Exhibit 10.4
 
 
COMMERCIAL PLEDGE AGREEMENT
 
Principal
Loan Date
Maturity
Loan No
Call/Coll
Account
Officer
Initials
 
$1,000,000.00
05-16-2008
05-16-2009
42431
   
10270
    References in the boxes above are for Lender's use only and do not limit the
applicability of this document to any particular loan or item. Any item above
containing " * * *" has been omitted due to text length limitations.

 

Borrower:
AEROGROW INTERNATIONAL, INC.
JACK J. WALKER
6075 LONGBOW DRIVE SUITE 200
BOULDER, CO 80301
 
 
Lender:
First National Bank Canyon Branch
11 55 Canyon Blvd.
Boulder, CO 80302-51 21
 
 
Grantor:     
JACK J. WALKER
1270 OLD TALE ROAD
BOULDER, CO 80303
     

 
 
 
THIS COMMERCIAL PLEDGE AGREEMENT dated May 16, 2008, is made and executed among
JACK J. WALKER ("Grantor"); AEROGROW INTERNATIONAL, INC.; and JACK J. WALKER
("Borrower"); and First National Bank ("Lender").
 

GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender
a security interest in the Collateral to secure the lndebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by law.

COLLATERAL DESCRIPTION. The word "Collateral" as used in this Agreement means
Grantor's present and future rights, title and interest in and to the following
described investment property, together with any and all present and future
additions thereto, substitutions therefor, and replacements thereof, and further
together with all lncome and Proceeds as described herein:

FIRST NATIONAL BANK INVESTMENT, MANAGEMENT AND TRUST IMA # 4001008195

CROSS-COLLATERALIZATION. In addition to the Note, this Agreement secures all
obligations, debts and liabilities, plus interest thereon, of either Grantor or
Borrower to Lender, or any one or more of them, as well as all claims by Lender
against Borrower and Grantor or any one or more of them, whether now existing or
hereafter arising, whether related or unrelated to the purpose of the Note,
whether voluntary or otherwise, whether due or not due, direct or indirect,
determined or undetermined, absolute or contingent, liquidated or unliquidated,
whether Borrower or Grantor may be liable individually or jointly with others,
whether obligated as guarantor, surety, accommodation party or otherwise, and
whether recovery upon such amounts may be or hereafter may become barred by any
statute of limitations, and whether the obligation to repay such amounts may be
or hereafter may become otherwise unenforceable.

BORROWER'S WAIVERS AND RESPONSIBILITIES. Except as otherwise required under this
Agreement or by applicable law, (A) Borrower agrees that Lender need not tell
Borrower about any action or inaction Lender takes in connection with this
Agreement; (B) Borrower assumes the responsibility for being and keeping
informed about the Collateral; and (C) Borrower waives any defenses that may
arise because of any action or inaction of Lender, including without limitation
any failure of Lender to realize upon the Collateral or any delay by Lender in
realizing upon the Collateral; and Borrower agrees to remain liable under the
Note no matter what action Lender takes or fails to take under this Agreement.

GRANTOR'S REPRESENTATIONS AND WARRANTIES. Grantor warrants that: (A) this
Agreement is executed at Borrower's request and not at the request of Lender;
(6) Grantor has the full right, power and authority to enter into this Agreement
and to pledge the Collateral to Lender; (C) Grantor has established adequate
means of obtaining from Borrower on a continuing basis information about
Borrower's financial condition; and (D) Lender has made no representation to
Grantor about Borrower or Borrower's creditworthiness.

GRANTOR'S WAIVERS. Grantor waives all requirements of presentment, protest,
demand, and notice of dishonor or non-payment to Borrower or Grantor, or any
other party to the lndebtedness or the Collateral. Lender may do any of the
following with respect to any obligation of any Borrower, without first
obtaining the consent of Grantor: (A) grant any extension of time for any
payment, (B) grant any renewal, (C) permit any modification of payment terms or
other terms, or (D) exchange or release any Collateral or other security. No
such act or failure to act shall affect Lender's rights against Grantor or the
Collateral.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender re<erves a
right of setoff in all Grantor's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Grantor holds
jointly with someone else and all accounts Grantor may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Grantor authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
lndebtedness against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. Grantor
represents and warrants to Lender that:
 
Ownership. Grantor is the lawful owner of the Collateral free and clear of all
security interests, liens, encumbrances and claims of others except as disclosed
to and accepted by Lender in writing prior to execution of this Agreement.

Right to Pledge. Grantor has the full right, power and authority to enter into
this Agreement and to pledge the Collateral.
 
Authority; Binding Effect. Grantor has the full right, power and authority to
enter into this Agreement and to grant a security interest in the Collateral to
Lender. This Agreement is binding upon Grantor as well as Grantor's successors
and assigns, and is legally enforceable in accordance with its terms. The
foregoing representations and warranties, and all other representations and
warranties contained in this Agreement are and shall be continuing in nature and
shall remain in full force and effect until such time as this Agreement is
terminated or cancelled as provided herein.
 
No Further Assignment. Grantor has not, and shall not, sell, assign, transfer,
encumber or otherwise dispose of any of Grantor's rights in the Collateral
except as provided in this Agreement.

No Defaults. There are no defaults existing under the Collateral, and there are
no offsets or counterclaims to the same. Grantor will strictly and promptly
perform each of the terms, conditions, covenants and agreements, if any,
contained in the Collateral which are to be performed by Grantor.

No Violation. The execution and delivery of this Agreement will not violate any
law or agreement governing Grantor or to which Grantor is a party.

Financing Statements. Grantor authorizes Lender to file a UCC financing
statement, or alternatively, a copy of this Agreement to perfect Lender's
security interest. At Lender's request, Grantor additionally agrees to sign all
other documents that are necessary to perfect, protect, and continue Lender's
security interest in the Property. Grantor will pay all filing fees, title
transfer fees, and other fees and costs involved unless prohibited by law or
unless Lender is required by law to pay such fees and costs. Grantor irrevocably
appoints Lender to execute documents necessary to transfer title if there is a
default. Lender may file a copy of this Agreement as a financing statement. If
Grantor changes Grantor's name or address, or the name or address of any person
granting a security interest under this Agreement changes, Grantor will promptly
notify the Lender of such change.

LENDER'S RIGHTS AND OBLIGATIONS WlTH RESPECT TO THE COLLATERAL. Lender may hold
the Collateral until all lndebtedness has been paid and satisfied. Thereafter
Lender may deliver the Collateral to Grantor or to any other owner of the
Collateral. Lender shall have the following rights in addition to all other
rights Lender may have by law:

Maintenance and Protection of Collateral. Lender may, but shall not be obligated
to, take such steps as it deems necessary or desirable to protect, maintain,
insure, store, or care for the Collateral, including paying of any liens or
claims against the Collateral. This may include such things as hiring other
people, such as attorneys, appraisers or other experts. Lender may charge
Grantor for any cost incurred in so doing. When applicable law provides more
than one method of perfection of Lender's security interest, Lender may choose
the method(s1 to be used.

lncome and Proceeds from the Collateral. Lender may receive all lncome and
Proceeds and add it to the Collateral. Grantor agrees to deliver to Lender
immediately upon receipt, in the exact form received and without commingling
with other property, all lncome and Proceeds from the Collateral which may be
received by, paid, or delivered to Grantor or for Grantor's account, whether as
an addition to, in discharge of, in substitution of, or in exchange for any of
the Collateral.

Application of Cash. At Lender's option, Lender may apply any cash, whether
included in the Collateral or received as lncome and Proceeds or through
liquidation, sale, or retirement, of the Collateral, to the satisfaction of the
lndebtedness or such portion thereof as Lender shall choose, whether or not
matured.

Transactions with Others. Lender may (1) extend time for payment or other
performance, (2) grant a renewal or change in terms or Loan No Calf t Coll
Account Officer lnitlals

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COMMERCIAL PLEDGE AGREEMENT Loan No: 42431 (Continued) Page 2
 
conditions, or (3) compromise, compound or release any obligation, with any one
or more Obligors, endorsers, or Guarantors of the lndebtedness as Lender deems
advisable, without obtaining the prior written consent of Grantor, and no such
act or failure to act shall affect Lender's rights against Grantor or the
Collateral.

All Collateral Secures Indebtedness. All Collateral shall be security for the
Indebtedness, whether the Collateral is located at one or more offices or
branches of Lender. This will be the case whether or not the office or branch
where Grantor obtained Grantor's loan knows about the Collateral or relies upon
the Collateral as security.

Collection of Collateral. Grantor agrees that Lender may, at any time and for
any reason, whether or not Borrower and Grantor are then in default under any
indebtedness, collect the lncome and Proceeds directly from the Obligors.
Grantor authorizes and directs the Obligors, if Lender decides to collect the
lncome and Proceeds, to pay and deliver to Lender all lncome and Proceeds from
the Collateral and to accept Lender's receipt for the payments.

Power of Attorney. Grantor irrevocably appoints Lender as Grantor's
attorney-in-fact, with full power of substitution, (a) to demand, collect,
receive, receipt for, sue and recover all lncome and Proceeds and other sums of
money and other property which may now or hereafter become due, owing or payable
from the Obligors in accordance with the terms of the Collateral; (b) to
execute, sign and endorse any and all instruments, receipts, checks, drafts and
warrants issued in payment for the Collateral; (c) to settle or compromise any
and all claims arising under the Collateral, and in the place and stead of
Grantor, execute and deliver Grantor's release and acquittance for Grantor; (d)
to file any claim or claims or to take any action or institute or take part in
any proceedings, either in Lender's own name or in the name of Grantor, or
otherwise, which in the discretion of Lender may seem to be necessary or
advisable; and (e) to execute in Grantor's name and to deliver to the Obligors
on Grantor's behalf, at the time and in the manner specified by the Collateral,
any necessary instruments or documents.

Perfection of Security Interest. Upon Lender's request, Grantor will deliver to
Lender any and all of the documents evidencing or constituting the Collateral.
When applicable law provides more than one method of perfection of Lender's
security interest, Lender may choose the method(s1 to be used. Upon Lender's
request, Grantor will sign and deliver any writings necessary to perfect
Lender's security interest. Grantor hereby appoints Lender as Grantor's
irrevocable attorney-in-fact for the purpose of executing any documents
necessary to perfect, amend, or to continue the security interest granted in
this Agreement or to demand termination of filings of other secured parties.
This is a continuing Security Agreement and will continue in effect even though
all or any part of the lndebtedness is paid in full and even though for a period
of time Borrower may not be indebted to Lender.

LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Grantor's failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Agreement or any Related
Documents, Lender on Grantor's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Collateral and paying all
costs for insuring, maintaining and preserving the Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Grantor. All such expenses will become a part
of the lndebtedness and, at Lender's option, will (A) be payable on demand; (B)
be added to the balance of the Note and be apportioned among and be payable with
any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note's
maturity. The Agreement also will secure payment of these amounts. Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon Default.

LlMlTATlONS ON OBLIGATIONS OF LENDER. Lender shall use ordinary reasonable care
in the physical preservation and custody of the Collateral in Lender's
possession, but shall have no other obligation to protect the Collateral or its
value. In particular, but without limitation, Lender shall have no
responsibility for (A) any depreciation in value of the Collateral or for the
collection or protection of any lncome and Proceeds from the Collateral, (B)
preservation of rights against parties to the Collateral or against third
persons, (C) ascertaining any maturities, calls, conversions, exchanges, offers,
tenders, or similar matters relating to any of the Collateral, or (D) informing
Grantor about any of the above, whether or not Lender has or is deemed to have
knowledge,of such matters. Except as provided above, Lender shall have no
liability for depreciation or deterioration of the Collateral.

DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:

Payment Default. Borrower fails to make any payment when due under the
Indebtedness.

Other Defaults. Borrower or Grantor fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or in any of
the Related Documents or to comply with or to perform any term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower or Grantor.

Default in Favor of Third Parties. Borrower or Grantor defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially
affect any of Borrower's or Grantor's property or ability to perform their
respective obligations under this Agreement or any of the Related Documents.

False Statements. Any warranty, representation or statement made or furnished to
Lender by Borrower or Grantor or on Borrower's or Grantor's behalf, or made by
Guarantor, or any other guarantor, endorser, surety, or accommodation party,
under this Agreement or the Related Documents in connection with the obtaining
of the lndebtedness evidenced by the Note or any security document directly or
indirectly securing repayment of the Note is false or misleading in any material
respect, either now or at the time made or furnished or becomes false or
misleading at any time thereafter.

Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
document to create a valid and perfected security interest or lien) at any time
and for any reason.

Death or Interdiction. The death of Borrower or Grantor or the dissolution or
termination of Borrower's or Grantor's existence as a going business, the
insolvency of Borrower or Grantor, the appointment of a receiver for any part of
Borrower's or Grantor's property, any assignment for the benefit of creditors,
any type of creditor workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Borrower or Grantor.

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or Grantor or by any governmental
agency against any collateral securing the Indebtedness. This includes a
garnishment of any of Borrower's or Grantor's accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply if there
is a good faith dispute by Borrower or Grantor as to the validity or
reasonableness of the claim which is the basis of the creditor or forfeiture
proceeding and if Borrower or Grantor gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a surety
bond for the creditor or forfeiture proceeding, in an amount determined by
Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.
 
Execution; Attachment. Any execution or attachment is levied against the
Collateral, and such execution or attachment is not set aside, discharged or
stayed within thirty (30) days after the same is levied.

Change in Zoning or Public Restriction. Any change in any zoning ordinance or
regulation or any other public restriction is enacted, adopted or implemented,
that limits or defines the uses which may be made of the Collateral such that
the present or intended use of the Collateral, as specified in the Related
Documents, would be in violation of such zoning ordinance or regulation or
public restriction, as changed.
 
Default Under Other Lien Documents. A default occurs under any other mortgage,
deed of trust or security agreement covering all or any portion of the
Collateral.

Judgment. Unless adequately covered by insurance in the opinion of Lender, the
entry of a final judgment for the payment of money involving more than ten
thousand dollars ($10,000.00) against Borrower or Grantor and the failure by
Borrower or Grantor to discharge the same, or cause it to be discharged, or
bonded off to Lender's satisfaction, within thirty (30) days from the date of
the order, decree or process under which or pursuant to which such judgment was
entered.

Events Affecting Guarantor. Any of the preceding events occurs with respect to
any Guarantor, or any other guarantor, endorser, surety, or accommodation party
of any of the lndebtedness or Guarantor, or any other guarantor, endorser,
surety, or accommodation party dies or becomes incompetent or revokes or
disputes the validity of, or liability under, any Guaranty of the Indebtedness.
 
Adverse Change. A material adverse change occurs in Borrower's or Grantor's
financial condition, or Lender believes the prospect of payment or performance
of the lndebtedness is impaired. 
 
Insecurity. Lender in good faith believes itself insecure.

 

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Loan No: 42431 COMMERCIAL PLEDGE AGREEMENT (Continued) Page 3
 
 
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender may exercise any one or more of the
following rights and remedies:

Accelerate Indebtedness. Declare all Indebtedness, including any prepayment
penalty which Borrower would be required to pay, immediately due and payable,
without notice of any kind to Borrower or Grantor.

Collect the Collateral. Collect any of the Collateral and, at ~ender'so ption
and to the extent permitted by applicable law, retain possession of the
Collateral while suing on the Indebtedness.

Sell the Collateral. Sell the Collateral, at Lender's discretion, as a unit or
in parcels, at one or more public or private sales. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Lender shall give or mail to Grantor, and other
persons as required by law, notice at least ten (10) days in advance of the time
and place of any public sale, or of the time after which any private sale may be
made. Howeyer, no notice need be provided to any person who, after an Event of
Default occurs, enters into and authenticates an agreement waiving that person's
right to notification of sale. Grantor agrees that any requirement of reasonable
notice as to Grantor is satisfied if Lender mails notice by ordinary mail
addressed to Grantor at the last address Grantor has given Lender in writing. If
a public sale is held, there shall be sufficient compliance with all
requirements of notice to the public by a single publication in any newspaper of
general circulation in the county where the Collateral is located, setting forth
the time and place of sale and a brief description of the property to be sold.
Lender may be a purchaser at any public sale.

Sell Securities. Sell any securities included in the Collateral in a manner
consistent with applicable federal and state securities laws. If, because of
restrictions under such laws, Lender is unable, or believes Lender is unable, to
sell the securities in an open market transaction, Grantor agrees that Lender
will have no obligation to delay sale until the securities can be registered.
Then Lender may make a private sale to one or more persons or to a restricted
group of persons, even though such sale may result in a price that is less
favorable than might be obtained in an open market transaction. Such a sale will
be considered commercially reasonable. If any securities held as Collateral are
"restricted securities" as defined in the Rules of the Securities and Exchange
Commission (such as Regulation D or Rule 144) or the rules of state securities
departments under state "Blue Sky" laws, or if Grantor or any other owner of the
Collateral is an affiliate of the issuer of the securities, Grantor agrees that
neither Grantor, nor any member of Grantor's family, nor any other person
signing this Agreement will sell or dispose of any securities of such issuer
without obtaining Lender's prior written consent.

Foreclosure. Maintain a judicial suit for foreclosure and sale of the
Collateral.

Specific Performance. Lender may, in addition to or in lieu of the foregoing
remedies, in Lender's sole discretion, commence an appropriate action against
Grantor seeking specific performance of any covenant contained in this Agreement
or in aid of the execution or enforcement of any power in this Agreement
granted.

Transfer Title. Effect transfer of title upon sale of all or part of the
Collateral. For this purpose, Grantor irrevocably appoints Lender as Grantor's
attorney-in-fact to execute endorsements, assignments and instruments in the
name of Grantor and each of them (if more than one) as shall be necessary or
reasonable.

Other Rights and Remedies. Have and exercise any or all of the rights and
remedies of a secured creditor under the provisions of the Uniform Commercial
Code, at law, in equity, or otherwise.
 
Application of Proceeds. Apply any cash which is part of the Collateral, or
which is received from the collection or sale of the Collateral, to
reimbursement of any expenses, including any costs for registration of
securities, commissions incurred in connection with a sale, attorneys' fees and
court costs, whether or not there is a lawsuit and including any fees on appeal,
incurred by Lender in connection with the collection and sale of such Collateral
and to the payment of the Indebtedness of Borrower to Lender, with any excess
funds to be paid to Grantor as the interests of Grantor may appear. Borrower
agrees, to the extent permitted by law, to pay any deficiency after application
of the proceeds of the Collateral to the Indebtedness. 
 
Election of Remedies. Except as may be prohibited by applicable law, all of
Lender's rights and remedies, whether evidenced by this Agreement, the Related
Documents, or by any other writing, shall,be cumulative and may be exercised
singularly or concurrently. Election by Lender to pursue any remedy shall not
exclude pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Grantor under this Agreement, after
Grantor's failure to perform, shall not affect Lender's right to declare a
default and exercise its remedies.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:

Amendments. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement. No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.

Attorneys' Fees: Expenses. Grantor agrees to pay upon demand all of Lender's
reasonable costs and expenses, including Lender's attorneys' fees and Lender's
legal expenses, incurred in connection with the enforcement of this Agreement.
Lender may hire or pay someone else to help enforce this Agreement, and Grantor
shall pay the reasonable costs and expenses of such enforcement. Costs and
expenses include Lender's attorneys' fees and legal expenses whether or not
there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services.
Grantor also shall pay all court costs and such additional fees as may be
directed by the court.
 
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.

Governing Law. This Agreement will be governed by federal law applicable to
Lender and, to the extent not preempted by federal law, the laws of the State of
Colorado without regard to its conflicts of law provisions. This Agreement has
been accepted by Lender in the State of Colorado.

Choice of Venue. If there is a lawsuit, Grantor agrees upon Lender's request to
submit to the jurisdiction of the courts of Boulder County, State of Colorado.

Joint and Several Liability. All obligations of Borrower and Grantor under this
Agreement shall be joint and several, and all references to Grantor shall mean
each and every Grantor, and all references to Borrower shall mean each and every
Borrower. This means that each Borrower and Grantor signing below is responsible
for all obligations in this Agreement.

No Waiver by Lender. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate as
a waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any of Lender's rights or of
any of Grantor's obligations as to any future transactions. Whenever the consent
of Lender is required under this Agreement, the granting of such consent by
Lender in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may be
granted or withheld in the sole discretion of Lender.

Non-Liability of Lender. The relationship between Borrower and Grantor and
Lender created by this Agreement is strictly a debtor and creditor relationship
and not fiduciary in nature, nor is the relationship to be construed as creating
any partnership or joint venture between Lender and Borrower and Grantor.
Borrower and Grantor are exercising Borrower's and Grantor's own judgment with
respect to Borrower's and Grantor's business. All information supplied to Lender
is for Lender's protection only and no other party is entitled to rely on such
information. There is no duty for Lender to review, inspect, supervise or inform
Borrower and Grantor of any matter with respect to Borrower's and Grantor's
business. Lender and Borrower and Grantor intend that Lender may reasonably rely
on ail information supplied by Borrower and Grantor to Lender, together with all
representations and warranties given by Borrower and Grantor to Lender, without
investigation or confirmation by Lender and that any investigation or failure to
investigate will not diminish Lender's right to so rely.
 
Notices. Any notice required to be given under this Agreement shall be given in
writing, and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage
prepaid, directed to the addresses shown near the beginning of this Agreement.
Any party may change its address for notices under this Agreement by giving
formal written notice to the other parties, specifying that the purpose of the
notice is to change the party's address. For notice purposes, Grantor agrees to
keep Lender informed at all times of Grantor's current address. Unless otherwise
provided or required by law, if there is more than one Grantor, any notice given
by Lender to any Grantor is deemed to be notice given to all Grantors.

Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be illegal, invalid, or unenforceable as to any
 
 

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COMMERCIAL PLEDGE AGREEMENT Loan No: 42431 (Continued) Page 4
 
circumstance, that finding shall not make the offending provision illegal,
invalid, or unenforceable as to any other circumstance. If feasible, the
offending provision shall be considered modified so that it becomes legal, valid
and enforceable. If the offending provision cannot be so modified, it shall be
considered deleted from this Agreement. Unless otherwise required by law, the
illegality, invalidity, or unenforceability of any provision of this Agreement
shall not affect the legality, validity or enforceability of any other provision
of this Agreement.
 
Sole Discretion of Lender. Whenever Lender's consent or approval is required
under this Agreement, the decision as to whether or,not to consent or approve
shall be in the sole and exclusive discretion of Lender and Lender's decision
shall be final and conclusive.
 
Successors and Assigns. Subject to any limitations stated in this Agreement on
transfer of Grantor's interest, this Agreement shall be binding upon and inure
to the benefit of the parties, their successors and assigns. If ownership of the
Collateral becomes vested in a person other than Grantor, Lender, without notice
to Grantor, may deal with Grantor's successors with reference to this Agreement
and the lndebtedness by way of forbearance or extension without releasing
Grantor from the obligations of this Agreement or liability under the
Indebtedness.

Time is of the Essence. Time is of the essence in the performance of this
Agreement.
 
Waive Jury. All parties to this Agreement hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by any party against
any other party.
 
DEFINITIONS. The following capitalized words and terms shall have the /allowing
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code:

Agreement. The word "Agreement" means this Commercial Pledge Agreement, as this
Commercial Pledge Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Commercial Pledge
Agreement from time to time.
 
Borrower. The word "Borrower" means AEROGROW INTERNATIONAL, INC.; and JACK J.
WALKER and includes all co-signers and co-makers signing the Note and all their
successors and assigns.

Collateral. The word "Collateral" means all of Grantor's right, title and
interest in and to all the Collateral.as described in the Collateral Description
section of this Agreement.

Default. The word "Default" means the Default set forth in this Agreement in the
section titled "Default".
 
Event of Default. The words "Event of Default" mean individually, collectively,
and interchangeably any of the events of default set forth in this Agreement in
the default section of this Agreement.

Grantor. The word "Grantor" means JACK J. WALKER.
 
Guarantor. The word "Guarantor" means any guarantor, surety, or accommodation
party of any or all of the Indebtedness, and, in each case, Grantor's
successors, assigns, heirs, personal representatives, executors and
administrators of any guarantor, surety, or accommodation party.

Guaranty. The word "Guaranty" means the guaranty from Guarantor, or any other
guarantor, endorser, surety, or accommodation party to Lender, including without
limitation a guaranty of all or part of the Note.

lncome and Proceeds. The words "lncome and Proceeds" mean all present and future
income, proceeds, earnings, increases, and substitutions from or for the
Collateral of every kind and nature, including without limitation all payments,
interest, profits, distributions, benefits, rights, options, warrants,
dividends, stock dividends, stock splits, stock rights, regulatory dividends,
subscriptions, monies, claims for money due and to become due, proceeds of any
insurance on the Collateral, shares of stock of different par value or no par
value issued in substitution or exchange for shares included in the Collateral,
and all other property Grantor is entitled to receive on account of such
Collateral, including accounts, documents, instruments, chattel paper,
investment property, and general intangibles.

Indebtedness. The word "lndebtedness" means the indebtedness evidenced by the
Note or Related Documents, including all principal and interest together with
all other indebtedness and costs and expenses for which Borrower is responsible
under this Agreement or under any of the Related Documents. Specifically,
without limitation, lndebtedness includes all amounts that may be indirectly
secured by the Cross-Collateralization provision of this Agreement.

Lender. The word "Lender" means First National Bank, its successors and assigns.

Note. The word "Note" means the Note executed by AEROGROW INTERNATIONAL, INC.;
and JACK J. WALKER in the principal amount of $1,000,000.00 dated May 16, 2008,
together with all renewals of, extensions of, modifications of, refinancings of,
consolidations of, and substitutions for the note or credit agreement.

Obligor. The word "Obligor" means individually, collectively and interchangeably
without limitation any and all persons obligated to pay money or to perform some
other act under the Collateral.

Property. The word "Property" means all of Grantor's right, title and interest
in and to all the Property as described in the "Collateral Description" section
of this Agreement.

Related Documents. The words "Related Documents" mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
 

 
BORROWER AND GRANTOR HAVE READ AND UNDERSTOOD ALL THE PROVISIONS OF THlS
COMMERCIAL PLEDGE AGREEMENT AND AGREE TO ITS TERMS. THlS AGREEMENT IS DATED MAY
16, 2008.
 
GRANTOR:
 
X                                                        
JACK J. WALKER, Individually
 
BORROWER:
 
AEROGROW INTERNATIONAL, INC.
 
By:                                                    
JERVIS B. PERKINS, President of AEROGROW INTERNATIONAL, INC.
 
 
X                                                  
JACK J. WALKER, Individually
 
 
 
 
 

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ADDENDUM
to
COMMERCIAL PLEDGE AGREEMENT
between
AEROGROW INTERNATIONAL, INC. and JACK J. WALKER (collectively the “Borrower”)
and
FIRST NATIONAL BANK (“Lender”)
Dated May 19, 2008

The provisions of this Addendum shall be considered additional provisions to
that certain Commercial Pledge Agreement (the “Agreement”) of even date herewith
and incorporated therein.  To the extent that the provisions of this Addendum
conflict with the provisions of the Agreement, the provisions of this Addendum
shall govern.  Capitalized terms not defined herein shall have the meanings
ascribed to them in the Agreement.

1.      The subsection of the Agreement entitled “DEFAULT” is amended and
restated to read in its entirety as follows:

 
Default.  Each of the following shall constitute an Event of Default under this
Agreement:

 
Payment Default.  Borrower fails to make any payment when due under this Note.

 
Other Defaults.  Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in the Business Loan Agreement (the
“Agreement”) between the Borrowers and the Lender of even date herewith or in
any of the Related Documents (as defined in the Agreement) or to comply with or
to perform any term, obligation, covenant or condition contained in any other
agreement between Borrowers and the Lender and such failure to comply or perform
remains uncured for a period of three (3) days.

 
Default in Favor of Third Parties.  Borrowers or any Guarantor defaults under
any loan, extension of credit, security agreement, purchase or sales agreement,
or any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower’s or any Guarantor’s property or Borrower’s or
any Guarantor’s ability to repay the Loans or perform their respective
obligations under the Agreement or any of the Related Documents and such default
remains uncured for a period of three (3) days.

 
False Statements.  Any warranty, representation or statement made, or furnished
to Lender by Borrowers or on Borrowers’ behalf under the Agreement or the
Related Documents is false or misleading in any material respect, either now or
at the time made or furnished or becomes false or misleading at any time
thereafter.

 
Insolvency.  The dissolution or termination of Aerogrow International, Inc
existence as a going business, the insolvency of Borrowers, the appointment of a
receiver for any part of Borrowers’ property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any proceeding
under any bankruptcy or insolvency laws by or against Borrowers and such
proceeding under any bankruptcy or insolvency laws remains unstayed for a period
of forty five (45) days.

 
Defective Collateralization.  The Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
document to create a valid and perfected security interest or lien) at any time
and for any reason.

 
Creditor or Forfeiture Proceedings.  Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of a Borrower or by any governmental agency
against any collateral securing the obligations arising under this Note or the
Agreement or Related Documents.  This includes a garnishment of any of a
Borrowers’ accounts, including deposit accounts, with Lender.  However, this
Event of Default shall not apply if there is a good faith dispute by Borrowers
as to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrowers give Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.

 
Events Affecting Guarantor.  Any of the preceding events occurs with respect to
any Guarantor of any of the indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness.

 
Change in Ownership.  Any change in ownership of fifty percent (50%) or more of
the common stock of AeroGrow International, Inc.

 
Adverse Change.  A material adverse change occurs in any Borrower’s financial
condition, or Lender believes the prospect or payment or performance of the Note
or the obligations arising under the Loan Agreement and Related Documents is
impaired and such condition remains uncured for a period of three (3) days after
notice from the Borrower.

 
Insecurity.  Lender in good faith believes itself insecure and such belief
remains uncured for a period of three (3) days after notice to the Borrowers.

 
2.             All other terms and conditions of the Agreement remain the same.
 

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In Witness Whereof, Grantor, Borrower and Lender agree to and acknowledge the
terms of this Addendum.

BORROWER:                                                                           LENDER:

AEROGROW INTERNATIONAL, INC.                             FIRST NATIONAL BANK

By:  ____________________________                          By:  ________________________
Jervis B.
Perkins                                                                      Zan
M. Powell
President                                                                                   Vice
President

____________________________________________
JACK J. WALKER, individually

GRANTOR:

 

____________________________
JACK J. WALKER

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