Document:

Exhibit 10.1 - First Amendment to Restated Credit Agreement

FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) dated as of July 9, 2015, among MERITAGE HOMES CORPORATION, a Maryland corporation (the “Borrower”), JPMORGAN CHASE BANK, N.A., as administrative agent on behalf of the Lenders (in such capacity, together with its successors and assigns in such capacity, the “Administrative Agent”), and as Swingline Lender and as Issuing Lender and the Lenders party hereto.
RECITALS:
A.    The Borrower, the Administrative Agent and the Lenders are parties to that certain Amended and Restated Credit Agreement dated as of June 13, 2014 (as amended, modified and supplemented and in effect from time to time, the “Credit Agreement”; and, except as otherwise herein expressly provided, all capitalized terms used herein shall have the meaning assigned to such terms in the Credit Agreement).
B.    The Borrower, the Administrative Agent and the Lenders desire to amend the Credit Agreement as more fully set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
Section 1.Amendment of Credit Agreement.  Effective as of the Effective Date (as hereinafter defined), the Credit Agreement is hereby amended as follows:
(a)The following defined terms are hereby added to Section 1.1 of the Credit Agreement as follows:
“Impacted Interest Period” has the meaning assigned to it in the definition of “Eurodollar Base Rate.”
“Interpolated Rate” means, at any time, for any Interest Period, the rate per annum (rounded to the same number of decimal places as the LIBO Screen Rate) determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the LIBO Screen Rate for the longest period (for which the LIBO Screen Rate is available for deposits in Dollars) that is shorter than the Impacted Interest Period; and (b) the LIBO Screen Rate for the shortest period (for which that LIBO Screen Rate is available for deposits in Dollars) that exceeds the Impacted Interest Period, in each case, at such time.
“Letter of Credit Commitment”:  with respect to each Issuing Lender, the commitment of such Issuing Lender to issue Letters of Credit hereunder.  The initial amount of each Issuing Lender’s Letter of Credit Commitment is set forth on Schedule 3.1A, or if an Issuing Lender has entered into an Assignment and 

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Assumption, the amount set forth for such Issuing Lender as its Letter of Credit Commitment in the Register maintained by the Administrative Agent.
“LIBO Screen Rate”:  has the meaning assigned to it in the definition of “Eurodollar Base Rate”.
(b)The following defined terms in Section 1.1 of the Credit Agreement are hereby amended and restated in their entirety to read as follows:
“Applicable Margin”: means, for each Type of Loan, the rate per annum set forth in the pricing grid below:
	
				
	Leverage Ratio
	Applicable Margin for Eurodollar Loans
	Applicable Margin for ABR Loans
	Commitment Fee Rate

	≤ 40%
	1.625%
	0.625%
	0.25%

	> 40% but ≤ 50%
	1.75%
	0.75%
	0.30%

	> 50% but ≤ 55%
	2.00%
	1.00%
	0.35%

	> 55%
	2.25%
	1.25%
	0.40%

“Commitment”:  as to any Lender, the obligation of such Lender to make Revolving Loans and participate in Swingline Loans and Letters of Credit in an aggregate principal and/or face amount not to exceed the amount set forth under the heading “Commitment” opposite such Lender’s name on Schedule 1.1A or in the Assignment and Assumption pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof.  The original amount of the Total Commitment is $500,000,000.

“Eurodollar Base Rate”:  with respect to each Interest Period pertaining to a Eurodollar Loan, the London interbank offered rate as administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate for deposits in Dollars) for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on the Reuters Screen LIBOR01 Page or LIBOR02 Page as of 11:00 A.M., London time, two (2) Business Days prior to the beginning of such Interest Period (or, in the event such rate does not appear on such Reuters page or screen, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion; in each case the “LIBO Screen Rate”); provided that if the LIBO Screen Rate shall be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement; provided further that if the LIBO Screen Rate shall not be available at such time for such Interest Period (an “Impacted Interest Period”) with respect to deposits in Dollars then the Eurodollar Base Rate shall be the Interpolated  Rate; provided that if any Interpolated Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

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 “Federal Funds Effective Rate”:  for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by JPMorgan Chase Bank, N.A. from three federal funds brokers of recognized standing selected by it; provided, that, if the Federal Funds Effective Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“Interest Period”:  as to any Eurodollar Loan, (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one week, or one, two, three or six months thereafter (or, such other period as may be agreed to by all Lenders), as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one week, or one, two, three or six months thereafter (or, such other period as may be agreed to by all Lenders), as selected by the Borrower by irrevocable notice to the Administrative Agent not later than 11:00 A.M., New York City time, on the date that is two (2) Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following:
(i)  if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;
(ii)    the Borrower may not select an Interest Period that would extend beyond the Termination Date; and
(iii)    any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month.
“Issuing Lender”:  JPMorgan Chase Bank, N.A., Bank of America, N.A., U.S. Bank, National Association, and Regions Bank, each in its capacity as issuer of any Letter of Credit and any other Lender approved by the Administrative Agent and the Borrower that has agreed in its sole discretion to act as an “Issuing Lender” hereunder, or any of their respective affiliates, in each case in its capacity as issuer of any Letter of Credit.  Each reference herein to “the Issuing Lender” shall be deemed to be a reference to the relevant Issuing Lender.  
“L/C Commitment”:  $250,000,000; provided, however, that the L/C Commitment automatically shall be increased by an amount equal to fifty percent (50%) of each dollar increase by which the Total Commitments have been increased in accordance with Section 2.21.
“Non-U.S. Lender”:  as defined in Section 2.16(f)(ii).

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“Termination Date”:  July 9, 2019, subject, however, to earlier termination of the Total Commitment pursuant of the terms of this Agreement.
(c)The following defined terms are hereby deleted in their entirety from Section 1.1 of the Credit Agreement:
“Exiting Lender”
“Gross Leverage Ratio”
“New DB Lender”
(d)The first sentence of Section 2.2 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
2.2    Procedure for Revolving Loan Borrowing.  The Borrower may borrow under the Commitments during the Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent (a) prior to 1:00 P.M., New York City time, three (3) Business Days prior to the requested Borrowing Date, in the case of Eurodollar Loans, or (b) by 2:00P.M., New York City time, on the requested Borrowing Date, in the case of ABR Loans), specifying (i) the amount and Type of Loans to be borrowed, (ii) the requested Borrowing Date and (iii) in the case of Eurodollar Loans, the respective amounts of each such Type of Loan and the respective lengths of the initial Interest Period therefor.  
(e)    Section 2.3(a) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

(a)    Subject to the terms and conditions hereof, the Swingline Lender agrees to make a portion of the credit otherwise available to the Borrower under the Commitments from time to time during the Commitment Period by making swing line loans (“Swingline Loans”) to the Borrower; provided that (i) the aggregate principal amount of Swingline Loans outstanding at any time shall not exceed the Swingline Commitment then in effect (notwithstanding that the Swingline Loans outstanding at any time, when aggregated with the Swingline Lender’s other outstanding Revolving Loans, may exceed the Swingline Commitment then in effect, but subject to clause (ii)), (ii) the aggregate principal amount of Swingline Loans outstanding when aggregated with the Swingline Lender’s Percentage Interest of other outstanding Revolving Loans and the Swingline Lender’s Percentage Interest of L/C Obligations shall not exceed the Swingline Lender’s Commitment, (iii) the Borrower shall not request, and the Swingline Lender shall not make, any Swingline Loan if, after giving effect to the making of such Swingline Loan, the aggregate amount of the Available Commitments would be less than zero, and (iv) Borrower shall not request, and the Swingline Lender shall not make, any Swingline Loan if, after giving effect to the making of such Swingline Loan, the Borrowing Base Availability would be less than zero.  During the Commitment Period, the Borrower may use the Swingline Commitment by borrowing, repaying and reborrowing, all in accordance with the terms and conditions hereof.  Swingline Loans shall be ABR Loans only.

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(f)Section 2.16(f)(ii) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
(ii)    any Lender that is not a U.S. Person (a “Non-U.S. Lender”) shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Non-U.S. Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:
(A)    in the case of a Non-U.S. Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN-E establishing an exemption from, or reduction of, U.S. Federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN-E establishing an exemption from, or reduction of, U.S. Federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;
(B)    executed originals of IRS Form W-8ECI;
(C)     in the case of a Non-U.S. Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit G-1 to the effect that such Non-U.S. Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed originals of IRS Form W-8BEN-E; or
(D) to the extent a Non-U.S. Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate substantially in the form of Exhibit G-2 or Exhibit G-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Non-U.S. Lender is a partnership and one or more direct or indirect partners of such Non-U.S. Lender are claiming the portfolio interest exemption, such Non-U.S. Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit G-4 on behalf of each such direct and indirect partner;

(g)Section 2.16(f)(iv) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
(iv)    If a payment made to a Lender under this Agreement would be subject to U.S. federal withholding tax imposed by FATCA and the rules and regulations promulgated pursuant thereto if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Administrative Agent, at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or 

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Administrative Agent, such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA, to determine that such Lender has or has not complied with such Lender’s obligations under FATCA and, as necessary, to determine the amount to deduct and withhold from such payment.  Solely for purposes of this clause (f), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.  For purposes of determining whether withholding Taxes will be imposed under FATCA, from and after the effective date of this Agreement, the Borrower and the Administrative Agent shall, to the extent permissible under applicable law, treat (and the Lenders hereby authorize the Borrower and the Administrative Agent to treat) this Agreement as not qualifying as a “grandfathered obligation” within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i).
(h)The first sentence of Section 2.21 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
2.21  Increase in Commitments.  The Borrower may, at its option, at any time or from time to time prior to the Termination Date, increase the Total Commitments by up to $100,000,000 (the “Commitment Increase”) to an aggregate principal amount not to exceed $600,000,000 by requesting the existing Lenders or new lenders to commit to any such increase; provided that:  (i) no Lender shall be required to commit to any such increase; (ii) no such increase shall become effective unless at the time thereof and after giving effect thereto (A) no Default or Event of Default shall have occurred and be continuing, (B) each of the representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall be true and correct in all material respects, provided, that, to the extent any such representation and warranty is already qualified by materiality or reference to Material Adverse Effect, such representation shall be true and correct in all respects, and (C) Administrative Agent shall have received a certificate from Borrower to the effect of (A) and (B) of clause (ii); and (iii) no new lender shall become a Lender pursuant to this Section 2.21 unless such lender is an Eligible Assignee and Administrative Agent shall have given its prior written consent, which consent shall not be unreasonably withheld.
(i)Section 3.1(a) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
(a)    Subject to the terms and conditions hereof, each Issuing Lender, in reliance on the agreements of the other Lenders set forth in Section 3.4(a), agrees to issue letters of credit (“Letters of Credit”), not to exceed in the aggregate such Issuing Lender’s Letter of Credit Commitment, for the account of the Borrower (and on behalf of the Borrower or any of its Subsidiaries or joint ventures) on any Business Day during the Commitment Period in such customary form as may be approved from time to time by the respective Issuing Lender; provided that the Issuing Lender shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (i) (A) the L/C Obligations would exceed the L/C Commitment, or (B) such Issuing Lender’s Percentage Interest of L/C Obligations when aggregated with such Issuing Lender’s Percentage Interest of outstanding Revolving Loans and such Issuing Lender’s Percentage Interest in Swingline Loans would exceed such Issuing Lender’s Commitment, (ii) the aggregate amount of the Available Commitments would be less than zero, or (iii) the Borrowing Base Availability would be less than zero.  

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The Borrower may, at any time and from time to time, reduce the Letter of Credit Commitment of any Issuing Lender with the consent of such Issuing Lender; provided that the Borrower shall not reduce the Letter of Credit Commitment of any Issuing Lender if, after giving effect of such reduction, the conditions set forth in clauses (i)- (iii) above shall not be satisfied.  The Borrower may, at any time and from time to time, reallocate the Letter of Credit Commitment by reducing the Letter of Credit Commitment of one or more Issuing Lenders and increasing the Letter of Credit Commitment of one or more other Issuing Lenders, provided that (a) each affected Issuing Lender consents to such reallocation, (b) Borrower provides written notice to the Administrative Agent and (c) the aggregate of the total Letter of Credit Commitment does not increase or decrease.  Each Letter of Credit shall (A) be denominated in Dollars and (B) expire no later than the earlier of (x) the second anniversary of its date of issuance and (y) the date that is 364 days after the Termination Date, provided (I) that any Letter of Credit with up to a two-year term may provide for the renewal thereof for up to an additional two-year period (which shall in no event extend beyond the date referred to in clause (y) above) and (II) at least 60 days prior to the Termination Date, Borrower shall, to the extent of the balance, replace outstanding Letters of Credit and/or deposit an amount equal to the Minimum Collateral Amount in cash in a cash collateral account established with the Administrative Agent for the benefit of the Lenders on terms and conditions satisfactory to the Administrative Agent.  The Borrower hereby acknowledges that the issuance of Letters of Credit for the account of a Subsidiary or joint venture inures to the benefit of the Borrower, and that the Borrower’s business derives substantial benefits from the businesses of such Subsidiary or joint venture.  The letters of credit issued under the Original Credit Agreement set forth on Schedule 3.1 (collectively, the “Existing LCs”) shall be continued from the Original Credit Agreement under this Agreement and from and after the date hereof, notwithstanding any language to the contrary contained in any of the Existing LCs, the Existing LCs shall be deemed Letters of Credit issued under this Agreement, and Borrower shall execute such acknowledgments and agreements as Administrative Agent my reasonably request to evidence the foregoing.  Each Lender from time to time party hereto, including each Lender which was not a lender under the Original Credit Agreement, each as an L/C Participant hereunder, hereby irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender under the Existing LCs, on the terms and conditions set forth in Section 3.4 below, for such L/C Participant’s own account and risk an undivided interest equal to such L/C Participant’s Percentage Interest in the Issuing Lender’s obligations and rights under and in respect of each Existing LCs and the amount of each draft paid by the Issuing Lender thereunder.
(j)    Section 10.2 of the Credit Agreement is hereby amended by modifying the Administrative Agent’s address for notices to read as follows:
JPMorgan Chase Bank, N.A. 
Wholesale Loan Operations 
Floor 03, Ops 2, 500 Stanton Christiana Road 
Newark, Delaware 19713 
Telephone: _____________________ 
Email: _________________________

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With a copy to:
Morrison & Foerster LLP 
707 Wilshire Blvd., Suite 6000 
Los Angeles, CA 90017 
Attention:  Marc D. Young, Esq. 
Telephone:  213-892-5659 
Email:  myoung@mofo.com
(k)Section 10.10 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
10.10  Integration.  This Agreement and the other Loan Documents and any separate letter agreements with respect to (i) fees payable to the Administrative Agent and (ii) changes to the Letter of Credit Commitment of any Issuing Lender represent the entire agreement of the Borrower, the Administrative Agent and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.

(l)Section 10.18 of the Credit Agreement is hereby deleted in its entirety.
(m)Schedule 1.1A [Commitments] to the Credit Agreement is hereby amended and restated in its entirety with amended Schedule 1.1A attached to this Amendment.
(n)Attached to this Amendment is a new Schedule 3.1A to the Credit Agreement.  
(o)From and after the Effective Date, all references in the Loan Documents to the Schedules to the Credit Agreement shall be deemed to refer to, in addition to the other existing Schedules to the Credit Agreement, the amended Schedule 1.1A and new Schedule 3.1A attached to this Amendment.
Section 2.    Effective Date.  Subject to the satisfaction of the conditions set forth in Section 4 hereof, this Amendment shall be effective as of the date of this Amendment (the “Effective Date”). 
Section 3.    Representations.  The Borrower hereby represents and warrants to the Administrative Agent and the Lenders, as follows:
(a)    Each of the representations and warranties contained in the Credit Agreement, as amended by this Amendment, or any of the other Loan Documents, is true and correct in all material respects on and as of the date hereof except if any such representation or warranty was made as of a specific date, then the same shall have been true and correct in all material respects as of such specific date;
(b)    As of the date hereof and immediately after giving effect to this Amendment and the actions contemplated hereby, no Default or Event of Default has occurred and is continuing; 

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(c)    Borrower has all necessary corporate power and authority to execute, deliver and perform its obligations under this Amendment; the execution, delivery and performance of this Amendment has been duly authorized by all necessary corporate action on the part of Borrower; and this Amendment has been duly and validly executed and delivered by Borrower and constitutes the legal, valid and binding obligation of Borrower, enforceable in accordance with its respective terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors’ rights and (ii) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and
(d)    This Amendment (i) does not require any consent or approval of, registration or filing with, or any other action by, any governmental authority, except for such as have been obtained or made and are in full force and effect, (ii) will not violate any applicable law or regulation, the certificate of incorporation or by-laws of Borrower, or any order of any governmental authority and (iii) will not violate or result in a default under any Contractual Obligation of Borrower.
Section 4.    Conditions to the Effectiveness of this Agreement.  It shall be a condition precedent to the effectiveness of this Amendment that each of the following conditions are satisfied:
(a)    the parties hereto shall have executed and delivered counterparts of this Amendment to the Administrative Agent; 
(b)    each Guarantor shall have executed and delivered a Reaffirmation of Amended and Restated Guarantee Agreement, in the form of the Reaffirmation of Guarantee Agreement attached hereto as Exhibit A;
(c)    the Administrative Agent shall have received such opinions with respect to Borrower as Administrative Agent may require concerning the due authorization, execution, delivery and enforceability of this Amendment;
(d)    the Borrower shall have executed and delivered Notes to each Lender requesting a promissory note;
(e)    no Default or Event of Default shall exist as of the Effective Date;
(f)    Borrower shall have delivered to the Administrative Agent a duly executed Compliance Certificate and a Borrowing Base Certificate, each for the period ending March 31, 2015;
(g)    Borrower shall have paid to the Administrative Agent and the Lenders all fees required to be paid in connection with this Amendment; 
(h)    Borrower shall have paid to the Administrative Agent all of the Administrative Agent’s reasonable out of pocket costs and expenses, including legal fees, incurred in connection with this Amendment.

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Section 5.    Reaffirmation and Ratification.  Borrower hereby: (a) reaffirms, ratifies, confirms, and acknowledges its obligations under the Loan Documents and agrees to continue to be bound thereby and perform thereunder; (b) agrees and acknowledges that all such Loan Documents and all of Borrower’s obligations thereunder are and remain in full force and effect and, except as expressly provided herein, have not been modified; and (c) acknowledges and agrees that to its knowledge it has no defenses, offsets or counterclaims of any kind or nature whatsoever to its obligations under the Loan Documents. 
Section 6.    Miscellaneous.
(a)    GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(b)    Amendments, Etc.  The terms of this Amendment may be waived, modified and amended only by an instrument in writing duly executed by Borrower and the Administrative Agent (with any required consent of the Lenders pursuant to the Credit Agreement).  Any such waiver, modification or amendment shall be binding upon Borrower, the Administrative Agent and each Lender (including the Swingline Lender and each Issuing Lender).
(c)    Successors and Assigns.  This Amendment shall be binding upon and inure to the benefit of the respective successors and assigns of Borrower, the Administrative Agent and the Lenders (including the Swingline Lender and each Issuing Lender).
(d)    Captions.  The captions and section headings used herein are for convenience of reference only, are not part of this Amendment and shall not affect the construction of, or be taken into consideration in interpreting, this Amendment.
(e)    Counterparts.  This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Amendment by signing any such counterpart.  Delivery of an executed signature page of this Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof.
(f)    Severability.  Any provision of this Amendment held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
[Signature pages follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.

MERITAGE HOMES CORPORATION, as Borrower

		
	By:
	/s/ Larry W. Seay 

		
	Name:   
	Larry W. Seay

		
	Title:  
	Exec. Vice President, Chief Financial Officer

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JPMORGAN CHASE BANK, N.A., as Administrative Agent, Issuing Lender, Swingline Lender and as a Lender
By:          /s/ Mohammad Hasan
Name:      Mohammad Hasan
		
	Title:   
	Executive Director

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CITIBANK, N.A., as a Lender
By:          /s/ Michael Vondriska
Name:      Michael Vondriska
		
	Title:   
	Vice President

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Deutsche Bank AG New York Branch, as a Lender
By:          /s/ Peter Cucchiars
Name:      Peter Cucchiars
		
	Title:   
	Vice President

By:          /s/ Anca Trifan
Name:      Anca Trifan
		
	Title:   
	Managing Director

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BANK OF AMERICA, N.A., as a Lender and an Issuing Lender
By:          /s/ Michael W. Edwards
Name:      Michael W. Edwards
		
	Title:   
	Senior Vice President

Signature page to Amendment with Meritage Homes Corporation

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REGIONS BANK, as a Lender and an Issuing Lender
By:          /s/ Daniel W. Hill
Name:      Daniel W. Hill
		
	Title:   
	Senior Vice President

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U.S. BANK NATIONAL ASSOCIATION, as a Lender and an Issuing Lender
By:          /s/ Adrian Montero
Name:      Adrian Montero
		
	Title:   
	Senior Vice President

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ROYAL BANK OF CANADA, as a Lender
By:          /s/ Brian Gross
Name:      Brian Gross
		
	Title:   
	Authorized Signatory

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PNC BANK, NATIONAL ASSOCIATION, as a Lender
By:          /s/ J. Richard Litton
Name:      J. Richard Litton
		
	Title:   
	Senior Vice President

By:          /s/ Douglas G. Paul
Name:      Douglas G. Paul
Title:           Senior Vice President

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NATIONAL BANK OF ARIZONA, a national banking association, as a Lender
By:          /s/ Martina Burberry
Name:      Martina Burberry
		
	Title:   
	Vice President

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TEXAS CAPITAL BANK, N.A., as a Lender
By:          /s/ Joe Hardy
Name:      Joe Hardy
		
	Title:   
	Senior Vice President

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COMERICA BANK, as a Lender
By:          /s/ Casey L. Stevenson
Name:      Casey L. Stevenson
		
	Title:   
	Vice President

Signature page to Amendment with Meritage Homes Corporation

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Exhibit A 

REAFFIRMATION OF AMENDED AND RESTATED GUARANTEE AGREEMENT
As consideration for the agreements and covenants contained in the within Amendment, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each of the undersigned (“Guarantor”), as a guarantor under that certain Amended and Restated Guarantee Agreement, dated as of June 13, 2014 (the “Guarantee Agreement”), delivered to the Administrative Agent in connection with the extension of credit made by the Lenders pursuant to the Credit Agreement referred to above, hereby acknowledges, covenants and agrees as follows:
1.    By the execution hereof, such Guarantor hereby consents to the within Amendment and all the modifications to the Loan Documents contemplated in connection therewith.
2.    References to the Guarantee Agreement in any or all of the Loan Documents shall be deemed to include references to the Guarantee Agreement as reaffirmed and ratified by this Reaffirmation of Guarantee Agreement.  
3.    Such Guarantor reaffirms that the Guarantee Agreement remains unchanged and in full force and effect.
4.    Such Guarantor reaffirms all of its respective obligations contained in the Guarantee Agreement, which shall remain in full force and effect for all the obligations of such Guarantor now or hereafter owing to Administrative Agent (on behalf of the Lenders) pursuant to the terms and conditions of the Guarantee Agreement and acknowledges, agrees, represents and warrants that no agreements exist with respect to the Guarantee Agreement or with respect to the obligations of the Guarantor thereunder except those specifically set forth in this Reaffirmation of Guarantee Agreement.
5.    As of the date hereof and immediately after giving effect to this Amendment and the actions contemplated thereby, each of the representations and warranties of such Guarantor contained in the Guarantee Agreement, as amended by this Amendment, is true and correct in all material respects.
6.    Such Guarantor acknowledges and agrees that it has entered into and delivered this Reaffirmation of Guarantee Agreement of Guarantor’s own free will, voluntarily and without coercion or duress of any kind, and has been represented in connection herewith by counsel of its choice and is fully aware of the terms contained in this Reaffirmation of Guarantee Agreement.
[Signature page follows.]

la-1290464 

IN WITNESS WHEREOF, each Guarantor has caused this Reaffirmation of Amended and Restated Guarantee to be duly executed and delivered as of this July ____, 2015.
	
					
	 	 
	GUARANTORS:

	 
	 	 
	MERITAGE PASEO CROSSING, LLC

	 	 

	 	By:
	Meritage Homes of Arizona, Inc.

	 	Its:
	Sole Member

	 	 

	 	 
	 

	 	By:
	Name:
	Larry W. Seay

	 	 
	Title:
	Executive Vice President, Chief

	 	 
	 
	Financial Officer and Assistant

	 	 
	 
	Secretary

	 	 
	 

	 	 
	MERITAGE PASEO CONSTRUCTION, LLC

	 	 

	 	By:
	Meritage Homes Construction, Inc.

	 	Its:
	Sole Member

	 	 

	 	 
	 

	 	By:
	Name:
	Larry W. Seay

	 	 
	Title:
	Executive Vice President, Chief

	 	 
	 
	Financial Officer and Assistant

	 	 
	 
	Secretary

	 	 
	 

	 	 
	MERITAGE HOMES OF ARIZONA, INC.

	 	 

	 	 
	 

	 	By:
	Name:
	Larry W. Seay

	 	 
	Title:
	Executive Vice President, Chief

	 	 
	 
	Financial Officer and Assistant

	 	 
	 
	Secretary

	 	 
	 

	 	 
	MERITAGE HOMES CONSTRUCTION, INC.

	 	 

	 	 
	 

	 	By:
	Name:
	Larry W. Seay

	 	 
	Title:
	Executive Vice President, Chief

	 	 
	 
	Financial Officer and Assistant

	 	 
	 
	Secretary

	 	 
	 

Signature Page to Reaffirmation
la-1290464 

	
				
	 
	MERITAGE HOMES OF TEXAS HOLDING, INC.

	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

	 
	MERITAGE HOMES OF CALIFORNIA, INC.

	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

	 
	MERITAGE HOMES OF TEXAS JOINT VENTURE 

	HOLDING COMPANY, LLC

	 

	By:
	Meritage Homes of Texas, LLC

	Its:
	Sole Member

	 

	By:
	Meritage Homes of Texas Holding, Inc.

	Its:
	Sole Member

	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

	 
	MERITAGE HOLDINGS, L.L.C

	 

	By:
	Meritage Homes of Texas Holding, Inc.

	Its:
	Sole Member

	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

Signature Page to Reaffirmation
la-1290464 

	
				
	 
	MERITAGE HOMES OF NEVADA, INC.

	 
	 
	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

	 
	MTH-CAVALIER, LLC

	 
	 
	 

	By:
	Meritage Homes Construction, Inc.

	Its:
	Sole Member

	 
	 
	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

	 
	MTH GOLF, LLC

	 
	 
	 

	By:
	Meritage Homes Construction, Inc.

	Its:
	Sole Member

	 
	 
	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

	 
	MERITAGE HOMES OF COLORADO, INC.

	 
	 
	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

Signature Page to Reaffirmation
la-1290464 

	
				
	 
	MERITAGE HOMES OF FLORIDA, INC.

	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

	 
	CALIFORNIA URBAN HOMES, LLC

	 

	By:
	Meritage Homes of California, Inc.

	Its:
	Sole Member and Manager

	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

	 
	MERITAGE HOMES OF TEXAS, LLC

	 

	By:
	Meritage Homes of Texas Holding, Inc.

	Its:
	Sole Member

	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

	 
	MERITAGE HOMES OPERATING COMPANY, LLC

	 

	By:
	Meritage Holdings, L.L.C.

	Its:
	Manager

	 

	By:
	Meritage Homes of Texas Holding, Inc.

	Its:
	Sole Member

	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

Signature Page to Reaffirmation
la-1290464 

	
				
	 
	WW PROJECT SELLER, LLC

	 

	By:
	Meritage Paseo Crossing, LLC

	Its:
	Sole Member

	 

	By:
	Meritage Homes of Arizona, Inc.

	Its:
	Sole Member

	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

	 
	MERITAGE HOMES OF THE CAROLINAS, INC.

	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

	 
	CAREFREE TITLE AGENCY, INC.

	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

	 
	M&M FORT MYERS HOLDINGS, LLC

	 

	By:
	Meritage Paseo Crossing, LLC

	Its:
	Sole Member and Manager

	 

	By:
	Meritage Homes of Arizona, Inc.

	Its:
	Sole Member

	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

Signature Page to Reaffirmation
la-1290464 

	
				
	 
	MERITAGE HOMES OF FLORIDA REALTY LLC

	 
	 

	By:
	Meritage Homes of Florida, Inc.

	Its:
	Manager and Sole Member

	 
	 
	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

	 
	MERITAGE HOMES OF TENNESSEE, INC.

	 
	 
	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

	 
	MERITAGE HOMES OF SOUTH CAROLINA, INC.

	 
	 
	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

	 
	MTH REALTY LLC

	 
	 
	 

	By:
	Meritage Paseo Crossing, LLC

	Its:
	Sole Member and Manager

	 
	 
	 

	By:
	Meritage Homes of Arizona, Inc.

	Its:
	Sole Member

	 
	 
	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 

Signature Page to Reaffirmation
la-1290464 

	
				
	 
	MERITAGE HOMES OF GEORGIA, INC.

	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 
	 

	 
	MTH GA REALTY LLC

	 

	By:
	Meritage Homes of Georgia, Inc.

	Its:
	Manager and Sole Member

	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 
	 

	 
	MTH SC REALTY LLC

	 

	By:
	Meritage Homes of South Carolina, Inc.

	Its:
	Manager and Sole Member

	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 
	 

	 
	MTH SHELF CO., INC.

	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 
	 

Signature Page to Reaffirmation
la-1290464 

	
				
	 
	MLC HOLDINGS, INC., dba MLC LAND

	HOLDINGS, INC.

	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 
	 

	 
	MERITAGE HOMES OF GEORGIA REALTY, 

	LLC

	 

	By:
	Meritage Homes of Georgia, Inc.

	Its:
	Manager and Sole Member

	 

	 
	 

	By:
	Name:
	Larry W. Seay

	 
	Title:
	Executive Vice President, Chief

	 
	 
	Financial Officer and Assistant

	 
	 
	Secretary

	 
	 

Signature Page to Reaffirmation
la-1290464 

Amended Schedule 1.1A

Commitments

	
		
	Lender
	Commitment

	JPMorgan Chase Bank, N.A.
	$60,000,000

	Citibank, N.A.
	$60,000,000

	Bank of America, N.A.
	$60,000,000

	Deutsche Bank AG New York Branch
	$60,000,000

	Royal Bank of Canada
	$60,000,000

	PNC Bank, National Association
	$60,000,000

	Regions Bank
	$30,000,000

	U.S. Bank National Association
	$45,000,000

	National Bank of Arizona, a national banking association
	$20,000,000

	Comerica Bank
	$20,000,000

	Texas Capital Bank, N.A.
	$25,000,000

	Total Commitments
	$500,000,000

la-1290464 

Schedule 3.1A

Letter of Credit Commitments

	
		
	Issuing Lender
	Letter of Credit Commitment

	JPMorgan Chase Bank, N.A.
	$40,000,000

	Bank of America, N.A.
	$85,000,000

	U.S. Bank National Association
	$85,000,000

	Regions Bank
	$40,000,000

	Total Letter of Credit Commitments
	$250,000,000

la-1290464ex10-1.htm

Exhibit 10.1

TERM LOAN AND SECURITY AGREEMENT

 

THIS TERM LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of July 6, 2015, is made by and among AEROGROW INTERNATIONAL, INC., a Nevada corporation (the “Borrower”), and SMG GROWING MEDIA, INC., an Ohio corporation (the, “Lender”).

 

RECITALS

 

WHEREAS, the Borrower has requested that the Lender make a term loan to the Borrower in multiple advances not to exceed $6,000,000.00 in the aggregate (the “Term Loan”) to be used to fund the acquisition of inventory by the Borrower; and

 

WHEREAS, the Lender is willing to extend the Term Loan on the terms and subject to the conditions set forth herein.

 

NOW THEREFORE, in consideration of the mutual promises set forth herein and for other valuable consideration, the parties agree as follows:

 

1.           Defined Terms.  Capitalized terms used herein shall have the meanings set forth below.  Unless otherwise defined herein, terms used herein that are defined in Article 9 of the Uniform Commercial Code, from time to time in effect in the State of Ohio (the “UCC”), shall have the meanings given in the UCC.

 

“Borrowing Date” shall have the meaning set forth in Section 2(a) of this Agreement.

 

“Borrowing Notice” shall have the meaning set forth in Section 2(b) of this Agreement.

 

“Business Day” means any day other than a Saturday or Sunday or a day when commercial banks are required or permitted by law to close in New York, New York.

 

“Business Plan” shall have the meaning set forth in Section 8(c).

 

“Closing Date” means July 6, 2015.

 

“Collateral” means all of the Borrower’s right, title and interest in the following property, whether now owned or hereafter acquired by the Borrower, and wherever located: (i) all Inventory of the Borrower, (ii) all Receivables of the Borrower and (ii) all products and Proceeds of the foregoing, including without limitation all distributions, dividends, cash, rights, instruments and other property and proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing.

 

“Collateral Access Agreement” means that certain landlord’s waiver and consent by and among the Borrower, the Lender and the landlord of such leased property where the Borrower’s Inventory is stored.

 

“Common Stock” shall have the meaning set forth in Section 4(a).

 

“Default” means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default.

 

“Designated Funding Account” means account #2032347 at First Western Trust Bank (or such other account designated by the Borrower to the Lender in writing) into which the Term Loan will be funded on each Borrowing Date.

 

“Event of Default” shall have the meaning set forth in Section 13 of this Agreement.

 

“Interest Payment Trigger Date” means the earlier of (i) the Maturity Date and (ii) the date of prepayment in full of the Term Loan following the September 1, 2015 Term Loan Advance.

 

“Interest Rate” shall have the meaning set forth in Section 4 of this Agreement.

 

“Lien” means any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any title retention agreement or financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction).

 

  

  

  

 

“Loan Documents” means this Agreement, the Collateral Access Agreement and all other agreements, instruments, documents and certificates executed and delivered to, or in favor of, the Lender and including all other powers of attorney, consents, assignments and contracts whether heretofore, now or hereafter executed by or on behalf of the Borrower and delivered to the Lender in connection with this Agreement or the transactions contemplated thereby.  Any reference in this Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to such Loan Document as the same may be in effect at any and all times such reference becomes operative.

 

“Material Adverse Effect” means (i) a material adverse effect on the business, operations, results of operations, assets, liabilities or financial condition of the Borrower, (ii) the material impairment of the ability of the Borrower to perform its material obligations under the Loan Documents or (iii) a material adverse effect on the rights and remedies of the Lender under the Loan Documents.

 

“Maturity Date” means April 15, 2016.

 

“Maximum Amount” shall have the meaning set forth in Section 2(a) of this Agreement.

 

“Person” means and includes any natural person, corporation, limited partnership, general partnership, limited liability company, joint venture, joint stock company, association, company, trust, bank, trust company, land trust, insurance trust or other organization, whether or not legal entities, and governments and agencies and political subdivisions thereof.

 

“Receivable” means any Account and any other right to payment for goods sold or leased or for services rendered, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance.

 

“Responsible Officer” means the Chief Executive Officer or the Vice President – Accounting and Finance of the Borrower.

 

“Secured Obligations” shall have the meaning set forth in Section 7 of this Agreement.

 

“Series B Preferred Conversion Price” shall have the meaning ascribed to such term in the Certificate of Designations of Series B Convertible Preferred Stock of AeroGrow International, Inc.

“Term Loan” shall have the meaning set forth in the Recitals of this Agreement.

 

2.           Term Loan.

 

(a)           Upon the terms and subject to the conditions of this Agreement, the Lender shall make the Term Loan to the Borrower in multiple term loan advances (each, a “Term Loan Advance”) on the dates (each a “Borrowing Date”) and in the amounts set forth below:

 

	
Term Loan Advance

Borrowing Date

	  	
Term Loan Advance

Amount

	  
	

Within two Business Days after receipt by the Lender of the initial Borrowing Notice

	  	

$

	

2,000,000

	  
	

August 1, 2015

	  	

$

	

2,500,000

	  
	

September 1, 2015

	  	

$

	

1,500,000

	  

The sum of the principal amount of all Term Loan Advances will not exceed $6,000,000.00 (the “Maximum Amount”).  The Lender may endorse and attach a schedule to reflect borrowings evidenced by this Agreement and all payments and prepayments thereon; provided, that any failure to endorse such information shall not affect the obligation of the Borrower to pay amounts evidenced hereby.

 

(b)           The Borrower shall give the Lender prior written notice substantially in the form of Exhibit A attached hereto (a “Borrowing Notice”), of each request for a Term Loan Advance.  Such notice must be received by the Lender not later than 12:00 p.m. Central Time two Business Days preceding the day on which the Term Loan Advance is requested to be made.  Each Borrowing Notice shall be signed by a Responsible Officer of the Borrower and certify that (i) the representations and warranties contained in this Agreement are correct in all material respects on and as of such date, before and after giving effect to the proposed Term Loan Advance as though made on and as of such date, (ii) the proceeds of the Term Loan Advance will be used solely for the purposes described in Section 3 below and (iii) all other conditions to the making of a Term Loan Advance set forth in Section 9 below have been satisfied.  On the Borrowing Date, the Lender shall make the requested Term Loan Advance by payment of immediately available funds to the Designated Funding Account.

 

  

  

  

 

3.           Use of Proceeds.  The proceeds of the Term Loan made by the Lender to the Borrower hereunder shall be used solely to fund the acquisition of Inventory by the Borrower.

 

4.           Interest Rate and Interest Payments.

 

(a)           The unpaid principal balance of the Term Loan through and including the Interest Payment Trigger Date shall bear interest at a rate equal to 10% per annum (the “Interest Rate”).  All accrued and unpaid interest on the Term Loan shall be due and payable within thirty (30) days after the Interest Payment Trigger Date (the “Interest Payment Date”), and shall be payable in shares of the Borrower’s common stock, par value $0.001 per share (“Common Stock”), valued at a price per share equal to the Series B Preferred Conversion Price on the Business Day immediately prior to the Interest Payment Trigger Date.  No fractional shares of Common Stock shall be issued in connection with making an interest payment on the Interest Payment Date.  In lieu of any fractional shares to which the Lender would otherwise be entitled, the Borrower shall pay such remainder of the interest payment in cash on the Interest Payment Date.  In the event that the Borrower is restricted by contract or law from paying accrued and unpaid interest in shares of Common Stock on the Interest Payment Date, then such accrued and unpaid interest shall be payable in cash on the Interest Payment Date.

(b)           After the occurrence and during the continuation of an Event of Default, interest shall accrue on all amounts due hereunder at a rate of 10% per annum above the Interest Rate, and shall be payable in Common Stock valued in accordance with Section 4(a) above.

 

5.           Maturity Date and Optional Prepayments.

 

(a)           The Borrower shall repay the entire principal amount of the Term Loan in cash on the Maturity Date.  The Borrower shall pay all accrued and unpaid interest in accordance with Section 4(a) above.

 

(b)           The Term Loan may be prepaid from time to time, in whole or in part, in an amount greater than or equal to $25,000, without penalty or premium, which prepayments shall be applied in accordance with Section 6 of this Agreement.  Accrued interest on the amount prepaid shall be payable in accordance with Section 4(a) above.  Amounts repaid or prepaid in respect of the Term Loan may not be reborrowed.

 

(c)           Except as set forth in Section 4(a) above, all payments under this Agreement shall be made in lawful money of the United States of America and in immediately available funds to the Lender.  Whenever any payments to be made hereunder (including principal and interest) shall be stated to be due on a day on which Lender’s office is not open for business, that payment will be due on the next following Business Day, and any extension of time shall in each case be included in the computation of interest payable on this Agreement.

 

6.           Application of Cash Payments.  Cash payments made by the Borrower pursuant to the terms of this Agreement shall be applied as follows: first, to any unpaid accrued collection costs and expenses incurred pursuant to Section 18 of this Agreement or any other provision of any Loan Document; second, pro rata to any unpaid accrued interest on the Term Loan that is payable in cash; and third, pro rata to the principal balance of the Term Loan in the inverse order of maturity.  Amounts repaid or prepaid in respect of the Term Loan may not be reborrowed.

 

7.           Security Agreement.

 

(a)           The Borrower hereby grants to the Lender a continuing, first-priority lien on and security interest in the Collateral, to secure the payment in full of the Term Loan and all other obligations of Borrower under this Agreement and any other Loan Document, including any extensions, modifications or renewals hereof (the “Secured Obligations”).  In addition to any remedies specified herein, the Lender shall have all of the rights and remedies of a secured party under the UCC upon an Event of Default.

 

(b)           The Borrower shall execute, deliver and file, or cause to be executed, delivered and filed, all documents, instruments and notices, in form and substance reasonably satisfactory to the Lender, that are necessary, in the opinion of the Lender, to perfect, maintain, and receive the full benefit of the Lender’s security interest in the Collateral, at such time or times as the Lender shall reasonably request, including, without limitation, filing of all financing statements and continuation statements, providing all notices and placing and maintaining signs.  The Borrower hereby authorizes the Lender to file financing statements (and all amendments thereto and continuations thereof) on its behalf.

 

  

  

  

(c)           All Collateral consisting of Inventory (whether now owned or hereafter acquired) is (or will be) located at the locations specified on Schedule 7.  The Collateral is of good and merchantable quality, free from any material defects.  None of the Inventory is subject to any licensing, patent, trademark, trade name or copyright with any Person that restricts the Borrower’s ability to manufacture and/or sell such Inventory.  The completion of the manufacturing process of such Inventory by a Person other than the Borrower would be permitted under any contract to which the Borrower is a party or to which the Inventory is subject.

 

(d)           The Borrower shall maintain full, accurate and complete records of its Inventory describing the kind, type and quantity of such Inventory, withdrawals therefrom and additions thereto.

 

(e)           In its sole discretion, the Lender may take, or at the request of the Lender, the Borrower will take, a physical verification of the Collateral as often as reasonably desired by the Lender and, in the case of the Borrower conducting the physical verification, a copy of such physical verification shall be promptly thereafter submitted to the Lender.  If so requested by the Lender, the Borrower shall execute and deliver to the Lender a confirmatory written instrument, in form and substance satisfactory to the Lender, listing all its Inventory, but any failure to execute or deliver the same shall not limit or otherwise affect the Lender's security interest in and to such Inventory.  The Borrower shall deliver to the Lender a monthly report of its Inventory, based upon its perpetual inventory, which shall describe such Inventory by category, item (in reasonable detail) and location and report the then appraised value of such Inventory and its location.

 

(f)           Upon the indefeasible payment in full of all Secured Obligations (other than contingent indemnification obligations) owing to the Lender under this Agreement or the other Loan Documents, the Lender will at the Borrower’s sole cost and expense, and without representation, warranty or recourse, express, statutory or implied, promptly deliver to the Borrower for filing, or authorize the Borrower to prepare and file, termination statements and releases of the Collateral.

 

8.           Conditions to Closing.  This Agreement and the obligations of the Lender under this Agreement shall be subject to prior or concurrent satisfaction of the conditions precedent set forth below:

 

(a)           the Borrower shall have duly executed and delivered to the Lender this Agreement and any other Loan Documents to which it is a party;

 

(b)           the Borrower shall have delivered a duly executed Collateral Access Agreement for each leased location where Inventory is located;

 

(c)           the Borrower shall have delivered corporate resolutions, incumbency certificates, certified organizational documents, good standing certificates and similar documents, in form and substance reasonably satisfactory to the Lender;

 

(d)           the Borrower shall have delivered UCC financing statements and any notices or other documents or instruments in form satisfactory to the Lender necessary to evidence and perfect the security interest in the Collateral granted to the Lender hereunder;

 

(e)           UCC and other Lien searches showing no existing security interests in or Liens on the Collateral, together with such payoff documentation reasonably acceptable to Lender as may be necessary to release any Liens on the Collateral;

 

(f)           the Lender shall have received, in each case in form and substance reasonably satisfactory to the Lender, evidence of casualty and liability insurance covering the Borrower (with appropriate endorsements naming the Lender as lender’s loss payee on all policies for casualty insurance and as additional insured on all policies for liability insurance).

 

(g)           the Borrower shall have paid all reasonable out-of-pocket costs and expenses of the Lender that have been invoiced, including without limitation all reasonable fees and expenses of Hunton & Williams LLP relating to this Agreement;

 

(h)           each representation or warranty by the Borrower contained herein or in any other Loan Document shall be true and correct on and as of the Closing Date;

 

(i)           no Default or Event of Default (i) shall have occurred and be continuing, or (ii) could reasonably be expected or anticipated to result from the Term Loan;

 

(j)           the making of the Term Loan shall not violate any requirement of applicable law in any material respect and shall not be subject to any injunction or stay; and

 

(k)           upon the filing of any financing statements, the Liens in favor of the Lender shall have been duly perfected and shall constitute first priority Liens, and the Collateral shall be free and clear of all Liens other than Liens in favor of the Lender.

 

  

  

  

 

The request and acceptance by the Borrower of the proceeds of the Term Loan shall be deemed to constitute, as of the date of such request or acceptance, a representation and warranty by the Borrower that the conditions in this Section 8 have been satisfied.

 

9.           Conditions to All Term Loan Advances.  The Lender shall not be obligated to make any Term Loan Advance unless each of the conditions precedent set forth below have been satisfied:

 

(a)           the representations and warranties contained in this Agreement are correct in all material respects on and as of such date, before and after giving effect to the proposed Term Loan Advance as though made on and as of such date;

 

(b)           no Default or Event of Default (i) shall have occurred and be continuing, or (ii) could reasonably be expected or anticipated to result from such Term Loan Advance;

 

(c)           the making of such Term Loan Advance shall not violate any requirement of applicable law in any material respect and shall not be subject to any injunction or stay; and

 

(d)           after giving effect to any Term Loan Advance, the aggregate outstanding principal amount of all Term Loan Advances shall not exceed the Maximum Amount.

 

The request and acceptance by the Borrower of the proceeds of any Term Loan Advance shall be deemed to constitute, as of the date of such request or acceptance, (i) a representation and warranty by the Borrower that the conditions in Section 9 have been satisfied and (ii) a reaffirmation by the Borrower of the Borrower’s obligations set forth herein and in the other Loan Documents.

 

10.           Representations and Warranties.  The Borrower represents and warrants to the Lender on the date hereof that:

 

(a)           The Borrower (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, (ii) has full corporate power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted and (iii) is duly qualified, authorized to do business and in good standing in each jurisdiction in which the conduct of its business requires such qualification or authorization, except to the extent that the failure to be so qualified or authorized or be in good standing could not reasonably be expected to have a Material Adverse Effect.

 

(b)           The Borrower has all necessary corporate power and authority to enter into, and has taken all necessary corporate action to authorize the execution, delivery and performance of, this Agreement and all of the transactions contemplated herein.  This Agreement has been duly executed and delivered by the Borrower and constitutes, and the other Loan Documents to which the Borrower is a party when executed and delivered will constitute, the legal, valid and binding obligations of the Borrower, enforceable against it in accordance with their respective terms, except as may be limited by (i) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally, (ii) the application of general principles of equity (regardless of whether applied in a proceeding in equity or at law) and (iii) any implied warranty of good faith and fair dealing.

 

(c)           Neither the execution and delivery by the Borrower of this Agreement and the other Loan Documents, nor the performance by the Borrower of its obligations hereunder or thereunder, results or will result in a breach of, or constitutes or will constitute a default under (i) any term or provision of the organizational documents of the Borrower, (ii) any law, rule, regulation, order, judgment, writ, injunction, or decree of any court or governmental entity having jurisdiction over the Borrower or the property of the Borrower or (iii) any loan agreement, mortgage, deed of trust, security agreement or lease, or any other material contract or instrument binding on or affecting the Borrower or the property of the Borrower.

 

(d)           No judgments, orders, writs or decrees are outstanding against it, nor is there now pending or, to the knowledge of a Responsible Officer of the Borrower, any threatened litigation, contested claim, investigation, arbitration, or governmental proceeding by or against the Borrower that (i) individually or in the aggregate would reasonably be expected to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of this Agreement, any other Loan Document or the consummation of the transactions contemplated hereby or thereby.

 

(e)           The Borrower has good and marketable title to all of its assets.  None of the Collateral is subject to any deed of trust, pledge, Lien, conditional sale or other title retention agreement, security interest, lease, charge or encumbrance (other than the Lien in favor of the Lender).

 

(f)           Neither any Loan Document nor any written statement furnished by the Borrower, or to the knowledge of a Responsible Officer of the Borrower, by a third person on behalf of the Borrower, in connection with this Agreement (including, but not limited to, any financial statements) contains any untrue statement of a material fact or omits a material fact of which the Borrower is aware that is necessary to make the statements contained therein or herein not misleading.  There is no fact of which the Borrower is aware that the Borrower has not disclosed in writing to the Lender that materially affects adversely the properties, business, profits or condition (financial or otherwise, but excluding general economic and real estate market conditions) of the Borrower or the ability of the Borrower to perform its obligations under the Loan Documents.

 

  

  

  

 

(g)           Since March 31, 2015, no material adverse change has occurred in (i) the business, operations, results of operations, assets, liabilities or financial condition of the Borrower, (ii) the ability of the Borrower to perform its obligations under the Loan Documents or (iii) the ability of the Lender to enforce the Loan Documents and obligations of the Borrower thereunder.

 

11.           Affirmative Covenants.  The Borrower covenants that for so long as this Agreement is outstanding:

 

(a)           The Borrower shall comply in all material respects with all applicable federal, state and local laws, ordinances, regulations and restrictive covenants relating to the Borrower’s businesses and operations.

 

(b)           The Borrower shall maintain its corporate existence and the right to carry on its business and duly procure all necessary renewals and extensions thereof and maintain, preserve and renew all rights, powers, privileges and franchises and conduct its business in the usual and ordinary course; provided, that the Borrower shall not be required to maintain, preserve or renew any such rights, powers, privileges or franchises that are immaterial to the business of the Borrower and if the Borrower reasonably determines that the preservation thereof is no longer desirable in the conduct of the Borrower’s business.

 

(c)           The Borrower shall use the proceeds of the Term Loan solely for the purposes described in Section 3 of this Agreement.

 

(d)           The Borrower shall maintain with financially sound and reputable independent insurers, insurance with respect to its assets and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons.

 

(e)           The Borrower shall furnish to the Lender:

 

	
  

	
(i)  

	
promptly after any Responsible Officer becoming aware of the occurrence of any Default or Event of Default (but in any event within three Business Days thereafter), a certificate of a Responsible Officer setting forth the details thereof and the action that the Borrower is taking or proposes to take with respect thereto;

	
  

	
(ii)  

	
promptly after any Responsible Officer becoming aware of any event or occurrence that could reasonably be expected to have a Material Adverse Effect (but in any event within three Business Days thereafter), a certificate of a Responsible Officer setting forth the details thereof and the action that the Borrower is taking or proposes to take with respect thereto;

	
  

	
(iii)  

	
promptly upon request, such additional information regarding the financial position or business (including with respect to environmental matters) of the Borrower as the Lender may reasonably request from time to time;

	
  

	
(iv)  

	
promptly upon approval, the 2015-2016 business plan of the Borrower (the “Business Plan”) approved by its Board of Directors in August 2015; and

	
  

	
(v)

	
promptly provide notice of any material adverse change in the business or deviation from the Business Plan.

 

12.           Negative Covenants.  The Borrower covenants that for so long as this Agreement is outstanding:

 

(a)           The Borrower shall not create, assume, incur or suffer to be created, assumed, incurred or to exist any Lien upon the Collateral (or any part thereof).  The Borrower shall not sell, convey, transfer, dispose or permit any sale, conveyance, transfer or disposition of its assets or any interest therein by operation of law or otherwise, other than sales, conveyances, transfers or dispositions of (i) inventory in the ordinary course of business or (ii) used, worn-out or surplus equipment.

 

(b)           The Borrower shall not create, incur, assume or suffer to exist any indebtedness of the Borrower for borrowed money or guarantee the obligations of any Person, except (i) indebtedness under this Agreement and the other Loan Documents, (ii) indebtedness existing on the Closing Date as set forth on Schedule 12 hereto and (iii) current trade accounts payable under normal trade terms and which arise in the ordinary course of business.

 

  

  

  

 

13.           Events of Default.  Each of the following shall constitute an “Event of Default” under this Agreement:

 

(a)           Failure to Pay Principal.  The Borrower shall default in any payment of the principal amount of the Term Loan when and as due hereunder;

 

(b)           Other Payment Default.  The Borrower shall default in the payment of interest on the Term Loan or any other payment obligation under this Agreement after the same becomes due hereunder and such default shall continue unremedied for three days;

 

(c)           Failure to Observe Other Covenants.  The Borrower shall (i) fail to perform or observe any agreement, covenant, condition, provision or term contained in Sections 11(b), 11(c) or 12 or (ii) fail to perform or observe any other term, covenant, warranty or agreement contained (or incorporated by reference) herein or in any other Loan Document and such failure shall continue for a period of 30 days after the earlier to occur of (i) the date upon which a Responsible Officer of the Borrower has actual knowledge of such default and (ii) the date upon which written notice thereof is given to Borrower by the Lender;

 

(d)           Representations and Warranties.  Any representation or warranty of the Borrower contained herein on in any other Loan Document shall prove to have been untrue in any material respect when made;

 

(e)           Voluntary Bankruptcy.  The Borrower makes an assignment for the benefit of creditors, files a petition in bankruptcy, petitions or applies to any tribunal for any receiver or any trustee of the Borrower or any substantial part of the property of the Borrower or commences any proceeding relating to the Borrower under any reorganization, arrangement, composition, readjustment, liquidation or dissolution law or statute of any jurisdiction, whether in effect now or after this Agreement is executed;

 

(f)           Involuntary Bankruptcy.  If, within 60 days after the filing of a bankruptcy petition or the commencement of any proceeding against the Borrower seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, the proceeding shall not have been dismissed, or, if within 30 days after the appointment, without the consent or acquiescence of the Borrower, of any trustee, receiver or liquidator of the Borrower or all or any substantial part of the properties of the Borrower, the appointment shall not have been vacated;

 

(g)           Dissolution.  Any action is taken that is intended to result, or results, in the dissolution, liquidation or termination of the existence of the Borrower;

 

(h)           Cross-Default.  The Borrower shall fail to pay any principal of any indebtedness owed by the Borrower (excluding the indebtedness of the Borrower hereunder) that is outstanding in a principal amount of $250,000 or more in the aggregate, or any interest or premium thereon, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration demand or otherwise), and such failure continues after the applicable grace period, if any, specified in the agreement or instrument relating to such indebtedness; any other event occurs or condition exists under any agreement or instrument relating to any such indebtedness and continues after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such indebtedness; or any such indebtedness is declared to be due and payable or is required to be prepaid, redeemed, purchased or defeased (other than by a regularly scheduled required prepayment, redemption, purchase or defeasance), or an offer to prepay, redeem, purchase or defease such indebtedness is required to be made, in each case before the stated maturity thereof; or

(i)           Judgments.  Any judgment or order for the payment of money in excess of $250,000 is rendered against the Borrower by a court of competent jurisdiction, and either (i) enforcement proceedings are commenced by any creditor upon such judgment or order or (ii) there is any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, is not in effect, unless such judgment or order has been vacated, satisfied, dismissed, or bonded pending appeal or, in the case of a judgment or order the entire amount of which is covered by insurance (subject to applicable deductibles), is the subject of a binding agreement with the plaintiff and the insurer covering payment therefor.

 

14.           Remedies Upon Default.

 

(a)           Upon the occurrence of an Event of Default and during the continuation thereof, the Lender may declare the Term Loan to be due and payable (provided that upon the occurrence of any Event of Default described in Section 13(e) or 13(f) of this Agreement, no such declaration shall be necessary and the acceleration hereinafter described shall occur automatically), whereupon the maturity of the then unpaid balance of the Term Loan shall be accelerated and the same and all interest accrued thereon shall forthwith become due and payable without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, anything contained herein or in the other Loan Documents to the contrary notwithstanding, and the Lender may exercise and shall have any and all rights and remedies available under applicable law and the Loan Documents, including with respect to the Collateral.

 

  

  

  

 

(b)           No right or remedy herein conferred upon the Lender is intended to be exclusive of any other right or remedy contained herein or in any instrument or document delivered in connection with or pursuant to this Agreement, and every such right or remedy contained herein and therein or now or hereafter existing at law or in equity or by statute, or otherwise may be exercised separately or in any combination.

 

(c)           No course of dealing between the Borrower, on the one hand, and the Lender, on the other hand, or any failure or delay on the Lender’s part in exercising any rights or remedies hereunder or under any Loan Document shall operate as a waiver of any rights or remedies of such parties and no single or partial exercise of any rights or remedies hereunder or thereunder shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or thereunder.

 

15.           Extensions; Amendments; Waivers.  No amendment or waiver of any provision of this Agreement or any other Loan Document, or consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Borrower and the Lender, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

 

16.           Indemnification.  The Borrower agrees to indemnify and save the Lender and its officers, directors, employees, advisors and agents harmless from, and compensate the Lender and its officers, directors, employees, advisors and agents for, any and all losses, liabilities, claims, damages and expenses incurred by the Lender and its officers, directors, employees, advisors and agents with respect to, resulting from or in connection with any of the transactions contemplated by this Agreement, including, without limitation, the Borrower’s use of the Term Loan hereunder, except, to the extent that any losses, liabilities, claims, damages and expenses are determined by a final non-appealable decision of a court of competent jurisdiction to have resulted from such indemnified party’s gross negligence or willful misconduct.  This agreement by the Borrower to indemnify and defend the Lender and its officers, directors, employees, advisors and agents will survive the payment in full of the Term Loan and the termination of this Agreement.  The Borrower shall pay all reasonable out-of-pocket expenses incurred by the Lender (including the fees, charges and disbursements of any outside counsel), in connection with the preparation and execution of this agreement and the enforcement or protection of its rights under this Section 16.

 

17.           Notices.  All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if (i) delivered personally, (ii) mailed, certified or registered mail with postage prepaid, (iii) sent by next-day or overnight mail or delivery or (iv) sent by fax, as follows:

 

if to the Borrower,

 

AeroGrow International, Inc.

6075 Longbow Drive, Suite 200

Boulder, CO

Fax: (303) 350-4770

Telephone: (303) 350-4770

Attention:   Grey Gibbs, Chief Financial Officer

 

if to the Lender,

 

SMG Growing Media, Inc.

14111 Scottslawn Road

Marysville, OH 43041

Fax:  (937) 578-5078

Telephone: (937) 578-5970

Attention:  Ivan C. Smith, Executive Vice President and Secretary

 

or, in each case, at such other address as may be specified in writing to the other parties hereto.

 

All such notices, requests, demands, waivers and other communications shall be deemed to have been received (i) if by personal delivery, on the day after such delivery, (ii) if by certified or registered mail, on the third Business Day after the mailing thereof, (iii) if by next-day or overnight mail or delivery, on the day delivered or (iv) if by fax on the next day following the day on which such fax was sent, provided that a copy is also sent by certified or registered mail or by next-day or overnight mail or delivery.  Notices delivered through electronic communications to the extent provided in the following paragraph, shall be effective as provided in said paragraph.

 

Notices and other communications to the Lender hereunder may be delivered or furnished by electronic communication (including e-mail) pursuant to procedures approved by the Lender.  Unless the Lender otherwise prescribes, notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.

 

  

  

  

 

18.           Expenses.

 

(a)           The Borrower shall pay all reasonable out-of-pocket costs and expenses of the Lender (including reasonable fees and expenses of counsel) in connection with (i) the preparation, execution and delivery of this Agreement and the other Loan Documents and (ii) the administration (after the execution hereof and including advice of counsel for the Lender as to the rights and duties of the Lender with respect thereto) of, and in connection with, the preparation, execution and delivery of, recording or filing of, preservation of rights under, enforcement of, and, after a Default, refinancing, renegotiation or restructuring of, this Agreement and the other Loan Documents, and any amendment, waiver or consent relating thereto (including, but not limited to, after an Event of Default has occurred and is continuing, the reasonable fees and disbursements of counsel for the Lender for such purposes) and, in each case, promptly reimburse the Lender within five Business Days after presentation of an invoice in reasonable detail for all amounts expended, advanced, or incurred by the Lender to satisfy any obligation of the Borrower under this Agreement or any other Loan Document.

 

(b)           The agreements in this Section 18 shall survive the termination of this Agreement and repayment of the Term Loan and all other amounts payable hereunder.

 

19.           Severability.  If any provision, including any phrase, sentence, clause, section or subsection, of this Agreement is invalid, inoperative or unenforceable for any reason, such circumstances shall not have the effect of rendering such provisions in question invalid, inoperative or unenforceable in any other case or circumstance, or of rendering any other provision herein contained invalid, inoperative, or unenforceable to any extent whatsoever.  Any provision of this Agreement held invalid, inoperative, or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid, inoperative, or unenforceable.

 

20.           Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the Borrower and the Lender, and their respective successors and permitted assigns.  The Borrower may not assign or delegate its obligations hereunder without the prior written consent of the Lender, which consent may be withheld in the Lender’s sole discretion.  The Lender may assign its obligations and the full amount of the Term Loan hereunder.

 

21.           Offset.  If an Event of Default occurs hereunder, then the Lender shall have the right to offset any amounts due hereunder against any amounts now or hereafter due from the Lender to the Borrower.

 

22.           Governing Law, Submission to Jurisdiction, etc.

 

(a)           This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio, as applied to contracts entered into and to be performed in Ohio.

 

(b)           The Parties hereby irrevocably consent and agree that any legal action, suit or proceeding arising out of or in any way in connection with this Agreement may be instituted or brought in the United States District Court for the Southern District of Ohio.  The Parties hereby irrevocably consent and submit to, for themselves and in respect of their property, generally and unconditionally, the jurisdiction of such Court, and to all proceedings in such Court.  Further, the Parties irrevocably consent to actual receipt of any summons and/or legal process at their respective addresses as set forth in this Agreement as constituting in every respect sufficient and effective service of process in any such legal action or proceeding.  The Parties further agree that final judgment in any such legal action, suit or proceeding shall be conclusive and may be enforced in any other jurisdiction, whether within or outside the United States of America, by suit under judgment, a certified or exemplified copy of which will be conclusive evidence of the fact and the amount of the liability.

 

(c)           The Borrower irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section.  Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(d)           Each party hereto irrevocably consents to service of process in the manner provided for notices in Section 17 of this Agreement (other than the provisions in Section 17 permitting notices to be delivered by electronic communications).  Nothing in this Agreement will affect the right of any party hereto to serve process in any other manner permitted by applicable law.

 

  

  

  

 

23.           Waiver of Jury Trial.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

24.           Counterparts; Integration; Effectiveness; Electronic Execution. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.  Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

 

[SIGNATURES ON FOLLOWING PAGE]

 

 

 

 

 

  

  

  

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective duly authorized representatives as of the day and year first above written.

 

 

BORROWER:

 

 

AEROGROW INTERNATIONAL, INC.

 

By: _________________________________

 

Name: _______________________________

 

Title: _______________________________

 

 

LENDER:

 

SMG GROWING MEDIA, INC.

 

By: _________________________________

 

Name: _______________________________

 

Title: _______________________________

 

 

  

  

  

 

Exhibit A

 

Form of Notice of Borrowing

 

Date:  ___________ ___, 2015

 

 

	
To:

	
SMG Growing Media, Inc., as the Lender under that certain Term Loan and Security Agreement dated as of July 6, 2015 (as extended, renewed, amended or restated from time to time, the “Loan Agreement”), by and between the Lender and AeroGrow International, Inc. (the “Borrower”)

 

Ladies and Gentlemen:

 

The undersigned, the Borrower, refers to the Loan Agreement, the terms defined therein being used herein as therein defined, and hereby gives you notice irrevocably, pursuant to Section 2(b) of the Loan Agreement, of the proposed Term Loan Advance specified below:

 

                 1.The Business Day of the proposed Term Loan Advance is ___________, ____.

 

                 2.The aggregate amount of the proposed Term Loan Advance is $______________.

 

The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed Term Loan Advance, before and after giving effect thereto and to the application of the proceeds therefrom:

 

(a)           the representations and warranties contained in the Loan Agreement are correct in all material respects on and as of such date, before and after giving effect to the proposed Term Loan Advance as though made on and as of such date;

 

(b)           the proceeds of the Term Loan Advance will be used solely for the purposes described in Section 3 of the Loan Agreement; and

 

(c)           all other conditions set forth in Section 9 of the Loan Agreement have been satisfied as of the date hereof.

 

 

AeroGrow International, Inc.

 

 

By                                                                            

 

Name

Title

 

 

  

  

  

 

Schedule 7

 

Collateral Locations

 

2201 Lakeview Road

Mexico, MO 65265

Landlord: Cagney Global (previously dba Wilderness Logistics Solutions, Inc.)

 

 

 

 

 

  

  

  

 

Schedule 12

 

Indebtedness

 

None

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