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Exhibit 10.3

 

ESCROW AND ACCOUNT CONTROL AGREEMENT

 

This Escrow and Account Control Agreement (this “Agreement”) is entered into as of October __, 2011, by and among AeroGrow International, Inc. (the “ Company ”), and First Western Trust Bank (in its capacity as escrow holder and Escrow Agent, the “ Escrow Agent ”).

 

RECITALS

 

This Agreement is entered into in reference to the following facts:

 

A.           The Company has issued or plans to issue to various lenders (the “ Lenders” ) its Series 2011CC Secured Promissory Notes (the “ Notes ”) in the aggregate principal amount of up to $2.0 million. To secure repayment of the Notes, the Company has agreed to transfer and assign all of its future credit card receipts (the “Receipts” ) to a newly established account with the Escrow Agent (the “ Account” or “ Escrow Account” ) from which Account a portion of the Receivables will be disbursed to the Lenders and the remaining portion of the Receivables will be disbursed to the Company in accordance with the terms of this Agreement. The assignment of the Receipts shall continue until such time as the Notes have been paid in full.

 

B.           The Escrow Agent is willing to act in such capacity, subject to the terms and conditions hereof.

 

C.           Each Lender shall be deemed an express beneficiary of the terms of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto hereby agree as follows.

 

 

ARTICLE 1 – ESCROW FUNDS

 

1.1            Appointment of Escrow Agent .  The Company hereby appoints the Escrow Agent to act as escrow holder for the Receipts under the terms of this Agreement.  The Escrow Agent hereby accepts such appointment, subject to the terms, conditions and limitations hereof.

 

1.2            Escrow Account .  Immediately following the Escrow Agent’s execution of this Agreement and prior to the date of the commencement of the Offering, the parties shall establish a segregated account at First Western Trust Bank (the "Escrow Account”) for the sole purpose of receiving, holding and disbursing the Receipts in accordance with the terms hereof.   The account shall be a demand deposit account, and deposits in such Escrow Account will not bear interest and will not otherwise be invested by the Escrow Agent on behalf of the Company or the Lenders.

 

1.3            Deposits in Escrow .

 

(a)           The Company shall execute and deliver to Litle & Co., its credit card service Processor (“ Processor” ) written authorization and instruction in such form as may be required by Processor to cause all of the Company’s Receipts to be transferred and deposited into the Escrow Account until such time as the Notes have been paid in full. The authorization and instruction from the Company to the Processor shall be irrevocable for so long as any of the Notes are outstanding and unpaid. The Escrow Agent shall deposit and hold all Receipts in the Escrow Account at all times until such funds are disbursed therefrom in accordance with the terms hereof.  The Company shall have the right to engage new Processors during the term hereof; provided that such successor Processor is subject to the same authorization and instruction.

 

(b)           The Company and REDACTED, as Placement Agent, shall jointly prepare and certify in writing to the Escrow Agent a schedule setting forth the name and address of each Lender and Note holder, including the principal amount of each Note held by such Lender (“ Lender Schedule” ). The Lender Schedule, when executed by both the Company and the Placement Agent, shall be conclusive and binding on all parties hereto.   The Escrow Agent shall be permitted to rely upon the accuracy of such Lender Schedule and shall not be required to verify or confirm the accuracy thereof.

 

(c)           The Receipts in the form of cash or its equivalent are deemed deposited into the Escrow Account when delivered to the Escrow Agent.  Any Receipts deposited in the form of a check, draft or similar instrument are deemed deposited only when such item is collected by the Escrow Agent (hereinafter, “Collected Funds”).

 

 

 


 

 

(d)           The Receipts shall be disbursed by the Escrow Agent from the Escrow Account by wire transfer of funds or by check payable to the appropriate distributee at the address set forth herein, with respect to the Company, and in accordance with the information provided to the Escrow Agent in the Lender Schedule pursuant to Section 1.3(b), with respect to each Lender.

 

ARTICLE 2 – DISBURSEMENT PROCEDURES

 

2.1            Disbursement of Receipts .  The Escrow Agent shall receive and disburse the Receipts in accordance with the following procedures:

 

(a)           For the purposes of this Agreement, the Lenders’ share of the Receipts (“ Lenders’ Share” ) shall be 20% and the Company’s share of the Receipts (“ C


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