**Exhibit 10.2**

 

**FIRST AMENDMENT TO CREDIT AGREEMENT**

 

**Parties:**

 
|   | “Bank”:     | Wells Fargo Bank, N.A.                                          |
|--------|-----------------------|-----------------------------------------------------------------|
|   |                  | (f/k/a Wells Fargo Bank West, N.A.)  1242 Pearl Street          |
|   |                  | P.O. Box 227                                               |
|   |                  | Boulder, Colorado 80302                                         |
|   |                  |                                                            |
|   | “Borrower”: | The Persons shown as parties on the signature pages hereto |

 
| **Execution Date**: | October 22, 2007 |
|---------------------|-----------------------|

 

**Recitals:**

 

A.            Bank and each Borrower have enteredinto that certain 2005 Amended and Restated Credit Agreement dated as of July 29,2005 (as amended, modified, or supplemented from time to time in the future,the “**Credit Agreement**”) pursuantto which the Lender has extended certain credit facilities to Borrower underthe terms and conditions set forth in the Credit Agreement.

 

B.            Borrower has requested that the Bankmodify certain provisions of the Credit Agreement and to remove Gaiam West, Inc.as a Borrower, which the Bank is willing to do under the terms and conditionsas set forth in this First Amendment to Credit Agreement (“**First Amendment**”).

 

**Agreement:**

 

Now,therefore, in consideration of the mutual covenants and agreements hereincontained and other good and valuable consideration, the receipt and adequacyof which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1.             **Amendmentsto Credit Agreement**.  TheCredit Agreement is amended as of the Effective Date as follows:

 

 1.1          Sections1.15, 1.33, and 1.90 are amended to read as follows:

 

1.15         Base Rate Margin: negative 75basis points.

 

1.33         Consolidated Subsidiaries:means, considered together, (a) each of Gaiam’s Subsidiaries other thanGaiam West, Inc.; and (b) the following entities in which Gaiam hasan equity ownership interest in excess of fifty percent (50.0%): (i) NaturalHabitat, Inc., and (ii) Gaiam Limited.

 

1.90         Revolving Maturity Date : means October 22,2009.

 

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1.2           Subsections 9.2.11, 9.2.12, and9.2.15 are amended to read as follows:

 

9.2.11      Borrowing Base Certificate.  Borrower shall, no later than the forty-fifth(45th) day after the end of each Fiscal Quarter during which there was aRevolving Advance outstanding, provide to Lender a Borrowing Base Certificate,certified to by Gaiam’s chief financial officer, effective as of the last dayof such Fiscal Quarter, and including a breakdown as to amounts of EligibleAccounts and Eligible Inventory owned by each Borrower individually.

 

9.2.12      Quarterly Inventory Report.  Borrower shall, no later than the forty-fifth(45th) day of each Fiscal Quarter, provide to Lender an Inventory Report,certified to by Gaiam’s chief financial officer, effective as of the last dayof the previous Fiscal Quarter, and including a breakdown as to amounts ofInventory owned by each Borrower individually.  The Inventory Report with certification, may,at Borrower’s discretion and subject to Lender’s receipt thereof in a readableform, be transmitted to Lender over the Internet by electronic mail or otherfile transfer or sharing method; provided that Lender shall not be responsibleif the contents are sent without encryption or are read or tampered with byPersons not employed by Lender.

 

9.2.15      Accounts Aging Report.  Borrower shall, no later than the forty-fifth(45th) day of each Fiscal Quarter, provide to Lender a report (“**Accounts Aging Report**”), certified to byGaiam’s chief financial officer, effective as of the last day of the previousFiscal Quarter, showing for each Borrower whose Accounts Receivable areincluded in the Borrowing Base: (a) aggregate balances of all AccountsReceivable owing on a current, 30-day, 60-day, 90-day and over 90-day basis, (b) byname of account debtor, those accounts (and amounts) which are more than90-days past due, (c) by name of account debtor, those of AccountsReceivable owing (and amounts) as to which the account debtor has (i) threatenedor asserted a set-off, defense or adverse claim or (ii) threatened orasserted a refusal to pay, (d) individually by name and amount owing allaccount debtors with respect to which twenty-five percent (25%) or more oftheir total outstanding balance of Accounts Receivable owing constitutesDelinquent Accounts, and (e) by name and amount owing all account debtorswhose outstanding balances of Accounts Receivable owing individually constitutein excess of twenty-five percent (25%) of Borrower’s total of AccountsReceivable owing at the time of the report.  The Accounts Aging Report, with certification,may, at Borrower’s discretion and subject to Lender’s receipt thereof in areadable form, be transmitted to Lender over the Internet by electronic mail orother file transfer or sharing method; provided that Lender shall not beresponsible if the contents are sent without encryption or are read or tamperedwith by Persons not employed by Lender.

 

1.3           Subsections 9.14.1 and 9.14.3 areamended to read as follows:

 

9.14.1      Net Worth.  At, and measured as of, the end of each FiscalQuarter Net Worth shall be no less than: (a) $40,000,000 for the periodfrom the Closing Date through and including September 30, 2005; (b) $47,000,000as of December 31, 2005

 

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through and including June 30, 2007; and (c) $80,000,000 asof September 30, 2007 and thereafter.

 

9.14.3    Total Liabilities toNet Worth.  At, and measured as of,the end of each Fiscal Quarter, a ratio of Total Liabilities, divided by NetWorth (in each case as determined in accordance with GAAP), of greater than0.75 to 1.0.

 

1.4         A new Section 9.16is added to read as follows:

 

9.16         Cash Coverage for Letters of Credit. Borrower shall at all times maintain inan account with Lender, or in an account maintained by Borrower with anothersubsidiary of Wells Fargo & Co. satisfactory to Lender, free cash, notsubject to any lien, security interest, or right of off set in favor of anyPerson other than Lender, in an amount not less than the then undrawn faceamount of all Letters of Credit issued and outstanding.

 

1.5         Sections 10.3, 10.5,10.6, 10.7, and 10.10 are amended to read as follows:

 

10.3         Sale of Assets.  Borrower will not sell, convey, assign, leaseor otherwise transfer or dispose of, voluntarily, by operation of law or otherwise,any of its assets to any Person, except that; (a) Borrower may sellinventory, equipment and fixtures disposed of in the ordinary course of itsbusiness; (b) Borrower may dispose of inventory and equipment which isworn out or obsolete or no longer used or useful by Borrower in its business solong as no Event of Default has occurred and is continuing; and (c) Borrowermay sell any equity or other interest it has in any Person so long as Borrowerwill, on a pro forma basis taking into account such sale, be in compliance witheach of the covenants set forth in Section 9.14 hereof and each Subsectionthereof.

 

10.5         Merger; Acquisitions; Business Form;Etc.  Borrower shall not mergeor consolidate with any entity, or acquire all or substantially all of theassets of any Person or entity, change its business form, or commenceoperations under any other name, organization, or entity, including any jointventure; provided however that Borrower (a) may acquire an equity or otherinterest in any Person so long as Borrower will, on a pro forma basis takinginto account such acquisition, be in compliance with each of the covenants setforth in Section 9.14 hereof and each Subsection thereof; provided that nolater than ten (10) Business Days after an acquisition as described inclause (a), Borrower shall (i) provide Lender with written notification ofsuch acquisition (including, as applicable, a detailed description, the name ofthe acquired Person, the business form of the acquired Person, and the place oflocation (as that term is used in the applicable Uniform Commercial Code) ofthe acquired Person, and (ii) take such action (or cause the acquiredPerson to take such action) as Lender directs in order to create and/or perfectLender’s security interest in any Collateral and assure such security interestas a first priority lien.

 

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10.6         Investments.  Borrower will not own, purchase or acquire anystock, obligations or securities of, or any other interest in, or make anycapital contribution to, any Person, except that Borrower may own, purchase oracquire:

 

(a)           Commercial paper maturing not inexcess of one year from the date of acquisition and rated P1 by Moody’sInvestors Service, Inc. or A1 by Standard & Poor’s Corporation onthe date of acquisition;

 

(b)           Certificates of deposit in NorthAmerican commercial banks rated C or better by Keefe, Bruyette & Woods, Inc.or 3 or better by Cates Consulting Analysts, maturing not in excess of one yearfrom the date of acquisition;

 

(c)           Obligations of the United Statesgovernment or any agency thereof, the obligations of which are guaranteed bythe United States government, maturing, in each case, not in excess of one yearfrom the date of acquisition; and

 

(d)           Repurchase agreements of any bank ortrust company incorporated under the laws of the United States of America orany state thereof and fully secured by a pledge of obligations issued or fullyand unconditionally guaranteed by the United States government;

 

(e)           Borrower may acquire or make anInvestment in any Person so long as Borrower will, on a pro forma basis takinginto account such Investment, be in compliance with each of the covenants setforth in Section 9.14 hereof and each Subsection thereof

 

10.7         Loans.  Borrower shall not lend or advance money,credit, or property to any Person, except for trade credit extended in theordinary course of business and loans or advances to employees not in excess of$200,000.00 for any such employee and an aggregate at any time of $500,000.00for all employees.

 

10.10       Payment of Dividends.  Borrower shall not, directly or indirectly,declare or pay any dividends on account of any shares of any class of itscapital stock now or hereafter outstanding, or set aside or otherwise depositor invest any sums for such purpose; provided that if no Potential Default orEvent of Default shall exist before, and after giving effect to, the payment ofsuch dividend, Borrower may pay dividends on any of its shares of capitalstock.

 

2.             **Removaland Release of Gaiam West, Inc.**.  As of the Effective Date, Gaiam West, Inc.is removed as a Borrower and shall have (a) no further right to request aRevolving Advance or issuance of a Letter of Credit under the Credit Agreement;and (b) no further liability for any amounts owing under the CreditAgreement, the Amended Revolving Note, or any other Loan Document, nor anyobligations under the Amended and Restated Security Agreement (notwithstandingthe fact that Gaiam West, Inc. has executed the Credit Agreement, AmendedRevolving Note, and Amended and Restated Security Agreement).

 

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3.**             Conditions toEffectiveness of this First Amendment**.  The effectiveness of this First Amendment issubject to satisfaction, in the Bank’s sole discretion, of each of thefollowing conditions precedent (the date on which all such conditions precedentare so satisfied shall be the “**Effective Date**”):

 

3.1           **Delivery of Executed Documents**.  Borrower shall have delivered to the Bank thefollowing documents:

 

A.           ThisFirst Amendment, duly executed by Borrower

 

3.2           **Representations and Warranties**.  The representations and warranties of Borrowerin the Credit Agreement shall be true and correct in all material respects onand as of the Effective Date as though made on and as of such date.

 

3.3           **No Event of Default**.  No Event of Default shall have occurred and becontinuing under the Credit Agreement as of the Effective Date of this FirstAmendment.

 

3.4           **Payment of Fees and Expenses**.  Borrower shall have paid the Bank, by wiretransfer of immediately available federal funds (a) all fees presently dueunder the Credit Agreement (as amended by this First Amendment); and (b) allexpenses owing as of the Effective Date pursuant to Section 13.1 of theCredit Agreement.

 

4.**             GeneralProvisions**.

 

4.1         **No Other Modifications**.  The Credit Agreement, as expressly modifiedherein, shall continue in full force and effect and be binding upon the partiesthereto.

 

4.2         **Successors and Assigns**.  This First Amendment shall be binding upon andinure to the benefit of each Borrower and the Bank, and their respectivesuccessors and assigns, except that Borrower may not assign or transfer itsrights or obligations hereunder without the prior written consent of the Bank.

 

4.3         **Definitions**.  Capitalized terms used, but not defined, inthis First Amendment shall have the meaning set forth in the Credit Agreement.

 

4.4         **Severability**.  Should any provision of this First Amendmentbe deemed unlawful or unenforceable, said provision shall be deemed several andapart from all other provisions of this First Amendment and all remainingprovision of this First Amendment shall be fully enforceable.

 

4.5         **Governing Law**.  To the extent not governed by federal law,this First Amendment and the rights and obligations of the parties hereto shallbe governed by, interpreted and enforced in accordance with the laws of theState of Colorado.

 

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4.6         **Headings**.  The captions or headings in this FirstAmendment are for convenience only and in no way define, limit or describe thescope or intent of any provision of this First Amendment.

 

4.7         **Counterparts**.  This First Amendment may be executed by the partieshereto in separate counterparts, each of which, when so executed and delivered,shall be an original, but all such counterparts shall together constitute oneand the same instrument.  Eachcounterpart may consist of a number of copies hereof, each signed by less thanall, but together signed by all, of the parties hereto.  Copies of documents or signature pages bearingoriginal signatures, and executed documents or signature pages deliveredby a party by telefax, facsimile, or e-mail transmission of an Adobe® fileformat document (also known as a PDF file) shall, in each such instance, bedeemed to be, and shall constitute and be treated as, an original signeddocument or counterpart, as applicable.  Anyparty delivering an executed counterpart of this First Amendment by telefax,facsimile, or e-mail transmission of an Adobe® file format document also shalldeliver an original executed counterpart of this First Amendment, but thefailure to deliver an original executed counterpart shall not affect thevalidity, enforceability, and binding effect of this First Amendment.

 

[**Signaturesto follow on next page.**]

 

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IN WITNESS WHEREOF, the parties hereto have caused this First Amendmentto be executed as of the Effective Date.

 
| ** ** | **BANK:**                                                                            |
|------------|--------------------------------------------------------------------------------------|
| ** ** | ** **                                                                           |
| ** ** | **Wells Fargo Bank, N.A.**                                                           |
| ** ** | ** **                                                                           |
| ** ** | ** **                                                                           |
|       | By:                                                                                  | /s/ Michael Hindman |
|       | Name:                                                                                | Michael Hindman |
|       | Title:                                                                               | Vice President, Business Banking |
|       |                                                                                 | Manager |
|       |                                                                                 |   |
|       |                                                                                 |   |
| ** ** | **BORROWER:**                                                                        |
| ** ** | ** **                                                                           |
|       | Gaiam, Inc., a corporation formed under the  laws of the State of Colorado.          |
|       |                                                                                 |
|       |                                                                                 |
|       | By:                                                                                  | /s/ Lynn Powers |
|       | Name:                                                                                | Lynn Powers |
|       | Title:                                                                               | President |
|       |                                                                                 |   |
|       |                                                                                 |   |
|       | Gaiam Americas, Inc., a corporation formed  under the laws of the State of Colorado. |
|       |                                                                                 |
|       |                                                                                 |
|       | By:                                                                                  | /s/ Lynn Powers |
|       | Name:                                                                                | Lynn Powers |
|       | Title:                                                                               | President |
|       |                                                                                 |   |
|       |                                                                                 |   |
|       | Gaiam.com, Inc., a corporation formed under  the laws of the State of Colorado.      |
|       |                                                                                 |
|       |                                                                                 |
|       | By:                                                                                  | /s/ Lynn Powers |
|       | Name:                                                                                | Lynn Powers |
|       | Title:                                                                               | President |
|            |                                                                                      |  |  |

 

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|   | Gaiam Direct, Inc., a corporation formed under  the laws of the State of Colorado.             |
|--------|------------------------------------------------------------------------------------------------|
|   |                                                                                           |
|   |                                                                                           |
|   | By:                                                                                            | /s/ Lynn Powers |
|   | Name:                                                                                          | Lynn Powers |
|   | Title:                                                                                         | President |
|   |                                                                                           |   |
|   |                                                                                           |   |
|   | Gaiam International, Inc., a corporation formed  under the laws of the State of Colorado.      |
|   |                                                                                           |
|   |                                                                                           |
|   | By:                                                                                            | /s/ Jirka Rysavy |
|   | Name:                                                                                          | Jirka Rysavy |
|   | Title:                                                                                         | President |
|   |                                                                                           |   |
|   |                                                                                           |   |
|   | Gaiam International II, Inc., a corporation  formed under the laws of the State of  Colorado.  |
|   |                                                                                           |
|   |                                                                                           |
|   | By:                                                                                            | /s/ Jirka Rysavy |
|   | Name:                                                                                          | Jirka Rysavy |
|   | Title:                                                                                         | President |
|   |                                                                                           |   |
|   |                                                                                           |   |
|   | Gaiam International III, Inc., a corporation  formed under the laws of the State of  Colorado. |
|   |                                                                                           |
|   |                                                                                           |
|   | By:                                                                                            | /s/ Jirka Rysavy |
|   | Name:                                                                                          | Jirka Rysavy |
|   | Title:                                                                                         | President |
|   |                                                                                           |   |
|   |                                                                                           |   |
|   | Gaiam Media, Inc., a corporation formed under  the laws of the State of Colorado.              |
|   |                                                                                           |
|   |                                                                                           |
|   | By:                                                                                            | /s/ Lynn Powers |
|   | Name:                                                                                          | Lynn Powers |
|   | Title:                                                                                         | President |
|        |                                                                                                |  |  |

 

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|   | Gaiam Shared Services, Inc., a corporation  formed under the laws of the State of  Colorado. |
|--------|----------------------------------------------------------------------------------------------|
|   |                                                                                         |
|   |                                                                                         |
|   | By:                                                                                          | /s/ Lynn Powers |
|   | Name:                                                                                        | Lynn Powers |
|   | Title:                                                                                       | President |
|   |                                                                                         |   |
|   |                                                                                         |   |
|   | Gaiam Travel, Inc., a corporation formed under  the laws of the State of Colorado.           |
|   |                                                                                         |
|   |                                                                                         |
|   | By:                                                                                          | /s/ Lynn Powers |
|   | Name:                                                                                        | Lynn Powers |
|   | Title:                                                                                       | President |
|   |                                                                                         |   |
|   |                                                                                         |   |
|   | GT Media, Inc., a corporation formed under  the laws of the State of Colorado.               |
|   |                                                                                         |
|   |                                                                                         |
|   | By:                                                                                          | /s/ Lynn Powers |
|   | Name:                                                                                        | Lynn Powers |
|   | Title:                                                                                       | President |
|        |                                                                                              |  |  |

 

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