Exhibit 10.1
 
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT

THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is made
and entered into as of the 24th day of October, 2008 (the “Amendment Date”),
between AEROGROW INTERNATIONAL, INC., a Nevada corporation (“Borrower”) and FCC,
LLC d/b/a First Capital, a Florida limited liability company (“Lender”).

W I T N E S S E T H:

WHEREAS, Borrower and Lender are parties to that certain Loan and Security
Agreement dated as of June 23, 2008 (as amended, restated, modified or
supplemented from time to time, the “Loan Agreement”); and

WHEREAS, the parties desire to amend the Agreement on the terms and conditions
set forth herein.

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

1.  
All capitalized terms used herein and not otherwise expressly defined herein
shall have the respective meanings given to such terms in the Agreement.

2.  
The Agreement is amended by deleting Section 3(a) and substituting the following
in lieu thereof:

(a)           (i)           Interest on Loans.  Borrower will pay Lender or, at
Lender’s option, Lender may charge Borrower’s loan account with, interest on the
average daily net principal amount of loans outstanding hereunder, calculated
monthly and payable on the first day of each calendar month, at a rate (computed
on the basis of the actual number of days elapsed over a year of 360 days) equal
to the sum of (i) the Base Rate (as defined below), plus (ii) the interest
margin specified in Item 8 of the Schedule (the “Interest Margin”).  The Base
Rate may not be the lowest or best rate at which Lender calculates interest or
extends credit. The Base Rate for each calendar month shall be adjusted (if
necessary) on the first day of such calendar month and shall be equal to the
Base Rate in effect as of the close of business on the last Business Day of the
immediately preceding calendar month.

  As used herein, the following terms shall have the following meanings:
 
“Base Rate” means, at any time, the greatest of (a) the Prime Rate (as defined
below), or (b)  LIBOR (as defined below) plus 2.75%.
 
“LIBOR” means, at any time, an interest rate per annum equal to the interest
rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) as
published in the “Money Rates” section of The Wall Street Journal (or another
national publication selected by the Lender) as the one month London Interbank
Offered Rate for United States dollar deposits or such other language (or, if
such page shall cease to be publicly available or, if the
information/description contained on such page, in Lender’s sole judgment, shall
cease to accurately reflect such London Interbank Offered Rate, then such rate
as reported by any publicly available recognized source of similar market data
selected by Lender that, in Lender’s reasonable judgment, accurately reflects
such London Interbank Offered Rate).
 
“Prime Rate” means, at any time, the rate of interest noted in The Wall Street
Journal, Money Rates section, as the “Prime Rate” (currently defined as the base
rate on corporate loans posted by at least 75% of the nation’s thirty (30)
largest banks).  In the event that The Wall Street Journal quotes more than one
rate, or a range of rates, as the Prime Rate, then the Prime Rate shall mean the
average of the quoted rates.  In the event that The Wall Street Journal ceases
to publish a Prime Rate, then the Prime Rate shall be the average of the three
(3) largest U.S. money center commercial banks, as determined by Lender.
 
(ii)           Market Disruption Event. If, at any time, Lender determines
(which determination shall be conclusive and binding) that (a) by reason of
circumstances affecting the London interbank market generally, adequate and fair
means do not exist for ascertaining LIBOR for the following month as provided in
subsection (a) hereof, or (b) disruptions in the short term money markets have
materially and adversely affected Lender’s cost of funds such that the interest
rate hereunder does not adequately or fairly reflect Lender’s cost of making,
funding or maintaining the loan hereunder, a “Market Disruption Event” will be
deemed to have occurred and the Lender shall promptly notify the Borrower
thereof. The rate of interest hereunder (the “Adjusted Rate of Interest”) shall
be adjusted and shall thereafter be a rate equal to the sum of (x) the rate that
Lender determines (which determination shall be conclusive and binding),
expressed as a percentage rate per annum, to be the cost to Lender of funding
the loan from whatever source it may reasonably elect, plus (y) the Interest
Margin. Lender shall give prompt notice to Borrower of the Adjusted Rate of
Interest.
 
 
 
 

--------------------------------------------------------------------------------

 

 
Borrower shall begin to be charged interest at the Adjusted Rate of Interest
effective as of the first day of the month following the month in which Lender
provides notice thereof to Borrower, provided, however, that if Borrower is
unwilling to accept the Adjusted Rate of Interest, it may terminate this
Agreement and prepay all amounts due hereunder within thirty (30) days of the
effective date of the Adjusted Rate of Interest without paying a prepayment fee.

3.  
Borrower acknowledges and agrees that Borrower is in default of the terms of
Items 21(b) and 21(c) of the Schedule for the fiscal quarter ending September
30, 2008 (the “Specified Default”).  Lender hereby waives the Specified Default;
provided, however, that this waiver is limited only to the Specified Default and
only for the quarter ending September 30, 2008.  Nothing contained herein shall
be deemed to constitute a waiver of future compliance of any term or condition
of the Agreement.

4.  
Borrower hereby restates, ratifies and reaffirms each and every term, condition
representation and warranty heretofore made by it under or in connection with
the execution and delivery of the Agreement, as amended hereby, and the other
Loan Documents, as fully as though such representations and warranties had been
made on the date hereof and with specific reference to this Amendment and the
Loan Documents.

5.  
Except as set forth herein, the Agreement shall be and remain in full force and
effect as originally written, and shall constitute the legal, valid, binding and
enforceable obligation of Borrower to Lender.

6.  
To induce Lender to enter into this Amendment, Borrower hereby releases, acquits
and forever discharges Lender, and Lender’s officers, directors, agents,
employees, successors and assigns, from all liabilities, claims, demands,
actions or causes of action of any kind (if any there be), whether absolute or
contingent, due or to become due, disputed or undisputed, liquidated or
unliquidated, at law or in equity, known or unknown, that Borrower now has or
ever has had against Lender, whether arising under or in connection with the
Agreement or otherwise

7.  
This Amendment may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same instrument.

8.  
This Amendment shall be binding upon and inure to the benefit of the successors
and permitted assigns of the parties hereto.

9.  
This Amendment shall be governed by, and construed in accordance with, the laws
of the State of Oklahoma, other than its laws respecting choice of law.

IN WITNESS WHEREOF, Borrower and Lender have caused this Amendment to be duly
executed as of the date first above written.

AEROGROW INTERNATIONAL, INC.

By: __________________________________________                                                               
H. MacGregor Clarke, Chief Financial Officer

FCC, LLC d/b/a FIRST CAPITAL

By: _________________________________________                                                              
Lee E. Elmore, Senior Vice President
 

The undersigned hereby acknowledge, consent and agree to the foregoing Amendment
and agree his respective Validity Agreement or Limited Guaranty of Individual
(as applicable and as may be amended from time to time) executed by the
undersigned in connection with the Agreement remains in full force and effect
notwithstanding the modification of the Agreement pursuant to the foregoing
Amendment, subject to no right of offset, claim or counterclaim.

________________________________
Jack J. Walker

________________________________
Jervis Perkins
 
________________________________
H. MacGregor Clarke