Exhibit 10.3

      SEPARATION AGREEMENT

 
AND RELEASE OF ALL CLAIMS   (SCOTTS LOGO) [l23608al2360800.gif] 

NOTICE: READ BEFORE YOU SIGN!
This agreement contains a RELEASE. We advise that you consult an ATTORNEY.
     THIS SEPARATION AGREEMENT AND RELEASE OF ALL CLAIMS (“Agreement”) is made
and entered into by and between Robert F. Bernstock (“Employee”) and The Scotts
Company LLC (“Company”), in its own behalf and as successor to The Scotts
Company;
     WHEREAS, Employee’s last day of employment with Company was September 12,
2006 (the “Termination Date”);
     WHEREAS, Employee and Company wish to enter into an agreement providing for
an orderly separation of Employee’s employment with Company and providing for
severance pay and additional consideration for Employee to which Employee is not
otherwise entitled;
     WHEREAS, Employee and Company are parties to an Employment Agreement and
Covenant Not to Compete, effective October 1, 2004, as subsequently amended (the
“Employment Agreement”), which sets forth various forms of compensation payable
by Company to Employee in the event Employee’s employment with Company is
terminated (the “Severance Compensation”);
     WHEREAS, this Agreement incorporates and enhances the Severance
Compensation payable to Employee, in addition to providing additional
consideration to both Employee and Company;
     WHEREAS, Employee and Company have agreed, in the February 9, 2006 Third
Amendment to the Employment Agreement, to administer the Employment Agreement in
a manner reasonably expected to avoid any penalties under Section 409A of the
Internal Revenue Code of 1986, as amended (“Section 409A”); and
     WHEREAS, Employee and Company agree that the terms of this Agreement are
reasonably expected to avoid any penalties under Section 409A and further agree
that the timing of payments made pursuant to this Agreement is the timing
requested by Employee upon advice of his counsel, with full recognition of the
provisions of Section 409A;
     NOW THEREFORE, in exchange for and in consideration of the promises and
covenants contained herein, along with other good and valuable consideration,
the receipt of which is expressly acknowledged hereby, the parties agree as
follows:

     
 
   
 
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     1. Severance Benefits. Company agrees to provide Employee with the
following (collectively, the “Severance Benefits”):
     (A) A payment in the gross amount of TWO MILLION ONE HUNDRED SEVENTY-EIGHT
THOUSAND and 00/100 Dollars ( $2,178,000.00 ), representing two times the sum of
Employee’s annual base salary and the Incentive Target Bonus under the Scotts
Executive/Management Incentive Plan (the “Incentive Plan”) for 2006 (the “Lump
Sum Payment”). This Lump Sum Payment shall be made on the first business day
following the Effective Date, as defined below, less applicable withholding and
deductions required by federal, state, and local taxing authorities.
     (B) A payment of the amount of the Incentive Target Bonus which Employee
would have earned for 2006, under the terms of the Incentive Plan, pro-rated to
the Termination Date (the “2006 Incentive Payment”). The amount of the 2006
Incentive Payment will be calculated consistent with the incentive metrics
established at the beginning of 2006 for the Employee. The payment shall be sent
in a lump sum on the first business day following the Effective Date, as defined
below, less applicable withholding and deductions required by federal, state,
and local taxing authorities.
     (C) Upon the Termination Date, all of Employee’s unvested equity grants
(including Nonqualified Stock Options, restricted stock and stock appreciation
rights) vested immediately. Employee will have the shorter of December 11, 2006,
or the expiration of a specific grant, to exercise Employee’s options and stock
appreciation rights. Notwithstanding the foregoing, in the event of a major
corporate event, Employee’s options shall be treated in the same manner as all
other Scotts associates. Also, all shares of restricted stock and any
undistributed dividends (currently estimated to be $35,300) associated with
those shares will be distributed to Employee on the first business day following
the Effective Date, as defined below.
     (D) A payment representing the balance of Employee’s Executive Retirement
Plan account (the “Executive Retirement Plan Payment”). The Executive Retirement
Plan Payment shall be made on or within three days after March 12, 2007, less
applicable withholding and deductions required by federal, state, and local
taxing authorities.
     (E) Payment of any benefit to which Employee is entitled under any other
non-qualified Scotts plan shall be paid out in accordance with Employee’s
previous elections. Any such payments shall be made on or within three days
after March 12, 2007, less applicable withholding and deductions required by
federal, state, and local taxing authorities, or in accordance with the terms of
any such plans, whichever is later.

     
 
   
 
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     (F) For so long as Employee is eligible, but for no longer than 24 months
after the Termination Date, Employee shall be entitled to elect and receive
COBRA coverage at his own expense. For the first 18 months of said COBRA
coverage, Employee’s cost shall be at regular COBRA rates. For the final six
months of said COBRA coverage, Employee’s cost shall be 150% of the regular
COBRA rates. On the first business day following the Effective Date, as defined
below, Company will pay to the Employee a gross amount equal to $19,312.13, net
of applicable withholding and deductions required by federal, state and local
taxing authorities, in mitigation of these costs; Employee will be solely
responsible for paying the balance of the COBRA costs.
     (G) Company shall maintain, through September 12, 2011, Directors and
Officers Liability Insurance covering the Employee (or the Employee’s estate, if
the Employee is deceased or incompetent), which provides coverage at least as
favorable to the Employee (or the Employee’s estate, if the Employee is deceased
or incompetent), as coverage under Company’s policy in effect on the Termination
Date, and which coverage shall be increased from time to time in such amounts as
Company may determine to be appropriate in light of Company’s operations.
     (H) On or about November 7, 2006, Company issued and Employee accepted
5,000 shares of Company’s common stock in full satisfaction of the Performance
Shares award granted pursuant to (and subject to the terms of) an award
agreement between Company and Employee dated December 9, 2005 and as
consideration for this Agreement. If Employee signs this Agreement (and does not
exercise his right of revocation under section 5), Company will not seek the
return of those shares
     (I) The Severance Benefits described herein shall be the only amounts paid
to Employee by or on behalf of Company, and no interest on any amount shall be
paid. Employee otherwise acknowledges hereby the receipt of all wages and other
compensation or benefits to which Employee is entitled as a result of Employee’s
employment with Company through the Termination Date.
     (M) Employee will be allowed to continue to use Company’s membership at
Tartan Fields through December 31, 2006 (after which period he will relinquish
usage of that membership) on the condition that he has paid all dues and fees
associated with that usage through December 31, 2006. Company will reimburse
Employee for any dues that he has paid for any usage of that facility for any
period after December 31, 2006.

     
 
   
 
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     2. Release of Claims by Employee. Employee, on behalf of Employee and
Employee’s spouse, personal representatives, administrators, minor children,
heirs, assigns, wards, agents, and all other persons claiming by or through
Employee, does hereby forever release and discharge Company and its respective
officers, directors, shareholders, agents, employees, affiliates, subsidiaries,
divisions, predecessors, successors, and assigns (the “Released Parties”) from
any and all charges, claims, demands, judgments, causes of action, damages,
expenses, costs, and liabilities of any kind whatsoever. Employee expressly
acknowledges that the claims released by this paragraph include all rights and
claims relating to Employee’s employment with Company and the termination
thereof, including without limitation any claims Employee may have under the Age
Discrimination in Employment Act, as amended by the Older Worker Benefit
Protection Act, Title VII of the Civil Rights Act of 1964, as amended, the Equal
Pay Act, the Americans with Disabilities Act, the Employee Retirement Income
Security Act, the Worker Adjustment Retraining and Notification (WARN) Act, Ohio
Revised Code Chapter 4112, and any other federal, state, or local laws or
regulations governing employment relationships. This release specifically and
without limitation includes a release and waiver of any claims for employment
discrimination, wrongful discharge, breach of contract, or promissory estoppel,
and extends to all claims of every nature and kind, whether known or unknown,
suspected or unsuspected, presently existing or resulting from or attributable
to any act or omission of the Released Parties occurring prior to the execution
of this Agreement. The release contained herein does not apply to any claim or
right to benefits Employee is entitled to receive as of the Termination Date
under the terms of any Company sponsored tax-qualified deferred compensation
program, to Employee’s right to indemnification as described in section 5 of the
Employment Agreement or to any claim or to rights or claims first arising after
the Effective Date of this Agreement, nor does it apply to any claims for
unemployment compensation or workers compensation benefits and does not apply to
any right or claim to enforce this Agreement.
In addition to the general nature of the release set forth in the preceding
paragraph, Employee specifically acknowledges that he is releasing and waiving
any claims which might arise as a result of the application of Section 409A of
the Internal Revenue Code of 1986, as amended, to the payments made pursuant to
this Agreement, and expressly acknowledges herein that the payments and timing
of payments made to him hereunder have been administered in a manner compliant
with any previous agreement he has with Company and in a good faith, mutually
agreed manner reasonably expected to avoid any penalties under Section 409A of
the Internal Revenue Code of 1986, as amended. Employee agrees to indemnify
Company for any penalties associated with any reporting obligation under
Section 409A with regard to any payments made pursuant to this Agreement and
with regard to any interest and penalties associated with a withholding
obligation under Section 409A and for any costs and fees incurred by Company in
respect of any claim made or government proceeding initiated relative to the
foregoing.

     
 
   
 
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Employee agrees not to file any claim or initiate any proceeding, in law or in
equity, released by this Agreement. In the event that Employee files any legal
action asserting any claim released by this Agreement other than a claim under
the Age Discrimination in Employment Act, as amended by the Older Worker Benefit
Protection Act, Employee must immediately repay to Company the Separation Pay
set forth herein as a condition precedent to the maintenance of such a lawsuit,
and Employee shall reimburse Company for all costs, including attorney fees,
incurred in defense of any such claim or proceeding; provided, however, that the
terms of this paragraph shall not permit the setting aside of this Agreement by
payment of such amounts without adjudication by a court that this Agreement is
otherwise invalid.
     3. Release of Claims by Scotts. Company, on behalf of itself and its
affiliated entities, does hereby forever release and discharge Employee from any
and all charges, claims, demands, judgments, causes of action, damages,
expenses, costs, and liabilities of any kind whatsoever. Company expressly
acknowledges and agrees that the claims released by this paragraph include all
rights and claims relating to Employee’s employment with Company and the
termination thereof. The release contained herein does not apply to any claim or
rights first arising after the Effective Date of this Agreement.
     4. Knowing and Voluntary Act. Employee acknowledges and agrees that the
release set forth above is a general release. Employee, having been encouraged
to and having had the opportunity to be advised by counsel, expressly waives all
claims for damages which exist as of this date, but of which Employee does not
now know or suspect to exist, whether through ignorance, oversight, error,
negligence, or otherwise, and which, if known would materially affect Employee’s
decision to enter into this Agreement. Employee further agrees that Employee
accepts the Severance Benefits as a complete compromise of matters involving
disputed issues of law and fact and assumes the risk that the facts and law may
be other than Employee believes. Employee further acknowledges and agrees that
all the terms of this Agreement shall be in all respects effective and not
subject to termination or rescission by reason of any such differences in the
facts or law, and that Employee provides this release voluntarily and with full
knowledge and understanding of the terms hereof.
     5. Revocation Period. Employee specifically acknowledges and understands
that this Agreement is intended to release and discharge any claims of Employee
under the Age Discrimination in Employment Act, as amended by the Older Worker
Benefit Protection Act. Employee has 21 calendar days in which to consider this
Agreement and will have 7 calendar days in which to revoke Employee’s acceptance
after signing this Agreement. To revoke, Employee must deliver written notice of
revocation to Company’s Human Resources Department at 14111 Scottslawn Rd;
Marysville, Ohio 43041. This Agreement will be effective on the eighth day after
it is signed by Employee, assuming that Employee does not exercise the right of
revocation described in this section (the “Effective Date”).

     
 
   
 
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     6. Non-disparagement. Company and the Employee agree not to make any
statement to any third party that the statement maker could reasonably foresee
would cause harm to the personal or professional reputation of the Employee or
Released Parties and Company will instruct its officers and directors to adhere
to the provisions of this Section.
     7. No Admission of Liability. Neither this Agreement, nor any term
contained herein, may be construed as, or may be used as, an admission on the
part of either party of any fault, wrongdoing, or liability whatsoever.
     8. Survivorship. Should Employee die or become totally disabled following
the Termination Date but before the payments due Employee under paragraph 1
above have been made, any remaining payments shall be made to Employee (or
Employee’s designated beneficiary, as applicable).
     9. Return of Property. Employee agrees to return all Company property
remaining in Employee’s possession or control, including without limitation any
and all equipment, documents, credit cards, hardware, software, source code,
data, keys or access cards, files, or records on or before the Termination Date.
     10. Confidentiality. Employee further acknowledges and agrees that any
confidentiality, nondisclosure, noncompetition, and nonsolicitation obligations
to Company under any prior agreement, are not being released hereby and will
specifically survive the termination of Employee’s employment and this
Agreement. Employee expressly agrees to keep and maintain Company confidential
information confidential, and not to use or disclose such information, directly
or indirectly, without the prior written consent of Company or unless required
by law or legal process. Employee agrees that the provisions of this paragraph
are material terms of this Agreement.
     11. Cooperation with Litigation. Employee will cooperate fully with Company
in its defense of any lawsuit filed over matters that occurred during the tenure
of Employee’s employment with Company, and Employee agrees to provide full and
accurate information with respect to same; Company will compensate Employee for
any such service at the rate of $300.00 per hour (but no more than $1,500 per
day plus reasonable costs and expenses. Employee further agrees not to assist
any party in maintaining any lawsuit against any of the Released Parties, and
will not provide any information to anyone concerning any of the Released
Parties, unless compelled to do so by valid subpoena or other court order, and
in such case only after first notifying Company sufficiently in advance of such
subpoena or court order to reasonably allow Company an opportunity to object to
same. Nothing in this paragraph shall be construed to mean that Employee may not
file a charge with, or from participating in any investigation of a charge
conducted by, any governmental agency. Employee nevertheless understands and
agrees that because of the waiver and release, he/she freely provides by signing
this Agreement, he/she cannot obtain any monetary relief or recovery from
Company or any Releasee in any proceeding.

     
 
   
 
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     12. Choice of Law. The validity, construction and interpretation of this
Agreement shall be governed by the laws of the State of Ohio.
     13. Execution in Parts. This Agreement may be executed in multiple
counterparts, each of which shall constitute an original, and all of which shall
constitute a single Agreement.
     14. No Waiver of Terms. Failure to insist upon strict compliance with any
of the terms, covenants, or conditions of this Agreement shall not be deemed a
waiver of any such term, covenant, or condition, nor shall any failure at any
one time or more times be deemed a waiver or relinquishment at any other time or
times of any right under this Agreement.
     15. Modifications. No modification or amendment of this Agreement shall be
effective unless the same is in a writing duly executed by all the parties
hereto.
     16. Assignment. Company may assign, in whole or in part, its rights under
this Agreement, and the rights of Company hereunder shall inure to the benefit
of, and the obligations of Company hereunder shall be binding upon, its
successors and assigns. Employee’s rights and obligations hereunder may not be
assigned.
     17. Entire Agreement. Except as otherwise set forth herein, this Agreement
sets forth the entire Agreement between Company and Employee and supersedes and
replaces any and all prior or contemporaneous representations or agreements,
whether oral or written, relating to the subject matter hereof, including but
not limited to the Employment Agreement, except that Paragraphs 4, 5 and 6, 7(i)
and 7(j) of said Employment Agreement shall survive and remain in full force and
effect.
     18. Method of Acceptance. To accept, Employee must deliver a signed and
dated copy hereof to Tasha Potts in Company’s Human Resources Department, 14111
Scottslawn Road, Marysville, Ohio 43041. This Agreement will not be effective or
enforceable until such signed copy is received by Company as set forth herein.
     19. Method of Distribution. The amounts described in Paragraph 1(A) will be
sent by wire transfer pursuant to instructions provided by Employee. The other
cash payments due under this Agreement will be distributed through the U.S.
Postal service and sent by first class mail, postage paid, to Employee’s
residence. Any shares of stock due to Employee under this Agreement will be
transferred through Merrill Lynch in the

     
 
   
 
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manner similar transfers are effected under the terms of the Company’s equity
plans through which those shares are being distributed.
IN WITNESS WHEREOF, EACH OF THE UNDERSIGNED, HAVING RECEIVED ALL THE ADVICE
DEEMED NECESSARY, AND HAVING CAREFULLY READ AND UNDERSTOOD THIS AGREEMENT, DOES
HEREBY SIGN AND ACCEPT THIS AGREEMENT AS OF THE DATE SET FORTH BELOW.

              12/01/06   /s/ Robert F. Bernstock               Date   Robert F.
Bernstock    
 
            December 1, 2006   THE SCOTTS COMPANY LLC              
Date
           
 
           
 
  By:   (SIGNATURE) [l23608al2360801.gif]
 
   
 
           
 
  Its:   Executive Vice President, Global HR    

     
 
   
 
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