Exhibit 10.1
 
 
THIRD AMENDMENT
TO
COLLABORATION SERVICES AGREEMENT

This THIRD AMENDMENT TO COLLABORATION SERVICES AGREEMENT (this "Amendment") is
effective as of _____, 2018 (the "Effective Date"), among The Scotts Company
LLC, an Ohio limited liability company having its principal place of business at
14111 Scottslawn Road, Marysville, Ohio 43041 ("Scotts Company"), OMS
Investments, Inc., a Delaware corporation having its principal place of business
at 10250 Constellation Blvd., Suite 2800, Los Angeles, California 90067 ("OMS,"
and together with Scotts Company, "Scotts"), and AeroGrow International, Inc., a
Nevada corporation having its principal place of business at 6075 Longbow Dr.,
Suite 200, Boulder, Colorado 80301 ("AeroGrow").  Scotts and AeroGrow are
sometimes referred to herein collectively as the "Parties" and individually as a
"Party."

WHEREAS, the Parties are parties to that certain Collaboration Services
Agreement, effective as of April 22, 2013, as amended by that First Amendment,
effective July 15, 2016, as further amended by that Second Amendment, effective
September 13, 2017  (as amended and supplemented, the "Services Agreement"); and

WHEREAS, the Parties wish to amend the Services as set forth below.

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

1.
Amendment. Exhibit B of the Services Agreement is hereby amended and restated in
its entirety with the Exhibit A attached hereto.

2.
Incorporation with Services Agreement. This Amendment is executed and delivered
pursuant to the Services Agreement and shall be subject to the terms and
conditions of, and interpreted in accordance with, the Services Agreement. 
Except as amended hereby, the Services Agreement and each of the provisions
contained therein shall remain in full force and effect as from the Effective
Date.  Capitalized terms defined in the Services Agreement and not otherwise
defined herein shall have the meanings given to them in the Services Agreement.

3.
Counterparts.  This Amendment may be executed in one or more counterparts, each
of which shall be deemed an original, and all of which shall constitute one and
the same Amendment.

 
[Signature page follows]
 

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

The Parties have caused this Amendment to be executed as of the Effective Date.

 
THE SCOTTS COMPANY LLC
 
 
By:  __________________________________
Name:
Title:
 
 
 
OMS INVESTMENTS, INC.
 
 
By:   __________________________________
Name:
Title:
 
 
 
AEROGROW INTERNATIONAL, INC.
 
 
By:   __________________________________
Name:
Title:

 

 
[Signature Page to Third Amendment to Collaboration Services Agreement]

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

EXHIBIT A

Exhibit B

AEROGROW SERVICES

AeroGrow Information Services

·
AeroGrow will provide Scotts with copies of AeroGrow's consumer lists, including
email addresses and all other data regarding those consumers, subject to
compliance with applicable law.

AeroGrow DTC Services

Services:               AeroGrow will provide Scotts and its Affiliates with
Direct to Consumer fulfillment capabilities with respect to products of Scotts'
and its Affiliates, including:

·
Consumer service, including order entry and processing and payment collection.

·
Product storage and order fulfillment through its third-party fulfillment
center.

·
Web-site development (in some cases, Scotts may develop its own websites and
transmit orders to AeroGrow).

·
Assistance in analysis of customers, trends and buying patterns.

·
Development of a customer database.

·
Design and implementation of testing around marketing message, appropriate
products for the channel and pricing.

·
Returns processing.

 
AeroGrow shall cause its third-party fulfillment center to accept shipment of
and store products of Scotts and its Affiliates at its fulfillment center in an
orderly manner, in accordance with substantially the same degree of care that is
exercised to protect AeroGrow's own goods, and in substantially the same manner
and under the same storage conditions that are utilized with respect to
AeroGrow's own goods. The title to Scotts' or its Affiliates' products that are
subject to the AeroGrow DTC Services shall not transfer from Scotts or its
applicable Affiliate to AeroGrow.

Limitations:     AeroGrow will support all of Scotts' and its Affiliates' direct
fulfillment needs (to the extent requested by Scotts and its Affiliates;
however, AeroGrow will not be expected to significantly expand its computer
systems or its fulfillment center in order to meet Scotts' or its Affiliates'
needs. If such expansion is necessary, the Parties will meet and work in good
faith towards a reasonable solution. For the avoidance of doubt, the AeroGrow
DTC Services shall be applicable to any products or product categories selected
by Scotts or its Affiliates and shall not be limited to hydroponic growing
systems or related products.
 

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

Geography:      United States of America and Canada only.

Exclusivity:     AeroGrow will not perform similar services for any other third
party. Scotts and its Affiliates shall have no obligation to use any AeroGrow
DTC Services and there shall be no restriction on Scotts or its Affiliates
obtaining services similar to or substitutable for the AeroGrow DTC Services
from other third-parties or performing such services on their own.

Service Level:      AeroGrow will perform the AeroGrow DTC Services in good
faith, in accordance with all applicable laws and in substantially the same
manner and pursuant to the same standards, quality and degree of care as
provided by AeroGrow for its own products and business (but in no event less
than a commercially reasonable standard of performance).

PCI Compliance: To the extent AeroGrow stores, transmits or processes any
cardholder data (as  such term is defined in the Payment Card Industry Data
Security Standard, version 3.0, as the same may be succeeded, modified or
amended from time to time ("PCI")) in connection with performing the AeroGrow
DTC Services, AeroGrow will comply with PCI as it relates to the system elements
and portions of the cardholder data environment (as such terms are defined in
PCI) for which AeroGrow is responsible pursuant to the performance of the
AeroGrow DTC Services, and perform all tasks and activities required under PCI
or otherwise to validate compliance with PCI. AeroGrow will promptly deliver to
Scotts copies of all documentation necessary to verify such compliance or
otherwise requested by Scotts in connection with such compliance at no
additional charge to Scotts.

Privacy:            AeroGrow will establish information security program and
policies with respect to Customer Data (as defined below) which: (i) ensures the
security and confidentiality thereof; (ii) protects against any anticipated
threats or hazards to the security or integrity thereof; and (iii) protects
against any unauthorized use thereof or access thereto. AeroGrow will also
establish and maintain network and internet security procedures, protocols,
security gateways and firewalls with respect thereto. All of the foregoing will
be no less rigorous than those currently maintained by AeroGrow, and none of the
foregoing will be less rigorous than what is standard in the industry for the
applicable AeroGrow DTC Services.

"Customer Data" means: (i) all data and information generated, provided or
submitted by, or caused to be generated, provided or submitted by, Scotts or its
Affiliates in connection with the AeroGrow DTC Services; (ii) all data and
information collected, generated or submitted by, or caused to be generated,
provided or submitted by, AeroGrow, its representatives and/or their Affiliates
and subcontractors; (iii) all such data and information processed or stored,
and/or then provided to or for Scotts or its Affiliates, as part of the AeroGrow
DTC Services; and (iv) all data and information, regardless of the media in
which it is contained, (1) relating to an identified or identifiable natural
person or (2) defined as "personal information" (or an equivalent term) under
applicable privacy law.
 

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

Security:           If AeroGrow becomes aware of any Security Breach (as defined
below), AeroGrow will, at its sole cost and expense: (i) as promptly as
practicable notify Scotts of such Security Breach; (ii) perform a root cause
analysis thereon; (iii) investigate such Security Breach and report its findings
to Scotts; (iv) provide Scotts with a remediation plan for its approval to
address the Security Breach and prevent any further incidents; (v) once
approved, remediate such Security Breach in accordance with such approved plan;
(vi) conduct a forensic investigation to determine what systems, data and
information have been affected by such Security Breach and provide all of the
results and related reporting to Scotts for its review; and (vii) cooperate with
Scotts and, at Scotts' request, any law enforcement or regulatory officials,
credit reporting companies, and credit card associations investigating such
Security Breach. If requested by Scotts, AeroGrow will allow Scotts and its
designees to conduct a forensic investigation of the Security Breach. AeroGrow
will reimburse Scotts for all internal and external costs associated with
addressing and responding to the Security Breach incurred by Scotts or its
Affiliates in connection with any such Security Breach, unless the Security
Breach is caused by the acts or omissions of Scotts or its Affiliates. Scotts
will make the final decision on notifying any third party of the Security
Breach, and the implementation of any other remedies, including the remediation
plan.

AeroGrow will provide Scotts and its representatives with reasonable access to
AeroGrow's systems, policies and procedures relating to intrusion detection and
interception with respect to AeroGrow's systems used to provide the AeroGrow DTC
Services for the purpose of examining, testing and assessing those systems,
policies and procedures.

"Security Breach" means (i) any circumstance pursuant to which applicable
security law requires notification of such breach to be given to affected
parties or other activity in response to such circumstance or (ii) any actual,
attempted, suspected or threatened circumstance that compromises, or could
reasonably be expected to compromise, either physical security measures or
systems security measures required pursuant to the performance of the AeroGrow
DTC Services.

Service Fees:       The fee for the AeroGrow DTC Services shall be the
out-of-pocket direct costs
incurred by AeroGrow for the AeroGrow DTC Services, as outlined below. The costs
outlined below are intended to reflect AeroGrow's actual out-of-pocket direct
costs for performing the AeroGrow DTC Services. To the extent AeroGrow's actual
out-of-pocket direct costs for performing the AeroGrow DTC Services vary from
the costs outlined below, the Parties will negotiate an appropriate adjustment
in good faith.
 

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

DTC Costs Charged to Scotts by AeroGrow
Item
Warehouse Function
Cost
1
Monthly Storage Fee
$5,400 (1)
2
Inventory movement fee between warehouses
$100 per truckload (from Aero warehouse to SMG warehouse)
 

$20 per truckload (from SMG warehouse to Aero warehouse)
3
Monthly Storage Fee per Bin (upon exit of Additional Space)
$8.00 per bin per month
4
Receiving per Pallet (minimum fee 1 pallet)
40" x 48" x no more than 52" high
$10.00 per pallet received

5
Fulfillment - 1st Item on a D2C order
$1.85 per first item in an order
6
Fulfillment - Additional Item(s) per Order
$0.42 per additional item
7
Corrugate/Dunnage/Shipping Supplies Cost per Order
$0.78 per order
8
Returns Processing
$1.76 per returned order
9
Shipping Costs
Actual costs passed through(2)
10
Credit Card/Sales Tax processing
Actual processing costs passed through

Notes:
(1)
Scotts is responsible for the monthly storage fee of $5,400 through 11/19/18, at
which time Scotts must either (a) vacate the space at their own expense or (b)
extend the lease through AeroGrow.  If Scotts intends to vacate the space
by 11/19/18, they must provide AeroGrow with 30 days prior notice.  If Scotts
vacates this storage space and plans to move their goods back into AeroGrow's
Mexico, Missouri facility, it is understood that the parties will use good faith
efforts to minimize the space that Scotts uses and that Scotts will pay for
inventory movements.

(2)
Shipping costs will include regular shipping rates plus typical surcharges
related to fuel, residential delivery, etc.

 
In addition, Scotts will also pay AeroGrow $50,000 on each of July 15, 2017 and
July 15, 2018, provided that this Agreement remains in effect as of such date.

Royalty:            Scotts or its applicable Affiliate will pay AeroGrow a
royalty of 2.0% times its net sales of products fulfilled by AeroGrow pursuant
to the AeroGrow DTC Services, determined in accordance with United States
generally accepted accounting principles and practices applied consistently
throughout the periods involved.
 

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

AeroGrow Development Services

Services:           AeroGrow (through its own expertise or through its network
of suppliers) to provide turn-key product design and development for Large-Sized
Products and Lighting Products (as such terms are defined in the Technology
License Agreement), as well as enhancements or redesigns of such products, for
Scotts and its Affiliates. AeroGrow will provide any personnel, hardware,
software and equipment necessary or desirable to support such development and
design.

Scotts and its Affiliates, with the assistance of AeroGrow, will define the
strategic direction and specific deliverables for the AeroGrow Development
Services, and will agree in advance on an approximate budget for any
out-of-pocket development costs at the onset of a project, such as
certifications or testing.

Scotts and its Affiliates, with the assistance of AeroGrow, will define
functional
and performance objectives of prototype and production Large-Sized Products and
Lighting Products and define cost targets of future production Large-Sized
Products and Lighting Products. Scotts and its Affiliates, with the assistance
of AeroGrow, will define a product and performance evaluation plan for the
Large- Sized Products and Lighting Products.

AeroGrow will perform the AeroGrow Development Services in good faith, in
accordance with all applicable laws and in substantially the same manner and
pursuant to the same standards, quality and degree of care as provided by
AeroGrow for its own products and business (but in no event less than a
commercially reasonable standard of performance).

Without limiting the foregoing, AeroGrow represents and warrants that and will
at all times ensure that, the AeroGrow Development Services and the Large-Sized
Products and Lighting Products developed pursuant to the AeroGrow Development
Services and the Project IP developed following the date hereof or the
commercialization of any thereof does not infringe, misappropriate or otherwise
violate the Intellectual Property (as such term is defined in the Technology
License Agreement) or contractual rights of any third party.

Process:            AeroGrow and Scotts each will assign a project manager
within such party's organization who is to be accountable for the support of all
AeroGrow Development Services processes and objectives and communication with
respect thereto.

Existing IP:     OMS shall exclusively own all right, title and interest in and
to all Intellectual Property (as such term is defined in the Technology License
Agreement) of AeroGrow or its Affiliates that is primarily related to
Large-Sized Products and
Lighting Products ("Existing Project IP") and AeroGrow hereby assigns to OMS its
entire right, title and interest in and to any Existing Project IP. AeroGrow
represents and warrants that and will at all times ensure that neither the
Existing
Project IP nor the commercialization thereof infringes, misappropriates or
otherwise violates the Intellectual Property (as such term is defined in the
Technology License Agreement) or contractual rights of any third party. For the
avoidance of doubt, nothing set forth in this Agreement shall result in the
assignment or transfer of any Intellectual Property of Scotts or its Affiliates
to
AeroGrow.
 

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

Project IP:       Scotts will own, and AeroGrow hereby assigns to Scotts its
entire right, title and interest in and to, any Intellectual Property (as such
term is defined in the Technology License Agreement) conceived, developed,
reduced to practice or made in the performance of the AeroGrow Development
Services by any of AeroGrow or otherwise related to Large-Sized Products or
Lighting Products and conceived, developed or reduced to practice following the
date hereof  collectively, with the Existing Project IP, the "Project IP").
AeroGrow and its Affiliates agree to promptly disclose in writing to Scotts any
Project IP.
 
Cooperation:  AeroGrow agrees to execute, and to cause its employees and
contractors to execute, without further consideration, any further documents and
instruments that may be necessary, lawful and proper to secure to OMS its
interest and title in the Project IP.
 
Term:                Through July 15, 2019, unless the Agreement is terminated
pursuant to Section 3(b) or 3(c) prior to such date or the Parties agree in
writing to extend the term for the AeroGrow Development Services beyond such
date. For the avoidance of doubt, all Project IP assigned to OMS or required to
be assigned to OMS pursuant hereto shall continue to be owned exclusively by OMS
following the expiration or termination of this Agreement.

Service Fee:    $40,000 per quarter (pro-rated as necessary).