro also sells a line of hose-end
applicators for water-soluble plant foods, through the Miracle-Gro No-Clog-
Registered Trademark- Garden and Lawn Feeder line, which allow consumers to
apply water-soluble fertilizers to large areas quickly and easily with no mixing
or measuring required.  Scotts' Miracle-Gro also markets a line of products for
houseplant use including Liquid Miracle-Gro-Registered Trademark-, African
Violet Food, Plant Food Spikes, Leaf Shine and Orchid Food (new in 1996).

     Management estimates that in fiscal 1996, the Company's share of the garden
and indoor plant foods market was approximately 59% (includes Miracle-Gro
products).

     ORGANICS PRODUCTS.   The Company sells a broad line of organic products
under the Scotts-Registered Trademark-, Hyponex-Registered Trademark-, Peters-
Registered Trademark- Professional-Registered Trademark- and other labels,
including retail potting soils, topsoil, humus, peat, manures, soil
conditioners, bark and mulches.  Management estimates that the Company's fiscal
1996 U.S. market share was approximately 45% in potting soils and other consumer
organic products.

     CONSUMER BUSINESS GROUP STRATEGY

     The Company believes that it has achieved its leading position in the do-
it-yourself lawn care and garden markets on the basis of its strong marketing
programs, its sophisticated technology, the superior quality and value of its
products, and the service it provides its customers.  The Company seeks to
maintain and expand its market position by emphasizing these qualities and
taking advantage of the name and reputation of its many strong brands such as
Scotts-Registered Trademark-, Miracle-Gro-Registered Trademark- and Hyponex-
Registered Trademark-.  Through its Scotts-Registered Trademark-, Peters-
Registered Trademark- and Hyponex-Registered Trademark- labels, the Company has
also focused on increasing sales of its higher margin organic products such as
potting soils.

     The Company is the market leader in the lawn, garden and organics segments
of the growing lawn and garden market.  Population trends indicate that the
consumer segment age of 40 and older, who represent the largest group of lawn
and garden product users, will grow by 30% from 1995 to 2010, a growth rate more
than twice that of the total population.

     Drawing upon its strong research and development capabilities, the 
Company intends to continue to develop and introduce new and innovative lawn 
and garden products.  The Company believes that its ability to introduce 
successful new consumer products has been a key element in the Company's 
growth.  New consumer products in recent years include:  
PatchMaster-Registered Trademark- (1992), a unique lawn repair product 
containing seed, Scotts Starter-Registered Trademark-fertilizer and mulch; a 
Poly-S-Registered Trademark- lawn fertilizer line(1993), which utilizes 
Scotts proprietary controlled-release technology to provide a lower priced 
product offering versus the premium Turf Builder-Registered Trademark- line; 
new AccuGreen-Registered Trademark- and Speedy Green-Registered Trademark- 
(1994) spreaders which are shipped and sold fully assembled; Scotts planting 
soils (1994), a line of ready-to-use, value-added soils which help simplify 
the do-it-yourself gardener's task and deliver superior growing performance; 
Miracle-Gro-Registered Trademark- Quick Start, a liquid starter solution for 
newly planted or young plants; GRUBEX-TM- (1995), providing season-long lawn 
protection against grubs; YardAll-TM- (1995), an extra large lawn and garden 
cart; flat-bottom, stand-up bags (1995) for soil products, which improve 
merchandising for retail customers; the redesigned HandyGreen-Registered 
Trademark- II (1996), a hand-held rotary spreader with an arm support; 
Vegi-Gro-TM-(1996), a soil product specially formulated to grow larger 
vegetables; and two new grass seed products, Mirage-TM- and Spring-Up-TM-, 
grass seed blends for rapid seeding in the spring.  In 1997, the Company 
plans to introduce a new GRUBEX-TM- product, which provides lawn fertilizer 
and season-long grub control in one application.

     The Company also seeks to capitalize upon the competitive advantages
stemming from its position as the leading nationwide supplier of a full line of
consumer lawn and garden products.  The 

                                  Page 4


Company believes that this gives it an advantage in selling to larger 
retailers, who value the efficiency of dealing with a limited number of 
suppliers.

     The Company has developed a program to take advantage of Hyponex's
composting expertise and the increasing concern about landfill capacity by
entering into agreements with municipalities and waste haulers to compost yard
waste.  The Company now has twelve compost facilities.  In addition to service
fees, the Company substitutes the resulting compost for a portion of the raw
materials in Hyponex and other Company products.  

     MARKETING AND PROMOTION

     The Company employs a 79-person direct sales force and numerous
distributors for its consumer lawn products to cover over 20,000 retail outlets
and headquarters of national, regional and local chains.  For fiscal 1997, a
separate sales force has been established for the newly formed Organics business
group.  For fiscal 1997, some of the Company's direct sales personnel will
supervise in-store retail merchandisers.  The Company also plans to employ over
250 seasonal part-time merchandisers and in-store weekend counselors, in
connection with the Company's increased emphasis on in-store retail
merchandising.  Most retail sales of the Company's lawn and garden products
occur on weekends during the months of early spring and summer.  Most of the
Company's salespeople have college degrees and prior sales experience. In recent
years, the percentage of sales to mass merchandisers and home improvement
centers has increased.  The top ten accounts (which include three buying groups
of independent retailers) represented 70% of the Consumer Business Group sales
in fiscal 1995 and 72% in 1996.

     The Company continues to support its independent retailers.  The Company
has developed a special line of products, marketed under the Lawn Pro-Registered
Trademark- name, which is sold by independent retailers.  These products include
the 4-Step-TM- program, introduced in 1984, which encourages consumers to
purchase four products at one time (fertilizer plus crabgrass preventer,
fertilizer plus weed control, fertilizer plus insect control and a special
fertilizer for Fall application).  The Company promotes the 4-Step-TM- program
as providing consumers with all their annual lawn care needs for, on average,
less than one-third of what a lawn care service would cost.  The Company
believes the Lawn Pro-Registered Trademark- line has helped the Company maintain
its business with the independent retailers in the face of increasing
competition from mass merchandisers.

     The Company supports its sales efforts with extensive advertising and
promotional programs. Because of the importance of the Spring sales season in
the marketing of consumer lawn and garden products, the Company focuses its
consumer promotional efforts on this period.  Through advertising and other
promotional efforts, the Company seeks to encourage consumers to make the bulk
of their lawn and garden purchases in the early Spring.  The Company believes
that its early season promotions moderate the risk to its consumer sales which
may result from bad weekend weather.

     In 1995, the Company introduced a promotional allowance to retailers
designed to provide retailers with the ability to customize and differentiate
promotions of Scotts products.  Also in 1995, the Company expanded a marketing
program originally begun in 1993, which provided incentives to retailers to
purchase a portion of their 1995 calendar fourth quarter and 1996 fertilizer
product requirements early, including extended payment terms consistent with the
anticipated pattern of sales to consumers.  Please see the discussion in the
section of Scotts' Annual Report to Shareholders for the fiscal year ended
September 30, 1996 entitled "MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Results of Operations -- 
Fiscal 1995 compared with fiscal 1994."  The Company and retailers have 
viewed these types of programs as important to the production, distribution 
and marketing of these seasonal products. To improve trade margins and reduce 
promotional costs for fiscal 1997, the Company has decided to replace the 
pre-season incentive programs to retailers with more efficient promotional 
allowances, increased consumer advertising and in-store merchandising support 
in furtherance of the Company's new "pull" advertising strategy.  Please see 
the discussion in the section of Scotts' Annual Report to Shareholders for 
the fiscal year ended 

                                  Page 5


September 30, 1996 entitled "MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Outlook for 1997."  

     The fiscal 1997 marketing strategies for the Consumer Lawns Group are to 
make additional efforts to improve Scotts' relationship with consumers, 
including:  carefully directed consumer research, to increase understanding 
of its markets and the needs of consumers; substantially increased media 
advertising; simplification of the product line; improvements in processing 
and formulations of key lawn fertilizer items, to make them more effective 
and easier to use; and increased use of retail merchandisers to enhance 
communications with consumers at the point of sale.  The fiscal 1997 
marketing strategy for the Consumer Gardens Group is to consolidate certain 
package sizes in the Miracle-Gro-Registered Trademark- and Scotts-Registered 
Trademark-ornamental fertilizers product lines, implement packaging 
improvements, continue cost-reduction and quality enhancement efforts 
throughout all product lines, increase use of national network television 
advertising, and use Scotts' Miracle-Gro's sales and distribution network for 
Scotts-Registered Trademark-garden products.  The strategy for the Organics 
Group is to become the industry's lowest cost producer and to develop 
national marketing programs, as the industry's only national competitor in 
this industry class.

     An important part of the Company's sales effort is its national toll-free
consumer hotline, on which its "lawn consultants" answer questions about the
Company's products and give general lawn care advice to consumers.  The
Company's lawn consultants responded to approximately 440,000 telephone and
written inquiries in fiscal 1996 and have handled over 3,340,000 calls since the
inception of the consumer hotline in 1972.

     Backing up the Company's marketing effort is its well-known "No Quibble"
guarantee, instituted in 1958, which promises consumers a full refund if for any
reason they are not satisfied with the results after using the Company's
products.  Refunds under this guarantee have consistently amounted to less than
0.3% of net sales on an annual basis.

     Consumer garden products are sold by a 14-person sales force to a network
of hardware and lawn and garden wholesale distributors, with certain sales made
directly to some retailers.  The percentage of sales to mass merchandisers,
warehouse-type clubs and large buying groups has increased in recent years.

     COMPETITION

     The consumer lawn and garden market is highly competitive.  The most
significant competitors for the consumer lawn care business are lawn care
service companies.  At least one of these, Tru Green Company, which also owns
the ChemLawn-Registered Trademark- lawn care service business, operates
nationally and is significantly larger than the Company.  In the do-it-yourself
segment, the Company's products compete primarily against regional products and
private label products produced by various suppliers and sold by such companies
as Kmart Corporation.  These products compete across the entire range of the
Company's product line.  In addition, certain of the Company's products compete
against branded fertilizers, pesticides and combination products marketed by
such companies as Monsanto Company (Ortho-Registered Trademark- and Greensweep-
Registered Trademark-), Lebanon Chemical Corp. (Greenview-Registered 
Trademark-), United Industries Corporation (Peters-Registered Trademark- water 
soluble fertilizers for the consumer market) and IMC Vigoro.

     Most competitors, with the exception of lawn care service companies, 
sell their products at prices lower than those of the Company.  The Company 
competes primarily on the basis of its strong brand names, consumer 
advertising campaigns, quality, value, service and technological innovation.  
The Company's competitive position is also supported by its national sales 
force and its unconditional guarantee.  There can be no assurance, however, 
that additional competition from new or existing competitors will not erode 
the Company's share of the consumer market or its profit margins.  Home 
Depot, one of the Company's large retail customers, has established a program 
to feature Vigoro-Registered Trademark- brand lawn fertilizers.  Home Depot 
will also continue to feature Scotts-Registered Trademark- lawn fertilizer 
products but a number of regional brands will no longer be offered at the 
Home Depot stores.  As of the date of this report, the 

                                  Page 6


Company is not able to determine the impact, if any, which the Vigoro program 
will have on sales of Scotts-Registered Trademark- brand lawn fertilizers in 
Home Depot stores.  

     The Company's lower-margin organics business faces primarily regional
competition, reflecting different soil conditions, raw materials and usage
patterns around the country.  Customers require short lead-time deliveries, with
very high on-time and complete-fill rates.

     BACKLOG

     The majority of annual consumer product orders (other than Organics
products which are normally ordered in season on an "as needed" basis) are
received from retailers during the months of October through April and are
shipped during the months of January through April.  As of December 2, 1996,
orders on hand for retailers totaled approximately $70 million compared to
approximately $62 million on the same date in 1995.  All such orders are
expected to be filled in fiscal 1997.

PROFESSIONAL BUSINESS GROUP

     THE MARKET

     The Company sells its professional products to golf courses, commercial
nurseries and greenhouses, schools and sportsfields, multi-family housing
complexes, business and industrial sites, lawn and landscape services and
specialty crop growers.  The Professional Group's two core businesses are
ProTurf-Registered Trademark-, the professionally managed turf market, and
Horticulture, the nursery and greenhouse markets.  In 1996, the Professional
Business Group served such high profile golf courses as Augusta National
(Georgia), Cypress Point and Pebble Beach (California), Desert Mountain
(Arizona), Muirfield Village Golf Club (Ohio), Oakmont Country Club
(Pennsylvania), Colonial Country Club (Texas) and Medinah Country Club
(Illinois).  Sports complexes such as Fenway Park, Camden Yard, Wrigley Field,
Yankee Stadium and the Rose Bowl are professional customers, as are major
commercial nursery/greenhouse operations such as Monrovia, Hines and Imperial.

     Golf courses and highly visible turf areas accounted for approximately 54%
of the Company's professional sales in fiscal 1996.  During 1996, the Company
sold products to approximately 53% of the over 14,500 golf courses in North
America, including 83 of GOLF DIGEST's top 100 U.S. courses.  Management
estimates, based on an independent bi-annual market survey and other information
available to the Company, that the Company's share of the North American golf
course turf maintenance market was approximately 20% in 1996.

     According to the National Golf Foundation, approximately 250 new golf
courses have been constructed annually during the last three years.  Management
believes that the increase in the number of courses, the concentration of the
growth in the West/South with a longer growing/maintenance season, the
increasing playing time requiring more course maintenance and the trend toward
more highly maintained courses should contribute to sales growth in the golf
course business.

     Horticulture sales accounted for approximately 46% of the Company's
professional sales in fiscal 1996.  The Company sold products to thousands of
nursery, greenhouse and specialty crop growers through a network of over 100
horticultural distributors.  The Company estimates that its leading share of the
North American horticultural segment was approximately 35% in 1996.

     Management believes the increasing acceptance of controlled-release
fertilizers in horticultural/ agricultural applications due to performance
advantages, labor savings and water quality concerns should contribute to sales
growth in the horticulture market.  However, other products and technologies may
also make inroads into this market as well as the turf market.

     In January 1994, a new business unit under the ProGrow-Registered 
Trademark-name was created to better serve the large, but highly fragmented, 
lawn/landscape service market, in addition to schools and sportsfields, 
multi-family housing complexes and business/industrial sites.  Effective 
October 1996, management 

                                  Page 7


consolidated this business unit within one division called ProTurf-Registered 
Trademark-, to focus on direct sales to the professionally managed turf 
market, including golf, sod and athletic fields.

     PRODUCTS

     The Company's professional products, marketed under such brand names as
ProTurf-Registered Trademark-,  Osmocote-Registered Trademark-, Peters-
Registered Trademark-, Metro-Mix-Registered Trademark- and Terra-Lite-Registered
Trademark-, include a broad line of sophisticated controlled-release
fertilizers, water soluble fertilizers, control products (herbicides,
insecticides, fungicides and growth regulators), wetting agents, organic
products, grass seed and application devices.  The fertilizer lines utilize a
range of proprietary controlled-release fertilizer technologies, including
Polyform-Registered Trademark-, Triaform-Registered Trademark-, Poly-S-
Registered Trademark-, Osmocote-Registered Trademark- and ScottKote-Registered
Trademark-, and proprietary water soluble fertilizer technologies, including
Peters-Registered Trademark- and Peters Excel-Registered Trademark-.  The
Company applies these technologies to meet a wide range of professional customer
needs, ranging from quick release greenhouse fertilizers to controlled-release
fairway/greens fertilizers to extended release nursery fertilizers that last up
to a year or more.

     The Company works very closely with basic pesticide manufacturers to secure
access to, and if possible, exclusive positions on, advanced control chemistry
which can be formulated on granular carriers, including fertilizers, or liquid
application.  In 1996, at least seven professional products featured exclusive
control technologies, including such products as the TGR-Registered Trademark-
growth regulator line, Turplex-Registered Trademark- bioinsecticide, Prograss-
Registered Trademark- and Confront-Registered Trademark- herbicides, and
Talstar-Registered Trademark- and Astro-Registered Trademark- insecticides and
miticides.  Liquid-applied fertilizers and control products numbered 38 in 1996.
Application devices include both rotary and drop action spreaders.  Over 20
proprietary grass seed varieties are part of the professional line.  The Sierra
acquisition in December 1993 added an established line of soil-less mixes in
which controlled-release and water soluble fertilizers, wetting agents and
control products can be incorporated to customize potting media for nurseries
and greenhouses.

     BUSINESS STRATEGY

     The Company's Professional Business Group focuses its sales efforts on the
middle and high end of the professional market and generally does not compete
for sales of commodity products.  Demand for the Company's professional products
is primarily driven by product quality, performance and technical support.  The
Company seeks to meet these needs with a range of sophisticated, specialized
products that are sold by a professional, agronomically-trained sales force.

     A primary focus of the Professional Business Group's strategy is to provide
innovative high value new products to its professional customers.  Products
introduced since 1990 accounted for over 45% of the Professional Business
Group's net sales in fiscal 1996.

     The Company intends to take advantage of its strong position in the golf 
course segment to increase sales of Sierra-Registered Trademark- products to 
those users, and, conversely, to expand the distribution of Scotts-Registered 
Trademark- nursery products in the commercial horticultural segment in which 
Sierra has a strong position.

     The Professional Business Group also is working to increase market coverage
by focusing on various professional market niches.  In 1965, the Company
established its first specialized professional sales force, focusing on golf
courses.  Since 1985, it has established separate sales forces and/or sales
managers for sports fields, golf course architects and construction companies,
and the international market of the Professional Business Group.  In 1992, the
Company introduced a fairway application service for golf courses.  This service
has been expanded and is now available in sixteen markets.  In January 1995,
Scotts entered into a licensing agreement with a lawn care service company,
Emerald Green Lawn Service ("Emerald Green"), which allows Emerald Green to use
the Scotts name and logo in its marketing efforts.  Emerald Green applies Scotts
products exclusively.  Scotts has a 25% equity interest in Emerald Green.

                                  Page 8


     MARKETING AND PROMOTION

     The Professional Business Group's sales force consists of 112 territory
managers.  Many territory managers are experienced former golf course
superintendents or nursery managers and most have degrees in agronomy,
horticulture or similar disciplines.  Territory managers work closely with golf
course and sports field superintendents, turf and nursery managers, and other
landscape professionals.  In addition to marketing the Company's products, the
Company's territory managers provide consultation, testing services, and advice
regarding maintenance practices, including individualized comprehensive programs
incorporating various products for use at specified times throughout the year. 
The professional grower business is served primarily through an extensive
network of distributors, all with substantial experience in the horticulture
market, with territory managers spending the majority of their time with
growers.

     To reach potential purchasers, the Company uses trade advertising and
direct mail, publishes newsletters, and sponsors seminars throughout the
country.  In addition, the Company maintains a special toll-free hotline for its
professional customers.  The professional customer service department responded
to over 45,000 telephone inquiries in fiscal 1996.

     COMPETITION

     In the professional turf and nursery market, the Company faces a broad
range of competition from numerous companies ranging in size from multi-national
chemical and fertilizer companies such as Monsanto and DowElanco Company, to
smaller specialized companies such as Lesco, Inc. and Lebanon Chemical Corp., to
local fertilizer manufacturers and blenders.  Portions of this market are served
by large agricultural fertilizer companies, while other segments are served by
specialized, research-oriented companies.  In certain areas of the country,
particularly Florida, a number of companies have begun to offer turf care
services, including product application, to golf courses.  In addition, the
higher margins available for sophisticated products to treat high value crops
continue to attract large and small chemical producers and formulators, some of
which have larger financial resources and research departments than the Company.
Also, the influence of mass merchandisers, with significant buying power, has
increased.  While the Company believes that its reputation, turf and ornamental
market focus, expertise in product development and professional sales force 
should enable it to continue to maintain and build its share of the 
professional market, there can be no assurance that the Company's market 
share or margins will not continue to be eroded in the future by new or 
existing competitors.

     BACKLOG

     A large portion of professional product orders are received during the
months of August through November and are filled during the months of September
through November.  As of December 2, 1996, orders on hand from professional
customers totaled approximately $10.4 million compared with $10.1 million on the
same date in 1995.  All such orders are expected to be filled in fiscal 1997.

INTERNATIONAL

     THE MARKET

     The Company sells its products to both consumer and professional users in
over sixty-five countries.  Growth potential exists in both markets.  The
Company has established business entities in many of the markets with
significant potential.

     Consumer lawn and garden products are sold under the Scotts-Registered
Trademark- label in Australia, Canada, the European Union and New Zealand.  In
addition, products bearing the Miracle-Gro-Registered Trademark- trademark are
marketed in Canada, the Caribbean, Australia, New Zealand and the United Kingdom
(the "U.K.").  The Company's Hyponex-Registered Trademark- line of products is
present in Japan as a result of a long-term agreement with Hyponex Japan
Corporation, Ltd., an unaffiliated entity.

                                  Page 9


     Professional markets include both the horticulture and turf industries. 
The Company markets professional products in Australia, Canada, the Caribbean,
European Union, Japan, Latin America, Mexico, the Middle East, New Zealand, and
South East Asia.  Horticultural products mainly carry the Scotts-Registered
Trademark-, Sierra-Registered Trademark-, Peters-Registered Trademark- and
Osmocote-Registered Trademark- labels.  Turf products primarily use the Scotts-
Registered Trademark- trademark.

     On December 31, 1994, the Garden and Professional Products Division of
Zeneca Garden Care was sold to Miracle Garden Care Limited ("Miracle Garden
Care"), a wholly-owned subsidiary of Miracle Holdings Limited ("Miracle
Holdings").  Miracle Holdings was established by Miracle-Gro UK and certain
institutional investors, each of which is an affiliate of either Charterhouse
plc or Advent International plc, for the purpose of pursuing the lawn and garden
care business in the U.K. and elsewhere.  Miracle-Gro UK received an approximate
32.3% equity interest in Miracle Holdings in return for its transfer to Miracle
Holdings of Miracle-Gro's UK and Ireland business and the grant to Miracle
Garden Care, pursuant to a license agreement, of rights to certain trademarks. 
In addition, Miracle-Gro UK was granted certain rights to buy out substantially
all of the equity stakes of the other investors in Miracle Holdings at certain
future times.  The option to buy out the other investors in Miracle Holdings now
extends to the Company.  In November 1996, the Company executed a letter of
intent for the purchase of the other investors' interests in Miracle Holdings.  

     Miracle Garden Care has leading positions in the U.K. in a number of lawn
and garden market categories.  Products are sold by a direct sales force to do-
it-yourself and gardening retailers.

     BUSINESS STRATEGY

     An increasing portion of the Company's sales and earnings is derived from
customers in foreign countries.  The Company's managers travel abroad regularly
to visit its facilities, distributors and customers.  The Company's own
employees manage its affairs in Europe, Australia, Malaysia, Mexico and the
Caribbean.  The Company plans to expand its international business in both the
consumer and professional markets.  The Company believes that the technology,
quality and value that are widely associated with its brands domestically can be
transferred to the global market place.  The Company intends to continue to
market internationally through both direct sales and distributor arrangements.

     Any significant changes in international economic conditions,
expropriations, changes in taxation and regulation by United States and/or
foreign governments could have a substantial effect upon the international
business of the Company.  Management believes, however, that these risks are not
unreasonable in view of the opportunities for profit and growth available in
foreign markets.  The Company's international earnings and cash flows are
subject to variations in currency exchange rates, which derive from sales and
purchases of the Company's products made in foreign currencies.  In order to
minimize the impact of adverse exchange rate movements, the Company has
developed a program to manage and mitigate this risk.  The risk management
program is designed to minimize impact on the cash value of the Company's
foreign currency payables and receivables.  The Company continues to use forward
foreign exchange contracts and purchase currency options to lessen this risk.

     COMPETITION

     The Company's international consumer business faces strong competition in
the garden center market, particularly in Australia, Canada and the U.K. 
Competitors in Australia include Chisso-Asahi, Phostrogen and Haifa Chemicals
Israel.  Competitors in the U.K. include Levington, Solaris, Phostrogen, PBI and
various local companies.  Competitors in Canada include Nu-Gro, So-Green and IMC
Vigoro.  The Company has historically responded to competition with superior
technology, excellent trade relationships, competitive prices, broad
distribution and strong advertising and promotional programs.

     The international professional products market is very competitive,
particularly in the controlled-release and water soluble fertilizer segments. 
Numerous United States and European companies are pursuing these segments
internationally, including Pursell Industries, Lesco, Lebanon Chemical Corp.,
IMC Vigoro, Noram, BASF, Norsk Hydro, Haifa Chemicals Israel, Kemira and private
label companies.  Historically, the Company's response to competition in the
professional markets has been to adapt its 

                                  Page 10


technology to solve specific user needs which are identified by developing 
close working relationships with key users.

     Management believes the Company is well-positioned to obtain an increased
share of the international market.  The Company has a broad, diversified product
line made up of value added fertilizers which can be targeted to market segments
of consumer, turf, horticulture and high value agricultural crops.  Also, the
Company has the capability to sell worldwide through its extensive distributor
network.   However, there can be no assurance that the Company's market share or
margins will not be eroded by new or existing competitors.

MATTERS RELATING TO THE COMPANY GENERALLY

     PATENTS, TRADEMARKS AND LICENSES

     The "Scotts-Registered Trademark-", "Miracle-Gro-Registered Trademark-" and
"Hyponex-Registered Trademark-" brand names and logos, as well as a number of
product trademarks, including "Turf Builder-Registered Trademark-", "Lawn Pro-
Registered Trademark-", "ProTurf-Registered Trademark-", "Osmocote-Registered
Trademark-" and "Peters-Registered Trademark-" are federally and internationally
registered and are considered material to the Company's business.  The Company
regularly monitors its trademark registrations, which are generally effective
for ten years, so that it can renew those nearing expiration.  In 1989, the
Company assigned rights to certain Hyponex-Registered Trademark- trademarks to
Hyponex Japan Corporation, Ltd., an unaffiliated entity.  In December 1994,
Miracle-Gro licensed exclusive rights to certain Miracle-Gro trademarks in the
U.K. and Ireland to Miracle Garden Care for terms ranging from five to twenty
years.  In July 1995, Sierra granted a non-exclusive license to Peters
Acquisition Corporation, now owned by United Industries, to use the Peters-
Registered Trademark- trademark in the United States consumer market.  In
October 1996, Scotts became the exclusive licensee of the trademark Nutralene-
Registered Trademark-, in connection with the marketing and sale of products
containing this nitrogen fertilizer.

     As of September 30, 1996, the Company held over 100 patents on processes,
compositions, grasses, and mechanical spreaders and has several additional
patent applications pending.  Patent protection generally extends seventeen
years, and many of the Company's patents extend well into the next decade.  The
Company also holds exclusive and nonexclusive patent licenses from certain
chemical suppliers permitting the use and sale of patented pesticides.  

     RESEARCH AND DEVELOPMENT

     The Company has a long history of innovation, and its research and
development successes can be measured in terms of sales of new products and by
the Company's patents.  Most of the Company's fertilizer products, many of its
grasses and many of its mechanical devices are covered by one or more of over
100 U.S. and foreign patents owned by the Company.

     The Company maintains a premier research and development organization 
headquartered in the Dwight G. Scott Research Center in Marysville, Ohio 
("Scotts Research").  The Company also operates three research field stations 
located in Florida, Texas and Oregon.  These field stations facilitate 
evaluation of products in a variety of climatic conditions, an integral part 
of the Company's product development, quality assurance and competitive 
product analysis programs.  Research to develop new and improved application 
devices is conducted at Republic's manufacturing facility in Carlsbad, 
California.  Taken together, the research and development effort maintains a 
focus on superior agronomic performance for lawn, turf and horticultural 
applications through products which are cost effective and easy to use.  The 
knowledge and concepts used to formulate products for the professional turf 
and plant production markets are also used to provide similar results for the 
do-it-yourself market. In addition to the Marysville R&D organization, Scotts 
Europe, B.V. (Netherlands) maintains an R&D facility devoted to the 
Osmocote-Registered Trademark-controlled-release fertilizer line produced in 
Heerlen, The Netherlands.

     Since its introduction of the first home lawn fertilizer in 1928, the
Company has used its research and development strengths to build the do-it-
yourself market. Technology continues to be a Company hallmark.  The Company's
introduction of the TGR-Registered Trademark- line in 1987 to control POA ANNUA
on golf courses is 

                                  Page 11


an example.  In 1992, the Company introduced Poly-S-Registered Trademark-, a 
patented proprietary controlled-release fertilizer technology.  In 1993, 
ScottKote-Registered Trademark-, another controlled-release technology 
primarily for the nursery market, was introduced.  In addition, the Company 
has modified its Marysville facility to utilize a new, patented production 
process which is expected to reduce costs and improve product quality, while 
increasing production capacity.  (See "Production Facilities.")  Since the 
Hyponex acquisition in 1988, the Company's research and development 
organization has worked to improve the quality and reduce the production cost 
of branded organic products, in particular potting soils.  One of the results 
of this effort was the introduction, in 1994, of a line of value-added, 
premium quality potting soils and planting mixes under the Scotts-Registered 
Trademark- brand.

     Through the acquisition of Sierra, Scotts sought to obtain patents for
technological advancements in water soluble fertilizers.  In 1996, Scotts
secured a patent on the use of urea phosphate in water soluble fertilizers used
as the basis for the Peters Excel-Registered Trademark- brand of fertilizers,
having previously obtained a solution and method patent for such product line. 
Also during fiscal 1996, the Company installed a dedicated turfgrass genetic
engineering laboratory in its existing Scotts Research facility, to research and
potentially develop turfgrass varieties with improved characteristics such as
resistance to disease, insects and herbicides.  Also, research in fiscal 1996
focused on improving the quality and durability of the Company's consumer lawn
fertilizer packaging.  The Company plans to phase in plastic packaging for all
consumer lawn products to be shipped in fiscal years 1997 and 1998.

     Research has also been focused on durability, precision, and reduced
production costs of the Republic-produced spreaders.  Recently, Republic
completely redesigned the major products within the Company's consumer spreader
line so that they are now completely preassembled and are distributed and
displayed using innovative packaging.

     Sierra pioneered the use of controlled-release fertilizers for the
horticultural markets with the introduction of "Osmocote" in the 1960's.  This
polymer-encapsulated technology has achieved a large share of the horticultural
markets due to its ability to meet the strict performance requirements of
professional growers.  Scotts' and Sierra's research and development efforts
have been fully integrated and are focused on cost reduction and product/process
innovation.

     During fiscal 1996, the Company developed new products in several branded
lines including Scotts-Registered Trademark- professional turf products;
Osmocote-Registered Trademark- controlled-release fertilizer; Miracle-Gro-
Registered Trademark- granular lawn food products; Scotts-Registered Trademark-
spreaders; Vegi-Gro-TM- potting soil; and PatchMaster-Registered Trademark-
flowering seed/fertilizer mix.

     Combined Company research and development expenses were approximately $10.6
million (1.4% of net sales) for 1996 including environmental and regulatory
expenses.  This compares to $10.4 million (1.5% of net sales) and $11.0 million
(1.5% of net sales) for 1994 and 1995, respectively.

     PRODUCTION FACILITIES       

     The manufacturing plants for consumer and professional fertilizer products
marketed under the Scotts-Registered Trademark- label are located in Marysville,
Ohio.  In 1995, a new facility opened for producing Poly-S-Registered 
Trademark-, a proprietary controlled-release fertilizer.  Continued demand 
for "Turf Builder-Registered Trademark-" products resulted in the Company 
developing the capability to expand operations of these product lines from 
five days per week operations to continuous operation if necessary during 
peak demand periods.  The Company currently operates its plants five days per 
week.  The Sierra-Registered Trademark- controlled-release fertilizers are 
produced in Charleston, South Carolina, Milpitas, California and Heerlen, The 
Netherlands.  At the Heerlen facility, expansion has been completed to permit 
the blending of products which utilize both Scotts and Sierra proprietary 
technology.  The Company's Taylor Seed Packaging Plant, located on a separate 
site in Marysville, was sold in November 1996, and seed blending and 
packaging outsourced to various packaging companies located on the West Coast 
near seed growers.  Hyponex-Registered Trademark- organic products are 
processed and packaged in over 22 locations throughout the United States.  
The Company's lawn spreaders are produced at the Republic facility in 
Carlsbad, California.  Peters-Registered Trademark- water-soluble fertilizers 
are produced in Allentown, Pennsylvania.

                                  Page 12



     With the sale of the Peters-Registered Trademark- consumer water-soluble 
fertilizer ("CWSF") business in 1995, the Allentown facility has produced 
CWSF products for the buyer under a long-term supply agreement.  On July 27, 
1995, the Company entered into a Long-Term Supply Agreement (the "Agreement") 
with Peters Acquisition Co. ("PAC"), a wholly-owned subsidiary of Alljack & 
Company and Celex Corporation ("Alljack"). Pursuant to a subsequent stock and 
asset sale, PAC is now owned by individuals associated with United Industries 
Corporation ("United").  The initial term of the Agreement is two years 
(beginning August 27, 1995 and ending August 26, 1997).  The term has been 
extended until August 26, 2000, and thereafter may be extended for one year 
terms by mutual agreement. The Agreement required PAC to purchase from the 
Company its entire requirements of Peters-Registered Trademark- CWSF products 
until September 30, 1996, at a price based upon a negotiated formula which 
applies during the initial term and any renewals.  Since September 30, 1996, 
PAC has had the authority to purchase quantities as desired and to develop 
independent sources of supply, as required by the Federal Trade Commission.  
United has given notice that it will likely make no purchases though 
September 30, 1997.

     Resin used for producing Osmocote-Registered Trademark- controlled-release
fertilizer is manufactured at Sierra Sunpol Resins, a joint venture company
which is 97% owned by Sierra.  The Company operates twelve composting facilities
where yard waste (grass clippings, leaves, and twigs) is converted to raw
materials for the Company's organic products.  Operations at these composting
facilities have been integrated with the Company's 22 organics facilities.  

     The Company's fertilizer processing and packaging facilities operate seven
days per week for three shifts, during peak production periods, generally from
October through May for Scotts' production.  At other times, they operate from
five to seven days per week for three shifts.  Production schedules at Sierra's
facilities vary to meet demand.  Steps continue to integrate product
manufacturing between the Scotts and Sierra manufacturing locations.

     Management believes that each of its facilities is well-maintained and
suitable for its purpose.

     CAPITAL EXPENDITURES

     The Company's Marysville facilities were substantially modified during
fiscal 1992 and 1993.  The Company replaced one of the existing fertilizer
production lines with a line utilizing a new, patented process which it
developed.  In addition, the Company erected a new physical-blend facility and
added equipment to apply polymer coating to fertilizer materials.

     During 1994, approximately $13 million was spent to erect a new Poly-S-
Registered Trademark- fertilizer plant, an investment made necessary by strong
previously forecasted demand.  Actual demand was approximately 10% below
forecast for 1995, and approximately 25% below forecast for 1996.  Management
attributes the decline to the scaling back of low margin product lines, the
effects of greater than expected industry competition, and lower than expected
demand for Poly-S-Registered Trademark- products.  Additionally, in 1995,
approximately $4.0 million was spent on improvements to Sierra plant facilities.
During 1995 and 1996, approximately $4.0 million was spent to condition, through
temperature and humidity control, two of the Company's major production lines.

     Capital expenditures totaled $23.6 million and $18.2 million for the fiscal
years ended September 30, 1995 and 1996, respectively.  The Company expects that
capital expenditures during fiscal 1997 will total approximately $20 million. 
The Company is evaluating expansion of its Marysville distribution facility,
which could result in additional capital expenditures of up to $10 million.

     PURCHASING

     The key ingredients in the Company's fertilizer and control products are
various commodity and specialty chemicals including vermiculite, phosphates,
urea, potash, herbicides, insecticides and fungicides.  The Company obtains its
raw materials from various sources, which the Company presently considers to be
adequate.  No one source is considered to be essential to any of the Company's

                                     Page 13




Consumer, Professional or International Business Groups, or to its business as a
whole.  The Company has never experienced a significant interruption of supply.

     Raw materials for Scotts' Miracle-Gro include phosphates, urea and potash. 
The Company considers its sources of supply for these materials to be adequate. 
All of the products sold by Scotts' Miracle-Gro (other than those produced by
Miracle Garden Care) are produced under contract by independent fertilizer
blending and packaging companies.

     Sierra purchases granular, homogeneous fertilizer substrates to be coated,
and the resins for coating.  These resins are primarily supplied domestically by
Sierra SunPol Resins, a 97%-owned subsidiary of Sierra.

     Sphagnum peat, peat humus, vermiculite, manure and bark constitute
Hyponex's most significant raw materials.  At current production levels, the
Company estimates Hyponex's peat reserves to be sufficient for its near-term
needs in all locations.  Bark products are obtained from sawmills and other wood
residue producers and manure is obtained from a variety of sources, such as feed
lots, race tracks and mushroom growers.  The Company is currently substituting
composted yard waste for some organic raw materials and continues to expand this
practice.

     Raw materials for Republic include various engineered resins and metals,
all of which are available from a variety of vendors.

     DISTRIBUTION    

     The primary distribution centers for the Company's Scotts-Registered 
Trademark-products are located near the Company's headquarters in central Ohio. 
The Company's products are shipped by rail and truck.  While the majority of 
truck shipments are made by contract carriers, a portion is made by the 
Company's own fleet of leased trucks.  Inventories are also maintained in field 
warehouses located in major markets.

     The products of Scotts' Miracle-Gro are warehoused and shipped from five
contract packagers located throughout the country.  These contract packagers
ship full truckloads of product via common carrier to lawn and garden
distributors.  

     Most of Hyponex's organic products have low sales value per unit of weight,
making freight costs significant to profitability. Therefore, Hyponex has
located all of its 22 plant/distribution locations near large metropolitan areas
in order to minimize shipping costs.  Hyponex uses its own fleet of
approximately 70 trucks as well as contract haulers to transport its products
from plant/distribution points to retail customers. A small private trucking
fleet is maintained at the organic facilities for direct shipment of custom
orders to customers.  Inventories are also maintained in field warehouses.

     Sierra's products are produced at three fertilizer and two organic
manufacturing facilities located in the United States and one fertilizer
manufacturing facility located in Heerlen, The Netherlands.  The majority of
shipments are via common carriers to nearby distributors' warehouses.

     Republic-produced, Scotts-Registered Trademark- branded spreaders are
shipped via common carrier to regional warehouses serving the Company's retail
network.  A majority of Republic's E-Z spreader line and its private label lines
are sold free-on-board (FOB) Carlsbad with transportation arranged by the
customer.

     SIGNIFICANT CUSTOMERS

     Kmart Corporation and Home Depot represented approximately 13.9% and 15.1%
respectively, of the Company's sales in fiscal 1996 and 3.0% and 8.8%,
respectively, of the Company's outstanding trade accounts receivable at
September 30, 1996, which reflects their significant position in the retail lawn
and garden market. The loss of either of these customers or a substantial
decrease in the amount of their purchases could have a material adverse effect
on the Company's business.

                                     Page 14




     EMPLOYEES

     The Company's corporate culture is a blend of the history, heritage and
cultures of The O.M. Scott & Sons Company and the companies Hyponex, Sierra,
Miracle-Gro, and Republic, all of which were acquired over the past seven years.
The Company provides a comprehensive benefit program to all full-time
associates.  As of September 30, 1996, the Company employed approximately 2,250
full-time year-round workers in the United States (includes all subsidiaries). 
An additional 156 full-time employees (including 12 temporary employees) are
located outside the United States.  As of September 30, 1996, full-time workers
averaged approximately nine years employment with the Company or its
predecessors.  During peak production periods, the Company engages as many as
750 temporary employees in the United States.  The Company's employees are not
unionized, with the exception of twenty-one of Sierra's employees at its
Milpitas facility, who are represented by the International Chemical Workers
Union.

ENVIRONMENTAL AND REGULATORY CONSIDERATIONS

     Federal, state and local laws and regulations relating to environmental
matters affect the Company in several ways.  All products containing pesticides
must be registered with the United States Environmental Protection Agency
("United States EPA") (and in many cases, similar state and foreign agencies)
before they can be sold.  The inability to obtain or the cancellation of any
such registration could have an adverse effect on the Company's business.  The
severity of the effect would depend on which products were involved, whether
another product could be substituted and whether the Company's competitors were
similarly affected.  The Company attempts to anticipate regulatory developments
and maintain registrations of, and access to, substitute chemicals, but there
can be no assurance that it will continue to be able to avoid or minimize these
risks.  Fertilizer and organic products (including manures) are also subject to
state labeling regulations.

     In addition, the use of certain pesticide and fertilizer products is
regulated by various local, state, federal and foreign environmental and public
health agencies.  These regulations may include requirements that only certified
or professional users apply the product or that certain products be used only on
certain types of locations (such as "not for use on sod farms or golf courses"),
may require users to post notices on properties to which products have been or
will be applied, may require notification of individuals in the vicinity that
products will be applied in the future or may ban the use of certain
ingredients.  The Company has been successful in complying with these
regulations.  Compliance with such regulations and the obtaining of
registrations does not assure, however, that the Company's products will not
cause injury to the environment or to people under all circumstances.

     State and federal authorities generally require Hyponex to obtain permits
(sometimes on an annual basis) in order to harvest peat and to discharge water
run-off or water pumped from peat deposits.  The state permits typically specify
the condition in which the property must be left after the peat is fully
harvested, with the residual use typically being natural wetland habitats
combined with open water areas.  Hyponex is generally required by these permits
to limit its harvesting and to restore the property consistent with the intended
residual use.  In some locations, Hyponex has been required to create water
retention ponds to control the sediment content of discharged water.

     In July 1990, the Philadelphia district of the Army Corps of Engineers
directed that peat harvesting operations be discontinued at Hyponex's Lafayette,
New Jersey facility, and the Company complied.  In May 1992, the Department of
Justice in the U.S. District Court for the District of New Jersey, filed suit
seeking a permanent injunction against such harvesting at that facility and
civil penalties.  The Philadelphia District of the Corps has taken the position
that peat harvesting activities there require a permit under Section 404 of the
Clean Water Act.  If the Corps' position is upheld, it is possible that further
harvesting of peat from this facility would be prohibited.  The Company is
defending this suit and is asserting a right to recover its economic losses
resulting from the government's actions.  Management does not believe that the
outcome of this case will have a material adverse effect on the Company's
operations or its financial condition.  Furthermore, management believes the
Company has 

                                      Page 15



sufficient raw material supplies available such that service to
customers will not be adversely affected by continued closure of this peat
harvesting operation.

     State, federal and local agencies regulate the disposal, handling and
storage of waste and air and water discharges from Company facilities.  During
fiscal 1996, the Company had approximately $885,000 in environmental capital
expenditures and $357,000 in other environmental expenses, compared with
approximately $538,000 in environmental capital expenditures and $332,000 in
other environmental expenses in fiscal 1995.  The Company has budgeted $485,000
in environmental capital expenditures and $320,000 in other environmental
expenses for fiscal 1997.

     In September 1991, the Company was identified by the Ohio Environmental
Protection Agency (the "Ohio EPA") as a Potentially Responsible Party ("PRP")
with respect to a site in Union County, Ohio (the "Hershberger site") that has
allegedly been contaminated by hazardous substances whose transportation,
treatment or disposal the Company allegedly arranged.  Pursuant to a consent
order with the Ohio EPA, the Company, together with four other PRPs identified
to date, investigated the extent of contamination in the Hershberger site and
remediation methods.  The results of the investigation were that the site
presents a low degree of risk and that the chemical compounds which contribute
to the risk are not compounds generally used by the Company.  However, due to
the fact that the Company was originally named as a PRP, and due to the
potential joint and several liability of PRPs, the Company may choose to
participate in voluntary remediation efforts which might occur at the site. 
Management believes that obligations incurred through such participation will
not have a significant adverse effect on the Company's results of operations or
financial condition.

     On January 30, 1996, Sierra was served with a Complaint and Notice of
Opportunity for Hearing in which the US EPA, Region 9 alleged certain labeling
violations under the Federal Insecticide, Fungicide and Rodenticide Act
("FIFRA").  The fines proposed for such alleged violations total $785,000 and
are based upon the maximum allowable penalties.  Sierra has vigorously defended
this action and raised numerous defenses.  Based on provisions in FIFRA which
allow for reductions of fines for good faith efforts at compliance, management
estimates Sierra's liability to be no more than $200,000, which has been accrued
in the financial statements.

     In addition, Sierra is a defendant in a private cost-recovery action
relating to the Novak Sanitary Landfill, located near Allentown, Pennsylvania. 
By agreement with W.R. Grace-Conn., Sierra's liability is limited to a maximum
of $200,000 with respect to this site.  The Company's management does not
believe that the outcome of this proceeding will have a material adverse effect
on its financial condition or results of operations.

ITEM 2.   PROPERTIES.

     The Company has fee or leasehold interests in approximately sixty (60)
facilities.

     The Company owns approximately 829 acres at its Marysville, Ohio
headquarters.  It owns three research facilities in Apopka, Florida; Cleveland,
Texas; and Gervais, Oregon.  The Company leases one fertilizer warehouse in
Ohio.  Republic leases its twenty (20) acre spreader facility in Carlsbad,
California.

     The Company's 22 organics bagging facilities are located nationwide in
nineteen states.  Twenty are owned by the Company.  Most facilities include
production lines, warehouses, offices and field processing areas.

     The Company operates 12 composting facilities whose operations have been
integrated with the Company's existing organics bagging facilities.  Five of
these sites are leased and are located in California, Indiana, Oregon and
Illinois.  Five other sites are utilized through agreements with the
municipalities of Greensboro, North Carolina; Shreveport, Louisiana; Spokane,
Washington; Independent Hill, Virginia; and Balls Ford, Virginia.  Two other
sites are located at existing bagging facilities in Wisconsin and California.

                                        Page 16



     The Company owns two Sierra manufacturing facilities in Fairfield,
California and Heerlen, The Netherlands.  It leases three Sierra manufacturing
facilities in Allentown, Pennsylvania; Milpitas, California; and North
Charleston, South Carolina.  

     The Company leases the land upon which Scotts' Miracle-Gro headquarters is
located.

     It is the opinion of the Company's management that its facilities are
adequate to serve their intended purposes at this time and that its property
leasing arrangements are stable.  Please also see the discussion of the
Company's production facilities in "ITEM 1.  BUSINESS - Matters Relating to the
Company Generally -- Production Facilities" above, which discussion is
incorporated herein by this reference.

ITEM 3.  LEGAL PROCEEDINGS.

     As noted in the discussion of "Environmental and Regulatory Considerations"
in ITEM 1. BUSINESS, the Company is defending a suit filed by the United States
Department of Justice which seeks civil penalties and a permanent injunction
against peat harvesting at Hyponex's Lafayette, New Jersey facility.  The
Company has asserted a right to recover its economic losses resulting from the
government's actions.  The Company has proposed a remediation plan, which is
currently being reviewed by the government.  The Company also is involved in
several other environmental matters, as set forth above in "Environmental and
Regulatory Considerations".  Management does not believe the outcome of these
matters will have a material adverse effect on the Company's operations or its
financial condition.

     The Company is involved in other lawsuits and claims which arise in the
normal course of its business.  In the opinion of management, these claims
individually and in the aggregate are not expected to result in an adverse
effect on the Company's financial position or operations.

     During 1993 and 1994, Miracle-Gro Products discussed with Pursell
Industries, Inc. ("Pursell") the feasibility of forming a joint venture to
produce and market a line of slow-release lawn food, and in October 1993, signed
a non-binding "heads of agreement".  On March 2, 1995, Pursell Industries, Inc.
("Pursell") instituted an action in the United States District Court for the
Northern District of Alabama, PURSELL INDUSTRIES, INC. V. STERN'S MIRACLE-GRO
PRODUCTS, INC., CV-95-C-0524-S (the "Alabama Action"), alleging, among other
things, breach of an alleged joint venture contract with Miracle-Gro Products,
fraud and breach of an alleged fiduciary duty owed Pursell.  On December 18,
1995, Pursell filed an amended complaint in which Scotts was named as an
additional party defendant, and which made similar allegations against Scotts'
Miracle-Gro.  The amended complaint also alleged that Scotts intentionally
interfered with the alleged business relationship between Pursell and
Miracle-Gro Products (now Scotts' Miracle-Gro); that Miracle-Gro Products
wrongfully disclosed to Scotts alleged trade secret information of Pursell; that
Scotts and Miracle-Gro Products engaged in allegedly false and misleading
advertising; and that Scotts and Miracle-Gro Products allegedly misappropriated
Pursell's trade dress.  The Alabama Action seeks compensatory damages in excess
of $10 million, punitive damages of $20 million, treble damages and injunctive
relief.  The Company continues to vigorously defend the Alabama Action.

     On April 14, 1996, in response to communications from the Company that the
Company believed Pursell was infringing the Company's Poly-S patents, Pursell
instituted a second action in the United States District Court for the Northern
District of Alabama, PURSELL INDUSTRIES, INC. V. THE SCOTTS COMPANY, CV-96-AR-
0931-S (the "Patent Action").  Pursell seeks a declaratory judgment that the
Company's patents are unenforceable as to Pursell and alleges that the Company
has engaged in unfair competition by allegedly mis-marking its patents on
various products.  The Company has vigorously defended this action and believes
its patents to be enforceable.

     Pursell and the Company have been engaged in settlement negotiations since
October, 1996 in an effort to settle both the Alabama Action and the Patent
Action.

                                     Page 17



ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     There were no matters submitted to a vote of the security holders during
the fourth quarter of the fiscal year covered by this Report.

EXECUTIVE OFFICERS OF REGISTRANT

     The executive officers of Scotts, their positions and, as of December 16,
1996, their ages and years with Scotts (and its predecessors) are set forth
below.

YEARS WITH THE COMPANY (AND ITS NAME AGE POSITION(S) HELD PREDECESSORS) ---- --- ---------------- ------------- Charles M. Berger 60 Chairman of the Board, President 4 months and Chief Executive Officer Horace Hagedorn 81 Vice Chairman of the Board 47 James Hagedorn 41 Director and Executive Vice 9 President, U.S. Business Groups Paul D. Yeager 58 Executive Vice President and 22 Chief Financial Officer Ronald E. Justice 51 Senior Vice President, 1 Operations Michael P. Kelty, Ph.D. 46 Senior Vice President, 17 Professional Business Group James L. Rogula 62 Senior Vice President, 1 Consumer Lawns Group John Kenlon 65 President, Consumer Gardens 26 Group Joseph M. Petite 46 Senior Vice President, Organics 8 Business Group L. Robert Stohler 55 Senior Vice President, 1 International Rosemary L. Smith 49 Vice President, Human Resources 23 Christiane W. Schmenk 37 Secretary and Director of Legal Affairs 3
Executive officers serve at the discretion of the Board of Directors (and in the case of Mr. Berger, Mr. Horace Hagedorn, Mr. James Hagedorn, and Mr. Kenlon, pursuant to employment agreements). The business experience of each of the persons listed above during the past five years is as follows: Mr. Berger was elected Chairman of the Board, President, and Chief Executive Officer of Scotts in August, 1996. Mr. Berger came to Scotts from H. J. Heinz Company, where he served as Chairman, President and Chief Executive Officer of Weight Watchers International, a Heinz affiliate, from November 1978 to September 1994. From October 1994 to August 1996, he was Chairman and CEO of Heinz India Pvt. Ltd. (Bombay), and he served as Managing Director and CEO of Heinz-Italy (Milan), the largest Heinz profit center in Europe, from August 1975 to November 1978. During his 32-year career at Heinz, he also held the positions of General Manager, Marketing, for all Heinz U.S. grocery products; Marketing Director for Heinz UK (London) and Director of Corporate Planning at Heinz World Headquarters. He is also a former director of Miracle-Gro Products. Page 18 Mr. Horace Hagedorn was named Vice Chairman of the Board and Director of Scotts, and Chairman of the Board and Chief Executive Officer of Scotts' Miracle-Gro, in May 1995. Mr. Hagedorn founded Miracle-Gro Products in 1950 and served as Chief Executive Officer of Miracle-Gro Products from 1985 until May 1995. Horace Hagedorn is the father of James Hagedorn. Mr. Hagedorn's recognitions include the "Man of the Year" award from the National Lawn and Garden Distributors Association, and the Distinguished Service Medal from the Garden Writers of America Association. He was elected New York Regional Area "Entrepreneur of the Year" in 1993. Mr. James Hagedorn was named Executive Vice President, U.S. Business Groups, in October 1996. From May 1995 to October 1996, he served as Senior Vice President, Consumer Gardens Group, of Scotts. Mr. Hagedorn has also been Executive Vice President of Scotts' Miracle-Gro since May 1995. He was Executive Vice President of Miracle-Gro Products from 1989 until May 1995. He was previously an officer and an F-16 pilot in the United States Air Force. James Hagedorn is the son of Horace Hagedorn. Mr. Yeager has been an Executive Vice President of Scotts since 1991 and a Vice President and the Chief Financial Officer of Scotts and its predecessors since 1980. He was first Assistant Comptroller and then Comptroller of Scotts' predecessor from 1974 to 1980. Mr. Yeager will cease active employment with the Company and resign as an executive officer of Scotts December 31, 1996. Mr. Justice was named Senior Vice President, Operations, of Scotts in July 1995. From 1992 to 1995, he was Vice President of Operations for Continental Baking, a producer of bread and cake bakery products and a subsidiary of Ralston Purina Company. From 1991 to 1992, he served as Vice President of Engineering for Frito-Lay, a snack food producer and a subsidiary of Pepsico, Inc. From 1988 to 1991, he was Vice President of Manufacturing for Frito-Lay's Central Division. Dr. Kelty was named Senior Vice President, Professional Business Group, of Scotts in July 1995. Dr. Kelty had been Senior Vice President, Technology and Operations, of Scotts from 1994 to July 1995. From 1988 to 1994, he served first as Director, then as Vice President, of Research and Development of Scotts. Prior to that, Dr. Kelty was the Director of Advanced Technology, Research of Scotts, and from 1983 to 1987, he was Director, Chemical Technology Development, of Scotts and its predecessors. Mr. Rogula was named Senior Vice President, Consumer Lawns Group, of Scotts in October 1996. He served as Senior Vice President, Consumer Business Group, of Scotts from January 1995 to October 1996. From May 1990 until the time he joined Scotts, he was President of The American Candy Company, a producer of non-chocolate candies. From January 1990 to May 1990, he was an independent business consultant. Mr. Kenlon was named President, Consumer Gardens Group, of Scotts in December 1996. He remains Chief Operating Officer and President of Scotts' Miracle-Gro, positions held since May 1995. Mr. Kenlon was the President of Miracle-Gro Products from December 1985 until May 1995. Mr. Kenlon began his association with the Miracle-Gro Companies in 1960. Mr. Petite was named Senior Vice President, Organics Business Group, of Scotts in December 1996. From July 1996 to December 1996, he served as Vice President, Organics Business Group, of Scotts. From November 1995 to July 1996, Mr. Petite served as Vice President, Strategic Planning of Scotts. From April 1989 to November 1995, he was Vice President of Marketing, Consumer Business Group of Scotts. Mr. Stohler was named Senior Vice President, International, of Scotts in December 1996. From November 1995 to December 1996, he served as Vice President, International of Scotts. From 1994 to 1995, he was President of Rubbermaid Europe S.A., a marketer of plastic housewares, toys, office supplies and janitorial and food service products. From 1992 to 1994, he was Vice President and Chief Financial Officer of Synthes (USA), a marketer and manufacturer of implants and surgical instruments for orthopedic health care. From 1979 to 1991, he held various positions with S. C. Johnson Wax, a Page 19 marketer of consumer goods, institutional products and specialty chemicals, including assignments in Asia/Pacific, Latin America and Europe. Ms. Smith was named Vice President, Human Resources of Scotts in October 1996. From April 1991 to October 1996, she was Director, Human Resources, and from January 1986 to March 1991, she was Director, Compensation & Benefits, of Scotts. Ms. Smith first joined Scotts in 1973. Ms. Schmenk was named Secretary of Scotts in December 1996. Ms. Schmenk joined Scotts in November of 1993 as Associate General Counsel, and held that position until January 1996 when she was appointed Director, Legal Affairs. From February 1992 to November 1993, she was an associate attorney at the law firm Buckley, King & Bluso, and from October 1989 to February 1992, she was an associate attorney at the law firm Denmead, Blackburn & Brown. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. In accordance with General Instruction G(2), the information contained under the captions "NYSE Symbol," "Stock Price Performance," "Price Range," "Shareholders" and "Dividends" on the Inside Back Cover of the Registrant's Annual Report to Shareholders for the fiscal year ended September 30, 1996, is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA. In accordance with General Instruction G(2), the information contained under the caption "Five Year Summary", at page 29 of the Registrant's Annual Report to Shareholders for the fiscal year ended September 30, 1996, is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. In accordance with General Instruction G(2), the information contained under the caption "Management's Discussion and Analysis", at pages 30 through 36 of the Registrant's Annual Report to Shareholders for the fiscal year ended September 30, 1996, is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The Consolidated Financial Statements included on pages 37 through 54 and the Report of Coopers & Lybrand L.L.P., Independent Auditors, thereon included on page 55 of the Registrant's Annual Report to Shareholders for the fiscal year ended September 30, 1996, are incorporated herein by reference. The "Quarterly Consolidated Financial Information" included in Note 16 of the Notes to Consolidated Financial Statements on page 54 of the Registrant's Annual Report to Shareholders for the fiscal year ended September 30, 1996, is also incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. Page 20 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. In accordance with General Instruction G(3), the information contained under the captions "BENEFICIAL OWNERSHIP OF SECURITIES OF THE COMPANY - Voting Restrictions on the Miracle-Gro Shareholders" and "ELECTION OF DIRECTORS" in the Registrant's definitive Proxy Statement for the 1997 Annual Meeting of Shareholders to be held on March 12, 1997 to be filed with the Securities and Exchange Commission pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934 (the "Proxy Statement"), is incorporated herein by reference. The information regarding executive officers required by Item 401 of Regulation S-K is included in Part I hereof under the caption "Executive Officers of Registrant." The Registrant is not required to make any disclosure pursuant to Item 405 of Regulation S-K. ITEM 11. EXECUTIVE COMPENSATION. In accordance with General Instruction G(3), the information contained under the captions "EXECUTIVE COMPENSATION" and "ELECTION OF DIRECTORS -- Compensation of Directors" in the Registrant's Proxy Statement, is incorporated herein by reference. Neither the report of the Compensation and Organization Committee of the Registrant's Board of Directors on executive compensation nor the performance graph included in the Registrant's Proxy Statement shall be deemed to be incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. In accordance with General Instruction G(3), the information contained under the caption "BENEFICIAL OWNERSHIP OF SECURITIES OF THE COMPANY" in the Registrant's definitive Proxy Statement, is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. In accordance with General Instruction G(3), the information contained under the captions "BENEFICIAL OWNERSHIP OF SECURITIES OF THE COMPANY" and "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" in the Registrant's definitive Proxy Statement, is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) DOCUMENTS FILED AS PART OF THIS REPORT 1. FINANCIAL STATEMENTS: The following Consolidated Financial Statements of The Scotts Company and Report of Coopers & Lybrand L.L.P., Independent Auditors, are incorporated by reference to pages 37 through 55 of the Registrant's 1996 Annual Report to Shareholders: Consolidated Statements of Operations -- Fiscal Years Ended September 30, 1994, 1995 and 1996. Consolidated Statements of Cash Flow -- Fiscal Years Ended September 30, 1994, 1995 and 1996. Page 21 Consolidated Balance Sheets -- September 30, 1995 and 1996. Consolidated Statements of Changes in Shareholders' Equity -- Fiscal Years Ended September 30, 1994, 1995 and 1996. Notes to Consolidated Financial Statements Report of Coopers & Lybrand L.L.P., Independent Auditors 2. FINANCIAL STATEMENT SCHEDULES: The following financial statement schedule of The Scotts Company, for the fiscal years ended September 30, 1996, 1995, and 1994 is filed as part of this Report and should be read in conjunction with the Consolidated Financial Statements of The Scotts Company. Schedule II Valuation and Qualifying Accounts........ 89-91 Schedules not listed above have been omitted because they are not applicable or are not required or the information required to be set forth therein is included in the Consolidated Financial Statements or Notes thereto. 3. EXHIBITS: Exhibits filed with this Annual Report on Form 10-K are attached hereto. For a list of such exhibits, see "Index to Exhibits" beginning at page E-1 (page 92 as sequentially numbered). The following table provides certain information concerning executive compensation plans and arrangements required to be filed as exhibits to this Annual Report on Form 10-K. Executive Compensatory Plans and Arrangements
EXHIBIT -------- NO. DESCRIPTION LOCATION --- ----------- -------- 10(a) The Scotts Company Associates' Pages 125 through 176 Pension Plan as amended effective January 1, 1989 and December 31, 1995 10(b) Third Restatement of The Scotts Pages 177 through 217 Company Profit Sharing and Savings Plan 10(c) Employment Agreement, dated as Incorporated herein by of October 21, 1991, between reference to the Annual Scotts (as successor to The O.M. Report on Form 10-K for Scott & Sons Company ("OMS") the fiscal year ended and Theodore J. Host September 30, 1993 of The Scotts Company, a Delaware corporation ("Scotts Delaware") (File No. 0-19768) [Exhibit 10(g)] Page 22 10(d) Stock Option Plan and Agreement, Incorporated herein by dated as of January 9, 1992, reference to Scotts' between Scotts (as successor to Annual Report on Scotts Delaware) and Theodore J. Form 10-K for the fiscal Host year ended September 30, 1994 (File No. 0-19768) [Exhibit 10(f)] 10(e) The O.M. Scott & Sons Company Incorporated herein by Excess Benefit Plan, effective reference to Scotts October 1, 1993 Delaware's Annual Report on Form 10-K for the fiscal year ended September 30, 1993 (File No. 0-19768) [Exhibit 10(h)] 10(f) The Scotts Company 1992 Long Incorporated herein by Term Incentive Plan reference to Scotts Delaware's Registration Statement on Form S-8 filed on March 26, 1993 (Registration No. 33-60056) [Exhibit 4(f)] 10(g) The Scotts Company 1996 Pages 218 through 220 Executive Annual Incentive Plan 10(h) Employment Agreement, dated as Incorporated herein by of May 19, 1995, between Scotts reference to Scotts' and James Hagedorn Annual Report on Form 10-K for the fiscal year ended September 30, 1995 (File No. 1-11593) [Exhibit 10(p)] 10(i) The Scotts Company 1996 Stock Pages 221 through 229 Option Plan (as amended through December 16, 1996) 10(j) Employment Agreement, dated as Pages 230 through 243 of May 19, 1995, among Stern's Miracle-Gro Products, Inc. (nka Scotts' Miracle-Gro Products, Inc.), Scotts and Horace Hagedorn 10(k) Employment Agreement, dated as Pages 244 through 257 of May 19, 1995, among Stern's Miracle-Gro Products, Inc. (nka Scotts' Miracle-Gro Products, Inc.), Scotts and John Kenlon Page 23 10(l) Employment Agreement, dated as Pages 258 through 268 of August 7, 1996, between Scotts and Charles M. Berger 10(m) Stock Option Agreement, dated as Pages 269 through 276 of August 7, 1996, between Scotts and Charles M. Berger 10(n) Stock Option Agreement, dated as Pages 277 through 283 of March 5, 1996, between Scotts and Tadd C. Seitz 10(o) Letter Agreement, dated April 10, Pages 284 through 293 1996, between Theodore J. Host and Scotts 10(p) Letter Agreement, dated January Pages 294 through 299 18, 1996, between Scotts and Paul D. Yeager, and amendment dated September 16, 1996
(b) REPORTS ON FORM 8-K The Registrant filed a Current Report on Form 8-K dated April 3, 1996, which reported, as an "Other Event", that a letter was forwarded by Mr. Tadd C. Seitz, then Chairman of the Board, Interim President and Chief Executive Officer of the Registrant, to certain investors and analysts. No financial statements were required to be filed with the Current Report on Form 8-K. (c) EXHIBITS See Item 14(a)(3) above. (d) FINANCIAL STATEMENT SCHEDULES The response to this portion of Item 14 is submitted as a separate section of this Annual Report on Form 10-K. See Item 14(a)(2) above. Page 24 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. THE SCOTTS COMPANY Dated: December 23, 1996 By /s/ Charles M. Berger ---------------------------------- Charles M. Berger, Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ----- /s/ James B Beard Director December 23, 1996 - ----------------------------------- James B Beard /s/ Charles M. Berger Chairman of the Board/ December 23, 1996 - ----------------------------------- President/Chief Executive Officer Charles M. Berger /s/ John S. Chamberlin Director December 23, 1996 - ----------------------------------- John S. Chamberlin /s/ Joseph P. Flannery Director December 23, 1996 - ----------------------------------- Joseph P. Flannery /s/ Horace Hagedorn Vice Chairman/Director December 23, 1996 - ----------------------------------- Horace Hagedorn /s/ James Hagedorn Executive Vice President/ December 23, 1996 - ----------------------------------- Director James Hagedorn /s/ John Kenlon Director December 23, 1996 - ----------------------------------- John Kenlon /s/ Karen Gordon Mills Director December 23, 1996 - ----------------------------------- Karen Gordon Mills /s/ Tadd C. Seitz Director December 23, 1996 - ----------------------------------- Tadd C. Seitz /s/ Donald A. Sherman Director December 23, 1996 - ----------------------------------- Donald A. Sherman /s/ John M. Sullivan Director December 23, 1996 - ----------------------------------- John M. Sullivan /s/ L. Jack Van Fossen Director December 23, 1996 - ----------------------------------- L. Jack Van Fossen /s/ Paul D. Yeager Executive Vice President/ December 23, 1996 - ----------------------------------- Chief Financial Officer/ Paul D. Yeager Principal Accounting Officer Page 25
FIVE-YEAR SUMMARY
THE SCOTTS COMPANY AND SUBSIDIARIES For years ended September 30 (in thousands except share data) 1992 1993(1) 1994(2) 1995(3) 1996 - ------------------------------------------------------------------------------------------------------------------------------ Consolidated Statements of Operations Data Net sales $ 413,558 $ 466,043 $ 606,339 $ 732,837 $ 751,880 Cost of sales 213,133 244,218 319,730 394,369 414,075 Inventory writedown - - - - 3,084 ------- ------- ------- ------- ------- Gross profit 200,425 221,825 286,609 338,468 334,721 ------- ------- ------- ------- ------- Operating expenses: Marketing 66,245 74,579 100,106 130,179 140,919 Distribution 61,051 67,377 84,407 104,513 95,181 General and administrative 24,759 27,688 30,189 28,672 34,266 Research and development 6,205 7,700 10,352 10,970 10,605 Amortization of goodwill and other intangibles 816 1,615 3,633 5,950 8,812 Other income, net (796) (955) (1,350) (163) (558) Unusual (income) charges - - - (4,227) 17,703 ------- ------- ------- ------- ------- Total operating expenses 158,280 178,004 227,337 275,894 306,928 ------- ------- ------- ------- ------- Income from operations 42,145 43,821 59,272 62,574 27,793 Interest expense 15,942 8,454 17,450 26,320 26,541 ------- ------- ------- ------- ------- Income before income taxes, extraordinary items and cumulative effect of accounting changes 26,203 35,367 41,822 36,254 1,252 Income taxes 11,124 14,320 17,947 13,898 3,782 ------- ------- ------- ------- ------- Income (loss) before extraordinary items and cumulative effect of accounting changes 15,079 21,047 23,875 22,356 (2,530) Extraordinary items: Loss on early extinguishment of debt, net of tax (4,186) - (992) - - Utilization of net operating loss carryforwards 4,699 - - - - Cumulative effect of changes in accounting for postretirement benefits, net of tax and accounting for income taxes - (13,157) - - - ------- ------- ------- ------- ------- Net income (loss) 15,592 7,890 22,883 22,356 (2,530) Preferred stock dividends - - - 3,559 9,750 ------- ------- ------- ------- ------- Income (loss) applicable to common shareholders $ 15,592 $ 7,890 $ 22,883 $ 18,797 $ (12,280) ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Net income (loss) per common share: Income (loss) before extraordinary items and cumulative effect of accounting changes $ 0.84 $ 1.07 $ 1.27 $ 0.99 $ (0.65) Extraordinary items: Loss on early extinguishment of debt, net of tax (0.23) - (0.05) - - Utilization of net operating loss carryforwards 0.26 - - - - Cumulative effect of changes in accounting for postretirement benefits, net of tax and income taxes - (0.67) - - - ------- ------- ------- ------- ------- Net income (loss) per common share $ 0.87 $ 0.40 $ 1.22 $ 0.99 $ (0.65) ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Common shares used in per share calculation 18,014,151 19,687,013 18,784,729 22,616,685 18,785,724 Consolidated Balance Sheets Data Working capital $ 54,795 $ 88,526 $ 140,566 $ 226,998 $ 181,203 Capital investment 19,896 15,158 33,402 23,606 18,215 Property, plant and equipment, net 89,070 98,791 140,105 148,754 139,488 Total assets 268,021 321,590 528,584 809,045 731,685 Term debt, including current portion 31,897 92,524 223,885 272,446 223,325 Total shareholders' equity 175,929 143,013 168,160 380,790 364,301
(1) Includes Republic Tool and Manufacturing Corp. ("Republic") from November 19, 1992 (2) Includes Scotts-Sierra Horticulture Products Company ("Sierra") from December 16, 1993 (3) Includes Scotts' Miracle-Gro Products, Inc. and its subsidiaries ("Miracle-Gro Companies") from May 19, 1995 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis of the consolidated results of operations for the fiscal years ended September 30, 1996, 1995 and 1994 and the financial condition at September 30, 1996 should be read in conjunction with the Consolidated Financial Statements and Notes included elsewhere in this Report. A merger and an acquisition in recent years have a significant impact on the year-to-year comparisons of results of operations. Effective May 19, 1995, The Scotts Company ("Scotts" or the "Company") merged with Stern's Miracle-Gro Products, Inc. ("Miracle-Gro"); therefore, fiscal 1996 was the first year Miracle-Gro's spring selling season was included in Scotts' consolidated results of operations. Effective December 16, 1993, Scotts completed its acquisition of Grace-Sierra Horticultural Products Company ("Sierra"). Pro forma discussions herein give effect to both of these transactions as if they had occurred on October 1, 1993. REVIEW OF FISCAL 1996 Fiscal 1996 was a significant and challenging financial year for Scotts. The Company continued as the clear market leader in the U.S. consumer lawn and garden industry, remained a leader in the U.S. professional turf and horticulture management markets, and continued to grow its highly profitable international business. During fiscal 1996, the Company reported record net sales of $751.9 million. While management believes Scotts maintained and expanded its key market positions in 1996, the Company made several decisions that resulted in a significant reduction in income from operations and a $2.5 million net loss for the fiscal year. Fiscal 1996 net sales were unfavorably impacted as the Company discontinued a program encouraging retailers to build their consumer lawns products inventories substantially in advance of the spring selling season. This program was costly to Scotts as it included higher than normal discounting and promotional allowances to retailers. Management estimates that retailers had approximately $60 million in inventories related to this program at the beginning of Scotts fiscal 1996. Marketing expense was higher in proportion to sales in 1995 and 1996, due in part to the impact of the consumer lawns retailer early purchase program. The Company took additional steps toward long-term sustained profitability by restructuring certain aspects of its business, resulting in $17.7 million of unusual charges during 1996. These unusual charges were for severance costs related to the termination of approximately 120 associates and for assets whose book values were impaired as a result of operational and strategic business changes. The Company has also recently realigned its U.S. Consumer Business Group into three smaller, more focused groups: Consumer Lawns, Consumer Gardens and Organics. Management believes these newly established groups, in addition to the previously existing Professional and International Business Groups, provide the Company with a strategic organizational structure that is focused on the opportunities associated with each business and the special requirements of their customers, with the ultimate objective of maximizing profitability and overall shareholder value. The first major positive outcome of the discontinuance of the consumer lawns retailer early purchase program was improved working capital management (that contributed to operating cash flows of $82.3 million in 1996), which combined with lower capital investments, generated approximately $51.9 million of free cash flow (cash provided by operating activities less capital investment and Preferred Stock dividends) during fiscal 1996, compared to negative free cash flow of $20.3 million and $23.5 million in fiscal 1995 and 1994, respectively. RESULTS OF OPERATIONS The following table sets forth the components of income and expense for the three years ended September 30, 1996 on a percent-of-net sales basis:
YEARS ENDED SEPTEMBER 30, ------------------------------ 1994 1995 1996 -------- -------- -------- Net sales 100.0% 100.0% 100.0% Cost of sales 52.7 53.8 55.1 Inventory writedown - - 0.4 -------- -------- -------- Gross profit 47.3 46.2 44.5 -------- -------- -------- Operating expenses: Marketing 16.5 17.8 18.7 Distribution 13.9 14.3 12.7 General and administrative 5.0 3.9 4.5 Research and development 1.7 1.5 1.4 Amortization of goodwill and other intangibles 0.6 0.8 1.2 Other income, net (0.2) - (0.1) Unusual (income) charges - (0.6) 2.4 -------- -------- -------- Total operating expenses 37.5 37.7 40.8 -------- -------- -------- Income from operations 9.8 8.5 3.7 -------- -------- -------- Interest expense 2.9 3.6 3.5 -------- -------- -------- Income before income taxes and extraordinary item 6.9 4.9 0.2 Income taxes 3.0 1.9 0.5 -------- -------- -------- Income (loss) before extraordinary item 3.9 3.0 (0.3) Extraordinary item: Loss on early extinguishment of debt, net of tax (0.1) - - -------- -------- -------- Net income (loss) 3.8 3.0 (0.3) Preferred stock dividends - 0.5 1.3 -------- -------- -------- Income (loss) applicable to common shareholders 3.8% 2.5% (1.6)% -------- -------- -------- -------- -------- --------
FISCAL 1996 COMPARED WITH FISCAL 1995 Net sales for the fiscal year ended September 30, 1996 totaled $751.9 million, an increase of $19 million or 2.6% from the prior year. Compared to fiscal 1995 pro forma net sales of $821.2 million, net sales decreased by $69.3 million or 8.4%. Compared to 1995 pro forma, 1996 net sales declined principally due to the discontinuance of a consumer lawns retailer early purchase program, that encouraged retailers to build their inventories substantially in advance of the spring selling season and had the impact of increasing sales in the latter four months of fiscal 1995. Management estimates that approximately $60 million (7.3%) of the 1996 net sales decline from 1995 pro forma is a result of the discontinuance of this program. Sales volumes (down 11.1% in total compared to 1995 pro forma) were also unfavorably impacted by unusually poor spring weather conditions in North America and Northern Europe. Net sales increased approximately 2.7% in 1996 compared to 1995 pro forma as a result of pricing. Consumer Lawns Group net sales decreased $49.7 million or 18.0% ($54.1 million or 19.3% on a pro forma basis) to $225.9 million in 1996, primarily as a result of the discontinuance of the retailer early purchase program (approximately 21.4%). Consumer lawns 1996 sales were further negatively impacted by poor spring weather in its major markets (6.0%), partially offset by modest price increases (5.2%) and the impact of expanded distribution of Miracle-Gro Extra Long Lasting Lawn Food (2.9%). Compared to 1995 actual, Consumer Gardens Group net sales increased from $82.2 million to $115.3 million, primarily as a result of the inclusion of Miracle-Gro for the first full fiscal year. On a pro forma basis, consumer gardens net sales decreased 1.5%, reflecting the integration of the Miracle-Gro and Scotts garden product lines, resulting in the elimination of certain overlapping products (2.6%), and the poor spring weather in 1996. Organics Business Group net sales decreased by $6.7 million or 3.6% to $181.1 million in 1996, primarily due to lower volume resulting from poor spring weather and the closure of several composting facilities. In 1996, Professional Business Group net sales were $154.5 million, a decrease of $6.8 million or 4.2%, primarily as a result of poor spring and summer weather, and the elimination of certain end of season discounting programs in 1996 (together, 7.6%), partially offset by modest price increases (3.3%). International Business Group net sales increased by $5.5 million or 8.0% to $75.1 million in 1996, principally due to strong sales gains in the Asia/Pacific and Latin American regions, partially offset by poor spring weather conditions in Northern Europe. During 1995, the Peters-Registered Trademark- line of U.S. consumer water-soluble fertilizer products ("CWSF") generated net sales of $5.4 million; this line was divested in 1995 under a Federal Trade Commission consent order pursuant to the merger with Miracle-Gro. Cost of sales were 55.5% of net sales in 1996, a 1.7 percentage point increase compared to 53.8% of net sales in 1995. The increase resulted from the inventory writedown for products that are being phased out as part of the Company's plan to simplify its products lines, lower than planned production volumes resulting in higher proportional manufacturing costs, and to a lesser extent, unfavorable sales mix resulting from the discontinuance of the consumer lawns retailer early purchase program. Operating expenses increased $31 million or 11.3% to $306.9 million in 1996, from $275.9 million in 1995. Operating expenses were 40.8% of net sales in 1996, compared to 37.7% in 1995. Excluding unusual (income) charges in both years, operating expenses increased $9.1 million or 3.3% to $289.2 million, from $280.1 million in 1995. Excluding unusual (income) charges, operating expenses were 38.4% of net sales in 1996, compared to 38.3% of net sales in 1995. Excluding unusual (income) charges, operating expenses increased due to the inclusion of Miracle-Gro for a full year in 1996 (7.7%), higher media advertising of consumer lawns products (2.1%), expansion of the International sales and marketing infrastructure (1.0%), and to a lesser extent, higher bad debts, associate medical and dental expenses, and external legal costs. These factors were partially offset by lower retailer promotional spending as a result of the discontinuance of the consumer lawns retailer early purchase program (3.8%), lower distribution costs on lower sales volumes (3.9%), and to a lesser extent, a partial year impact of cost reduction programs. During fiscal 1996, the Company recorded $17.7 million (2.4% of net sales) of unusual charges resulting from initiatives designed to reduce costs, increase operating efficiencies and return the Company to profitability. The unusual charges were for severance costs associated with restructurings and write-downs of various under-utilized or idle assets, including several plant closings. In fiscal 1995, the Company recorded $4.2 million of unusual income related to the divestiture of the Peters-Registered Trademark- line of U.S. CWSF products, decreasing operating expenses by 0.6% of net sales. Interest expense increased $0.2 million to $26.5 million in 1996. The increase was a result of higher average borrowings in the first eight months of fiscal 1996, reflecting incremental receivables associated with the consumer lawns retailer early purchase program and the first year impact of Miracle-Gro's seasonal working capital requirements. Average borrowings increased to approximately $317.5 million in 1996, $23.5 million higher than 1995. Higher average borrowings were partially offset by a decrease in the average variable interest rate for the Company of approximately one-half of one percent. The Company's effective tax rate in 1996 was 302.3%, compared to 38.3% in 1995. Excluding unusual (income) charges in both years, the effective tax rate would have been 52.4% in 1996 versus 43.4% in 1995. Including unusual charges, the high effective tax rate in 1996 is attributable to non-tax deductible amortization of goodwill and certain intangibles in the U.S., combined with the low level of reported pre-tax income. Additional information on the effective tax rate is provided in Note 10 to the Company's Consolidated Financial Statements. During 1996, the Company reported a net loss of $2.5 million, compared to net income of $22.4 million in 1995. Excluding unusual (income) charges and the inventory writedown (approximately $13 million in 1996 and ($4.2) million in 1995, on an after tax basis), Scotts would have reported net income of approximately $10.5 million in 1996 versus net income of $18.2 million in 1995. The decline in net income before unusual items in 1996 is primarily due to lower net sales as a result of the discontinuance of the consumer lawns retailer early purchase program and poor spring weather impacting all business groups, lower gross margins due to lower than planned manufacturing volumes and unfavorable sales mix, and higher investment in consumer directed media, partially offset by the positive impact from inclusion of Miracle-Gro for a full year in fiscal 1996. FISCAL 1995 COMPARED WITH FISCAL 1994 Net sales increased to $732.8 million, up approximately 20.9%, primarily due to increased sales volume (14.5%), of which 5.2% resulted from a consumer lawns early purchase program which encouraged retailers to start building their inventories for the spring of 1996 in the latter four months of Scotts fiscal 1995, while deferring payment to 1996. The increase in actual net sales also reflects the inclusion of Sierra for the full year in 1995 (3.4%) and Miracle-Gro from the merger date of May 19, 1995 (3.0%). On a pro forma basis, net sales increased by $95 million or 13.1% to $821.2 million Consumer Lawns Group net sales increased $54.1 million or 22.9% to $275.6 million. This increase resulted primarily from increased volume, of which 12.9% resulted from the retailer early purchase. Consumer Gardens Group net sales increased $21 million to $33.1 million, reflecting the partial year impact of the merger with Miracle-Gro on May 19, 1995. On a pro forma basis, consumer gardens net sales increased $5.8 million or 5.2% to $117 million. Organics Business Group net sales increased $17.5 million or 10.2% to $187.8 million, primarily as a result of volume increases. Professional Business Group net sales of $161.3 million increased by 11.1%, primarily due to the inclusion of Sierra for a full year in 1995 (8.0%) and an increased demand for horticulture products (3.1%). International Business Group sales increased by 43.7% to $69.6 million due to gains in these markets combined with the positive impact resulting from the sale of Scotts products in the Company's international distribution network (19.7%), the inclusion of Sierra net sales for the full year (16.9%) and favorable exchange rates (7.1%). Cost of sales represented 53.8% of net sales in fiscal 1995, a 1.1 percentage point increase compared to 52.7% of net sales in fiscal 1994. The increase resulted from higher prices for urea (a primary source of nitrogen in most of Company's fertilizer products), increased International sales of lower margin U.S. produced products, increased sales of lower margin domestic products, and to a lesser extent, pricing incentives to major consumer lawns and professional customers. Operating expenses increased $48.6 million or 21.4% to $275.9 million in 1995, from $227.3 million in 1994. Excluding unusual income in 1995, operating expenses increased $52.8 million or 23.2%. Marketing expense increased 30.0% due primarily to increased promotional allowances to retailers (16.2%) and to a lesser extent increased sales, a higher proportion of International sales which carry a higher ratio of marketing cost to sales, and higher sales force incentives. Distribution expense increased 23.8% as a result of higher sales volume, higher warehousing and storage costs as a result of increased inventory levels, higher freight rates and a higher proportion of the sales growth in lower value per pound products. These increases were partially offset by a 5% decline in general and administrative expense as a result of synergies achieved from the integration of Sierra, cost controls and reduced management incentives. Amortization of goodwill and other intangibles increased as a result of the merger with Miracle-Gro and the first full year including Sierra. Other income, net decreased principally as a result of the Company's portion of the loss from Miracle Garden Care, Ltd ("MGC Ltd") and a reduction in royalty income. Interest expense increased 50.8%. The increase was caused by higher interest rates on the floating-rate bank debt and the 9 7/8% Senior Subordinated Notes due August 1, 2004 (the "Notes") compared with the floating-rate bank debt the Notes replaced (32.6%), a full year outstanding of the borrowings to fund the Sierra acquisition (8.1%) and an increase in borrowing levels (10.1%) principally to support higher working capital requirements and capital investments. The Company's effective tax rate decreased from 42.9% in 1994 to 38.3% in 1995. This decrease results primarily from the tax treatment of the disposition of the Peters-Registered Trademark- line of CWSF products (3%) and resolution of prior year tax contingencies (3.9%) offset by an increase in non-tax deductible amortization of goodwill and intangible assets (1.3%). Net income of $22.4 million decreased by $0.5 million from 1994. Among the significant items impacting 1995 results were increased revenues and costs from the Consumer Lawns retailer early purchase program, the gain from the divestiture of the Peters-Registered Trademark- line of CWSF products, the lower effective tax rate, and the higher cost of urea, each as discussed more fully above and an extraordinary charge of $1 million, net of tax, in 1994 for the early extinguishment of debt. LIQUIDITY AND CAPITAL RESOURCES Current assets of $292 million as of September 30, 1996, decreased by $58.9 million compared with the prior year end. The decrease was attributable to a $66.1 million decrease in accounts receivable, partially offset by slightly higher inventories and cash balances. Accounts receivable as of September 30, 1995 included approximately $60 million related to the consumer lawns retailer early purchase program. This retailer early purchase program was significantly modified for the spring 1997 selling season, eliminating the majority of extended terms accounts receivable on September 30, 1996. Current liabilities of $110.8 million as of September 30, 1996, decreased by $13.1 million compared with the prior year end. The decrease was principally attributable to lower trade payables as a result of lower fourth quarter 1996 manufacturing volumes, in line with the discontinuance of the retailer early purchase program that increased fourth quarter 1995 sales and production requirements. Capital investments totaled approximately $18.2 million and $23.6 million for the fiscal years ended September 30, 1996 and 1995, respectively, and are expected to be approximately $20 million in fiscal 1997. In addition, the Company is evaluating expansion of its Marysville distribution facility, which is expected to generated annual distribution savings of at least $1.5 million. The proposed expansion could result in additional capital investments of up to $10 million in 1997. The Company's Fourth Amended and Restated Credit Agreement (the "Credit Agreement") restricts capital investments to $50 million per fiscal year, with a one-year carryover provision. These investments will be financed with cash provided by operations and utilization of available credit facilities. Long-term debt as of September 30, 1996 decreased $48.9 million compared with September 30, 1995. The decrease in long-term debt is a direct result of $82.3 million in cash provided by operating activities, less capital investments of $18.2 million, cash paid for preferred stock dividends of $12.2 million (higher than the $9.8 million annual dividend requirement due to timing of payments around the end of fiscal 1995), and net common stock repurchases of $2.3 million. Shareholders' equity decreased by $16.5 million to $364.3 million as of September 30, 1996. The decrease was due to the net loss of $2.5 million, Convertible Preferred Stock dividends of $9.8 million, a net change in treasury stock of $2.2 million and an unfavorable change in the cumulative foreign currency adjustment of $1.9 million. The primary sources of liquidity for the Company are funds generated by operations and borrowings under the Company's Credit Agreement. The Credit Agreement was amended and restated in March 1995. As amended, the Credit Agreement is unsecured and provides up to $375 million through March 31, 2000, and does not contain a term loan facility. Additional information on the Credit Agreement is described in Note seven to the Company's Consolidated Financial Statements. The Company has foreign exchange rate risk related to international operations and cash flows. During fiscal 1995, a program was designed to minimize the exposure to adverse currency impacts on the cash value of the Company's non-local currency receivables and payables, as well as the associated earnings impact. Since January 1995, the Company has entered into forward foreign exchange contracts and purchase currency options tied to the economic value of receivables and payables and expected cash flows denominated in non-local foreign currencies. Management anticipates that these financial instruments will act as an effective hedge against the potential adverse impact of exchange rate fluctuations on the Company's results of operations, financial condition and liquidity. It is recognized, however, that the program will minimize but not completely eliminate the Company's exposure to adverse currency movements. As of September 30, 1996, the Company's European operations had foreign exchange risk in various European currencies tied to the Dutch guilder. These currencies include the Australian Dollar, Belgian Franc, German Mark, Spanish Peseta, French Franc, British Pound, Italian Lire, and the U.S. Dollar. The Company's U.S. operations had foreign exchange rate risk in the Canadian Dollar, Dutch Guilder and the British Pound which are tied to the U.S. Dollar. As of September 30, 1996, there were outstanding forward foreign exchange contracts with a value of approximately $16.6 million. These contracts had maturity dates ranging from October 29, 1996 to June 10, 1997. In the opinion of the Company's management, cash flows from operations and capital resources will be sufficient to meet debt service and working capital needs during the 1997 fiscal year. INFLATION The Company is subject to the effects of changing prices. The Company has, however, generally been able to pass along inflationary increases in its costs by increasing the prices of its products. ENVIRONMENTAL MATTERS The Company is subject to local, state, federal and foreign environmental protection laws and regulations with respect to its business operations and believes it is operating in substantial compliance with, or taking action aimed at ensuring compliance with, such laws and regulations. The Company is involved in several environmental related legal actions with various governmental agencies. While it is difficult to quantify the potential financial impact of actions involving environmental matters, particularly remediation costs at waste disposal sites and future capital expenditures for environmental control equipment, in the opinion of management, the ultimate liability arising from such environmental matters, taking into account established reserves, should not have a material adverse affect on the Company's financial position; however, there can be no assurance that future quarterly or annual operating results will not be materially affected by the resolution of these matters. Additional information on environmental matters affecting the Company is provided in Note 12 to the Company's Consolidated Financial Statements and in the annual report on Form 10-K to the Securities and Exchange Commission for the year ended September 30, 1996 under the "Business" and "Legal Proceedings" sections. ACCOUNTING ISSUES During 1996, the Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which requires review for possible impairment whenever events or business circumstances indicate that the carrying amount of an asset may not be recoverable. Although the Company's previous accounting policies were in accordance with SFAS No. 121, the guidelines of this pronouncement were applied in determining certain of the unusual charges recorded in fiscal 1996. In October 1995, the Financial Accounting Standards Board issued SFAS No. 123 "Accounting for Stock-Based Compensation", effective for financial statements for fiscal years beginning after December 15, 1995. SFAS No. 123 provides for, but does not require, a fair value method of accounting for stock-based compensation arrangements rather than the intrinsic value method previously required. Alternatively, entities that retain the intrinsic value method are required to disclose in the notes to the financial statements pro forma net income and earnings per share information as if the fair value method had been applied. The Company does not intend to adopt the fair value method of SFAS No. 123; therefore, this standard will not have a material effect on the Company's consolidated financial statements. RECENT DEVELOPMENTS The Company has signed a letter of intent to acquire the remaining ownership interests of the MGC Ltd business; Scotts currently owns approximately a one-third interest in this business. MGC Ltd is principally engaged in the manufacture and sale of consumer lawn and garden products in the United Kingdom. Closing of this transaction is expected to occur during the second quarter of fiscal 1997. In connection with the pending MGC Ltd acquisition, the Company is seeking an amendment to its Credit Agreement for the purpose of financing the acquisition, refinancing MGC Ltd's existing debt and providing for MGC Ltd's seasonal working capital needs. The proposed amendment provides for an increase in the available line-of-credit from $375 million to $425 million, and allows up to the equivalent of $100 million of the available credit to be borrowed in British pounds sterling. Other terms of the Credit Agreement will remain essentially unchanged. OUTLOOK FOR 1997 Looking forward to 1997, management expects that the discontinuance of the consumer lawns retailer early purchase program, the realignment of the business groups designed to provide better focus on and accountability for performance, and the positive impacts of the recent restructurings to return the Company to profitability. However, these changes, along with inherent risks of a seasonal business, present several challenges for 1997. The Consumer Lawns Groups' marketing strategy has been refocused on consumer directed, "pull" advertising and less on the retailer directed, "push" promotional programs heavily relied upon in recent years. Although presentations to retailers indicate encouraging acceptance of these new marketing and promotional programs, the success thereof and the impact of the change in the pre-season selling programs is unknown. On a pro forma basis, the Company has historically generated 66% to 68% of its annual revenues in its second and third fiscal quarters. Management expects this relationship to continue or to become slightly more pronounced with the change in the consumer lawns marketing and promotional programs. Spring weather conditions in North America are also a significant factor impacting sales of the Company's products, especially in the early spring selling season. Management expects gross profit margins to improve in 1996 as a result of the anticipated recovery of the relatively higher margin consumer lawns business, higher volumes increasing manufacturing efficiencies, and stabilized raw material prices. In particular, recent prices for urea have stabilized, which combined with a long-term supply agreement, should keep the cost of this key raw material in-line with 1996 levels. In the last quarter of 1997, the Company plans to change over to plastic packaging for its key consumer lawns products and update the technology of one of its key manufacturing lines. These planned changes, along with the general direction toward simplifying its product lines, may put temporary downward pressure on gross profit margins during the transition period as new processes startup and old products are phased out. The Company expects a lower effective tax rate in 1997 in the range of 42% to 44%, principally as a result of the anticipated return to profitability. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION ACT OF 1995. The statements contained in this report which are not historical fact are "forward looking statements" that involve various important risks, uncertainties, and other factors which could cause the Company's actual results for 1997 and beyond to differ materially from those expressed in such forward looking statements. These important factors include, without limitation, the risks and factors set forth above in "Outlook for 1997" as well as other risks previously disclosed in the Company's securities filings. THE SCOTTS COMPANY AND SUBSIDIARIES Consolidated Statements of Operations for the years ended September 30, 1994, 1995 and 1996 (in thousands except per share amounts)
1994 1995 1996 -------- -------- -------- Net sales $606,339 $732,837 $751,880 Cost of sales 319,730 394,369 414,075 Inventory writedown - - 3,084 -------- -------- -------- Gross profit 286,609 338,468 334,721 -------- -------- -------- Marketing 100,106 130,179 140,919 Distribution 84,407 104,513 95,181 General and administrative 30,189 28,672 34,266 Research and development 10,352 10,970 10,605 Amortization of goodwill and other intangibles 3,633 5,950 8,812 Other income, net (1,350) (163) (558) Unusual (income) charges - (4,227) 17,703 -------- -------- -------- Income from operations 59,272 62,574 27,793 Interest expense 17,450 26,320 26,541 -------- -------- -------- Income before income taxes and extraordinary item 41,822 36,254 1,252 Income taxes 17,947 13,898 3,782 -------- -------- -------- Income (loss) before extraordinary item 23,875 22,356 (2,530) Extraordinary item: Loss on early extinguishment of debt, net of tax (992) - - -------- -------- -------- Net income (loss) 22,883 22,356 (2,530) Preferred stock dividends - 3,559 9,750 -------- -------- -------- Income (loss) applicable to common shareholders $ 22,883 $ 18,797 $(12,280) -------- -------- -------- -------- -------- -------- Net income (loss) per common share: Income (loss) before extraordinary item $ 1.27 $ 0.99 $ (0.65) Extraordinary item: Loss on early extinguishment of debt, net of tax (.05) - - -------- -------- -------- Net income (loss) per common share $ 1.22 $ 0.99 $ (0.65) -------- -------- -------- -------- -------- -------- Common shares used in per share calculation 18,785 22,617 18,786 -------- -------- -------- -------- -------- --------
See Notes to Consolidated Financial Statements. THE SCOTTS COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows for the years ended September 30, 1994, 1995 and 1996 1994 1995 1996 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 22,883 $22,356 $ (2,530) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 13,375 16,056 16,812 Amortization 8,562 9,599 12,473 Extraordinary loss on early extinguishment of debt 992 - - Unusual (income) charges - (4,227) 15,052 Postretirement benefits 368 145 (2) Deferred income taxes 5,378 (2,596) (5,728) Loss (gain) on sale of equipment 29 (55) (93) Equity in loss (income) of unconsolidated businesses - 1,216 (493) Provision for losses on accounts receivable 1,974 1,533 3,363 Other 234 (309) (464) Changes in assets and liabilities: Accounts receivable (33,846) (36,661) 62,736 Inventories (10,406) (22,984) (4,883) Prepaid and other current assets (2,065) (2,119) 2,068 Accounts payable 6,400 12,049 (16,919) Accrued liabilities 6,220 9,567 638 Other assets and liabilities (10,231) 906 312 ------ ------ ------ Net cash provided by operating activities 9,867 4,476 82,342 ------ ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES Investment in property, plant and equipment (33,402) (23,606) (18,215) Proceeds from sale of equipment 384 718 834 Investment in affiliate - (250) - Acquisitions, net of cash acquired (117,107) - - Cash acquired in merger with Miracle-Gro - 6,449 - Proceeds from Peters divestiture - 9,966 - ------ ------ ------ Net cash used in investing activities (150,125) (6,723) (17,381) ------ ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES Borrowings under term debt 289,215 - - Payments on term and other debt (166,844) (27,127) - Net borrowings (payments) under revolving credit 30,500 27,402 (48,553) Net borrowings (payments) under bank line of credit 1,211 (1,819) 1,903 Deferred financing cost incurred (5,139) (486) - Purchase of Common Shares - - (9,779) Issuance of Common Shares 160 436 7,477 Dividends on Class A Convertible Preferred Stock - (1,122) (12,187) ------ ------ ------ Net cash provided by (used in) financing activities 149,103 (2,716) (61,139) ------ ------ ------ Effect of exchange rate changes on cash (473) 1,296 (252) ------ ------ ------ Net increase (decrease) in cash 8,372 (3,667) 3,570 Cash, beginning of period 2,323 10,695 7,028 ------ ------ ------ Cash, end of period $ 10,695 $ 7,028 $ 10,598 ------ ------ ------ ------ ------ ------ SUPPLEMENTAL CASH FLOW INFORMATION: Interest (net of amount capitalized) $ 10,965 $ 23,808 $ 25,483 Income taxes paid 20,144 11,339 4,420 Dividends declared not paid - 2,437 - Businesses acquired: Fair value of assets acquired 143,520 235,564 Liabilities assumed (26,413) (39,875) Net cash paid for acquisition 117,107 - Class A Convertible Preferred Stock issued 177,255 Warrants issued 14,434
See Notes to Consolidated Financial Statements. THE SCOTTS COMPANY AND SUBSIDIARIES Consolidated Balance Sheets September 30, 1995 and 1996 (in thousands) ASSETS
1995 1996 ---- ---- Current Assets: Cash $ 7,028 $ 10,598 Accounts receivable, less allowance of $3,406 in 1995 and $4,114 in 1996 176,525 110,426 Inventories 143,953 148,836 Prepaid and other assets 23,354 22,101 --------- -------- Total current assets 350,860 291,961 --------- -------- Property, plant and equipment, net 148,754 139,488 Trademarks 89,250 86,997 Other intangibles 24,421 19,455 Goodwill 179,988 180,154 Other assets 15,772 13,630 --------- -------- Total Assets $809,045 $731,685 --------- -------- --------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Revolving credit line $ 97 $ 2,000 Current portion of term debt 421 197 Accounts payable 63,207 46,288 Accrued liabilities 41,409 42,603 Accrued taxes 18,728 19,670 --------- -------- Total current liabilities 123,862 110,758 --------- -------- Term debt, less current portion 272,025 223,128 Postretirement benefits other than pensions 27,159 27,157 Other liabilities 5,209 6,341 --------- -------- Total Liabilities 428,255 367,384 --------- -------- Commitments and Contingencies Shareholders' Equity: Class A Convertible Preferred Stock, no par value 177,255 177,255 Common shares, $.01 stated value, issued 21,082 shares in 1995 and 1996 211 211 Capital in excess of par value 207,551 207,650 Retained earnings 32,672 20,392 Cumulative foreign currency translation adjustments 4,082 2,151 Treasury stock, 2,388 shares in 1995 and 2,507 shares in 1996, at cost (40,981) (43,358) --------- -------- Total Shareholders' Equity 380,790 364,301 --------- -------- Total Liabilities and Shareholders' Equity $809,045 $731,685 --------- -------- --------- --------
See Notes to Consolidated Financial Statements.
THE SCOTTS COMPANY AND SUBSIDIARIES Consolidated Statements of Changes in Shareholders' Equity for the years ended September 30, 1994, 1995 and 1996 (in thousands) Total Convertible Class A Share- Preferred Stock Common Shares Capital in Retained Treasury Stock Cumulative holders' ------------------- ------------- excess of Earnings/ -------------- Translation Equity/ Shares Amount Shares Amount Par Value (Deficit) Shares Amount Gain(Loss) (Deficit) ------ ------ ------ ------ --------- --------- ------ ------- --------- ---------- Balance, September 30, 1993 21,073 $211 $193,263 $(9,008) (2,415) $(41,441) $(12) $143,013 Net income 22,883 22,883 Amortization of unearned compensation 27 27 Foreign currency translation adjustment 2,077 2,077 Issuance of common shares 9 160 160 ------ ------ ------ ------ --------- --------- ------ ------- --------- ---------- Balance, September 30, 1994 21,082 211 193,450 13,875 (2,415) (41,441) 2,065 168,160 Net income 22,356 22,356 Dividends (3,559) (3,559) Amortization of unearned compensation 24 24 Foreign currency translation adjustment 2,017 2,017 Issuance of common shares held in treasury (24) 27 460 436 Issuance of Class A Convertible Preferred Stock 195 $177,255 177,255 Issuance of warrants 14,434 14,434 Options outstanding (333) (333) ------ ------ ------ ------ --------- --------- ------ ------- --------- ---------- Balance, September 30, 1995 195 177,255 21,082 211 207,551 32,672 (2,388) (40,981) 4,082 380,790 Net loss (2,530) (2,530) Dividends (9,750) (9,750) Amortization of unearned compensation 24 24 Foreign currency translation adjustment (1,931) (1,931) Issuance of common shares held in treasury 75 431 7,402 7,477 Purchase of common shares (550) (9,779) (9,779) ------ ------ ------ ------ --------- --------- ------ ------- --------- ---------- Balance, September 30, 1996 195 $177,255 21,082 $211 $207,650 $20,392 (2,507) $(43,358) $2,151 $364,301 ------ ------ ------ ------ --------- --------- ------ ------- --------- ---------- ------ ------ ------ ------ --------- --------- ------ ------- --------- ---------- See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS The Scotts Company is engaged in the manufacture and sale of lawn care and garden products. The Company's major customers include mass merchandisers, home improvement centers, large hardware chains, independent hardware stores, nurseries, garden centers, food and drug stores, golf courses, professional sports stadiums, lawn and landscape service companies, commercial nurseries and greenhouses, and specialty crop growers. Scotts products are sold in the United States, Canada, the United Kingdom, continental Europe, Southeast Asia, the Middle East, Africa, Australia, New Zealand, and several Latin American countries. BASIS OF PRESENTATION The consolidated financial statements include the accounts of The Scotts Company ("Scotts") and its wholly owned subsidiaries, Hyponex Corporation ("Hyponex"), Republic Tool and Manufacturing Corp. ("Republic"), Scotts-Sierra Horticultural Products Company ("Sierra") and Scotts' Miracle-Gro Products, Inc. ("Miracle-Gro"), (collectively, the "Company"). All material intercompany transactions have been eliminated. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. The most significant of these estimates are related to the allowance for doubtful accounts, inventory valuation reserves, marketing promotional and consumer rebate liabilities, income taxes and contingencies. Although these estimates are based on management's best knowledge of current events and actions the Company may undertake in the future, actual results ultimately may differ from the estimates. ACCOUNTING CHANGES In 1996, the Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", which requires review for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Although the Company's previous policies were in accordance with SFAS No. 121, the guidelines of this pronouncement were applied in determining certain of the unusual charges recorded in fiscal 1996; see Note 2. INVENTORIES Inventories are principally stated at the lower of cost or market, determined by the FIFO method; certain inventories of Hyponex (primarily organic products) are accounted for by the LIFO method. At September 30, 1995 and 1996, approximately 25% and 15% of inventories, respectively, are valued at the lower of LIFO cost or market. Inventories include the cost of raw materials, labor and manufacturing overhead. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company makes provisions for obsolete or slow-moving inventories as necessary to properly reflect inventory value. Inventories, net of provisions of $6,711,000 and $8,666,000 as of September 30, 1995 and 1996, respectively, consisted of: (in thousands) 1995 1996 ---- ---- Finished Goods $ 72,551 $ 96,690 Raw Materials 71,624 51,942 ------- ------- FIFO Cost 144,175 148,632 LIFO Reserve (222) 204 ------- ------- $ 143,953 $ 148,836 ------- ------- ------- ------- REVENUE RECOGNITION Revenue generally is recognized when products are shipped. For certain large multi-location customers, revenue is recognized when products are shipped to intermediate locations and ownership is acknowledged by the customer. ADVERTISING, PROMOTION AND CONSUMER GUARANTEE The Company advertises its branded products through national and regional media, and through cooperative advertising programs with retailers. Retailers are also offered pre-season stocking and in-store promotion allowances. Certain products are also promoted with direct consumer rebate programs. Costs for these advertising and promotion programs are charged to marketing expense as incurred or expensed ratably over the year in relation to revenues. Advertising and promotion costs were $38,341,000, $58,470,000 and $64,930,000 in 1994, 1995 and 1996, respectively. The Company expenses and establishes a liability for its consumer product "no quibble" guarantee program by applying an experience rate to sales in the period eligible product is shipped to retailers. Consumer guarantee costs were $778,000, $920,000 and $1,227,000 in 1994, 1995 and 1996, respectively. INVESTMENTS IN UNCONSOLIDATED BUSINESSES The Company's investments in affiliated companies which are not majority owned or controlled are accounted for using the equity method. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, including significant improvements, are stated at cost. Expenditures for maintenance and repairs are charged to operating expenses as incurred. When properties are retired, or otherwise disposed of, the cost of the asset and the related accumulated depreciation are removed from the accounts. Depletion of applicable land is computed on the units-of-production method. Depreciation of other property, plant and equipment is provided on the straight-line method and is based on the estimated useful economic lives of the assets as follows: Land improvements 10-25 years Buildings 10-40 years Machinery and equipment 3-15 years Furniture and fixtures 6-10 years NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Property, plant and equipment at September 30, 1995 and 1996 consisted of the following: (in thousands) 1995 1996 --------- --------- Land and improvements $ 27,796 $ 28,399 Buildings 45,032 44,327 Machinery and equipment 136,213 137,814 Furniture and fixtures 10,262 11,479 Software - 1,845 Construction in progress 11,916 10,433 ------- ------- 231,219 234,297 Less accumulated depreciation 82,465 94,809 ------- ------- $ 148,754 $ 139,488 ------- ------- ------- ------- RESEARCH AND DEVELOPMENT Significant costs are incurred each year in connection with research and development programs that are expected to contribute to operating profits in future years. All costs associated with research and development are charged to expense as incurred. INTANGIBLE ASSETS Goodwill arising from business acquisitions is amortized over 40 years on a straight-line basis. Other intangible assets consist primarily of patents and debt issuance costs. Debt issuance costs are being amortized over the terms of the corresponding agreements. Patents and trademarks are being amortized on a straight-line basis over periods varying from 7 to 40 years. Accumulated amortization at September 30, 1995 and 1996 was $52,182,000 and $55,773,000, respectively. During the year ended September 30, 1994, the Company capitalized $5,100,000 of debt issuance costs related to the issuance of Term Debt and 9 7/8% Senior Subordinated Notes and recognized an extraordinary charge of $992,000, net of income taxes of $662,000, for unamortized debt issuance costs in connection with certain debt prepayments. During the year ended September 30, 1995, the Company capitalized approximately $500,000 of debt issuance costs related to its Fourth Amended and Restated Credit Agreement. Company management periodically assesses the recoverability of goodwill, trademarks and other intangible assets by determining whether the amortization of such assets over the remaining lives can be recovered through projected undiscounted net cash flows generated by such assets. In 1995, goodwill was reduced by $3,485,000 related to the disposition of the Peters U.S. consumer water-soluble fertilizer ("CWSF") business. FOREIGN CURRENCY The Company enters into forward foreign exchange and currency options contracts to hedge its exposure to fluctuation in foreign currency exchange rates. These contracts generally involve the exchange of one currency for a second currency at some future date. Counterparties to these contracts are major financial institutions. Gains and losses on these contracts generally offset gains and losses on the assets, liabilities and transactions being hedged. Realized and unrealized foreign exchange gains and losses are recognized and offset foreign exchange gains or losses on the underlying exposures. Unrealized gains and losses that are designated and effective as hedges on such transactions are deferred and recognized in operations in the same period as the hedged transactions. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS At September 30, 1996, the Company's European operations had foreign exchange risk in various European currencies tied to the Dutch guilder. These currencies are the Australian Dollar, Belgian Franc, German Mark, Spanish Peseta, French Franc, British Pound, Italian Lire and the U.S. Dollar. The Company's U.S. operations have foreign exchange rate risk in the Canadian Dollar, the Dutch Guilder and the British Pound which are tied to the U.S. Dollar. As of September 30, 1996, the Company had outstanding forward foreign exchange contracts with a contract value of approximately $16,585,000. These contracts have maturity dates ranging from October 29, 1996 to June 10, 1997. All assets and liabilities in the balance sheets of foreign subsidiaries whose functional currency is other than the U.S. dollar are translated into United States dollar equivalents at year-end exchange rates. Translation gains and losses are accumulated as a separate component of shareholders' equity. Income and expense items are translated at average monthly exchange rates. Cumulative foreign currency translation gain was $4,082,000 and $2,151,000 as of September 30, 1995 and 1996, respectively. Foreign currency transaction gains and losses are included in determining net income. In fiscal 1994, 1995 and 1996 the Company recorded foreign currency transaction losses in other expenses of $168,000, $337,000 and $1,249,000, respectively. The cash flows related to these gains and losses are classified in the statement of cash flows, as part of cash flows from operating activities. INCOME TAXES The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of the assets and liabilities using enacted tax rates. NET INCOME (LOSS) PER COMMON SHARE Net income (loss) per common share is based on the weighted-average number of common shares and common share equivalents (dilutive stock options, convertible preferred stock and warrants) outstanding each period. 2. UNUSUAL (INCOME) CHARGES During 1996, the Company recorded $17,703,000 of unusual, non-recurring charges as part of management's plan to reduce costs, improve operating efficiencies and return to future profitable growth. This program was substantially completed as of September 30, 1996 and includes the cost of exiting certain facilities, asset impairments due to production and product realignments, and employee severance costs. These unusual charges included: (1) $4,898,000 for severance costs related to the termination of 120 associates; (2) $3,456,000 for previously deferred packaging costs for products that are being eliminated or for planned packaging changes; and (3) $9,349,000 related to the write-down of various under-utilized or idle assets, including several plant closings. As of September 30, 1996 approximately $2,247,000 remained in accrued liabilities related to these charges. It is anticipated the remaining balance will be disbursed by the end of fiscal 1997. In addition, the Company recorded inventory writedowns of $3,084,000 for products that are being phased out as part of the Company's plan to simplify and rationalize its product lines. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In the fourth quarter of 1995, the Company divested its Peters CWSF business for approximately $9,966,000. The gain on the divestiture was approximately $4,227,000. In connection with this transaction, the Company entered into a supply agreement through August 1997, in which the Company will produce all product requirements for the buyer at cost plus an agreed upon profit charge. The transaction was pursuant to a Federal Trade Commission ("FTC") consent order which the Company entered into in connection with its merger transactions with the Miracle-Gro Companies. 3. MERGERS AND ACQUISITIONS SIERRA Effective December 16, 1993, the Company completed the acquisition of Grace-Sierra Horticultural Products Company (all further references to Grace-Sierra, now known as Scotts-Sierra Horticultural Products Company, will be made as "Sierra") for an aggregate purchase price of approximately $121,221,000, including transaction costs of $1,221,000. Additionally, the Company incurred $2,261,000 of deferred financing fees related to its financing of the acquisition. Sierra is a leading international manufacturer and marketer of specialty fertilizers and related products for the nursery, greenhouse, golf course and consumer markets. Sierra manufactures controlled-release fertilizers in the United States and the Netherlands, as well as water-soluble fertilizers and specialty organics in the United States. Approximately one-quarter of Sierra's net sales are derived from European and other international markets; approximately one-quarter of Sierra's assets are internationally based. The acquisition was accounted for using the purchase method. Accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of purchase price over the estimated fair value of the net assets acquired ("goodwill") of approximately $65,755,000 is being amortized on a straight-line basis over 40 years. Sierra's results of operations have been included in the Consolidated Statements of Operations from the acquisition date. MIRACLE-GRO Effective May 19, 1995, the Company completed merger transactions with Stern's Miracle-Gro Products, Inc. ("Miracle-Gro Products") and affiliated companies (the "Miracle-Gro Companies") for an aggregate purchase price of approximately $195,689,000. The consideration was comprised of $195,000,000 face amount of Class A Convertible Preferred Stock of Scotts with a fair value of $177,255,000, warrants to purchase 3,000,000 common shares of Scotts with a fair value of $14,434,000 and approximately $4,000,000 of transaction costs. The Preferred Stock has a dividend yield of 5.0% and is convertible into common shares of Scotts at $19.00 per share. The warrants are exercisable for 1,000,000 common shares at $21.00 per share, 1,000,000 common shares at $25.00 per share and 1,000,000 common shares at $29.00 per share. The fair value of the warrants has been included in capital in excess of par value in the Company's Consolidated Balance Sheets. The Miracle-Gro Companies are engaged in the marketing and distribution of plant foods and lawn and garden products primarily in the United States, Canada and Europe. On December 31, 1994, Miracle-Gro Products Limited ("MG Limited"), a subsidiary of Miracle-Gro, entered into an agreement to exchange its equipment and a license for distribution of Miracle-Gro products in certain areas of Europe for approximately a one-third equity interest in a U.K. based garden products company. The initial period of the license is five years and may be extended up to twenty years from January 1, 1995, under certain circumstances set forth in the license agreement. MG Limited is entitled to annual royalties for the first five years of the license. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The FTC, in granting permission for the acquisition of the Miracle-Gro Companies, required that the Company divest its Peters CWSF business. The merger transactions with the Miracle-Gro Companies have been accounted for using the purchase method. Accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of the acquisition. The excess of purchase price over the estimated fair values of the net assets acquired ("goodwill") of approximately $87,182,000 and trademarks of $90,000,000 are being amortized on a straight-line basis over 40 years. The Miracle-Gro Companies' results of operations have been included in the Consolidated Statements of Operations from the acquisition date of May 19, 1995. The following pro forma results of operations give effect to the above Miracle-Gro Companies merger transactions as if it had occurred on October 1, 1994. (in thousands, except per share amounts) (unaudited) Year ended September 30, 1995 ------------ Net sales $821,189 -------- -------- Net income $ 32,943 -------- -------- Net income per common share $ 1.13 -------- -------- For purposes of computing pro forma net income per common share, the Class A Convertible Preferred Stock is considered a common share equivalent. Pro forma primary net income per common share for the year ended September 30, 1995 is calculated using the weighted average common shares outstanding for Scotts of 22,617,000, and the common shares that would have been issued assuming conversion of Class A Convertible Preferred Stock at the beginning of the year to 10,263,000 common shares. The computation of pro forma primary net income per common share assuming reduction of net income for preferred dividends and no conversion of Class A Convertible Preferred Stock was anti-dilutive. The pro forma information provided does not purport to be indicative of actual results of operations if the Miracle-Gro Companies acquisition had occurred as of October 1, 1994 and is not intended to be indicative of future results or trends. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. OTHER INCOME, NET Other income, net consisted of the following: (in thousands) Year ended September 30, 1994 1995 1996 ---- ---- ---- Foreign currency loss $ 168 $ 337 $ 1,249 Royalty income (1,726) (857) (968) Equity in (income) loss of unconsolidated businesses - 1,216 (493) Other 208 (859) (346) --------- ------- -------- Total $ (1,350) $ (163) $ (558) --------- ------- -------- --------- ------- -------- 5. PENSION Scotts and Sierra have defined benefit pension plans covering substantially all full-time associates who have completed one year of eligible service and reached the age of 21. The benefits under these plans are based on years of service and the associates' average final compensation for the Scotts plan and for Sierra salaried employees and stated amounts for Sierra hourly employees. The Company's funding policy, consistent with statutory requirements and tax considerations, is based on actuarial computations using the Projected Unit Credit method. The following table sets forth the plans' funded status and the related amounts recognized in the Consolidated Balance Sheets. SEPTEMBER 30 ------------------------------------ (in thousands) 1995 1996 -------------------- ---- Over- Under- funded funded Plans Plan ----- ------ Actuarial present value of benefit obligations: Accumulated benefit obligation: Vested benefits $(31,436) $(1,593) $(35,677) Nonvested benefits (5,241) (496) (7,223) Additional obligation for projected compensation increases (6,669) (130) (9,358) -------- ------- -------- Projected benefit obligation for service rendered to date (43,346) (2,219) (52,258) Plan assets at fair value, primarily corporate bonds, U.S. bonds and cash equivalents 40,287 1,468 48,095 -------- ------- -------- Plan assets less than projected benefit obligations (3,059) (751) (4,163) Unrecognized net asset being amortized over 11 1/2 years (297) 16 (157) Unrecognized net loss 5,197 148 7,004 -------- ------- -------- Prepaid pension costs $ 1,841 $ (587) $ 2,684 -------- ------- -------- -------- ------- --------
There were no underfunded plans as of September 30, 1996. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Pension cost includes the following components: YEAR ENDED SEPTEMBER 30 ------------------------------- (in thousands) 1994 1995 1996 ---- ---- ---- Service cost $ 1,685 $ 1,732 $ 1,849 Interest cost 2,968 3,280 3,777 Actual return on plan assets (3,092) (5,104) (4,316) Net amortization and deferral (53) 2,046 582 -------- -------- -------- Net pension cost $ 1,508 $ 1,954 $ 1,892 -------- -------- -------- -------- -------- -------- The weighted average settlement rate used in determining the actuarial present value of the projected benefit obligation was 8% as of September 30, 1994, 1995 and 1996. Future compensation was assumed to increase 4% annually for fiscal 1994, 1995 and 1996. The expected long-term rate of return on plan assets was 9% in fiscal 1994, 1995 and 1996. The Company has a non-qualified supplemental pension plan covering certain employees, which provides for incremental pension payments from the Company's funds so that total pension payments equal amounts that would have been payable from the Company's pension plans if it were not for limitations imposed by income tax regulations. The projected benefit obligation relating to this unfunded plan totaled $1,240,000 and $1,922,000 at September 30, 1995 and 1996, respectively. Pension expense for the plan was $445,000 and $348,000 in 1995 and 1996, respectively. 6. ASSOCIATE BENEFITS The Company provides comprehensive major medical benefits to some of its retired associates and their dependents. Substantially all of the Company's associates become eligible for these benefits if they retire at age 55 or older with more than ten years of service. The plan requires certain minimum contributions from retired associates and includes provisions to limit the overall cost increases the Company is required to cover. The Company funds its portion of retiree medical benefits on a pay-as-you-go basis. Prior to October 1, 1993, the Company effected several changes in plan provisions, primarily related to current and ultimate levels of retiree and dependent contributions. Current retirees will be entitled to benefits existing prior to these plan changes. These plan changes resulted in a reduction in unrecognized prior service cost, which is being amortized over future years. Net periodic postretirement benefit costs for fiscal 1995 and 1996 included the following components: 1995 1996 (in thousands) ---- ---- Service cost - benefits attributed to associate service during the year $ 428 $ 433 Interest cost on accumulated postretirement benefit obligation 1,446 1,478 Amortization of prior service costs and gains from changes in assumptions (904) (904) -------- ------- Net periodic postretirement benefit costs $ 970 $ 1,007 ======== ======= NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table sets forth the retiree medical plan status reconciled to the amount included in the Consolidated Balance Sheets, as of September 30, 1995 and 1996. 1995 1996 ---- ---- (in thousands) Accumulated postretirement benefit obligation: Retirees $10,034 $10,589 Fully eligible active plan participants 395 187 Other active plan participants 9,071 7,296 ------- ------- Total accumulated postretirement benefit obligation 19,500 18,072 Unrecognized prior service cost 7,686 6,782 Unrecognized gain (loss) from changes in assumptions (27) 2,303 ------- ------- Accrued postretirement benefit cost $27,159 $27,157 ======= ======= The discount rates used in determining the accumulated postretirement benefit obligation were 8.0% in 1995 and 1996. For measurement purposes, a 12% annual rate of increase in per capita cost of covered retiree medical benefits was assumed for fiscal 1995 and a 9% annual rate for 1996; the rate was assumed to decrease gradually to 5.5% through the year 2004 and remain at that level thereafter. A 1% increase in the health care cost trend rate assumptions would increase the aggregate of the service and interest cost components of net periodic postretirement benefit costs by $123,000 and increase the accumulated postretirement benefit obligation $1,193,000 as of September 30, 1996. Both Scotts and Hyponex have defined contribution profit sharing plans. Both plans provide for associates to become participants following one year of service. The Hyponex plan also requires associates to have reached the age of 21 for participation. The plans provide for annual contributions which are entirely at the discretion of the respective Board of Directors. Contributions are allocated among the participants employed as of the last day of the calendar year, based upon participants' earnings. Each participant's share of the annual contributions vest according to the provisions of the plans. The Company has provided a profit sharing provision for the plans of $2,097,000, $1,498,000 and $930,000 for fiscal 1994, 1995 and 1996, respectively. The Company's policy is to deposit the contributions with the trustee in the following year. Sierra has a savings and investment plan ("401(k) Plan") for certain salaried U.S. employees. Participants may make voluntary contributions to the plan between 2% and 16% of their compensation. Sierra contributes the lesser of 50% of each participant's contribution or 3% of each participant's compensation. Sierra's contribution for 1995 and 1996 were $70,000 and $56,600, respectively. The Company is self-insured for certain health benefits up to $200,000 per occurrence per individual. The cost of such benefits is recognized as expense in the period the claim is incurred. This cost was $6,177,000, $7,861,000 and $9,385,000 in 1994, 1995 and 1996, respectively. The Company is self-insured for State of Ohio workers' compensation up to $500,000 per claim. The cost for workers' compensation was $297,000, $331,000 and $193,000 in 1994, 1995 and 1996, respectively. Claims in excess of stated limits of liability and claims for workers' compensation outside of the State of Ohio are insured with commercial carriers. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. DEBT (in thousands) 1995 1996 ---- ---- Revolving credit lines $172,597 $125,750 9 7/8% Senior Subordinated Notes $100 million face amount due 2004 99,307 99,378 Capital lease obligations and other 639 197 -------- -------- 272,543 225,325 Less current portions 518 2,197 -------- -------- $272,025 $223,128 ======== ======== Maturities of term debt for the next five calendar years are as follows: (in thousands) 1997 $ 2,197 1998 - 1999 - 2000 123,750 2001 - Thereafter 100,000 On March 17, 1995, the Company entered into the Fourth Amended and Restated Credit Agreement ("Agreement") with Chemical Bank ("Chemical") and various participating banks. The Agreement provides, on an unsecured basis, up to $375,000,000 to the Company, comprised of an uncommitted advance facility and a committed revolving credit facility through the scheduled termination date of March 31, 2000. The Agreement contains a requirement limiting the maximum amount borrowed to $225,000,000 million for a minimum of 30 consecutive days each fiscal year. Interest pursuant to the commercial paper/competitive advance facility is determined by auction. Interest pursuant to the revolving credit facility is at a floating rate initially equal, at the Company's option, to the Alternate Base Rate as defined in the Agreement without additional margin or the Eurodollar Rate as defined in the Agreement plus a margin of .3125% per annum, which margin may be decreased to .25% or increased up to .625% based on the changes in the unsecured debt ratings of the Company. Applicable interest rates for the various borrowing facilities ranged from 5.77% to 8.25% at September 30, 1996. The Agreement provides for the payment of an annual administration fee of $100,000 and a facility fee of .1875% per annum, which fee may be reduced to .15% or increased up to .375% based on the unsecured debt ratings of the Company. The Agreement contains certain financial and operating covenants, including maintenance of interest coverage ratios, maintenance of consolidated net worth, and restrictions on additional indebtedness and capital expenditures. Dividends and stock repurchases are restricted only in the event of default. The Company was not in compliance with one of the financial covenants at September 30, 1996 and accordingly, has received a waiver with respect to such covenant from its bank lenders, subject to achievement of other minimum requirements, for applicable periods up to and including December 28, 1996. In the opinion of management, the Company will be in compliance with the covenant in the reporting period subsequent to December 28, 1996; however, there can be no assurance that in the future the Company will not require additional waivers or, if required, that the lenders will grant them. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS At September 30, 1996, the Company also had an unsecured $2,000,000 line of credit with a bank, renewable annually, with an interest rate of 8.25%, of which $97,000 and $2,000,000 was outstanding at September 30, 1995 and 1996, respectively. On July 19, 1994, the Company issued $100,000,000 9 7/8% Senior Subordinated Notes. Net proceeds were $96,354,000, after original issue discount of $788,000 and expenses of $2,858,000. The Notes are subject to redemption, at the option of the Company, in whole or in part at any time on or after August 1, 1999 at a declining premium to par until 2001 and at par thereafter and are not subject to sinking fund requirements. The fair market value of the 9 7/8% Senior Subordinated Notes, estimated based on the quoted market prices for same or similar issues was approximately $104,500,000 at September 30, 1996. 8. SHAREHOLDERS' EQUITY STOCK ----- (in thousands) 1995 1996 ---- ---- Class A Convertible Preferred Stock, no par value: Authorized 195,000 shares 195,000 shares Issued 195,000 shares 195,000 shares Common shares, no par value Authorized 50,000 shares 50,000 shares Issued 21,082 shares 21,082 shares Effective with the Miracle-Gro Companies merger transactions, $195,000,000 face amount of Class A Convertible Preferred Stock was issued as part of the purchase price. This Preferred Stock is convertible into 10,263,158 common shares at $19.00 per common share. Additionally, warrants to purchase 3,000,000 common shares of Scotts were issued as part of the purchase price. The warrants are exercisable for 1,000,000 common shares at $21.00 per share, 1,000,000 common shares at $25.00 per share and 1,000,000 common shares at $29.00 per share. The exercise term for the warrants expires September 2003. The fair value of the warrants has been included in capital in excess of par value in the Company's Consolidated Balance Sheets. The Class A Convertible Preferred Stock has certain voting restrictions and limits on the ability of the shareholders to acquire additional voting securities of the Company. The Class A Convertible Preferred Stock is subject to redemption five years from the date of issuance. Both the Class A Convertible Preferred Stock and the warrants have limits on transferability. On November 4, 1992, Scotts adopted The Scotts Company 1992 Long Term Incentive Plan (the "Plan"). The Plan was approved by the shareholders at Scotts' annual meeting on February 25, 1993. Under the Plan, stock options, stock appreciation rights and performance share awards may be granted to officers and other key employees of the Company. The Plan also provides for Board members, who are not Company associates to receive stock options. The maximum number of common shares that may be issued under the Plan is 1,700,000, plus the number of shares surrendered to exercise options (other than director options) granted under the Plan, up to a maximum of 1,000,000 surrendered shares. On February 12, 1996, Scotts adopted The Scotts Company 1996 Stock Option Plan (the "1996 Plan"). The 1996 Plan was approved by the shareholders at Scotts annual meeting on April 6, 1996. Under the 1996 Plan, stock options may be granted to officers, other key employees and non-employee Directors of the Company. The maximum number of common shares that may be issued under the 1996 Plan is 1,500,000. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Aggregate stock option activity consists of the following: YEAR ENDED SEPTEMBER 30, ------------------------ 1994 1995 1996 ---- ---- ---- Options outstanding at October 1 586,289 1,364,589 1,662,125 Options granted 942,354 435,420 482,000 Options exercised (8,529) (26,870) (429,558) Options canceled (155,525) (111,014) (168,551) --------- --------- --------- Options outstanding at September 30 1,364,589 1,662,125 1,546,016 --------- --------- --------- --------- --------- --------- Options exercisable at September 30 204,422 575,938 1,150,688 --------- --------- --------- --------- --------- --------- Option prices per share: Granted $17.25-$19.375 $15.50-$21.375 $17.00-$22.00 ============== ============== ============= Exercised $18.75 $16.25 $15.50-$17.625 ============== ============== ============= During fiscal 1994, 117,220 of performance share awards were granted. These awards entitle the grantee to receive shares or, at the grantee's election, the equivalent value in cash or stock options, subject to stock ownership requirements. These awards are conditioned on the attainment of certain performance and other objectives established by the Compensation and Organization Committee of Scotts' Board of Directors. Compensation expense for certain stock options results from the difference between the grant price and market price at the date of grant, and is recognized over the vesting period of the options. Compensation expense for performance share awards is initially measured at the grant date based upon the current market value of the common shares, with adjustments made quarterly for market price fluctuations. In 1995, the Plan was amended to cancel outstanding performance share awards. Previously recognized compensation of $300,000 was recognized as a reduction of compensation expense. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. EARNINGS PER SHARE COMPUTATION Net income per common share is based on the weighted average number of common shares and common share equivalents (dilutive stock options, convertible preferred stock and warrants) outstanding each period. The following table presents information necessary to calculate net income per common share. YEAR ENDED SEPTEMBER 30, -------------------------------------- (in thousands) 1994 1995 1996 ---- ---- ---- Net income (loss) Net income (loss) before extraordinary item $23,875 $22,356 $ (2,530) Extraordinary item Loss on early extinguishment of debt, net of tax (992) - - ------- ------- -------- Net income (loss) 22,883 22,356 (2,530) Class A Convertible Preferred Stock dividends - - (9,750) ------- ------- -------- Income (loss) applicable to common shareholders $22,883 $22,356 $(12,280) ------- ------- -------- ------- ------- -------- Weighted average common shares outstanding during the period 18,663 18,670 18,786 Assuming conversion of Class A convertible Preferred Stock - 3,706 - Assuming exercise of options using the Treasury Stock Method 122 230 Assuming exercise of warrants using the Treasury Stock Method - 11 - ------- ------- -------- Common shares used in per share calculation 18,785 22,617 18,786 ------- ------- -------- ------- ------- -------- Net income (loss) per common share Net income (loss) before extraordinary item $ 1.27 $ 0.99 $ (0.65) Extraordinary item: Loss on early extinguishment of debt, net of tax (0.05) - - ------- ------- ------- Net income (loss) per common share $ 1.22 $ 0.99 $ (0.65) ------- ------- ------- ------- ------- ------- The shares of Class A Convertible Preferred Stock were issued in connection with Miracle-Gro merger transactions on May 19, 1995. These shares were not considered in the earnings per share computation for the year ended September 30, 1996 because they were antidilutive for such period. For 1994, 1995 and 1996, fully diluted net income per common share is considered to be the same as primary net income per common share as it was not materially different from primary net income per common share. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. INCOME TAXES The provision for income taxes consists of the following: YEAR ENDED SEPTEMBER 30, -------------------------------------- (in thousands) 1994 1995 1996 ---- ---- ---- Currently Payable: Federal $ 7,400 $ 9,373 $ 4,218 State 2,131 2,634 2,533 Foreign 2,376 4,487 2,759 Deferred: Federal 4,290 (2,220) (5,076) State 1,088 (376) (652) ------- ------- ------- Income Tax Expense $17,285 $13,898 $ 3,782 ------- ------- ------- ------- ------- ------- Income tax expense is included in the financial statements as follows: YEAR ENDED SEPTEMBER 30, (in thousands) 1994 1995 1996 ---- ---- ---- Operations $17,947 $13,898 $3,782 Extraordinary items (662) - - ------- ------- ------ Income Tax Expense $17,285 $13,898 $3,782 ------- ------- ------ ------- ------- ------ Deferred income taxes for fiscal 1995 and 1996 reflect the impact of differences between the amounts of assets and liabilities for financial reporting purposes and such amounts as determined by tax regulations. The components of the net deferred tax asset (liability) are as follows: (in thousands) SEPTEMBER 30, -------------------- 1995 1996 ---- ---- ASSETS Accounts receivable $ 1,024 $ 1,023 Inventories 3,453 5,601 Accrued expenses 9,181 10,432 Postretirement benefits 10,633 10,727 Other 4,776 4,526 -------- -------- Gross deferred tax assets $ 29,067 $ 32,309 -------- -------- LIABILITIES Property, plant and equipment (18,288) (19,114) -------- -------- Net deferred tax asset $ 10,779 $ 13,195 -------- -------- -------- -------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The net current and non-current components of deferred income taxes recognized in the Consolidated Balance Sheets at September 30 are: (in thousands) 1995 1996 ---- ---- Net current asset $14,563 $18,386 Net non-current liability (3,784) (5,191) ------- ------- Net asset $10,779 $13,195 ------- ------- A reconciliation of the Federal corporate income tax rate and the effective tax rate on income before income taxes is summarized below: YEAR ENDED SEPTEMBER 30, -------------------------------------- 1994 1995 1996 ---- ---- ---- Statutory income tax rate 35.0% 35.0% 35.0% Pension amortization 0.1 0.1 6.3 Meals and entertainment 0.5 0.9 17.6 Peters sale - (3.0) - Goodwill amortization and other permanent differences resulting from purchase accounting 2.1 3.4 206.9 State taxes, net of federal benefit 5.6 4.4 97.6 Reversal of previous tax contingencies - (3.9) (42.0) Equity income of affiliate - 0.7 (13.8) Other (0.4) 0.7 (5.3) ---- ---- ----- Effective income tax rate 42.9% 38.3% 302.3% ---- ---- ----- ---- ---- ----- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. OPERATING LEASES The Company leases buildings, land and equipment under various noncancellable lease agreements for periods of two to six years. The lease agreements generally provide that the Company pay taxes, insurance and maintenance expenses related to the leased assets. Certain lease agreements contain purchase options. At September 30, 1996, future minimum lease payments were as follows: Year Ending Operating September 30, Leases (in thousands) -------------- --------- 1997 $10,770 1998 8,664 1999 4,966 2000 2,745 2001 310 Thereafter 147 ------- Total minimum lease payments $27,602 ------- ------- The Company also leases transportation and production equipment under various one-year operating leases, which provide for the extension of the initial term on a monthly or annual basis. Total rental expenses for operating leases were $12,914,000, $14,660,000 and $13,989,000 for fiscal 1994, 1995 and 1996, respectively. 12. COMMITMENTS AND CONTINGENCIES Seed production agreements obligate the Company to make future purchases based on estimated yields. Seed purchases under production agreements for fiscal 1994, 1995 and 1996 were approximately $6,508,000, $6,935,000 and $11,401,000 respectively. At September 30, 1996, estimated annual commitments were as follows: Year Ending September 30, (in thousands) -------------- 1997 $16,246 1998 11,656 1999 6,089 2000 3,686 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company has entered into a long-term contract through 2000 for the purchase of certain raw materials. Purchase commitments are approximately $15 million annually. Sierra has a supply agreement through 2000, subject to renewal thereafter, under which Sierra is required to purchase, at prices determined by formulas, 100% of its requirements for vermiculite. Management continually evaluates the Company's contingencies, including various lawsuits and claims which arise in the normal course of business. In the opinion of management, its assessment of contingencies is reasonable and related reserves, in the aggregate, are adequate, however, there can be no assurance that future quarterly or annual operating results will not be materially affected by final resolution of these matters. The following details the more significant of the Company's identified contingencies. In September 1991, the Company was identified by the Ohio Environmental Protection Agency (the "Ohio EPA") as a Potentially Responsible Party ("PRP") with respect to a site in Union County, Ohio (the "Hershberger site") that has allegedly been contaminated by hazardous substances whose transportation, treatment of disposal the Company allegedly arranged. Pursuant to a consent order with the Ohio EPA, the Company, together with four other PRP's identified to date, investigated the extent of contamination in the Hershberger site. The results of the investigation were that the site presents a low degree of risk and that the chemical compounds which contribute to the risk are not compounds used by the Company. However, as a result of the joint and several liability of PRP's, the Company may be subject to financial participation in the costs of the remediation plan, if any. However, management does not believe any such obligations would have a significant adverse effect on the Company's results of operations or financial condition. In July 1990, the Philadelphia district of the Army Corps of Engineers directed that peat harvesting operations be discontinued at Hyponex's Lafayette, New Jersey facility, and the Company complied. In May 1992, the Department of Justice in the U.S. District Court for the District of New Jersey, filed suit seeking a permanent injunction against such harvesting at that facility and civil penalties. The Philadelphia District of the Corps has taken the position that peat harvesting activities there require a permit under Section 404 of the Clean Water Act. If the Corps' position is upheld, it is possible that further harvesting of peat from this facility would be prohibited. The Company is defending this suit and is asserting a right to recover its economic losses resulting from the government's actions. Management does not believe that the outcome of this case will have a material adverse effect on the Company's operations or its financial condition. Furthermore, management believes the Company has sufficient raw material supplies available such that service to customers will not be adversely affected by continued closure of this peat harvesting operation. On January 30, 1996, the United States Environmental Protection Agency (the "U.S. EPA") served a Complaint and Notice of Opportunity for Hearing upon Sierra's wholly-owned subsidiary, Scotts-Sierra Crop Protection Company ("Crop Protection"). The Complaint alleged labeling violations under the Federal Insecticide, Fungicide and Rodenticide Act ("FIFRA") during 1992 and 1993 and proposed NOTES TO CONSOLIDATED FINANCIAL STATEMENTS penalties totaling $785,000, the maximum allowable under FIFRA according to management's calculations. Presently pending is the U.S. EPA's Motion for an Accelerated Decision. Based upon Crop Protection's good faith compliance actions and FIFRA's provisions for "gravity-based" penalty reductions, management believes Crop Protection's maximum liability in this action to be $200,000. The Company does not believe that the outcome of this proceeding will have a material adverse effect on its financial condition or results of operations. During 1993 and 1994, Stern's Miracle-Gro Products, Inc. ("Miracle-Gro Products") discussed with Pursell Industries, Inc. ("Pursell") the feasibility of forming a joint venture to produce and market a line of slow-release lawn food, and in October 1993, signed a non-binding "heads of agreement.". On March 2, 1995, Pursell instituted an action in the United States District Court for the Northern District of Alabama, PURSELL INDUSTRIES, INC. V. STERN'S MIRACLE-GRO PRODUCTS, INC., (the "Alabama Action"), alleging, among other things, that a joint venture was formed, that Miracle-Gro Products breached an alleged joint venture contract, committed fraud, and breached an alleged fiduciary duty owned Pursell by not informing Pursell of negotiations concerning the merger transactions. On December 18, 1995, Pursell filed an amended complaint in which Scotts was named as an additional party defendant. The amended complaint contains a number of allegations and seeks compensatory damages in excess of $10 million, punitive damages of $20 million, treble damages as allowed by law and injunctive relief with respect to the advertising and trade dress allegations. The Company does not believe that the amended complaint has any merit and intends to vigorously defend that action. On April 14, 1996, in response to communications from Scotts that Pursell was infringing the Company's Poly-S patents, Pursell instituted a second action in the United States District Court for the Northern District of Alabama, PURSELL INDUSTRIES, INC. V. THE SCOTTS COMPANY, (the "Patent Action"). The complaint seeks declaration that, among other things, Scotts' patents are invalid and that Pursell has not infringed any of Scotts' patents. Pursell also alleges unfair competition in relation to Scotts' working of its products with its Poly-S patents. The Company does not believe that this action has merit and has vigorously defended it, adding counterclaims of infringement against Pursell. Pursell and the Company have been engaged in settlement negotiations since October , 1996 in an effort to settle both the Alabama Acton and the Patent Action. Management does not believe either the Alabama Action or the Patent Action will have a significant adverse effect on the Company's results of operation or financial condition. 13. SUBSEQUENT EVENT The Company has signed a letter of intent to acquire the remaining ownership interests of the Miracle Garden Care Ltd. ("MGC Ltd.") business; Scotts currently owns approximately one-third interest in this business. MGC Ltd. is principally engaged in the manufacture and sale of lawn and garden products in the United Kingdom. Closing of this transaction is expected to occur during the Company's second quarter of fiscal 1997. 14. CONCENTRATIONS OF CREDIT RISK Financial instruments which potentially subject the Company to concentration of credit risk consist principally of trade accounts receivable. The Company sells its consumer products to a wide variety of retailers, including mass merchandisers, home centers, independent hardware stores, nurseries, garden outlets, warehouse clubs and local and regional chains. Professional products are sold to golf courses, schools and sports fields, nurseries, lawn care service companies and growers of specialty agriculture crops. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In 1994, one customer accounted for 15.1% of consolidated net sales. In 1995 and 1996, two customers account for 14.4% and 13.1% and 15.1% and 13.9%, respectively, of consolidated net sales. 15. ACCOUNTING ISSUES In October 1995, the Financial Accounting Standards Board issued SFAS No. 123 "Accounting for Stock-Based Compensation", effective for financial statements for fiscal years beginning after December 15, 1995. SFAS No. 123 provides for, but does not require, a fair value method of accounting for stock-based compensation arrangements rather than the intrinsic value method previously required. Alternatively, entities that retain the intrinsic value method are required to disclose in the notes to the financial statements pro forma net income and earnings per share information as if the fair value method had been applied. The Company does not intend to adopt the fair value method of SFAS No. 123; therefore, this standard will not have a material effect on the Company's consolidated financial statements. 16. QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED) The following is a summary of the unaudited quarterly(2) results of operations for fiscal 1995 and 1996 (in thousands except share data): FISCAL 1995 (1) DECEMBER 31 APRIL 1 JULY 1 SEPTEMBER 30 FULL YEAR - -------------- ----------- ------- ------ ------------ --------- Net sales $ 98,019 $236,092 $229,028 $169,698 $732,837 Gross profit 44,499 112,202 108,513 73,254 338,468 Net income (loss) (4,598) 13,793 13,026 135 22,356 Net income (loss) per common share (.25) .73 .55 (.12) 0.99 Common shares used in per share calculation 18,667 18,820 23,580 18,678 22,617 FISCAL 1996 (1) DECEMBER 30 MARCH 30 JUNE 29 SEPTEMBER 30 FULL YEAR - -------------- ----------- -------- ------- ------------ --------- Net sales $117,928 $251,224 $247,965 $134,763 $751,880 Gross profit 53,214 116,389 114,843 50,275 334,721 Net income (loss) (7,174) 10,630 7,606 (13,592) (2,530) Net income (loss) per common share (.51) .36 .26 (.86) (.65) Common shares used in per share calculation 18,689 29,350 29,352 18,647 18,786 (1) Fiscal 1996 results of operations included $17.7 million of unusual charges and a $3.1 million inventory writedown on a pretax basis or $13.0 million on a combined after-tax basis. These items reduced after-tax earnings by $1.1 million, $1.7 million, $1.6 million and $8.6 million in the first, second, third and fourth quarters, respectively. Fiscal 1995 fourth quarter results of operations includes a $4.2 million after-tax gain on the divestiture of the Peters line of U.S. Consumer water-soluble fertilizers. In addition, fiscal 1995 includes Scotts Miracle-Gro Products and its subsidiaries ("Miracle-Gro Companies") from the merger date of May 19, 1995. (2) The Company's business is highly seasonal with approximately 65% to 70% of sales occurring in the second and third fiscal quarters. REPORT OF MANAGEMENT Management of The Scotts Company is responsible for the preparation, integrity and objectivity of the financial information presented in this Annual Report. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles appropriate in the circumstances and accordingly, include some amounts that are based on management's best judgments and estimates. Management is responsible for maintaining a system of accounting and internal controls which it believes is adequate to provide reasonable assurance that assets are safeguarded against loss from unauthorized use or disposition and that the financial records are reliable for preparing financial statements. The selection and training of qualified personnel, the establishment and communication of accounting and administrative policies and procedures, and a program of internal audits are important elements of these control systems. The financial statements have been audited by Coopers & Lybrand LLP, independent accountants, selected by the Board of Directors. The independent accountants conduct a review of internal accounting controls to the extent required by generally accepted auditing standards and perform such tests and related procedures as they deem necessary to arrive at an opinion on the fairness of the financial statements. The Board of Directors, through its Audit Committee consisting solely of non-management directors, meets periodically with management, internal audit and the independent accountants to discuss internal accounting controls and auditing and financial reporting matters. The Committee reviews with the independent auditors the scope and results of the audit effort. Both internal audit and the independent accountants have free access to the Audit Committee with or without the presence of management. REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of The Scotts Company We have audited the accompanying consolidated balance sheets of The Scotts Company and Subsidiaries as of September 30, 1995 and 1996, and the related consolidated statements of operations, cash flows and changes in shareholders' equity for each of the three years in the period ended September 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Scotts Company and Subsidiaries as of September 30, 1995 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended September 30, 1996, in conformity with generally accepted accounting principles. Coopers & Lybrand L. L. P. Columbus, Ohio November 15, 1996 NYSE SYMBOL: The common shares of The Scotts Company trade on The New York Stock Exchange under the symbol "SMG." STOCK PRICE PERFORMANCE: The Scotts Company common stock has been publicly traded since January 31, 1992. The initial public offering price per share was $19.00. PRICE RANGE: Fiscal year ended September 30, 1995 HIGH LOW First Quarter 16 14 1/4 Second Quarter 19 3/8 15 7/8 Third Quarter 23 18 1/8 Fourth Quarter 23 7/8 20 3/4 Fiscal year ended September 30, 1996 HIGH LOW First Quarter 21 7/8 18 7/8 Second Quarter 21 1/4 16 1/8 Third Quarter 18 3/4 16 1/2 Fourth Quarter 19 3/8 16 3/4 SHAREHOLDERS: As of December 1, 1996 there were approximately 6,500 shareholders, including holders of record and the Company's estimate of beneficial holders. DIVIDENDS: The Company has not paid any dividends since the initial public offering of its common stock. The payment of any future dividends will be determined by the Board of Directors of the Company in light of conditions then existing, including the Company's earnings, financial condition and capital requirements, restriction in financing agreements, business conditions and other factors. To the Shareholders and Board of Directors of The Scotts Company Our report on the consolidated financial statements of The Scotts Company and Subsidiaries has been incorporated by reference in this form 10-K from page 55 of the 1996 Annual Report to Shareholders of The Scotts Company. In connection with our audits of such financial statements, we have also audited the financial statement schedules listed in the index on page 22 of this Form 10-K. In our opinion, the financial statement schedules referred to above, when considered in relation to the consolidated financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. Coopers & Lybrand, L.L.P. Columbus, Ohio November 15, 1996 THE SCOTTS COMPANY AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS for the year ended September 30, 1994
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ------------------------------------ ------------------- -------------------- ------------- ------------- BALANCE AT ADDITIONS CHARGED TO DEDUCTION BALANCE AT CLASSIFICATION BEGINNING OF PERIOD COSTS AND EXPENSES FROM RESERVES END OF PERIOD - ------------------------------------ ------------------- -------------------- ------------- ------------- Valuation and qualifying accounts deducted from the assets to which they apply: Inventory reserve $3,811,000 $2,987,000 $ 690,000 $6,108,000 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Allowance for doubtful accounts $2,511,000 $1,974,000 $1,552,000 $2,933,000 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Other valuation and qualifying account: Product guarantee $ 130,000 $ 778,000 $ 789,000 $ 119,000 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
THE SCOTTS COMPANY AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS for the year ended September 30, 1995
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ------------------------------------ ------------------- --------------------- ------------- ------------- BALANCE AT ADDITIONS: CHARGED TO DEDUCTION BALANCE AT CLASSIFICATION BEGINNING OF PERIOD COSTS AND EXPENSES FROM RESERVES END OF PERIOD - ------------------------------------ ------------------- -------------------- ------------- ------------- Valuation and qualifying accounts deducted from the assets to which they apply: Inventory reserve $6,108,000 $2,986,000 $2,383,000 $6,711,000 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Allowance for doubtful accounts $2,933,000 $2,033,000 $1,560,000 $3,406,000 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Other valuation and qualifying account: Product guarantee $ 119,000 $ 920,000 $ 933,000 $ 106,000 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
THE SCOTTS COMPANY AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS for the year ended September 30, 1996
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ------------------------------------ ------------------- -------------------- ------------- ------------- BALANCE AT ADDITIONS CHARGED TO DEDUCTION BALANCE AT CLASSIFICATION BEGINNING OF PERIOD COSTS AND EXPENSES FROM RESERVES END OF PERIOD - ------------------------------------ ------------------- -------------------- ------------- ------------- Valuation and qualifying accounts deducted from the assets to which they apply: Inventory reserve $6,711,000 $7,986,000 $6,031,000 $8,666,000 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Allowance for doubtful accounts $3,406,000 $3,363,000 $2,655,000 $4,114,000 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Other valuation and qualifying account: Product guarantee $ 106,000 $1,227,000 $1,075,000 $ 258,000 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
THE SCOTTS COMPANY ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996 INDEX TO EXHIBITS Exhibit No. Description Location - ---------- ----------- -------- 2 Amended and Restated Agreement Incorporated herein by reference and Plan of Merger, dated as of to the Registrant's Current May 19, 1995, among Stern's Report on Form 8-K filed with Miracle-Gro Products, Inc., the Securities and Exchange Stern's Nurseries, Inc., Commission (the "SEC") on June Miracle-Gro Lawn Products, Inc., 2, 1995 (File No. 0-19768) Miracle-Gro Products Limited, [Exhibit 2(b)] Hagedorn Partnership, L.P., the general partners of Hagedorn Partnership, L.P., Horace Hagedorn, Community Funds, Inc., and John Kenlon, the Registrant, and ZYX Corporation 3(a) Amended Articles of Incorporation Incorporated herein by reference of the Registrant as filed with to the Registrant's Annual Report the Ohio Secretary of State on Report on Form 10-K for the September 20, 1994 fiscal year ended September 30, 1994 (File No. 0-19768) [Exhibit 3(a)] 3(b) Certificate of Amendment by Incorporated herein by reference Shareholders to the Articles of to the Registrant's Quarterly Incorporation of the Registrant Report on Form 10-Q for the as filed with the Ohio Secretary fiscal quarter ended April 1, of State on May 4, 1995 1995 (File No. 0-19768)[Exhibit 4(b)] 3(c) Regulations of the Registrant Incorporated herein by reference (reflecting amendments adopted by to the Registrant's Quarterly the shareholders of the Registrant Report on Form 10-Q for the on April 6, 1995) fiscal quarter ended April 1, 1995 (File No. 0-19768) [Exhibit 4(c)] 4(a) Form of Series A Warrant Included in Exhibit 2 above 4(b) Form of Series B Warrant Included in Exhibit 2 above 4(c) Form of Series C Warrant Included in Exhibit 2 above 4(d) Fourth Amended and Restated Incorporated herein by reference Credit Agreement, dated as of to the Registrant's Quarterly March 17, 1995, among the Report on Form 10-Q for the Registrant, Chemical Bank, the fiscal quarter ended April 1, lenders party thereto and 1995 (File No. 0-19768) [Exhibit Chemical Bank, as agent (the 4(d)] "Credit Agreement") 4(e) First Amendment and Consent, Pages 95 through 124 dated as of December 23, 1996, to the Credit Agreement among the Registrant, the lenders party thereto and The Chase Manhattan Bank (formerly Chemical Bank), as agent E-1 Exhibit No. Description Location - ---------- ----------- -------- 4(f) Subordinated Indenture, dated as Incorporated herein by reference of June 1, 1994, among The Scotts to Scotts Delaware's Registration Company, a Delaware Corporation Statement on Form S-3 filed with ("Scotts Delaware"), The O. M. the SEC on June 1, 1994 Scott & Sons Company ("OMS") and (Registration No. 33-53941) Chemical Bank, as trustee [Exhibit 4(b)] 4(g) First Supplemental Indenture, Incorporated herein by reference dated as of July 12, 1994, among to Scotts Delaware's Current Scotts Delaware, OMS and Chemical Report on Form 8-K dated July 18, Bank, as trustee 1994 (File No. 0-19768) [Exhibit 4.1] 4(h) Second Supplemental Indenture, Incorporated herein by reference dated as of September 20, 1994, to the Registrant's Annual among the Registrant, OMS, Scotts Report on Form 10-K for the Delaware and Chemical Bank, as fiscal year ended September 30, trustee 1994 (File No. 0-19768) [Exhibit 4(i)] 4(i) Third Supplemental Indenture, Incorporated herein by reference dated as of September 30, 1994, to the Registrant's Annual Report between the Registrant and on Form 10-K for the fiscal year Chemical Bank, as trustee ended September 30, 1994 (File No. 0-19768) [Exhibit 4(j)] 10(a) The Scotts Company Associates' Pages 125 through 176 Pension Plan as amended effective January 1, 1989 and December 31, 1995 10(b) Third Restatement of The Scotts Pages 177 through 217 Company Profit Sharing and Savings Plan 10(c) Employment Agreement, dated as Incorporated herein by reference of October 21, 1991, between Report on Form 10-K for the Scotts (as successor to The O.M. fiscal year ended September 30, Scott & Sons Company ("OMS") 1993 of The Scotts Company, a and Theodore J. Host to Annual Delaware corporation ("Scotts Delaware") (File No. 0-19768) [Exhibit 10(g)] 10(d) Stock Option Plan and Agreement, Incorporated herein by reference dated as of January 9, 1992, to the Scott's Annual Report on between Scotts (as successor to Form 10-K for the fiscal year Scotts Delaware) and Theodore J. ended September 30, 1994 (File Host No. 0-19768) [Exhibit 10(f)] 10(e) The O.M. Scott & Sons Company Incorporated herein by reference Excess Benefit Plan, effective to Scotts Delaware's Annual October 1, 1993 Report on Form 10-K for the fiscal year ended September 30, 1988 (File No. 0-19768) [Exhibit 10(h)] 10(f) The Scotts Company 1992 Long Incorporated herein by reference Term Incentive Plan to Scotts Delaware's Registration Statement on Form S-8 filed with the SEC on March 26, 1993 (Registration No. 33-60056) [Exhibit 4(f)] 10(g) The Scotts Company 1996 Pages 218 through 220 Executive Annual Incentive Plan E-2 Exhibit No. Description Location - ---------- ----------- -------- 10(h) Employment Agreement, dated as Incorporated herein by reference of May 19, 1995, between Scotts to Scotts' Annual Report on Form and James Hagedorn 10-K for the fiscal year ended September 30, 1995 (File No. 1-11593) [Exhibit 10(p)] 10(i) The Scotts Company 1996 Stock Pages 221 through 229 Option Plan (as amended through December 16, 1996) 10(j) Employment Agreement, dated as Pages 230 through 243 of May 19, 1995, among Stern's Miracle-Gro Products, Inc. (nka Scotts' Miracle-Gro Products, Inc.), Scotts and Horace Hagedorn 10(k) Employment Agreement, dated as Pages 244 through 257 May 19, 1995, among Stern's Miracle-Gro Products, Inc. (nka Scotts' Miracle-Gro Products, Inc.), Scotts and John Kenlon 10(l) Employment Agreement, dated as Pages 258 through 268 of August 7, 1996, between Scotts and Charles M. Berger 10(m) Stock Option Agreement, dated as Pages 269 through 276 of August 7, 1996, between Scotts and Charles M. Berger 10(n) Stock Option Agreement, dated as Pages 277 through 283 of March 5, 1996, between Scotts and Tadd C. Seitz 10(o) Letter Agreement, dated April Pages 284 through 293 10, 1996, between Theodore J. Host and Scotts 10(p) Letter Agreement, dated January Pages 294 through 299 18, 1996, between Scotts and Paul D. Yeager, and amendment dated September 16, 1996 11(a) Computation of Net Income Per Page 300 Common Share 13 Registrant's Annual Report to Pages 26 through 87 Shareholders for this fiscal year ended September 30, 1996 (not deemed filed except for portions thereof which are specifically incorporated by reference into this Annual Report on Form 10-K) 21 Subsidiaries of the Registrant Pages 301 and 302 23 Consent of Independent Page 303 Accountants 27 Financial Data Schedule Page 304 E-3


                           FIRST AMENDMENT AND CONSENT


     FIRST AMENDMENT AND CONSENT, dated as of December 23, 1996, to the Fourth
Amended and Restated Credit Agreement, dated as of March 17, 1995, as amended
(the "Credit Agreement"), among The Scotts Company, an Ohio corporation (the
"Borrower" or "Scotts"), the several banks and other financial institutions from
time to time parties to this Agreement (individually, a "Lender" and,
collectively, the "Lenders") and The Chase Manhattan Bank (formerly Chemical
Bank), a New York banking corporation ("Chase"), as agent for the Lenders
thereunder (in such capacity, the "Agent").


                              W I T N E S S E T H :


     WHEREAS, the Borrower has requested that the Agent and the Lenders enter
into this Amendment to among other things, increase the aggregate Revolving
Credit Commitments (as defined in the Credit Agreement) to $425,000,000 and to
allow O.M. Scott  International Investments Limited and Miracle Garden Care
Limited, subsidiaries of the Borrower (the "U.K. Borrowers") to become borrowers
in Sterling as set forth herein; and

     NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:

     1.   DEFINED TERMS.  (a) Unless otherwise defined herein, all capitalized
terms defined in the Credit Agreement and used herein are so used as so defined.

          (b)  The following term shall have the following meaning:

          "FIRST AMENDMENT" shall mean this First Amendment and Consent, as the
     same may be amended, modified or otherwise supplemented from time to time.


     2.   AMENDMENTS TO SECTION 1 OF THE CREDIT AGREEMENT.  (a) Subsection 1.1
of the Credit Agreement is hereby amended by inserting therein the following new
definitions in proper alphabetical order:

          "CHASE" shall mean The Chase Manhattan Bank (formerly, Chemical Bank).

          "CHASE LONDON" shall mean The Chase Manhattan Bank, London Branch.



                                                                               2


          "DOLLAR EQUIVALENT" shall mean, on any Business Day with respect to
     any Revolving Credit Loan denominated in Sterling, the amount of Dollars
     that would be required to purchase the amount of Sterling of such Revolving
     Credit Loan on the day two Business Days prior to such Business Day for
     settlement on such Business Day, based upon the spot selling rate at which
     Chase London offers to sell Sterling for Dollars in the London foreign
     exchange market at approximately 11:00 a.m. London time for delivery two
     Business Days later.

          "FIRST AMENDMENT EFFECTIVE DATE" shall mean December 23, 1996.

          "MLA COST" the MLA Cost for a LIBOR Loan denominated in Sterling is
     calculated in accordance with the following formula:

               BY + L(Y-X)+S(Y-Z)% per annum - MLA Cost
               ------------------

          where on the day of application of the formula;

     B    is the percentage of the Agent's eligible liabilities which the Bank
          of England requires the Agent to hold on a noninterest-bearing deposit
          account in accordance with its cash ratio requirements;

     Y    is the rate at which Sterling deposits are offered by the Agent to
          leading banks in the London interbank market at or about 11:00 a.m. on
          that day for the relevant period;

     L    is the percentage of eligible liabilities which the Bank of England
          requires the Agent to maintain as secured money with members of the
          London Discount Market Association and/or as secured call money with
          certain money brokers and gilt-edged primary market markers;

     X    is the rate at which secured Sterling deposits in the relevant amount
          may be placed by the Agent with members of the London Discount Market
          Association and/or as secured call money with certain money brokers
          and gilt-edged primary market makers at or about 11:00 a.m. on that
          day for the relevant period;

     S    is the percentage of the Agent's eligible liabilities which the Bank
          of England requires the Agent to place as a special deposit; and

     Z    in the interest rate per annum allowed by the Bank of England on
          special deposits.

     I.   For the purposes of this formula:



                                                                               3


          A.   "eligible liabilities" and "special deposits" all have the
               meanings given to them at the time of application of the formula
               by the Bank of England;

          B.   "relevant period" in relation to a LIBOR Loan means;

               1.   if its term is three months or less, its term; or

               2.   if its term is more than three months, each successive
                    period of three months and any necessary short period
                    comprised in that term.

     II.  in the application of the formula, B, Y, L, X, S and Z are included in
          the formula as figures and not as percentages, e.g. if B = 0.5% and Y
          + 15% BY is calculated as 0.5 x 15.

     III. A.   The formula is applied on the first day of each relevant period
               comprised in the term of the relevant LIBOR Loan.

          B.   Each rate calculated in accordance with the formula is, if
               necessary, rounded upward to four decimal places.

     IV.  If the Agent determines that a change in circumstances has rendered,
          or will render, the formula inappropriate, the Agent (after
          consultation with the U.K. Reference Lender) shall notify the U.K.
          Borrowers of the manner in which the MLA Cost will subsequently be
          calculated.  The manner of calculation so notified by the Agent shall,
          in the absence of manifest error, be binding on all the parties.

          "SCREEN" shall mean, with respect to any currency, the relevant
     Telerate Page on which appears the LIBOR Base Rate for deposits in such
     currency; PROVIDED that, if there is no such Telerate Page, the relevant
     Reuters Screen Page will be substituted.

          "SCOTTS GUARANTEE" shall mean the guarantee to be executed and
     delivered by Scotts, substantially in the form of Exhibit L, as the same
     may be amended, supplemented or otherwise modified from time to time.

          "STERLING" and "L" shall mean lawful currency of the U.K.

          "STERLING EQUIVALENT" shall mean, on any Business Day with respect to
     any amount in Dollars, the amount of Sterling that could be purchased with
     such amount of Dollars



                                                                               4


     using the foreign exchange rate for such Business Day specified in the
     definition of "Dollar Equivalent", as determined by the Agent.

          "U.K." shall mean the United Kingdom.

          "U.K. BORROWERS" shall mean O.M. Scott International Investments
     Limited and, on and after the date it becomes a party hereto, Miracle
     Garden Care Limited.

          "U.K. REFERENCE LENDER" shall mean the principal London office of
     Chase London.

     (b)  Subsection 1.1 is further amended by deleting the definitions of
"Business Day", "Eurodollar Base Rate", "Eurodollar Rate", "LIBOR Rate" and
"Loan Documents" and substituting in lieu thereof the following new definitions
in proper alphabetical order:

          "BUSINESS DAY" shall mean (a) when such term is used in respect of a
     day on which a Loan in Dollars is to be made, a day other than Saturday,
     Sunday or any other day on which commercial banks in New York City are
     authorized or required by law to close; PROVIDED, HOWEVER, that when used
     to describe the date of any borrowing of, or any payment or interest rate
     determination in respect of, a LIBOR or LIBOR Bid Loan, the term "Business
     Day" shall also exclude any day on which commercial banks are not open for
     dealings in Dollar deposits in the London Interbank Market, and (b) when
     such term is used in respect of a day on which a Loan in Sterling is made,
     any day on which commercial banks are generally open for business in
     London, England.

          "LIBOR BASE RATE" shall mean, with respect to any LIBOR Loan in
     Dollars or Sterling for any Interest Period therefor:

          (a)  the rate per annum (rounded to the nearest 1/16 of 1%) appearing
     on the Screen for such currency as the London Interbank Offered Rate for
     deposits in such currency at approximately 11:00 a.m. London time (or as
     soon thereafter as practicable) on (in the case of any LIBOR Loan in
     Sterling), or (in the case of any LIBOR Loan in Dollars) two Business Days
     prior to, the first day of such Interest Period as the London Interbank
     Offered Rate for such currency having a term comparable to such Interest
     Period and in an amount of U.S.$1,000,000; or

          (b)  if such rate does not appear on the Screen (or, if the Screen
     shall cease to be publicly available or if the information contained on the
     Screen, in the Agent's reasonable judgment, shall cease accurately to
     reflect such LIBOR Base Rate, as reported by any publicly available source
     of similar market data selected by the Agent that, in



                                                                               5


     the Agent's reasonable judgment, accurately reflects such LIBOR Base Rate),
     the LIBOR Base Rate shall mean, with respect to any LIBOR Loan for any
     Interest Period, the arithmetic mean, as determined by the Agent, of the
     rate per annum (rounded to the nearest 1/16 of 1%) quoted by each relevant
     U.K. Reference Lender at approximately 11:00 a.m. London time (or as soon
     thereafter as practicable) on (in the case of any LIBOR Loan in Sterling),
     or (in the case of any LIBOR Loan in Dollars) two Business Days prior to,
     the first day of the Interest Period for such Loan for the offering by such
     U.K. Reference Lender to leading banks in the London interbank market of
     deposits in such currency having a term comparable to such Interest Period
     and in an amount comparable to the principal amount of the LIBOR Loan to be
     made by such U.K. Reference Lender (or its relevant Applicable Lending
     Office, as the case may be) for such Interest Period.

          "LIBOR RATE" shall mean (a) with respect to (i) a LIBOR Loan
     denominated in Dollars and (ii) each day during each Interest period
     pertaining to a LIBOR Loan, the rate per annum equal to the quotient
     (rounded upward to the nearest 1/100 of 1%) of (A) the LIBOR Base Rate,
     DIVIDED by (B) a number equal to 1.00 minus the aggregate of the rates
     (expressed as a decimal fraction) of reserve requirements current on the
     date two Business Days prior to the beginning of such Interest Period
     (including, without limitation, basic, supplemental, marginal and emergency
     reserves under any regulations of the Board of Governors of the Federal
     Reserve System or other Governmental Authority having jurisdiction with
     respect thereto),  as now and from time to time hereafter in effect,
     dealing with reserve requirements prescribed for eurocurrency funding
     (currently referred to as "Eurocurrency liabilities" in Regulation D of
     such Board) maintained by a member of such System, (b) with respect to a
     LIBOR Loan denominated in Sterling, the sum of the LIBOR Base Rate PLUS the
     MLA cost, and (c) with respect to any Bid Loan requested pursuant to a
     LIBOR Bid Loan Request, the LIBOR Base Rate for such Bid Loan.

          "LOAN DOCUMENTS" shall mean, collectively, this Agreement, any Notes,
     the Applications, the Letters of Credit, the Subsidiaries Guarantee and the
     Scotts Guarantee.

     (c)  Subsection 1.1 is further amended by adding after "(a)" in the
definition of "Aggregate Outstanding Extensions of Credit"  the phrase "the
Dollar Equivalent of".

     3.   AMENDMENTS TO SECTION 2 OF THE CREDIT AGREEMENT. Section 2 of the
Credit Agreement is hereby amended by deleting such section in its entirety and
inserting in lieu thereof Annex I to this First Amendment.



                                                                               6


     4.   AMENDMENT TO SECTION 6 OF THE CREDIT AGREEMENT.  Section 6.8(b)(ii) of
the Credit Agreement is hereby amended by adding after the phrase "preferred
stock of the Borrower or such Subsidiary", the following:  "(PROVIDED that such
amount has not been paid in a prior period)".

     5.   AMENDMENT TO SECTION 10 OF THE CREDIT AGREEMENT.  (a) Section 10 of
the Credit Agreement is hereby amended by adding the following new Sections
10.17 and 10.18 in their entirety:

               10.17  JUDGMENT.  (a)  If for the purpose of obtaining judgment
     in any court it is necessary to convert a sum due hereunder in one currency
     into another currency, the parties hereto agree, to the fullest extent that
     they may effectively do so, that the rate of exchange used shall be that at
     which in accordance with normal banking procedures the Agent could purchase
     the first currency with such other currency on the Business Day preceding
     the day on which final judgment is given.

               (b)  The obligations of the Borrower or any U.K. Borrower in
     respect of this Agreement and any Lender party hereto shall,
     notwithstanding any judgment in a currency (the "JUDGMENT CURRENCY") other
     than the currency in which the sum originally due to such Lender is
     denominated (the "ORIGINAL CURRENCY"), be discharged only to the extent
     that on the Business Day following receipt by such Lender of any sum
     adjudged to be so due in the judgment currency such Lender may in
     accordance with normal banking procedures purchase the original currency
     with the judgment currency; if the amount of the original currency so
     purchased is less than the sum originally due to such Lender in the
     original currency, such Borrower or U.K. Borrower agrees, as a separate
     obligation and notwithstanding any such judgment, to indemnify such Lender
     against such loss, and if the amount of the original currency so purchased
     exceeds the sum originally due to any Lender to this Agreement, such Lender
     agrees to remit to such Borrower or U.K. Borrower, such excess.  This
     covenant shall survive the termination of this Agreement and payment of the
     Loans and all other amounts payable hereunder.

               10.18  CHANGE OF LENDING OFFICE.  Any Lender may at any time
     change its office or branch in respect in respect of any of its Loans, or
     make or maintain any of its Loans through any of its subsidiaries or
     affiliates, by giving notice thereof to the Agent, PROVIDED that such
     change shall not increase the cost to such Lender or such subsidiary or
     affiliate of agreeing to make, making, funding or maintaining such Loans,
     and PROVIDED, FURTHER that after any such change, such Lender or such
     subsidiary or affiliate shall not have any greater rights in respect of
     such Loan pursuant to Section 2.18 hereof than it had in respect thereof
     immediately before such change.



                                                                               7


(b)  All references to the Borrower in Sections 10.13, 10.14 and 10.15 shall
constitute a reference to the Borrower and the U.K. Borrowers.

     6.   AMENDMENT TO SCHEDULE I.  Schedule I to the Credit Agreement is hereby
amended by deleting such Schedule I in its entirety and inserting in lieu
thereof Schedule I to this First Amendment with the effect that the aggregate
amount of the Revolving Credit Commitments is increased to $425,000,000.

     7.   ADDITION OF SCOTTS GUARANTEE.  The Credit Agreement is hereby amended
by adding the Scotts Guarantee as Exhibit L.

     8.   THE CHASE MANHATTAN BANK.  All references to "Chemical" and "Chemical
Bank" in the Credit Agreement shall hereinafter be deemed to be references to
"Chase" and to "The Chase Manhattan Bank".

     9.   LIBOR.  All references to "Eurodollar" in the Credit Agreement shall
hereinafter be deemed to be references to "LIBOR".

     10.  CONSENT TO ACQUISITION OF MIRACLE HOLDINGS LIMITED.  Each of the Agent
and the Lenders hereby consent to the acquisition by the Borrower or O.M. Scott
International Investments Limited of the remaining outstanding shares of Miracle
Holdings Limited and agree that such acquisition shall not violate subsection
7.4 of the Credit Agreement and shall not constitute usage of any of the
permitted baskets therein.

     11.  EFFECTIVENESS.  The amendments provided for herein shall become
effective on December 23, 1996 ( the "First Amendment Effective Date"), PROVIDED
that the following conditions precedent have been satisfied on or before such
date:

          (a)  the Agent shall have received counterparts of this First
     Amendment, duly executed and delivered by all the parties listed on the
     signature pages hereto;

          (b)  the Agent shall have received opinions of (i) Clifford Chance,
     U.K. counsel to the U.K. Borrower and (ii) Vorys, Sater, Seymor and Pease,
     counsel to Scotts.

          (c)  the Agent shall have received the Scotts Guarantee, duly executed
     and delivered by a duly authorized officer of the Borrower.

          (d)  the Agent shall have received a copy of the resolutions, in form
     and substance satisfactory to the Agent, of the Board of Directors of each
     of the U.K. Borrowers authorizing the execution and delivery of this First
     Amendment, certified by the Secretary or an Assistant Secretary of the U.K.
     Borrowers, as the case may be, as of the First Amendment Effective Date,
     which certificate shall



                                                                               8


     state that the resolutions thereby certified have not been amended,
     modified revoked or rescinded since the date of adoption thereof.

     12.  REPRESENTATIONS AND WARRANTIES.  The Borrower hereby represents and
warrants as of the date hereof that after giving effect to each of this First
Amendment and the Miracle Garden Supplement (as hereinafter defined) (a) each of
the representations and warranties made by the Borrower in or pursuant to
Section 4 of the Credit Agreement shall be true and correct on and as of such
date as if made on and as of such date and (b) no Default or Event of Default
shall have occurred and be continuing.

     13.  LIMITED AMENDMENT.  Except as expressly amended hereby, all the
provisions of the Credit Agreement and the other Loan Documents are hereby
affirmed and shall continue to be in full force and effect in accordance with
their terms, and any amendments contained herein shall be limited precisely as
drafted and shall not constitute an amendment of any terms or provisions of the
Credit Agreement except as expressly provided herein.

     14.  U.K. BORROWER.  By executing and delivering this First Amendment, O.M.
Scott International Investments Limited shall become a party to the Credit
Agreement and entitled to the rights and subject to the liabilities and duties
provided for it in the Credit Agreement as amended by the First Amendment,
without any further action being necessary.  By executing and delivering a
Supplement (the "Miracle Garden Supplement") to the Credit Agreement in
substantially the form of Annex II, Miracle Garden Care Limited shall become a
party to the Credit Agreement and entitled to the rights and subject to the
liabilities and duties provided for it in the Credit Agreement as amended by the
First Amendment, without any further action being necessary.  Prior to its
execution and delivery of the Miracle Garden Supplement, Miracle Garden Care
Limited shall not be, and shall not be permitted to borrow as, a "U.K. Borrower"
under the Credit Agreement.

     15.  COUNTERPARTS.  This First Amendment may be executed by the parties
hereto in any number of counterparts, and all of such counterparts taken
together shall be deemed to constitute one and the same instrument.

     16.  GOVERNING LAW.  THIS FIRST AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.



                                                                               9


     IN WITNESS WHEREOF, the parties hereto have caused this amendment to be
duly executed and delivered in New York by their proper and duly authorized
officers as of the day and year first above written.


                                        THE SCOTTS COMPANY


                                        By: /s/ P. D. Yeager
                                           -------------------------------
                                             Title: Chief Financial Officer



                                        O.M. SCOTT & SONS INTERNATIONAL
                                          INVESTMENTS LIMITED


                                        By: /s/ L. Robert Stohler
                                           -------------------------------
                                             Title: Director



                                        THE CHASE MANHATTAN BANK (formerly
                                          Chemical Bank), as Agent and as a
                                          Bank


                                        By: /s/ Lawrence Polumbo, Jr.
                                           -------------------------------
                                             Title: Vice President
                                                    Attorney-in-fact



                                        BANK ONE, COLUMBUS, N.A.


                                        By: /s/ Douglas H. Klamforth
                                           -------------------------------
                                             Title: Vice President




                                        COMERICA BANK



                                        By: /s/ Jeffrey J. Judge
                                           -------------------------------
                                             Title: Assistant Vice President



                                        CREDIT LYONNAIS


                                        By: /s/ Julie T. Kanak
                                           -------------------------------
                                             Title: JULIE T. KANAK
                                                    VICE PRESIDENT



                                                                              10


                                        THE FIRST NATIONAL BANK OF CHICAGO


                                        By: /s/ J. J. Csernits
                                           -------------------------------
                                             Title: Senior Vice President


                                        NATIONAL CITY BANK, COLUMBUS


                                        By: /s/ David G. Yates
                                           -------------------------------
                                           Title: Vice President


                                        PNC BANK, OHIO, NATIONAL
                                          ASSOCIATION


                                        By: /s/ John T. Taylor
                                           -------------------------------
                                             Title: SVP


                                        SOCIETY NATIONAL BANK


                                        By: /s/ Susan M. Lipowicz
                                           -------------------------------
                                             Title: Vice President


                                        THE TORONTO DOMINION BANK


                                        By: /s/ David G. Parker
                                           -------------------------------
                                             Title: Mgr. Cr. Admin.


                                        NBD BANK


                                        By:
                                           -------------------------------
                                             Title:


                                        SOCIETE GENERALE


                                        By: /s/ Joseph A. Philbin
                                           -------------------------------
                                             Title: Vice President



                                                                              11


                                        THE BANK OF NOVA SCOTIA


                                        By: /s/ F. C. H. Ashby
                                           -------------------------------
                                             Title: Senior Manager Loan
                                                    Operations


                                        SCOTIABANK (U.K.) LIMITED


                                        By: /s/ Barry G. Hodges
                                           -------------------------------
                                             Title: Relationship Manager


                                        THE BANK OF TOKYO - MITSUBISHI
                                           NEW YORK BRANCH


                                        By:
                                           -------------------------------
                                             Title: Assistant Vice President


                                        UNION BANK OF CALIFORNIA, N.A.


                                        By:
                                           -------------------------------
                                             Title: Vice President


                                        THE NORTHERN TRUST COMPANY


                                        By:
                                           -------------------------------
                                             Title: Vice President


                                        ROYAL BANK OF SCOTLAND


                                        By: /s/ Russell M. Gibson
                                           -------------------------------
                                             Title: Vice President &
                                                    Deputy Manager


                                        THE SANWA BANK, LIMITED, CHICAGO
                                             BRANCH


                                        By: /s/ James P. Byrnes
                                           -------------------------------
                                             Title: First Vice President



                                        THE TOKAI BANK, LIMITED




                                        By: /s/ Hiroshi Tanaka
                                           -------------------------------
                                             Title: General Manager



                                                                EXHIBIT 10(a)
                                                                -------------


                     The Scotts Company Associates' Pension 
                     Plan as amended effective January 1, 
                     1989 and December 31, 1995



                                 THE SCOTTS COMPANY


                               ASSOCIATES' PENSION PLAN
                                           








                                  AMENDED EFFECTIVE
                        JANUARY 1, 1989 AND DECEMBER 31, 1995
                                           




                                           
                                  THE SCOTTS COMPANY
                               ASSOCIATES' PENSION PLAN
                                           

                                  TABLE OF CONTENTS
ARTICLE                           -----------------                       PAGE
- -------                                                                   ----
    1    DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

    2    SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  6
    2.01 Eligibility Service for Regular or Part-Time Employees . . . . .   6
    2.02 Eligibility Service for Temporary or Part-Time Employees . . . .   6
    2.03 Vesting Service and Benefit Service for All Employees . . . . . .  7
    2.04 Effect of Breaks in Eligibility Service . . . . . . . . . . . . .  8
    2.05 Effect of Breaks in Vesting Service . . . . . . . . . . . . . . .  8
    2.06 Questions Relating to Service Under the Plan . . . . . . . . . .   8
    2.07 Transfer from Part-Time to Full-Time . . . . . . . . . . . . . .   8
    2.08 Transfer from Full-Time to Part-Time . . . . . . . . . . . . . .   9

    3    MEMBERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . .   9
    3.01 Members of the Plan on December 31, 1984 . . . . . . . . . . . .   9
    3.02 All Oother Employees . . . . . . . . . . . . . . . . . . . . . .   9
    3.03 Leased Employees . . . . . . . . . . . . . . . . . . . . . . . .   9
    3.04 Reemployment . . . . . . . . . . . . . . . . . . . . . . . . . .   9
    3.05 Termination of Membership . . . . . . . . . . . . . . . . . . .   10
    3.06 Questions Relating to Membership in the Plan . . . . . . . . . .  10

    4    BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
    4.01 Normal Retirement Allowance . . . . . . . . . . . . . . . . . .   10
    4.02 Early Retirement Allowance . . . . . . . . . . . . . . . . . . .  12
    4.03 Vested Benefit . . . . . . . . . . . . . . . . . . . . . . . . .  14
    4.04 Optional Forms of Benefit after Retirement . . . . . . . . . . .  14
         (a)  Automatic Joint and Survivor Option applicable to Future 
                   Service Benefit . . . . . . . . . . . . . . . . . . .   14
         (b)  Spouse's Contingent Annuity Option . . . . . . . . . . . .   16
         (c)  Standard Contingent Annuity Option . . . . . . . . . . . .   18
         (d)  Other Settlement Options . . . . . . . . . . . . . . . . .   18
    4.05 Optional Forms of Benefit Before Retirement . . . . . . . . . .   19
    4.06 Maximum Benefits . . . . . . . . . . . . . . . . . . . . . . . .  27
    4.07 No Duplication . . . . . . . . . . . . . . . . . . . . . . . . .  30
    4.08 Payment of Benefits . . . . . . . . . . . . . . . . . . . . . .   31
    4.09 Reemployment of Former Member or Retired Member . . . . . . . .   32
    4.10 Top-Heavy Provisions . . . . . . . . . . . . . . . . . . . . .    34
    4.11 Elective Rollovers . . . . . . . . . . . . . . . . . . . . . . .  35
    4.12 Merger of Stern's Miracle-Gro Products, Inc. Defined Benefit 
                   Pension Plan . . . . . . . . . . . . . . . . . . . . .  37

                                       i



    5    ADMINISTRATION OF PLAN . . . . . . . . . . . . . . . . . . . . .  37

    6    CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . .   39

    7    MANAGEMENT OF FUNDS . . . . . . . . . . . . . . . . . . . . . .   39

    8    CERTAIN RIGHTS AND LIMITATIONS . . . . . . . . . . . . . . . . .  40

    9    NONALIENATION OF BENEFITS . . . . . . . . . . . . . . . . . . .   45

    10   AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .  46
    10.01     Company's Right to Amend Plan . . . . . . . . . . . . . . .  46
    10.02     Amendments to Vesting Schedule . . . . . . . . . . . . . .   46


APPENDIX A    FACTORS USED FOR DETERMINING VARIOUS FORMS OF BENEFITS

APPENDIX B    SUPPLEMENTAL BENEFITS

APPENDIX C    MERGER OF STERN'S MIRACLE-GRO PRODUCTS, INC. DEFINED BENEFIT
         PENSION PLAN

                                      ii



                                  THE SCOTTS COMPANY
                               ASSOCIATES' PENSION PLAN
                                           

    WHEREAS, The O.M. Scott & Sons Company established The O.M. Scott & Sons
Company Employees' Pension Plan (the "Plan") effective January 1, 1954, in
recognition of the contribution made to its successful operation by its
employees and for the exclusive benefit of its eligible employees and their
beneficiaries; and

    WHEREAS, The O.M. Scott & Sons Company was merged into The Scotts Company,
an Ohio corporation (the "Company"), which assumed sponsorship of the Plan; and

    WHEREAS, the Plan was previously amended and restated effective January 1,
1976, January 1, 1985, December 31, 1986 and January 1, 1989; and

    WHEREAS, the Internal Revenue Service requested and approved certain
changes in the Plan in connection with the issuance of a favorable determination
letter dated December 12, 1995; and

    WHEREAS, the Plan was further amended effective as of December 31, 1995 to
reflect the merger of the Stern's Miracle-Gro Products, Inc. Defined Benefit
Pension Plan into the Plan; and

    WHEREAS, Company wishes to restate the Plan to reflect such amendments; 

    NOW, THEREFORE, the Company hereby amends the Plan in its entirety and
restates the Plan as of the Effective Amendment Date to provide as follows: 


                               ARTICLE 1 - DEFINITIONS
                                           
    "ADMINISTRATIVE COMMITTEE" shall mean the committee established for the
purposes of administering the Plan as provided in Article 5.

    "AFFILIATE" shall mean the Company and any entity which, with the Company,
constitutes: (a) a controlled group of corporations (within the meaning of
Section 414(b) of the Code); (b) a group of trades or businesses under common
control (within the meaning of Section 414(c) of the Code); (c) an affiliated
service group (within the meaning of Section 414(m) of the Code); or (d) a group
of entities required to be aggregated pursuant to Section 414(o) of the Code and
the regulations thereunder. 

    "APPENDIX A" shall mean the tables of factors, attached to the Plan as
exhibits, which are used in determining the amount of the various forms of
benefits payable under the Plan.

    "APPENDIX B" shall mean an attachment to the Plan containing the names of
those Members, surviving spouses, contingent annuitants and beneficiaries for
whom supplemental benefits are provided, and the amount thereof.



    "APPENDIX C" shall mean an attachment to the Plan describing the additional
terms and options applicable to former participants in the Stern's Miracle-Gro
Products, Inc. Defined Benefit Pension Plan.

    "AVERAGE FINAL COMPENSATION" shall mean the average annual Compensation of
a Member for the 60 consecutive calendar months included in his Years of Vesting
Service during the last 120 consecutive calendar months of his Years of Vesting
Service affording the highest such average, or for all the calendar months of
his Years of Vesting Service if he has less than 60 calendar months included in
his Years of Vesting Service.  For purposes of determining a Member's Average
Final Compensation in Plan Years starting after December 31, 1988, Compensation
in excess of $200,000 (as adjusted under Sections 401(a)(17) and 415(d) of the
Internal Revenue Code) shall not be taken into account.  For purposes of
determining a Member's Average Final Compensation in Plan Years starting after
December 31, 1993, Compensation in excess of $150,000 (as adjusted under Section
401(a)(17) and 415(d) of the Internal Revenue Code) shall not be taken into
account.  Notwithstanding the foregoing, the accrued benefit of a Section
401(a)(17) Employee (as that term is defined in Section 1.401(a)(17)-1(e)(2) of
the regulations under the Internal Revenue Code) shall be determined under the
extended wear-away method of Section 1.401(a)(4)-13(c)(4)(iii) of the
regulations under the Internal Revenue Code.   

    "BOARD OF DIRECTORS" shall mean the Board of Directors of the Company.

    "CODE" shall mean the Internal Revenue Code of 1986, as may be amended from
time to time.

    "COMPANY" shall mean: (a) The O. M. Scott & Sons Company, a Delaware
corporation, until the merger of The O.M. Scott & Sons Company into The Scotts
Company, an Ohio corporation; and (b) thereafter, The Scotts Company or any
successor by merger, purchase or otherwise. 

    "COMPENSATION" shall mean total earnings for the Plan Year paid to the
Member by an Affiliate.  Compensation shall include: (a) commissions; (b) salary
reduction contributions to The Scotts Company Profit Sharing and Savings Plan
and any other Section 401(k) plans sponsored by an Affiliate; and (c) salary
reduction contributions for welfare benefits.  Compensation shall exclude: (i)
commissions in excess of the salary grade maximum for Plan Years starting before
January 1, 1995; and (ii) foreign service, automobile, separation and other
special allowances.  Compensation taken into account under the Plan with respect
to any Employee for a Plan Year shall not exceed: (A) effective January 1, 1989,
$200,000 (as automatically adjusted for increases in the cost of living as
prescribed by the Secretary of the Treasury); and (B) effective January 1, 1994,
$150,000 (as adjusted under Section 401(a)(17) of the Code).  Notwithstanding
the foregoing, the accrued benefit of a Section 401(a)(17) Employee (as that
term is defined in Section 1.401(a)(17)-1(e)(2) of the regulations under the
Code) shall be determined under the extended wear-away method of Section
1.401(a)(4)-13(c)(4)(iii) of the regulations under the Code.  In determining the
Compensation of a Member for purposes of this limitation, the rules of Section
414(q)(6) of the Code shall apply, except in applying such rules, the term
"family" shall include only the spouse of the Member and any lineal descendants
of the Member who have not attained age 19 before the close of the Plan Year. 
If, as a result of the application of 

                                       2



such rules, Compensation would exceed the adjusted $200,000 or $150,000 
limitation, then the limitation shall be prorated among the affected persons 
in proportion to each such person's Compensation as determined under this 
paragraph prior to the application of this limitation. 

    "DEFERRED RETIREMENT DATE" shall mean, with respect to Employees who do not
retire at Normal Retirement Date but who continue without interruption to work
beyond such date, the first day of the calendar month coincident with or next
following the date on which such Employee retires from active service.  No
retirement allowance shall be paid to the Employee until his Deferred Retirement
Date, except as otherwise provided in Article 4.

    "EARNINGS" shall mean all compensation received by a Member including 
bonuses paid by the Company in accordance with its bonus policy.  Earnings 
shall be recognized only for the purpose of determining an annual Current 
Service Benefit as provided pursuant to the last sentence of Section 
4.01(b)(i). Earnings taken into account under the Plan with respect to any 
Employee for a Plan Year shall not exceed: (a) effective January 1, 1989, 
$200,000 (as automatically adjusted for increases in the cost of living as 
prescribed by the Secretary of the Treasury); and (b) effective January 1, 
1994, $150,000 (as adjusted under Section 401(a)(17) of the Code).  
Notwithstanding the foregoing, the accrued benefit of a Section 401(a)(17) 
Employee (as that term is defined in Section 1.401(a)(17)-1(e)(2) of the 
regulations under the Code) shall be determined under the extended wear-away 
method of Section 1.401(a)(4)-13(c)(4)(iii) of the regulations under the 
Code.  In determining the Earnings of a Member for purposes of this 
limitation, the rules of Section 414(q)(6) of the Code shall apply, except in 
applying such rules, the term "family" shall include only the spouse of the 
Member and any lineal descendants of the Member who have not attained age 19 
before the close of the Plan Year.  If, as a result of the application of 
such rules, Earnings would exceed the adjusted $200,000 or $150,000 
limitation, then the limitation shall be prorated among the affected persons 
in proportion to each such person's Earnings as determined under this 
paragraph prior to the application of this limitation.

    "EFFECTIVE AMENDMENT DATE" of this amendment and restatement of the Plan
shall be January 1, 1989, except as otherwise specifically stated herein.

    "EFFECTIVE DATE" of the Plan shall mean January 1, 1976.

    "ELIGIBLE EMPLOYEE" shall mean an Employee  who is: (a) working with The
Scotts product line; (b) in corporate management or administration of The Scotts
Company; or (c) effective December 31, 1995, working with the Miracle-Gro
product line.  Notwithstanding, persons (i) whose terms and conditions of
employment are determined by collective bargaining with a third party, with
respect to whom inclusion in this Plan has not been provided for in the
collective bargaining agreement setting forth those terms and conditions of
employment; (ii) who are nonresident aliens described in Section 410(b)(3)(C) of
the Code; or (iii) who are leased employees within the meaning of Section
414(n)(2) of the Code, are not Eligible Employees.

    "EMPLOYEE" shall mean a person employed by an Affiliate. 

                                       3



    "HOUR OF SERVICE" means (a) each hour for which an Employee is paid or
entitled to payment for the performance of duties for an Affiliate during the
applicable computation period, (b) each hour for which an Employee is paid or
entitled to payment by an Affiliate on account of a period of time during which
no duties are performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury or military duty, or leave of absence, and (c) each
hour for which back pay, irrespective of mitigation of damages, is either
awarded or agreed to by an Affiliate.  In computing Hours of Service on a weekly
or monthly basis when a record of hours of employment is not available, the
Employee shall be assumed to have worked 40 hours for each full week of
employment and eight hours for each day in less than a full week of employment,
regardless of whether the Employee has actually worked fewer hours. 
Notwithstanding the foregoing, (i) not more than 501 Hours of Service shall be
credited to an Employee on account of any single continuous period during which
the Employee performs no duties, (ii) no credit shall be granted for any period
with respect to which an Employee receives payment or is entitled to payment
under a plan maintained solely for the purpose of complying with applicable
workers' compensation or disability insurance laws, and (iii) no credit shall be
granted for a payment which solely reimburses an Employee for medical or
medically related expenses incurred by the Employee.  In the case of a person
who was a Leased Employee and who subsequently becomes an Employee, hours of
service as a Leased Employee shall count as Hours of Service as an Employee.
Determination and crediting of Hours of Service shall be made under Department
of Labor Regulations Sections 2530.200b-2 and 3.

    "INVESTMENT COMMITTEE" shall mean the committee established by the Company
for the purposes of managing the assets of the Plan as provided in Article 5.

    "LEASED EMPLOYEE" shall mean any person (other than an employee of the
recipient) who, pursuant to an agreement between the recipient and any other
person (leasing organization), has performed services for the recipient (or for
the recipient and related persons determined in accordance with Sections
414(n)and 414(o) of the Code) on a substantially full-time basis for a period of
at least one year and such services are of a type historically performed by
employees in the business field of the recipient employer.  Contributions or
benefits provided a Leased Employee by the leasing organization which are
attributable to services performed for the recipient employer shall be treated
as provided by the recipient employer.  A Leased Employee shall not be
considered an employee of the recipient (and thus not otherwise an Employee) if
(a) such employee is covered by a money purchase pension plan providing (i) a
nonintegrated employer contribution rate of at least 10% of compensation, as
defined in Code Section 415(c)(3), but including amounts contributed by the
employer pursuant to a salary reduction agreement which are excludable from the
employee's gross income under Code Section 125, Section 402(a)(8), Section
402(h) or Section 403(b); (ii) immediate participation; and (iii) full and
immediate vesting; and (b) Leased Employees do not constitute more than 20% of
the recipient's non-highly-compensated work force.

    "MEMBER" shall mean any person included in the membership of the Plan as
provided in Article 3.  The pronoun he, his or him is used in this document
solely for convenience and does not in any way connote a limit or restriction to
persons of the masculine gender.  In all cases, when he, his or him is used it
means with equal effect persons of the feminine gender, and vice versa.

                                       4



    "NORMAL RETIREMENT DATE" shall mean the first day of the calendar month
coincident with or next following the 65th anniversary of an Employee's birth. 
The Member's right to a normal retirement allowance shall be non-forfeitable
upon the attainment of age 65 whether or not the Employee retires on such date.

    "PARENTAL LEAVE" shall mean a period in which a person is absent from work
on or after January 1, 1985 because of the person's pregnancy, the birth of a
person's child, the adoption by a person of a child, or, for purposes of caring
for that child for a period beginning immediately following such birth or
adoption.

    "PLAN" shall mean The Scotts Company Associates' Pension Plan as set forth
herein or as hereafter amended.

    "PLAN YEAR" shall mean the 12 month period ending each December 31.

    "SOCIAL SECURITY BENEFIT" shall mean the amount of old-age insurance
benefit under Title II of the Federal Social Security Act as determined by the
Administrative Committee under reasonable rules uniformly applied, on the basis
of such Act as in effect at the time of retirement or termination to which a
Member or former Member is or would upon application be entitled, even though
the Member does not receive such benefit because of his failure to apply
therefor or he is ineligible therefor by reason of earnings he may be receiving
in excess of any limit on earnings for full entitlement to such benefit;
provided, however, if a Member remains in employment on or after his Normal
Retirement Date, the Social Security Benefit hereunder shall be calculated as of
his Normal Retirement Date on the basis of the Federal Social Security Act in
effect as of such Normal Retirement Date.  For all years prior to retirement or
other termination of employment with the Company where actual earnings are not
available, the Member's Social Security Benefit shall be determined on the basis
of the Member's actual earnings in conjunction with a salary increased
assumption based on the actual yearly change in national average wages as
determined by the Social Security Administration.  If, within a reasonable time
after the later of (i) the date of retirement or other termination of employment
or (ii) the date on which a Member is notified of the retirement allowance or
vested benefit to which he is entitled, the Member provides documentation from
the Social Security Administration as to his actual earnings history with
respect to those prior years, his Social Security Benefit shall be redetermined
using the actual earnings history.  If this recalculation results in a different
Social Security Benefit, his retirement allowance or vested benefit shall be
adjusted to reflect this change.  Any adjustment to his retirement allowance or
vested benefit shall be made retroactive to the date his payments commenced. 
The Administrative Committee shall resolve any questions arising under this
Section 1.18 on a basis uniformly applicable to all Employees similarly
situated.

    "TRUSTEE" shall mean the trustee or trustees by which the funds of the Plan
are held as provided in Article 7.

                                       5



    "YEAR OF BENEFIT SERVICE" shall mean employment recognized as such for the
purposes of computing a benefit under the Plan with respect to service on or
after January 1, 1976, as provided under Article 2.

    "YEAR OF ELIGIBILITY SERVICE" shall mean any employment recognized for
purposes of meeting the eligibility requirements for membership in the Plan, as
provided in Article 2. 

    "YEAR OF VESTING SERVICE" shall mean any employment recognized for purposes
of meeting the requirements for vesting in benefits, as provided in Article 2.


                                 ARTICLE 2 - SERVICE
                                 -------------------

2.01     ELIGIBILITY SERVICE FOR REGULAR OR FULL-TIME EMPLOYEES 

    For an Employee who is classified as a regular full-time Employee according
    to the Employer's policies and practices, "Year of Eligibility Service" and
    "Break in Eligibility Service" shall have the same meaning as "Year of
    Vesting Service" and "Break in Vesting Service."

2.02     ELIGIBILITY SERVICE FOR TEMPORARY OR PART-TIME EMPLOYEES 

    For an Employee who is classified as a temporary Employee or a part-time
    Employee according to the Employer's policies and practices:

    (a)  "BREAK IN ELIGIBILITY SERVICE" shall mean failure by an Employee to
         complete more than 500 Hours of Service during any Computation Period. 
         Any Break in Service shall be deemed to have commenced on the first
         day of the Computation Period in which it occurs.  In the case of an
         absence from work beginning after December 31, 1984, if an Employee is
         absent from work for any period by reason of pregnancy, the birth or
         placement for adoption of a child, or for caring for a child for a
         period immediately following the birth or placement, then for purposes
         of determining whether a Break in Service has occurred (and not for
         purposes of determining Years of Eligibility Service) such Employee
         shall be credited with the Hours of Service which otherwise normally
         would have been credited to such Employee, or, if the Administrator is
         unable to determine the number of such Hours of Service, eight Hours
         of Service for each day of absence, in any case not to exceed 501
         Hours of Service.  The Hours of Service credited to an Employee under
         this definition shall be treated as Hours of Service in the
         Computation Period in which the absence from work begins, if the
         Employee would be prevented from incurring a Break in Service in such
         year solely because of such Hours of Service or, in any other case, in
         the immediately following year.  The Administrator may require that
         the Employee certify and/or supply documentation that his or her
         absence is for one of the permitted reasons and the number of days for
         which there as such an absence.

                                       6



         (b)  "COMPUTATION PERIOD" shall mean a 12 month period starting on an
              Employee's most recent date of employment commencement or any 
              Plan Year starting after anniversary of that date.

         (c)  "YEAR OF ELIGIBILITY SERVICE" shall mean a Computation Period 
              during which an Employee has 1,000 or more Hours of Service 
              for an Affiliate.

2.03     VESTING SERVICE AND BENEFIT SERVICE FOR ALL EMPLOYEES  

         For all Employees:

         (a)  "BREAK IN VESTING SERVICE" shall mean each 12 consecutive months 
              in the period:  (i) commencing on an Employee's Severance from 
              Service Date; and (ii) ending on the date the Employee is 
              again credited with an Hour of Service for the performance of 
              duties for an Affiliate.  If an Employee is absent from work 
              for any period by reason of a pregnancy, the birth or 
              placement for adoption of a child, or caring for a child for a 
              period immediately following the birth or placement, and the 
              absence continues beyond the first anniversary of the absence, 
              the Employee's Break in Vesting Service will commence no 
              earlier than the second anniversary of the absence.  The 
              period between the first and second anniversaries of the first 
              date of the absence is not part of either a Period of Service 
              or a Break in Vesting Service.  The Administrative Committee 
              may require the Employee to certify and/or supply 
              documentation that his or her absence is for one of the 
              permitted reasons and the number of days for which there was 
              such an absence.
              
         (b)  "PERIOD OF SERVICE" shall mean the period:  (i) commencing on the 
              date an Employee is first credited with an Hour of Service for 
              the performance of duties for an Affiliate; and (ii) ending on 
              the Employee's Severance from Service Date.  A Period of 
              Service will include any period after an Employee's Severance 
              from Service Date if within 12 months of the Employee's 
              Severance from Service Date, the Employee has an Hour of 
              Service for an Affiliate.
              
         (c)  "SEVERANCE FROM SERVICE DATE" is the earlier of:  (i) the date on
              which an Employee quits, is discharged, retires or dies; or 
              (ii) the first anniversary of the first date of any other 
              absence.
              
         (d)  "YEAR OF BENEFIT SERVICE" shall mean a full 365 days in an 
              Employee's Period of Service, excluding:  (i) the period 
              before the Employee became a Member; (ii) any period during 
              which the Employee is not an Eligible Employee; and (iii) 
              service before January 1, 1976.  A Member shall not receive 
              credit for more than 40 Years of Benefit Service.
                            
         (e)  "YEAR OF VESTING SERVICE" shall mean a full 365 days in an 
              Employee's Period of Service.
              


                                         7



2.04     EFFECT OF BREAKS IN ELIGIBILITY SERVICE

         (a)  If an Employee has a Break in Eligibility Service, Years of
              Eligibility Service before such break will not be taken into 
              account until the Employee has completed a Year of Eligibility 
              Service after such Break in Eligibility Service.
              
         (b)  If an Employee who does not have a vested benefit under the Plan
              incurs five consecutive Breaks in Eligibility Service (and the 
              number of consecutive Breaks in Eligibility Service exceeds 
              the number of Years of Eligibility Service completed before 
              such break), Years of Eligibility Service before such break 
              will not be taken into account.
              
         (c)  If an Employee's Years of Eligibility Service may not be 
              disregarded pursuant to this Section, such Years of 
              Eligibility Service shall be taken into account.

2.05     EFFECT OF BREAKS IN VESTING SERVICE

         (a)  If an Employee has a Break in Vesting Service, Years of Vesting
              Service before such break will not be taken into account until 
              the Member has completed a Year of Vesting Service after such 
              Break in Vesting Service.
              
         (b)  If an Employee who does not have a vested benefit under the Plan
              incurs a Break in Vesting Service (and the number of 
              consecutive Breaks in Vesting Service exceed the number of 
              Years of Vesting Service completed before such break), Years 
              of Vesting Service and Years of Benefit Service before such 
              break will not be taken into account. 
              
         (c)  If an Employee's Years of Vesting Service and Years of Benefit 
              Service may not be disregarded pursuant to this Section, such 
              Years of Vesting Service and Years of Benefit Service shall be 
              taken into account. 
              
2.06     QUESTIONS RELATING TO SERVICE UNDER THE PLAN

         If any question shall arise hereunder as to an Employee's Years of 
         Benefit Service, Years of Eligibility Service or Years of Vesting 
         Service, such question shall be resolved by the Administrative 
         Committee on a basis uniformly applicable to all Employee(s) 
         similarly situated.  
         
2.07     TRANSFER FROM PART-TIME TO FULL-TIME

         If a Temporary or Part-Time Employee transfers to Full-Time status, 
         the Employee shall receive credit for a period of service 
         consisting of: (a) the number of Years of Eligibility Service 
         credited to the Employee before the computation period during which 
         the transfer 


                                         8



         occurs; and (b) the greater of (1) the period of service that would 
         be credited to the Employee under the elapsed time method for his 
         service during the entire computation period in which the transfer 
         occurs, or (2) the service taken into account under the as a 
         Temporary or Part-Time Employee as of the date of the transfer.
         
2.08     TRANSFER FROM FULL-TIME TO PART-TIME

         If a Full-Time Employees transfers to Temporary of Part-Time 
         status, the Employee shall receive credit for: (a) the number of 
         Years of Eligibility Service credited to the Employee as of the 
         date of the transfer; and (b) 45 Hours of Service for each week in 
         a partial Year of Eligibility Service credited to the Employee as 
         of the date of the transfer. 

                                ARTICLE 3 - MEMBERSHIP
                                           
3.01     MEMBERS OF THE PLAN ON DECEMBER 31, 1984 

         Every Employee who was a Member of the Plan on December 31, 1984 
         shall continue to be a Member of the Plan on and after January 1, 
         1985.
         
3.02     ALL OTHER EMPLOYEES

         An Employee shall become a Member of the Plan as of the first day 
         of the calendar month, commencing with January 1, 1985, coincident 
         with or next following the later of:
         
         (a)  the date on which he attains the 21st anniversary of his birth, 
 
         (b)  the date on which he completes one Year of Eligibility Service, or

         (c)  the date on which he becomes an Eligible Employee.

3.03     LEASED EMPLOYEES

         Any person who is a Leased Employee shall not be eligible to 
         participate in the Plan.  However, if such a person subsequently 
         becomes an Employee, or if an Employee subsequently becomes 
         employed as a Leased Employee, uninterrupted employment with 
         Affiliates as a Leased Employee, subject to the provisions of 
         Section 414(n)(4) of said Code, shall be counted for the sole 
         purpose of determining Years of Eligibility Service but not for the 
         purpose of determining Years of Benefit Service.

3.04     REEMPLOYMENT

         The membership of any person reemployed by an Affiliate as an 
         Eligible Employee shall be immediately resumed if such Employee was 
         previously a Member of the Plan.
         


                                       9


         If a retired Member or a former Member is reemployed by an 
         Affiliate, his membership in the Plan shall be immediately resumed 
         and any payment of a retirement allowance with respect to his 
         original retirement or any payment of a vested benefit with respect 
         to his original employment shall cease in accordance with the 
         provisions of Section 4.09.

3.05     TERMINATION OF MEMBERSHIP

         Unless otherwise determined by the Administrative Committee under 
         rules uniformly applicable to all person(s) or Employee(s) 
         similarly situated, an Employee's membership in the Plan shall 
         terminate if he ceases to be an Eligible Employee otherwise than by 
         reason of retirement under the Plan, except that an Employee's 
         membership shall continue (a) during any period while on leave of 
         absence approved by an Affiliate, or (b) while absent by reason of 
         temporary disability for a period of not more than six months, or 
         (c) while he is not an Eligible Employee herein defined but is in 
         the employ of an Affiliate.  Employees covered by the Plan may not 
         waive such coverage.
         
3.06     QUESTIONS RELATING TO MEMBERSHIP IN THE PLAN

         If any question shall arise hereunder as to the commencement, 
         duration or termination of the membership of any person(s) or 
         Employee(s) employed by an Affiliate, such question shall be 
         resolved by the Administrative Committee under rules uniformly 
         applicable to all person(s) or Employee(s) similarly situated.
         
                                 ARTICLE 4 - BENEFITS
                                           
4.01     NORMAL RETIREMENT ALLOWANCE

         (a)  Retirement Date - A Member may retire from active service on a 
              normal retirement allowance upon reaching his Normal 
              Retirement Date or, if he continues in active service after 
              his Normal Retirement Date, upon reaching his Deferred 
              Retirement Date.  A Member shall be retired from active 
              service on a normal retirement allowance upon reaching his 
              Deferred Retirement Date.  However, in accordance with the 
              procedure established by the Administrative Committee, on a 
              basis uniformly applicable to all Employees similarly 
              situated, the monthly benefit payments commencing on his 
              Deferred Retirement Date shall be adjusted, if necessary, in 
              compliance with Title 29 of the Code of Federal Regulations, 
              Section 2530.203-3, to reflect the amount of any monthly 
              benefits that would have been payable, had he retired on his 
              Normal Retirement Date, with respect to each month during the 
              deferral period in which he was not credited with eight days 
              of service.


                                    10



         (b)  Benefit - Prior to adjustment in accordance with Section 4.04(a), 
              the annual normal retirement allowance payable on a lifetime 
              basis upon retirement at a Member's Normal Retirement Date or 
              at his Deferred Retirement Date shall be equal to the sum of 
              the Member's Current Service Benefit and Past Service Benefit, 
              if any, as follows, and as further provided in Appendix B:
                            
              (i)  Current Service Benefit - One and one-half percent (1-1/2%) 
                   of the Member's Average Final Compensation multiplied by 
                   his Years of Benefit Service on and after January 1, 
                   1976, not in excess of 40 years, reduced by one-half of 
                   his Social Security Benefit; except, however, that if the 
                   Member has less than 40 Years of Benefit Service on and 
                   after January 1, 1976, the Social Security Benefit 
                   reduction shall not exceed one and one-quarter percent 
                   (1-1/4%) of the Social Security Benefit multiplied by his 
                   Years of Benefit Service.  However, the annual Current 
                   Service Benefit payable to any Member who was a 
                   participant of the Plan on December 31, 1975, and who had 
                   attained age 51 on or before December 31, 1975, shall not 
                   be less than 1.3% of the Member's Earnings in each 
                   calendar year during his Years of Benefit Service up to 
                   $7,800 plus 2% of such Earnings in excess of $7,800.
                   
              (ii) Past Service Benefit - With respect to any Member who was a
                   participant of the Plan on December 31, 1975, an amount 
                   equal to the annual normal retirement benefit accrued up 
                   to and including December 31, 1975, to such Member under 
                   the Plan in respect of service prior to January 1, 1976, 
                   with such retirement benefit being computed in accordance 
                   with the provisions of the Plan as in effect on December 
                   31, 1975.
                   
              The annual normal retirement allowance determined prior to any 
              Social Security Benefit offset shall be an amount not less 
              than the greatest annual early retirement allowance which 
              would have been payable to a Member had he retired under 
              Section 4.02 at any time before his Normal Retirement Date, 
              and as such early retirement allowance would have been reduced 
              to commence at such earlier date, but prior to any Social 
              Security Benefit offset; provided, however, that such offset 
              shall in any event be based on the Federal Social Security Act 
              in effect at the earlier of the Member's actual retirement or 
              Normal Retirement Date.
              
              Except as adjusted in accordance with the election of any 
              optional form of pension under Sections 4.04 and/or 4.05 and 
              unless the Company determines otherwise, the retirement 
              allowance payable to a Member who retires on his Deferred 
              Retirement Date shall be determined in accordance with the 
              provisions of the Plan in effect on his Normal Retirement Date 
              and as if he had retired from active service on his Normal 
              Retirement Date.


                                          11


4.02     EARLY RETIREMENT ALLOWANCE

         (a)  Eligibility - A Member who has not reached his Normal Retirement 
              Date but who has reached the 55th anniversary of his birth and 
              completed ten Years of Vesting Service is eligible to retire 
              on an early retirement allowance on the first day of the 
              calendar month next following termination of employment, which 
              date shall be his Early Retirement Date.
              
         (b)  Special Eligibility - A Member who retires on or after January 1,
              1987, who has not reached his Normal Retirement Date but who 
              has reached the 55th anniversary of his birth and completed 
              fifteen Years of Vesting Service, is eligible to retire on a 
              special early retirement allowance on the first day of the 
              calendar month next following termination of employment, which 
              date shall be his Special Early Retirement Date.

         (c)  Benefit if Retiring under Section 4.02(a) - Except as hereinafter
              provided and prior to adjustment in accordance with Section 
              4.04(a), the early retirement allowance payable upon 
              retirement in accordance with Section 4.02(a) shall be a 
              deferred allowance commencing on the Member's Normal 
              Retirement Date and shall be equal to the normal retirement 
              allowance computed in accordance with Section 4.01(b) on the 
              basis of his Average Final Compensation (or Earnings, if 
              applicable) and Years of Benefit Service prior to the time of 
              early retirement.
              
              The Member may, however, elect to receive an early retirement 
              allowance commencing with his Early Retirement Date or the 
              date specified in his later request therefor in a reduced 
              amount which shall be equal to such deferred allowance prior 
              to the reduction to be made to the Current Service Benefit on 
              account of the Social Security Benefit, if applicable, reduced 
              by 1/4 of 1 percent per month for each month by which the 
              commencement date of his retirement allowance precedes his 
              Normal Retirement Date.
              
              The reduction to be made on account of the Social Security 
              Benefit shall be determined on the assumption that the Member 
              had no earnings after his Early Retirement Date and, if 
              retirement allowance payments commence prior to the Member's 
              Normal Retirement Date, shall not be made until such time as 
              the Member is or would upon proper application first be 
              entitled to receive said Social Security Benefit.
              
         (d)  Benefit if Retiring under Section 4.02(b) - Except as hereinafter
              provided and prior to adjustment in accordance with Section 
              4.04(a), the special early retirement allowance shall be an 
              immediate allowance commencing on the Member's Special Early 
              Retirement Date and shall be equal to the following:


                                        12


              (i)  In the case of a Member whose Special Early Retirement Date
                   occurs at or after age 60 with fifteen Years of Vesting 
                   Service, the immediate allowance shall be equal to the 
                   normal retirement allowance under Section 4.01(b) earned 
                   up to the Member's Special Early Retirement Date (prior 
                   to the reduction to be made to the Current Service 
                   Benefit on account of the Social Security Benefit, if 
                   applicable), computed on the basis of his Average Final 
                   Compensation (or Earnings, if applicable) and Years of 
                   Benefit Service at Special Early Retirement Date; or
                   
              (ii) In the case of a Member whose Special Early Retirement Date
                   occurs at or after age 55 but prior to age 60 with 
                   fifteen Years of Vesting Service, the special early 
                   retirement allowance shall be a deferred allowance 
                   commencing on the first day of the calendar month 
                   coincident with or next the 60th anniversary of his birth 
                   and shall be following equal to the normal retirement 
                   allowance under Section 4.01(b) earned up to the Member's 
                   Special Early Retirement Date (prior to the reduction to 
                   be made to the Current Service Benefit on account of the 
                   Social Security Benefit, if applicable), computed on the 
                   basis of his Average Final Compensation (or Earnings, if 
                   applicable) and Years of Benefit Service at Special Early 
                   Retirement Date.  The Member, may, however, elect to 
                   receive a special early retirement allowance commencing 
                   with his Special Early Retirement Date or the date 
                   specified in his later request therefore in a reduced 
                   amount which shall be equal to such deferred allowance 
                   reduced by 5/12 of 1 percent for each month by which the 
                   commencement date of his retirement allowance precedes 
                   the first day of the calendar month coincident with or 
                   next following the 60th anniversary of his birth.
                   
              A Member may elect to defer commencement of his special early 
              retirement allowance to any date after the first day of the 
              calendar month coincident with or next following the 60th 
              anniversary of his birth, up to an including his Normal 
              Retirement Date.  If the Member elects to defer commencement 
              of his special early retirement allowance, the amount of such 
              retirement allowance shall not be increased to reflect such 
              later commencement date.

              The reduction to be made on account of the Social Security 
              Benefit, if applicable, shall be determined on the assumption 
              that the Member has no earnings after his Special Early 
              Retirement Date and, if retirement allowance payments commence 
              prior to the Member's Normal Retirement Date, shall not be 
              made until such time as the Member is or would upon proper 
              application first be entitled to receive said Social Security 
              benefit.


                                        13


4.03     VESTED BENEFIT

         (a)  Eligibility - On or after December 31, 1986, a Member who has not
              reached his Normal Retirement Date shall be entitled to a 
              vested benefit if his services are terminated for reasons 
              other than death or early retirement after he has completed 
              five Years of Vesting Service.

         (b)  Benefit - Prior to adjustment in accordance with Section 4.04(a), 
              the vested benefit payable to a Member who terminates 
              employment shall be a deferred benefit commencing on the 
              former Member's Normal Retirement Date and shall be equal to 
              the normal retirement allowance computed in accordance with 
              section 4.01(b) on the basis of his Average Final Compensation 
              (or Earnings, if applicable) and Years of Benefit Service at 
              date of termination, with the Social Security Benefit 
              determined on the assumption that he continued in service to 
              his Normal Retirement Date at his rate of Compensation in 
              effect as of his date of termination.  If a former Member had 
              completed at least 10 Years of Vesting Service on the date he 
              terminated service, he may elect to receive a benefit 
              commencing on the first day of the calendar month next 
              following the 55th anniversary of his birth or a later date 
              specified in his request therefor, after receipt by the 
              Administrative Committee of written application therefor made 
              by the former Member and filed with the Administrative 
              Committee.  Upon such earlier payment, the vested benefit will 
              be reduced by 1/180th for each month up to 60 by which the 
              commencement date of such payments precedes the former 
              Member's Normal Retirement Date and further reduced by 1/360th 
              for each such month in excess of 60.

4.04     OPTIONAL FORMS OF BENEFIT AFTER RETIREMENT

         (a)  (i)  Automatic Joint and Survivor Option applicable to Current 
                   Service Benefit - Unless the Member or the former Member 
                   elects otherwise, the immediate retirement allowance 
                   attributable to Section 4.01(b)(i) payable to a Member 
                   who retires under Section 4.01 or Section 4.02, or the 
                   vested benefit attributable to Section 4.01(b)(i) payable 
                   to a former Member whose service is terminated under 
                   Section 4.03, shall be equal to the retirement allowance 
                   or vested benefit attributable to Section 4.01(b)(i), 
                   computed in accordance with Section 4.01, 4.02, or 4.03, 
                   as the case may be, and multiplied by the appropriate 
                   factor contained in Table 1 of Appendix A; such 
                   retirement allowance or vested benefit shall be payable 
                   during the retired Member's or former Member's life with 
                   the provision that after his death a benefit at one-half 
                   the rate of the reduced retirement allowance or vested 
                   benefit payable to the retired Member or former Member 
                   shall automatically be paid during the life of, and to, 
                   his spouse, if any; provided, however, in the case of a 
                   Member who retires on his Deferred Retirement Date, the 
                   appropriate factor shall be determined as of his Normal 
                   Retirement Date.  It shall also be provided hereunder 
                   that the 


                                         14




                   spouse shall have been married to the Member on his 
                   retirement date or married to the former Member on the 
                   date on which benefit payments to the former Member 
                   commence; and provided further that the spouse of a 
                   former Member shall not be entitled to receive a benefit 
                   (other than provided in Section 4.05) unless the Member 
                   or former Member's death occurs after the first day of 
                   the month in which his first benefit payment is due or, 
                   in the case of a former Member whose vested benefit has 
                   not commenced, unless his death occurs after his Normal 
                   Retirement Date.  In the case of a Member who retires on 
                   his Normal Retirement Date or Deferred Retirement Date 
                   and who dies before his retirement allowance commences, 
                   his spouse shall be entitled to receive a benefit after 
                   his death as provided in Section 4.05(d).
                   
                   If the former Member who is entitled to a vested benefit 
                   under Section 4.03 does not wish to provide a benefit to 
                   his spouse after his death as provided above, he shall 
                   make an election, in accordance with the provisions of 
                   Section 4.04(d), to provide that the vested benefit 
                   attributable to Section 4.01(b)(i) payable to him under 
                   Section 4.03 shall be in the form of a lifetime benefit 
                   payable during his own lifetime with no further benefit 
                   payable after his death.  If a retired Member who is 
                   entitled to a retirement allowance under Section 4.01 or 
                   Section 4.02 does not wish to provide a benefit to his 
                   spouse after his death as provided above, he shall make 
                   an election, in accordance with the provisions of Section 
                   4.04(d), to provide that the retirement allowance payable 
                   to him attributable to Section 4.01(b)(i) under Section 
                   4.01 or Section 4.02 shall be in the form of a lifetime 
                   benefit payable during his own lifetime with no further 
                   benefit payable after his death unless he makes an 
                   election in accordance with Section 4.04(b) or Section 
                   4.04(c) of the Plan.

              (ii) Automatic joint and survivor benefit applicable to Past 
                   Service Benefit - Unless the Member or the former Member 
                   elects otherwise in accordance with the provisions of 
                   Section 4.04(d), the retirement allowance attributable to 
                   Section 4.01(b)(ii) payable to a Member who retires under 
                   Section 4.01 or Section 4.02, or the vested benefit 
                   attributable to Section 4.01(b) (ii) payable to a former 
                   Member under Section 4.03, shall be computed in 
                   accordance with Section 4.01, 4.02 or 4.03, as the case 
                   may be, and shall be payable during the retired Member's 
                   or former Member's life with the provision that after his 
                   death a benefit at one-half the rate of such retirement 
                   allowance or vested benefit payable to the retired Member 
                   or former Member shall automatically be paid during the 
                   life of, and to, his spouse; provided, however, that the 
                   spouse shall have been married to the Member or former 
                   Member on the date on which benefit payments to the 
                   retired Member or former Member commence; and provided 
                   further that the spouse shall not be entitled to receive 
                   a benefit unless the former 
                   


                                           15



                   Member's death occurs after the first day of the month in 
                   which his first benefit payment is due or, in the case of 
                   a former Member whose vested benefit has not commenced, 
                   unless his death occurs after his Normal Retirement Date.

              Not more than 90 days before the date of commencement of his 
              benefit, the Administrative Committee shall notify each 
              married Member or married former Member of the general terms 
              and conditions of the Automatic Joint & Survivor Option as 
              described above and the financial effect of an election to 
              receive, in place thereof, a lifetime benefit payable to him 
              during his own lifetime with no further benefit payable after 
              his death.  If, prior to the date of commencement of his 
              benefit, a married Member or married former Member exercises 
              his right to file a written request with the Administrative 
              Committee for detailed information as to (i) the amount of his 
              retirement allowance or vested benefit payable on an Automatic 
              Joint & Survivor Option basis and (ii) the amount payable on a 
              lifetime basis, then the period during which he may elect to 
              receive his retirement allowance or vested benefit on a 
              lifetime basis shall be extended, if necessary, to include the 
              60 days following receipt by the Member or former Member of 
              such information.

              A married Member entitled to, but not in receipt of, a vested 
              benefit as of August 23, 1984 who terminated service prior to 
              January 1, 1976 shall have his vested benefit payable in the 
              form of the Automatic Joint and Survivor Option as described 
              in Section 4.04(a)(ii) above, unless he elects otherwise in 
              accordance with the provisions of Section 4.04(d) prior to the 
              date as of which his vested benefit commences.
              
              If a Member is not married on the date his benefit payments 
              commence, his retirement allowance or vested benefit shall be 
              in the form of a lifetime benefit payable during his own 
              lifetime with no further benefit payable after his death 
              unless the Member is eligible for and makes an election in 
              accordance with Section 4.04(c) of the Plan.

         (b)  Spouse's Contingent Annuitant Option - Any Member who retires 
              from active service under Section 4.01 or Section 4.02 and who 
              elects not to receive the optional form of benefit under 
              Section 4.04(a)(i) may elect to convert the retirement 
              allowance attributable to Section 4.01(b)(i), prior to any 
              optional modification under said Section 4.04(a)(i), into one 
              of the following alternative benefits payable to him and his 
              surviving spouse, provided the Member and his spouse are 
              married at the time such election is made.  It is provided 
              that:
              
              (i)  the retirement allowance attributable to Section 4.01(b)(i)
                   payable to the Member and his spouse under Option I below 
                   shall not be less than the retirement allowance that 
                   would have been payable without optional 



                                    16


             modification at retirement under Section 4.01 or Section 4.02 
             multiplied by the appropriate factor contained in Table 3 of 
             Appendix A, and

(ii)         the retirement allowance attributable to Section 4.01(b)(i) 
             payable to the Member and his spouse under Option II below shall 
             not be less than the retirement allowance that would have been 
             payable if the Member had elected Option 1 under Section 4.04(c).

             Option I - In order to provide a lifetime benefit to his surviving
             spouse equal to 50% of the retirement allowance attributable to 
             Section 4.01(b)(i) without optional modification otherwise payable
             to the Member at retirement under Section 4.01 or Section 4.02, 
             the Member shall elect to receive a reduced retirement allowance 
             payable during his own lifetime equal to 90% of the retirement 
             allowance attributable to Section 4.01(b)(i), without optional 
             modification, otherwise payable to him under said Section.

             If the spouse is more than five years older than the Member, the 
             reduced retirement allowance payable to the Member shall be 
             increased for each such additional year in excess of five years, 
             but for not more than 20 years, by one-half of 1%. of the 
             retirement allowance payable to the Member prior to optional 
             modification.  If the spouse is more than five years younger than 
             the Member, the reduced retirement allowance payable to the Member
             shall be further reduced for each such additional year in excess 
             of five years by one-half of 1% of the retirement allowance 
             payable to the Member prior to optional modification.

             Option II - In order to provide a lifetime benefit to his 
             surviving spouse equal to the Member's retirement allowance as 
             herein reduced, the Member shall elect to receive a reduced 
             retirement allowance payable during his own lifetime equal to 80%
             of the retirement allowance attributable to Section 4.01(b)(i) and
             payable to him at retirement under Section 4.01 or Section 4.02.

             If the spouse is more than five years older than the Member, the 
             reduced retirement allowance payable to the Member shall be 
             increased for each such additional year in excess of five years, 
             but for not more than 20 years, by 1% of the retirement allowance 
             payable to the Member prior to optional modification.  If the 
             spouse is more than five years younger than the Member, the 
             reduced retirement allowance payable to the Member shall be 
             further reduced for each such additional year in excess of five 
             years by 1% of the retirement allowance payable to the Member 
             prior to optional modification.


                                       17




  (c)       Standard Contingent Annuity Option - Any Member who retires from
            active service under Section 4.01 or Section 4.02 and who was not
            eligible for or elected not to receive the optional form of 
            benefit under Section 4.04(a) may elect, in accordance with the 
            provisions of Section 4.04(d), to convert the retirement allowance
            attributable to Section 4.01(b)(i) and/or Section 4.01(b)(ii) 
            otherwise payable to him under Section 4.01 or Section 4.02 into 
            one of the following alternative options.  If the contingent 
            annuitant selected is other than the Member's spouse, the reduced 
            retirement allowance payable to the Member shall in no event be 
            less than 50% of the retirement allowance which would otherwise be
            payable to the Member prior to optional modification.  The 
            optional benefit elected shall be the retirement allowance without
            optional modification otherwise payable to the Member under 
            Section 4.01 or Section 4.02, multiplied by the appropriate factor
            contained in Appendix A.

            Option 1 - A reduced retirement allowance payable during the 4
            Member's life, with the provision that after his death it shall be
            paid during the life of, and to, the contingent annuitant 
            designated by him; or

            Option 2 - A reduced retirement allowance payable during the 
            Member's life with the provision that after his death an allowance
            at one-half (or any other percentage approved by the 
            Administrative Committee) of the rate of his reduced allowance 
            shall be paid during the life of, and to, the contingent annuitant
            designated by him.

            Option 3 - A reduced retirement allowance payable during the 
            member's life with the provision that if he should die prior to 
            receiving 120 monthly benefit payments, the balance of such 
            payments shall be paid to the beneficiary designated by him, or to
            his legal representative if there is no surviving designated 
            beneficiary.  Option 3 may not be elected if the payment period 
            would extend beyond the combined life expectancy of the Member and
            his beneficiary.

  (d)       Any election made under Section 4.04(a), Section 4.04(b) or 
            Section 4.04(c) shall be made on a form approved by the 
            Administrative Committee.  Any such election shall become 
            effective 30 days before the due date of the first payment of the 
            retirement allowance or vested benefit provided the appropriate 
            form is filed with and received by the Administrative Committee 
            not less than 30 days before said due date.  In the case of a 
            Member retired early under Section 4.02 of the Plan with the 
            payment of the early retirement allowance deferred to commence at
            a date later than his Early Retirement Date, the survivor's 
            benefits applicable before retirement under Section 4.05 of the 
            Plan shall apply for the period between his Early Retirement Date 
            and the effective date of any election of an optional form of 
            benefit under Section 4.04. The provisions of this Section 4.04(d)
            shall be administered to accommodate such an early retired Member 
            under rules uniformly applicable to all Members similarly 
            situated.


                                       18




              A married Member's or a married former Member's election made on 
              or after January 1, 1985 of a life only form of payment under 
              Section 4.04(a), or any form of payment under Section 4.04(c) 
              which does not provide for monthly payments to his spouse for 
              life after the Member's or former Member's death in an amount 
              equal to at least 50% but not more than 100% of the monthly 
              amount payable under that form of payment to the Member or 
              former Member, shall be effective only if (i) it is made within 
              90 days of benefit commencement, and (ii) his spouse's consent 
              to the election has been received by the Administrative 
              Committee. The spouse's consent shall (A) be witnessed by a 
              notary public or in accordance with uniform rules of the 
              Administrative Committee, by a Plan representative, (B) 
              acknowledge the effect on the spouse of the Member's or former 
              Member's election of such form of payment, and (C) apply to a 
              specific nonspouse beneficiary (or a class of beneficiaries).

              The requirement for spouse's consent may be waived by the 
              Administrative Committee in accordance with applicable law in the
              event that the Member's spouse cannot be located.

              Any election made under Section 4.04(a), Section 4.04(b) or 
              Section 4.04(c), after having been filed, may be revoked or 
              changed by the Member only by written notice received by the 
              Administrative Committee before the election becomes effective; 
              provided, however, that a married Member may revoke or make an 
              election under Section 4.04(a) any time prior to the date his 
              retirement allowance or vested benefit commences.  If, however, 
              the Member or the spouse or the contingent annuitant or the 
              beneficiary designated in the election dies before the election 
              has become effective, the election shall thereby be revoked.

              The benefit payable in accordance with Section 4.04(a), Section 
              4.04(b) or Section 4.04(c)  to the designated spouse or 
              contingent annuitant or beneficiary of a Member or former Member 
              in receipt of a retirement allowance whose death occurs prior to 
              the age at which the Member or former Member is, upon-proper 
              application, first entitled to receive his Social Security 
              Benefit, if applicable, shall be based upon the appropriately 
              reduced retirement allowance which is or would be payable to the 
              Member or former Member after he attained such age.

4.05     OPTIONAL FORMS OF BENEFIT BEFORE RETIREMENT

         The term Beneficiary for purposes of this Section 4.05 shall mean any
         person designated by the Member to receive benefits payable under this
         Section; provided, however, that, for any married Member who is first
         eligible for or continues to be eligible for the coverage provided 
         under this Section 4.05 on and after August 23, 1984, the term 
         "Beneficiary" shall automatically mean the Member's spouse and any 
         prior designation to the contrary will be canceled, unless the Member 
         designates otherwise.  An election on or after January 1, 1985 of a 
         non-spouse Beneficiary by a married Member shall be effective only if 
         the Member's spouse consents to such designation and such consent has 
         been received by the


                                       19




Administrative Committee.  The spouse's written consent shall be witnessed by 
a notary public or, in accordance with uniform rules of the Administrative 
Committee, by a Plan representative and shall acknowledge the effect on the 
spouse of the Member's Beneficiary designation.  This requirement for spouse's 
consent may be waived by the Administrative Committee in accordance with 
applicable law in the event that the Member's spouse cannot be located.  If the
Member dies without an effective designation of Beneficiary, the Member's 
Beneficiary for purposes of this Section 4.05 shall automatically be the 
Member's spouse, if any.  The Administrative Committee shall resolve any 
questions arising hereunder as to the meaning of Beneficiary on a basis 
uniformly applicable to all Members similarly situated.

    (a)  Death in Service Benefit applicable to Past Service Benefit - In the
         event of the death prior to the date payments commence of a Member who
         was a participant of the Plan on December 31, 1975, his spouse to whom
         he was married not less than one year prior to his date of death shall
         be entitled to receive a benefit equal to one-half of the Member's
         retirement allowance attributable to Section 4.01(b)(ii), commencing
         on what would have been the Member's Normal Retirement Date, or
         commencing on the first day of the month following the death of the
         Member, if later, and continuing during the life of such spouse;
         provided, however, that if a Member dies prior to his Normal
         Retirement Date, his spouse can elect, by written application filed
         with the Administrative Committee, to have such payments begin as of
         the first day of any month following the Member's date of death and
         prior to what would have been the Member's Normal Retirement Date.

    (b)  Death in Service Option applicable to Current Service Benefit for
         Members eligible for Vested Benefits - On and after December 31 1986,
         the spouse of a Member shall be eligible for a benefit payable to, and
         for the lifetime of, such spouse if the Member should die:

         (i)  while in active service after completing five Years of Vesting
              Service but prior to becoming eligible for early retirement in
              accordance with Section 4.02(a), provided that the Member had
              not, by timely written notice to the Pension Administrative
              Committee and with his spouse's written consent, elected to waive
              such benefit, or 

         (ii) after termination of employment on or after August 23, 1984 with
              entitlement to a vested benefit attributable to Section
              4.01(b)(i), but prior to the earlier of the date such benefit
              commences or his Normal Retirement Date, provided that the Member
              had not, by timely written notice to Pension Administrative
              Committee and with his spouse's written consent, elected to waive
              such benefit.

         The benefit payable to the spouse under this paragraph (b) shall begin
         as of the month in which the Member's Normal Retirement Date would
         have occurred. However, in the case of the death of any eligible
         Member, who had completed 10


                                       20




         Years of Vesting Service prior to attaining his Normal Retirement 
         Date, the spouse may elect to begin receiving payments as of any month
         following the month in which the Member's 55th birthday would have 
         occurred (or following the month in which his date of death occurred, 
         if later) and prior to what would have been his Normal Retirement 
         Date.

         Prior to its reduction set forth below, if applicable, the benefit
         payable to the spouse covered under this Section 4.05(b) shall be
         equal to the amount of benefit the spouse would have received if the
         vested benefit attributable to Section 4.01 (b)(i) to which the Member
         was entitled at his date of death had commenced as of the month in
         which his Normal Retirement Date would have occurred in accordance
         with Section 4.04(a)(i), and the Member had died immediately
         thereafter.  However, if the spouse elects early commencement, the
         amount of benefit payable to the spouse shall be based on the amount
         of vested benefit to which the Member would have been entitled if he
         had requested benefit commencement at that earlier date, reduced in
         accordance with Section 4.03(b).

         The retirement allowance attributable to Section 4.01(b)(i) payable to
         a Member whose spouse is covered under Section 4.05(b)(ii) or, if
         applicable, the benefit payable under Section 4.05(b)(ii) to his
         spouse upon his death, shall be equal to the vested benefit to which
         he would otherwise be entitled, reduced by the applicable percentages
         shown below for the period, or periods, that coverage under Section
         4.05(b)(ii) was in effect:

                       Annual Reduction for Spouse's Coverage 
                                 After Termination of
                           Employment Other Than Retirement
                                           

               Age                                         Reduction
               ---                                         ---------

               60 and over                                 1% per year
               55 - 59                                     5/10 of 1% per year
               50 - 54                                     3/10 of 1% per year
               40 - 49                                     2/10 of 1% per year
               Prior to 40                                 1/10 of 1% per year

         Such annual reduction shall be prorated to include months in which
         coverage was in effect for at least one day.  Under rules uniformly
         applicable to all Employees similarly situated, the reduction will be
         waived until the Employee is given a reasonable period of time to
         waive such coverage and thereby avoid the charge.


                                       21




         Coverage under Section 4.05(b)(i) shall become effective on the later
         of the date a Member completes the eligibility requirement for a
         vested benefit or the date the Member marries.  Coverage under Section
         4.05(b)(ii) shall become effective on the later of the date a Member
         terminates employment on or after August 23, 1984 under Section
         4.03(a) or the date the Member marries.  Except in the event of a
         waiver or revocation as described in paragraph (f) of this Section
         4.05, coverage under this Section 4.05(b) shall cease on the earlier
         of (i) the date the Member meets the eligibility requirements of
         Section 4.05(c), (ii) the date such Member's marriage is legally
         dissolved by a divorce decree, or (iii) the date such Member's spouse
         dies.  If the Member or his spouse dies prior to the time such
         coverage becomes effective, no benefit shall be payable.

    (c)  Death in Service Option applicable to Current Service Benefit for
         Members Eligible for Early Retirement -

         (i)  The Beneficiary of a Member who has reached the 55th anniversary
              of his birth and completed 10 Years of Vesting Service shall
              automatically receive a retirement allowance in the event said
              Member should die after the effective date of coverage hereunder
              and before his Early, Special Early or Normal Retirement Date. 
              In the case of a Member retired early under Section 4.02 of the
              Plan with the payment of the early or special early retirement
              allowance deferred to commence at a date later than his Early or
              Special Early Retirement Date, the provisions of this Section
              4.05(c) shall also apply to the period between his Early or
              Special Early Retirement Date and the effective date of any
              election of an optional form of benefit under Section 4.04 of the
              Plan, provided the Member does not waive coverage under this
              Section 4.05(c).

              The benefit payable to the Beneficiary shall be equal to one-half
              of the amount of the Member's retirement allowance under Section
              4.01(b)(i) accrued to the date of his death which would have been
              payable if the Member had retired on his Normal Retirement Date,
              computed pursuant to and effective election of Option 1 under
              Section 4.04(c) with his Beneficiary nominated as his contingent
              annuitant, reduced by one-half of 1% per year for each year
              between the date on which coverage hereunder became effective and
              the date of his death.  Notwithstanding anything to the contrary
              herein contained, if the Beneficiary is the Member's Spouse, the
              benefit payable to such spouse under this Section 4.05(c)(i)
              shall not be less than the benefit said spouse would have
              received under Section 4.04(a) had the Member been retired on the
              first day of the month following the month in which he dies. 
              Coverage hereunder shall be effective on the earlier of (1) the
              date the Member elected coverage under the provisions of the Plan
              as in effect prior to August 23, 1984, or (2) August 23, 1984 or,
              if later, the date the Member first meets the eligibility
              requirements described


                                       22




              in this Section 4.05(c).  In the case of a married Member, 
              coverage under Section 4.05(b) shall cease on the date coverage
              under this Section 4.05(c) is effective, as set forth in the 
              preceding sentence.

         (ii) 1% Election - In lieu of the benefit described in subparagraph
              (i) above, an eligible Member may elect to reduce the retirement
              allowance attributable to Section 4.01(b)(i), otherwise payable
              to him under Section 4.01 or Section 4.02, by 1% per year to
              provide a benefit payable to his Beneficiary upon his death (1)
              in active service, or (2) during the period between his Early
              Retirement Date and the effective date of any election of an
              optional form of benefit under Section 4.04.  This benefit shall
              be equal to the amount of the Member's retirement allowance under
              Section 4.01(b)(i) accrued to the date of his death which would
              have been payable if the Member had retired on his Normal
              Retirement Date, computed pursuant to an effective election of
              Option 1 under Section 4.04(c) with his Beneficiary nominated as
              his contingent annuitant, reduced by 1% per year for each year
              between the date on which the election became effective and the
              date of his death.  If the Member does not make this election
              until after he is first eligible to do so, it shall become
              effective one year after the first day of the calendar month
              coincident with or next following the date the notice is received
              by the Administrative Committee or on the date specified on such
              notice, if later.  In the case of a married Member, coverage
              under Section 4.05(b) shall cease on the date coverage under this
              Section 4.05(c) is effective, as set forth in the preceding
              sentence.

              The benefit payable under this Section 4.05(c)(i) or (ii) shall
              be payable for the life of the Beneficiary commencing on what
              would have been the Member's Normal Retirement Date; provided,
              however, that the Beneficiary of the Member may elect, by written
              application filed with the Administrative Committee, to have such
              payments begin as of the first day of any month following the
              Member's date of death and prior to what would have been the
              Member's Normal Retirement Date.  If the payment of the death
              benefit commences prior to what would have been the Member's
              Normal Retirement Date, the amount of such benefit shall be
              reduced to reflect such early commencement in accordance with the
              provisions of Section 4.02(c) or (d), whichever is applicable. 
              Notwithstanding the foregoing, if the Beneficiary is not the
              Participant's surviving spouse, the benefit payable under this
              Section 4.05(c)(i) or (ii) shall commence no later than the
              December 31 of the calendar year after the year in which the
              Member died.


                                       23




    (d)  Death in service option after Normal Retirement Date -

         (i)  Automatic Spouse's Benefit - If a married Member reaches his
              Normal Retirement Date and does not retire from active service
              and if he should die after his Normal Retirement Date and before
              his Deferred Retirement Date, a benefit shall automatically be
              paid during the life of, and to, his spouse, if any.

              The benefit payable to the spouse shall be equal to one-half of
              the amount of the Member's normal retirement allowance accrued to
              his Normal Retirement Date, adjusted with respect to the benefit
              determined under Section 4.01(b)(i) as if the Member had elected
              Option 1 under Section 4.04(c) with his spouse as the contingent
              annuitant thereunder and as if the spouse had been the age she
              would have been on the 65th anniversary of the Member's birth. 
              Notwithstanding anything to the contrary herein contained, the
              benefit payable to such spouse shall not be less than the benefit
              said spouse would have received under Section 4.04(a) had the
              Member been retired on his Normal Retirement Date.

              If a married Member does not wish to provide a benefit under this
              Section 4.05(d)(i) with respect to the benefit determined under
              Section 4.01(b)(i) payable to his spouse in the event of his
              death in active service before his Deferred Retirement Date, he
              shall make an election to waive such coverage.  For such an
              election by a married Member to be effective, the Administrative
              Committee must have received a written consent to such election
              by the Member's spouse.  This spouse's written consent shall be
              witnessed by a notary public or, in accordance with uniform rules
              of the Administrative Committee, by a Plan representative and
              shall acknowledge the effect on the spouse of such election. 
              This requirement for spouse's consent may be waived by the
              Administrative Committee in accordance with applicable law in the
              event that the Member's spouse cannot be located.

         (ii) Other Options Available - If a Member reaches his Normal
              Retirement Date and does not retire from active service, such
              Member shall make an election indicating whether or not he wishes
              to provide that, if he should die after his Normal Retirement
              Date and before his Deferred Retirement Date, a benefit shall be
              paid during the life of, and to, any person designated by him. 
              No married Member shall make an election under one of the
              following optional forms of benefits unless he has elected not to
              receive the benefit under Section 4.05(d)(i).


                                       24




              No Death Protection - If a Member does not wish to provide a
              benefit payable to anyone with respect to the benefit determined
              under Section 4.01(b)(i) in the event of his death before
              Deferred Retirement Date, he shall so elect.  In such event, no
              further benefit shall be payable to anyone after his death prior
              to his Deferred Retirement Date with respect to the benefit
              determined under Section 4.01(b)(i).

         100% Election - The Member may elect to reduce the normal retirement
         allowance to which he would otherwise be entitled at his Deferred
         Retirement Date under Section 4.01(b)(i) by one-half of 1% per year
         for each year between his Normal Retirement Date and the earliest of
         the Member's Deferred Retirement Date, the date the designated person
         dies, the date the Member dies, or the date the election is revoked as
         provided in Section 4.05(d).  The benefit payable to the designated
         Beneficiary shall be equal to (1) the amount of the Member's normal
         retirement allowance accrued to his Normal Retirement Date, (2)
         reduced by one-half of 1% per year for each year between his Normal
         Retirement Date and the date of his death, and (3) further adjusted as
         if the Member had elected Option 1 under Section 4.04(c) at Normal
         Retirement Date with the designated person nominated as his contingent
         annuitant thereunder and as if the designated person had been the age
         he would have been on the 65th anniversary of the Member's birth.

         Post-65 Standard Contingent Annuity Option Election -The Member may
         elect to provide that, if he should die after his Normal Retirement
         Date and before his Deferred Retirement Date, a benefit shall be
         payable during the life of, and to, the Beneficiary designated by him.
         The benefit payable to the designated Beneficiary shall be equal to
         (1) one-half of the amount of the Member's normal retirement allowance
         accrued to his Normal Retirement Date, but adjusted as if the Member
         had elected Option 1 under Section 4.04(c) with the designated person
         nominated as his contingent annuitant thereunder and as if the
         designated person had been the age he would have been on the 65th
         anniversary of the Member's birth.  Notwithstanding anything to the
         contrary herein contained, if the designated Beneficiary is the
         member's spouse, the benefit payable to such spouse under this
         election shall not be less than the benefit said spouse would have
         received under Section 4.04(a) had the Member been retired on his
         Normal Retirement Date.

         If a retired Member or a former Member is re-employed at or after his
         Normal Retirement Date, his rights with respect to the election of an
         optional form of benefit under the Plan shall be determined in
         accordance with Section 4.09(b).

         The benefit payable under this Section 4.05(d) shall commence no later
         than the December 31 of the calendar year after the year in which the
         Member died.


                                       25




    (e)  Election of coverage by former Members who terminated employment on or
         after January 1, 1976 and prior to August 23, 1984.  Notwithstanding
         the provisions of Section 4.05(b), a former Member whose employment
         terminated on or after January 1, 1976 and prior to August 23, 1984,
         who is married and entitled to a vested benefit pursuant to the
         provisions of Section 4.03 but who is not yet in receipt thereof, may
         elect, prior to the commencement of such vested benefit, to have the
         provisions of Section 4.05(b) apply to him.  Such coverage shall
         become effective on the first of the month coincident with or
         following the date the completed election form is received by the
         Administrative Committee.

    (f)  Election Procedure - Any election made under Section 4.05 shall be
         made on a form approved by the Administrative Committee.  The
         Administrative Committee shall furnish to each married Member a
         written explanation in nontechnical language which describes (i) the
         terms and conditions of the benefit payable to a Member's spouse under
         Section 4.05(b), (c) or (d), (ii) the Member's right to make, and the
         effect of, an election to waive the such benefit, (ii) the rights of
         the Member's spouse, and (iv) the right to make, and the effect of, a
         revocation of such a waiver.  Such written explanation shall be
         furnished (i) in the case of a Member in active service, within the
         three-year period immediately preceding the first day of the Plan Year
         in which the Member would first complete the eligibility requirements
         for an early or normal retirement allowance, and (ii) in the case of a
         Member who terminates employment with entitlement to a vested benefit
         prior to age 35, as soon as practicable within the 12-month period
         beginning on his date of termination.

         An election to waive the spouse's benefit payable under Section
         4.05(b), (c) or (d), or any revocation of that election, may be made
         at any time during the period which begins on the first day of the
         Plan Year in which the Member would first complete the eligibility
         requirements for an early or normal retirement allowance, and ends on
         the date payment of the Member's retirement allowance or vested
         benefit commences.  However, in the case of a Member who has
         terminated employment, the period during which he may make an election
         to waive this spouse's benefit coverage with respect to his benefit
         accrued before his termination of employment shall begin not later
         than the date his employment terminates.  An election to waive this
         spouse's benefit coverage or any revocation of that election shall be
         made on a form provided by the Pension Administrative Committee, and
         any such waiver of coverage shall require the written consent of the
         spouse, duly witnessed by a notary public, unless the spouse's consent
         is waived by the Pension Administrative Committee in accordance with
         applicable law in the event that the Member's spouse cannot be
         located.  The election or revocation shall be effective when the
         completed form is filed with the Pension Administrative Committee.


                                       26



         Any other election made under Section 4.05(c) or (d) may be changed or
         revoked either before or after it becomes effective.  If the
         designated Beneficiary dies after the effective date of the election,
         the election is thereby canceled and there shall be no further
         reduction to the Member's retirement allowance for the period between
         the date of the designated Beneficiary's death and the Member's
         retirement date unless the Member makes a new election in accordance
         with this Section.  Such Member is entitled to make a new election
         within 60 days following the designated Beneficiary's death or a
         subsequent marriage.  Such new election will become effective on the
         first day of the calendar month coincident with or next following the
         date the notice is received by the Administrative Committee.  If the
         Member does not make a new election within said 60 days, any
         subsequent election shall become effective one year after the first
         day of the calendar month coincident with or next following the date
         the notice is received by the Administrative Committee or on the date
         specified in such notice, if later.

         If the person designated in an election under Section 4.05(c) or (d)
         is the Member's spouse and if the Member's marriage to said spouse is
         legally dissolved by a divorce decree, the election shall be
         automatically revoked as of the effective date of the divorce decree. 
         Such Member is entitled to make a new election within 60 days
         following the effective date of the divorce decree or a subsequent
         marriage.  Such new election shall become effective on the first day
         of the calendar month coincident with or next following the date the
         notice is received by the Administrative Committee.  If the Member
         does not make a new election within said 60 days, any subsequent
         election shall become effective one year after the first day of the
         calendar month coincident with or next following the date the notice
         is received by the Administrative Committee or on the date specified
         in such notice, if later.

         If the Member dies prior to the time the election becomes effective,
         the election shall be revoked.  Distributions will be made in
         accordance with the requirements of the regulations under 
         Section 401(a)(9), including the minimum distribution incidental 
         benefit requirements of Section 1.401(a)(9)-2 of the proposed 
         regulations.

4.06  MAXIMUM BENEFITS

     (a) The maximum annual normal, early retirement allowance, death in
         service benefit, or vested benefit attributable to Company
         contributions, payable after adjustment for any optional elections
         under Section 4.05(b), or Options 1 or 2 of Section 4.05(c), provided
         the Member's spouse is the designated contingent annuitant, when added
         to any retirement allowance attributable to contributions of the
         Company or an Affiliate provided to a Member under any other qualified
         defined benefit plan, shall be equal to the lesser of:


                                      27

         
         (i)   $90,000 adjusted in accordance with regulations issued under
               Section 415 of the Internal Revenue Code by the Secretary of the
               Treasury or his delegate; provided, however, that each year in
               which such an adjustment is made, it shall not become effective
               prior to January 1 of such year, or

         (ii)  the Member's average annual remuneration during the three
               consecutive Years of Benefit Service  affording the highest such
               average, or during all of Years of Benefit Service if less than
               three years; provided that if the Member has not completed 
               10 Years of Benefit Service, such maximum annual retirement
               allowance or vested benefit shall be reduced by the ratio which
               the number of Years of Benefit Service bears to 10.

     (b) If the benefit begins before the Member's social security retirement
         age (as defined in Section 415(b) of the Code), the $90,000 limitation
         set forth in this Section shall be reduced:

         (i)   for the period between the Member's attainment of age 62 and the
               Member's social security retirement age, in a manner that is
               consistent with the reduction for old-age social security
               benefits commencing before such Member's social security
               retirement age;

         (ii)  for the period before the month in which the Member attains 
               age 62, actuarially in accordance with the an interest rate
               assumption which is the greater of 5% or the interest rate used
               in Appendix A and the mortality assumption used in Appendix A.

         In the case of a Member whose benefits hereunder commence after his
         attainment of social security retirement age, the $90,000 limitation
         in this Section shall be increased so that it is equivalent of such a
         benefit commencing at the Member's social security retirement age,
         using the interest rate assumption of the lesser of 5% or the interest
         rate used in Appendix A and the mortality assumption used in 
         Appendix A.

     (c) In the case of a Member who is participating in The Scotts Company
         Profit Sharing and Savings Plan or any other defined contribution plan
         of an Affiliate, the maximum benefit limitation shall not exceed the
         adjusted limitation computed as follows:

         (i)   Determine the "defined contribution fraction" as set forth in
               sub-paragraph (i) of the following paragraph (d).

         (ii)  Subtract the result of (i) from one (1.0) with the result not to
               be less than zero.

         (iii) Multiply the dollar amount in Section 4.06(a)(i) by 1.25.


                                      28


         (iv)  Multiply the amount described in Section 4.06(a)(ii) by 1.4.

         (v)   Multiply the lesser of the result of (iii) or the result of (iv)
               by the result of (ii) to determine the adjusted maximum benefit
               limitation applicable to the Member.

     (d) For purposes of this Section 4.06(d)

         (i)   The "defined contribution fraction" for a Member who is
               participating in The Scotts Company Profit Sharing and Savings
               Plan or any other defined contribution plans of an Affiliate
               shall be a fraction the numerator of which is the sum of the
               following:

               (A)  Affiliates' contributions credited to the Member's accounts
                    under any defined contribution plan or plans, including the
                    amount of any contribution made on a Member's behalf on a
                    salary reduction basis under any such plan qualified under
                    Section 401(k) of the Code.

              (B)   the Member's contributions to such plan or plans, and

              (C)   any forfeitures allocated to his accounts under such plan or
                    plans, but reduced by any amount permitted by regulations
                    promulgated by the Commissioner of Internal Revenue; and the
                    denominator of which is the lesser of the following amounts
                    determined for each of the Member's Years of Vesting
                    Service:

              (D)   1.25 multiplied by the maximum dollar amount allowed by law
                    for that year; or

              (E)   1.4 multiplied by 25% of the Member's remuneration for that
                    year.  At the direction of the Administrative Committee, the
                    portion of the denominator of that fraction with respect to
                    calendar years before 1983 shall be computed as the
                    denominator for 1982, as determined under the law as then in
                    effect, multiplied by a fraction the numerator of which is
                    the lesser of:

              (F)   $51,875, or

              (G)   1.4 multiplied by 25% of the Member's remuneration for 1981,
                    and the denominator of which is the lesser of:

              (H)   $41,500, or

              (I)   25% of the Member's remuneration for 1981;


                                      29


         (ii)  a "defined contribution plan" means a qualified pension plan
               which provides for an individual account for each participant and
               for benefits based solely upon the amount contributed to the
               participant's account, and any income, expenses, gains and
               losses, and any forfeitures of accounts of other participants
               which may be allocated to that participant's accounts, subject to
               (iii) below;

         (iii) a "defined benefit plan" means any qualified pension plan
               which is not a defined contribution plan; however in the case of
               a defined benefit plan which provides a benefit which is based
               partly on the balance of the separate account of a participant,
               that plan shall be treated as a defined contribution plan to the
               extent benefits are based on the separate account of a
               participant and as a defined benefit plan with respect to the
               remaining portion of the benefits under the plan; and

         (iv)  the term "remuneration" for purposes of this Section 4.06 with
               respect to any Member shall mean the wages, salaries and other
               amounts paid to such Member by the Company for personal services
               actually rendered, determined after any reduction for
               contributions made on his behalf on a salary reduction basis
               under any plan qualified under Section 401(k) of the Internal
               Revenue Code, and shall include, without being limited to,
               bonuses, overtime payments and commissions; and shall exclude
               deferred compensation, stock options and other distributions
               which receive special tax benefits under the Internal Revenue
               Code.

    (e)  Notwithstanding the preceding paragraphs of this Section, in no event
         shall a Member's annual retirement allowance or vested benefit payable
         under this Plan be less than the allowance or benefit which the Member
         had accrued under the Plan as of the end of the plan year beginning in
         1982; provided, however, that in determining that benefit no changes
         in the terms and conditions of the Plan on or after July 1, 1982 shall
         be taken into account.

4.07 NO DUPLICATION

     There shall be deducted from any retirement allowance or vested benefit
     payable under this Plan the part of any pension or comparable benefit,
     including any lump sum payment, provided by employer contributions which
     the Company, or an Affiliate is obligated to pay or has paid to or under
     any pension plan or other agreement (except for any pension plan or other
     agreement which provides for the payment of that portion of any benefits
     accrued under the Plan but not payable from the Plan on account of 
     Section 4.06 or other statutory limits) with respect to any service which 
     is included in Years of Benefit Service for purposes of computation of
     benefits under this Plan.


                                      30


4.08 PAYMENT OF BENEFITS

     Unless otherwise provided under an optional benefit elected pursuant to
     Section 4.04 or under the survivor's benefits available under Section 4.05,
     all retirement allowances, vested benefits or other benefits payable under
     the Plan will be paid in monthly installments as of the beginning of each
     month beginning with (i) the month in which a Member has reached his Normal
     Retirement Date and has retired from active service or (ii) the month in
     which a Member has reached his Deferred Retirement Date and has retired
     from active service or (iii) the month in which a Member upon proper
     application has requested commencement of his vested benefit or early
     retirement allowance or (iv) the month in which benefits under an optional
     benefit under Section 4.04 or the survivor's benefits under Section 4.05
     become payable; and such monthly installments shall cease with the payment
     for the month in which the recipient dies.  In no event shall a retirement
     allowance or vested benefit be payable to a Member who continues in or
     resumes active service with the Company or an Affiliate for any period
     between his Normal Retirement Date and Deferred Retirement Date, except as
     provided in Section 4.09(c)(i).

     In any case, upon direction of the Administrative Committee, a lump sum
     payment equal to the retirement allowance multiplied by the appropriate
     factor contained in Table 6 or 7 of Appendix A shall be made in lieu of any
     retirement allowance payable to a Member or his spouse or contingent
     annuitant, or any vested benefit payable to a former Member or his spouse,
     if the present value of such allowance or benefit amounts to $3,500 or less
     (as of the current and any prior distribution).  In no event, however,
     shall that adjustment factor produce a lump sum that is less than the
     amount determined by using: (a) effective for distributions after April 18,
     1995, the interest rate on 30-year Treasury securities for the January of
     the Plan Year that includes the date of distribution and the prevailing
     NAIC standard mortality table; and (b) effective for distributions on or
     before April 18, 1995, the interest rate assumption for immediate annuities
     used by the Pension Benefit Guaranty Corporation for valuing benefits for
     single employer plans that terminate on January 1 of the plan year in which
     the date of distribution occurs.  The lump sum payment may be made at any
     time on or after the date the Member has terminated employment and prior to
     benefit commencement.  Any lump sum distribution shall be paid in
     accordance with Section 4.11.

     In the event that the Administrative Committee shall find that a person to
     whom benefits are payable is unable to care for his affairs because of
     illness or accident or is a minor or has died, then, unless claim shall
     have been made therefor by a legal representative, duly appointed by a
     court of competent jurisdiction, the Administrative Committee may direct
     that any benefit payment due him be paid to his spouse, a child, a parent
     or other blood relative, or to a person with whom he resides, and any such
     payment made shall be a complete discharge of the liabilities of the Plan
     therefor.


                                      31


     Before any benefit shall be payable to a Member, a former Member, or other
     person who is or may become entitled to a benefit hereunder, such Member,
     former Member, or other person shall file with the Administrative Committee
     such information as it shall require to establish his rights and benefits
     under the Plan.

     Notwithstanding anything contained in the Plan to the contrary, the Plan
     retirement allowance or vested benefit of a Member shall commence not later
     than the April 1 following the calendar year in which he attains age 70-1/2
     even if he continues to be a Member after such date.

4.09 REEMPLOYMENT OF FORMER MEMBER OR RETIRED MEMBER

     (a) Cessation of benefit payments.  If a former Member or a retired Member
         entitled to or in receipt of a vested benefit or retirement allowance
         is reemployed by the Company or an Affiliate as an Employee, any
         benefit payments he is receiving shall cease.  Notwithstanding the
         preceding sentence, if a retired Member is reemployed on a part-time
         basis, his benefit payments shall not be discontinued until he has
         completed a Year of Eligibility Service, measured from his date of
         reemployment.

     (b) Optional forms of retirement allowances

         (i)   If the Member is reemployed after his Normal Retirement Date and
               his benefit payments are discontinued, any previous election of
               an optional benefit in effect shall continue in effect and, in
               the event of the Member's death during reemployment, any payments
               under such effective optional benefit election shall commence.

         (ii)  If the Member is reemployed prior to his Normal Retirement Date
               and his benefit payments are discontinued, any previous election
               of an optional benefit under Section 4.04 or the survivor's
               benefits under Section 4.05 shall be revoked and the terms and
               conditions of subparagraph (iii) of this Section 4.09(b) shall
               apply.

         (iii) Any Member described in subparagraph (ii) above who is at
               least age 55 with 10 or more Years of Vesting Service when he is
               reemployed prior to Normal Retirement Date shall, with respect to
               the vested benefit or retirement allowance earned prior to his
               reemployment and with respect to any additional benefits earned
               during reemployment, be covered by the provisions of
               Section 4.05(c).  Coverage under Section 4.05(c) shall be
               effective on the first day of the calendar month coincident with
               or next following the date of his reemployment and any previous
               election shall remain in effect until such date.  If, within 30
               days after reemployment, the Member elects coverage under
               Section 4.05(c)(ii), in lieu of coverage under 
               Section 4.05(c)(i), such coverage shall be effective as of the
               first day


                                      32


               of the calendar month coincident with or next following the date 
               of his reemployment.  If the Member does not make an election 
               under Section 4.05(c)(ii) within 30 days after his reemployment 
               prior to Normal Retirement Date or he waives such coverage, any 
               later election shall become effective one year after the first 
               day of the calendar month coincident with or next following the 
               date notice is received by the Administrative Committee or on the
               date specified in such notice, if later.

               Any former Member described in subparagraph (ii) above who is
               less than age 55, but who has completed 10 or more Years of
               Vesting Service at such reemployment, shall be covered by the
               provisions of Section 4.05(b) until he attains age 55, and such
               coverage shall be effective on the first day of the calendar
               month coincident with or next following the date of his
               reemployment; any previous election shall remain in effect until
               such date.  Such former Member shall be covered by the provisions
               of Section 4.05(b) and shall be eligible for coverage under
               Section 4.05(c) upon attaining age 55, and such coverage shall be
               in accordance with the provisions of such Sections and shall
               apply with respect to his vested benefit earned prior to his
               reemployment, as well as any additional benefits earned during
               reemployment.

     (c) Benefit payments at subsequent termination or retirement

         (i)   If the Member is reemployed after his Normal Retirement Date and
               his benefit payments are discontinued pursuant to
               Section 4.09(a), payment of the same vested benefit or retirement
               allowance he was receiving or to which he was entitled at
               reemployment shall be resumed or shall begin at his subsequent
               termination of employment or retirement occurring not later than
               his Deferred Retirement Date.  However, in accordance with the
               procedure established by the Administrative Committee on a basis
               uniformly applicable to all Employees similarly situated, his
               monthly benefit payments shall be adjusted, if necessary, in
               compliance with Title 29 of the Code of Federal Regulations
               Section 2530.203-3, to reflect the amount of the monthly benefits
               that would have been payable, had he not returned to service,
               with respect to each month during the reemployment period in
               which he is not credited with at least eight days of service.

         (ii)  If the Member is reemployed prior to his Normal Retirement Date
               and his benefit payments are discontinued, either immediately or
               upon completion of one Year of Eligibility Service, the
               Administrative Committee shall, in accordance with rules
               uniformly applicable to all persons similarly situated, determine
               the amount of vested benefit or retirement allowance which shall
               be payable to such Member upon his subsequent termination of
               employment or retirement.  Such vested benefit or retirement
               allowance shall not be less than the original amount of vested
               benefit or retirement allowance previously earned by such Member
               in accordance with the terms of the Plan in effect during such
               previous employment plus any additional vested benefit or
               retirement allowance


                                      33



               earned during his period of reemployment, adjusted in accordance 
               with the provisions of Section 4.05(b)(ii), Section 4.05(c) or 
               Section 4.05(d), if applicable.  Notwithstanding anything to the 
               contrary contained in this Plan, the vested benefit or retirement
               allowance for Years of Benefit Service credited prior to the date
               of reemployment shall not be re-calculated or increased unless 
               and until the Member has completed a Year of Eligibility Service 
               and, in such event, the re-calculated vested benefit or 
               retirement allowance shall be reduced by an amount determined by 
               dividing the sum of any payments previously received by the 
               former Member or retired Member by the appropriate factor 
               contained in Table 6 of Appendix A.

     (d) Questions relating to reemployment of former Members or retired
         Members.  If, at subsequent termination of employment or retirement,
         any question shall arise under this Section 4.09 as to the calculation
         or re-calculation of a reemployed former Member's or retired Member's
         vested benefit or retirement allowance or election of an optional form
         of benefit under the Plan, such question shall be resolved by the
         Administrative Committee on a basis uniformly applicable to all
         Members similarly situated.

4.10 TOP-HEAVY PROVISIONS

     (a) For purposes of this Section 4.10, the Plan shall be "top-heavy" with
         respect to any plan year beginning on or after January 1, 1984 if, as
         of the last day of the preceding plan year, the present value of the
         cumulative accrued benefits under the Plan for "key employees" exceeds
         60 per cent of the present value of the cumulative accrued benefits
         under the Plan for all Employees or former Employees, determined as of
         the applicable "valuation date".  For purposes of this Section 4.10,
         "valuation date" shall mean the date as of which annual plan costs are
         or would be computed for minimum funding purposes with respect to such
         preceding plan year.  The determination as to whether an Employee or
         former Employee will be considered a "key employee" shall be made in
         accordance with the provisions of Section 416(i)(1) and (5) of the
         Internal Revenue Code and any regulations thereunder, and, where
         applicable, on the basis of the Employee's or former Employee's
         remuneration from the Company or an Affiliate as reported on Form W-2
         for the applicable Plan Year.  The present value of accrued benefits
         shall be computed in accordance with Section 416(g)(3) and (4)(B) of
         the Internal Revenue Code on the basis of the same mortality and
         interest rate assumptions used to value the Plan.  For purposes of
         determining whether the Plan is top-heavy, the present value of
         accrued benefits under the Plan will be combined with the present
         value of accrued benefits or account balances under any other
         qualified plan of the Company or an Affiliate (including any plan
         terminated in the current Plan


                                      34



         Year or in any of the four preceding Plan Years) in which there are 
         participants who are key employees or which enables this Plan to meet 
         the requirements of Section 401(a)(4) or 410 of the Internal Revenue 
         Code, and, in the Company's discretion, may be combined with the 
         present value of accrued benefits or account balances under any other 
         qualified plan of the Company or an Affiliate in which all participants
         in that plan are non-key employees, provided that the resulting 
         aggregation group will continue to qualify under Section 401(a)(4) and 
         410 of said Code.  A Member's accrued benefit in a defined benefit plan
         will be determined under a uniform accrual method which applies in all 
         defined benefit plans maintained by the Employer and all Affiliates or,
         where there is not such method, as if such benefit accrued not more 
         rapidly than the slowest rate of accrual permitted under the fractional
         rule of Section 411(b)(1)(C) of the Code.  

     (b) The following provisions shall be applicable to Members for any plan
         year with respect to which the Plan is top-heavy:

         (i)   In lieu of the vesting requirements specified in Section 4.03,
               the following vesting schedule shall apply:

                   Years of Vesting Service            Percentage Vested
                   ------------------------            -----------------
         
                      Less than 2 years                          0%
                           2 years                              20
                           3 years                              40
                           4 years                              60
                           5 or more years                     100
         

         (ii)  The accrued benefit of a Member who is a non-key employee shall
               not be less than two per cent of his "average remuneration"
               multiplied by the number of Years of Vesting Service, not in
               excess of 10, during the plan years for which the Plan is top
               heavy.  Such minimum benefit shall be payable at a Member's
               Normal Retirement Date.  If payments commence at a time other
               than the Member's Normal Retirement Date, the minimum accrued
               benefit shall be of equivalent actuarial value to such minimum
               benefit, as determined on the basis of the actuarial assumptions
               stated in Section 4.10(a) above.  For purposes of this 
               Section 4.10(b), "average remuneration" shall mean the average 
               annual remuneration of a Member, based on amounts reported on 
               Form W-2, for the five consecutive Years of Vesting Service after
               December 31, 1983 during which he received the greatest aggregate
               remuneration from the Company or an Affiliate, excluding any
               remuneration for service after the last plan year with respect to
               which the Plan is top-heavy.


                                      35


         (iii) The multiplier "1.25" in Subsections (c)(iii) and (d)(i)(D)
               of Section 4.06 shall be reduced to "1.0", and the dollar amount
               "$51,875" in Subsection (d)(i)(F) of Section 4.06 shall be
               reduced to "$41,500."

     (c) If the Plan is top-heavy with respect to a plan year and ceases to be
         top-heavy for a subsequent plan year, the following provisions shall
         be applicable:

         (i)   The accrued benefit in any such subsequent plan year shall not be
               less than the minimum accrued benefit provided in
               Section 4.10(b)(ii) above, computed as of the end of the most
               recent plan year for which the Plan was top-heavy.

         (ii)  If a Member has completed less three Years of Vesting Service on
               or before the last day of the most recent plan year for which the
               Plan is top-heavy, the vesting provisions of Section 4.03 shall
               again be applicable; provided, however, that in no event shall
               the vested percentage of a member's accrued benefit be less than
               the percentage determined under Section 4.10(b)(i) above as of
               the last day of the most recent plan year for which the Plan was
               top-heavy.  Any Member with three or more Years of Vesting
               Service at the time the Plan ceases to be top- heavy may elect to
               have the vesting schedule contained in the Section remain
               applicable.

4.11 ELECTIVE ROLLOVERS

     Notwithstanding any provision of the Plan to the contrary that would 
     otherwise limit a distributee's election under the Plan, a distributee may 
     elect, at the time and in the manner prescribed by the Administrative 
     Committee, to have all or any portion of an lump sum distribution (except 
     to the extent such distribution is required under Section 401(a)(9) of the 
     Code) made on or after January 1, 1993 paid directly to an eligible 
     retirement plan specified by the distributee in a direct rollover.

     The following definitions will apply for purposes of this section:

     (a)  Eligible retirement plan:  An eligible retirement plan is an
          individual retirement account described in Code Section 408(a), an
          individual retirement annuity described in Code Section 408(b), an
          annuity plan described in Code Section 403(a) or a qualified trust
          described in Code Section 401(a) that accepts the distributee's
          eligible rollover distribution.  However, in the case of an eligible
          rollover distribution to the Surviving Spouse, an eligible retirement
          plan is an individual retirement account or individual retirement
          annuity.

     (b)  Distributee:  A distributee includes an Employee or former Employee. 
          In addition, the Spouse or Surviving Spouse of an Employee or former
          Employee is a distributee with regard to the interest of the Spouse or
          Surviving Spouse.


                                      36


     (c)  Direct rollover:  A direct rollover is a payment by the Plan to the
          eligible retirement plan specified by the distributee.

4.12  MERGER OF STERN'S MIRACLE-GRO PRODUCTS, INC. DEFINED BENEFIT PENSION PLAN

      The additional terms and options in Appendix C shall apply to the benefit
      of a former participant in the Stern's Miracle-Gro Products, Inc. Defined
      Benefit Pension Plan.


                          ARTICLE 5 - ADMINISTRATION OF PLAN

5.01  The responsibility for carrying out all phases of the administration of 
      the Plan, except those phases connected with the management of assets, 
      shall be placed in a Administrative Committee appointed from time to time
      by the Board of Directors to serve at the pleasure of the Board of 
      Directors.  The Board of Directors may also designate alternate members 
      to act in the absence of the regular members.  The Board of Directors 
      shall designate a Chairman of the Administrative Committee from among 
      the regular members and a Secretary who may be, but need not be, one of 
      its members.  Any member of the Administrative Committee may resign by 
      delivering his written resignation to the Board of Directors and the 
      Secretary of the Administrative Committee.

5.02  The Administrative Committee is designated as a named fiduciary within 
      the meaning of Section 402(a) of the Employee Retirement Income Security 
      Act of 1974.

5.03  The Administrative Committee shall hold meetings upon such notice, at such
      place or places, and at such time or times as it may determine.  The 
      action of at least a majority of the members, or alternate members, of 
      such Committee expressed from time to time by a vote at a meeting or in 
      writing without a meeting shall constitute the action of the Committee 
      and shall have the same effect for all purposes as if assented to by all 
      members of such Committee at the time in office.  No member of the 
      Committee shall receive any compensation for his service as such.

5.04  The Administrative Committee may authorize one or more of its number or 
      any agent to execute or deliver any instrument or make any payment on its
      behalf; may retain counsel, employ agents and such clerical, accounting 
      and actuarial services as it may require in carrying out the provisions of
      the Plan for which it has responsibility; may allocate among its members 
      or to other persons all or such portion of its duties hereunder as it, in 
      its sole discretion, shall decide.

5.05  Subject to the limitations of the Plan, the Administrative Committee from
      time to time shall establish rules or regulations for the administration
      of the Plan and the transaction of its business.  The Administrative 
      Committee shall have the exclusive right, except as to matters which the
      Board of Directors from time to time may reserve to itself, to interpret
      the Plan 

                                      37


      and to decide any and all matter arising hereunder, including the
      right to remedy possible ambiguities, inequities, inconsistencies or
      omissions.  The Administrative Committee shall also have the right to 
      exercise powers otherwise exercisable by the Board of Directors hereunder
      to the extent that the exercise of such powers does not involve the 
      management of Plan assets nor, in the judgment of the Administrative
      Committee, a substantial number of persons.  In addition, where the number
      of persons is deemed to be substantial, the Administrative Committee shall
      have the further right to exercise such powers as may be delegated to the
      Administrative Committee by the Board of Directors.

      Subject to applicable Federal and State Law, all interpretations,
      determinations and decisions of the Administrative Committee or the Board
      of Directors in respect of any matter hereunder shall be final, conclusive
      and binding on all parties affected thereby.

5.06  The Investment Committee appointed from time to time by the Board of
      Directors shall be responsible for managing the assets under the Plan.
      Said Committee is designated a named fiduciary of the Plan within the
      meaning of Section 402(a) of the Employee Retirement Income Security Act 
      of 1974, and, shall have the authority, powers and responsibilities 
      delegated and allocated to it by resolutions of Board of Directors, 
      including, but not by way of limitation, the authority to establish one or
      more trust for the Plan pursuant to trust instrument(s) approved or 
      authorized by the Committee -- subject to the provisions of such trust
      instrument(s) -- to

         (i)  provide direction to the trustee(s) thereunder, including, but
              not by way of limitation, the direction of investment of all or
              part of the Plan assets and the establishment of investment
              criteria, and

         (ii) appoint and provide for use of investment advisors and investment
              managers.

         In discharging its responsibility, the Committee shall evaluate and
         monitor the investment performance of the trustee(s) and investment
         manager, if any.

5.07  The members of the Committees shall use that degree of care, skill,
      prudence and diligence in carrying out their duties that a prudent man,
      acting in a like capacity and familiar with such matters, would use in his
      conduct of a similar situation.  A member of either Committee shall not be
      liable for the breach of fiduciary responsibility of another fiduciary
      unless:

         (i)  he participates knowingly in, or knowingly undertakes to conceal,
              an act or omission of such other fiduciary, knowing such act or
              omission is a breach; or

         (ii) by his failure to discharge his duties solely in the interest of
              the Members and other persons entitled to benefits under the
              Plan, for the exclusive purpose of providing benefits and
              defraying reasonable expenses of

                                      38


               administering the Plan not met by the Company, he has enabled 
               such other fiduciary to commit a breach; or

         (iii) he has knowledge of a breach by such other fiduciary and
               does not make reasonable efforts to remedy the breach; or

         (iv)  if the Committee of which he is a member improperly allocates
               responsibilities among its members or to others and he fails to
               review prudently such allocation.

5.08  ACTIONS BY THE COMPANY

      Any action which may be taken and any decision which may be made by the
      Company under the Plan (including authorization of Plan amendments or
      termination) may be made by: (a) the Board of Directors; or (b) any
      committee to which the Board of Directors delegates discretionary 
      authority with respect to the Plan.


                              ARTICLE 6 - CONTRIBUTIONS

6.01  It is the intention of the Company to continue the Plan and make regular
      contributions to the Trustee each year in such amounts as are necessary to
      maintain the Plan on a sound actuarial basis and to meet minimum funding
      standards as prescribed by any applicable law.  However, subject to the
      provisions of Article 8, the Company may reduce or suspend its
      contributions for any reason at any time.  Any forfeitures shall be used 
      to reduce the Company contributions otherwise payable, and will not be 
      applied to increase the benefits any Member or other person would 
      otherwise receive under the Plan.

6.02  In the event that the Commissioner of Internal Revenue, on timely
      application made by the time for filing the Employer's federal income tax
      return for the year in which the Plan was adopted,  determines that the
      implementing trust does not initially constitute an exempt trust, the
      Company's contributions made on or after the date for which such
      determination is applicable shall be returned to the Company without
      interest.  In the event that all or part of the Company's deductions under
      Section 404 of the Internal Revenue for contributions to the Plan are
      disallowed by the Internal Revenue Service, the portion of the
      contributions to which such disallowance applies may be returned to the
      Company without interest at its request.  Either such return shall be made
      within one year after either the denial of qualification or disallowance 
      of deductions, as the case may be.


                           ARTICLE 7 - MANAGEMENT OF FUNDS
                                           
7.01  All the funds of the Plan shall be held by a Trustee or Trustees including
      any member(s) of the Investment Committee, appointed from time to time by
      said Committee in one or more 

                                      39


      trusts under a trust instrument or instruments approved or authorized by 
      said Committee for use in providing the benefits of the Plan and paying 
      any expenses of the Plan not paid directly by the Company; provided, 
      however, that the Investment Committee may, in its discretion, also enter
      into any type of contract with any insurance company or companies selected
      by it for providing benefits under the Plan.

7.02  Prior to the satisfaction of all liabilities with respect to persons
      entitled to benefits, except for the payment of expenses, no part of the
      corpus or income of the funds shall be used for, or diverted to, purposes
      other than for the exclusive benefit of Members and other persons who are
      or may become entitled to benefits hereunder, or under any trust 
      instrument or under any insurance contract made pursuant to this Plan.

7.03  Subject to applicable Federal and State law, no person shall have any
      interest in or right to any part of the corpus or income of the funds,
      except as and to the extent expressly provided in the Plan and in any 
      trust instrument or under any insurance contract made pursuant to this 
      Plan.

7.04  Subject to applicable Federal and State law, the Company shall have no
      liability for the payment of benefits under the Plan nor for the
      administration of the funds paid over to the Trustee(s) or insurer(s)
      except as expressly provided under this Plan.

7.05  Except to the extent permitted by applicable Federal law, no part of the
      corpus or income of the trust shall be invested in securities of the
      Company or of any Affiliate or in real property and related personal
      property which is leased to the Company or any Affiliate or in the
      securities of the Trust or Trustees or their subsidiary companies, if any.

7.06  Notwithstanding the foregoing, the Company may recover without interest 
      the amount of its contributions to the Plan made on account of a mistake 
      in fact, provided that such recovery is made within one year after the 
      date of such contribution.


                  ARTICLE 8 - CERTAIN RIGHTS AND LIMITATIONS
                                           
The following provisions shall apply in all cases whenever a Member or any other
person is affected thereby.

8.01  The Company may terminate the Plan for any reason at any time.  Upon
      termination or partial termination of the Plan, the rights of affected
      Members or other persons to benefits accrued to date of such termination 
      or partial termination, to the extent then funded, shall be 
      non-forfeitable. In the event of termination or partial termination, the 
      funds of the Plan shall be used for the exclusive benefit of Members or 
      other persons who are or may become entitled to benefits hereunder as of 
      the date of such termination or partial termination, except that any funds
      not required to satisfy all liabilities of the Plan for benefits because 
      of erroneous actuarial calculations shall be returned to the Company only 
      upon termination of 

                                      40


      the trust.  In the event of such termination or partial termination, the 
      funds of the Plan shall be applied in the  following manner:

      First,

         (i)   each Member or other person in receipt of a benefit on the date
               three years prior to the date of Plan termination,

         (ii)  each Member who would have been in receipt of a benefit on the
               date three years prior to such date of Plan termination and if he
               had retired prior to that date, and

         (iii) each spouse, contingent annuitant or beneficiary of a
               deceased Member who was in receipt of a benefit on the date three
               years prior to the date of Plan termination or would have been in
               receipt of a benefit had he retired prior to such date, shall be
               entitled to a share equal to the reserve determined to be
               required for the benefit accrued under the Plan to the date three
               years prior to the date of such Plan termination, or, if earlier,
               to the date of a Member's retirement or termination of service,
               and based on the provisions of the Plan as in effect during the
               five year period ending on such date of Plan termination when the
               said benefit was or would have been the lowest, and

      Second, each Member or other person in receipt of a benefit and each 
      Member who is eligible to retire on the date of Plan termination shall be
      entitled to a share equal to the reserve determined to be required for 
      his "priority benefits", as hereinafter defined, reduced by his shares 
      under paragraph First above; and

      Third, each Member or former Member not eligible to retire on the date of
      Plan termination but who has then met the eligibility requirements for, or
      is then entitled to receive, a vested benefit shall be entitled to 2 share
      equal to the reserve determined to be required for his "priority 
      benefits", as hereinafter defined; and

      Fourth, each Member or other person in receipt of a benefit and each 
      Member who is eligible to retire on the date of Plan termination shall 
      be entitled to a share equal to the reserve determined to be required for
      his total retirement allowance, reduced by his shares under paragraphs 
      First and Second above; and

      Fifth, each Member or former Member not eligible to retire on the date of
      Plan termination but who has then met the eligibility requirements for, or
      is then entitled to receive, a vested benefit shall be entitled to a share
      equal to the reserve determined to be required for his total vested
      benefit, reduced by his shares under paragraph Third above; and

                                      41


      Sixth, each other Member not included in the above paragraphs on the date
      of Plan termination shall be entitled to a share equal to the reserve
      determined ;to be required for his benefit accrued under the Plan.

      Each spouse of a deceased Member, who is entitled to receive a surviving
      spouse's benefit but who has not yet elected (or who is not yet eligible 
      to elect) to begin receiving it, shall be entitled to a share equal to the
      reserve computed to be required for such surviving spouse's benefit, and
      such share shall be attributed to the appropriate priority category
      described above in accordance with such rules and regulations as the
      Pension Benefit Guaranty Corporation shall prescribe.

      If the funds are insufficient to provide in full for the shares under
      paragraph First, Second or Third, each share under each such paragraph
      First, Second or Third shall be reduced pro rata.

      If the funds are insufficient to provide in full for the shares under
      paragraph Fourth, Fifth or Sixth after provision for all shares under
      previous paragraphs, the funds available for allocation under each such
      paragraph Fourth, Fifth or Sixth shall be allocated first to provide the
      shares under each such paragraph without regard to any benefits resulting
      from any amendments to the Plan which became effective within the 60 
      months preceding the date of Plan termination and, if the funds are 
      insufficient to provide such shares in full, each such share shall be 
      reduced pro rata. If the funds are sufficient to provide such shares in 
      full, any remaining assets shall be allocated to provide the shares under 
      such paragraph based on the benefits resulting from each successive 
      amendment until the first such amendment as to which the funds are 
      insufficient, and the shares with respect to such amendment shall be 
      reduced pro rata.

      The Administrative Committee may require that any such shares be withdrawn
      in cash, or in immediate or deferred annuities or other periodic payments
      as the Administrative Committee may determine.

      "Priority benefit" for purposes of paragraphs Second and Third of this
      Section 8.01 shall mean

      (a) the amount of a Member's retirement allowance or vested benefit
          accrued under the Plan which has not resulted from an amendment which
          was made, or became effective, whichever is later, within the 60 
          month period ending on the date of Plan termination, plus

      (b) 20 per cent of the amount of his accrued retirement allowance or
          vested benefit resulting from each amendment made within the 60 month
          period prior to the date of Plan termination, multiplied by the 
          number of full years that the Plan or such amendment has been in 
          effect, or, ii greater, an allowance of $20 per month multiplied by 
          such number of full years, but not in excess of

                                      42


      (c) the total accrued retirement allowance or vested benefit under the
          Plan as of the said date of Plan termination, or

      (d) the value of the monthly retirement allowance or vested benefit
          payable to the Member for life equal to the lesser of:

         (i)   his average monthly Compensation during the five consecutive
               Years of Vesting Service affording the highest such average, or

         (ii)  $750 multiplied by a fraction, the numerator of  which is the
               Social Security taxable wage base in effect on the date of Plan
               termination had the Social Security Act as in effect prior to the
               Social Security Amendments of 1977 continued in effect without
               amendment, and the denominator of which is $13,200.

      The Plan may not be merged or consolidated with, nor may its assets or
      liabilities be transferred to, any other plan unless each Member or other
      person entitled to a benefit under the Plan would, if the resulting plan
      were then terminated, receive a benefit immediately after the merger,
      consolidation, or transfer which is equal to or greater than the benefit 
      he would have been entitled to receive immediately before the merger,
      consolidation, or transfer, if the Plan had then terminated.

8.02  (a) Subject to the provisions of Section 8.02(b), notwithstanding any
          provision of the Plan which may be to the contrary:

         (i)   in the event of Plan termination, the benefit of any highly-
               compensated active employee or any highly-compensated former
               employee (as those terms are defined under Section 414(q) of the
               Code) will be limited to one that is nondiscriminatory under
               Section 401(a)(4) of the Code; and

         (ii)  in any Plan Year beginning on or after January 1, 1994, the
               payment of benefits to, or on behalf of, a Restricted Employee
               shall not exceed an amount equal to the payments that would be
               made to, or on behalf of, the Restricted Employee in that Plan
               Year under:

              (A)  a straight life annuity that is the actuarial equivalent of
                   the Accrued Benefit and other benefits to which the
                   Restricted Employee is entitled under the Plan (other than a
                   Social Security supplement); and

              (B)  the amount of the payments that the Restricted Employee is
                   entitled to receive under a Social Security supplement, if
                   any.

                                      43


      (b) The restrictions contained in Section 8.02(a) will not apply if any
          one of the following requirements is satisfied:

         (i)   after payment to, or on behalf of, a Restricted Employee of all
               benefits payable to, or on behalf of, such Restricted Employee
               under the Plan, the value of Plan assets equals or exceeds 110%
               of the value of current liabilities (as defined in Section
               412(l)(7) of the Code);

         (ii)  the value of the benefits payable to, or on behalf of, the
               Restricted Employee is less than 1% of the value of current
               liabilities (as defined in Section 412(l)(7) of the Code); or

         (iii) the value of the benefits payable to, or on behalf of, the
               Restricted Employee does not exceed the amount described in
               Section 411(a)(11)(A) of the Code.

      (c) As used in this Section:

         (i)   "Restricted Employee" means any highly-compensated active
               employee or highly-compensated former employee; provided,
               however, that a highly-compensated active employee or highly-
               compensated former employee need not be treated as a Restricted
               Employee in the current Plan Year if he is not one of the 25
               nonexcludable Employees or former Employees with the largest
               amount of compensation in the current or any prior Plan Year; and

         (ii)  "benefit" includes, among other benefits, loans in excess of
               amounts set forth in Code Section 72(p)(2)(A), any periodic
               income, any withdrawal values payable to a living Employee or
               former Employee and any death benefits not provided for by
               insurance on the Employee's or former Employee's life.

8.03  The establishment of the Plan shall not be construed as conferring any
      legal rights upon any Employee or other person for a continuation of
      employment, nor shall it interfere with the rights of the Company to
      discharge any Employee or other person and to treat him without regard to
      the effect which such treatment might have upon him under the Plan.

      Unless the Company otherwise provides under rules uniformly applicable to
      all Employees similarly situated, the Administrative Committee shall 
      deduct from the amount of any retirement allowance or vested benefit under
      the Plan, any amount paid or payable to or on account of any Member under 
      the provisions of any present or future law, pension or benefit scheme of 
      any sovereign government, or any political subdivision thereof or any fund
      or organization or government agency or department on account of which
      contributions have been made or premiums or taxes paid by the Company or
      Affiliate with respect to any service 

                                      44


      which is included in Years of Benefit Service for purposes of computation 
      of benefits under the Plan; provided, however, that pensions payable for 
      government service or benefits under Title II of the Social Security Act 
      are not to be used to reduce the benefits otherwise provided under this 
      Plan except as specifically provided herein.


                     ARTICLE 9 - NONALIENATION OF BENEFITS
                                           
      (a) Subject to any applicable Federal and State law, no benefit under the
          Plan shall be subject in any manner to anticipation, alienation, sale,
          transfer, assignment, pledge, encumbrance or charge, and any attempt
          so to do shall be void, except as specifically provided in the Plan,
          nor shall any such benefit be in any manner liable for or subject to
          garnishment, attachment, execution or levy or liable for or subject to
          the debts, contracts, liabilities, engagements or torts of the person
          entitled to such benefit.

      (b) Subject to applicable Federal and State law, in the event that the
          Administrative Committee shall find that any Member or other person
          who is or may become entitled to benefits hereunder has become
          bankrupt or that any attempt has been made to anticipate, alienate,
          sell, transfer, assign, pledge, encumber or charge any of his benefits
          under the Plan, except as specifically provided in the Plan, or if any
          garnishment, attachment, execution, levy or court order for payment of
          money has been issued against any of his benefits under the Plan, then
          such benefit shall cease and terminate.  In such event the
          Administrative Committee shall hold or apply the payments to or for
          the benefit of such Member or other person who is or may become
          entitled to benefits hereunder, his spouse, children, parents or other
          blood relatives, or any of them.

      (c) Notwithstanding the foregoing provisions of this Article 9, payment
          shall be made in accordance with the provisions of any judgment,
          decree, or order which:

         (i)   creates for, or assigns to, a spouse, former spouse, child or
               other dependent of a Member the right to receive all or a portion
               of the Member's benefits under the Plan for the purpose of
               providing child support, alimony payments of marital property
               rights to that spouse, child or dependent,

         (ii)  is made pursuant to the domestic relations law of any State (as
               such term is defined in Section 3(10) of the Employee Retirement
               Income Security Act of 1974, (ERISA)),

         (iii) does not require the Plan to provide any type of benefit, or
               any option, not otherwise provided under the Plan, and

                                      45


         (iv)  otherwise meets the requirements of Section 206(d) of ERISA, as
               amended.

      (d) The Administrative Committee shall resolve any questions arising under
          this Article 9 on a basis uniformly applicable to all Employees
          similarly situated.


                           ARTICLE 10 - AMENDMENTS
                                           
10.01 COMPANY'S RIGHT TO AMEND PLAN

      The Company reserves the right at any time and from time to time and
      retroactively if deemed necessary or appropriate to conform with
      governmental regulations or other policies, to modify or amend in whole or
      in part any or all of the provisions of the Plan or any Former Pension 
      Plan or Prior Plan; provided that no such modification or amendment shall 
      make it possible for any part of the funds of the Plan to be used for, or
      diverted to, purposes other than for the exclusive benefit of Members,
      spouses, or contingent annuitants or other persons who are or may become
      entitled to benefits hereunder prior to the satisfaction of all 
      liabilities with respect to them; and that no modification or amendment 
      shall be made which has the effect of decreasing the accrued benefit of 
      any Member or of reducing the nonforfeitable percentage of the accrued 
      benefit of a Member attributable to Company contributions below that 
      nonforfeitable percentage thereof computed under the Plan as in effect on 
      the later of the date on which the amendment is adopted or becomes 
      effective.

10.02 AMENDMENTS TO VESTING SCHEDULE

      If an amendment changes the vesting schedule provided in Section 4.03, 
      each Member with three or more Years of Vesting Service may elect, 
      during the period beginning when the amendment is adopted and ending no 
      earlier than the latest of: (a) 60 days after the amendment's adoption; 
      (b) 60 days after the amendment's effective date; or (c) 60 days after 
      the Member is issued a written notice of the amendment, to have his 
      nonforfeitable rights computed without regard to the amendment.

      IN WITNESS WHEREOF, the Company has caused this Plan to be executed as of
the 12th day of January, 1996.

                                      THE SCOTTS COMPANY



                                      By:  Robert A. Stern
                                           ------------------------
                                           Robert A. Stern, Vice President - 
                                           Human Resources

                                      47


                                  APPENDIX C
                                           
                                  MERGER OF
                     STERN'S MIRACLE-GRO PRODUCTS, INC.
                       DEFINED BENEFIT PENSION PLAN


MERGER

Effective as of December 31, 1995, the Stern's Miracle-Gro Products, Inc. 
Defined Benefit Pension Plan (the "Miracle-Gro Pension Plan") is merged into 
this Plan. On and after such date:

(a) Assets and liabilities of the Miracle-Gro Pension Plan shall be transferred
    to this Plan.

(b) Each person entitled to receive benefits from the Miracle-Gro Pension Plan
    shall be entitled to receive such benefits from this Plan.

(c) Each participant in the Miracle-Gro Pension Plan who is employed by 
    Miracle-Gro on December 31, 1995 shall become a Member of this Plan on 
    December 31, 1995.  Such persons are referred to herein as "Miracle-Gro 
    Transferees."

ACCRUED BENEFIT

(a) The Accrued Benefit of a Miracle-Gro Transferee shall be the greater of:

    (i)   the benefit he would receive determined as if: (A) years of
          participation credited under the Miracle-Gro Pension Plan are Years of
          Benefit Service under this Plan; and (B) compensation paid by 
          Miracle-Gro is Compensation under this Plan; or 

    (ii)  the sum of: (A) the Member's accrued benefit under the Miracle-Gro
          Pension Plan, taking into account service and compensation through
          December 31, 1995; plus (B) the Member's Accrued Benefit under this
          Plan, taking into account Years of Benefit Service and Compensation
          after December 31, 1995.

(b) The Accrued Benefit of a former participant in the Miracle-Gro Pension Plan
    who terminated employment before December 31, 1995 shall be his accrued
    benefit under the Miracle-Gro Pension Plan, taking into account service and
    compensation through December 31, 1995.

ELIGIBILITY AND VESTING

(a) For a Miracle-Gro Transferee, all years of service under the Miracle-Gro
    Pension Plan shall count as Years of Eligibility Service and Years of 
    Vesting Service under this Plan.  The Accrued Benefit of a Miracle-Gro 
    Transferee with five or more Years of Vesting 



    Service shall be fully vested and nonforfeitable.  If a Miracle-Gro 
    Transferee has less than five years of service under the Miracle-Gro Pension
    Plan as of December 31, 1995, then his transferred accrued benefit shall 
    continue to vest under the schedule which was in effect under the 
    Miracle-Gro Pension Plan, until he has five Years of Vesting Service, as
    follows:

            Years of Vesting Service          Vested Percentage
            ------------------------          -----------------

                 less than 2                          0%
                      2                              20%
                      3                              40%
                      4                              60%
                  5 or more                         100%


(b) The vesting of a former participant in the Miracle-Gro Pension Plan who
    terminated employment before December 31, 1995 shall be governed by the 
    terms of the Miracle-Gro Pension Plan as in effect when he terminated 
    employment. 


FORMS AND TIMING OF DISTRIBUTION

(a) A former participant in the Miracle-Gro Pension Plan may elect to have the
    portion of his Accrued Benefit, equal to his accrued benefit under the
    Miracle-Gro Pension Plan as of December 31, 1995, paid in a lump sum or 
    other optional form of benefit permitted under Part Two of the Miracle-Gro
    Pension Plan, to the extent permitted by current law.

(b) A former participant in the Miracle-Gro Pension Plan may elect to defer
    payment of the portion of his Accrued Benefit equal to his accrued benefit
    under the Miracle-Gro Pension Plan as of December 31, 1995.  However, the
    entire interest of the individual must be distributed, or begin to be
    distributed, no later that the individual's required beginning date.  The
    required beginning date of a retired or active individual is the first day 
    of April following the calendar year in which such individual attains age
    70-1/2, except as otherwise elected in accordance with Section 2.08 of Part 
    Two of the Miracle-Gro Pension Plan (applicable to pre-TEFRA Section 242
    elections).

(c) The remainder of an individual's Accrued Benefit shall be paid under the
    terms of this Plan.  




                                                                   EXHIBIT 10(B)



    Third Restatement of The Scotts Company Profit Sharing and Savings
    Plan










                              THIRD RESTATEMENT OF
                                           
                               THE SCOTTS COMPANY
                                           
                        PROFIT SHARING AND SAVINGS PLAN
                                           




                              THIRD RESTATEMENT OF
                               THE SCOTTS COMPANY
                        PROFIT SHARING AND SAVINGS PLAN
                                           
                                           
                                  TABLE OF CONTENTS
                                        
SECTION                                                                     PAGE
- -------                                                                     ----

  1.     DEFINITIONS........................................................  1

  2.     PARTICIPATION......................................................  9
  2.1.   Eligibility........................................................  9
  2.2.   Breaks in Service..................................................  9
  2.3.   Change in Status................................................... 10
  2.4.   Erroneous Omission or Inclusion of Employee........................ 10
  2.5.   Waiver of Participation............................................ 10

  3.     CONTRIBUTIONS...................................................... 10
  3.1.   Profit Sharing Contributions....................................... 10
  3.2.   Savings Contributions.............................................. 11
  3.3.   Limits on Elective Profit Sharing and Savings Contributions........ 11
  3.4.   Timing of Contributions............................................ 13
  3.5.   Rollover Contributions............................................. 13
  3.6.   Exclusive Benefit; Refund of Contributions......................... 14
  3.7.   Annual Additions and Limitations................................... 14
  3.8.   Fail-Safe Allocations of Profit Sharing Contributions.............. 16

  4.     INVESTMENT......................................................... 16
  4.1.   Investment Direction............................................... 16
  4.2.   Investment Funds................................................... 16
  4.3.   Investment in Employment Securities................................ 17
  4.4.   Voting Employer Securities......................................... 17
  4.5.   Tender Offers...................................................... 17
  4.6.   Investment Managers................................................ 17
  4.7.   Section 16 Persons................................................. 18

  5.     VALUATIONS AND CREDITING........................................... 18
  5.1.   Valuations......................................................... 18
  5.2.   Credits to and Charges Against Accounts............................ 18
  5.3.   Expenses........................................................... 18


                                      1


  6.     BENEFITS........................................................... 19
  6.1.   Forms of Benefit Payments.......................................... 19
  6.2.   Retirement Benefit................................................. 20
  6.3.   Death Benefit...................................................... 21
  6.4.   In-Service Distributions........................................... 21
  6.5.   Advance Distribution for Hardship.................................. 22
  6.6.   Loans to Participants.............................................. 23
  6.7.   Latest Commencement of Benefits.................................... 23
  6.8.   Post-Distribution Credits.......................................... 24
  6.9.   Prevention of Escheat.............................................. 24
  6.10   Transfers to Affiliates' Plans..................................... 24
  6.11   Merger of the Stern's Miracle-Gro Products, Inc. Employees 401(k)
         Savings Plan....................................................... 24

  7.     TOP-HEAVY PLAN PROVISIONS.......................................... 24
  7.1.   Minimum Benefits................................................... 24
  7.2.   Adjustment in Benefit Limitations.................................. 25
 
  8.     CLAIMS PROCEDURES.................................................. 25
  8.1.   Application for Benefits........................................... 25
  8.2.   Appeal of Denial of Claim for Benefits............................. 25
  8.3.   Effect of Administrative Committee Decision........................ 26

  9.     ALLOCATION OF AUTHORITY AND RESPONSIBILITY......................... 26
  9.1.   Authority and Responsibilities of the Administrative Committee..... 26
  9.2.   Authority and Responsibilities of the Advisory Committee........... 27
  9.3.   Authority and Responsibilities of the Investment Committee......... 27
  9.4.   Appointment and Tenure............................................. 27
  9.5.   Meetings; Majority Rule............................................ 27
  9.6.   Compensation....................................................... 28
  9.7.   Indemnification.................................................... 28
  9.8.   Authority and Responsibilities of the Company...................... 28
  9.9.   Obligations of Named Fiduciaries................................... 28

  10.    AMENDMENT, TERMINATION, MERGERS AND CONSOLIDATIONS
         OF THE PLAN........................................................ 28
  10.1.  Amendment.......................................................... 28
  10.2.  Plan Termination................................................... 29
  10.3.  Permanent Discontinuance of Profit Sharing Contributions........... 29
  10.4.  Suspension of Profit Sharing Contributions......................... 29
  10.5.  Mergers and Consolidations of Plans................................ 30
  10.6.  Transfers of Assets to or from this Plan........................... 30
  10.7.  Effect of Amendment and Restatement................................ 30


                                      ii


  11.    PARTICIPATING EMPLOYERS............................................ 30
  11.1.  Adoption by Affiliates............................................. 30
  11.2.  Employee Transfers................................................. 30
  11.3.  Discontinuance of Participation.................................... 30

  12.    MISCELLANEOUS PROVISIONS........................................... 31
  12.1.  Nonalienation of Benefits.......................................... 31
  12.2.  No Contract of Employment.......................................... 32
  12.3.  Title to Assets.................................................... 32
  12.4.  Effect of Admission................................................ 32
  12.5.  Payments to Minors, Etc. .......................................... 32
  12.6.  Approval of Restatement by Internal Revenue Service................ 32
  12.7.  Other Miscellaneous................................................ 32


SIGNATURES.................................................................. 33

APPENDIX A..................................................................




                                      iii


                              THIRD RESTATEMENT OF
                               THE SCOTTS COMPANY
                        PROFIT SHARING AND SAVINGS PLAN
                                           

          WHEREAS, The O.M. Scott & Sons Company established and maintained 
The O.M. Scott & Sons Company Profit Sharing and Savings Plan (the "Plan") in 
recognition of the contribution made to its successful operation by its 
employees and for the exclusive benefit of its eligible employees and their 
beneficiaries; and

          WHEREAS, The O.M. Scott & Sons Company was merged into The Scotts 
Company, an Ohio corporation (the "Company"), which assumed sponsorship of 
the Plan; and

          WHEREAS, the Plan was previously amended and restated effective 
January 1, 1987 and effective April 1, 1992; and

          WHEREAS, the Internal Revenue Service requested and approved 
certain changes in the Plan in connection with the issuance of a favorable 
determination letter dated December 12, 1995; and

          WHEREAS, the Plan was further amended effective as of December 31, 
1995 to reflect the merger of the Stern's Miracle-Gro Products, Inc. 
Employees 401(k) Plan into the Plan; and

          WHEREAS, Company wishes to restate the Plan to reflect such 
amendments; 

          NOW, THEREFORE, the Company hereby amends the Plan in its entirety 
and restates the Plan as of the Effective Amendment Date to provide as 
follows:

                                   SECTION 1
                                  DEFINITIONS
                                           
          "ACCOUNT" means the account maintained for a Participant, which 
shall be the entire interest of the Participant in the Trust Fund.  Unless 
otherwise specified, the value of an Account shall be determined as of the 
Valuation Date coincident with or next following the occurrence of the event 
to which reference is made.  A Participant's Account shall consist of the 
Participant's Non-Elective Profit Sharing Account, Elective Profit Sharing 
Account, Savings Account and Rollover Account.  A Participant shall always be 
fully vested in his or her Account.

          "ADMINISTRATIVE COMMITTEE" means the committee appointed as such by 
the Board of Directors under the provisions of the Plan or, in the absence of 
such appointment, the Company.  



The Administrative Committee is the administrator of the Plan within the 
meaning of Section 3(16) of ERISA.

          "AFFILIATE" means any entity which, with the Employer, constitutes 
either (a) a controlled group of corporations (within the meaning of Section 
414(b) of the Code), (b) a group of trades or businesses under common control 
(within the meaning of Section 414(c) of the Code), (c) an affiliated service 
group (within the meaning of Section 414(m) of the Code), or (d) a group of 
entities required to be aggregated pursuant to Section 414(o) of the Code and 
the regulations thereunder.

          "AGGREGATION GROUP" means (a) the Plan, (b) any plan of the 
Employer or any Affiliate in which a Key Employee or any of a Key Employee's 
beneficiaries is a participant, (c) any plan which enables any plan described 
in (a) or (b) to meet the requirements of Sections 401(a)(4) or 410 of the 
Code, (d) any plan maintained by the Employer or an Affiliate within the last 
five years ending on the last day of the immediately preceding Plan Year and 
would, but for the fact it was terminated, be part of the Aggregation Group, 
and (e) any plan of the Employer or any Affiliate designated by the Employer, 
the inclusion of which in the Aggregation Group would not cause the 
Aggregation Group to fail to meet the requirements of Sections 401(a)(4) and 
410 of the Code.

          "BENEFICIARY" means the beneficiary under the Plan of a deceased 
Participant.

          "BOARD OF DIRECTORS" means the board of directors of the Company.

          "BREAK IN SERVICE" means failure by an Employee to complete more 
than 500 Hours of Service during any Plan Year.  Any Break in Service shall 
be deemed to have commenced on the first day of the Plan Year in which it 
occurs.  In the case of an absence from work which begins in any Plan Year 
beginning after December 31, 1984, if an Employee is absent from work for any 
period by reason of pregnancy, the birth or placement for adoption of a 
child, or for caring for a child for a period immediately following the birth 
or placement, then for purposes of determining whether a Break in Service has 
occurred (and not for purposes of determining Years of Eligibility Service) 
such Employee shall be credited with the Hours of Service which otherwise 
normally would have been credited to such Employee, or, if the Administrative 
Committee is unable to determine the number of such Hours of Service, eight 
Hours of Service for each day of absence, in any case not to exceed 501 Hours 
of Service.  The Hours of Service credited to an Employee under this 
definition shall be treated as Hours of Service in the Plan Year in which the 
absence from work begins, if the Employee would be prevented from incurring a 
Break in Service in such year solely because of such Hours of Service or, in 
any other case, in the immediately following year.  The Administrative 
Committee may require that the Employee certify and/or supply documentation 
that his or her absence is for one of the permitted reasons and the number of 
days for which there was such an absence.

          "CODE" means the Internal Revenue Code of 1986, as now or hereafter 
amended, construed, interpreted and applied by regulations, rulings or cases.


                                      2


          "COMPANY" means The O.M. Scott & Sons Company, a Delaware 
corporation, until the merger of The O.M. Scott & Sons Company into The 
Scotts Company, an Ohio corporation, and The Scotts Company thereafter, and 
any successor thereto.

          "COMPANY STOCK FUND" means the Investment Fund consisting of 
Employer Securities and cash or cash equivalents needed to meet the 
obligations of such fund or for the purchase of Employer Securities.

          "COMPENSATION" means an Employee's wages, salaries, fees for 
professional service and other amounts received for personal services 
actually rendered in the course of employment with the Employer (including, 
but not limited to, commissions paid salesmen, compensation for services on 
the basis of a percentage of profits, commissions on insurance premiums, tips 
and bonuses), but shall not include distributions from a plan of deferred 
compensation (other than an unfunded non-qualified plan), amounts realized 
from the exercise of a non-qualified stock option or from the sale, exchange 
or other disposition of stock acquired under a qualified stock option plan, 
and other amounts which receive special tax benefits.  For purposes of 
identifying Highly Compensated Employees and computing the Compensation 
Deferral Limit only, a Participant's Compensation includes amounts which 
would have been includable in the Participant's income but for the 
Participant's election to make Savings Contributions, Elective Profit Sharing 
Contributions, and contributions to a cafeteria plan maintained by the 
Employer, determined in accordance with Section 414(s) of the Code.  
Notwithstanding the foregoing, (i) effective for Plan Years beginning after 
December 31, 1988, Compensation paid by the Employer during any Plan Year in 
excess of $200,000 as adjusted at the same time and in the same manner as 
under Section 415(d) of the Code shall be excluded; and (ii) effective for 
Plan Years beginning after December 31, 1993, Compensation paid by the 
Employer during any Plan Year in excess of $150,000, adjusted under Section 
401(a)(17) of the Code shall be excluded.  In determining the Compensation of 
a Participant for purposes of the $200,000 or $150,000 limit, the family 
aggregation rules of Section 414(q)(6) of the Code shall apply, except in 
applying such rules, the term "family" shall include only the spouse of the 
Participant and any lineal descendants of the Participant who have not 
attained age 19 before the close of the year.  If, as a result of the 
application of such rules, Compensation would exceed the adjusted $200,000 or 
$150,000 limitation, then the limitation shall be prorated among the affected 
persons in proportion to each such person's Compensation as determined under 
this paragraph prior to the application of this limitation.

          "COMPENSATION DEFERRAL LIMIT" means the greater of (a) the average 
actual contribution deferral percentage of Non-Highly Compensated Employees 
multiplied by 1.25, or (b) the lesser of (i) the average actual contribution 
deferral percentage of Non-Highly Compensated Employees multiplied by two, or 
(ii) the average actual contribution deferral percentage of Non-Highly 
Compensated Employees plus 2%, as determined under Section 401(k)(3) of the 
Code and the regulations thereunder.  A Participant's actual contribution 
deferral percentage is the Savings Contributions and Elective Profit Sharing 
Contributions made for the Participant which may be taken into account for 
the Plan Year for purposes of Section 401(k)(3) of the Code, divided by the 
Participant's Compensation while a Participant during the Plan Year.  All or 
any portion of the Non-Elective Profit Sharing Contributions for the Plan 
Year may be included in the calculation of the Compensation Deferral Limit 
for the Plan Year at the option of the Employer.


                                      3


          "EFFECTIVE AMENDMENT DATE" means: (a) in the case of any change in 
the Plan required by a change in the Code or ERISA, the date on which such 
change in the Plan is required to be effective; (b) in the case of any change 
in the Plan for which an effective date is specifically stated elsewhere in 
the Plan, such date; and (c) in the case of any other change in the Plan, 
April 1, 1992.

          "ELECTIVE PROFIT SHARING ACCOUNT" means the portion of the Account 
of a Participant consisting of Elective Profit Sharing Contributions, as 
adjusted under the Plan.

          "ELECTIVE PROFIT SHARING CONTRIBUTION" means the portion of the 
Profit Sharing Pool which is allocated to the Participant and which is 
contributed to the Plan under Section 3.1 on behalf of the Participant, as a 
result of an absence of an election by the Participant to receive such amount 
in cash.

          "ELIGIBLE COMPENSATION" means, for the period during a Plan Year 
that an Employee is a Participant, amounts paid by the Employer plus amounts 
which would have been includable in a Participant's income but for a 
Participant's election to make Savings Contributions and contributions to a 
cafeteria plan maintained by the Employer, which are or would have been (a) 
wages, (b) salaries and executive, management and sales incentives, (c) 
overtime, and (d) commissions.  Notwithstanding the foregoing, a 
Participant's Eligible Compensation shall not include amounts paid in lieu of 
Elective Profit Sharing Contributions and shall not exceed the lesser of (i) 
effective for Plan Years starting before January 1, 1995, grade 20 midpoint 
salary  as defined in The Scotts Company Salaried, Exempt and Office 
Technical Salaried Non-Exempt Compensation Policy and The Scotts Company Job 
Evaluation Plan, or (ii) effective for Plan Years starting before January 1, 
1994, $200,000 as adjusted at the same time and in the same manner as under 
Section 415(d) of the Code and effective for Plan Years starting on or after 
January 1, 1994, $150,000 as adjusted under Section 401(a)(17) of the Code.  
In determining the Eligible Compensation of a Participant for purposes of 
this limitation, the family aggregation rules of Section 414(q)(6) of the 
Code shall apply, except in applying such rules, the term "family" shall 
include only the spouse of the Participant and any lineal descendants of the 
Participant who have not attained age 19 before the close of the year.  If, 
as a result of the application of such rules, Compensation would exceed the 
adjusted $200,000 or $150,000 limitation, then the limitation shall be 
prorated among the affected persons in proportion to each such person's 
Eligible Compensation as determined under this paragraph prior to the 
application of this limitation.

          "ELIGIBILITY COMPUTATION PERIOD" means (a) the initial Eligibility 
Computation Period of 12 consecutive months commencing on an Employee's most 
recent date of employment commencement, and (b) each and every full Plan 
Year, commencing with the Plan Year in which falls the last day of an 
Employee's initial Eligibility Computation Period, during which the Employee 
is in the service of the Employer.

          "ELIGIBLE ROLLOVER DISTRIBUTION" means any distribution of all or 
any portion of the balance to the credit of the distributee, except that an 
eligible rollover distribution does not include: (a) any distribution that is 
one of a series of substantially equal periodic payments (not less frequently 
than annually) made for the life (or life expectancy) of the distributee or 
the joint lives (or joint life 


                                      4


expectancies) of the distributee and the distributee's designated 
beneficiary, or for a specified period of ten years or more; (b) any 
distribution to the extent such distribution is required under section 
401(a)(9) of the Code; and (c) the portion of any distribution that is not 
includible in gross income (determined without regard to the exclusion for 
net unrealized appreciation with respect to employer securities).

          "EMPLOYEE" means any person employed by the Employer or an 
Affiliate who is: (a) working with the Scotts product line; (b) in corporate 
management and administration; or (c) effective December 31, 1995, working 
with the Miracle-Gro product line.  Notwithstanding, persons (i) whose terms 
and conditions of employment are determined by collective bargaining with a 
third party, with respect to whom inclusion in this Plan has not been 
provided for in the collective bargaining agreement setting forth those terms 
and conditions of employment; (ii) who are nonresident aliens described in 
Section 410(b)(3)(C) of the Code; or (iii) who are Leased Employees, shall be 
excluded.

          "EMPLOYER" means the Company and any Affiliate which, with the 
consent of the Board of Directors, adopts this Plan and joins in the 
corresponding Trust Agreement.

          "EMPLOYER SECURITIES" means stock or other securities of the 
Employer or an Affiliate permitted to be held by the Plan under ERISA and the 
Code.

          "EMPLOYER SECURITIES CONTRIBUTION FUND" means a fund consisting of 
Employer Securities contributed by the Employer and held by the Trustee in 
accordance with the Plan.

          "ENROLLMENT DATE" means the date on which an Employee first becomes 
a Participant and the first day of each quarter of the Plan Year and any 
additional dates designated by the Administrative Committee as dates on which 
Participants may enter into or modify elections to make Savings Contributions 
and/or change their investment directions.

          "ERISA" means the Employee Retirement Income Security Act of 1974 
(P.L. No. 93-406), as now existing or hereafter amended, and as now or 
hereafter construed, interpreted and applied by regulations, rulings or cases.

          "HIGHLY COMPENSATED EMPLOYEE" means any employee who performs 
service for the Employer or an Affiliate during the determination year and 
who, during the look-back year (a) received compensation from the Employer 
and all Affiliates in excess of $75,000 (as adjusted pursuant to Section 
415(d) of the Code); (b) received compensation from the Employer and all 
Affiliates in excess of $50,000 (as adjusted pursuant to Section 415(d) of 
the Code) and was a member of the top-paid group for such year; or (c) was an 
officer of the Employer or an Affiliate and received compensation during such 
year that is greater than 50% of the dollar limitation in effect under Code 
Section 415(b)(1)(A).

          The term Highly Compensated Employee also includes:  (a) Employees 
who are both described in the preceding paragraph if the term "determination 
year" is substituted for the term "look-back year" and the Employee is one of 
the 100 Employees who received the most compensation from 


                                      5 


the Employer and all Affiliates during the determination year; and (b) 
Employees who are 5% owners at any time during the look-back year or 
determination year.  If no officer has satisfied the compensation requirement 
of (c) in the preceding paragraph during either a determination year or 
look-back year, the highest paid officer for such year shall be treated as a 
Highly Compensated Employee.  For this purpose, the determination year shall 
be the Plan Year.  The look-back year shall be the 12-month period 
immediately preceding the determination year unless the Employer elects that 
the look-back year shall be the calendar year ending with or within the 
determination year.

          If an Employee is, during a determination year or look-back year, a 
family member (spouse, lineal ascendants and descendants, and spouses of 
lineal ascendants and descendants) of either a 5% owner who is an active or 
former Employee or a Highly Compensated Employee who is one of the 10 most 
Highly Compensated Employees ranked on the basis of compensation paid by the 
Employer and all Affiliates during such year, then the family member and the 
5% owner or top-10 Highly Compensated Employee shall be aggregated.  In such 
case, the family member and 5% owner or top-10 Highly Compensated Employee 
shall be treated as a single Employee receiving compensation and Plan 
contributions or benefits equal to the sum of such compensation and 
contributions or benefits of the family member and 5% owner or top-10 Highly 
Compensated Employee.

          Notwithstanding the previous paragraph, with respect to any 
Employee who separated from service prior to January 1, 1987, the Plan may 
provide that such an Employee will be included as a Highly Compensated 
Employee only if the Employee was a 5% owner or received compensation in 
excess of $50,000 during (a) the Employee's separation year (or the year 
preceding such separation year); or (b) any year ending on or after such 
individual's 55th birthday (or the last year ending before such Employee's 
55th birthday).

          The determination of who is a Highly Compensated Employee, 
including the determinations of the number and identity of Employees in the 
top-paid group, the top 100 Employees, the number of Employees treated as 
officers and the compensation that is considered, will be made in accordance 
with Code Section 414(q) and the regulations thereunder.

          "HOUR OF SERVICE" means (a) each hour for which an Employee is paid 
or entitled to payment for the performance of duties for the Employer or an 
Affiliate during the applicable computation period, (b) each hour for which 
an Employee is paid or entitled to payment by the Employer or an Affiliate on 
account of a period of time during which no duties are performed 
(irrespective of whether the employment relationship has terminated) due to 
vacation, holiday, illness, incapacity (including disability), layoff, jury 
or military duty, or leave of absence, and (c) each hour for which back pay, 
irrespective of mitigation of damages, is either awarded or agreed to by the 
Employer or an Affiliate.  In computing Hours of Service on a weekly or 
monthly basis when a record of hours of employment is not available, the 
Employee shall be assumed to have worked 40 hours for each full week of 
employment and eight hours for each day in less than a full week of 
employment, regardless of whether the Employee has actually worked fewer 
hours.  Notwithstanding the foregoing, (i) not more than 501 Hours of Service 
shall be credited to an Employee on account of any single continuous period 
during which the Employee performs no duties, (ii) no credit shall be granted 
for any period with respect to which an Employee receives payment or is 
entitled to payment under a plan maintained 

                                      6 


solely for the purpose of complying with applicable workers' compensation or 
disability insurance laws, and (iii) no credit shall be granted for a payment 
which solely reimburses an Employee for medical or medically related expenses 
incurred by the Employee.  In the case of a person who was a Leased Employee 
and who subsequently becomes an Employee, hours of service as a Leased 
Employee shall count as Hours of Service as an Employee. Determination and 
crediting of Hours of Service shall be made under Department of Labor 
Regulations Sections 2530.200b-2 and 3.

          "INVESTMENT FUNDS" means the funds described in Section 4.2.

          "KEY EMPLOYEE" has the meaning set forth in Section 416(i) of the 
Code and the regulations thereunder.

          "LEASED EMPLOYEE" means any person (other than an Employee) who 
pursuant to an agreement between the Employer and any other person ("leasing 
organization") has performed services for the Employer (or for the Employer 
and related persons determined in accordance with Section 414(n)(6) of the 
Code) on a substantially full time basis for a period of at least one year, 
and such services are of a type historically performed by Employees in the 
business field of the Employer.  Contributions or benefits provided a Leased 
Employee by the leasing organization which are attributable to services 
performed for the Employer shall be treated as provided by the Employer.  A 
person who would otherwise be considered a Leased Employee shall not be 
considered a Leased Employee if (a) such person is covered by a money 
purchase pension plan providing (i) a nonintegrated employer contribution 
rate of at least 10% of compensation, as defined in Section 415(c)(3) of the 
Code, but including amounts contributed pursuant to a salary reduction 
agreement which are excludable from the person's gross income under Section 
125, Section 402(a)(8), Section 402(h) or Section 403(b) of the Code, (ii) 
immediate participation, and (iii) full and immediate vesting; and (b) Leased 
Employees do not constitute more than 20 percent of the Employer's Non-Highly 
Compensated Employees.

          "NON-ELECTIVE PROFIT SHARING ACCOUNT" means the portion of the 
Account of a Participant consisting of Non-Elective Profit Sharing 
Contributions plus the amount in the Account of the Participant prior to 
January 1, 1987 (excluding any portion as to which the Participant had a 
distribution election in effect on January 1, 1987), as adjusted under the 
Plan.

          "NON-ELECTIVE PROFIT SHARING CONTRIBUTION" means the portion of the 
Profit Sharing Pool which the Participant does not have the opportunity to 
elect to receive in cash and which is automatically contributed to the Plan 
on behalf of the Participant.

          "NON-HIGHLY COMPENSATED EMPLOYEE" means any Employee other than a 
Highly Compensated Employee.

          "NON-KEY EMPLOYEE" means any Employee other than a Key Employee.

          "PARTICIPANT" means any person who has been admitted to 
participation in the Plan and has not ceased participation in the Plan.


                                      7 


          "PLAN" means the Third Restatement of The Scotts Company Profit 
Sharing and Savings Plan as set forth herein and as from time to time 
amended. The Plan is a profit sharing and stock bonus plan.

          "PLAN YEAR" means the calendar year.

          "PROFIT SHARING CONTRIBUTION" means a Non-Elective Profit Sharing 
Contribution or an Elective Profit Sharing Contribution.

          "PROFIT SHARING POOL" means for a Plan Year the dollar amount which 
the Company determines is available for Non-Elective Profit Sharing 
Contributions and, at the option of Participants, Elective Profit Sharing 
Contributions or cash compensation.

          "ROLLOVER ACCOUNT" means the portion of the Account of a Participant
consisting of Rollover Contributions, as adjusted under the Plan.

          "ROLLOVER CONTRIBUTION" means the amount contributed by an Employee 
as a rollover contribution in accordance with Section 402 of the Code.

          "SAVINGS CONTRIBUTION" means an Employer contribution to the Plan in
an amount equal to the reduction in the Participant's Compensation pursuant to
the Participant's election under the Plan.

          "SAVINGS ACCOUNT" means the portion of the Account of a Participant
consisting of Savings Contributions, as adjusted under the Plan.

          "SECTION 16 PERSON" means (a) any member of the board of directors of
The Scotts Company, (b) The Scotts Company's president, principal financial
officer, principal accounting officer (or, if there is no such accounting
officer, the controller), any vice-president in charge of a principal business
unit, division or function, or any other officer or other person who performs a
significant policy making function, or (c) any person who is the beneficial
owner of more than 10% of the outstanding common stock of The Scotts Company. 
The principal financial officer of The Scotts Company shall designate those
persons who are Section 16 Persons and deliver a list of the Section 16 Persons
eligible to participate in the Plan to the Administrative Committee from time to
time or at the request of the Administrative Committee.  Such list of Section 16
Persons will be conclusive on the Administrative Committee and the sole source
for determining who is a Section 16 Person, and the Administrative Committee
shall not be required to further investigate whether a person is a Section 16
Person.

          "TERMINATION DATE" means the date on which an Employee quits, is
discharged, retires, dies or otherwise terminates employment.  For purposes of
this Plan, a Participant who has ceased to perform services for the Employer
shall be deemed to incur a Termination Date on the date 


                                      8 


he or she is found by the Company to be permanently and totally disabled 
under The Scotts Company Long Term Disability Plan.

          "TOP-HEAVY PLAN" has the meaning set forth in Section 416 of the Code
and the regulations thereunder.  For purposes of determining whether the Plan is
a Top-Heavy Plan, the determination date is, for the first Plan Year, the last
day of the Plan Year and for each succeeding Plan Year, the last day of the
preceding Plan Year.

          "TRUST" means the trust created by the Trust Agreement.

          "TRUST AGREEMENT" means The O.M. Scott & Sons Company Profit Sharing
Plan Trust Agreement as the same presently exists and as it may from time to
time hereafter be amended.

          "TRUST FUND" means all of the assets of the Plan held by the Trustee
under the Trust Agreement.

          "TRUSTEE" means the party or parties acting as such under the Trust
Agreement.

          "VALUATION DATE" means the last day of each quarter of the Plan Year
and each interim date as of which the Administrative Committee directs the
allocation of distributions, contributions and earnings of the Trust Fund.

          "YEAR OF ELIGIBILITY SERVICE" means an Eligibility Computation Period
in which a person has 1,000 or more Hours of Service.


                                 SECTION 2
                               PARTICIPATION
                                      
          2.1.  ELIGIBILITY.  Effective July 1, 1995 and subject to Section 3.1,
an Employee shall become a Participant on the first day of the month coincident
with or next following the date on which the Employee starts employment as an
Employee. Each Employee who becomes eligible for admission to participation in
this Plan shall complete such forms and provide such data as are reasonably
required by the Administrative Committee.  Participation shall cease on a
Participant's Termination Date.

          2.2.  BREAKS IN SERVICE.  If an Employee had no Account attributable
to Profit Sharing Contributions before any period of consecutive Breaks in
Service, and if the number of consecutive Breaks in Service within such period
equals or exceeds five, the Employee shall upon reemployment be required to
satisfy the requirements for participation in the Plan as though such Employee
had not previously been an Employee.  If any Years of Eligibility Service are
not required to be taken into account because of a period of Breaks in Service
to which this Section applies, such Years of Eligibility Service shall not be
taken into account in applying this Section to any subsequent Breaks in Service.
If 


                                      9 


a former Participant is re-employed and his or her prior service cannot be 
disregarded under this Section, he or she shall become a Participant upon 
re-employment.

          2.3.  CHANGE IN STATUS.  If a person who has been in the employ of 
the Employer or an Affiliate in a category of employment not eligible for
participation in this Plan subsequently becomes an Employee by reason of a
change in status to a category of employment eligible for participation, such
person shall become a Participant as of the date on which the change in status
occurs, if, on such date, such person has otherwise satisfied the requirements
for participation in the Plan.

          2.4.  ERRONEOUS OMISSION OR INCLUSION OF EMPLOYEE.  If, in any Plan
Year, any Employee who should have been included as a Participant in the Plan is
erroneously omitted and discovery of such omission is not made until after a
Profit Sharing Contribution for the Plan Year has been made and allocated, the
Employer shall make a contribution with respect to the omitted Employee equal to
the amount which the Employee would have received as an allocation had the
Participant not been omitted.  If, in any Plan Year, any person who should not
have been included as a Participant in the Plan is erroneously included and
discovery of such incorrect inclusion is not made until after a contribution for
the Plan Year has been made and allocated, the Employer shall not be entitled to
recover the contribution made with respect to the ineligible person, and any
earnings thereon, unless no deduction is allowable with respect to such
contribution.  The amount contributed with respect to the ineligible person,
together with any earnings thereon, shall be applied to reduce Profit Sharing
Contributions for the Plan Year in which the discovery is made.

          2.5.  WAIVER OF PARTICIPATION.  The Administrative Committee shall
have the right to permit an Employee to waive participation in the Plan on a
year-to-year, nondiscriminatory basis.


                                  SECTION 3
                                CONTRIBUTIONS
                                       
          3.1.  PROFIT SHARING CONTRIBUTIONS.  Effective July 1, 1995,
notwithstanding anything in the Plan to the contrary, a Participant shall not be
eligible to share in Profit Sharing Contributions until the first day of the
month coincident with or next following the date on which the Employee completes
one Year of Eligibility Service. 

                3.1.1.  The Employer intends to create a Profit Sharing Pool for
each Plan Year during which the Plan is in effect in such amount as the Employer
in its absolute discretion shall timely determine.  This provision shall not be
construed as requiring the Employer to create a Profit Sharing Pool for any
specific Plan Year.  The Profit Sharing Pool shall be allocated as of the last
day of the Plan Year among all Participants who are Employees on the last day of
the Plan Year, in proportion to the Eligible Compensation of each such
Participant to the Eligible Compensation of all such Participants for the Plan
Year.  In the Plan Year of his or her Termination Date, a Participant who
retires under The Scotts Company Employees' Pension Plan, dies or incurs a
permanent and total disability under The Scotts Long Term Disability Plan shall
share in the Profit Sharing Pool as if he or she were an Employee on the last
day of the Plan Year.


                                      10 


                3.1.2.  One-half of the amount of the Profit Sharing Pool
allocated to a Participant shall be contributed by the Employer to the Plan as a
Non-Elective Profit Sharing Contribution and allocated to the Participant's
Non-Elective Profit Sharing Account.  The remainder of the Profit Sharing Pool
allocated to the Participant shall be paid to the Participant as a bonus or
contributed by the Employer to the Plan as an Elective Profit Sharing
contribution and allocated to the Participant's Elective Profit Sharing Account,
in accordance with the Participant's profit sharing election.

                3.1.3.  Each Participant shall have the opportunity to make a
profit sharing election to have one-half of his or her share in the Profit
Sharing Pool, if any, (a) if the Participant so elects, paid to the Participant
as a bonus, or (b) if the Participant so elects or fails to make an election,
contributed to the Plan and allocated to the Participant's Elective Profit
Sharing Account.  A Participant may enter into or modify his or her profit
sharing election effective as to the current Plan Year by submitting a new
profit sharing election to the Administrative Committee at least 30 days prior
to the last day of the Plan Year (or such other date as the Administrative
Committee may establish for purposes of administrative convenience).  A profit
sharing election for a prior Plan Year may not be modified and a profit sharing
election for the current Plan Year shall not be effective for future Plan Years.
The Administrative Committee may limit the Elective Profit Sharing Contributions
of some or all Highly Compensated Employees, in such manner as the
Administrative Committee determines, so as to comply with a projected
Compensation Deferral Limit as provided in Section 401(k) of the Code and the
regulations thereunder.

          3.2. SAVINGS CONTRIBUTIONS.  Each Participant shall be entitled to
make a Savings Contribution enrollment election, which shall be in the form
prescribed by the Administrative Committee.  The enrollment election shall
provide for a reduction of the Participant's Compensation, in whole percentage
points up to 15% of Compensation, and a corresponding contribution to the
Participant's Savings Account as a Savings Contribution.  A Participant may
enter into or modify his or her enrollment election as of any Enrollment Date by
submitting a new enrollment election to the Administrative Committee at least 30
days prior to the Enrollment Date (or such greater or lesser period prior to the
Enrollment Date as the Administrative Committee may establish for purposes of
administrative convenience).  A Participant may terminate his or her enrollment
election at any time upon 30 days prior written notice (or such greater or
lesser period as the Administrative Committee may establish for purposes of
administrative convenience).  

          3.3.  LIMITS ON ELECTIVE PROFIT SHARING AND SAVINGS CONTRIBUTIONS.

                3.3.1.  A Participant's Savings Contributions for a calendar
year, plus the Elective Profit Sharing Contributions actually made for the
Participant during the calendar year, shall not exceed the limit in Section
402(g) of the Code.  Any Savings Contribution which, when combined with the
Participant's Elective Profit Sharing Contribution and deferrals under any other
plans sponsored by an Affiliate, exceeds the limit in Section 402(g) of the Code
shall be returned together with earnings for the Plan Year to the Participant
not later than the April 15 following the close of the calendar year for which
the contribution was made.  If a Participant's Savings Contribution, Elective


                                      11 


Profit Sharing Contribution and deferrals under plans not sponsored by
Affiliates exceed the limit in Section 402(g) of the Code, the Participant may
assign to the Plan any portion of the excess by notifying the Administrative
Committee in writing of such excess by March 31 of the following year.  Any
excess and income allocatable to such excess for the Plan Year shall be
distributed to the Participant no later than the April 15 of the following year.

                3.3.2. In the case of a Highly Compensated Employee, the Savings
Contributions, Elective Profit Sharing Contributions and, to the extent they are
taken into account in calculating the Compensation Deferral Limit, Non-Elective
Profit Sharing Contributions made for the Participant which may be taken into
account for the Plan Year for purposes of Section 401(k)(3) of the Code, shall
not exceed the Compensation Deferral Limit.  The Administrative Committee may
limit the Savings Contributions of some or all Highly Compensated Employees, in
such manner as the Administrative Committee determines, so as to comply with a
projected Compensation Deferral Limit as provided in Section 401(k) of the Code
and the regulations thereunder.  Any Savings Contribution and/or Elective Profit
Sharing Contribution which exceeds the Compensation Deferral Limit shall be
returned together with earnings for the Plan Year to the Participant within two
and one-half (2-1/2) months after the close of the Plan Year for which the
contribution was made.

                3.3.3.  The amount of excess contributions for a Highly 
Compensated Employee shall be determined in the following manner: first, the 
actual deferral ratio of the Highly Compensated Employee(s) with the highest 
actual deferral ratio is reduced to the extent necessary to meet the 
Compensation Deferral Limit or cause such ratio to be equal to the actual 
deferral ratio of the Highly Compensated Employee with the next highest 
ratio. Second, the process is repeated until the Compensation Deferral Limit 
is met. The amount of excess contributions for a Highly Compensated Employee 
is then equal to the total of elective and other contributions taken into 
account in computing the Compensation Deferral Limit, minus the product of 
the Highly Compensated Employee's contribution ratio as determined above and 
the Highly Compensated Employee's Compensation.

                3.3.4.  If the Highly Compensated Employee's actual deferral 
ratio is determined by combining the contributions and compensation of all 
family members, then the actual deferral ratio is reduced in accordance with 
the "leveling" method described in Section 1.401(k)-1(f)(2) of the 
regulations under the Code and the excess contributions for the family unit 
are allocated among the family members in proportion to the contributions of 
each family member that have been combined.  If the Highly Compensated 
Employee's actual deferral ratio is determined by combining the contributions 
and compensation of only those family members who are Highly Compensated 
Employees without regard to family aggregation, then the actual deferral 
ratio is reduced in accordance with the leveling method but not below the 
actual deferral ratio of eligible family members who are Non-Highly 
Compensated Employees.  Excess contributions are determined by taking into 
account the contributions of the eligible family members who are Highly 
Compensated Employees without regard to family aggregation and are allocated 
among such family members in proportion to their contributions.  If further 
reduction of the actual deferral ratio is required, excess contributions 
resulting from this reduction are determined by taking into account the 
contributions of all eligible family members and are allocated among such 
family members in proportion to their contributions.


                                      12 


                3.3.5.  The amount of excess contributions to be distributed 
shall be reduced by excess deferrals previously distributed for the taxable 
year ending in the same Plan Year and excess deferrals to be distributed for 
a taxable year will be reduced by excess contributions previously distributed 
for the Plan Year beginning in such taxable year.

          3.4.  TIMING OF CONTRIBUTIONS.  All Savings Contributions shall be 
made no later than the earlier of (a) the earliest date after the reduction 
of Participants' Compensation on which the Savings Contributions can 
reasonably be segregated from the Employer's general assets, or (b) 90 days 
after the reduction of Participants' Compensation. Non-Elective Profit 
Sharing Contributions and Elective Profit Sharing Contributions shall be made 
no later than the due date (including extensions) of the income tax return of 
the Company for the fiscal year of the Company including the last day of the 
Plan Year for which such contribution is made.  All contributions shall be 
paid over to the Trustee and shall be invested by the Trustee in accordance 
with the Plan and the Trust Agreement.

          3.5.  ROLLOVER CONTRIBUTIONS.  Effective July 1, 1995:

                3.5.1.  An Participant may roll over a cash distribution from 
a qualified plan or conduit individual retirement account to this Plan, 
provided that (a) the distribution is (i) received from a qualified plan as 
an Eligible Rollover Distribution, and (ii) rolled over directly from the 
qualified plan or within the 60 days following the date the Participant 
received the distribution, or (b) the distribution is (i) received from a 
conduit individual retirement account which has no assets other than assets 
attributable to an Eligible Rollover Distribution or a "qualified total 
distribution" within the meaning of Section 402 of the Code as in effect 
prior to January 1, 1993, which was deposited in the conduit individual 
retirement account within 60 days of the date the Participant received the 
distribution, plus earnings, (ii) eligible for tax free rollover to a 
qualified plan, and (iii) rolled over within the 60 days following the date 
the Participant received the distribution.  The Participant shall present a 
written certification to the foregoing requirements to the Administrative 
Committee.  The Administrative Committee may also require the Participant to 
provide an opinion of counsel that the amount rolled over meets the 
requirements of this Section.


                3.5.2.  The foregoing contributions, which shall be Rollover 
Contributions, shall be accounted for separately and shall be credited to an 
Participant's Rollover Account.  An Participant shall not be permitted to 
withdraw any portion of his or her Rollover Account until the earlier of the 
date the Participant attains age 59-1/2 or such time as the Participant is 
otherwise eligible to make a withdrawal from or receive a distribution of his 
or her Account.

                3.5.3.  If an individual participated in another defined 
contribution plan sponsored by an Affiliate before becoming a Participant, he 
or she may elect to have his or her vested account balance under such other 
plan transferred to this Plan.  Amounts attributable to a transferred account 
balance shall: (a) retain their character as profit sharing, Section 401(k), 
after tax, rollover and/or deductible contributions and earnings; and (b) be 
distributable in the optional forms available under the transferor plan, in 
addition to any other forms available under this Plan. 


                                      13 


          3.6.  EXCLUSIVE BENEFIT; REFUND OF CONTRIBUTIONS.

                3.6.1.  All contributions made by the Employer are made for 
the exclusive benefit of the Participants and their Beneficiaries, and such 
contributions shall not be used for or diverted to purposes other than for 
the exclusive benefit of the Participants and their Beneficiaries, including 
the costs of maintaining and administering the Plan and Trust.

                3.6.2.  Notwithstanding any other provision of this Section, 
amounts contributed to the Trust by the Employer may be refunded to the 
Employer, to the extent that such refunds do not, in themselves, deprive the 
Plan of its qualified status, under the following circumstances and subject 
to the following limitations:  (a) to the extent that a federal income tax 
deduction is disallowed for any contribution made by the Employer, the 
Trustee shall refund to the Employer the amount so disallowed within one year 
of the date of such disallowance; (b) if a contribution is made, in whole or 
in part, by reason of a mistake of fact, there shall be returned to the 
Employer so much of such contribution as is attributable to the mistake of 
fact within one year after the payment of the contribution to which the 
mistake applies; and (c) except as provided in the event of an erroneous 
allocation to an ineligible person, if the Plan initially fails to satisfy 
the qualification requirements of Section 401(a) of the Code, and if the 
Employer declines to amend the Plan to satisfy such qualification 
requirements, contributions made prior to the determination that the Plan has 
failed to qualify shall be returned to the Employer within one year of denial 
of qualification provided the Employer filed an application for determination 
by the due date of the Employer's return for the taxable year in which the 
Plan was adopted.

                3.6.3.  Notwithstanding any other provision of this Section, 
no refund shall be made to the Employer which is specifically chargeable to 
the Account of any Participant in excess of 100% of the amount in such 
Account nor shall a refund be made by the Trustee of any funds, otherwise 
subject to refund hereunder, which have been distributed to any Participant 
or Beneficiary.  If any such distributions become refundable, the Employer 
shall have a claim directly against the distributees to the extent of the 
refund to which it is entitled.

                3.6.4.  All refunds under this Section shall be limited in 
amount, circumstance and timing by the provisions of Section 403 of ERISA, 
and no such refund shall be made if, solely because of such refund, the Plan 
would cease to be a qualified plan under Section 401(a) of the Code.

          3.7.  ANNUAL ADDITIONS AND LIMITATIONS.

                3.7.1.  Notwithstanding any other provisions of this Plan, in 
no event shall the annual addition to a Participant's Account for any Plan 
Year exceed the lesser of $30,000 (or, if greater, 1/4 of the defined benefit 
dollar limitation under Section 415(b)(1) of the Code) or 25% of such 
Participant's Compensation.  All amounts contributed to any defined 
contribution plan maintained by the Employer or any Affiliate, and all 
amounts described in Section 415(l)(1) and Section 419A(d)(2), shall be 
aggregated with contributions under this Plan in computing any Employee's 
annual additions limitation.  In no event shall the amount allocated to the 
Account of any Participant be greater than the maximum amount allowed under 
Section 415 of the Code with respect to any combination of plans without 
disqualification of any such plan.  Any adjustment to the dollar limitation 
set forth in this Section shall 


                                      14 


be effective only for the Plan Years ending on or after January 1 of the year 
for which the adjustment is made.  For purposes of this Section, the term 
"annual addition" shall mean the sum of Non-Elective Profit Sharing 
Contributions, Elective Profit Sharing Contributions and Savings 
Contributions allocable to the Participant's Account for the Plan Year.

          3.7.2.  In the event a Participant is a participant in any other 
defined contribution plan and/or defined benefit plan sponsored by the 
Employer or any Affiliate, and the sum of the "defined benefit plan fraction" 
and the "defined contribution plan fraction" would exceed 1.0 but for the 
operation of this Section, the "defined contribution fraction" shall be 
reduced so that the sum of the fractions shall not exceed 1.0.  For purposes 
of this subsection, the "defined benefit plan fraction" is the ratio that (a) 
the Participant's projected annual retirement benefit as of the end of the 
Plan Year under the defined benefit plans bears to (b) the lesser of (i) the 
product of 1.25 multiplied by the dollar limitation in effect under Section 
415(b)(1)(A) of the Code for such Plan Year, or (ii) the product of 1.4 
multiplied by the maximum amount permitted under Section 415(b)(1)(B) of the 
Code for such Plan Year.  The "defined contribution plan fraction" is the 
ratio of (a) the Participant's annual additions for the Plan Year to the 
defined contribution plans bears to (b) the lesser of the following amounts 
determined for such Plan Year and for each prior Year of Service with the 
Employer: (i) the product of 1.25 multiplied by the dollar limitation in 
effect under Section 415(c)(1)(A) of the Code for such year, or (ii) the 
product of 1.4 multiplied by the maximum amount permitted under Section 
415(c)(1)(B) of the Code for such year.

          3.7.3.  If the annual addition to a Participant's Account exceeds 
the amount permitted under this Section due to a reasonable error in 
estimating a Participant's Compensation or in determining the amount of 
Savings Contributions and Elective Profit Sharing Contributions which may be 
made under the limits of Section 415 of the Code, such excess shall be 
disposed of as follows:

                  (a)  At the discretion of the Administrative Committee, 
Savings Contributions and Elective Profit Sharing Contributions will be 
returned to the Participant;  

                  (b)  If the Participant is a Participant on the last day of 
the Plan Year, such excess shall be applied to reduce Non-Elective Profit 
Sharing Contributions for such Participant in subsequent Plan Years, and no 
Profit Sharing Contribution shall be made to such Participant's Account until 
such excess annual addition is eliminated;

                  (c)  If at any time while an excess annual addition is 
being applied or would be applied to reduce future Non-Elective Profit 
Sharing Contributions for a Participant, such Participant ceases to be a 
Participant, then such excess annual addition shall be held unallocated in a 
suspense account for the Plan Year and shall be allocated in the next Plan 
Year as an Employer contribution, and no contribution which would constitute 
an annual addition shall be made until any such suspense account is 
completely allocated; and

                  (d)  No suspense account maintained under this Section 
shall participate in allocations of gains and losses of the Investment Funds 
unless otherwise directed by the Administrative Committee.


                                      15



     3.8.  FAIL-SAFE ALLOCATIONS OF PROFIT SHARING CONTRIBUTIONS. 
Notwithstanding anything in the Plan to the contrary, for Plan Years 
beginning after December 31, 1989, if the Plan would otherwise fail to meet 
the requirements of Section 401(a)(4) or Section 410(b) of the Code and the 
regulations thereunder because Non-Elective Profit Sharing Contributions have 
not been allocated to a sufficient number or percentage of Participants for a 
Plan Year, then the group of Participants eligible to share in the 
Non-Elective Profit Sharing Contribution for the Plan Year shall be expanded 
to include the minimum number of former Participants (who are not employed on 
the last day of the Plan Year and so would not otherwise be eligible to share 
in the Non-Elective Profit Sharing Contribution) as are necessary to satisfy 
the applicable test.  The specific former Participants who shall become 
eligible under the terms of this paragraph shall be those former Participants 
who are Non-Highly Compensated Employees who, when compared to similarly 
situated former Participants, have completed the greatest number of Hours of 
Service in the Plan Year before terminating employment.  Nothing in this 
Section shall permit the reduction of a Participant's benefit.  Therefore any 
amounts that have previously been allocated to Participants may not be 
reallocated to satisfy these requirements.  In the event additional 
allocations are required, the Employer shall make an additional contribution 
equal to the additional allocations, even if it exceeds the amount which 
would be deductible under Section 404 of the Code.  Any adjustment to the 
allocations pursuant to this Section shall be made by the October 15 after 
the Plan Year and shall be considered to be made as of the last day of the 
Plan Year.

                                   SECTION 4
                                   INVESTMENT
                                           
     4.1.  INVESTMENT DIRECTION.

           4.1.1.  Each Participant shall have the right to direct, in 
multiples of five percentage points, that  (a) future contributions to and 
the existing balance in the Participant's Non-Elective and Elective Profit 
Sharing Accounts be invested in one or more of the Investment Funds, (b) 
future contributions to and the existing balance in the Participant's Savings 
Account be invested in one or more Investment Funds, and (c) future 
contributions to and the existing balance in the Participant's Rollover 
Account be invested in one or more Investment Funds.

           4.1.2.  A Participant may change his or her investment direction 
as of any Enrollment Date by submitting a form prescribed by the 
Administrative Committee to the Administrative Committee at least 30 days 
prior to the Enrollment Date (or such greater or lesser period prior to the 
Enrollment Date as the Administrative Committee may establish for purposes of 
administrative convenience) along with payment of a reasonable charge 
established by the Administrative Committee to defray the administrative 
expense of processing the investment direction.

     4.2.  INVESTMENT FUNDS.  One of the Investment Funds shall be the 
Company Stock Fund, consisting of Employer Securities and cash or cash 
equivalents needed to meet obligations of such fund or for the purchase of 
Employer Securities.  The Administrative Committee shall direct the Trustee 
to create and maintain three or more additional Investment Funds according to 
investment criteria established by the Administrative Committee.  The 
Administrative Committee shall have the right to 


                                      16


direct the Trustee to merge or modify any existing Investment Funds, other 
than the Company Stock Fund.

     4.3.  INVESTMENT IN EMPLOYER SECURITIES.  One of the purposes of the 
Plan is to provide Participants with ownership interests in the Employer, and 
to the extent practicable, all available assets of the Company Stock Fund 
shall be used to purchase Employer Securities, which shall be held by the 
Trustee until distribution or sale for distribution of cash to Participants 
or Beneficiaries or until disposition is required to implement changes in 
investment designations.  In addition, all or any portion of any other 
Investment Fund may consist of Employer Securities.  Such percentage of the 
Trust Fund, up to 100%, shall be invested in Employer Securities as results 
from the operation of this Section.

     4.4.  VOTING EMPLOYER SECURITIES.  The Administrative Committee shall 
have the power to direct the Trustee in the voting of all Employer Securities 
held by the Trustee.  All voting of Employer Securities shall be in 
compliance with all applicable rules and regulations of the Securities and 
Exchange Commission and all applicable rules of or any agreement with any 
stock exchange on which the Employer Securities being voted are traded. The 
Trustee shall vote all Employer Securities as directed by the Administrative 
Committee and in the absence of such directions shall vote or not vote 
Employer Securities in such manner as the Trustee shall, in its sole 
discretion, determine.  Notwithstanding the foregoing, the Administrative 
Committee may, in its sole discretion and at any time or from time to time, 
permit Participants and Beneficiaries to direct the manner in which any 
Employer Securities allocated to their Accounts shall be voted on such matter 
as the Administrative Committee permits.

     4.5.  TENDER OFFERS.  Each Participant and Beneficiary shall have the 
sole right to direct the Trustee as to the manner in which to respond to a 
tender or exchange offer for Employer Securities allocated to such person's 
Account.  The Administrative Committee shall use its best efforts to notify 
or cause to be notified each Participant and Beneficiary of any tender or 
exchange offer and to distribute or cause to be distributed to each 
Participant and Beneficiary such information as is distributed in connection 
with any tender or exchange offer to holders generally of Employer 
Securities, together with the appropriate forms for directing the Trustee as 
to the manner in which to respond to such tender or exchange offer.  Upon 
timely receipt of directions under this Section from the Participant or 
Beneficiary, the Trustee shall respond to the tender or exchange offer in 
accordance with, and only in accordance with, such directions.  If the 
Trustee does not receive timely directions from a Participant or Beneficiary 
under this Section, the Trustee shall not tender, sell, convey or transfer 
any Employer Securities allocated to such person's Account in response to any 
tender or exchange offer.

     4.6.  INVESTMENT MANAGERS.  The Administrative Committee may appoint one 
or more investment managers to manage all or any portion of all or any of the 
Investment Funds, and one or more custodians for all or any portion of any 
Investment Fund.  The Administrative Committee may also establish investment 
guidelines for the Trustee or any one or more investment managers and may 
direct that all or any portion of the assets in an Investment Fund be 
invested in one or more guaranteed investment contracts having such terms and 
conditions as the Administrative Committee deems appropriate.  The 
Administrative Committee or the Trustee, at the direction of the 
Administrative 


                                      17


Committee, may enter into such agreements as the Administrative Committee 
deems advisable to carry out the purposes of this Section.

     4.7.  SECTION 16 PERSONS.  Notwithstanding anything in the Plan to the 
contrary, Section 16 Persons may not direct the investment of their Accounts 
into the Company Stock Fund unless the Administrative Committee determines 
otherwise.

                                   SECTION 5
                            VALUATIONS AND CREDITING
                                           
     5.1.  VALUATIONS.  The Trust Fund shall be valued by the Trustee at fair 
market value as of the close of business on each Valuation Date.  In 
determining the fair market value of assets other than securities for which 
trading or bid prices can be obtained, the Trustee shall rely on valuations 
provided by the Administrative Committee, which may appraise such assets 
itself or employ one or more appraisers, including the Trustee or an 
affiliate of the Trustee, for that purpose.  The portions of all Accounts 
held in the Company Stock Fund shall be maintained on a share basis.

     5.2.  CREDITS TO AND CHARGES AGAINST ACCOUNTS.  All crediting to and 
charging against Accounts shall be made as follows:

           5.2.1.  First, there shall be determined the net adjusted Account 
by (a) charging all distributions and withdrawals made during the period from 
the prior Valuation Date to the current Valuation Date, and (b) crediting 
Savings Contributions and Rollover Contributions on such time weighted basis 
as the Administrative Committee determines.

           5.2.2.  Second, all earnings of the Trust Fund shall then be 
allocated to and among the Participants' Accounts according to their net 
adjusted Accounts and the relative investment results of the Investment Funds 
in which their Accounts were invested.

           5.2.3.  Third, at the option of the Administrative Committee, all 
administrative expenses relating to the maintenance of Accounts of former 
Participants shall be charged against such Accounts.


           5.2.4.  Last, there shall be credited to each Participant's 
Account, (a) Non-Elective Profit Sharing Contributions and Elective Profit 
Sharing Contributions allocated to such Account, and (b) Savings 
Contributions and Rollover Contributions to such Account not previously 
credited under this Section.

           5.3.  EXPENSES.  All brokerage fees, transfer taxes, and other 
expenses incurred in connection with the investment of the Trust Fund shall 
be added to the cost of such investments or deducted from the proceeds 
thereof, as the case may be.  All other costs and expenses of administering 
the Plan shall be paid from the Trust Fund unless the Employer elects to pay 
such costs and expenses.


                                      18


                                   SECTION 6
                                    BENEFITS
                                           
     6.1.  FORMS OF BENEFIT PAYMENTS.  A Participant or Beneficiary shall 
receive any benefit to which he or she is entitled in the form of:

     6.1.1.  A lump sum distribution to the Participant or Beneficiary 
consisting of cash for amounts not invested in the Company Stock Fund and, 
for amounts invested in the Company Stock Fund, (i) the greatest number of 
whole shares of Employer Securities which can be distributed on the basis of 
the portion of his or her Account balance invested in the Company Stock Fund 
plus cash for any fractional share, if the number of whole shares is 20 or 
more and the Participant or Beneficiary elects to receive shares, or (ii) 
cash if the number of whole shares is less than 20 or if the Participant or 
Beneficiary elects to receive cash; or

           6.1.2.  Effective for distributions made after December 31, 1993, 
at the election of the Participant or Beneficiary who is the Participant's 
surviving or former spouse, if the benefit is an Eligible Rollover 
Distribution, a lump sum payment of the benefit directly to an Eligible 
Retirement Plan specified by the Participant or Beneficiary in the form of 
cash for amounts not invested in the Company Stock Fund and, for amounts 
invested in the Company Stock Fund, (i) the greatest number of whole shares 
of Employer Securities which can be distributed on the basis of the portion 
of his or her Account balance invested in the Company Stock Fund plus cash 
for any fractional share, if the number of whole shares is 20 or more and the 
Participant or Beneficiary elects to receive shares, or (ii) cash if the 
number of whole shares is less than 20 or if the Participant or Beneficiary 
elects to receive cash; or

           6.1.3.  Effective for distributions made after December 31, 1993, 
at the election of the Participant or Beneficiary who is the Participant's 
surviving or former spouse, if the benefit is an Eligible Rollover 
Distribution, distribution to both the Participant or Beneficiary and an 
Eligible Retirement Plan as follows:

           (a)  for amounts not invested in the Company Stock Fund, a lump
           sum cash payment to:

                    (i)  the Participant or Beneficiary; or

                    (ii)  an Eligible Retirement Plan specified by the
           Participant or Beneficiary; or

                    (iii)  the Participant or Beneficiary of a portion of
           the benefit specified by the Participant or Beneficiary, with the
           remainder paid to an Eligible Retirement Plan, and

           (b)  for amounts invested in the Company Stock Fund:

                    (i)  a lump sum cash payment to the Participant or 
           Beneficiary; or


                                      19


                                                                      
                    (ii)  a distribution to the Participant or Beneficiary of 
           the greatest number of whole shares of Employer Securities which can 
           be distributed on the basis of the portion of his or her Account 
           balance invested in the Company Stock Fund plus cash for any 
           fractional share, if the number of whole shares is 20 or more: or

                    (iii)  a lump sum cash payment to an Eligible
           Retirement Plan specified by the Participant or Beneficiary; or

                    (iv)  a distribution to an Eligible Retirement Plan of
           the greatest number of whole shares of Employer Securities which
           can be distributed on the basis of the portion of the
           Participant's Account balance invested in the Company Stock Fund
           plus cash for any fractional share, if the number of whole shares
           is 20 or more.  

           6.1.4.  Effective July 1, 1995 and notwithstanding anything in the 
Plan to contrary, the portion of the Participant's Account which is 
attributable to amounts transferred from another plan sponsored by an 
Affiliate shall be: (a) distributable in any optional form available under 
the plan from which it was transferred, in addition to forms available under 
this Plan; and (b) distributed in accordance with any applicable spousal 
notice and consent requirements under the transferor plan.

     6.2.  RETIREMENT BENEFIT.  Effective January 1, 1993, any Participant 
who has incurred a Termination Date shall receive his or her retirement 
benefit as soon as administratively practicable after:

           (a)  if the Participant's benefit is $3,500 or less (as of the 
applicable Valuation Date and as of the Valuation Date applicable to any 
withdrawal), the Valuation Date coincident with or following the 
Participant's Termination Date; or

           (b)  if the Participant's benefit is more than $3,500 (as of the 
applicable Valuation Date and as of the Valuation Date applicable to any 
withdrawal):

                    (i)  the Valuation Date coincident with or following
           the later of the Participant's Termination Date and the date the
           Participant attains age 62, or

                    (ii)  at the election of the Participant (made during
           the time period, before and after the applicable Valuation Date,
           that the Administrative Committee establishes for purposes of
           administrative convenience), the Valuation Date following the
           Participant's Separation Date; or

                    (iii)  at the election of the Participant (made in the time
           period, before the applicable Valuation Date, that the Administrative
           Committee establishes for the purposes of administrative 
           convenience), any Valuation Date, starting with the third Valuation
           Date after the  Participant's Separation Date and ending with the 
           Valuation Date in (i).


                                      20


The amount of the retirement benefit shall be equal to the undistributed balance
in the Participant's Account determined as of the applicable Valuation Date. 
Such distribution shall be made as soon as practicable after the applicable
Valuation Date.  

     6.3.  DEATH BENEFIT.

           6.3.1.  If a Participant dies before receiving a distribution of 
his or her retirement benefit, the Participant's Beneficiary shall receive a 
death benefit, in lieu of the retirement benefit, as soon as administratively 
practicable after the Valuation Date coincident with or next following the 
Participant's death.  The amount of the death benefit shall be equal to the 
undistributed balance in the Participant's Account determined as of the 
applicable Valuation Date.

           6.3.2.  A married Participant may, with the consent of his or her 
spouse, designate and from time to time change the designation of one or more 
Beneficiaries or contingent Beneficiaries to receive any death benefit. The 
designation and consent shall be on a form supplied by the Administrative 
Committee, which form shall describe the effect of the designation on the 
Participant's spouse, and shall be signed by the Participant and the 
Participant's spouse.  The spouse's signature shall be witnessed by a Plan 
representative or a notary public.  Notwithstanding the foregoing, a 
Beneficiary designation made by a married Participant who has no Hours of 
Service and no paid leave of absence on or after August 23, 1984, shall be 
effective without the consent of such Participant's spouse.  An unmarried 
Participant or a married Participant whose spouse has abandoned him or her or 
cannot be located may designate a Beneficiary or Beneficiaries without the 
consent of any other person, after having first established to the 
satisfaction of the Administrative Committee either that he or she has no 
spouse or that his or her spouse cannot be located.  All records of 
Beneficiary designations shall be maintained by the Administrative Committee.

           6.3.3.  In the event that the Participant fails to designate a
Beneficiary to receive a benefit that becomes payable under the provisions of
this Section, or in the event that the Participant is predeceased by all
designated primary and contingent Beneficiaries, (a) if the Participant is
survived by a spouse, the death benefit shall be payable to the Participant's
surviving spouse who shall be deemed to be the Participant's designated
Beneficiary for all purposes under this Plan, or (b) if the Participant is not
survived by a spouse, the death benefit shall be payable to the Participant's
estate.

     6.4.  IN-SERVICE DISTRIBUTIONS.  Any Participant who has completed more 
than five years of participation in the Plan and who has attained age 59-1/2 
may withdraw from the Trust as of any Valuation Date all of his or her 
Savings Account, or any portion of his or her Savings Account which would not 
reduce the amount in his or her Savings Account to less than $500.  Upon 
receipt of a request for withdrawal of a portion of a Participant's Savings 
Account which would reduce it to less than $500, the Trustee shall distribute 
the entire amount of the Participant's Savings Account.

                                     21


     6.5.  ADVANCE DISTRIBUTION FOR HARDSHIP.

            6.5.1.  If a Participant has an immediate and heavy financial 
need and has obtained all distributions, other than hardship distributions, 
currently available under the Plan and any other plans maintained by the 
Employer or an Affiliate, he or she may obtain a hardship distribution of his 
or her Savings Contributions.  The amount of the hardship distribution shall 
be the lesser of the Participant's Savings Contributions or the amount 
necessary to satisfy the immediate and heavy financial need (including 
amounts necessary to pay reasonably anticipated taxes and penalties on the 
hardship distribution). Hardship distributions of other amounts shall not be 
allowed.  

           6.5.2.  An amount shall not be treated as necessary to satisfy the 
immediate and heavy financial need if the need can be reasonably relieved by 
(a) reimbursement or compensation from insurance or otherwise, (b) reasonable 
liquidation of the Participant's assets, to the extent such liquidation would 
not itself cause an immediate and heavy financial need, (c) cessation of 
Savings Contributions and Elective Profit Sharing Contributions, (d) other 
distributions from the Plan or any other plan, (e) loans from the Plan or any 
other plans, or (f) loans from commercial sources on reasonable terms.  A 
need cannot reasonably be relieved by one of the listed actions if the effect 
would be to increase the amount of the need.  The Administrative Committee 
shall be entitled to rely on the Participant's certification of the foregoing 
except that the Administrative Committee may require further documentation as 
to the amount necessary to satisfy the immediate and heavy financial need, or 
deny the hardship distribution, if under the circumstances the Administrative 
Committee's reliance on the certification is not reasonable.

           6.5.3.  For purposes of this Plan, an immediate and heavy 
financial need is the need for money for:

                   (a) expenses for or necessary to obtain medical care 
described in Section 213(d) of the Code for the Participant or the 
Participant's spouse or dependents;

                   (b) costs directly related to the purchase (excluding 
mortgage payments) of a principal residence of the Participant;

                   (c) the payment of tuition and related educational fees 
for the next 12 months of post-secondary education for the Participant or the 
Participant's spouse, children or dependents;

                   (d) the prevention of the eviction of the Participant from
his or her principal residence or the foreclosure on the mortgage of the
Participant's principal residence; or

                    (e) any other reason added to the list of deemed immediate 
and heavy financial needs by the Commissioner of the Internal Revenue Service.

           6.5.4.  A Participant who has obtained a hardship distribution
shall not be eligible to make any Savings Contributions or Elective Profit
Sharing Contributions for the 12 months after the hardship distribution.


                                      22


     6.6.  LOANS TO PARTICIPANTS.

           6.6.1.  Loans to a Participant from his or her Savings Account 
and, effective July 1, 1994, from his or her Rollover Account shall be 
allowed, subject to such uniform and nondiscriminatory rules as may from time 
to time be adopted by the Administrative Committee.  Loans from other 
Accounts shall not be allowed.  The Trustee may make a loan to a Participant 
who has applied for a loan, in accordance with rules adopted by the 
Administrative Committee, on forms provided by the Administrative Committee.

           6.6.2.  A Participant shall be permitted to borrow no more than 
the lesser of (a) $50,000 reduced by the excess (if any) of (i) the highest 
outstanding balance of Plan loans during the previous 12 months over (ii) the 
current outstanding balance of Plan loans, or (b) 50% of the value of the 
Participant's Account as of the Valuation Date coincident with or next 
preceding the date on which the loan is made.

           6.6.3.  Loans shall be available to all Participants on a 
reasonably equivalent basis; provided, however, that the Trustee may make 
reasonable distinctions among prospective borrowers on the basis of 
creditworthiness and available security.  Any amount withdrawn by or payable 
to a Participant from his or her Account while a loan is outstanding shall be 
immediately applied to reduce such loan.

           6.6.4.  (a)  All loans to Participants made by the Trustee shall 
be secured by the pledge of the Participant's Account.

           (b)  Interest shall be charged at an interest rate which 
the Administrative Committee finds to be reasonable on the date of the loan.

           (c)  Loans shall be for a term of five years or for such 
lesser term as the Administrative Committee and the Trustee agree is 
appropriate, with substantially level amortization (with payments not less 
frequently than quarterly) over the term of the loan.

           (d)  If not paid as and when due, any such outstanding loan
or loans may be deducted from any benefit which is or becomes payable to such
Participant or the Participant's Beneficiary.  The Participant shall remain
liable for any deficiency, and any surplus remaining shall be paid to the
Participant.

           (e)  Any loan made to a Participant shall be (i) treated as an 
investment of the Participant's Account with interest payments credited and 
expenses deducted from the Participant's Account, and (ii) excluded from the 
Participant's Account for purposes of implementing the Participant's 
investment directions and allocation of the investment results of the 
Investment Funds.

     6.7.  LATEST COMMENCEMENT OF BENEFITS.  Payment of benefits shall 
commence in accordance with this Section, provided, however, in no event 
shall payment of benefits commence later than the April 1 of the calendar 
year following the calendar year in which the Participant attains age 70-1/2. 


                                      23



Unless a Participant elects otherwise, the payment of benefits shall begin 
no later than 60 days after the latest of the close of the Plan Year in which 
(a) the Participant attains age 65; (b) occurs the 10th anniversary of the 
year in which the Participant commenced participation in the Plan; or (c) the 
Participant terminates service with the Employer.

     6.8.  POST-DISTRIBUTION CREDITS.  If, after the distribution of 
retirement or death benefits under this Plan, there remain in a Participant's 
Account any funds, or any funds shall be subsequently credited thereto, such 
funds shall be distributed to the Participant or his or her Beneficiary as 
promptly as practicable.

     6.9.  PREVENTION OF ESCHEAT.  If the Administrative Committee cannot 
ascertain the whereabouts of any person to whom a payment is due under the 
Plan, the Administrative Committee may place the amount of the payment in a 
segregated account. If a segregated account is an interest bearing account, 
the interest, which may be net of expenses, shall be credited to the 
segregated account.  If a segregated account holds Employer Securities, any 
dividends may be treated as earnings of the Trust Fund or of the segregated 
account, at the option of the Administrative Committee.  After two years from 
the date such payment is due, the Administrative Committee may mail a notice 
of the payment to the last known address of such person as shown on the 
records of the Plan, the Employer and all Affiliates.  If such person has not 
made claim for the payment within three months after the date of the mailing 
of the notice or if the notice is returned as undeliverable, then the payment 
and all remaining payments which would otherwise be due to such person shall 
be canceled and the amount thereof shall be applied to reduce Profit Sharing 
Contributions. If any person subsequently has a claim allowed for such 
benefits, such person shall be treated as an omitted eligible Employee.

     6.10.  TRANSFERS TO AFFILIATES' PLANS.  Effective July 1, 1995, if a
Participant transfers to employment with an Affiliate in a category of
employment not eligible for participation in the Plan, the Participant may elect
to transfer his or her Account balance to any defined contribution plan for
which he or she is then eligible.

     6.11  MERGER OF STERN'S MIRACLE-GRO PRODUCTS, INC. EMPLOYEES 401(K) SAVINGS
PLAN.  A person whose account balance under the Stern's Miracle-Gro Products,
Inc. Employees 401(k) Savings Plan (the "Miracle-Gro 401(k) Plan") is
transferred to this Plan shall have additional distribution options with respect
to the portion of his or her Account attributable to participation in the
Miracle-Gro 401(k) Plan, as described in Appendix A.  


                                   SECTION 7
                           TOP-HEAVY PLAN PROVISIONS
                                           
     7.1.  MINIMUM BENEFITS.  For any Plan Year that this Plan is a
Top-Heavy Plan, the Employer shall contribute, for and on behalf of each Non-Key
Employee who is a Participant on the last day of the Plan Year, an amount which
is not less than the lesser of (a) 3% of such Participant's Compensation, or (b)
such Participant's Compensation multiplied by a fraction, determined with
respect to the Key Employee for whom the fraction is greatest, the numerator of
which is the 


                                      24


contributions allocated to such Key Employee's Account for the Plan Year and 
the denominator of which is the Key Employee's Compensation for the Plan 
Year.  In determining the minimum benefit, all contributions, including 
Savings Contributions, for any Participant to any plan included in the 
Aggregation Group shall be taken into account.  If a Participant participates 
in this Plan and a defined benefit plan in the Aggregation Group, the 
Participant shall receive minimum benefits under such defined benefit plan.

          7.2.  ADJUSTMENT IN BENEFIT LIMITATIONS.  In applying the limits of 
Section 415 of the Code where a Participant participates in both one or more 
defined benefit plans and one or more defined contribution plans of the 
Employer, paragraphs (2)(B) and (3)(B) of Section 415(e) of the Code shall be 
applied by substituting "1.0" for "1.25", unless (a) the sum of the account 
balances and the present value of the accrued benefits of Key Employees do 
not exceed 90% of the account balances and the present value of the accrued 
benefits of all participants and their beneficiaries, as determined under 
Section 416(h) of the Code, and (b) the Employer elects to have the minimum 
benefit under Section 416 of the Code applied by substituting "4%" for "3%" 
therein.

                                      
                                  SECTION 8
                              CLAIMS PROCEDURES

          8.1.  APPLICATION FOR BENEFITS.  Each Participant or Beneficiary 
believing himself or herself eligible for benefits under this Plan may apply 
for such benefits by completing and filing with the Administrative Committee 
an application for benefits on a form supplied by the Administrative 
Committee. Before the date on which benefit payments commence, each such 
application must be supported by such information and data as the 
Administrative Committee deems relevant and appropriate. Evidence of age, 
marital status (and, in the appropriate instances, death), and location of 
residence shall be required of all applicants for benefits.

          8.2.  APPEAL OF DENIAL OF CLAIM FOR BENEFITS.  In the event that 
any claim for benefits is denied in whole or in part, the Participant or 
Beneficiary whose claim has been so denied shall be notified of such denial 
in writing by the Administrative Committee within 90 days after the 
Administrative Committee receives the claim.  The notice advising of the 
denial shall specify the reasons for denial, make specific reference to 
pertinent Plan provisions, describe any additional material or information 
necessary for the claimant to perfect the claim (explaining why such material 
or information is needed), and shall advise the Participant or Beneficiary, 
as the case may be, of the procedure for the appeal of such denial.  If a 
claimant wishes to appeal the denial of the claim, the claimant shall submit 
a written appeal to the Administrative Committee within 60 days after the 
Administrative Committee notifies the claimant of the denial.  The appeal 
shall set forth all of the facts upon which the appeal is based.  Appeals 
which are not timely filed shall be barred.  The Administrative Committee 
shall consider the merits of the claimant's appeal, the merits of any facts 
or evidence in support of the denial of benefits, and such other facts and 
circumstances as the Administrative Committee deems relevant.  A decision 
shall be made promptly and not later than 60 days after the receipt of a 
request for review, unless special circumstances require an extension of the 
time for processing; in which case, a decision shall be rendered as soon as 
possible, but not later than 120 days 


                                      25 


after receipt of a request for review.  The decision on review shall be in 
writing and shall include specific reasons for the decision, written in a 
manner calculated to be understood by the claimant, and specific references 
to the pertinent Plan provisions on which the decision is based.

          8.3.  EFFECT OF ADMINISTRATIVE COMMITTEE DECISION.  The 
Administrative Committee shall have wide discretion in rendering decisions on 
claims and appeals.  Any decision or action of the Administrative Committee 
on appeal shall be final and binding on all persons absent fraud or arbitrary 
abuse of the wide discretion granted to the Administrative Committee.  No 
appeal or contest of any decision or action may be brought other than after 
following the procedures for claims and appeals as set forth herein by a 
legal proceeding in a court of competent jurisdiction brought within one year 
after such decision or action.

                                  SECTION 9
                  ALLOCATION OF AUTHORITY AND RESPONSIBILITY

          9.1.  AUTHORITY AND RESPONSIBILITIES OF THE ADMINISTRATIVE COMMITTEE.

                9.1.1.  If the Board of Directors delegates discretionary 
authority with respect to Plan amendments to the Administrative Committee, 
the Administrative Committee may consider and approve amendments to the Plan. 

                9.1.2.  The Administrative Committee shall supervise the 
maintenance of such accounts and records as shall be necessary or desirable 
to show the contributions of the Employer, allocation to Participants' 
Accounts, payments from Participants' Accounts, valuations of the Trust Fund 
and all other transactions pertinent to the Plan.  The Administrative 
Committee is authorized to perform, in its discretion, all functions 
necessary to administer the Plan, including, without limitation, to determine 
the eligibility and qualification of Employees for benefits under the Plan; 
to determine the allocation and vesting of contributions, earnings and 
profits of the Plan; to interpret and construe the terms of the Plan; to 
adopt rules, regulations and procedures consistent therewith and to decide 
all disputes with respect to the rights and obligations of Participants in 
the Plan.  The Administrative Committee may employ one or more persons to 
render advice with regard to any responsibility it has under the Plan and may 
designate others to carry out any of its responsibilities.  The 
Administrative Committee may appoint Employees to perform ministerial acts 
with respect to the administration of the Plan in their capacity as Employees 
of the Company.

                9.1.3.  The construction and interpretation of the Plan 
provisions are vested with the Administrative Committee, in its absolute 
discretion, including, without limitation, the determination of benefits, 
eligibility and interpretation of Plan provisions.  The Administrative 
Committee will endeavor to act, whether by general rules or by particular 
decisions, so as to treat all persons in similar circumstances without 
discrimination.  All such decisions, determinations and interpretations shall 
be final, conclusive and binding upon all parties having an interest in the 
Plan.


                                      26 


                9.1.4.  The Administrative Committee shall appoint the 
Trustee, provide direction to the Trustee (including direction of investment 
of all or part of the Trust Fund and the establishment of investment criteria 
and Investment Funds), monitor the performance of the Trustee, and terminate 
the appointment of the Trustee.  The Administrative Committee may appoint 
investment advisors and investment managers, to monitor their performances, 
and terminate such appointments.

          9.2.  APPOINTMENT AND TENURE.  The Administrative Committee shall 
consist of a committee of one or more members who shall serve at the pleasure 
of the Board of Directors.  A committee member may be dismissed at any time, 
with or without cause, upon notice from the Board of Directors.  A committee 
member may resign by delivering his or her written resignation to the Board 
of Directors.  Vacancies arising by the death, resignation or removal of a 
committee member shall be filled by the Board of Directors.  If the Board of 
Directors fails to act, and in any event, until the Board of Directors so 
acts, the remaining members of a committee may appoint an interim member to 
fill any vacancy occurring on the committee.  If no person has been appointed 
to the Administrative Committee, or if no person remains on the committee, 
the Company shall be deemed to be the Administrative Committee. 

          9.3.  MEETINGS; MAJORITY RULE.  Any and all acts of the 
Administrative Committee taken at a meeting shall be by a majority of all 
members of the committee.  The committee may act by vote taken in a meeting 
(at which a majority of members shall constitute a quorum).  The committee 
may also act by majority consent in writing without the formality of 
convening a meeting.  The committee shall elect one of its members to serve 
as chairman.  The chairman shall preside at all meetings of the committee or 
shall delegate such responsibility to another committee member.

          9.4.  COMPENSATION.  The Administrative Committee shall serve 
without compensation for services as such, but all expenses of such persons 
shall be paid or reimbursed by the Employer, and if not so paid or 
reimbursed, shall be paid from the Trust Fund.

          9.5.  INDEMNIFICATION.  Each member of the Administrative Committee 
and Employees carrying out the duties of the Administrative Committee shall 
be indemnified by the Employer against costs, expenses and liabilities (other 
than amounts paid in settlement to which the Employer does not consent) 
reasonably incurred by the person in connection with any action to which the 
person may be a party by reason of his or her service as a member of the 
committee, except in relation to matters as to which he or she shall be 
adjudged in such action to be personally guilty of negligence or willful 
misconduct in the performance of his or her duties.  The foregoing right to 
indemnification shall be in addition to such other rights as the person may 
enjoy as a matter of law or by reason of insurance coverage of any kind, but 
shall not extend to costs, expenses and/or liabilities otherwise covered by 
insurance or that would be so covered by any insurance then in force if such 
insurance contained a waiver of subrogation. Rights granted hereunder shall 
be in addition to and not in lieu of any rights to indemnification to which 
the person may be entitled under the bylaws of the Company.  Service on the 
Administrative Committee shall be deemed in partial fulfillment of the 
person's function as an Employee, officer and/or director of the Employer, if 
the person serves in such capacity as well.


                                      27 


          9.6.  AUTHORITY AND RESPONSIBILITIES OF THE COMPANY.  The Company, 
as Plan sponsor, shall have the following (and only the following) authority 
and responsibilities:  (a) to appoint the Administrative Committee and to 
monitor its performance; (c) to communicate such information to the 
Administrative Committee and the Trustee as each needs for the proper 
performance of its duties; (d) to provide channels and mechanisms through 
which the Administrative Committee and/or the Trustee can communicate with 
Participants and Beneficiaries; and (e) to perform such duties as are imposed 
by law or by regulation and to serve as Administrative Committee in the 
absence of an appointed committee.  Any action which may be taken and any 
decision which may be made by the Company under the Plan (including 
authorization of Plan amendments or termination) may be made by: (a) the 
Board of Directors; or (b) any committee (including the Administrative 
Committee) to which the Board of Directors delegates discretionary authority 
with respect to the Plan.

          9.7.  OBLIGATIONS OF NAMED FIDUCIARIES.  The Administrative 
Committee and the Trustee are named fiduciaries within the meaning of Section 
402(a) of ERISA.  A named fiduciary shall have only those particular powers, 
duties, responsibilities and obligations specifically given to it under this 
Plan or the Trust Agreement.  No named fiduciary shall have authority or 
responsibility to deal with matters other than as delegated to it under this 
Plan, under the Trust Agreement or by operation of law.  Notwithstanding the 
foregoing, named fiduciaries may perform in more than one fiduciary capacity 
if so appointed and may reallocate duties between themselves by mutual 
agreement.  A named fiduciary shall not in any event be liable for breach of 
fiduciary responsibility or obligation by another fiduciary (including named 
fiduciaries) if the responsibility or authority of the act or omission deemed 
to be a breach was not within the scope of such named fiduciary's authority 
or responsibility.

                                  SECTION 10
        AMENDMENT, TERMINATION, MERGERS AND CONSOLIDATIONS OF THE PLAN

          10.1. AMENDMENT.  The Company (by its Board of Directors, an 
executive committee of its Board of Directors or other committee to which the 
Board of Directors delegates discretionary authority with respect to the 
Plan) may amend the provisions of this Plan at any time and from time to 
time; provided, however, that:

                10.1.1.  No amendment shall increase the duties or liabilities
of the Trustee without the consent of such party.

                10.1.2.  No amendment shall deprive any Participant or 
Beneficiary of a deceased Participant of any of the benefits to which such 
person is entitled under the Plan with respect to contributions previously 
made or decrease the balance in any Participant's Account, except as 
permitted by Section 412(c)(8) of the Code and Section 302(c)(8) of ERISA.

                10.1.3.  No amendment changing the vesting schedule shall 
decrease the vested percentage of any Participant.


                                      28 


                10.1.4.  No amendment shall eliminate an optional form of 
benefit in violation of Section 411(d)(6).

                10.1.5.  No amendment shall provide for the use of funds or 
assets held to provide benefits under the Plan other than for the benefit of 
Employees and Beneficiaries, except as may be specifically authorized by 
statute or regulation.

                10.1.6.  Any amendment necessary to maintain the qualification 
of the Plan under Section 401(a) of the Code may be made without the further 
approval of the Board of Directors or any committee if signed by an officer of 
the Company.

          10.2.  PLAN TERMINATION.  The Company reserves the right to terminate
the Plan in whole or in part.  Plan termination shall be effective as of the
date specified by resolution of the Board of Directors.  The Company shall
instruct the Trustee to either (a) continue to manage and administer the assets
of the Trust for the benefit of Participants and Beneficiaries under the terms
and provisions of the Trust Agreement, or (b) pay over to each Participant the
value of his or her interest, and thereupon dissolve the Trust.

          10.3. PERMANENT DISCONTINUANCE OF PROFIT SHARING CONTRIBUTIONS. While
it is the Company's intention to make substantial and recurring contributions to
the Trust Fund under the provisions of the Plan, the right is, nevertheless, 
reserved to permanently discontinue Profit Sharing Contributions at any time.  
Such permanent discontinuance shall have the effect of a termination of the 
Plan, except that the Trustee shall not have the authority to dissolve the Trust
Fund except upon adoption of a further resolution by the Board of Directors to 
the effect that the Plan is terminated and upon receipt from the Company of 
instructions to dissolve the Trust Fund.  Failure to make a contribution solely 
because of a lack of net income shall not be deemed to be a permanent 
discontinuance of Profit Sharing Contributions.

          10.4. SUSPENSION OF PROFIT SHARING CONTRIBUTIONS.  The Company shall
have the right, at any time and from time to time, to suspend Profit Sharing
Contributions to the Trust Fund under the Plan.  Such suspension shall have no
effect on the operation of the Plan except as set forth below:

                10.4.1.  If the Board of Directors determines by resolution that
such suspension shall be permanent, a permanent discontinuance of contributions
shall be deemed to have occurred as of the date of such resolution or such
earlier date as is therein specified.

                10.4.2.  If a temporary suspension becomes a permanent
discontinuance or a Plan termination, the discontinuance or termination shall be
deemed to have occurred on the earlier of:  (a) the date specified by resolution
of the Board of Directors, or (b) the last day of the Plan Year next following
the first Plan Year during the period of suspension in which there occurred a
failure of the Employer to make contributions in a year in which there was net
income out of which such contributions could have been made.


                                      29 


          10.5. MERGERS AND CONSOLIDATIONS OF PLANS.  In the event of any
merger or consolidation of the Plan with, or transfer of assets or liabilities
to, any other plan, each Participant and Beneficiary shall have a benefit in the
surviving or transferee plan (determined as if such plan were then terminated
immediately after such merger, etc.) that is equal to or greater than the
benefit he or she would have been entitled to receive immediately before such
merger, etc., in this Plan (had this Plan been terminated at that time).  

          10.6. TRANSFERS OF ASSETS TO OR FROM THIS PLAN.  A transfer of all or
any portion of the assets or liabilities of the Plan to any other plan, or the
transfer of all or any portion of the assets or liabilities of another plan to
this Plan, shall be in accordance with directions of the Company.

          10.7. EFFECT OF AMENDMENT AND RESTATEMENT.  Notwithstanding anything
herein to the contrary, the identities, Account balances, Hours of Service, and
Years of Eligibility Service of Participants and Employees as of the Effective
Amendment Date, and the rights of persons terminating their employment with the
Employer and all Affiliates prior to the Effective Amendment Date, shall be
determined under the Plan as in effect prior to the Effective Amendment Date.

                                  SECTION 11
                           PARTICIPATING EMPLOYERS

          11.1. ADOPTION BY AFFILIATES.  With the consent of the Company, any
Affiliate may adopt the Plan as a participating Employer.  Each participating
Employer shall be required to use the same Trustee and Trust Agreement as
provided in this Plan, and the Trustee shall commingle, hold and invest as one
Trust Fund all contributions made by participating Employers, as well as all
increments thereof.  With respect to all relations with the Trustee and the
Administrative Committee, each participating Employer shall be deemed to have
irrevocably designated the Company as its agent.  The Company shall have
authority to make any and all necessary rules or regulations, binding upon all
participating Employers and all Participants, to effectuate the purposes of the
Plan.

          11.2. EMPLOYEE TRANSFERS.  If an Employee is transferred between
Employers, the Employee involved shall carry with him or her the Employee's
accumulated service and eligibility, no such transfer shall effect a termination
of employment hereunder, and the participating Employer to which the Employee is
transferred shall thereupon become obligated with respect to such Employee in
the same manner as was the participating Employer from whom the Employee was
transferred.

          11.3. DISCONTINUANCE OF PARTICIPATION.  Any participating Employer
may discontinue or revoke its participation in the Plan.  At the time of any
such discontinuance or revocation, satisfactory evidence thereof and of any
applicable conditions imposed shall be delivered to the Trustee.  The Trustee
shall retain assets for the Employees of the participating Employer under the
Plan.

                                      30 


                                  SECTION 12
                           MISCELLANEOUS PROVISIONS

          12.1.  NONALIENATION OF BENEFITS.

                 12.1.1.  None of the payments, benefits or rights of any
Participant or Beneficiary shall be subject to any claim of any creditor, and,
in particular, to the fullest extent permitted by law, all such payments,
benefits and rights shall be free from attachment, garnishment, trustee's
process or any other legal or equitable process available to any creditor of
such Participant or Beneficiary.  No Participant or Beneficiary shall have the
right to alienate, anticipate, commute, pledge, encumber, or assign any of the
benefits or payments which he or she may expect to receive, contingently or
otherwise, under this Plan, except the right to designate a Beneficiary or
Beneficiaries as hereinbefore provided. Notwithstanding the foregoing,
assignments permitted under the Code shall be permitted under the Plan,
including (a) assignments pursuant to a qualified domestic relations order, and
(b) any loans made by the Trustee to a Participant that are secured by a pledge
of the borrower's Account, which shall give the Trustee a first lien on such
interest to the extent of the entire outstanding amount of such loan, unpaid
interest thereon, and all costs of collection.

                 12.1.2.  If a domestic relations order is received by the
Administrative Committee, the Administrative Committee shall make a
determination as to whether the domestic relations order is a qualified domestic
relations order as defined in Section 414(p) of the Code, treating the domestic
relations order as a claim for benefits under the Plan and all alternate payees
and the Participant as claimants.  Within 30 days after the Administrative
Committee's receipt of the domestic relations order and at least 30 days prior
to its determination, the Administrative Committee shall notify the Participant
and any alternate payees other than the one who is the subject of the domestic
relations order of the receipt of the domestic relations order and the
procedures that the Administrative Committee will follow in determining the
qualified status of the domestic relations order.  During any period in which
the issue of whether the domestic relations order is a qualified domestic
relations order is pending, the Administrative Committee shall segregate in a
separate account under the Plan the amounts which would have been payable to the
alternate payee during such period if the domestic relations order had been
determined to be a qualified domestic relations order.  If, within 18 months, it
is finally determined that the domestic relations order is a qualified domestic
relations order, the Administrative Committee shall direct the Trustee to pay
the segregated amount to the person entitled thereto.  If, within 18 months, it
is finally determined that the domestic relations order is not a qualified
domestic relations order, or the issue has not yet been resolved, the
Administrative Committee shall direct the Trustee to pay the segregated amount
without regard to the terms of the domestic relations order.  Any determination
that a domestic relations order is a qualified domestic relations order which is
made after the close of the 18 month period shall be applied prospectively only.

                 12.1.3.  The Trustee may make a lump sum distribution to an
alternate payee pursuant to a qualified domestic relations order as soon as
administratively practical after the Valuation Date following the earlier of the
date a Participant attains age 50 or the date a Participant terminates
employment.  The Trustee may make a lump sum distribution pursuant to a
qualified domestic relations order before such date provided no more than one
distribution is made to each alternate payee.


                                      31 


          12.2.  NO CONTRACT OF EMPLOYMENT.  Neither the establishment of the
Plan, nor any modification thereof, nor the creation of any fund, trust or
Account, nor the payment of any benefits, shall be construed as giving any
Participant or Employee, or any person whomsoever, the right to be retained in
the service of the Employer, and all Participants and other Employees shall
remain subject to discharge to the same extent as if the Plan had never been
adopted.

          12.3.  TITLE TO ASSETS.  No Participant or Beneficiary shall have any
right to, or interest in, any assets of the Trust Fund upon termination of his
or her employment or otherwise, except to the extent of the benefits payable
under the Plan to such Participant or Beneficiary out of the assets of the Trust
Fund.  All payments of benefits as provided for in this Plan shall be made from
the assets of the Trust Fund, and neither the Employer nor any other person
shall be liable therefor in any manner.

          12.4.  EFFECT OF ADMISSION.  By becoming a Participant, each Employee
shall be conclusively deemed to have assented to the provisions of the Plan and
the corresponding Trust Agreement and to all amendments to such instruments.  

          12.5.  PAYMENTS TO MINORS, ETC.  Any benefit payable to or for the
benefit of a minor, an incompetent person or other person incapable of
receipting therefor shall be deemed paid when paid to such person's guardian or
to the party providing, or reasonably appearing to provide, for the care of such
person, and such payment shall fully discharge the Trustee, the Administrative
Committee, the Employer and all other parties with respect thereto.

          12.6.  APPROVAL OF RESTATEMENT BY INTERNAL REVENUE SERVICE. 
Notwithstanding anything herein to the contrary, if the Commissioner of the
Internal Revenue Service or his delegate should determine that the Plan, as
amended and restated, does not qualify as a tax-exempt plan and trust under
Sections 401 and 501 of the Code, and such determination is not contested, or if
contested, is finally upheld, then the Plan shall operate as if it had not been
amended and restated.

          12.7.  OTHER MISCELLANEOUS.  If any provision of this Plan is held
invalid or unenforceable, such holding will not affect any other provisions
hereof, and the Plan shall be construed and enforced as if such provisions were
not been included.  The Plan shall be binding upon the heirs, executors,
administrators, personal representatives, successors, and assigns of the
parties, including each Participant and Beneficiary, present and future.  The
headings and captions herein are provided for convenience only, shall not be
considered a part of the Plan, and shall not be employed in the construction of
the Plan.  Except where otherwise clearly indicated by context, the masculine
and the neuter shall include the feminine and the neuter, the singular shall
include the plural, and vice-versa.  The Plan shall be construed and enforced
according to the laws of the State of Ohio to the extent not preempted by
federal law, which shall otherwise control.


                                      32 


     IN WITNESS WHEREOF, the Company has caused this Plan to be executed as 
of the 12th day of January, 1996.

                                      THE SCOTTS COMPANY


                                      By:      /s/  ROBERT A. STERN          
                                         ----------------------------------- 
                                         Robert A. Stern, Vice President -   
                                         Human Resources                     





































                                      33 



                                  APPENDIX A


MERGER

Effective as of December 31, 1995, the Stern's Miracle-Gro Products, Inc.
Employees 401(k) Savings Plan (the "Miracle-Gro 401(k) Plan") is merged into
this Plan.  On and after such date:

(a)  Assets and liabilities of the Miracle-Gro 401(k) Plan shall be transferred
     to this Plan.

(b)  Each person with an account balance under the Miracle-Gro 401(k) Plan shall
     have an Account under this Plan.

(c)  Each participant in the Miracle-Gro 401(k) Plan who is employed on December
     31, 1995 shall become a Participant in this Plan on December 31, 1995. Such
     persons are referred to herein as "Miracle-Gro Transferees."

Notwithstanding, assets may continue to be invested under the terms of the 
Miracle-Gro 401(k) Plan until it is administratively practicable to transfer 
assets to the Investment Funds.

ELIGIBILITY AND VESTING

All years of service under the Miracle-Gro 401(k) Plan shall count as Years 
of Eligibility Service under this Plan.  The Account balance of a Miracle-Gro 
Transferee shall be fully vested and nonforfeitable.  However, the vesting of 
a participant in the Miracle-Gro 401(k) Plan who terminated employment before 
December 31, 1995 shall be governed by the terms of the Miracle-Gro 401(k) 
Plan as in effect when he or she terminated employment.  

ADDITIONAL FORMS OF DISTRIBUTION

Notwithstanding anything in the Plan to the contrary, a Participant may elect 
to have the portion of his or her Account which is attributable to 
participation in the Miracle-Gro 401(k) Plan distributed in any of the 
following forms:

(a)  a lump sum, which shall be the normal form of benefit as provided above;

(b)  periodic installments over a period of time to be elected by the 
     Participant;

(c)  an annuity for the life of the Participant;

(d)  an immediate annuity for the life of the Participant with a survivor 
     annuity for the life of the Participant's Beneficiary which is equal to 50%
     of the amount of the annuity which is payable during the joint lives of the
     Participant and his Beneficiary;



(e)  any other annuity form of payment provided by an insurance company through
     the purchase of an annuity contract.  

SPOUSE'S RIGHTS IF ANNUITY ELECTED

(a)  In the event that a married Participant elects any optional method of
     payment which provides an annuity, the benefit of such married Participant
     shall be paid in the form of a Qualified Joint and Survivor Annuity,
     unless, within the 90-day period ending on the Annuity Starting Date, the
     spouse of the Participant consents, pursuant to a Qualified Election, to
     another method of payment.

(b)  "Qualified Election" means a waiver of a Qualified Joint and Survivor
     Annuity.  Any waiver of a Qualified Joint and Survivor Annuity shall not be
     effective unless (a) the Participant's spouse consents in writing to the
     election; (b) the spouse's consent acknowledges the effect of the election;
     and (c) the spouse's consent is witnessed by a Plan representative or
     notary public.  Additionally, a Participant's waiver of the Qualified Joint
     and Survivor Annuity shall not be effective unless the election designates
     a form of benefit payment which may not be changed without consent of the
     spouse (or the spouse expressly permits designations by the Participant
     without any further consent of the spouse).  If it is established to the
     satisfaction of a Plan representative that there is no spouse or that the
     spouse cannot be located, a waiver will be deemed a Qualified Election. 
     Any consent by a spouse obtained under this provision (or establishment
     that the consent of a spouse may not be obtained) shall be effective only
     with respect to such spouse.  A consent that permits designations by the
     Participant without any requirement of further consent by such spouse must
     acknowledge that the spouse has the right to limit consent to a specific
     Beneficiary, and a specific form of benefit where applicable, and that the
     spouse voluntarily elects to relinquish either or both of such rights.  A
     revocation of a prior waiver may be made by a Participant without the
     consent of the spouse at any time before the commencement of benefits.  The
     number of revocations shall not be limited.  No consent obtained under this
     provision shall be valid unless the Participant has received notice as
     provided in this Appendix.

(c)  "Qualified Joint and Survivor Annuity" means an immediate annuity,
     purchased with the Participant's Account balance, for the life of the
     Participant with a survivor annuity for the life of the spouse which is
     equal to 50% of the amount of the annuity which is payable during the joint
     lives of the Participant and the spouse.  

MAXIMUM PAYMENT PERIOD

If a Participant's Account is to be distributed in other than an immediate lump
sum, minimum annual payments under the Plan must be paid over one of the
following periods (or a combination thereof):

(a)  the life of the Participant;

(b)  the life of the Participant and a designated Beneficiary;

                                      2 


(c)  a period certain not extending beyond the life expectancy of the 
     Participant; or

(d)  a period certain not extending beyond the joint and last survivor 
     expectancy of the Participant and a designated Beneficiary.

DEFERRED DISTRIBUTION

A Participant may elect to defer payment of the portion of his or her Account 
attributable to participation in the Miracle-Gro 401(k) Plan.  However, the 
entire interest of the Participant must be distributed, or begin to be 
distributed, no later that the Participant's required beginning date.  The 
required beginning date of a retired or active Participant is the first day 
of April following the calendar year in which such individual attains age 
70-1/2, except as otherwise elected in accordance with Appendix A of the 
Miracle-Gro 401(k) Plan (applicable to pre-TEFRA Section 242 elections).  The 
minimum distribution for other calendar years, including the minimum 
distribution for the calendar year in which the Participant's required 
beginning date occurs, must be made on or before the December 31 of that 
distribution calendar year.  A distribution calendar year is a calendar year 
for which a minimum distribution is required.  The first distribution 
calendar year is the calendar year immediately preceding the calendar year 
which contains the Participant's required beginning date.  All distributions 
required under this Section shall be determined and made in accordance with 
the Income Tax Regulations under Code Section 401(a)(9), including the 
minimum distribution incidental benefit requirement of Section 1.401(a)(9)-2 
of the Proposed Regulations.  

















                                      3 

                                                                 EXHIBIT 10(g)
                                  THE SCOTTS COMPANY
                         1996 EXECUTIVE ANNUAL INCENTIVE PLAN
                                         4/10/96


PURPOSE:           To motivate performance of executives to achieve corporate
                   and business unit profitability.



MEASUREMENTS:      FOR CORPORATE PARTICIPANTS.....

                        2/3rds based on consolidated corporate results

                        1/3rd based on CEO discretion



                   FOR BUSINESS UNIT PARTICIPANTS....

                        1/3 based on business unit results

                        1/3 based on consolidated corporate results

                        1/3 based on CEO discretion

                   The business unit must achieve its "threshold" profitability
                   level in order to be eligible for the 1/3 corporate
                   component.



                   FOR OPERATIONS PARTICIPANTS....

                        1/2 based on consolidated corporate results

                        1/2 based on CEO discretion



TARGET AWARD:      Each participant will be assigned a 1996 "Bonus Target % of
                   Salary" equal to one-half of the defunct plan's target: the
                   aggregation of these amounts approximates $500,000.


EARNED AWARDS:     Consolidated corporate performance, as measured by net
                   income, will tie to an earned award percentage.  For
                   purposes of this Plan, net income is defined as income after
                   tax but before accounting for extraordinary items or
                   accounting changes.



EARNED AWARDS      CORPORATE PERFORMANCE          NET INCOME   INCENTIVE PAYOUT
(CONT.):           ---------------------          ----------   ----------------
                   THRESHOLD  (90% OF TARGET)      $ 19,133         25%
                   1996 TARGET                     $ 21,259        100%
                   SUPERIOR  (110% OF TARGET)      $ 23,385        125%
                   OUTSTANDING (LAST YEAR
                     PROFORMA)                     $ 32,943        300%

                                       [GRAPH]



         Results between "Superior" and "Outstanding" performance will be
         incrementally calculated so that participants will receive a prorated
         payout calculated on a straight line basis.

         Based upon actual results as compared to the four performance levels,
         the quantitative portion of the award can be calculated.



QUANTITATIVE       FOR CORPORATE PARTICIPANTS...
AWARD:
                        1996 Target  x  2/3  x  Consolidated Earned Award
                        Percentage = Quantitative Award



                   FOR BUSINESS UNIT PARTICIPANTS...

                        1996 Target  x  1/3   x  Business Unit Earned Award
                        Percentage

                                            +

                        1996 Target  x  1/3  x  Consolidated Earned Award
                        Percentage (PROVIDED BUSINESS UNIT ATTAINS THRESHOLD
                        PROFITABILITY LEVEL)

                        =    Quantitative Award



QUANTITATIVE       FOR OPERATIONS PARTICIPANTS...
AWARD (CONT.):
                      1996 Target  x  1/2  x  Consolidated Earned Award
                      Percentage = Quantitative Award


DISCRETIONARY      As limited by the total funds available, the CEO applies
AWARDS:            a discretionary adjustment to reward superior results,
                   teamwork, inventory reduction or other special contri-
                   butions. Such discretionary bonus is largely based on 
                   achievements within the individual's area of respons-
                   ibility. If applicable, specific quantifiable goals may
                   be established; the discretionary award may be applied
                   based on the performance of such goals.


BONUS POOL:        Provided corporate performance is "superior" or above, a
                   pool for awards will be generated to provide recognition to
                   associates who are not eligible for participation in the
                   Executive Annual Incentive Plan or the Management Incentive
                   Plan and whose individual performance is exceptional.  The
                   number of awards granted will vary from year to year,
                   however, recipients must be employed on the last day of the
                   fiscal year to be eligible for consideration of an award.
                   The total pool will not exceed $100,000, with awards
                   typically ranging from $500 to $2,000.


COMPENSATION       The Compensation Committee shall review the operation of the
COMMITTEE/ BOARD   Plan and, if at any time the continuation of the Plan, or
OF DIRECTORS:      any of its provisions becomes inappropriate or inadvisable,
                   the Compensation Committee shall revise or modify Plan
                   provisions or recommend to the Board that the Plan be
                   suspended or withdrawn.  In addition, the Compensation
                   Committee reserves the right to modify incentive formulas to
                   reflect unusual circumstances.

                   The Board of Directors reserves to itself the right to
                   suspend the Plan, to withdraw the Plan, and to make
                   substantial alterations in Plan concept.



                                                                  EXHIBIT 10(i)

                                           
                                           
                                           
                                           
                                  THE SCOTTS COMPANY
                                1996 STOCK OPTION PLAN
                        (AS AMENDED THROUGH DECEMBER 16, 1996)



                                  THE SCOTTS COMPANY
                                1996 STOCK OPTION PLAN
                        (AS AMENDED THROUGH DECEMBER 16, 1996)
                                           
                                           

                                      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)  "Award" means any Option.
               
               (c)  "Board" means the Board of Directors of the Company.
               
               (d)  "Cause" means (i) the willful failure by a Participant to 
perform substantially his 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.
               
               (e)  "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 

                                       -2-



               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 l4(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.

               (f)  "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.
               
               (g)  "Code" means the Internal Revenue Code of 1986, as amended.
               
               (h)  "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 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.
               
               (i)  "Company" means The Scotts Company, an Ohio corporation, 
and any successor thereto.
               
               (j)  "Director Option" means a Nonstatutory Stock Option 
granted to each Eligible Director pursuant to Section 6.7 without any action 
by the Board or the Committee.
               
               (k)  "Disability" means the inability of the Participant to 
perform his 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.
               
               (l)  "Eligible Director" means, on any date, a person who is 
serving as a member of the Board and who is not an Employee.
               
               (m)  "Employee" means any officer or other key executive and 
management employee of the Company or of any of its Subsidiaries.
               
               (n)  "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.
               
               (o)  "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) a "Nonstatutory Stock Option" (NSO) which does not 
qualify for treatment as an "Incentive Stock Option."
               
               (p)  "Participant" means any Employee designated by the 
Committee to participate in the Plan.

                                      -3-



               (q)  "Plan" means The Scotts Company 1996 Stock Option Plan, 
as in effect from time to time.
               
               (r)  "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 retirement date established under any 
retirement plan maintained by the Company or a Subsidiary in which the 
Participant participates.
               
               (s)  "Stock" means the Common Shares, without par value, of 
the Company.
               
               (t)  "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 Section 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 Awards shall be granted, the type or types of Awards to 
be granted and the terms and conditions of any and all such Awards. The 
Committee may establish different terms and conditions for different types of 
Awards, for different Participants receiving the same type of Award and for 
the same Participant for each Award 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.

                                      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 
1,500,000 shares of Stock.  Subject to the provisions of Section 5.3, no 
Employee shall receive Awards for more than 150,000  shares of Stock over any 
one-year period. For this purpose, to the extent that any Award is cancelled 
(as described in Section 1.162-27(e)(2)(vi)(B) of the final regulations 
promulgated under Section 162(m) of the Code), such cancelled Award shall 
continue to be counted against the maximum number of shares of Stock for 
which Awards may be granted to an Employee 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.

                                       -4-



               5.2  CANCELLED, TERMINATED, OR FORFEITED AWARDS.  Except as 
provided in Section 5.1, any shares of Stock subject to an Award which for 
any reason is cancelled, 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 may 
be appropriately adjusted by the Committee, whose determination shall be 
conclusive. If, pursuant to the preceding sentence, an adjustment is made to 
the number of shares subject to outstanding Options held by Participants a 
corresponding adjustment shall be made to the number of shares subject to 
outstanding Director Options and if an adjustment is made to the number of 
shares of Stock authorized for issuance under the Plan, a corresponding 
adjustment shall be made to the number of shares subject to each Director 
Option thereafter granted pursuant to Section 6.7.

                                      SECTION 6.
                                           
                                       OPTIONS
                                           
               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) Nonstatutory Stock Options. 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 
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.  Nonstatutory Stock Options 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 awarded 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 in three approximately equal installments on each of the 
first three anniversaries 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 
10 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 5 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 to make payment in Stock already owned 
by 

                                       -5-



him, 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 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 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.  Each Director Option shall be exercisable six 
months after the date of grant and shall remain exercisable until the earlier 
to occur of (i) the tenth anniversary of the date of grant or (ii) the first 
anniversary of the date the Eligible Director ceases to be a member of the 
Board, except that 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, his Director Options shall be cancelled on the date he ceases to be a 
director. An Eligible Director may exercise a Director Option in the manner 
described in Section 6.4.

                                      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 (5) 
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 his 
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 
(3) 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 (5) 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 his 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 (1) year following the 
Participant's termination of employment, whichever period is shorter.

               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.

                                       -6-



               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 shall remain exercisable until the earlier to occur 
of (i) the expiration of the term of such Options or (ii) the thirtieth day 
following the Participant's termination of employment, whichever period is 
shorter.

                                      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 
Option (excluding any Director Option) shall be cancelled in exchange for a 
payment in cash of an amount equal to the excess of the Change in Control 
Price over the exercise price for such Option.

               8.2  ALTERNATIVE AWARDS.  Notwithstanding Section 8.l, no 
cancellation or cash settlement or other payment shall occur with respect to 
any Award or any class of Awards if the Committee reasonably determines in 
good faith prior to the occurrence of a Change in Control that such Award or 
Awards 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:

               (i)  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;
               
               (ii) 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 Award, 
including, but not limited to, an identical or better exercise or vesting 
schedule and identical or better timing and methods of payment;
               
               (iii)     have substantially equivalent economic value to such 
Award (determined at the time of the Change in Control); and
               
               (iv) 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.  Upon a Change in Control, each 
Director Option granted to an Eligible Director shall be cancelled in 
exchange for a payment in cash of an amount equal to the excess of the Change 
in Control Price over the exercise price for such Director Option unless (i) 
the Stock remains traded on an established securities market following the 
Change in Control and (ii) such Eligible Director remains on the Board 
following the Change in Control.

               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 (i) is held by a 
person subject to the reporting requirements of Section 16(a) of the Act and 
(ii) 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 

                                       -7-



occur without such reporting person being potentially subject to liability 
under Section 16(b) of the Act by reason of such cash out.

                                      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; 
provided, however, that no amendment may be made to Section 6.6 or any other 
provision of the Plan relating to Director Options within six months of the 
last date on which any such provision was amended. 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 Committee member's losing his status as a 
"disinterested person" 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's 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 
therefore granted under the Plan, without the consent of the Participant.

                                      SECTION 10
                                           
                               MISCELLANEOUS PROVISIONS
                                           
               10.1 NONTRANSFERABILITY OF AWARDS.  No Awards granted under 
the Plan may be sold, transferred, pledged, assigned, or otherwise alienated 
or hypothecated, other than by will or by the laws of descent and 
distribution. All rights with respect to Awards granted to a Participant 
under the Plan shall be exercisable during his lifetime only by such 
Participant and all rights with respect to any Director Options granted to an 
Eligible Director shall be exercisable during his lifetime only by such 
Eligible Director.

               10.2 BENEFICIARY DESIGNATION.  Each Participant and each 
Eligible Director under the Plan may from time to time name any 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 his 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 death shall be paid to or exercised by 
his surviving spouse, if any, or otherwise to or by his estate and Director 
Options outstanding at the Eligible Director's death shall be exercised by 
his surviving spouse, if any, or otherwise by his 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 to 
elect, subject to such conditions as the Committee shall impose, (i) to have 
shares of Stock otherwise issuable under the Plan withheld by the Company or 
(ii) 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 
estimated total Federal, state, and local tax obligation associated with the 
transaction.

                                       -8-



               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 him in connection 
with or resulting from any claim, action, suit, or proceeding to which he may 
be made a party or in which he 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 him in settlement thereof, with the Company's approval, or paid by 
him in satisfaction of any judgment in any such action, suit, or proceeding 
against him, provided he shall give the Company an opportunity, at its own 
expense, to handle and defend the same before he undertakes to handle and 
defend it on his 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 REQUIREMENTS OF LAW.  The granting 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.

               10.8 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 Annual Meeting of 
Shareholders. 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.

               10.9 GOVERNING LAW.  The Plan, and all agreements hereunder, 
shall be construed in accordance with and governed by the laws of the State 
of Ohio.

               10.10     NO IMPACT ON BENEFITS.  Plan Awards are not 
compensation for purposes of calculating an Employee's rights under any 
employee benefit plan.

                                      -9-


                                                                   EXHIBIT 10(j)



         Employment Agreement, dated as of May 19, 1995, among Stern's
         Miracle-Gro Products, Inc. (nka Scotts' Miracle-Gro 
         Products, Inc.), The Scotts Company and Horace Hagedorn



                              EMPLOYMENT AGREEMENT


         EMPLOYMENT AGREEMENT (this "Agreement"), dated as of May 19, 1995, 
by and among Stern's Miracle-Gro Products, Inc., a New Jersey corporation 
(the "Company"), The Scotts Company, an Ohio corporation ("Scotts"), and 
Horace Hagedorn (the "Employee").

         WHEREAS, the Company and Scotts have entered into an Agreement and 
Plan of Merger (the "Merger Agreement"), dated as of January 26, 1995, and 
amended as of May 1, 1995;

         WHEREAS, in connection with the transactions contemplated by the 
Merger Agreement and in recognition of the Employee's experience and 
abilities, the Company desires to assure itself of the employment of the 
Employee in accordance with the terms and conditions provided herein; and

         WHEREAS, the Employee wishes to continue to perform services for the 
Company in accordance with the terms and conditions provided herein.

         NOW, THEREFORE, in consideration of the premises and the respective 
covenants and agreements of the parties herein contained, and intending to be 
legally bound hereby, the parties hereto agree as follows:

         1.   EMPLOYMENT.  The Company hereby agrees to employ the Employee,
and the Employee hereby agrees to perform services for the Company, on the terms
and conditions set forth herein.

         2.   TERM.  This Agreement is for the three-year period (the "Term")
commencing as of the "Effective Time," as defined in the Merger Agreement, and
terminating on the third anniversary of such date, or upon the Employee's
earlier death, disability or other termination of employment pursuant to 
Section 7 hereof; PROVIDED, HOWEVER, that commencing on the second anniversary 
of the Effective Time and each anniversary thereafter the Term shall 
automatically be extended for one additional year beyond its otherwise scheduled
expiration unless, not later than 30 days prior to any such anniversary, either
the Employee or the Company shall have notified the other parties hereto in 
writing that such extension shall not take effect.

         3.   POSITIONS.  During the Term, the Employee shall serve as the
Chief Executive Officer of the Company.



         4.   DUTIES AND REPORTING RELATIONSHIP.

              (a)  During the Term, the Employee shall, on a full time basis,
use his skills and render services to the best of his abilities in supervising
and conducting the operations of the Company; PROVIDED, HOWEVER, that, subject
to Section 10 hereof, the foregoing shall not prevent the Employee from devoting
a portion of his time and efforts to his personal business affairs so long as
they do not materially interfere with the performance of his duties hereunder. 
The Employee shall report directly to the Chief Executive Officer of Scotts.

              (b)  The Employee shall be permitted to serve on the boards of
other for-profit and not-for-profit organizations so long as such activities do
not materially interfere with the performance of his duties hereunder.

         5.   PLACE OF PERFORMANCE.  The Employee shall perform his duties and
conduct his business at the offices of the Company, located in Port Washington,
New York, except for required travel on the Company's business.

         6.   COMPENSATION AND RELATED MATTERS.

              (a)  ANNUAL BASE SALARY.  Commencing on the Effective Time, the
Company shall pay to the Employee an annual base salary (the "Base Salary") at a
rate not less than $200,000, such salary to be paid in conformity with the
Company's payroll policies relating to its senior executive officers.  The Base
Salary may, from time to time, be increased, subject to and in accordance with
the performance review procedures for senior executive officers of the Company
or Scotts; PROVIDED, HOWEVER, if the Employee's Base Salary is increased, it
shall not thereafter be decreased during the Term.

              (b)  EXECUTIVE BENEFIT PLANS.  During the Term, the Employee
shall be entitled to participate in those incentive plans, programs and
arrangements which are available to other senior executive officers of the
Company or Scotts (the "Benefit Plans"), including, but not limited to,
(i) annual and long-term bonus plans (payments in any given year with respect
thereto, collectively, the "Bonus") and (ii) stock option and other equity-based
compensation plans now or hereinafter maintained by the Company or Scotts.  The
Employee shall be provided benefits under the Benefit Plans substantially
equivalent (in the aggregate) to the benefits provided to other senior executive
officers of the Company or Scotts and on substantially similar terms and
conditions as such benefits are provided to other senior executive officers of
the Company or Scotts.


                                      -2-



              (c)  PENSION AND WELFARE BENEFITS.  During the Term, the Employee
shall be eligible to participate in the pension and retirement plans (the
"Pension Plans") provided to other senior executive officers of the Company or
Scotts (including, without limitation, Scotts' Pension Plan and Scotts' Excess
Benefit Plan), and participate fully in all health benefits, insurance programs
and other similar employee welfare benefit arrangements available to other
senior executive officers of the Company or Scotts and shall be provided
benefits under such plans and arrangements substantially equivalent (in the
aggregate) to the benefits provided to other senior executive officers of the
Company or Scotts and on substantially similar terms and conditions as such
benefits are provided to other senior executive officers of the Company or
Scotts.  All service with the Company accrued by the Employee during his
employment therewith shall be preserved and maintained for eligibility and
vesting purposes under the Pension Plans that are maintained by Scotts.  This
Section 6(c) is not intended to provide the Employee with a duplication of
benefits.

              (d)  STOCK OPTIONS.  Effective as of the Effective Time, Scotts
shall grant to the Employee a non-qualified stock option (the "Option") to
acquire 24,000 of Scotts' common shares without par value ("Common Stock"),
pursuant to the terms and conditions of Scotts' 1992 Long Term Incentive Plan,
or any successor or replacement plan thereto (the "Plan"), and pursuant to a
stock option agreement which shall provide terms and conditions no less
favorable to the Employee than any stock option agreement entered into by and
between Scotts and its other senior executive officers.

              (e)  FRINGE BENEFITS AND PERQUISITES.  During the Term, the
Company shall provide to the Employee all of the fringe benefits and perquisites
that are provided to other senior executive officers of the Company or Scotts,
and the Employee shall be entitled to receive any other fringe benefits or
perquisites that become available to other senior executive officers of the
Company or Scotts subsequent to the Effective Time.  Without limiting the
generality of the foregoing, the Company or Scotts shall provide the Employee
with the following benefits during the Term:  (i) paid vacation, paid holidays
and sick leave in accordance with the Company's or Scotts' standard policies for
its senior executive officers, which policies shall provide the Employee with
benefits no less favorable (in the aggregate) than those provided to other
senior executive officers of the Company or Scotts, and (ii) an automobile
allowance no less than any such allowance provided to any other senior executive
officer of the Company or Scotts.


                                      -3-



              (f)  BUSINESS EXPENSES.  The Employee will be reimbursed for all
ordinary and necessary business expenses incurred by him in connection with his
employment (including without limitation, expenses for travel and entertainment
incurred in conducting or promoting business for the Company) upon submission by
the Employee of receipts and other documentation in accordance with the
Company's normal reimbursement procedures.

         7.   TERMINATION.  The Employee's employment hereunder may be
terminated without breach of this Agreement only under the following
circumstances:

              (a)  DEATH.  The Employee's employment hereunder shall terminate
upon his death.

              (b)  DISABILITY.  If, as a result of the Employee's incapacity
due to physical or mental illness, the Employee shall have been absent from his
duties hereunder for the entire period of six consecutive months, and within
thirty (30) days after written Notice of Termination (as defined in 
paragraph (e) below) is given, shall not have returned to the performance of his
duties hereunder, the Company may terminate the Employee's employment hereunder
for "Disability."

              (c)  CAUSE.  The Company may terminate the Employee's employment
hereunder for "Cause."  For purposes of this Agreement, the Company shall have
"Cause" to terminate the Employee's employment hereunder (i) upon the Employee's
conviction for the commission of an act or acts constituting a felony under the
laws of the United States or any state thereof, or (ii) upon the Employee's
willful and continued failure to substantially perform his duties hereunder
(other than any such failure resulting from the Employee's incapacity due to
physical or mental illness), after written notice has been delivered to the
Employee by the Company, which notice specifically identifies the manner in
which the Employee has not substantially performed his duties, and the
Employee's failure to substantially perform his duties is not cured within ten
business days after notice of such failure has been given to the Employee.  For
purposes of this Section 7(c), no acts or failure to act, on the Employee's part
shall be deemed "willful" unless done, or omitted to be done, by the Employee
not in good faith and without reasonable belief that the Employee's act, or
failure to act, was in the best interest of the Company.

              (d)  TERMINATION BY THE EMPLOYEE.  The Employee may terminate his
employment hereunder for "Good Reason."  "Good Reason" for termination by the
Employee of the Employee's employment shall mean the occurrence (without the
Employee's express 


                                      -4-



written consent) of any one of the following acts by the Company, or failures 
by the Company to act, unless, in the case of any act or failure to act 
described in paragraph (i), (v), (vi), or (vii) below, such act or failure to 
act is corrected prior to the Date of Termination specified in the Notice of 
Termination given in respect thereof:

              (i)  the assignment to the Employee of any duties inconsistent
     with the Employee's status as a senior executive officer of the Company or
     a substantial adverse alteration in the nature or status of the Employee's
     responsibilities;

              (ii) a reduction by the Company of the Base Salary as in effect
     on the date hereof or as the same may be increased from time to time;

              (iii) the relocation of the Employee's place of performance, by
     the Company, outside of the New York City metropolitan area;

              (iv) the failure by the Company or Scotts, without the Employee's
     consent, to pay to the Employee any portion of the Employee's current
     compensation, or to pay to the Employee any portion of an installment of
     deferred compensation under any deferred compensation program of the
     Company or Scotts, within seven (7) days of the date such compensation is
     due;

              (v)  the failure by the Company or Scotts to continue in effect
     any compensation or benefit plan in which the Employee is entitled to
     participate which is material to the Employee's total compensation, unless
     an equitable arrangement has been made with respect to such plan, or the
     failure by the Company or Scotts to continue the Employee's participation
     therein (or in such substitute or alternative plan) on a basis not
     materially less favorable, both in terms of the amount of benefits provided
     and the level of the Employee's participation relative to other
     participants;

              (vi) the failure by the Company or Scotts to continue to provide
     the Employee with benefits substantially similar to those enjoyed by the
     Employee under any of the Company's or Scotts' pension, life insurance,
     medical, health and accident, or disability plans in which the Employee is
     entitled to participate, the taking of any action by the Company or Scotts
     which would directly or indirectly materially reduce any of such benefits
     or deprive the Employee of any material fringe benefit or perquisite
     enjoyed by the Employee, or the failure by the Company or 


                                      -5-



     Scotts to provide the Employee with the number of paid vacation days to 
     which the Employee is entitled pursuant to this Agreement; or

              (vii) any purported termination of the Employee's employment
     which is not effected pursuant to a Notice of Termination satisfying the
     requirement of paragraph (e) below; for purposes of this Agreement, no such
     purported termination shall be effective.

          The Employee's right to terminate the Employee's employment for Good
Reason shall not be affected by the Employee's incapacity due to physical or
mental illness.  The Employee's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.

              (e)  NOTICE OF TERMINATION.  Any termination of the Employee's
employment by the Company or by the Employee (other than termination under
Section 7(a) hereof) shall be communicated by written Notice of Termination to
the other parties hereto in accordance with Section 12 hereof.  For purposes of
this Agreement, a "Notice of Termination" shall mean a notice that shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Employee's employment under the provision
so indicated.  Further, a Notice of Termination for Cause is required to include
a copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the entire membership of the Board at a meeting of the Board (after
reasonable notice to the Employee and an opportunity for the Employee, together
with the Employee's counsel, to be heard before the Board) finding that, in the
good faith opinion of the Board, the Employee was guilty of conduct set forth in
the definition of Cause herein, and specifying the particulars thereof.

              (f)  DATE OF TERMINATION.  "Date of Termination" shall mean (i) if
the Employee's employment is terminated by his death, the date of his death,
(ii) if the Employee's employment is terminated pursuant to paragraph (b) above,
thirty (30) days after Notice of Termination is given (provided that the
Employee shall not have returned to the performance of his duties on a full-time
basis during such thirty (30)-day period), and (iii) if the Employee's
employment is terminated pursuant to paragraph (c) or (d) above, the date
specified in the Notice of Termination; PROVIDED, HOWEVER, that if within thirty
(30) days after any Notice of Termination is given the party receiving such
Notice of Termination notifies the other parties that a dispute exists


                                      -6-



concerning the termination, the Date of Termination shall be the date on which
the dispute is finally determined.  If within fifteen (15) days after any Notice
of Termination is given, or, if later, prior to the Date of Termination (as
determined without regard to this Section 7(f)), the party receiving such Notice
of Termination notifies the other parties that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally resolved, either by mutual written agreement of the parties or by a
final judgment, order or decree of a court of competent jurisdiction (which is
not appealable or with respect to which the time for appeal therefrom has
expired and no appeal has been perfected); provided further that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution of
such dispute with reasonable diligence.

              (g)  COMPENSATION DURING DISPUTE.  If a purported termination
occurs during the term of this Agreement, and such termination is disputed in
accordance with Section 7(f) hereof, the Company or Scotts shall continue to pay
the Employee the full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, Base Salary) and continue the
Employee as a participant in all compensation, benefit and insurance plans in
which the Employee was participating when the notice giving rise to the dispute
was given, until the dispute is finally resolved.  Amounts paid under this
Section 7(g) are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement.

         8.   COMPENSATION UPON TERMINATION OR DURING DISABILITY.

              (a)  DISABILITY OR DEATH.  During any period that the Employee
fails to perform his duties hereunder as a result of incapacity due to physical
or mental illness, the Employee shall continue to receive his full Base Salary,
as well as other applicable employee benefits provided to other senior
executives of the Company or Scotts, as provided in this Agreement, until his
employment is terminated pursuant to Section 7(b) hereof.  In the event the
Employee's employment is terminated pursuant to Section 7(a) or 7(b) hereof,
then as soon as practicable thereafter, the Company or Scotts shall pay the
Employee or the Employee's Beneficiary (as defined in Section 11(b) hereof), as
the case may be, (i) all unpaid amounts, if any, to which the Employee was
entitled as of the Date of Termination under Section 6(a) hereof and (ii) all
unpaid amounts to which the Employee was then entitled under the Benefit Plans,
the Pension Plans and any other unpaid employee benefits, perquisites or other
reimburse-


                                      -7-



ments (the amounts set forth in clauses (i) and (ii) above being
hereinafter referred to as the "Accrued Obligation").

               (b)  TERMINATION FOR CAUSE; VOLUNTARY TERMINATION WITHOUT GOOD
REASON.  If the Employee's employment is terminated by the Company for Cause or
by the Employee other than for Good Reason, then the Company or Scotts shall pay
all Accrued Obligations to the Employee and neither the Company nor Scotts shall
have any further obligations to the Employee under this Agreement.

               (c)  TERMINATION WITHOUT CAUSE; TERMINATION FOR GOOD REASON.  If
(i) the Company shall terminate the Employee's employment, other than for
Disability or for Cause, or (ii) the Employee shall terminate his employment for
Good Reason, then:

               (1)  the Company or Scotts shall pay to the Employee, within ten
                    (10) days after the Date of Termination, the Accrued
                    Obligations;

               (2)  the Company or Scotts shall pay to the Employee, within ten
                    (10) days after the Date of Termination, a lump sum amount
                    in cash equal to three (3) multiplied by the sum of (i) the
                    Employee's Base Salary as in effect immediately prior to the
                    circumstances giving rise to the Notice of Termination plus
                    (ii) the highest annual Bonus paid to the Employee in
                    respect of the three years preceding the Date of
                    Termination;

               (3)  to the extent permitted under the terms and conditions of
                    each applicable plan or arrangement, the Company or Scotts
                    shall pay to the Employee a lump sum payment, in cash,
                    within ten (10) days after the Date of Termination, equal to
                    the Employee's accrued benefits (or the actuarial equivalent
                    if applicable) as of the Date of Termination under the
                    Pension Plans and the Benefit Plans.  In addition, to the
                    extent permitted under the terms and conditions of each
                    applicable plan or arrangement, for purposes of computing
                    the benefits payable to the Employee under the Pension Plans
                    and Benefit Plans in which the Employee participated as of
                    the Date of Termination, the Employee shall be treated as if
                    he had continued in employment for three (3) years following
                    the Date of Termination; and


                                      -8-



               (4)  for a period of three (3) years following the Date of
                    Termination the Company or Scotts shall pay all costs and
                    expenses associated with the continuation of coverage of the
                    Employee (as contemplated under Section 4980B of the
                    Internal Revenue Code of 1986, as amended) under all
                    applicable medical, disability and life insurance plans as
                    existed immediately prior to the circumstances giving rise
                    to the Notice of Termination; PROVIDED, HOWEVER, that such
                    coverage shall be reduced to the extent that the Employee
                    obtains similar coverage paid by a subsequent employer.

          9.   NON-DISCLOSURE.  The parties hereto agree, recognize and
acknowledge that during the Term the Employee shall obtain knowledge of
confidential information regarding the business and affairs of the Company.  It
is therefore agreed that the Employee will respect and protect the
confidentiality of all confidential information pertaining to the Company, and
will not (i) without the prior written consent of the Company, (ii) unless
required in the course of the Employee's employment hereunder, or (iii) unless
required by applicable law, rules, regulations or court, governmental or
regulatory authority order or decree, disclose in any fashion such confidential
information to any person (other than a person who is a director of, or who is
employed by, the Company or any subsidiary or who is engaged to render services
to the Company or any subsidiary) at any time during the Term.

          10.  COVENANT NOT TO COMPETE.  (a) Employee hereby agrees that for a
period of three (3) years following the termination of this Agreement (other
than a termination of the Employee's employment (i) by the Employee for Good
Reason, or (ii) by the Company other than for Cause or Disability) (the
"Restricted Period") the Employee shall not, directly or indirectly, whether
acting individually or through any person, firm, corporation, business or any
other entity:

                    (i)  engage in, or have any interest in any person, firm,
corporation, business or other entity (as an officer, director, employee, agent,
stockholder or other security holder, creditor, consultant or otherwise) that
engages in any business activity where any aspect of the business of the Company
is conducted, or planned to be conducted, at any time during the Restricted
Period, which business activity is the same as, similar to or competitive with
the Company as the same may be conducted from time to time;


                                      -9-



                    (ii) interfere with any contractual relationship that may
exist from time to time of the business of the Company, including, but not
limited to, any contractual relationship with any director, officer, employee,
or sales agent, or supplier of the Company; or

                    (iii) solicit, induce or influence, or seek to induce or
influence, any person who currently is, or from time to time may be, engaged or
employed by the Company (as an officer, director, employee, agent or independent
contractor) to terminate his or her employment or engagement by the Company.

               (b)  Notwithstanding anything to the contrary contained herein,
Employee, directly or indirectly, may own publicly traded stock constituting not
more than three percent (3%) of the outstanding shares of such class of stock of
any corporation if, and as long as, Employee is not an officer, director,
employee or agent of, or consultant or advisor to, or has any other relationship
or agreement with such corporation.

               (c)  Employee acknowledges that the non-competition provisions
contained in this Agreement are reasonable and necessary, in view of the nature
of the Company and his knowledge thereof, in order to protect the legitimate
interests of the Company.

          11.  SUCCESSORS; BINDING AGREEMENT.

               (a) The Company and Scotts shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company or Scotts, by
agreement in form and substance reasonably satisfactory to the Employee, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company and Scotts would be required to perform it if
no such succession had taken place.  Failure of the Company or Scotts to obtain
such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Employee to
compensation from the Company and/or Scotts in the same amount and on the same
terms as he would be entitled to hereunder if he terminated his employment for
Good Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination.  As used in this Agreement, each of "Company" and "Scotts" shall
mean the Company and Scotts, respectively in each case as hereinbefore defined
and any of their respective successors to their businesses and/or assets as
aforesaid that executes and delivers the agreement provided for in this


                                      -10-



Section 11 or that otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.

               (b)  This Agreement and all rights of the Employee hereunder
shall inure to the benefit of and be enforceable by the Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.  If the Employee should die while any
amounts would still be payable to him hereunder if he had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Employee's devisee, legatee, or other
designee or, if there be no such designee, to the Employee's estate (any of
which is referred to herein as a "Beneficiary").

          12.  NOTICE.  For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:

          If to the Company:

               Stern's Miracle-Gro Products, Inc.
               800 Port Washington Boulevard
               Port Washington, New York 11050
               Attn:     General Counsel

          If to Scotts:

               The Scotts Company
               14111 Scottslawn Road
               Marysville, Ohio 43201
               Attn:     General Counsel

          If to the Employee:

               Horace Hagedorn
               Old House Lane
               Sands Point, New York 11050

or to such other address as each party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

          13.  MISCELLANEOUS.  No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Employee and such officer of the Company as
may be 


                                      -11-



specifically designated by the Board.  No waiver by a party hereto at any
time of any breach by another party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time.  No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by the parties which are not set forth expressly in this Agreement. 
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the state of Ohio without regard to its
conflicts of law principles.

          l4.  VALIDITY.  The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.  To the extent that any of the provisions hereof are inconsistent with
the provisions of the Agreement Containing Consent Order and the Agreement to
Hold Separate (collectively, the "Consent Order") between Scotts and the Federal
Trade Commission, the provisions of the Consent Order shall govern in all
respects.

          15.  COUNTERPARTS.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

          l6.  ENTIRE AGREEMENT.  This Agreement sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and
supersedes any and all other prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto; and any
prior agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and cancelled.


                                      -12-



          IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.


                                        STERN'S MIRACLE-GRO PRODUCTS, INC.
                                        
                                        
                                        By:  /S/ HORACE HAGEDORN           
                                             -----------------------------------
                                        Name:
                                        Title:
                                        
                                        
                                        THE SCOTTS COMPANY
                                        
                                        
                                        By:  /S/ CRAIG WALLEY              
                                             -----------------------------------
                                        Name:
                                        Title:
                                        
                                        
                                        EMPLOYEE
                                        
                                        
                                        /S/ HORACE HAGEDORN                
                                        ----------------------------------------
                                        HORACE HAGEDORN


                                      -13-




                                                            EXHIBIT 10(K)



               Employment Agreement, dated as of May 19, 1995, 
               among Stern's Miracle-Gro Products, Inc. (nka 
               Scotts' Miracle-Gro Products, Inc.), The Scotts 
               Company and John Kenlon




                              EMPLOYMENT AGREEMENT


          EMPLOYMENT AGREEMENT (this "Agreement"), dated as of May 19, l995, by
and among Stern's Miracle-Gro Products, Inc., a New Jersey corporation (the
"Company"), The Scotts Company, an Ohio corporation ("Scotts"), and John Kenlon
(the "Employee").

          WHEREAS, the Company and Scotts have entered into an Agreement and
Plan of Merger (the "Merger Agreement"), dated as of January 26, 1995, and
amended as of May 1, 1995;

          WHEREAS in connection with the transactions contemplated by the Merger
Agreement and in recognition of the Employee's experience and abilities, the
Company desires to assure itself of the employment of the Employee in accordance
with the terms and conditions provided herein; and

          WHEREAS, the Employee wishes to continue to perform services for the
Company in accordance with the terms and conditions provided herein.

          NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements of the parties herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:

          1.   EMPLOYMENT.  The Company hereby agrees to employ the Employee,
and the Employee hereby agrees to perform services for the Company, on the terms
and conditions set forth herein.

          2.   TERM.  This Agreement is for the three-year period (the "Term")
commencing as of the "Effective Time," as defined in the Merger Agreement, and
terminating on the third anniversary of such date, or upon the Employee's
earlier death, disability or other termination of employment pursuant to
Section 7 hereof; PROVIDED, HOWEVER, that commencing on the second anniversary
of the Effective Time and each anniversary thereafter the Term shall
automatically be extended for one additional year beyond its otherwise scheduled
expiration unless, not later than 30 days prior to any such anniversary, either
the Employee or the Company shall have notified the other parties hereto in
writing that such extension shall not take effect.

          3.   POSITIONS.  During the Term, the Employee shall serve as the
President of the Company.




          4.   DUTIES AND REPORTING RELATIONSHIP.

               (a)  During the Term, the Employee shall, on a full time basis,
use his skills and render services to the best of his abilities in supervising
and conducting the operations of the Company; PROVIDED, HOWEVER, that, subject
to Section 10 hereof, the foregoing shall not prevent the Employee from devoting
a portion of his time and efforts to his personal business affairs so long as
they do not materially interfere with the performance of his duties hereunder. 
The Employee shall report directly to the Chief Executive Officer of the
Company.

               (b)  The Employee shall be permitted to serve on the boards of
other for-profit and not-for-profit organizations so long as such activities do
not materially interfere with the performance of his duties hereunder.

          5.   PLACE OF PERFORMANCE.  The Employee shall perform his duties and
conduct his business at the offices of the Company, located in Port Washington,
New York, except for required travel on the Company's business.

          6.   COMPENSATION AND RELATED MATTERS.

               (a)  ANNUAL BASE SALARY.  Commencing on the Effective Time, the
Company shall pay to the Employee an annual base salary (the "Base Salary") at a
rate not less than $195,000, such salary to be paid in conformity with the
Company's payroll policies relating to its senior executive officers.  The Base
Salary may, from time to time, be increased, subject to and in accordance with
the performance review procedures for senior executive officers of the Company
or Scotts; PROVIDED, HOWEVER, if the Employee's Base Salary is increased, it
shall not thereafter be decreased during the Term.

               (b)  EXECUTIVE BENEFIT PLANS.  During the Term, the Employee
shall be entitled to participate in those incentive plans, programs and
arrangements which are available to other senior executive officers of the
Company or Scotts (the "Benefit Plans"), including, but not limited to,
(i) annual and long-term bonus plans (payments in any given year with respect
thereto, collectively, the "Bonus") and (ii) stock option and other equity-based
compensation plans now or hereinafter maintained by the Company or Scotts.  The
Employee shall be provided benefits under the Benefit Plans substantially
equivalent (in the aggregate) to the benefits provided to other senior executive
officers of the Company or Scotts and on substantially similar terms and
conditions as such benefits are provided to other senior executive officers of
the Company or Scotts.


                                     -2-



               (c)  PENSION AND WELFARE BENEFITS.  During the Term, the Employee
shall be eligible to participate in the pension and retirement plans (the
"Pension Plans") provided to other senior executive officers of the Company or
Scotts (including, without limitation, Scotts' Pension Plan and Scotts' Excess
Benefit Plan), and participate fully in all health benefits, insurance programs
and other similar employee welfare benefit arrangements available to other
senior executive officers of the Company or Scotts and shall be provided
benefits under such plans and arrangements substantially equivalent (in the
aggregate) to the benefits provided to other senior executive officers of the
Company or Scotts and on substantially similar terms and conditions as such
benefits are provided to other senior executive officers of the Company or
Scotts.  All service with the Company accrued by the Employee during his
employment therewith shall be preserved and maintained for eligibility and
vesting purposes under the Pension Plans that are maintained by Scotts.  This
Section 6(c) is not intended to provide the Employee with a duplication of
benefits.

               (d)  STOCK OPTIONS.  Effective as of the Effective Time, Scotts
shall grant to the Employee a non-qualified stock option (the "Option") to
acquire 24,000 of Scotts' common shares without par value ("Common Stock"),
pursuant to the terms and conditions of Scotts' 1992 Long Term Incentive Plan,
or any successor or replacement plan there to (the "Plan"), and pursuant to a
stock option agreement which shall provide terms and conditions no less
favorable to the Employee than any stock option agreement entered into by and
between Scotts and its other senior executive officers.

               (e)  FRINGE BENEFITS AND PERQUISITES.  During the Term, the
Company shall provide to the Employee all of the fringe benefits and perquisites
that are provided to other senior executive officers of the Company or Scotts,
and the Employee shall be entitled to receive any other fringe benefits or
perquisites that become available to other senior executive officers of the
Company or Scotts subsequent to the Effective Time.  Without limiting the
generality of the foregoing, the Company or Scotts shall provide the Employee
with the following benefits during the Term:  (i) paid vacation, paid holidays
and sick leave in accordance with the Company's or Scotts' standard policies for
its senior executive officers, which policies shall provide the Employee with
benefits no less favorable (in the aggregate) than those provided to other
senior executive officers of the Company or Scotts, and (ii) an automobile
allowance no less than any such allowance provided to any other senior executive
officer of the Company or Scotts.


                                     -3-



               (f)  BUSINESS EXPENSES.  The Employee will be reimbursed for all
ordinary and necessary business expenses incurred by him in connection with his
employment (including without limitation, expenses for travel and entertainment
incurred in conducting or promoting business for the Company) upon submission by
the Employee of receipts and other documentation in accordance with the
Company's normal reimbursement procedures.

          7.   TERMINATION.  The Employee's employment hereunder may be
terminated without breach of this Agreement only under the following
circumstances:

               (a)  DEATH.  The Employee's employment hereunder shall terminate
upon his death.

               (b)  DISABILITY.  If, as a result of the Employee's incapacity
due to physical or mental illness, the Employee shall have been absent from his
duties hereunder for the entire period of six consecutive months, and within
thirty (30) days after written Notice of Termination (as defined in paragraph
(e) below) is given, shall not have returned to the performance of his duties
hereunder, the Company may terminate the Employee's employment hereunder for
"Disability."

               (c)  CAUSE.  The Company may terminate the Employee's employment
hereunder for "Cause."  For purposes of this Agreement, the Company shall have
"Cause" to terminate the Employee's employment hereunder (i) upon the Employee's
conviction for the commission of an act or acts constituting a felony under the
laws of the United States or any state thereof, or (ii) upon the Employee's
willful and continued failure to substantially perform his duties hereunder
(other than any such failure resulting from the Employee's incapacity due to
physical or mental illness), after written notice has been delivered to the
Employee by the Company, which notice specifically identifies the manner in
which the Employee has not substantially performed his duties, and the
Employee's failure to substantially perform his duties is not cured within ten
business days after notice of such failure has been given to the Employee.  For
purposes of this Section 7(c), no act, or failure to act, on the Employee's part
shall be deemed "willful" unless done, or omitted to be done, by the Employee
not in good faith and without reasonable belief that the Employee's act, or
failure to act, was in the best interest of the Company.

               (d)  TERMINATION BY THE EMPLOYEE.  The Employee may terminate his
employment hereunder for "Good Reason."  "Good Reason" for termination by the
Employee of the Employee's employment shall mean the occurrence (without the
Employee's express


                                     -4-



written consent) of any one of the following acts by the Company, or failures 
by the Company to act, unless, in the case of any act or failure to act 
described in paragraph (i), (v), (vi), or (vii) below, such act or failure to 
act is corrected prior to the Date of Termination specified in the Notice of 
Termination given in respect thereof:

               (i)  the assignment to the Employee of any duties inconsistent
    with the Employee's status as a senior executive officer of the Company or
    a substantial adverse alteration in the nature or status of the Employee's
    responsibilities;

               (ii) a reduction by the Company of the Base Salary as in effect
    on the date hereof or as the same may be increased from time to time;

               (iii) the relocation of the Employee's place of performance, by
    the Company, outside of the New York City metropolitan area;

               (iv) the failure by the Company or Scotts, without the Employee's
    consent, to pay to the Employee any portion of the Employee's current
    compensation, or to pay to the Employee any portion of an installment of
    deferred compensation under any deferred compensation program of the
    Company or Scotts, within seven (7) days of the date such compensation is
    due;

               (v)  the failure by the Company or Scotts to continue in effect
    any compensation or benefit plan in which the Employee is entitled to
    participate which is material to the Employee's total compensation, unless
    an equitable arrangement has been made with respect to such plan, or the
    failure by the Company or Scotts to continue the Employee's participation
    therein (or in such substitute or alternative plan) on a basis not
    materially less favorable, both in terms of the amount of benefits provided
    and the level of the Employee's participation relative to other
    participants;

               (vi) the failure by the Company or Scotts to continue to provide
    the Employee with benefits substantially similar to those enjoyed by the
    Employee under any of the Company's or Scotts' pension, life insurance,
    medical, health and accident, or disability plans in which the Employee is
    entitled to participate, the taking of any action by the Company or Scotts
    which would directly or indirectly materially reduce any of such benefits
    or deprive the Employee of any material fringe benefit or perquisite
    enjoyed by the Employee, or the failure by the Company or


                                     -5-



    Scotts to provide the Employee with the number of paid vacation days to 
    which the Employee is entitled pursuant to this Agreement; or

               (vii) any purported termination of the Employee's employment
    which is not effected pursuant to a Notice of Termination satisfying the
    requirement of paragraph (e) below; for purposes of this Agreement, no such
    purported termination shall be effective.

          The Employee's right to terminate the Employee's employment for Good
Reason shall not be affected by the Employee's incapacity due to physical or
mental illness.  The Employee's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.

               (e)  NOTICE OF TERMINATION.  Any termination of the Employee's
employment by the Company or by the Employee (other than termination under
Section 7(a) hereof) shall be communicated by written Notice of Termination to
the other parties hereto in accordance with Section 12 hereof.  For purposes of
this Agreement, a "Notice of Termination" shall mean a notice that shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Employee's employment under the provision
so indicated.  Further, a Notice of Termination for Cause is required to include
a copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the entire membership of the Board at a meeting of the Board (after
reasonable notice to the Employee and an opportunity for the Employee, together
with the Employee's counsel, to be heard before the Board) finding that, in the
good faith opinion of the Board, the Employee was guilty of conduct set forth in
the definition of Cause herein, and specifying the particulars thereof.

               (f)  DATE OF TERMINATION.  "Date of Termination" shall mean
(i) if the Employee's employment is terminated by his death, the date of his
death, (ii) if the Employee's employment is terminated pursuant to paragraph (b)
above, thirty (30) days after Notice of Termination is given (provided that the
Employee shall not have returned to the performance of his duties on a full-time
basis during such thirty (30)-day period), and (iii) if the Employee's
employment is terminated pursuant to paragraph (c) or (d) above, the date
specified in the Notice of Termination; PROVIDED, HOWEVER, that if within thirty
(30) days after any Notice of Termination is given the party receiving such
Notice of Termination notifies the other parties that a dispute exists


                                     -6-



concerning the termination, the Date of Termination shall be the date on which
the dispute is finally determined.  If within fifteen (15) days after any Notice
of Termination is given, or, if later, prior to the Date of Termination (as
determined without regard to this Section 7(f)), the party receiving such Notice
of Termination notifies the other parties that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally resolved, either by mutual written agreement of the parties or by a
final judgment, order or decree of a court of competent jurisdiction (which is
not appealable or with respect to which the time for appeal therefrom has
expired and no appeal has been perfected); provided further that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution of
such dispute with reasonable diligence.

               (g)  COMPENSATION DURING DISPUTE.  If a purported termination
occurs during the term of this Agreement, and such termination is disputed in
accordance with Section 7(f) hereof, the Company or Scotts shall continue to pay
the Employee the full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, Base Salary) and. continue the
Employee as a participant in all compensation, benefit and insurance plans in
which the Employee was participating when the notice giving rise to the dispute
was given, until the dispute is finally resolved.  Amounts paid under this
Section 7(g) are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement.

          8.   COMPENSATION UPON TERMINATION OR DURING DISABILITY.

               (a)  DISABILITY OR DEATH.  During any period that the Employee
fails to perform his duties hereunder as a result of incapacity due to physical
or mental illness, the Employee shall continue to receive his full Base Salary,
as well as other applicable employee benefits provided to other senior
executives of the Company or Scotts, as provided in this Agreement, until his
employment is terminated pursuant to Section 7(b) hereof.  In the event the
Employee's employment is terminated pursuant to Section 7(a) or 7(b) hereof,
then as soon as practicable thereafter, the Company or Scotts shall pay the
Employee or the Employee's Beneficiary (as defined in Section 11(b) hereof), as
the case may be, (i) all unpaid amounts, if any, to which the Employee was
entitled as of the Date of Termination under Section 6(a) hereof and (ii) all
unpaid amounts to which the Employee was then entitled under the Benefit Plans,
the Pension Plans and any other unpaid employee benefits, perquisites or


                                     -7-



other reimbursements (the amounts set forth in clauses (i) and (ii) above being
hereinafter referred to as the "Accrued Obligation").

               (b)  TERMINATION FOR CAUSE; VOLUNTARY TERMINATION WITHOUT GOOD
REASON.  If the Employee's employment is terminated by the Company for Cause or
by the Employee other than for Good Reason, then the Company or Scotts shall pay
all Accrued Obligations to the Employee and neither the Company nor Scotts shall
have any further obligations to the Employee under this Agreement.

               (c)  TERMINATION WITHOUT CAUSE; TERMINATION FOR GOOD REASON.  If
(i) the Company shall terminate the Employee's employment, other than for
Disability or for Cause, or (ii) the Employee shall terminate his employment for
Good Reason, then:

               (1)  the Company or Scotts shall pay to the Employee, within ten
                    (10) days after the Date of Termination, the Accrued
                    Obligations;

               (2)  the Company or Scotts shall pay to the Employee, within ten
                    (10) days after the Date of Termination, a lump sum amount
                    in cash equal to three (3) multiplied by the sum of (i) the
                    Employee's Base Salary as in effect immediately prior to the
                    circumstances giving rise to the Notice of Termination plus
                    (ii) the highest annual Bonus paid to the Employee in
                    respect of the three years preceding the Date of
                    Termination;

               (3)  to the extent permitted under the terms and conditions of
                    each applicable plan or arrangement, the Company or Scotts
                    shall pay to the Employee a lump sum payment, in cash,
                    within ten (10) days after the Date of Termination, equal to
                    the Employee's accrued benefits (or the actuarial equivalent
                    if applicable) as of the Date of Termination under the
                    Pension Plans and the Benefit Plans.  In addition, to the
                    extent permitted under the terms and conditions of each
                    applicable plan or arrangement, for purposes of computing
                    the benefits payable to the Employee under the Pension Plans
                    and Benefit Plans in which the Employee participated as of
                    the Date of Termination, the Employee shall be treated as if
                    he had continued in


                                     -8-



                    employment for three (3) years following the Date of 
                    Termination; and

               (4)  for a period of three (3) years following the Date of
                    Termination the Company or Scotts shall pay all costs and
                    expenses associated with the continuation of coverage of the
                    Employee (as contemplated under Section 4980B of the
                    Internal Revenue Code of 1986, as amended) under all
                    applicable medical, disability and life insurance plans as
                    existed immediately prior to the circumstances giving rise
                    to the Notice of Termination; PROVIDED, HOWEVER, that such
                    coverage shall be reduced to the extent that the Employee
                    obtains similar coverage paid by a subsequent employer.

          9.  NON-DISCLOSURE.  The parties hereto agree, recognize and
acknowledge that during the Term the Employee shall obtain knowledge of
confidential information regarding the business and affairs of the Company.  It
is therefore agreed that the Employee will respect and protect the
confidentiality of all confidential information pertaining to the Company, and
will not (i) without the prior written consent of the Company, (ii) unless
required in the course of the Employee's employment hereunder, or (iii) unless
required by applicable law, rules, regulations or court, governmental or
regulatory authority order or decree, disclose in any fashion such confidential
information to any person (other than a person who is a director of, or who is
employed by, the Company or any subsidiary or who is engaged to render services
to the Company or any subsidiary) at any time during the Term.

         10.  COVENANT NOT TO COMPETE.  (a) Employee hereby agrees that for a
period of three (3) years following the termination of this Agreement (other
than a termination of the Employee's employment (i) by the Employee for Good
Reason, or (ii) by the Company other than for Cause or Disability) (the
"Restricted Period") the Employee shall not, directly or indirectly, whether
acting individually or through any person, firm, corporation, business or any
other entity:

              (i)  engage in, or have any interest in any person, firm,
corporation, business or other entity (as an officer, director, employee, agent,
stockholder or other security holder, creditor, consultant or otherwise) that
engages in any business activity where any aspect of the business of the Company
is conducted, or planned to be conducted, at any time during the Restricted
Period, which business activity is the same as,


                                     -9-



similar to or competitive with the Company as the same may be conducted from 
time to time;

              (ii) interfere with any contractual relationship that may exist
from time to time of the business of the Company, including, but not limited to,
any contractual relationship with any director, officer, employee, or sales
agent, or supplier of the Company; or

              (iii) solicit, induce or influence, or seek to induce or
influence, any person who currently is, or from time to time may be, engaged or
employed by the Company (as an officer, director, employee, agent or independent
contractor) to terminate his or her employment or engagement by the Company.

              (b) Notwithstanding anything to the contrary contained herein,
Employee, directly or indirectly, may own publicly traded stock constituting not
more than three percent (3%) of the outstanding shares of such class of stock of
any corporation if, and as long as, Employee is not an officer, director,
employee or agent of, or consultant or advisor to, or has any other relationship
or agreement with such corporation.

              (c) Employee acknowledges that the non-competition provisions
contained in this Agreement are reasonable and necessary, in view of the nature
of the Company and his knowledge thereof, in order to protect the legitimate
interests of the Company.

         11.  SUCCESSORS; BINDING AGREEMENT.

              (a)  The Company and Scotts shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company or Scotts, by
agreement in form and substance reasonably satisfactory to the Employee, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company and Scotts would be required to perform it if
no such succession had taken place.  Failure of the Company or Scotts to obtain
such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Employee to
compensation from the Company and/or Scotts in the same amount and on the same
terms as he would be entitled to hereunder if he terminated his employment for
Good Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination.  As used in this Agreement, each of "Company" and "Scotts" shall
mean the Company and Scotts; respectively, in each case as hereinbefore defined
and any of their respective


                                     -10-



successors to their businesses and/or assets as aforesaid that executes and 
delivers the agreement provided for in this Section 11 or that otherwise 
becomes bound by all the terms and provisions of this Agreement by operation 
of law.

              (b)  This Agreement and all rights of the Employee hereunder shall
inure to the benefit of and be enforceable by the Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.  If the Employee should die while any amounts would still
be payable to him hereunder if he had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Employee's devisee, legatee, or other designee or, if
there be no such designee, to the Employee's estate (any of which is referred to
herein as a "Beneficiary").

         12.  NOTICE.  For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:

                    If to the Company:

                         Stern's Miracle-Gro Products, Inc.
                         800 Port Washington Boulevard
                         Port Washington, New York 11050
                         Attn:     General Counsel

                    If to Scotts:

                         The Scotts Company
                         14111 Scottslawn Road
                         Marysville, Ohio 43201
                         Attn:     General Counsel

                    If to the Employee:

                         John Kenlon
                         21 Rocky Wood Road
                         Manhassett, New York 11030

or to such other address as each party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

         13.  MISCELLANEOUS.  No provisions of this Agreement may be modified,
waived or discharged unless such waiver,


                                     -11-



modification or discharge is agreed to in writing signed by the Employee and 
such officer of the Company as may be specifically designated by the Board.  
No waiver by a party hereto at any time of any breach by another party hereto 
of, or compliance with, any condition or provision of this Agreement to be 
performed by such other party shall be deemed a waiver of similar or 
dissimilar provisions or conditions at the same or at any prior or subsequent 
time.  No agreements or representations, oral or otherwise, express or 
implied, with respect to the subject matter hereof have been made by the 
parties which are not set forth expressly in this Agreement.  The validity, 
interpretation, construction and performance of this Agreement shall be 
governed by the laws of the state of Ohio without regard to its conflicts of 
law principles.

         14.  VALIDITY.  The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.  To the extent that any of the provisions hereof are inconsistent with
the provisions of the Agreement Containing Consent Order and the Agreement to
Hold Separate (collectively, the "Consent Order") between Scotts and the Federal
Trade Commission, the provisions of the Consent Order shall govern in all
respects.

         15.  COUNTERPARTS.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

         16.  ENTIRE AGREEMENT.  This Agreement sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and
supersedes any and all other prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto; and any
prior agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and cancelled.


                                     -12-



     IN WITNESS WHEREOF, the parties have executed Agreement as of the date and
year first above written.



                                        STERN'S MIRACLE-GRO PRODUCTS, INC.



                                        By/s/ JAMES HAGEDORN
                                          -------------------------------------
                                        Name:
                                        Title:  Exec. V.P.


                                        THE SCOTTS COMPANY



                                        By:/s/ CRAIG WALLEY
                                           ------------------------------------
                                        Name:
                                        Title:



                                        EMPLOYEE



                                        By:/s/ JOHN KENLON
                                           ------------------------------------
                                        JOHN KENLON






                                     -13-



                                                 EXHIBIT 10(l)



    Employment Agreement, dated as of August 7, 1996, between The Scotts
    Company and Charles M. Berger





                                 EMPLOYMENT AGREEMENT
                                           
                                           
         THIS EMPLOYMENT AGREEMENT, dated as of August 7, 1996, between THE
SCOTTS COMPANY, an Ohio corporation (the "Company"), and CHARLES M. BERGER (the
"Employee");

                                W I T N E S S E T H :
                                - - - - - - - - - -

         WHEREAS, the Company desires to enter into this Agreement with the 
Employee; and

         WHEREAS, the Employee desires to enter into this Agreement with the
Company and agrees to be bound by the covenants herein;

         NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth hereinafter, the Company and the Employee agree as follows:

         1.   EMPLOYMENT.  The Company shall employ the Employee for a period
of three (3) years commencing on the date hereof, unless this Agreement is
terminated earlier as provided herein.

         2.   DUTIES.  During the period of his employment, the Employee will
be employed as the Chairman, President and Chief Executive Officer of the
Company and, in addition, in such other executive capacity or capacities (to
which he is suited on the basis of his education and experience and which do not
require time and attention in excess of that reasonably available after
performance of the foregoing duties) for the Company or any subsidiary of the
Company as may be determined from time to time by or under the authority of the
Company's Board of Directors, and he will devote all of his skill, knowledge and
full working time (reasonable vacation time, service as a member of any outside
Boards of Directors and absence for sickness or similar disability excepted)
solely and exclusively to the conscientious performance of such duties.  The
Employee hereby represents that his employment hereunder and compliance by him
with the terms and conditions of this Agreement will not conflict with or result
in the breach of any agreement to which he is a party or by which he may be
bound.

         3.   COMPENSATION.  

         (a)  BASE SALARY.  As compensation for the duties to be performed by
him hereunder, the Company will pay the Employee a base salary at a rate of not
less than $400,000 per year during the period of his employment hereunder,
payable in equal monthly installments.  It is contemplated that the Company will
review the Employee's base salary from time to time during the period of his
employment (the first such review to take place in October, 1997) and, at the
discretion of the Board of Directors, may increase his base salary from time to
time based upon his performance, the then generally prevailing industry salary
scales and other relevant factors.



         (b)  INCENTIVE COMPENSATION.  The Employee shall be entitled to
participate in The Scotts Company Executive Management Incentive Plan, as the
same may be amended from time to time, or any substitute or successor plan, with
an initial target percentage of fifty-five percent (55%) of salary (the full
target percentage to be paid assuming 100% of the Employee's objectives are
met), in accordance with the terms of the said Plan.  The Company shall pay the
Employee a bonus with respect to fiscal 1997 of at least $100,000, so long as
the Employee is a full-time employee of the Company at the end of such fiscal
year.

         (c)  STOCK AND OPTIONS.  In consideration of and as an inducement to 
the Employee to enter into this Agreement, and to provide an incentive for 
successful management of the Company, the Employee shall have the right to 
purchase up to 250,000 shares of Common Stock (the "Common Stock") of the 
Company at the closing price of the Company's Common Stock on the New York 
Stock Exchange on August 7, 1996, and otherwise on the terms and conditions 
set forth in the Stock Option Agreement attached hereto as Exhibit A.  The 
Company makes no representation regarding the value of the Common Stock and 
the Employee agrees that he shall be solely responsible for any tax 
consequences to him of the purchase of such stock and the grant of such 
options.

         4.   EXPENSES.  The Company shall reimburse the Employee for 
reasonable travel, lodging and meal expenses incurred by him in connection 
with his performance of services hereunder in accordance with Company policy.

         5.   BENEFITS.  

         (a)  GENERAL.  The Company shall, at its expense, provide the 
Employee life insurance, medical insurance, disability insurance and other 
benefits comparable to those provided to the Company's other executive 
officers.  The Employee shall be compensated for the expense of any 
relocation in accordance with the standard relocation policies of the Company.

         (b)  AUTOMOBILE.  The Company shall provide Employee with a car 
allowance of $7,000 per year.

         (c)  FINANCIAL SERVICES.  The Company shall reimburse Employee for 
the cost of financial services provided by AYCO.

         6.   TERMINATION PROVISIONS.  

         (a)  AUTOMATIC TERMINATION; TERMINATION BY THE COMPANY.  The 
Employee's employment hereunder shall automatically terminate upon his death 
or Disability (as hereinafter defined), and the Company may terminate the 
Employee's employment for "Cause" (as hereinafter defined).  For purposes of 
this Agreement, "Disability" is defined to mean that, as a result of the 
Employee's incapacity due to physical or mental illness, the Employee shall 
have been absent from his duties as an officer of the Company on a 
substantially full-time basis for six (6) consecutive months, and the 
Employee shall not have returned to the performance of such duties on a 
full-time 

                                      -2-



basis within thirty (30) days after the Company notifies the Employee in 
writing that it intends to replace him.  

         For purposes of this Agreement, the Company shall have "Cause" to 
terminate the Employee's employment hereunder upon (i) the failure by the 
Employee to substantially perform his duties pursuant to Section 2 hereof 
(other than such failure due to physical or mental illness) and continuance 
of such failure for more than twenty (20) days (or, if not reasonably 
correctable within 20 days, such additional time as may reasonably be 
required) after the Company notifies the Employee in writing that he is 
failing to substantially perform his duties; (ii) the engaging by the 
Employee in willful misconduct which is materially injurious to the Company 
or any subsidiary of the Company; or (iii) the conviction of the Employee of, 
or the entering by the Employee of a plea of NOLO CONTENDERE to, a crime 
which constitutes a felony involving moral turpitude.  Notwithstanding the 
foregoing, the Employee shall not be deemed to have been terminated for Cause 
unless and until there should be delivered to him a copy of a resolution, 
duly adopted by the Board of Directors of the Company, finding that the 
Company has "Cause" to terminate the Employee as contemplated in this Section 
6(a).

         (b)  NOTICE OF TERMINATION.  Any termination by the Company pursuant 
to Section 6(a) hereof shall be communicated by a written Notice of 
Termination (as hereinafter defined) to the other party to this Agreement.  
For purposes of this Agreement, a "Notice of Termination" shall mean a notice 
which shall indicate the specific termination provisions in this Agreement 
relied upon and shall set forth in reasonable detail the facts and 
circumstances claimed to provide a basis for termination of employment.

         (c)  PAYMENTS UPON TERMINATION.  If the Employee's employment is 
terminated by the Company without Cause, as a result of the Employee's death 
or Disability, as a result of Employee's Cause (as hereinafter defined) or as 
a result of a Change of Control (as hereinafter defined), the Company shall 
pay the Employee (i) his full base salary at the annual base rate in effect 
immediately prior to the Date of Termination (as hereinafter defined) for a 
period of twenty-four (24) months after the Date of Termination and (ii) 
incentive compensation for a period of twenty-four (24) months after the Date 
of Termination equal to the lesser of Employee's target percentage in effect 
at the Date of Termination (the Employee being deemed to have earned his 
target percentage for such year) or the amount of the Employee's last actual 
bonus.  If the Employee's employment is terminated during the Company's 1997 
fiscal year for any reason which would entitle the Employee to receive the 
payments provided for in the immediately preceding sentence, the amount of 
incentive compensation which the Employee shall be deemed to have earned in 
fiscal 1997 for the purpose of calculating the payments owed to the Employee 
upon termination shall be the sum of $100,000.  The parties acknowledge that 
the 24-month period in the first sentence of this Section 6(c) may extend 
beyond the term hereof.  If the Employee voluntarily terminates his 
employment, or if the Employee's employment with the Company is terminated 
for any other reason (including for Cause as set forth in Section 6(a)), the 
Company shall pay the Employee his full base salary through the Date of 
Termination at the annual base rate in effect immediately prior to the Date 
of Termination and shall have no other obligation to the Employee except to 
honor his stock options according to their terms.


                                    -3-



         (d)  DATE OF TERMINATION.  As used in this Agreement, the term "Date
of Termination" shall mean (i) if the Employee's employment is terminated for
Cause, the date on which the Company delivers a written Notice of Termination as
contemplated by Section 6(b), (ii) if the Employee's employment is terminated by
his death, the date of his death, (iii) if the Employee's employment is
terminated upon his Disability, the date thirty (30) days after the Company
notifies the Employee in writing that it intends to replace him as contemplated
by Section 6(a) hereof and (iv) if the Employee's employment is terminated for
any other reason, the date on which Notice of Termination is given.

         (e)  CHANGE OF CONTROL.  If the employment of the Employee is
terminated as a result of a Change of Control, he shall be entitled to the
payments set forth in the first sentence of Section 6(c) above.  As used in this
Agreement, "Change of Control" means the occurrence of any of the following
events:

              (i)  the members of the Board at the beginning of any consecutive
twenty-four (24) 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 (24) calendar month period, shall
be treated as an Incumbent Director; or

              (ii) any "person," including a "group" (as such terms are used in
Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (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 forty-nine percent (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 fifty percent (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 forty-nine percent (49%) of the Stock of the
Company.

         (f)  MITIGATION METHOD OF PAYMENT:  LUMP SUM.  Any compensation or
benefits to which the Employee may be entitled for termination without Cause or
as a result of a 


                                       -4-



Change of Control pursuant to Section 6(c) shall be reduced or canceled to 
the extent that the Employee receives compensation or benefits of like nature 
by reason of his securing other employment.  Employee agrees to make a good 
faith effort to obtain other employment subject to the limitations imposed 
upon the Employee pursuant to Section 8.  Compensation payable pursuant to 
Section 6(c) shall be paid monthly in 24 equal monthly consecutive 
installments.  Notwithstanding anything else contained in this Section 6, the 
Company may pay to the Employee at any time after the Date of Termination, in 
a lump sum, an amount equal to the Company's good faith determination of the 
present value of the compensation remaining to be paid to the Employee as of 
the date of such lump sum payment, calculated using a discount factor based 
on the prime rate of any major New York bank plus one percent (1%), whereupon 
the Company's obligations under this Section 6 shall be discharged in full 
and it shall have no further obligation to the Employee except to honor his 
stock options according to their terms.

         (g)  LIMITATION.  Anything in this Agreement or the Stock Option Plan
and Agreement to the contrary notwithstanding, the Employee's entitlement to
payments under this Section 6 or under any other plan or agreement and the
acceleration of the exercisability of stock options under the terms of any
applicable stock option plan shall be limited to the extent necessary so that no
payment to be made to the Employee on account of termination of his employment
with the Company (or the value of such acceleration on account thereof) will be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), as then in effect, but only if, by reason of
such limitation, the Employee's net after tax benefit shall exceed the net after
tax benefit if such reduction were not made.  "Net after tax benefit" shall mean
(i) the sum of all payments and benefits (including the value of acceleration of
stock options) that the Employee is then entitled to receive under this Section
6 or under any other plan or agreement that would constitute a "parachute
payment" within the meaning of Section 280G of the Code, less (ii) the amount of
federal income tax payable with respect to the payments and benefits described
in clause (i) above calculated at the maximum marginal income tax rate for each
year in which such payments and benefits shall be paid to the Employee (based
upon the rate in effect for such year as set forth in the Code at the time of
the first payment of the foregoing), less (iii) the amount of excise tax imposed
with respect to the payments and benefits described in clause (i) above by
Section 4999 of the Code.  Any limitation under this subsection 6(g) of the
Employee's entitlement to payments or upon the acceleration of exercisability of
stock options shall be made in the manner and in the order directed by the
Employee.

         (h)  EMPLOYEE'S CAUSE.  The Employee shall have the right to terminate
his employment at any time, without cause, on at least 30 days' advance written
notice to the Company.  

         In addition, the Employee may terminate his employment, effectively
immediately upon notice (or, effective as otherwise provided in subparagraphs
(i) and (iii), below) in the event of the following ("Employee's Cause"):

              (i)  the failure of the Company to substantially perform its
duties pursuant to this Agreement or the Stock Option Agreement attached hereto
as Exhibit A and the continuance of such failure for more than 20 days (or, if
not reasonably correctable within 20 

                                          -5-




days, such additional time as may reasonably be required) after the Employee 
notifies the Company in writing that it is failing to substantially perform 
its duties;

              (ii) the Company's filing a voluntary petition in bankruptcy or
insolvency;

              (iii) the filing against the Company of an involuntary petition 
in bankruptcy or insolvency which is not dismissed within 30 days after its 
filing;

              (iv) the Company's being convicted of a criminal act relating to
any activity occurring prior to the date hereof, the effect of which has a
material adverse effect on the business operations of the Company; or

              (v)  the breach or inaccuracy in any material respect of the
Company's representations and warranties contained herein.

         In the event of his termination as a result of Employee Cause,
notwithstanding any provision of this Agreement to the contrary, the Employee
shall be entitled to all compensation and benefits provided for in the first
sentence of Section 6(c) hereof.

         7.   UNAUTHORIZED DISCLOSURE.

         (a)  During the period of his employment hereunder and thereafter, the
Employee shall not, without the written consent of the Board of the Company or a
person authorized thereby, disclose to any person, information, knowledge or
data which is not theretofore publicly known and in the public domain obtained
by him while in the employ of the Company with respect to the Company or any of
its subsidiaries or of any products, improvements, formulas, designs of styles,
processes, customers, methods of distribution or methods of manufacture, sales,
prices, profits, costs, contracts, suppliers, business prospects, business
methods, techniques, research, trade secrets, or know-how of the Company or any
of its subsidiaries, regardless of whether such information is confidential,
except as the Employee, in good faith, reasonably believes to be for the
Company's benefit.  For a period of five (5) years following the termination of
employment hereunder, the Employee shall not disclose any information, knowledge
or data of the type described above except as may be required in connection with
any judicial or administrative proceedings or inquiry, or otherwise required by
law.  The covenant contained in this Section 7 shall survive the termination of
the Employee's employment pursuant to this Agreement.

         (b)  The foregoing provision of this Section 7 shall be binding upon
the Employee's heirs, successors and legal representatives.

         (c)  The foregoing does not apply to disclosure of the terms of this
Agreement and any other aspects of the Employee's compensation and benefits to
the Employee's accountants, financial planners, insurance agents and advisors.


                                       -6-


         8.   COVENANT NOT TO COMPETE.  In consideration of his employment
hereunder and in view of the key position in which he will serve the Company,
the Employee agrees that during the period of his employment by the Company
hereunder and (unless the Company terminates his employment for Cause as
provided in Section 6(a) hereof) for two (2) years after the date of termination
of such employment he will not directly or indirectly own, manage, operate,
control, be employed by, participate in or be connected in any manner with the
ownership, management, operation or control of any business involving lawn,
garden, horticultural or turf care products or services in any area where the
Company's business is being conducted at the time of such termination.  The
covenant contained in this Section 8 shall survive the termination of the
Agreement.  The foregoing shall (i) be ineffective in the event of the
Employee's termination of his employment on the basis of Employee Cause, and
(ii) not apply in the event of a reorganization of the Company which results in
any of its divisions or subsidiaries becoming separate enterprises of which the
Employee becomes an employee.

         9.   ARBITRATION.  Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Columbus, Ohio, in accordance with the rules of the American Arbitration
Association then in effect.

         10.  SUCCESSORS; BINDING AGREEMENT.  The Company will require any
successor (by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Employee, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place. 
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Employee to compensation from the Company in the same amount and on the same
terms as the Employee would be entitled hereunder according to the provisions of
the first sentence of Section 6(c) hereof, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.  As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which executed and delivers the
agreement provided for in this Section 10 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.  This
Agreement shall inure to the benefit of and be enforceable by the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.  Any amounts payable to the Employee
hereunder after his death shall be paid in accordance with the terms of this
Agreement to the Employee's devisee, legatee, or other designee or, if there be
no such designee, to his estate, unless otherwise provided herein.

         11.  INDEMNIFICATION.  The Company agrees that it shall indemnify the
Employee to the fullest extent permitted by Ohio law.

         12.  NOTICES.  All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by certified express
mail, return receipt requested, postage prepaid, to the 


                                     -7-


parties to this Agreement at the following addresses or to such other address 
as either party to this Agreement shall specify by notice to the other:

         If to the Company, to it at:

              The Scotts Company
              14111 Scottslawn Road
              Marysville, Ohio  43041
              Attn:  General Counsel
              
         If to the Employee:
         
              Charles M. Berger
              40 Hill Road
              Sands Point, New York  11050
              
         With a Copy to:
              
              Sheldon P. Berger
              Resch Polster Alpert & Berger LLP
              10390 Santa Monica Blvd., 4th Floor
              Los Angeles, California  90025-5058
              
All notices and communications shall be deemed to have been received on the date
of delivery or on the third business day after the mailing thereof.

         13.  MISCELLANEOUS.  No provisions of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is approved
by the Board of Directors of the Company or a person authorized thereby and is
agreed to in a writing signed by the Employee and such officer as may be
specifically designated by the Board.  No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.  No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement.  The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Ohio.

         14.  VALIDITY.  The invalidity or unenforceability of any one or more
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

         15.  COUNTERPARTS.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.


                                      -8-


         16.  AUTHORITY.  The individual signing this Agreement on behalf of
the Company hereby represents and warrants that he, acting alone, is fully
authorized and empowered to do so, that he does so to the fullest extent of his
authority, and that this Agreement is binding upon and enforceable against the
Company.

         17.  REPRESENTATIONS AND WARRANTIES.  The Company represents and
warrants to the Employee that:

         (a)  The Company and each of its subsidiaries have been duly organized
and are validly existing under the laws of their respective states of
organization, and each is qualified or licensed as a foreign corporation in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualification or licensing necessary, except
for those jurisdictions where the failure to be so qualified or licensed  would
not, individually or in the aggregate, have a material adverse effect on the
business operation of the Company or its subsidiaries.

         (b)  The Company has the full right, power, and authority to execute
and deliver this Employment Agreement and the Stock Option Agreement with the
Employee, and to perform all of the Company's obligations under each and to
carry out all of the transactions contemplated by each Agreement.  Except as
otherwise disclosed in writing to the Employee, neither the execution and
delivery of the Employment Agreement or the Stock Option Agreement, nor the
consummation of the transactions contemplated therein, will, to the best of the
Company's knowledge, (i) violate any statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Company is subject or any provision
of the Company's articles of incorporation or code of regulations, or
(ii) conflict with, result in a breach of, constitute a default under, result in
acceleration of, or create in any party the right to terminate, modify, or
cancel, any material contract to which the Company or any of its subsidiaries is
a party or to which any of their assets is subject.

         (c)  The business of the Company and its subsidiaries has been and is
being conducted in all material respects in compliance with all applicable
statutes, laws, rules, ordinances, codes and regulations of foreign, federal,
state, and local governmental authorities (collectively, "Laws"), and the
Company and each of its subsidiaries holds, and is in all material respects in
compliance with, all licenses, permits, and authorizations necessary for the
conduct of the Company's and each subsidiary's business pursuant to all Laws to
which the Company, any subsidiary, and/or any of their businesses or assets may
be subject.

         (d)  There are no actions, suits, or proceedings pending, or, to the
best of the Company's knowledge, threatened or anticipated, before a court or
governmental or administrative body or agency which are materially affecting, or
could materially affect, the Company, any of its subsidiaries, or any of their
businesses or assets, except as set forth in Schedule 1 hereto.  Neither the
Company nor any of its subsidiaries is presently subject to any injunction,
order, or other decree of any court of competent jurisdiction which materially
affects 

 
                                        -9-




the business or assets of the Company or any subsidiary, nor to the best
of the Company's knowledge, is the Company, any of its subsidiaries, or any of
their officers or directors subject to any private investigation or audit being
conducted by any governmental or administrative body or agency, except as set
forth in Schedule 1 hereto.

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.


                                  THE SCOTTS COMPANY
                                  
                                  
                                  By:  /S/ P. D. YEAGER              
                                      -----------------------------------------
                                  
                                  
                                  
                                       /S/ CHARLES M. BERGER              
                                  ---------------------------------------------
                                  Charles M. Berger



                                     -10-


                                                                 EXHIBIT 10(m)


          Stock Option Agreement, dated as of August 7, 1996, between The 
          Scotts Company and Charles M. Berger





                                STOCK OPTION AGREEMENT
                            (NON-QUALIFIED STOCK OPTIONS)
                                           
                                           
     THIS AGREEMENT is made to be effective as of August 7, 1996, by and 
between The Scotts Company, an Ohio corporation (the "Company"), and Charles M. 
Berger (the "Optionee").                                            

                                     WITNESSETH:
                                           
     WHEREAS, the Board of Directors of The Scotts Company, a Delaware 
corporation ("Scotts Delaware"), adopted The Scotts Company 1992 Long Term
Incentive Plan (the "1992 Plan") on November 11, 1992; and

     WHEREAS, the stockholders of Scotts Delaware, upon the recommendation of
the Board of Directors of Scotts Delaware, approved the Plan at the Annual
Meeting of Stockholders of Scotts Delaware held on February 25, 1993; and

     WHEREAS, pursuant to Section 2.04(a) of the Agreement of Merger, dated as
of August 16, 1994, between Scotts Delaware and the Company, the Company 
assumed the Plan and all of the obligations of Scotts Delaware thereunder 
effective as of September 20, 1994, the effective date of the merger of 
Scotts Delaware with and into the Company; and

     WHEREAS, the Board of Directors of the Company adopted The Scotts Company
1996 Stock Option Plan (the "1996 Plan") on February 12, 1996; and

     WHEREAS, the shareholders of the Company, approved the 1996 Plan at the
Annual Meeting of Shareholders of the Company held on April 9, 1996; and

     WHEREAS, the 1992 Plan and the 1996 Plan are hereinafter sometimes 
referred to collectively as "the Plans"; and

     WHEREAS, pursuant to the provisions of the Plans, the Board of Directors 
of the Company has appointed a Compensation and Organization Committee (the
"Committee") to administer the Plans and the Committee has determined that
options to acquire common shares, without par value (the "Common Shares"), of
the Company should be granted to the Optionee under the terms and conditions 
set forth in this Agreement;

     NOW, THEREFORE, in consideration of the premises, the parties hereto make
the following agreements, intending to be legally bound thereby:

     1.   GRANT OF OPTIONS.  The Company hereby grants to the Optionee two
options (the "Options") to purchase a total of 250,000 Common Shares of the




Company.  The first Option shall cover 150,000 Common Shares and be granted
under the 1992 Plan, while the second Option shall cover 100,000 Common Shares
and be granted under the 1996 Plan.  The Options are not intended to qualify as
incentive stock options under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").

     2.   TERMS AND CONDITIONS OF THE OPTIONS.

          (A)  OPTION PRICE.  The purchase price (the "Option Price") to be 
paid by the Optionee to the Company upon the exercise of each of the Options 
shall be $17.75 per share (being 100% of the Fair Market Value (as that term 
is defined in the Plans) for the Common Shares of the Company on the date of 
grant of the Options), subject to adjustment as provided in Section 3.

          (B)  EXERCISE OF THE OPTIONS.  The Options shall become vested and 
may be exercised as follows:

               (i)   at any time, as to the 150,000 Common Shares subject to 
the Option granted under the 1992 Plan;

               (ii)  assuming the Optionee is employed by the Company 12 months
from the date of this Agreement, at any time after 12 months from the date of
this Agreement, as to 50,000 of the Common Shares subject to the Option granted
under the 1996 Plan; and

               (iii) assuming the Optionee is employed by the Company 24
months from the date of this Agreement, at any time after 24 months from the
date of this Agreement, as to the remaining 50,000 of the Common Shares subject
to the Option granted under the 1996 Plan.

     Subject to the other provisions of this Agreement and to the provisions of
the Plans, if the Options become exercisable as to certain Common Shares, they
shall remain exercisable as to those Common Shares until the date of expiration
of the term of the Options.  The Committee may, but shall not be required to
(unless otherwise provided in this Agreement or in the Plans), accelerate the
schedule of the time or times when the Options may first be exercised, but 
shall not shorten the Term of each Option set forth in Paragraph C of this 
Section 2. 

     The grant of the Options shall not confer upon the Optionee any right to
continue in the employment of the Company nor limit in any way the right of the
Company to terminate the employment of the Optionee at any time in accordance
with law and the Company's governing corporate documents.

          (C)  TERM OF OPTION.  The Options shall in no event be exercisable
after the expiration of ten years from the date of this Agreement.


                                       2




          (D)  METHOD OF EXERCISE.  To the extent that any portion of either
Option is exercisable, that portion of such Option may be exercised in whole or
in part by delivering to the Committee in the care of the General Counsel or 
the Director, Legal Affairs of the Company, a written notice of exercise, 
signed by the Optionee or, in the event of the death of the Optionee, by such 
other person as is entitled to exercise the Option.  The notice of exercise 
shall state the number of full Common Shares in respect of which the Option 
is being exercised.  Payment for all such Common Shares shall be made to the 
Company at the time the Option is exercised.  The Option Price may be paid in 
cash (including check, bank draft or money order) in U.S. dollars, or with 
the consent of the Committee, by the transfer by the Optionee to the Company 
of free and clear Common Shares already owned by the Optionee having a Fair 
Market Value (as that term is defined in the Plans) on the exercise date 
equal to the Option Price, or by a combination of cash and Common Shares 
already owned by the Optionee equal in the aggregate to the Option Price for 
the Common Shares being purchased.  After payment in full for the Common 
Shares to be purchased upon exercise of the Option has been made, the Company 
shall take all such action as is necessary to deliver appropriate share 
certificates evidencing the Common Shares purchased upon the exercise of the 
Option to the Optionee as promptly thereafter as is reasonably practicable.

          (E)  SATISFACTION OF TAXES AND TAX WITHHOLDING REQUIREMENTS.  The
Company has the right to withhold, or require the Optionee to remit to the
Company, an amount sufficient to satisfy any applicable federal, state or local
withholding tax requirements.  The Committee may permit the Optionee to elect
(i) to have Common Shares otherwise issuable under the applicable Plan withheld
by the Company or (ii) to deliver to the Company free and clear Common Shares
already owned by the Optionee having a Fair Market Value (as that term is
defined in the Plans) on the exercise date sufficient to pay all or part of the
Optionee's estimated total federal, state and local tax obligations.

     3.   ADJUSTMENTS AND CHANGES IN THE COMMON SHARES.  In the event of any
share dividend or share 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, appropriate adjustments shall be made by the 
Committee in the number of Common Shares and Option Price applicable to the 
Options to reflect such change.

     4.   CHANGE OF CONTROL PROVISIONS.  In the event of a Change of Control 
(as defined in the Plans), the Options shall be canceled in exchange for the 
payment to the Optionee of cash in an amount equal to the excess of the highest
price paid for Common Shares of the Company during the preceding 30 day period 
over the exercise price for such Options.  Notwithstanding the foregoing, if 
the Committee determines that the Optionee will receive a new award (or have 
the Options honored in a manner which preserves its value and eliminates the 
risk that the value of the Options will be forfeited due to involuntary 
termination), no cash payment will be made as a result of a


                                       3




Change of Control. If any cash payment with respect to the Options would result
in the Optionee's incurring potential liability under Section 16(b) of the 
Securities Exchange Act of 1934, the cash payment will be deferred until the 
first time at which such cash payment may be made without subjecting the 
Optionee to such potential liability under Section 16(b) by reason of such 
cash payment. 

     5.   NONTRANSFERABILITY OF THE OPTIONS.  The Options may not be sold,
transferred, pledged, assigned or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution.  The Options may not 
be exercised during the lifetime of the Optionee except by the Optionee.

     6.   EXERCISE AFTER TERMINATION OF EMPLOYMENT.

          (A)  In the event of the termination of the Optionee's employment by
reason of retirement, Disability (as that term is defined in the Plans), or
death, the Options may thereafter be exercised in full (whether or not then
exercisable by their terms) for a period of five years, subject to the stated
term of the Options.

          (B)  In the event of the Company's termination of the Optionee's
employment for Cause, as defined in that certain Employment Agreement entered
into between the Optionee and the Company as of even date herewith, the Options
shall be forfeited.

          (C)  In the event of the Optionee's termination of employment for any
reason other than retirement, Disability, death or for Cause, the Options shall
be exercisable, to the extent exercisable at the date of termination of
employment, for a period of 90 days, subject to the stated term of the Options.

     7.   RESTRICTIONS OF TRANSFER OF COMMON SHARES.  Anything contained in 
this Agreement or elsewhere to the contrary notwithstanding:

          (A)  The Options shall not be exercisable for the purchase of any
Common Shares subject thereto except for:

               (i)   Common Shares subject thereto which at the time of such
exercise and purchase are registered under the Securities Act of 1933, as
amended (the "1933 Act");

               (ii)  Common Shares subject thereto which at the time of such
exercise and purchase are exempt or are the subject matter of an exempt
transaction or are registered by description, by coordination or by
qualification, or at such time are the subject matter of a transaction which 
has been registered by description, all in accordance with Chapter 1707 of 
the Ohio Revised Code, as amended; and


                                       4




               (iii) Common Shares subject thereto in respect of which the
laws of any state applicable to such exercise and purchase have been satisfied.

                     The Company hereby covenants that it shall have adequate
amounts of Common Shares available, at all times after the Options are
exercisable in whole or in part, to satisfy the foregoing, and shall take all
necessary actions to insure compliance with the foregoing conditions.

          (B)  If any Common Shares subject to the Options are sold or issued
upon the exercise thereof to a person who (at the time of such exercise or
thereafter) is an affiliate of the Company for purposes of Rule 144 promulgated
under the 1933 Act, then upon such sale and issuance:

               (i)  such Common Shares shall not be transferable by the holder
thereof, and neither the Company nor its transfer agent or registrar, if any,
shall be required to register or otherwise to give effect to any transfer
thereof and may prevent any such transfer, unless the Company shall have
received an opinion from its counsel to the effect that any such transfer would
not violate the 1933 Act; and

               (ii) the Company may cause each share certificate evidencing 
such Common Shares to bear a legend reflecting the applicable restrictions on 
the transfer thereof.

          (C)  Any share certificate issued to evidence Common Shares as to
which the Options have been exercised may bear such legends and statements as
shall be required to comply with applicable federal and state laws and
regulations, provided that this paragraph does not relieve the Company of its
obligations pursuant to Section 7(A) above.

          (D)  Nothing contained in this Agreement (other than Paragraph
7(A)(iii)) or elsewhere shall be construed to require the Company to take any
action whatsoever to make the Options exercisable or to make transferable any
Common Shares purchased and issued upon the exercise of the Options.

     (8)  RIGHTS OF THE OPTIONEE AS A SHAREHOLDER.  The Optionee shall have no
rights or privileges as a shareholder of the Company with respect to any Common
Shares of the Company covered by the Options until the date of exercise.

     (9)  PLANS AS CONTROLLING.  All terms and conditions of the Plans on the
effective date hereof applicable to the Options which are not set forth in this
Agreement shall be deemed incorporated herein by reference.  In the event that
any term or condition of this Agreement is inconsistent with the terms and
conditions of the Plans, the Plans shall be deemed controlling.


                                       5




     (10) GOVERNING LAW.  This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.

     (11) RIGHTS AND REMEDIES CUMULATIVE.  All rights and remedies of the
Company and of the Optionee enumerated in this Agreement shall be cumulative
and, except as expressly provided otherwise in this Agreement, none shall
exclude any other rights or remedies allowed by law or in equity, and each of
said rights and remedies may be exercised and enforced concurrently.

     (12) CAPTIONS.  The captions contained in this Agreement are included only
for convenience of reference and do not define, limit, explain or modify this
Agreement or its interpretation, construction or meaning and are in no way to 
be construed as a part of this Agreement.

     (13) SEVERABILITY.  If any provision of this Agreement or the application
of any provision hereof to any person or any circumstance shall be determined 
to be invalid or unenforceable, then such determination shall not affect any 
other provision of this Agreement or the application of such provision to any 
other person or circumstance, all of which other provisions shall remain in 
full force and effect, and it is the intention of each party to this 
Agreement that if any provision of this Agreement is susceptible of two or 
more constructions, one of which would render the provision enforceable and 
the other or others of which would render the provision unenforceable, then 
the provision shall have the meaning which renders it enforceable.

     (14) NUMBER AND GENDER.  When used in this Agreement, the number and 
gender of each pronoun shall be construed to be such number and gender as the 
context, circumstances or its antecedent may require.

     (15) ENTIRE AGREEMENT.  This Agreement constitutes the entire Agreement
between the Company and the Optionee in respect of the subject matter of this
Agreement, and this Agreement supersedes all prior and contemporaneous
agreements between the parties hereto in connection with the subject matter of
this Agreement.  No change, termination or attempted waiver of any of the
provisions of this Agreement shall be binding upon any party hereto unless
contained in a writing signed by the party to be charged.

     (16) SUCCESSORS AND ASSIGNS.  This Agreement shall inure to the benefit of
and be binding upon the successors and assigns (including successive, as well as
immediate, successors and assigns) of the Company.


                                       6




     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed to be effective as of the date first written above.

                                        COMPANY:

                                        The Scotts Company,
                                        an Ohio corporation

                                        By:  /S/ P. D. YEAGER              
                                             ------------------------------

                                        Its: Executive Vice President and
                                             Chief Financial Officer

                                        OPTIONEE:

                                        Charles M. Berger

                                             /S/ CHARLES M. BERGER         
                                         -----------------------------------
                                             Signature of Optionee

                                         Address:  40 Hill Road
                                                   Sands Point, NY 11050

                                         SSN: ###-##-####









                                       7




                                                                  EXHIBIT 10(n)


               Stock Option Agreement, dated as of March 5, 1996,
               between The Scotts Company and Tadd C. Seitz





























                            STOCK OPTION AGREEMENT
                        (NON-QUALIFIED STOCK OPTIONS)

    THIS AGREEMENT is made to be effective as of March 5, 1996, by and 
between The Scotts Company, an Ohio corporation (the "Company"), and Tadd C. 
Seitz (the "Optionee").

                                 WITNESSETH:

    WHEREAS, the Board of Directors of The Scotts Company, a Delaware 
corporation ("Scotts Delaware"), adopted The Scotts Company 1992 Long Term 
Incentive Plan (the "Plan") on November 11, 1992; and

    WHEREAS, the stockholders of Scotts Delaware, upon the recommendation of 
the Board of Directors of Scotts Delaware, approved the Plan at the Annual 
Meeting of Stockholders of Scotts Delaware held on February 25, 1993; and

    WHEREAS, pursuant to Section 2.04(a) of the Agreement of Merger, dated as 
of August 16, 1994, between Scotts Delaware and the Company, the Company 
assumed the Plan and all of the obligations of Scotts Delaware thereunder 
effective as of September 20, 1994, the effective date of the merger of 
Scotts Delaware with and into the Company; and

    WHEREAS, the Board of Directors of the Company adopted The Scotts Company 
1996 Stock Option Plan (the "1996 Plan") on February 12, 1996; and

    WHEREAS, the shareholders of the Company, approved the 1996 Plan at the 
Annual Meeting of Shareholders of the Company held on April 9, 1996; and

    WHEREAS, the 1992 Plan and the 1996 Plan are hereinafter sometimes 
referred to collectively as "the Plans"; and

    WHEREAS, pursuant to the provisions of the Plans, the Board of Directors 
of the Company has appointed a Compensation and Organization Committee (the 
"Committee") to administer the Plans and the Committee has determined that 
options to acquire common shares, without par value (the "Common Shares"), of 
the Company should be granted to the Optionee under the terms and conditions 
set forth in this Agreement;

    NOW, THEREFORE, in consideration of the premises, the parties hereto make 
the following agreements, intending to be legally bound thereby:







    1.   GRANT OF OPTIONS.  The Company hereby grants to the Optionee three 
options (the "Options") to purchase a total of 100,000 Common Shares of the 
Company.  The first option shall cover 60,000 Common Shares and be granted 
under the 1992 Plan, while the second and third options shall cover 20,000 
Common Shares each and be granted under the 1996 Plan.  The Options are not 
intended to qualify as incentive stock options under Section 422 of the 
Internal Revenue Code of 1986, as amended (the "Code").

    2.   TERMS AND CONDITIONS OF THE OPTIONS.

         (A)  OPTION PRICE.  The purchase price (the "Option Price") to be 
paid by the Optionee to the Company upon the exercise of the Options shall be:

         -    60,000 @ $17.125 per share (granted under the 1992 Plan),
         -    20,000 @ $18.00 per share (granted under the 1996 Plan),
         -    20,000 @ $22.00 per share (granted under the 1996 Plan).

The purchase price is subject to adjustment as provided in Section 3.

         (B)  EXERCISE OF THE OPTIONS.  The Options may be exercised 
immediately.

    The grant of the Options shall not confer upon the Optionee any right to 
continue in the employment of the Company nor limit in any way the right of 
the Company to terminate the employment of the Optionee at any time in 
accordance with law and the Company's governing corporate documents.

         (C)  OPTION TERM.  The Options shall in no event be exercisable 
after the expiration of ten years from the date of this Agreement.

         (D)  METHOD OF EXERCISE.  To the extent that any portion of these 
Options is exercisable, that portion of such Option may be exercised in whole 
or in part by delivering to the Committee in the care of the General Counsel 
or the Director, Legal Affairs of the Company, a written notice of exercise, 
signed by the Optionee or, in the event of the death of the Optionee, by such 
other person as is entitled to exercise the Option.  The notice of exercise 
shall state the number of full Common Shares in respect of which the Option 
is being exercised. Payment for all such Common Shares shall be made to the 
Company at the time the Option is exercised.  The Option Price may be paid in 
cash (including check, bank draft or money order) in U.S. dollars, or with 
the consent of the Committee, by the transfer by the Optionee to the Company 
of free and clear Common Shares already owned by the Optionee having a Fair 
Market Value (as that term is defined in the Plans) on the exercise date 
equal to the Option Price, or by a combination of cash and Common Shares 
already owned by the Optionee equal in the aggregate to the Option Price for 
the Common Shares being purchased. After payment in full for the Common 
Shares to be purchased upon exercise of the Option has been 


                                      2



made, the Company shall take all such action as is necessary to deliver 
appropriate share certificates evidencing the Common Shares purchased upon 
the exercise of the Option to the Optionee as promptly thereafter as is 
reasonably practicable.

         (E)  SATISFACTION OF TAXES AND TAX WITHHOLDING REQUIREMENTS.  The 
Company has the right to withhold, or require the Optionee to remit to the 
Company, an amount sufficient to satisfy any applicable federal, state or 
local withholding tax requirements.  The Committee may permit the Optionee to 
elect (i) to have Common Shares otherwise issuable under the Plans withheld 
by the Company or (ii) to deliver to the Company free and clear Common Shares 
already owned by the Optionee having a Fair Market Value (as that term is 
defined in the Plans) on the exercise date sufficient to pay all or part of 
the Optionee's estimated total federal, state and local tax obligations.

    3.   ADJUSTMENTS AND CHANGES IN THE COMMON SHARES.  In the event of any 
share dividend or share 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, appropriate adjustments shall be 
made by the Committee in the number of Common Shares and Option Price 
applicable to the Options to reflect such change.

    4.   CHANGE IN CONTROL PROVISIONS.  In the event of a Change in Control 
(as defined in the Plans), the Options shall be canceled in exchange for the 
payment to the Optionee of cash in an amount equal to the excess of the 
highest price paid (or offered) for Common Shares of the Company during the 
preceding 30 day period over the exercise price for such Options.  
Notwithstanding the foregoing, if the Committee determines that the Optionee 
will receive a new award (or have the Options honored in a manner which 
preserves their value and eliminates the risk that the value of the Options 
will be forfeited due to involuntary termination), no cash payment will be 
made as a result of a Change in Control. If any cash payment with respect to 
the Options would result in the Optionee's incurring potential liability 
under Section 16(b) of the Securities Exchange Act of 1934, the cash payment 
will be deferred until the first time at which such cash payment may be made 
without subjecting the Optionee to such potential liability under Section 16 
(b) by reason of such cash payment.

    5.   NONTRANSFERABILITY OF THE OPTIONS.  The Options may not be sold, 
transferred, pledged, assigned or otherwise alienated or hypothecated, other 
than by will or by the laws of descent and distribution.  The Options may not 
be exercised during the lifetime of the Optionee except by the Optionee.

    6.   EXERCISE AFTER TERMINATION OF EMPLOYMENT.

         (A)  In the event of the termination of the Optionee's employment by
reason of retirement, Disability (as that term is defined in the Plans), or
death, the 


                                      3



Options may thereafter be exercised in full for a period of five years, 
subject to the stated term of the Options.

         (B)  In the event of the Optionee's termination of employment for 
cause, the Options shall be forfeited.

         (C)  In the event of the Optionee's termination of employment for 
any reason other than retirement, Disability, death or for cause, the Options 
shall be exercisable, to the extent exercisable at the date of termination of 
employment, for a period of 30 days, subject to the stated term of the 
Options.

    7.   RESTRICTIONS OF TRANSFER OF COMMON SHARES.  Anything contained in 
this Agreement or elsewhere to the contrary notwithstanding:

         (A)  The Options shall not be exercisable for the purchase of any 
Common Shares subject thereto except for:

              (i)  Common Shares subject thereto which at the time of such 
exercise and purchase are registered under the Securities Act of 1933, as 
amended (the "1933 Act");

              (ii) Common Shares subject thereto which at the time of such 
exercise and purchase are exempt or are the subject matter of an exempt 
transaction or are registered by description, by coordination or by 
qualification, or at such time are the subject matter of a transaction which 
has been registered by description, all in accordance with Chapter 1707 of 
the Ohio Revised Code, as amended; and

              (iii)     Common Shares subject thereto in respect of which the 
laws of any state applicable to such exercise and purchase have been 
satisfied.

         (B)  If any Common Shares subject to the Options are sold or issued 
upon the exercise thereof to a person who (at the time of such exercise or 
thereafter) is an affiliate of the Company for purposes of Rule 144 
promulgated under the 1933 Act, then upon such sale and issuance:

              (i)  such Common Shares shall not be transferable by the holder 
thereof, and neither the Company nor its transfer agent or registrar, if any, 
shall be required to register or otherwise to give effect to any transfer 
thereof and may prevent any such transfer, unless the Company shall have 
received an opinion from its counsel to the effect that any such transfer 
would not violate the 1933 Act; and

              (ii) the Company may cause each share certificate evidencing 
such Common Shares to bear a legend reflecting the applicable restrictions on 
the transfer thereof.


                                      4



         (C)  Any share certificate issued to evidence Common Shares as to 
which the Options have been exercised may bear such legends and statements as 
the Company shall deem advisable to ensure compliance with applicable federal 
and state laws and regulations.

         (D)  Nothing contained in this Agreement or elsewhere shall be 
construed to require the Company to take any action whatsoever to make the 
Options exercisable or to make transferable any Common Shares purchased and 
issued upon the exercise of the Options.

    (8)  RIGHTS OF THE OPTIONEE AS A SHAREHOLDER.  The Optionee shall have no 
rights or privileges as a shareholder of the Company with respect to any 
Common Shares of the Company covered by the Options until the date of 
issuance and delivery of a certificate to the Optionee evidencing such Common 
Shares.

    (9)  PLANS AS CONTROLLING.  All terms and conditions of the Plans 
applicable to the Options which are not set forth in this Agreement shall be 
deemed incorporated herein by reference.  In the event that any term or 
condition of this Agreement is inconsistent with the terms and conditions of 
the Plans, the Plans shall be deemed controlling.

    (10) GOVERNING LAW.  This Agreement shall be governed by and construed in 
accordance with the laws of the State of Ohio.

    (11) RIGHTS AND REMEDIES CUMULATIVE.  All rights and remedies of the 
Company and of the Optionee enumerated in this Agreement shall be cumulative 
and, except as expressly provided otherwise in this Agreement, none shall 
exclude any other rights or remedies allowed by law or in equity, and each of 
said rights or remedies may be exercised and enforced concurrently.

    (12) CAPTIONS.  The captions contained in this Agreement are included 
only for convenience or reference and do not define, limit, explain or modify 
this Agreement or its interpretation, construction or meaning and are in no 
way to be construed as a part of this Agreement.

    (13) SEVERABILITY.  If any provision of this Agreement or the application 
of any provision hereof to any person or any circumstance shall be determined 
to be invalid or unenforceable, then such determination shall not affect any 
other provision of this Agreement or the application of such provision to any 
other person or circumstance, all of which other provisions shall remain in 
full force and effect, and it is the intention of each party to this 
Agreement that if any provision of this Agreement is susceptible of two or 
more constructions, one of which would render the provision enforceable and 
the other or others of which would render the provision unenforceable, then 
the provision shall have the meaning which renders it enforceable.


                                      5



    (14) NUMBER AND GENDER.  When used in this Agreement, the number and 
gender of each pronoun shall be construed to be such number and gender as the 
context, circumstances or its antecedent may require.

    (15) ENTIRE AGREEMENT.  This Agreement constitutes the entire Agreement 
between the Company and the Optionee in respect of the subject matter of this 
Agreement, and this Agreement supersedes all prior and contemporaneous 
agreements between the parties hereto in connection with the subject matter 
of this Agreement.  No change, termination or attempted waiver of any of the 
provisions of this Agreement shall be binding upon any party hereto unless 
contained in a writing signed by the party to be charged.

    (16) SUCCESSORS AND ASSIGNS.  This Agreement shall inure to the benefit 
of and be binding upon the successors and assigns (including successive, as 
well as immediate, successors and assigns) of the Company.

    IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be 
executed to be effective as of the date first written above.

                                        COMPANY:

                                        The Scotts Company,
                                        an Ohio corporation

                                        By:  /s/ PAUL D. YEAGER
                                           -----------------------------------
                                             Paul D. Yeager

                                        Its:
                                            ----------------------------------
                                            Executive Vice President

                                        OPTIONEE:

                                        Tadd C. Seitz

                                             /s/ TADD C. SEITZ
                                           -----------------------------------
                                             Signature of Optionee

                                        7500 Bridlespur Drive
                                        Delaware, OH  43015

                                        SSN: ###-##-####




                                      6




                                                                  EXHIBIT 10(o)




            Letter Agreement, dated April 10, 1996, between 
            Theodore J. Host and The Scotts Company
            
      





      


                                                                  [Scotts logo]

The Scotts Company
and Subsidiaries

Tadd C. Seitz 
Chairman




                                       April 10, 1996



Theodore J. Host
10019 Wellington Blvd.
Powell, OH 43065

Dear Ted:

     The purpose of this letter is to set forth the understanding of The Scotts
Company (hereinafter "Scotts" or the "Company") regarding the termination of
your employment with Scotts and various of its subsidiaries and affiliates. 
Under the terms of your Employment Agreement dated as of October 21, 1991, you
may terminate your employment for "Good Reason" if the Company removes you from
the position of President of the Company.  While it may be subject to some
debate whether you were removed or whether you resigned, the Company is willing
to assume that you were removed from office, thus triggering your ability to
terminate your employment for Good Reason.  A form of letter stating that you
are terminating your employment for Good Reason is attached to this letter as
Exhibit A.  Also attached are letters of resignation from each position you held
with the Company, its subsidiaries and affiliates.  I would appreciate it if you
would sign the letter attached as Exhibit A and each resignation letter and
return each to me..

     Your Employment Agreement provides that if you terminate your employment
for Good Reason, you are entitled to the following benefits:

     1.  Your full base salary at the annual base rate in effect immediately
prior to the date of termination;

     2.  A pro rata share of any incentive compensation due you for the year in
which you terminated your employment; and 

     3.  Reimbursement for reasonable outplacement expenses.





     You have already received a check for 1/12 of your full base salary. 
Checks, net of normal deductions, will continue through February, 1997, subject
to the provisions of paragraph 6(f) of your Employment Agreement.  So long as
you are receiving monthly checks, you will continue to be covered under Scotts'
medical and dental plans (and will be entitled to continue any flexible spending
accounts under those plans).  Prior to the end of the period for which you are
being compensated, you will receive notice of your ability to continue medical
and dental coverage at your expense under the provisions of COBRA.

14111 Scottslawn Road, Marysville, Ohio 43041  (513) 644-7251 Fax (513) 644-7136

     Your pro rata share of any incentive compensation due you for fiscal 1996
will be figured using the restated net income of the Company for fiscal 1995 -
$22,356,000.  You will be entitled to 5/12 of whatever award would have been
paid to you under the terms of the Company's 1996 Executive Annual Incentive
Plan.

     We have agreed to reimburse you for up to $15,000 of outplacement expenses,
payable against invoices submitted by you to Rosemary Smith.

     In addition to the payments due you pursuant to the terms of your
Employment Agreement as outlined above, the Company has agreed with you, as
follows:

     1.  Within a reasonable time after you have executed a copy of this letter
agreeing to its terms, you will be paid for two years of accrued vacation.  You
are not eligible for any payments for sick leave.

     2.  During the period you are receiving monthly payments for your full base
salary, you will not receive vesting credit under the Company's Profit Sharing
and Savings Plan, nor under its Associates' Pension Plan (including the
Company's Excess Benefit Plan).

     3.  Your coverage under the Company's base life/ad&d plan, its supplemental
life insurance plan, its business travel accident plan, its short and long term
disability plans (including supplemental long term disability) and its associate
assistance program, as well as your eligibility for a car allowance, terminated
as of February 29, 1996.

     4.  You will be entitled to use the financial planning services offered
through AYCO through the end of calendar 1996.





     5.  The Company will reimburse you for legal fees incurred in connection
with your termination of employment up to a maximum amount of $5,000, to be paid
against invoices actually received by you from your legal counsel for this work.
Please submit such invoices to Rosemary Smith.

     6.  In connection with the execution of your Employment Agreement in 1991,
you received a grant of options for 136,364 shares of common stock of the
Company at $9.90 per share.  These options, all of which are non-qualified, are
fully vested and may be exercised until January 8, 2002.  The exercisability of
these options is not affected by the termination of your employment.

     7.  During your employment, you were the recipient of several other 
option grants, a summary of which is provided in Exhibit B attached to this 
letter. You agree that Exhibit B properly sets forth the vesting arrangements 
with respect to said options and that no further vesting will occur during 
the period you are receiving monthly payments or other benefits from the 
Company.

     Options which have vested would normally have to be exercised, if at all,
within 30 days of the termination of your employment.  For a variety of reasons,
you and we have agreed that this 30 day exercise period shall be extended until
the earlier of (1) 30 days after the first day after the date of this letter on
which Company "insiders" are permitted to buy or sell shares of the Company in
the open market (i.e., 30 days after  the next "window period" commences) or (2)
the date on which the window period, once having commenced, is halted.  (The
Company agrees to give you written notice, with a copy to Robert Rupp, your
counsel, of the opening and closing of the next window period.)  Provided,
however, that you shall be free to exercise any options and sell any underlying
shares at any time after you have delivered to the Company a legal opinion
reasonably acceptable to the Company opining that you are no longer an "insider"
of the Company and that you have met any other requirements (such as those
contained in Rule 144 of the Securities Act of 1933) in connection with your
proposed exercise and sale.  Any options not exercised within the period set
forth in this paragraph shall expire.

     We have further agreed to consider the purchase from you, in a privately 
negotiated transaction, of shares of the Company owned by you as the result 
of your exercise of options at a price equal to the closing price of the 
Company's shares on the New York Stock Exchange on the date you offer such 
shares to the Company (except that this agreement to consider purchasing 
shares does not extend to shares subject to the option granted pursuant to 
your Employment Agreement).  If the Company elects to purchase any shares 
from you, the Company will also consider making such purchase on a net basis 
(i.e., you will be paid the net amount between your exercise price for such 
shares and the closing price for such shares on the date of purchase).  Let 
me emphasize (1) that the Company is not making any commitment to purchase 
any shares from you and (2) that so long as you are an "insider," any such 
purchase would only be made during an open "window period".

     Finally, the Company has agreed to consider the purchase from you, in a
privately negotiated transaction, of up to 45,454 shares of common stock of the
Company currently owned 




by you.  Should the Company elect to make such a purchase, it would be at a 
purchase price equal to the closing price of the Company's shares on the New 
York Stock Exchange on the date of purchase, and, so long as you remained an 
"insider" of the Company, would be effected only during an open "window 
period."

     8.  We have agreed on a form of reference letter to be used should one be
requested.  A copy of the form of letter agreed upon is attached as Exhibit C.

     9.  You resigned as an officer and director of Scotts and certain of its
subsidiaries and affiliates effective February 22, 1996.  Any actions which you
undertook while an officer and director of Scotts, its subsidiaries or
affiliates, will be covered by the indemnity provisions in the By-Laws or Code
of Regulations of Scotts (or of its subsidiaries and affiliates, as the case may
be) according to the terms thereof and you will continue to be covered after
that date by the directors' and officers' insurance policy which Scotts
maintains according to its terms.

    10.  You agree, except for the obligations set forth in this Agreement,
that all of Scotts' other obligations and any claims by you against Scotts and
the officers, directors and employees of Scotts, are released by your acceptance
of this Agreement, including but not limited to claims of age discrimination in
employment under the Federal Age Discrimination in Employment Act and the Older
Workers Benefit Protection Act.  Except as specifically stated herein and except
as provided in any benefit plans maintained by Scotts in which you are
participating, you have no claim for and will not be entitled to any other
benefits, bonus, compensation, perquisites, vacation or sick pay allowance or
any kind of other remuneration arising out of your employment or the termination
thereof, provided, however, that this release shall not be construed to prevent
you from pursuing any rights you have to COBRA benefits or any rights you have
to enforce the terms of this letter.

    11.  You agree to keep the terms of this Agreement confidential and that
you will not disclose any information concerning these matters to anyone,
including but not limited to past, present or future employees of Scotts or its
affiliates (but excepting your legal and financial advisors and your spouse). 
You agree to indemnify Scotts from any loss or costs arising from any breach by
you of this Agreement.

     12.  You understand that you are entering into this Agreement (and the
release contained herein) voluntarily in order to be the recipient of certain of
the agreements described herein that were not required pursuant to the terms of
your Employment Agreement.  You understand that Scotts would not enter into
these agreements to which you would not otherwise be entitled without your
voluntary consent to this Agreement.

    13.  In making your decision whether or not to accept this Agreement, you
recognize that you have the right to seek advice and counsel from others,
including that of an attorney if you so choose.  You acknowledge that you have
21 days within which to consider this offer.

    14.  You have seven calendar days from the date you sign this Agreement to
cancel it in writing.  No payments (other than those to which you are entitled
pursuant to your Employment 





Agreement) will be made under this Agreement until the expiration of the 
seven day revocation period.  You may cancel this Agreement by signing the 
cancellation notice below (or by any other written signed notice) and 
delivering it to Scotts (to my attention) within seven days of the date you 
signed this Agreement.

     You are reminded that certain provisions of your Employment Agreement
survive the termination of your employment with Scotts.  Nothing in this letter
is intended to constitute a waiver by Scotts of the provisions of such
Agreement.

     This Agreement will be construed in accordance with the substantive laws of
the State of Ohio.  The rights and duties of the parties shall not be
assignable.  This Agreement may not be amended except in writing signed by the
party against whom an obligation is to be enforced.  No representations, other
than those contained herein, have been made as an inducement.

     If this letter satisfactorily sets forth the provisions relating to your
termination of employment with the Company, please execute the enclosed copy and
return it to me.

                              Very truly yours,

                              /s/ Tadd C. Seitz

                              Tadd C. Seitz




Dear Tadd:

     This letter satisfactorily set forth the terms of my termination of
employment with The Scotts Company.


Dated: April 10, 1996                      /s/ Theodore J. Host         
                                           ----------------------------
                                           Theodore J. Host

CANCELLATION NOTICE

     To cancel this Agreement, sign below and deliver this copy of the Agreement
     to Tadd Seitz within seven days of the date you signed the Agreement.
     
     I hereby cancel this Agreement.
     
     
     __________________________         _________________________
     (Date)                             (Signature)
                              



                                                                   Exhibit A


                               THEODORE J. HOST
                            10019 WELLINGTON BLVD.
                             POWELL, OHIO  43065



February 22, 1996




Tadd C. Seitz, Chairman
The Scotts Company
14111 Scottslawn Road
Marysville, Ohio  43041

Dear Tadd:

It is with deep regret that I hereby submit my resignation, effective today, as
President, Chief Operating Officer and Directors of The Scotts Company
("Scotts").

I am terminating my employment and submitting my resignation for "Good Reason"
pursuant to the provisions of Paragraph 6(b) of my Employment Agreement with
Scotts dated October 21, 1991.  In recent months, it has become apparent that
the Board and my philosophies regarding sales and profitability have taken
different directions.  I understand that this philosophical difference may cause
the Board to diminish my duties or remove me from my present positions. 
Accordingly, I have chosen to resign.

I have enjoyed my time at Scotts, and I look forward to finalizing my severance
arrangements.

Sincerely,

/s/ Theodore J. Host

Theodore J. Host





                                                                     EXHIBIT B

Theodore J. Host
10019 Wellington Blvd.
Powell, OH  43065

The Scotts Company       LONG TERM INCENTIVE STATEMENT        Run Date 2/23/96
                                                                Page No. 1
                               As of 02/23/96

Date of Type of Options Options Option Date of Available Grant Grant Granted Outst. Price Expir. Options Vested for Excercise - ------- ------- ------- ------- ------ ------- -------------- ------------- 11/04/92 NON-QUAL 26,000 26,000 $16.2500 11/03/02 26,000 (CURRENT) 26,000 11/04/92 NON-QUAL 25,987 25,987 $16.2500 11/03/02 25,987 (CURRENT) 25,987 11/04/92 NON-QUAL 25,987 25,987 $16.2500 11/03/02 25,987 (CURRENT) 25,987 11/04/92 NON-QUAL 27,108 27,108 $16.2500 11/03/02 27,108 (CURRENT) 27,108 10/01/93 NON-QUAL 28,290 28,290 $17.2500 09/30/03 18,860 (CURRENT) 18,860 9,430 on 10/01/96 10/01/93 NON-QUAL 28,290 28,290 $17.2500 09/30/03 0 (CURRENT) 0 28,290 on 10/01/96 10/01/94 NON-QUAL 56,580 56,580 $15.5000 09/30/04 18,860 (CURRENT) 18,860 18,860 on 10/01/96 18,860 on 10/01/97 12/13/95 NON-QUAL 46,000 46,000 $20.1875 12/12/05 0 (CURRENT) 0 15,333 on 12/13/96 15,333 on 12/13/97 15,334 on 12/13/98 --------- -------- --------- Shares 264,242 42,802
EXHIBIT C To whom it may concern, I am pleased to offer this letter of reference for Theodore J. Host. He was employed by The Scotts Company as President, C.O.O. and a member of the company's Board of Directors on October 21, 1991. On April 19, 1995, he was promoted to President, Chief Executive Officer. During his tenure with the Company, significant progress was made. He was a significant participant in the acquisitions of The Republic Tool Company in 1992, The Grace Sierra Division of W.R. Grace Company in January of 1994, and the merger with Miracle-Gro Products in May, 1995. As a result of this effort, the Company during his time as President, grew in sales from $388,000,000 to $733,000,000 in a four year period. In the same period, net income grew from $1,735,000 to $22,400,000. His contribution to the growth of The Scotts Company is appreciated.


                                                                  EXHIBIT 10(p)



            Letter Agreement, dated January 18, 1996, between
            The Scotts Company and Paul D. Yeager, and
            amendment dated September 16, 1996
            


                                January 18, 1996
                                 


Paul Yeager
17910 Timber Lane
Marysville, OH  43040

Dear Paul:

          As you have indicated your desire to retire from The Scotts Company 
("Scotts"), this letter states the terms and conditions of your retirement on 
which we have mutually agreed.

          You will cease active employment with the Company as of September 
30, 1996.  Thereafter and until your retirement date, July 1, 1998, you will 
be paid in the following manner.  From October 1996 through December 1996, 
you will continue to receive your base salary which was in effect on 
September 30, 1996; and from January 1997 through June 1998, on a monthly 
basis, at the rate calculated by dividing 12 months' base salary in effect on 
September 30, 1996 by 18.  In addition, your 400 unused leave hours will also 
be paid out to you with no additional accrual after September 30, 1996.

          You will be eligible for consideration under the 1996 Executive 
Annual incentive Plan for payout, if any.  Payouts under the terms of this 
plan are normally made in December.

          The AYCO program will be available to you through December 31, 
1996.  This program or its cash value will also be available for calendar 
year 1997.

          Assuming you retire as of July 1, 1998, all stock options will vest 
on that date and you will have the shorter of the normal term of the options 
or five years to exercise.

          Your car allowance will be paid monthly through September 30, 1996.

          You are entitled to outplacement or a payment of $10,000 in lieu 
thereof.


Paul Yeager
September 16, 1996
Page 2

           Your medical and dental insurance coverage as you elected under 
the terms of the plans available will be continued while you are being paid 
on the Scotts payroll.  You are reminded that in order to be eligible for 
retiree medical coverage, you must do so at the aforementioned retirement 
date of July 1, 1998 or you will lose access to this benefit.

          Your eligibility for short and long term disability benefits under 
current Scotts group plans expires on your last day worked.  Life insurance 
coverage will continue through September 30, 1996.  Within 30 days following 
the expiration of your life insurance coverage, you have the right to convert 
all or part of your group life insurance.

          This agreement anticipates that you may be asked to perform a 
limited amount of consulting work for Scotts after September 30, 1996 and 
during the term of this agreement.  The Company does not anticipate this to 
be more than 15 days during the term of this agreement.  The retainer for 
this has been included in your salary continuation as previously provided in 
this agreement.  Any additional services and fees paid will be mutually 
determined at a subsequent time and included in your W-2 earnings under this 
Agreement.  As the fees are included, they are eligible for consideration 
under the terms and conditions of the qualified plans of the company.

          As long as you continue to receive monthly payments, you will 
continue to be eligible to participate in the qualified plans of The Scotts 
Company.  At the time that you leave the payroll of the Company, your pension 
benefit will be handled in accordance with plan provisions.  Your Profit 
Sharing and 401(k) Plan benefits will be handled according to your election 
under the plan options.  As always, you should discuss the tax effect of 
these decisions with your advisors.

          You are reminded of the terms of the Scotts Associate Agreement, a 
copy of which is attached.

          You will resign as an officer of The Scotts Company effective 
September 30, 1996.  Any actions which you undertook while an officer of the 
Company which were consistent with Company policy will continue to be covered 
after that date by the directors and officers insurance policy which the 
Company maintains.

          You agree, except for the obligations set forth in this agreement, 
that all of the employer's other obligations and any claims by you against 
Scotts or affiliated corporations or employees thereof are released by your 
acceptance of this agreement including claims of Age Discrimination in 
employment under the Federal Age Discrimination in Employment Act and the 
Older Workers Benefit Protection Age.


Paul Yeager
September 16, 1996
Page 3

Except as specifically stated herein and except as provided in the Scotts 
Pension Plan, you have no claim for and will not be entitled to any other 
benefits, bonus, compensation, perquisites, sick pay allowance or any kind of 
other remuneration arising out of your employment or the termination of 
employment.

          You will have until February 9, 1996 to consider this offer.  If 
you accept, you will have seven (7) calendar days from date of acceptance to 
revoke this agreement.

          This Agreement contains the release of important legal rights.  You 
should consult with an attorney before executing it.

          This Agreement will be construed in accordance with the substantive 
law of the State of Ohio.  The rights and duties of the parties shall not be 
assignable.  The Agreement may not be amended except in writing signed by the 
party against whom an obligation is to be enforced.  No representations, 
other than those contained herein, have been made as an inducement.

          Intending to be legally bound hereby, we have executed this 
Agreement this  18th day of  January, 1996.

                              THE SCOTTS COMPANY
                              
                              BY:       /s/ Robert A. Stern      
                                   ------------------------------
                                   Robert A. Stern
                                   Vice President, Human Resources
                              
                              
                                        /s/ Paul Yeager          
                                   ------------------------------
                                   Paul Yeager


                              
                                September 16, 1996
                                 

Paul Yeager
17910 Timber Lane
Marysville, Ohio 43040

          RE:  AMENDMENT TO LETTER DATED JANUARY 18, 1996

Dear Paul:

          This letter is to amend the letter agreement between you and The 
Scotts Company ("Scotts") dated January 18, 1996 (the "Letter Agreement").

          We have agreed to amend the terms of the Letter Agreement as follows:

     - Your new date to cease active employment with Scotts will be December 
       31, 1996;
          
     - After December 31, 1996 and until your retirement date, July 1, 1998, 
       you will be paid in the following manner.  From January 1, 1997 
       through June 30, 1998, on a monthly basis, at the rate calculated 
       by dividing 15 months' base salary in effect on December 31, 1996 by 18;
          
     - You will continue to accrue leave hours on a normal basis until 
       December 31, 1996, and after that date, any unused hours will be paid
       out to you.  You may take reasonable leave between now and December 31
       as long as you are able to adequately perform your essential job
       responsibilities;
          
     - You will be eligible for consideration under the 1996 and 1997 Executive
       Annual Incentive Plans for payout, if any;
          
     - Your car allowance will be paid monthly through December 31, 1996;


Paul Yeager
September 16, 1996
Page 2

          
     - Your life insurance coverage and all other benefits which you are 
       currently covered under will continue through December 31, 1996, 
       except for dental and medical coverage to retirement and at 
       retirement if selected, and
          
     - You will resign as an officer of The Scotts Company effective December 
       31, 1996.
          
     - You will have until September 30, 1996 to accept this offer.  If you 
       accept, you will have seven calendar days from acceptance to revoke.  
       If you accept, you agree to release Scotts from any claims or 
       obligations (other than those set forth in the Letter Agreement and 
       this amendment), including claims of age discrimination in employment 
       under the Federal Age Discrimination in Employment Act and the Older 
       Workers Benefit Protection Act.  You should consult your attorney 
       before signing this document.
          
     - Intending to be legally bound, we have hereby executed this agreement 
       on this 30th day of  September, 1996.


                              THE SCOTTS COMPANY
                              
                              
                              BY:  /s/ Charles M. Berger         
                                 --------------------------------
                                   Charles M. Berger
                                   Chairman, CEO and President
                              
                              
                                   /s/ Paul Yeager               
                                 --------------------------------
                                   Paul Yeager




                                                                  Exhibit 11(a)

                               THE SCOTTS COMPANY
                   Computation of Net Income Per Common Share
                       (in thousands except share amounts)

For the Three Months Ended For the Year Ended --------------------------------- --------------------------------- September 30 September 30 September 30 September 30 1995 1996 1995 1996 ------------ ------------ ------------ ------------ Net income for computing net income per common share: Net income (loss) $ 135 $(13,592) $22,356 $ (2,530) Preferred stock dividend (1) (2,437) (2,438) -- (9,750) ------------ ------------ ------------ ------------ Net income (loss) applicable to common shares $(2,302) $(16,030) $22,356 $(12,280) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Net income (loss) per common share: $ (.12) $ (.86) $ 0.99 $ (.65) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Computation of Weighted Average Number of Common Shares Outstanding
For the Three Months Ended For the Year Ended -------------------------------- -------------------------------- September 30 September 30 September 30 September 30 1995 1996 1995 1996 ------------ ------------ ------------ ------------ Weighted average common shares outstanding during the period 18,678,382 18,646,755 18,669,894 18,785,724 Assuming conversion of preferred stock -- -- 3,706,140 -- Assuming exercise of options using the Treasury Stock Method -- -- 230,126 -- Assuming exercise of warrants using the Treasury Stock Method -- -- 10,525 -- ------------ ------------ ------------ ------------ Weighted average number of common shares outstanding as adjusted 18,678,382 18,646,755 22,616,685 18,785,724 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Fully diluted weighted average common shares outstanding were not materially different than primary weighted average common shares outstanding for the periods presented.


                                  EXHIBIT 21

                         SUBSIDIARIES OF REGISTRANT

Scotts Grass Co., an Ohio corporation
Scotts Sod Co., an Ohio corporation
Scotts Energy Co., an Ohio corporation
Scotts Pesticide Co., an Ohio corporation
Scotts Green Lawns Co., an Ohio corporation
Scotts Plant Co., an Ohio corporation
Scotts Tree Co., an Ohio corporation
Scotts Service Co., an Ohio corporation
Scotts Products Co., an Ohio corporation
Scotts Fertilizer Co., an Ohio corporation
Scotts Park Co., an Ohio corporation
Scotts Pro Turf Co., an Ohio corporation
Scotts Control Co., an Ohio corporation
Scotts Professional Products Co., an Ohio corporation
Scotts Turf Co., an Ohio corporation
Scotts Best Lawns Co., an Ohio corporation
Scotts Weed Control Co., an Ohio corporation
Scotts Golf Co., an Ohio corporation
Scotts Garden Co., an Ohio corporation
Scotts Design Co., an Ohio corporation
Scotts Tech Rep Co., an Ohio corporation
Scotts Broad Leaf Co., an Ohio corporation
Scotts Insecticide Co., an Ohio corporation
Scotts Spreader Co., an Ohio corporation
Scotts Improvement Co., an Ohio corporation
Hyponex Corporation, a Delaware corporation
        Old Fort Financial Corp., a Delaware corporation
OMS Investments, Inc., a Delaware corporation
Republic Tool & Manufacturing Corp., a Delaware corporation
Scotts-Sierra Horticultural Products Company, a California corporation
         Scotts-Sierra Crop Protection Company, a  California corporation
       **Sierra-Sunpol Resins, Inc., a  California corporation






        #Scotts France, SARL (France)
        #Scotts Deutschland GMBH (Germany)
        #Scotts O M Espana, S.A. (Spain)
        Scotts-Sierra Investments, Inc., a  Delaware corporation
              #Scotts Australia Pty, Ltd. (Australia)
              #O M Scott International Investments Limited (United Kingdom)
              #O M Scott & Sons Limited (United Kingdom)
              #Scotts United Kingdom, Limited (United Kingdom)
              #Scotts Italia, SRL (Italy)
              #Scotts Europe, BV (Netherlands)
                   #Scotts Belgium, B.V.B.A. (Belgium)
Scott's Miracle-Gro Products, Inc., an Ohio corporation
        Miracle-Gro Lawn Products, Inc., a Delaware corporation
        Miracle-Gro Products Limited, a New York corporation




- -----------------------
#    Foreign
**   Not wholly-owned

























                                      2


                                                                    EXHIBIT 23




                          CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements 
of The Scotts Company on Form S-8 (File Nos. 33-47073, 33-60056, 333-00021 and 
333-06061) of our report dated November 15, 1996 on our audits of the 
consolidated financial statements and our report dated November 15, 1996 on 
our audits of the financial statement schedules of The Scotts Company as of 
September 30, 1995 and 1996 and for the years ended September 30, 1994, 1995 
and 1996, which reports are incorporated by reference in this Annual Report on
Form 10-K.




Coopers & Lybrand L.L.P.
Columbus, Ohio
December 23, 1996
 


5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS OF THE SCOTTS COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 1996. 1,000 US YEAR SEP-30-1996 OCT-01-1995 SEP-30-1996 1 10,598 0 110,426 0 148,836 291,961 234,297 (94,809) 731,685 110,758 0 0 177,255 211 186,835 731,685 751,880 752,848 417,159 725,055 410 0 26,541 1,252 3,782 (2,530) 0 0 0 (2,530) (.65) (.65)