ex10-3.htm


    Exhibit 10.3


     

    VALIDITY
AGREEMENT

     

     

    THIS
VALIDITY AGREEMENT (this “Agreement”) is made as of the ____ day of _____, 2008,
by and between H. MacGregor Clarke (the “Principal”), AEROGROW INTERNATIONAL,
INC., a Nevada corporation (“Company”), and FCC, LLC, d/b/a First Capital
(“Secured Party”).

     

    RECITALS

     

     

    A. The
Principal is part of top-level management of Company and has considerable
expertise and familiarity in the management of Company's business.

     

    B. Company
and Secured Party are parties to a Loan and Security Agreement dated the same
date as this Agreement (as amended, modified, restated, substituted, extended
and renewed at any time and from time to time, the “Loan
Agreement”).  Capitalized terms not otherwise defined in this
Agreement shall have the meanings set forth in the  Loan
Agreement.

     

    C. Under the
Loan Agreement, Company has obtained and is currently indebted under, and may
obtain in the future, certain loans which are part of the “Obligations” (as that
term is defined in the Loan Agreement) of Company to Secured
Party.  The Obligations are secured by the “Collateral” (as that term
is defined in the Loan Agreement) as set forth in various agreements between
Company and Secured Party.

     

    D. A
condition of the making of the Loans was that the Principal and Company enter
into this Agreement.

     

    AGREEMENTS

     

    NOW,
THEREFORE, IN CONSIDERATION of the premises, and for other good and valuable
consideration, receipt of which is hereby acknowledged, and intending to be
legally bound, Secured Party, the Principal and Company hereby agree as
follows:

     

    1. Recitals.

     

    The
parties hereto hereby acknowledge and agree that to the best of their knowledge
the Recitals are true and accurate in all material respects.

     

    2. Assurances By
Principals.

     

    (a) The
Principal covenants and agrees for the benefit of the Secured Party that the
Principal will not willfully and intentionally (i) make any untrue statement
of  a material fact to Secured Party relating to the Collateral that
would constitute a fraud under the laws of the State of Colorado, (ii) make any
untrue statement of  a material fact to Secured Party relating to the
Loans that would constitute a fraud under the laws of the State of Colorado, or
(iii) fail or refuse to turn over any Collateral or proceeds thereof to the
Secured Party or otherwise take any action that would constitute a fraud or
conversion under the laws of the State of Colorado.

     

    (b) If there
occurs a breach or violation of any of the obligations of the Principal in
subsection (a) above, to the maximum extent permitted by applicable law, Secured
Party shall only be entitled to recover direct pecuniary losses on the Loans
caused by the breach or violation of any of the obligations of Principal in
subsection (a) above, and Principal shall not be liable for any other loss of
profits or any special, incidental, consequential or punitive
damages.

     

    (c) Any
action by Secured Party for a breach or violation of any of the obligations of
Principal in subsection (a) above must be brought (i) within six (6) months from
any termination under Section 4 below,  (ii) the applicable Colorado
statute of limitations for a breach of a written contract, or (iii) the
applicable Colorado statute of limitations for civil fraud, which ever is the
shorter time period.

     

    (d) The
provisions of subsections (b) and (c) shall survive the termination of this
Agreement.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3. Default; Waiver;
Etc.

     

    (a) Any
default by the Principal or Company under Section 2 of this Agreement will cause
immediate and irreparable injury to Secured Party and will authorize recourse
against the defaulting party by Secured Party, to include injunction, specific
performance and all other legal or equitable remedies.

     

    (b) Company
agrees to pay all of Secured Party's attorney's reasonable fees and expenses
relating to a default by the Principal or Company under this
Agreement.

     

    (c) Neither
Secured Party's entering into this Agreement, nor any failure on the part of
Secured Party in exercising any right, power, or privilege under one or more of
the instruments, security agreements or other loan documents relating to the
Loans shall operate as a waiver thereof, nor shall a single or partial exercise
thereof preclude any other or further exercise of any other right, power or
privilege.  Secured Party's acceptance of this Agreement shall in no
way be deemed to obligate Secured Party to make any Loans.  This
Agreement is intended solely for the benefit of Secured Party, its successors
and assigns to be used in the exercise of its absolute discretion from time to
time and shall not be interpreted to place on it directly or indirectly any
obligation or duty whatsoever to enforce the obligations of the Principal or
Company hereunder.

     

    4. Termination.

     

    This
Agreement shall terminate upon the earliest of (a) the date on which Secured
Party has received payment of all amounts due and owing under the Loan
Agreement, including all fees and expenses of Secured Party due and owing under
any agreement relating to the Loan Agreement, and all commitments of Secured
Party to provide loans or other credit accommodations to Borrower have
terminated, or (b) the date on which the assets of Company shall have been
completely liquidated, with insubstantial exceptions, or (c) Principal’s
voluntary or involuntary termination of employment with the
Company.  Notwithstanding the foregoing, Principal’s liabilities, if
any, under this Agreement shall continue and survive past any termination
related to subsections (b) or (c) of the foregoing sentence with respect to any
statements, actions or omissions of Principal prior to such
termination.

     

    5. Entire
Agreement.

     

                   
Principal and Company and Secured Party acknowledge that this written agreement
represents the final agreement between the parties and may not be contradicted
by evidence of prior, contemporaneous or subsequent oral agreements of the
parties.  There is no unwritten oral agreements between the
parties.

    


    6.  Governing
Law.

     

    THIS
AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES
HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO,
APPLICABLE TO AGREEMENTS EXECUTED, DELIVERED AND PERFORMED WITHIN SUCH STATE,
AND PRINCIPAL AND COMPANY HEREBY AGREES TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN DENVER, COLORADO. SECURED PARTY, PRINCIPAL AND
COMPANY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO
VENUE OF ANY ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH
LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.

     

    


     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date and year first written
above.

     

     

    COMPANY

     

    AEROGROW INTERNATIONAL, INC.

     

     

    By: __________________________________                                                               

         Jervis
B. Perkins, President
and Chief
Executive Officer

     

     

    PRINCIPAL

    


    _____________________________________

    H. MacGregor Clarke

    Address: ______________________________

     ______________________________                          

    
 

    


    SECURED PARTY

    


    FCC, LLC d/b/a First
Capital

    A Florida limited liability
company

    


    


    By:____________________________

          Lee E.
Elmore, Senior Vice President

    


    


    FCC, LLC

    3520 NW 58th
Street

    Oklahoma City, OK 73112

    Attn.:  Lee E. Elmore,
Senior Vice President

    Facsimile
No.:  405-917-9660

    


    


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      STATE OF
___________________

      


      COUNTY OF
_________________

    

    
 

    Before
me, the undersigned authority, on this date personally appeared Jervis B.
Perkins, President and Chief Executive Officer of Aerogrow International, Inc.,
known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that he executed the same for the purposes
and consideration therein expressed, in the capacity stated, and as the act and
deed of said corporation.

    


    Given
under my hand and seal this ______ day of __________________, 2008.

    


    


    


    ______________________________________

    Notary
Public

    


    ( S E A L
)

    


    


    


    My
Commission Expires:

    


    _____________________

    


     

    


    STATE OF
___________________

    


    COUNTY OF
_________________

    


    


    Before
me, the undersigned authority, on this date personally appeared Lee E. Elmore,
Senior Vice President of FCC, LLC, a Florida limited liability company, known to
me to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed the same for the purposes and consideration
therein expressed, in the capacity stated, and as the act and deed of said
limited liability company.

    


    Given
under my hand and seal this ______ day of __________________, 2008.

    


    


    


    ______________________________________

    Notary
Public

    


    ( S E A L
)

     

    


    My
Commission Expires:

    


    _____________________

     

    


    STATE OF
___________________

    


    COUNTY OF
_________________

    


    Before
me, the undersigned authority, on this date personally appeared H. MacGregor
Clarke, known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that he executed the same for the purposes
and consideration therein expressed.

    


    Given
under my hand and seal this ______ day of __________________, 2008.

    


    


    


    ______________________________________

    Notary
Public

    


    ( S E A L
)

    


    


    


    My
Commission Expires:

    


    _____________________