SECOND FORBEARANCE AGREEMENT
Exhibit
10.57
SECOND
FORBEARANCE AGREEMENT
THIS
SECOND FORBEARANCE AGREEMENT (this “Second Forbearance Agreement”) effective as
of April 29, 2009 among AEROGROW INTERNATIONAL, INC., a Nevada corporation
(“Borrower”), Xxxx X. Xxxxxx, a Colorado resident (“Guarantor”; Borrower and
Guarantor are sometimes referred to herein individually as an “Obligor” and
collectively as “Obligors”), and FCC, LLC, d/b/a First Capital, a Florida
limited liability company (“Lender”).
WITNESSETH:
WHEREAS,
Borrower and Lender are parties to that certain Loan and Security Agreement
dated as of June 23, 2008 (as amended, restated or otherwise modified from time
to time, the “Loan Agreement”), pursuant to which Lender agreed to extend
certain financial accommodations to Borrower; and
WHEREAS,
Borrower violated certain financial covenants under the Loan Agreement;
and
WHEREAS,
on January 31, 2009, Borrower and Lender entered into a Forbearance Agreement
(the “First Forbearance Agreement”) in which Lender agreed to temporarily
forbear from exercising its rights and remedies under the Loan Agreement,
subject to Borrower’s compliance with certain terms and conditions;
and
WHEREAS,
Borrower failed to comply with Section 6(f) of the First Forbearance Agreement;
and
WHEREAS,
as a result of Borrower’s failure to comply with the First Forbearance
Agreement, Lender has the right, as set forth in the First Forbearance
Agreement, the Loan Agreement and the other Loan Documents, to immediately
exercise all of its rights and remedies with respect to the Collateral, Borrower
and Guarantors, all without notice to Borrower, Guarantors or any other Person;
and
WHEREAS,
Obligors have asked Lender to temporarily forbear from exercising its rights and
remedies with respect to the defaults described above, as more particularly
described herein; and
WHEREAS,
Lender is willing to grant such temporary forbearance, subject to the terms and
conditions set forth herein; and
WHEREAS,
Borrower and Lender desire to temporarily amend the Loan Agreement and the First
Forbearance Agreement as set forth herein.
NOW,
THEREFORE, in consideration of the foregoing premises, and other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. All
capitalized terms used herein and not otherwise expressly defined herein shall
have the respective meanings given to such terms in the Loan
Agreement.
2. Borrower
acknowledges and agrees that (i) Borrower has failed to comply with Section
6(f) of the First Forbearance Agreement, and (ii) the foregoing failure
to comply with the First Forbearance Agreement constitutes a Default under the
Loan Agreement and is referred to herein as the “Existing Default.”
3. In
order to induce Lender to enter into this Second Forbearance Agreement and to
grant the forbearance contemplated hereby, Borrower and Guarantor hereby
acknowledge and agree with Lender as follows:
|
|
(a)
|
The
facts set forth in the recitals to this Second Forbearance Agreement are
true and correct in all material
respects.
|
|
|
(b)
|
The
Loan Agreement, the Guaranty, as amended (the “Guaranty”) and the other
Loan Documents constitute the valid, binding and enforceable obligations
of each Obligor thereto to Lender, Lender has a valid and perfected
security interest in and to the Collateral, and each Obligor hereby
reaffirms such Obligor’s obligations to Lender under each of the Loan
Documents to which such Obligor is a
party.
|
|
|
(c)
|
As
of the date hereof, the outstanding principal balance of the loans
outstanding under the Loan Agreement is $5,177,838.58. Such
amount, together with all accrued interest thereon, is validly owing by
Borrower and Guarantor to Lender and is not subject to any right of
offset, claim or counterclaim in favor of Borrower, Guarantor or any other
Person.
|
1
4. In
consideration of Borrower’s timely and strict compliance with Borrower’s
agreements set forth in the Loan Agreement and in this Second Forbearance
Agreement, and in reliance upon the representations, warranties, agreements and
covenants of Obligors, other than by Guarantor, set forth herein, Lender agrees
to forbear until the Forbearance Termination Date (as defined below) from
exercising its rights and remedies under the Loan Agreement and the other Loan
Documents as a result of the Existing Defaults. Lender reserves its
rights and remedies at all times with respect to any Default under the Loan
Agreement, the Guaranty, the First Forbearance Agreement, this Second
Forbearance Agreement or any other Loan Document other than the Existing
Defaults, whether presently existing or occurring hereafter. At any
time on or after the Forbearance Termination Date, Lender may exercise any and
all of its rights and remedies under or with respect to the Loan Agreement, the
Guaranty, the First Forbearance Agreement, this Second Forbearance Agreement and
the other Loan Documents, whether relating to the Existing Default or
otherwise. As used herein, “Forbearance Termination Date” means the
earlier of (x) June 30, 2009, (y) the date of the occurrence of a Default other
than an Existing Default (whether any such Default first occurred or arose on,
prior or after the date hereof), and (z) the default or breach by any Obligor of
any of the covenants, agreements, representations and warranties set forth in
this Second Forbearance Agreement.
5. In
conjunction with the forbearance contemplated in this Second Forbearance
Agreement, from the date of this Second Forbearance Agreement through and
including the Forbearance Termination Date, the Loan Agreement is amended as
follows:
(a) Item
1(a)(ii) of the Schedule to the Loan Agreement is amended by deleting the
item in its entirety (including the proviso at the end of Item 1(a)(ii)(B) of
the Schedule) and replacing it with the following in
lieu thereof:
“(ii) the
sum of :
|
(A)
|
85%
of the dollar amount of Eligible Accounts;
plus
|
|
(B)
|
the
lessor of
|
(i) $6,000,000,
or
(ii) 80%
of the dollar value (determined at the lower of cost or market value) of
Eligible Inventory.
On July
1, 2009, the amendment to Item
1(a)(ii) of the Schedule set forth above shall cease to be effective, and
the terms of Item
1(a)(ii) of the Schedule shall revert back to those terms otherwise in
effect under the Loan Agreement.
6. Borrower
and Lender agree to the make the following amendments and modifications to the
First Forbearance Agreement, and except as amended and modified below, the First
Forbearance Agreement will remain in full force and effect:
|
|
(a)
Effective as of the date hereof, Section 6(a) of the First Forbearance
Agreement is deleted.
|
|
|
(b)
Effective as of the date hereof, Section 6(b) of the First Forbearance
Agreement is deleted.
|
|
|
(c)
|
Effective
as of the date hereof, Section 6(f) of the First Forbearance Agreement is
deleted.
|
7. In
consideration of the accommodations made by Lender hereunder, Borrower agrees as
follows:
| (a) | Borrower will pay to Lender on demand all reasonable costs and expenses of Lender in connection with the preparation, execution, delivery and enforcement of this Second Forbearance Agreement and any other transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and out-of-pocket expenses of legal counsel to Lender. |
|
|
(b) On
or before June 30, 2009, Borrower shall raise additional equity capital in
an amount of at least $4,000,000.
|
|
|
(c)
|
On
or before May 29, 2009, Borrower will cause Xxxx X. Xxxxxx to execute and
deliver to Lender (i) a Second Amendment to Limited Guaranty of Individual
in form and substance similar to Exhibit A attached hereto, and (ii) a
mortgage against real property located at Commerce and Xxxxxxxxx streets
in San Antonio, TX to secure Xxxx X. Xxxxxx’x guaranty, which mortgage
must be in form and substance satisfactory to Lender, but which mortgage
will be held in escrow by Lender until any Default occurs, at which time
Lender may record the
mortgage.
|
|
|
(d)
|
Borrower
shall pay Lender a forbearance fee of Sixty Thousand and No/100 Dollars
($60,000) upon the earlier of (i) the termination date of the Second
Forbearance Agreement, or (2) closing of the capital raise referred to in
Section 6(b) above.
|
2
8. Each
Obligor acknowledges that (a) except as expressly set forth herein, Lender has
not agreed to (and has no obligation whatsoever to discuss, negotiate or agree
to) any restructuring, modification, amendment, waiver or forbearance with
respect to the Obligations or any of the terms of the Loan Documents, (b) no
understanding with respect to any other restructuring, modification, amendment,
waiver or forbearance with respect to the Obligations or any of the terms of the
Loan Documents shall constitute a legally binding agreement or contract, or have
any force or effect whatsoever, unless and until reduced to writing and signed
by authorized representatives of each Obligor and Lender, and (c) the execution
and delivery of this Second Forbearance Agreement has not established any course
of dealing between the parties hereto or created any obligation or agreement of
Lender with respect to any future restructuring, modification, amendment, waiver
or forbearance with respect to the Obligations or any of the terms of the Loan
Documents.
9. To
induce Lender to enter into this Second Forbearance Agreement and grant the
accommodations set forth herein, each Obligor (a) acknowledges and agrees that
no right of offset, defense, counterclaim, claim or objection exists in favor of
any Obligor against Lender arising out of or with respect to the Loan Agreement,
the Guarantees, any other Loan Document, the Obligations, or any other
arrangement or relationship between Lender and any Obligor, and (b) releases,
acquits, remises and forever discharges Lender and its affiliates and all of
their past, present and future officers, directors, employees, agents,
attorneys, representatives, successors and assigns from any and all claims,
demands, actions and causes of action, whether at law or in equity, and whether
known or unknown, which any Obligor may have by reason of any manner, cause or
things to and including the date of this Second Forbearance Agreement with
respect to matters arising out of or with respect to the Loan Agreement, the
First Forbearance Agreement, the Guarantees, any other Loan Document, the
Obligations, or any other arrangement or relationship between Lender and any
Obligor.
10. To
induce Lender to enter into this Second Forbearance Agreement, each Obligor
hereby represents and warrants that, as of the date hereof, and after giving
effect to the terms hereof, there exists no Default under the First Forbearance
Agreement, the Loan Agreement or any of the other Loan Documents, other than the
Existing Default.
11. Borrower
hereby restates, ratifies, and reaffirms each and every term, condition,
representation and warranty, with the exception of Section 4(a)(ix) and Section
4(a)(vi) of the Loan Agreement, heretofore made by it under or in connection
with the execution and delivery of the Loan Agreement, as amended hereby, and
the other Loan Documents, as fully as though such representations and warranties
had been made on the date hereof and with specific reference to the First
Forbearance Agreement, this Second Forbearance Agreement and the other Loan
Documents. With respect to Section 4(a)(vi) of the Loan Agreement,
Borrower herewith discloses the existence of an adversarial proceeding in
bankruptcy court with Linens ‘N Things regarding a claim of preferential
payment.
12. Except
as expressly set forth herein, the Loan Agreement shall be and remain in full
force and effect as originally written, and shall constitute the legal, valid,
binding and enforceable obligations of Borrower to Lender. Guarantor
acknowledges and agrees that his Guaranty remains in full force and effect after
giving effect to this Second Forbearance Agreement and constitutes the legal,
valid, binding and enforceable obligations of Guarantor to Lender.
13. Each
Obligor hereby acknowledges that Lender shall not be obligated to release its
security interest in any Collateral unless and until the Obligations have been
paid in full in cash and the Loan Agreement has been terminated.
14. This
Second Forbearance Agreement constitutes a Loan Document, and any breach of any
representation, warranty, covenant, agreement or obligation of Borrower or
Guarantors hereunder shall constitute a Default, which shall terminate Lender’s
obligation to forbear hereunder and entitle Lender to exercise all of its rights
and remedies under the First Forbearance Agreement, the Loan Agreement, the
Guaranty and the other Loan Documents.
15. Each
Obligor hereby knowingly, intelligently and voluntarily renounces and waives any
and all notice or right to notice, including without limitation any and all
rights that Borrower or Guarantors may have under Section 9-601 et seq. of the Uniform
Commercial Code to notice of Lender’s intended disposition of any or all of the
Collateral, and Lender may, on or after the Forbearance Termination date,
dispose of the Collateral or any portion thereof without further notice to
Borrower or Guarantors, if Borrower is in default. THE WAIVER OF
NOTICE AS PROVIDED IN THIS PARAGRAPH IS KNOWINGLY AND INTELLIGENTLY GIVEN AFTER
DEFAULT UNDER ONE OR MORE OF THE LOAN DOCUMENTS AND IS ACKNOWLEDGED TO BE
COMMERCIALLY REASONABLE IN ALL RESPECTS.
16. Each
Obligor agrees to take such further action as Lender shall reasonably request in
connection herewith to evidence the amendments herein contained to the Loan
Agreement.
17. This
Second Forbearance Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which, when so
executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same
instrument.
18. This
Second Forbearance Agreement shall be binding upon and inure to the benefit of
the successors and permitted assigns of the parties hereto.
19. This
Second Forbearance Agreement shall be governed by, and construed in accordance
with, the laws of the State of Oklahoma.
3
IN
WITNESS WHEREOF, Borrower, Guarantor and Lender have caused this Second
Forbearance Agreement to be duly executed as of the date first above
written.
FCC, LLC d/b/a FIRST
CAPITAL
By: /s/Xxx X.
Xxxxxx
Xxx X. Xxxxxx, Senior Vice President
By: /s/ Xxxxxx X.
Xxxxxxx
Xxxxxx
X. Xxxxxxx, Chief Executive Officer
Attest:
/s/
Xxxxxxxxx
Xxxxx
Xxxxxxxxx
Xxxxx, Secretary
(Corporate Seal)
GUARANTOR
/s/ Xxxx X.
Xxxxxx
XXXX X. XXXXXX
4
