ex10-1.htm


    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