Document:

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 Clarkeex10-2.htm

    Exhibit
10.2

     

    TEMPORARY
AMENDMENT TO LOAN AND SECURITY AGREEMENT

    

    THIS TEMPORARY AMENDMENT TO LOAN AND
SECURITY AGREEMENT ("Amendment") is made and effective this 27th day of October,
2008 by and among AEROGROW INTERNATIONAL, INC. (“Borrower”), JACK J. WALKER
(“Guarantor”; Borrower and Guarantor are collectively referred to herein as
“Obligors”) and FCC, LLC d/b/a First Capital ("Lender").

    

    WHEREAS, Lender and Borrower are
parties to a certain Loan and Security Agreement, dated June 23, 2008 (as
amended from time to time, the "Agreement") pursuant to which Lender makes loans
and other extensions of credit to Borrower, which loans and extensions of credit
are secured by security interests upon the Collateral, and guaranteed
unconditionally by Guarantor; and

    

    WHEREAS, the Agreement establishes a
secured lending facility limited to a Borrowing Base, which limits the amount
that Borrower may borrow under the Agreement (“Original Borrowing Base”);
and

    

    WHEREAS, the parties desire to increase
temporarily the Original Borrowing Base as hereinafter set forth in order to
permit Borrower to borrow increased funds under the Agreement.

    

    NOW THEREFORE, in consideration of the
mutual conditions and agreements set forth in the Agreement and this Amendment,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as
follows:

    

    
      	
              1.  

            	
              Definitions.  Capitalized
      terms used in this Amendment, unless otherwise defined herein, shall have
      the meaning ascribed to such term in the
  Agreement.

            

    

    

    
      	
              2.  

            	
              Temporary
      Amendments.  The amendments herein shall only be
      applicable beginning October 24, 2008 and ending December 31, 2008
      (“Temporary Amendment Period”).  On January 1, 2009, the
      increase to the Original Borrowing Base herein shall become null and void
      and the Borrowing Base shall revert to the Original Borrowing Base.

            

    

    

    
      	
              3.  

            	
              Temporary Increase to
      the Original Borrowing Base.  This Amendment represents a
      temporary increase in the Original Borrowing Base.  As such, on
      January 1, 2009 Borrower shall repay the loans under the Agreement in an
      amount sufficient to comply with the Original Borrowing Base in
      effect.  Subject to the conditions set forth below, the
      Agreement is amended for the term of the Temporary Amendment Period by
      deleting Item
      1(a)(ii)(B)(2) of the Schedule to the Agreement and replacing it
      with the following:

            

    

    

    (i) from
October 24, 2008 through Novmber 30, 2008 Item
1(a)(ii)(B)(2) of the Schedule shall read:

    

    
      (2)
70%
of the dollar value (determined at the lower of cost or market value)of Eligible
Inventory.

    

    

    
      	
               
      

            	
              provided, however,
      that the aggregate principal amount available to be borrowed
      against Eligible Inventory under this clause (B) shall not exceed 70% of
      the Obligations outstanding at any time and from October 20, 2008 through
      November 30, 2008.

            

    

     

    (ii) from
December 1, 2008 through December 15, 2008 Item
1(a)(ii)(B)(2) of the Schedule shall read:

    

    
      (2)
65%
of the dollar value (determined at the lower of cost or market value)of Eligible
Inventory.

    

    

    
      	
               
      

            	
              provided, however,
      that the aggregate principal amount available to be borrowed
      against Eligible Inventory under this clause (B) shall not exceed 40% of
      the Obligations outstanding at any time and from December 1, 2008 through
      December 15, 2008.

            

    

    

    (iii)
from December 16, 2008 – through December 31, 2008 Item
1(a)(ii)(B)(2) of the Schedule shall read:

    

    
      (2)
60%
of the dollar value (determined at the lower of cost or market value)of Eligible
Inventory.

    

    

    provided, however,
that the aggregate principal amount available to be borrowed against
Eligible Inventory under this clause (B) shall not exceed 40% of the Obligations
outstanding at any time and from December 16, 2008 through December 31,
2008.

    

    
      	
               
      

            	
              4.

            	
              Conditions.  The
      effectiveness of this Amendment is subject to the following conditions
      precedent (unless specifically waived in writing by
    Lender):

            

    

    

    
      	
               
      

            	
              (a)

            	
              Borrower
      shall have executed and delivered such other documents and instruments as
      Lender may require.

            

    

    

    
      	
               
      

            	
              (b)

            	
              All
      proceedings taken in connection with the transactions contemplated by this
      Amendment and all documents, instruments and other legal matters incident
      thereto shall be satisfactory to Lender and its legal
    counsel.

            

    

    

    
      	
               
      

            	
              (c)

            	
              No
      Default shall be continuing.

            

    

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    
      	
               
      

            	
              (d)

            	
              There
      shall have occurred no material adverse change in the business,
      operations, financial condition, profits or prospects of Borrower, or in
      the Collateral.

            

    

    

    
      	
               
      

            	
              (e)

            	
              Borrower
      shall pay a document fee to Lender in the amount of $1,000.00 (“Document
      Fee”).  The Document Fee shall shall be earned at closing of
      this Amendment and is
non-refundable.

            

    

    

    
      	
               
      

            	
              (e)

            	
              Borrower
      shall pay a closing fee to Lender in the amount of $50,000.00 (“Closing
      Fee”).  The Closing Fee shall be earned at closing of this
      Amendment and is non-refundable.

            

    

    

    
      	
               
      

            	
              (f)

            	
              Guarantor
      shall execute and deliver to Lender a Limited Guaranty of Individual in
      form and substance substantially similar to the agreement attached to this
      Amendment as Exhibit “A.”

            

    

    

    5.           Representations and
Warranties of Obligors.  Each Obligor represents and warrants
that (a) no Default exists under the Agreement; (b) the representations and
warranties of Borrower contained in the Agreement were true and correct in all
material respects when made and continue to be true and correct in all material
respects on the date hereof; (c) the execution, delivery and performance by
Borrower of this Amendment and the consummation of the transactions
contemplated hereby are within the corporate power of Borrower and have been
duly authorized by all necessary corporate action on the part of Borrower, do
not require any approval or consent, or filing with, any governmental agency or
authority, do not violate any provisions of any law, rule or regulation or
any provision of any order, writ, judgment, injunction, decree, determination or
award presently in effect in which Borrower is named or any provision of
the charter documents of Borrower and do not result in a breach of or constitute
a default under any agreement or instrument to which Borrower is a party or by
which it or any of its properties are bound; (d) this Amendment constitutes the
legal, valid and binding obligation of Obligors, enforceable against Obligors in
accordance with its terms; (e) all payroll taxes required to be withheld from
the wages of Borrower's employees have been paid or deposited when due; (f)
each Obligor is entering into this Amendment freely and voluntarily with
the advice of legal counsel of his or its own choosing; (g) each has freely
and voluntarily agreed to the releases, waivers and undertakings set forth in
this Amendment; (h) each understands that this increase in the Original
Borrowing Base is temporary and that the Borrowing Base will automatically
revert to the Original Borrowing Base on January 1, 2009; and (i) each
understands that any amounts outstanding, due and owing to Lender in excess of
the Original Borrowing Base on January  1, 2009 shall be immediately
due and payable to Lender.

    

    6.           Reaffirmation of
Obligations.  Borrower hereby ratifies and reaffirms the
Agreement and all of its obligations and liabilities thereunder.  Each
Guarantor hereby ratifies and reaffirms the validity, legality and
enforceability of the Guaranty and agrees that such Guaranty is and shall remain
in full force and in effect until all the Obligations have been paid in full.
Borrower and each Guarantor acknowledges and agrees that all terms and
provisions, covenants and conditions of the Agreement shall be and remain
in full force and effect and constitute the legal, valid, binding and
enforceable obligations of Borrower and each Guarantor that is a party thereto
in accordance with their respective terms as of the date hereof.  Although
each Guarantor has been informed of the matters set forth herein and has
acknowledged and agreed to same, each Guarantor understands that Lender has no
obligation to inform any Guarantor of such matters in the future or to seek any
Guarantor’s acknowledgment or agreement to future amendments or waivers, and
nothing herein shall create such a duty.  Borrower shall pay to Lender
all costs and expenses, including legal fees, incurred by Lender in connection
with preparation, negotiation and closing of this Amendment.

    

    7.           Ratification.  The
terms and provisions set forth in this Amendment shall modify and supersede all
inconsistent terms and provisions of the Agreement, and shall not be deemed to
be a consent to the modification or waiver of any other term or condition of the
Agreement.  Except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement are ratified and confirmed
and shall continue in full force and effect.

    

    8.           No Novation,
etc.  This Amendment is not intended to be, nor shall it be
construed to create, a novation or accord and satisfaction, and the Agreement,
as amended hereby, shall remain in full force and
effect.  Notwithstanding any prior mutual temporary disregard of any
of the terms of the Agreement, the parties agree that the terms of
the Agreement shall be strictly adhered to on and after the date
hereof, except as expressly modified by this Amendment.

    

    9.           Release
of Claims.  To
induce Lender to enter into this Amendment, each Obligor 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, or known or unknown, that any one or more of
them now have or ever have had against Lender up to and including the date of
this Amendment, whether arising under or in connection with the Agreement or
otherwise.

    

    10.           Non-Waiver of
Default.  Neither this Amendment, Lender’s forbearance
hereunder nor Lender's continued making of loans or other extensions of credit
at any time extended to Borrower in accordance with the Agreement shall be
deemed a waiver of or consent to any Default.  Obligors agree that
such Defaults shall not be deemed to have been waived, released or cured by
virtue of advances, loans or other extensions of credit at any time extended to
Borrower, Lender's agreement to forbear pursuant to the terms of this Amendment
or the execution of this Amendment.

    

    11.           Severability.  Any
provision of this Amendment held by a court of competent jurisdiction to be
invalid or unenforceable shall not impair or invalidate the remainder of this
Amendment, and the effect thereof shall be confined to the provision so held to
be invalid or unenforceable.

    

    12.           Counterparts.  This
Amendment may be executed in one or more counterparts, each of which shall
constitute an original, but all of which taken together shall be one and the
same instrument.

    

    13.           Successors and
Assigns.  This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns, heirs
and personal representatives.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    IN WITNESS WHEREOF, the parties hereto
have caused this Amendment to be duly executed under seal and delivered by their
respective duly authorized officers on the date first written
above.

    

    

    FCC,
LLC d/b/a First Capital

     

    

    By:__________________________

          Lee
E.
Elmore                                                                           

          Senior
Vice
President                                                                                                

    

    

    Aerogrow
Interational, Inc.

     

    

    By:__________________________

          H.
MacGregor Clarke, Chief Financial
Officer                                                                                                           

    

    

    

    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

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