NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF
COUNSEL, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE
SECURITIES.
THIS
WARRANT MAY NOT, IN ANY EVENT, BE TRANSFERRED TO ANY PERSON OR ENTITY
THAT IS
NOT AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(c)
OF
REGULATION D OF THE SECURITIES ACT OF 1933, AS AMENDED.
Void
after 5:00 p.m., Mountain time on February ___, 2012
COMMON
STOCK PURCHASE WARRANT
OF
AEROGROW
INTERNATIONAL, INC.
AEROGROW
INTERNATIONAL, INC., a Nevada corporation (the “Company”), hereby certifies
that, for value received, ______________ (the “Warrant Holder” and collectively
with all other holders of Warrants issued pursuant to the Securities
Purchase
Agreement defined below, the “Warrant Holders”) is the owner of this Warrant to
purchase, at any time during the period commencing on the Commencement
Date (as
defined in Section 2.1)
and
ending on the Expiration Date (as defined Section 2.5),
up to
__________ fully paid and non-assessable shares of common stock, par
value
$0.001 per share, of the Company (“Common Stock”) at a per share purchase price
equal to the Exercise Price (as defined in Section 1.2)
in
lawful money of the United States of America. This Warrant is part
of the duly
authorized issuance of up to ____________ Units, each Unit consisting
of one
share of Common Stock and a warrant to purchase one share of Common
Stock,
issued or to be issued by the Company as part of a certain private
offering
(“Offering”) pursuant a Securities Purchase Agreement dated March 12, 2007
between the Buyers (as defined therein) and the Company (the “Securities
Purchase Agreement”). The warrants issued pursuant to the Securities Purchase
Agreement are referred to herein as the “Warrants”.
1. WARRANT;
EXERCISE PRICE.
1.1 Each
share of Common Stock to which the Warrant Holder is entitled to purchase
pursuant to this Warrant is referred to herein individually as a “Warrant Share”
and severally, the “Warrant Shares.”
1.2 The
purchase price payable upon exercise (“Exercise Price”) shall be $8.25 per
share, subject to adjustment as provided in Section
8.
2. EXERCISE
OF WARRANT; EXPIRATION DATE.
2.1 Exercise
of Warrant.
(a) Exercise
for Cash.
This
Warrant is exercisable during the period commencing on February ___,
2006
(“Commencement Date”) and ending on the Expiration Date, in whole, or from time
to time, in part, at the option of the Warrant Holder, upon surrender
of this
Warrant to the Company, or such other person as the Company may designate,
together with a duly completed and executed form of exercise attached
hereto
(indicating exercise by payment of the Exercise Price) and payment
of an amount
equal to the then applicable Exercise Price multiplied by the number
of Warrant
Shares then being purchased upon such exercise. The payment of the
Exercise
Price shall be in cash or by certified check or official bank check,
payable to
the order of the Company.
(b) Cashless
Exercise.
In lieu
of exercising the Warrant pursuant to Section 2.1(a), this Warrant
may be
exercised during any period commencing on the first anniversary of
the closing
of the Offering and ending on the Expiration Date during which a valid
Company
prospectus covering the public re-sale of the Warrant Shares is not
available to
the Warrant Holder, in whole, or from time to time, in part, at the
option of
the Warrant Holder, upon surrender of the Warrant to the Company, or
such other
person as the Company may designate, together with a duly completed
and executed
form of exercise attached hereto (indicating exercise by cashless exercise),
specifying the number of shares to be purchased upon exercise. The
number of
Warrant Shares to be issued to the Warrant Holder upon such cashless
exercise
shall be computed using the following formula:
|
X
=
(P)(Y)(A-B)/A
|
|
Where
|
X
=
|
the
number of shares of Warrant Shares to be issued to the Warrant
Holder for
the Warrant being converted.
|
|
|
|
P
=
|
the
number of shares of Common Stock being purchased on exercise
expressed as
a decimal fraction.
|
|
|
|
Y
=
|
the
total number of Warrant Shares issuable upon exercise of
the Warrant in
full.
|
|
|
|
A
=
|
the
fair market value of one Warrant Share which shall mean the
"last sale
price" as determined in accordance with Section 2.4.
|
|
|
|
B
=
|
the
Exercise Price on the date of
conversion.
|
2.2 Effectiveness.
Each
exercise of a Warrant shall be deemed to have been effected immediately
prior to
the close of business on the day on which such Warrant shall have been
surrendered to the Company as provided in Section
2.1.
At such
time, the person or persons in whose name or names any certificates
for Warrant
Shares shall be issuable upon such exercise as provided in Section
2.3
below
shall be deemed to have become the holder or holders of record of the
Warrant
Shares represented by such certificates.
2.3 Issuance.
As soon
as practicable after the exercise of this Warrant, in full or in part,
the
Company, at its expense, will use its best efforts to cause to be issued
in the
name of, and delivered to, the Warrant Holder, or, subject to the terms
and
conditions hereof, to such other individual or entity as such Warrant
Holder may
direct:
(a)
a
certificate or certificates for the number of full Warrant Shares to
which such
Warrant Holder shall be entitled upon such exercise plus, in lieu of
any
fractional share to which such Warrant Holder would otherwise be entitled,
cash
in an amount determined pursuant to Section
2.4
hereof,
(b)
in
case
such exercise is in part only, a new Warrant (dated the date hereof)
of like
tenor, stating on the face or faces thereof the number of shares currently
stated on the face of this Warrant minus the number of such shares
purchased by
the Warrant Holder upon such exercise as provided in Section
2.1
(prior
to any adjustments made thereto pursuant to the provisions of this
Warrant), and
The
Company shall not be required upon the exercise of this Warrant to
issue any
fractional shares, but shall round down to the next whole share.
2.4 Price.
“Last
sale price” means (i) if the Common Stock is listed on a national securities
exchange or quoted on the Nasdaq National Market, Nasdaq Capital Markets
or NASD
OTC Bulletin Board (or successor
such as the Bulletin Board Exchange), the closing bid price of the
Common Stock
in the principal trading market for the Common Stock as reported by
the
exchange, Nasdaq or the NASD, as the case may be, (ii) if the Common
Stock is
not listed on a national securities exchange or quoted on the Nasdaq
National
Market, Nasdaq SmallCap Market or the NASD OTC Bulletin Board (or successor
such
as the Bulletin Board Exchange), but is traded in the residual over-the-counter
market, the closing bid price for the Common Stock on the last trading
day
preceding the date in question for which such quotations are reported
by the
Pink Sheets, LLC or similar publisher of such quotations, and (iii)
if the fair
market value of the Common Stock cannot be determined pursuant to clause
(i) or
(ii) above, such price as the Board of Directors of the Company shall
determine,
in good faith.
2.5 Expiration
Date.
The
term “Expiration Date” shall mean 5:00 p.m., Mountain time on February ___,
2012, or if such date shall in the State of Colorado be a holiday or
a day on
which banks are authorized to close, then 5:00 p.m., Mountain time
the next
following day which in the State of Colorado is not a holiday or a
day on which
banks are authorized to close.
3. REGISTRATION
AND TRANSFER ON COMPANY BOOKS.
3.1 The
Company (or an agent of the Company) will maintain a register containing
the
names and addresses of the Warrant Holders. Any Warrant Holder may
change its,
his or her address as shown on the warrant register by written notice
to the
Company requesting such change.
3.2 The
Company shall register upon its books any transfer of a Warrant upon
surrender
of same as provided in Section
5.
4. RESERVATION
OF SHARES.
The
Company will at all times reserve and keep available, solely for issuance
and
delivery upon the exercise of this Warrant, such Warrant Shares and
other stock,
securities and property, as from time to time shall be issuable upon
the
exercise of this Warrant. The Company covenants that all shares of
Warrant
Shares so issuable when issued will be duly and validly issued and
fully paid
and non-assessable.
5. EXCHANGE,
LOSS OR MUTILATION OF WARRANT.
This
Warrant is exchangeable, without expense, at the option of the Warrant
Holder,
upon presentation and surrender hereof to the Company for other warrants
of
different denominations entitling the holder thereof to purchase in
the
aggregate the same number of shares of Common Stock purchasable hereunder
on the
same terms and conditions as provided herein. Subject to the provisions
of
Section
6,
if
applicable, this Warrant may be divided or combined with other warrants
which
carry the same rights upon presentation of such warrants at the Company’s office
together with a written notice specifying the names and denominations
in which
new warrants are to be issued and signed by the Warrant Holder hereof.
The term
“Warrant” as used herein includes any warrants into which this Warrant may be
divided or exchanged. Upon receipt by the Company of reasonable evidence
of the
ownership and the loss, theft, destruction or mutilation of this Warrant
and, in
the case of loss, theft or destruction, receipt of indemnity reasonably
satisfactory to the Company, or, in the case of mutilation, upon surrender
and
cancellation of the mutilated Warrant, the Company shall execute and
deliver in
lieu thereof a new Warrant of like tenor and date representing an equal
number
of shares of Common Stock.
6. LIMITATION
ON EXERCISE AND SALES.
6.1 Each
Warrant Holder acknowledges that the Warrants and the Warrant Shares
have not
been registered under the Securities Act of 1933, as amended (“the Securities
Act”) and the rules and regulations thereunder, or any successor legislation,
and agrees not to sell, pledge, distribute, offer for sale, transfer
or
otherwise dispose of any Warrant, or any Warrant Shares issued upon
its
exercise, in except in compliance with the requirements of Section
6.2.
6.2 This
Warrant and the rights granted to the Warrant Holder are transferable
only to
Accredited Investors (as defined in Section 502 of the Securities
Act) in whole
or in part, upon surrender of this Warrant,
together with a properly executed assignment in the form attached
hereto, at the
office or to the agent of the Company; provided,
however, that
if
at the time of the surrender of this Warrant in connection with any
exercise,
transfer or exchange of this Warrant, this Warrant (or, in the case
of any
exercise, the Warrant Shares issuable hereunder), shall not be registered
for
resale under the Securities Act or under applicable state securities
or blue sky
laws, then the Company may require, as a condition of allowing such
exercise,
transfer or exchange, (i) a written opinion of counsel, which opinion
and
counsel are acceptable to the Company, to the effect that such exercise,
transfer or exchange may be made without registration under the Securities
Act
or under applicable state securities or blue sky laws, (ii) that
any transferee
of the Warrant execute and deliver to the Company a document containing
investment representations and warranties substantially similar to
those set
forth in the Securities Purchase Agreement pursuant to which the
initial Warrant
Holder acquired this Warrant, and (iii) prior to exercise of the
Warrant, the
Warrant Holder shall have executed the form of exercise annexed
hereto.
6.3 Certificates
delivered to the Warrant Holder upon exercise hereof shall be imprinted
with a
legend in substantially the following form if such Warrant Shares are
not
registered at the time of exercise:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN
A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
THIS
WARRANT MAY NOT, IN ANY EVENT, BE TRANSFERRED TO ANY PERSON OR ENTITY
THAT IS
NOT AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(c)
OF
REGULATION D OF THE SECURITIES ACT
OF 1933, AS AMENDED.
7. REGISTRATION
RIGHTS OF WARRANT HOLDER.
The
initial Warrant Holder (and certain permitted assignees thereof) is
entitled to
the benefit of registration rights in respect of Warrant Shares in
accordance
with and subject to the terms and conditions of the Registration Rights
Agreement executed and delivered by the initial Warrant Holder and
the Company.
8. ADJUSTMENT
OF PURCHASE PRICE AND NUMBER OF SHARES DELIVERABLE.
The
Exercise Price and the number of Warrant Shares purchasable pursuant
to each
Warrant shall be subject to adjustment from time to time as hereinafter
set
forth in this Section
8:
(a) If
the
Company shall (i) issue any shares of its Common Stock as a stock dividend
or
(ii) subdivide the number of outstanding shares of its Common Stock
into a
greater number of shares, the Exercise Price shall be proportionately
reduced
and the number of Warrant Shares at that time purchasable pursuant
to this
Warrant shall be proportionately increased. If the Company shall reduce
the
number of outstanding shares of Common Stock by combining such shares
into a
smaller number of shares, the Exercise Price per Warrant Share shall
be
proportionately increased and the number of Warrant Shares at that
time
purchasable pursuant to this Warrant shall be proportionately decreased.
If the
Company shall, at any time during the life of this Warrant, declare
a dividend
payable in cash on its Common Stock and shall at substantially the
same time
offer to its stockholders a right to purchase new Common Stock from
the proceeds
of such dividend or for an amount substantially equal to the dividend,
for
purposes of this Warrant, all Common Stock so issued shall be deemed
to have
been issued as a stock dividend. Any dividend paid or distributed upon
the
Common Stock in stock of any other class of securities convertible
into shares
of Common Stock shall be treated as a dividend paid in Common Stock
to the
extent that shares of Common Stock are issuable upon conversion
thereof.
(b) If
the
Company shall be recapitalized by reclassifying its outstanding Common
Stock,
(other than a change in par value or a subdivision or combination as
provided in
Section
8(a)),
or the
Company or a successor corporation shall consolidate or merge with
or convey all
or substantially all of its or of any successor corporation’s property and
assets to any other corporation or corporations (any such other corporations
being included within the meaning of the term “successor corporation”
hereinbefore used), then, as a condition of such recapitalization,
consolidation, merger or conveyance, lawful and adequate provision
shall be made
whereby the Warrant Holder shall thereafter have the right to receive
upon the
exercise hereof the kind and amount of shares of stock or other securities
or
property which such Warrant Holder would have been entitled to receive
if,
immediately prior to any such reorganization or reclassification, such
Warrant
Holder had held the number of shares of Common Stock which were then
purchasable
upon the exercise of this Warrant. In any such case, appropriate adjustment
shall be made in the application of the provisions set forth herein
with respect
to the rights and interest thereafter of the Warrant Holder such that
the
provisions set forth in this Section
8
(including provisions with respect to adjustment of the Exercise Price
and
number of shares purchasable upon the exercise of this Warrant) shall
thereafter
be applicable, as nearly as may be in relation to any shares of stock
or other
securities or property thereafter deliverable upon the exercise of
this
Warrant.
(c) If
the
Company shall sell all or substantially all of its property or dissolve,
liquidate, or wind up its affairs, lawful provision shall be made as
part of the
terms of any such sale, dissolution, liquidation or winding up, so
that the
holder of this Warrant may thereafter receive upon exercise hereof
in lieu of
each Warrant Share that it would have been entitled to receive, the
same kind
and amount of any securities or assets as may be issuable, distributable
or
payable upon any such sale, dissolution, liquidation or winding up
with respect
to each share of Common Stock of the Company, provided,
however,
that in
any case of any such sale or of dissolution, liquidation or winding
up, the
right to exercise this Warrant shall terminate on a date fixed by the
Company;
such date so fixed to be not earlier than 5:00 p.m., Mountain time,
on the 45th
day next succeeding the date on which notice of such termination of
the right to
exercise this Warrant has been given by mail to the registered holder
of this
Warrant at its address as it appears on the books of the Company.
(d) No
adjustment in the per share Exercise Price shall be required unless
such
adjustment would require an increase or decrease in the Exercise Price
by at
least $0.01; provided,
however,
that
any adjustments that by reason of this subsection are not required
to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section
8
shall be
made to the nearest cent or to the nearest 1/100th
of a
share, as the case may be.
(e) The
Company will not, by amendment of its Certificate of Incorporation
or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or
seek to
avoid the observance or performance of any of the terms to be observed
or
performed hereunder by the Company but will at all times in good faith
assist in
the carrying out of all the provisions of this Section
8
and in
the taking of all such actions as may be necessary or appropriate in
order to
protect against impairment of the rights of the Warrant Holder to adjustments
in
the Exercise Price.
(f) Upon
the
happening of any event requiring an adjustment of the Exercise Price
hereunder,
the Company shall give written notice thereof to the Warrant Holder
stating the
adjusted Exercise Price and the adjusted number of Warrant Shares resulting
from
such event and setting forth in reasonable detail the method of calculation
and
the facts upon which such calculation is based.
9. VOLUNTARY
ADJUSTMENT BY THE COMPANY.
The
Company may, at its option, at any time during the term of this Warrant,
reduce
the then current Exercise Price to any amount deemed appropriate by
the Board of
Directors of the Company and/or extend the date of the expiration of
this
Warrant.
10. RIGHTS
OF THE HOLDER.
The
Warrant Holder shall not, by virtue hereof, be entitled to any rights
of a
stockholder in the Company, either at law or equity, and the rights
of the
Warrant Holder are limited to those expressed in this Warrant and are
not
enforceable against the Company except to the extent set forth herein.
11. NOTICES
OF RECORD DATE.
In
case: (a) the Company shall take a record of the holders of its Common
Stock (or
other stock or securities at the time deliverable upon the exercise
of this
Warrant) for the purpose of entitling or enabling them to receive any
dividend
or other distribution, or to receive any right to subscribe for or
purchase any
shares of any class or any other securities, or to receive any other
right, or
(b) of any capital reorganization of the Company, any reclassification
of the
capital stock of the Company, any consolidation or merger of the Company
with or
into another corporation (other than a consolidation or merger in which
the
Company is the surviving entity), or any transfer of all or substantially
all of
the assets of the Company, or (c) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Company, then, and in each such case,
the
Company will mail or cause to be mailed to the Warrant Holder a notice
specifying, as the case may be: (i) the date on which a record is to
be taken
for the purpose of such dividend, distribution or right, and stating
the amount
and character of such dividend, distribution or right, or (ii) the
effective
date on which such reorganization, reclassification, consolidation,
merger,
transfer, dissolution, liquidation or winding-up is to take place,
and the time,
if any is to be fixed, as of which the holders of record of Common
Stock (or
such other stock or securities at the time deliverable upon the exercise
of this
Warrant) shall be entitled to exchange their shares of Common Stock
(or such
other stock or securities) for securities or other property deliverable
upon
such reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up. Such notice shall be mailed
at least 20
days prior to the record date or effective date for the event specified
in such
notice, provided that the failure to mail such notice shall not affect
the
legality or validity of any such action.
12. SUCCESSORS.
The
rights and obligations of the parties to this Warrant will inure to
the benefit
of and be binding upon the parties hereto and their respective permitted
heirs,
successors, assigns, pledgees, transferees and purchasers.
13. CHANGE
OR WAIVER.
Any
term of this Warrant may be changed or waived only by an instrument
in writing
signed by the party against whom enforcement of the change or waiver
is sought.
14. HEADINGS.
The
headings in this Warrant are for purposes of reference only and shall
not limit
or otherwise affect the meaning of any provision of this Warrant.
15. GOVERNING
LAW.
This
Warrant shall be governed by and construed in accordance with the laws
of the
State of Colorado as such laws are applied to contracts made and to
be fully
performed entirely within that state between residents of that
state.
16. JURISDICTION
AND VENUE.
The
Company and the Warrant Holder (i) agree that any legal suit, action
or
proceeding arising out of or relating to this Warrant shall be instituted
exclusively in the federal courts located in Denver, Colorado, U.S.A.,
(ii)
waive any objection to the venue of any such suit, action or proceeding
and the
right to assert that such forum is not a convenient forum, and (iii)
irrevocably
consent to the jurisdiction of the federal courts located in Denver,
Colorado,
U.S.A. in any such suit, action or proceeding, and the Company further
agrees to
accept and acknowledge service or any and all process that may be served
in any
such suit, action or proceeding in the federal courts located in Denver,
Colorado, U.S.A. in person or by certified mail addressed as provided
in
Section 18.
17. AMENDMENT
AND WAIVER.
Any
amendment or waiver of any of the terms or conditions of the Warrants
by the
Company must be in writing and must be duly executed by the Company
or on its
behalf. Any of
the
terms or conditions of the Warrants may be amended or waived by the
Warrant
Holders only upon the written consent of Warrant Holders representing
51% of the
Warrants then outstanding. Any such amendment or waiver shall be binding
on all
Warrant Holders whether they consented or not or whether their consent
was
solicited or not. The failure of a party to exercise any of its rights
hereunder
or to insist upon strict adherence to any term or condition hereof
on any one
occasion shall not be construed as a waiver or deprive that party of
the right
thereafter to insist upon strict adherence to the terms and conditions
of this
Warrant at a later date. Further, no waiver of any of the terms and
conditions
of this Warrant shall be deemed to or shall constitute a waiver of
any other
term of condition hereof (whether or not similar).
18. MAILING
OF NOTICES, ETC.
All
notices and other communications under this Warrant (except payment)
shall be in
writing and shall be sufficiently given if delivered to the addressees
in
person, by Federal Express or similar overnight courier service, or
if mailed,
postage prepaid, by certified mail, return receipt requested, as follows:
| |
Registered
Holder
|
:
|
To
his or her last known address as indicated on the Company’s books and
records.
|
| |
The
Company
|
:
|
To
the Company’s Chief Executive Officer at the address of the Company’s
principal office as set forth in the last filing by the Company
with the
Securities and Exchange Commission
|
or
to
such other address as any of them, by notice to the others, may designate
from
time to time. Notice shall be deemed given (a) when personally delivered,
(b) on
the scheduled delivery date if sent by Federal Express or other overnight
courier service or (c) the fifth day after sent by certified mail.
IN
WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly
authorized officer as of the ____ day of March, 2007.
| |
|
|
| |
AEROGROW
INTERNATIONAL, INC. |
|
|
|
| |
By: |
|
| |
|
| |
Michael
Bissonnette, CEO |
Notice
of Exercise
To
be
Executed by the Warrant Holder
in
Order
to Exercise Warrant
The
undersigned Warrant Holder hereby irrevocably elects to exercise the
attached
Warrant for ______ shares of Common Stock represented by this Warrant
by:
(check
one)
¨
payment
of the Exercise Price in cash pursuant to Section 2.1(a) of the
Warrant
¨
the
cashless exercise option pursuant to Section 2.1(b) of the Warrant
for
the
shares of Common Stock issuable upon the exercise of such Warrant,
and requests
that certificates for such shares of Common Stock shall be issued in
the name of
PLEASE
INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
(Please
print or type name and address)
and
be
delivered to
(Please
print or type name and address)
and
if
such number of shares of Common stock shall not be all the shares of
Common
Stock into which this Warrant may be exercised, that a new Warrant
for the
balance of such shares of Common Stock be registered in the name of,
and
delivered to, the registered Warrant Holder at the address stated
above.
The
undersigned hereby represents and warrants to the Company that it is
an
“Accredited Investor” within the meaning of Rule 501(c) of Regulation D of the
Securities Act of 1933, as amended (the “Securities Act”), and is acquiring
these securities for its own account and not with a view to, or for
sale in
connection with, any distribution thereof, nor with any present intention
of
distributing or selling the same provided, however, the undersigned
may sell
such securities in accordance with federal and state securities laws.
The
undersigned further represents that it does not have any contract,
agreement,
understanding or arrangement with any person to sell, transfer or grant
the
shares of Common Stock issuable under this Warrant. The undersigned
understands
that the shares it will be receiving are “restricted securities” under federal
securities laws inasmuch as they are being acquired from AEROGROW INTERNATIONAL,
INC., in transactions not including any public offering and that under
such
laws, such shares may only be sold pursuant to an effective and current
registration statement under the Securities Act or an exemption from
the
registration requirements of the Securities Act and any other applicable
restrictions including the requirements of state securities and “blue sky” laws,
in which event a legend or legends will be placed upon the certificate(s)
representing the Common Stock issuable under this Warrant denoting
such
restrictions. The undersigned understands and acknowledges that the
Company will
rely on the accuracy of these representations and warranties in issuing
the
securities underlying the Warrant.
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Dated:
_______________
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__________________________________________ |
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(Signature
of Registered Holder)
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ASSIGNMENT
FORM
To
be
executed by the Warrant Holder
in
order
to Assign Warrants
FOR
VALUE
RECEIVED,____________________________________ hereby sell, assigns
and transfer
unto
PLEASE
INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
(Please
print or type name and address)
______________________
of the shares of Common Stock into which this Warrant is exercisable,
and hereby
irrevocably constitutes and appoints ________________________ Attorney
to
transfer this Warrant on the books of the Company, with full power
of
substitution in the premises.
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Dated:
_______________
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__________________________________________ |
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(Signature
of Registered Holder)
|
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CERTIFICATION
OF STATUS OF TRANSFEREE
TO
BE EXECUTED BY THE TRANSFEREE OF THIS WARRANT
The
undersigned transferee hereby certifies to the registered holder of
this Warrant
and to AEROGROW INTERNATIONAL, INC. that the transferee is an “Accredited
Investor” within the meaning of Rule 501 of Regulation D of the Securities Act
of 1933, as amended.
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Dated:
_______________
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__________________________________________ |
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(Signature
of Transferee)
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10
REGISTRATION
RIGHTS AGREEMENT
REGISTRATION
RIGHTS AGREEMENT
(this
"Agreement"),
dated
as of March 12, 2007, by and among AeroGrow International, Inc.,
a Nevada
corporation
with
headquarters located at
6075
Longbow Drive, Suite 200, Boulder, Colorado 80301 (the "Company"),
and
the undersigned buyers (each, an "Investor",
and
collectively, the "Investors"
as
listed on Exhibit A).
WHEREAS:
A. In
connection with the Securities Purchase Agreement by and among the
parties
hereto dated as of March 12, 2007 (the "Securities
Purchase Agreement"),
the
Company has agreed, upon the terms and subject to the conditions
set forth in
the Securities Purchase Agreement, to issue and sell to each Investor
(i) shares
of the Company's common stock, par value $0.001 per share (the "Common
Stock"),
and
(ii) warrants (the "Warrants")
which
will be exercisable to purchase shares of Common Stock (as exercised,
collectively the "Warrant
Shares")
in
accordance with the terms of the Warrants.
B. To
induce
the Investors to execute and deliver the Securities Purchase Agreement,
the
Company has agreed to provide certain registration rights under the
Securities
Act of 1933, as amended, and the rules and regulations thereunder,
or any
similar successor statute (collectively, the "1933
Act"),
and
applicable state securities laws.
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants contained
herein and
other good and valuable consideration, the receipt and sufficiency
of which are
hereby acknowledged, the Company and each of the Investors hereby
agree as
follows:
1. Definitions.
Capitalized
terms used herein and not otherwise defined herein shall have the
respective
meanings set forth in the Securities Purchase Agreement. As used
in this
Agreement, the following terms shall have the following meanings:
a. "Business
Day"
means
any day other than Saturday, Sunday or any other day on which commercial
banks
in the City of New York are authorized or required by law to remain
closed.
b. "Closing
Date"
shall
have the meaning set forth in the Securities Purchase Agreement.
c. "Effective
Date"
means
the date the Registration Statement is declared effective by the
SEC.
d. "Effectiveness
Deadline"
means
the date that is 180 days after the Closing Date.
e. "Filing
Date"
means
the date on which the Registration Statement (as defined below) is
filed with
the SEC.
f. "Filing
Deadline"
means
the date that is 15 days after the Closing Date.
g. "Investor"
means
an Investor or any transferee or assignee thereof to whom an Investor
assigns
its rights under this Agreement and who agrees to become bound by
the provisions
of this Agreement in accordance with Section 9 and any transferee
or assignee
thereof to whom a transferee or assignee assigns its rights under
this Agreement
and who agrees to become bound by the provisions of this Agreement
in accordance
with Section 9.
h. "Person"
means
an individual, a limited liability company, a partnership, a joint
venture, a
corporation, a trust, an unincorporated organization and a government
or any
department or agency thereof.
i. "Public
Sale"
means
any sale of Registrable Securities to the public pursuant to a public
offering
registered under the 1933 Act or to the public through a broker or
market-maker
pursuant to the provisions of Rule 144 (or any successor rule) adopted
under the
1933 Act.
j. "register,"
"registered,"
and
"registration"
refer
to a registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and
pursuant to
Rule 415 and the declaration or ordering of effectiveness of such
Registration
Statement(s) by the SEC.
j. "Registrable
Securities"
means
(i) the Common Stock, (ii) the Warrant Shares issued or issuable
upon exercise
of the Warrants, and (iii) any capital stock of the Company issued
or issuable
with respect to the Common Stock, the Warrant Shares, or the Warrants
as a
result of any stock split, stock dividend, recapitalization, exchange
or similar
event or otherwise, without regard to any limitations on exercise
of the
Warrants, provided
that
Registrable Securities shall not include shares of Common Stock or
other
securities that have been sold in a Public Sale or held by an Investor
whose
entire holdings of Registrable Securities are then eligible for resale
without
registration and without regard to volume or time limitations under
Rule 144
under the 1933 Act, as such rule may be amended from time to time,
or any
similar rule or regulation hereafter adopted by the SEC.
k. "Registration
Statement"
means a
registration statement or registration statements of the Company
filed under the
1933 Act covering the Registrable Securities. "Registration
Statement"
means a
registration statement or registration statements of the Company
filed under the
1933 Act covering the Registrable Securities.
l. "Required
Holders"
means
the holders of at least a majority of the Registrable Securities.
m. "Required
Registration Amount"
means
the sum of (i) the number of Common Stock issued and, (ii) 100% of
the maximum
number of Warrant Shares issued and issuable pursuant to the Warrants
as of the
trading day immediately preceding the applicable date of determination,
all
subject to adjustment as provided in Section 2(d).
n. "Rule
415"
means
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis.
o. "SEC"
means
the United States Securities and Exchange Commission.
2. Registration.
a. Mandatory
Registration.
The
Company shall prepare, and, as soon as practicable, but in no event
later than
the Filing Deadline, file with the SEC the Registration Statement
on Form SB-2
covering the resale of all of the Registrable Securities. In the
event that Form
SB-2 is unavailable for such a registration, the Company shall use
such other
form as is available for such a registration on another appropriate
form
reasonably acceptable to the Required Holders, subject to the provisions
of
Section 2(c). The Registration Statement prepared pursuant hereto
shall register
for resale at least the number of shares of Common Stock equal to
the Required
Registration Amount determined as of date the Registration Statement
is
initially filed with the SEC. The Registration Statement shall contain
(except
if otherwise directed by the Required Holders) the "Selling
Stockholders"
and
"Plan
of Distribution"
sections in substantially the form attached hereto as Exhibit
B.
The
Company shall use its best efforts to have the Registration Statement
declared
effective by the SEC as soon as practicable, but in no event later
than the
Effectiveness Deadline.
b. Allocation
of Registrable Securities.
The
initial number of Registrable Securities included in any Registration
Statement
and any increase in the number of Registrable Securities included
therein shall
be allocated pro rata among the Investors based on the number of
Registrable
Securities held by each Investor at the time the Registration Statement
covering
such initial number of Registrable Securities or increase thereof
is declared
effective by the SEC. In the event that an Investor sells or otherwise
transfers
any of such Investor's Registrable Securities in any manner that
leaves the
Common Stock so transferred ineligible for resale without registration,
each
transferee shall be allocated a pro rata portion of the then remaining
number of
Registrable Securities included in such Registration Statement for
such
transferor. In no event shall the Company include any securities
other than
Registrable Securities on any Registration Statement without the
prior written
consent of the Required Holders except for up to 66,672 shares of
Common Stock
(or up to 83,340 shares of Common Stock in the event that Additional
Units (as
defined in the Securities Purchase Agreement) are issued) issuable
by the
Company upon exercise of warrants issued by the Company to the Placement
Agent
(as defined in the Securities Purchase Agreement) on the Closing
Date.
c. Ineligibility
for Form SB-2 or S-3.
In the
event that neither Form SB-2 nor Form S-3 is available for the registration
of
the resale of Registrable Securities hereunder, the Company shall
(i) register
the resale of the Registrable Securities on another appropriate form
reasonably
acceptable to the Required Holders and (ii) undertake to register
the
Registrable Securities on Form SB-2 or S-3 as soon as either such
form is
available, provided that the Company shall maintain the effectiveness
of the
Registration Statement then in effect until such time as a Registration
Statement on Form SB-2 or Form S-3 covering the Registrable Securities
has been
declared effective by the SEC.
d. Sufficient
Number of Shares Registered.
In the
event the number of shares available under a Registration Statement
filed
pursuant to Section 2(a) is insufficient to cover all of the Registrable
Securities required to be covered by such Registration Statement
or an
Investor's allocated portion of the Registrable Securities pursuant
to Section
2(b), the Company shall amend the applicable Registration Statement,
or file a
new Registration Statement (on the short form available therefor,
if
applicable), or both, so as to cover at least the Required Registration
Amount
as of the trading day immediately preceding the date of the filing
of such
amendment or new Registration Statement, in each case, as soon as
practicable,
but in any event not later than fifteen days after the necessity
therefor
arises. The Company shall use its best efforts to cause such amendment
and/or
new Registration Statement to become effective as soon as practicable
following
the filing thereof. For purposes of the foregoing provision, the
number of
shares available under a Registration Statement shall be deemed "insufficient
to
cover all of the Registrable Securities" if at any time the number
of shares of
Common Stock available for resale under the Registration Statement
is less than
the product determined by multiplying (i) the Required Registration
Amount as of
such time less that number of shares of Common Stock that have already
been sold
pursuant to transactions covered by the Registration Statement by
(ii) 0.90. The
calculation set forth in the foregoing sentence shall be made without
regard to
any limitations on the exercise of the Warrants and such calculation
shall
assume that the Warrants are then exercisable for shares of Common
Stock at the
then prevailing Exercise Price (as defined in the Warrants).
e. Effect
of Failure to File and Obtain and Maintain Effectiveness of Registration
Statement.
If,
during the period from the Closing Date until the second anniversary
of the
Closing Date (i) the Registration Statement covering all of the Registrable
Securities required to be covered thereby and required to be filed
by the
Company pursuant to this Agreement is (A) not filed with the SEC
on or before
the Filing Deadline (a "Filing
Failure")
or (B)
not declared effective by the SEC on or before the Effectiveness
Deadline (an
"Effectiveness
Failure")
or
(ii) after the Effective Date sales of all of the Registrable Securities
required to be included on such Registration Statement cannot be
made (other
than during an Allowable Grace Period (as defined in Section 3(p))
pursuant to
such Registration Statement or otherwise (including, without limitation,
because
of a failure to keep such Registration Statement effective, to disclose
such
information as is necessary for sales to be made pursuant to such
Registration
Statement, to register a sufficient number of shares of Common Stock
or to
maintain the listing of the shares of Common Stock) (a "Maintenance
Failure")
then,
as partial relief for the damages to any holder by reason of any
such delay in
or reduction of its ability to sell the underlying shares of Common
Stock (which
remedy shall not be exclusive of any other remedies available at
law or in
equity), the Company shall pay to each holder of Registrable Securities
relating
to such Registration Statement an amount in cash equal to one percent
of the
aggregate Purchase Price (as such term is defined in the Securities
Purchase
Agreement) of such Investor's Registrable Securities included in
such
Registration Statement on each of the following dates: (i) the day
of a Filing
Failure and on every thirtieth day (pro rated for periods totaling
less than
thirty days) thereafter until such Filing Failure is cured, and (ii)
the day of
an Effectiveness Failure and on every thirtieth day (pro rated for
periods
totaling less than thirty days) thereafter until such Effectiveness
Failure is
cured, and (iii) the initial day of a Maintenance Failure and on
every thirtieth
day (pro rated for periods totaling less than thirty days) thereafter
until such
Maintenance Failure is cured. The payments to which a holder shall
be entitled
pursuant to this Section 2(e) are referred to herein as "Registration
Delay Payments."
Registration Delay Payments shall be paid on the day of the Filing
Failure,
Effectiveness Failure or the initial day of Maintenance Failure,
as applicable,
and thereafter on the earlier of (I) the thirtieth day after the
event or
failure giving rise to a Registration Delay Payments occurs, or (II)
the third
Business Day after the event or failure giving rise to the Registration
Delay
Payments is cured. In the event the Company fails to make Registration
Delay
Payments in a timely manner, such Registration Delay Payments shall
bear
interest at the rate of one and one-half percent per month (prorated
for partial
months) until paid in full. Notwithstanding anything herein or in
the Securities
Purchase Agreement to the contrary in no event shall the aggregate
amount of
Registration Delay Payments (other than Registration Delay Payments
payable
pursuant to events that are within the control of the Company) exceed,
in the
aggregate, ten percent of the aggregate Purchase Price.
3. Related
Obligations.
At
such
time as the Company is obligated to file a Registration Statement
with the SEC
pursuant to Section 2(a) or 2(d), the Company will use its best efforts
to
effect the registration of the Registrable Securities in accordance
with the
intended method of disposition thereof and, pursuant thereto, the
Company shall
have the following obligations:
a. The
Company shall submit to the SEC, within two Business Days after the
Company
learns that no review of a particular Registration Statement will
be made by the
staff of the SEC or that the staff has no further comments on a particular
Registration Statement, as the case may be, a request for acceleration
of
effectiveness of such Registration Statement to a time and date not
later than
three business days after the submission of such request. The Company
shall keep
each Registration Statement effective pursuant to Rule 415 at all
times until
the earlier of (i) the date as of which the Investors may sell all
of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) (or any successor thereto) promulgated
under
the 1933 Act and is not otherwise prohibited by the SEC or any statute,
rule,
regulation or other applicable law from selling any such Registrable
Securities
pursuant to such Rule or (ii) the date on which the Investors shall
have sold
all of the Registrable Securities covered by such Registration Statement
(the
"Registration
Period").
The
Company shall ensure that each Registration Statement (including
any amendments
or supplements thereto and prospectuses contained therein) shall
not contain any
untrue statement of a material fact or omit to state a material fact
required to
be stated therein, or necessary to make the statements therein (in
the case of
prospectuses, in the light of the circumstances in which they were
made) not
misleading.
b. The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement
and the
prospectus used in connection with such Registration Statement, which
prospectus
is to be filed pursuant to Rule 424 promulgated under the 1933 Act,
as may be
necessary to keep such Registration Statement effective at all times
during the
Registration Period, and, during such period, comply with the provisions
of the
1933 Act with respect to the disposition of all Registrable Securities
of the
Company covered by such Registration Statement until such time as
all of such
Registrable Securities shall have been disposed of in accordance
with the
intended methods of disposition by the seller or sellers thereof
as set forth in
such Registration Statement. In the case of amendments and supplements
to a
Registration Statement which are required to be filed pursuant to
this Agreement
(including pursuant to this Section 3(b)) by reason of the Company
filing a
report on Form 10-QSB, Form 10-KSB or any analogous report under
the Securities
Exchange Act of 1934, as amended (the "1934
Act"),
the
Company shall have incorporated such report by reference into such
Registration
Statement, if applicable, or shall file such amendments or supplements
with the
SEC on the same day on which the 1934 Act report is filed which created
the
requirement for the Company to amend or supplement such Registration
Statement.
c. Upon
request, the Company shall furnish to each Investor whose Registrable
Securities
are included in any Registration Statement, without charge, (i) promptly
after
the same is prepared and filed with the SEC, one copy of such Registration
Statement and any amendment(s) thereto, including financial statements
and
schedules, all documents incorporated therein by reference, if requested
by an
Investor, all exhibits and each preliminary prospectus, (ii) upon
the
effectiveness of any Registration Statement, up to ten copies of
the prospectus
included in such Registration Statement and all amendments and supplements
thereto (or such other number of copies as such Investor may reasonably
request), and (iii) such other documents, including copies of any
preliminary or
final prospectus, as such Investor may reasonably request from time
to time in
order to facilitate the disposition of the Registrable Securities
owned by such
Investor.
d. The
Company shall use its best efforts to (i) register and qualify, unless
an
exemption from registration and qualification applies, the resale
by Investors
of the Registrable Securities covered by a Registration Statement
under such
other securities or "blue sky" laws of all jurisdictions in the United
States as
may be requested in writing by an Investor, (ii) prepare and file
in those
jurisdictions, such amendments (including post-effective amendments)
and
supplements to such registrations and qualifications as may be necessary
to
maintain the effectiveness thereof during the Registration Period,
(iii) take
such other actions as may be necessary to maintain such registrations
and
qualifications in effect at all times during the Registration Period,
and (iv)
take all other actions reasonably necessary or advisable to qualify
the
Registrable Securities for sale in such jurisdictions; provided,
however, that
the Company shall not be required in connection therewith or as a
condition
thereto to (x) qualify to do business in any jurisdiction where it
would not
otherwise be required to qualify but for this Section 3(d), (y) subject
itself
to general taxation in any such jurisdiction, or (z) file a general
consent to
service of process in any such jurisdiction. The Company shall promptly
notify
each Investor who holds Registrable Securities of the receipt by
the Company of
any notification with respect to the suspension of the registration
or
qualification of any of the Registrable Securities for sale under
the securities
or "blue sky" laws of any jurisdiction in the United States or its
receipt of
actual notice of the initiation or threatening of any proceeding
for such
purpose.
e. The
Company shall notify each Investor in writing of the happening of
any event, as
promptly as practicable after becoming aware of such event, as a
result of which
the prospectus included in a Registration Statement, as then in effect,
includes
an untrue statement of a material fact or omission to state a material
fact
required to be stated therein or necessary to make the statements
therein, in
the light of the circumstances under which they were made, not misleading
(provided that in no event shall such notice contain any material,
nonpublic
information), and, subject to Section 3(p), promptly prepare a supplement
or
amendment to such Registration Statement to correct such untrue statement
or
omission, and upon request deliver ten copies of such supplement
or amendment to
each Investor (or such other number of copies as such Investor may
reasonably
request). The Company shall also promptly notify each Investor in
writing and by
overnight mail, (i) of any request by the SEC for amendments or supplements
to a
Registration Statement or related prospectus or related information,
and (ii) of
the Company's reasonable determination that a post-effective amendment
to a
Registration Statement would be appropriate.
f. The
Company shall use its best efforts to prevent the issuance of any
stop order or
other suspension of effectiveness of a Registration Statement, or
the suspension
of the qualification of any of the Registrable Securities for sale
in any
jurisdiction and, if such an order or suspension is issued, to obtain
the
withdrawal of such order or suspension at the earliest possible moment
and to
notify each Investor who holds Registrable Securities being sold
of the issuance
of such order and the resolution thereof or its receipt of actual
notice of the
initiation or threat of any proceeding for such purpose.
g. If
any
Investor is required under applicable securities laws to be described
in the
Registration Statement as an underwriter, at the reasonable request
of such
Investor, the Company shall furnish to such Investor, on the date
of the
effectiveness of the Registration Statement and thereafter from time
to time on
such dates as an Investor may reasonably request (i) a letter, dated
such date,
from the Company's independent certified public accountants in form
and
substance as is customarily given by independent certified public
accountants to
underwriters in an underwritten public offering, addressed to the
Investors, and
(ii) an opinion, dated as of such date, of counsel representing the
Company for
purposes of such Registration Statement, in form, scope and substance
as is
customarily given in an underwritten public offering, addressed to
the
Investors.
h. If
any
Investor is required under applicable securities laws to be described
in the
Registration Statement as an underwriter, then at the request of
such Investor
in connection with such Investor's due diligence requirements, the
Company shall
make available for inspection by (i) such Investor, (ii) legal counsel
for such
investor and (iii) one firm of accountants or other agents retained
by such
Investors (collectively, the "Inspectors"),
all
pertinent financial and other records, and pertinent corporate documents
and
properties of the Company (collectively, the "Records"),
as
shall be reasonably deemed necessary by each Inspector, and cause
the Company's
officers, directors and employees to supply all information which
any Inspector
may reasonably request; provided, however, that each Inspector shall
agree to
hold in strict confidence and shall not make any disclosure (except
to an
Investor) or use of any Record or other information which the Company
determines
in good faith to be confidential, and of which determination the
Inspectors are
so notified, unless (a) the disclosure of such Records is necessary
to avoid or
correct a misstatement or omission in any Registration Statement
or is otherwise
required under the 1933 Act, (b) the release of such Records is ordered
pursuant
to a final, non-appealable subpoena or order from a court or government
body of
competent jurisdiction, or (c) the information in such Records has
been made
generally available to the public other than by disclosure in violation
of this
or any other agreement of which the Inspector has knowledge. Each
Investor
agrees that it shall, upon learning that disclosure of such Records
is sought in or by a court or governmental body of competent jurisdiction
or
through other means, give prompt notice to the Company and allow
the Company, at
its expense, to undertake appropriate action to prevent disclosure
of, or to
obtain a protective order for, the Records deemed confidential. Nothing
herein
(or in any other confidentiality agreement between the Company and
any Investor)
shall be deemed to limit the Investors' ability to sell Registrable
Securities
in a manner which is otherwise consistent with applicable laws and
regulations.
i. The
Company shall hold in confidence and not make any disclosure of information
concerning an Investor provided to the Company unless (i) disclosure
of such
information is necessary to comply with federal or state securities
laws, (ii)
the disclosure of such information is necessary to avoid or correct
a
misstatement or omission in any Registration Statement, (iii) the
release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available
to the
public other than by disclosure in violation of this Agreement or
any other
agreement. The Company agrees that it shall, upon learning that disclosure
of
such information concerning an Investor is sought in or by a court
or
governmental body of competent jurisdiction or through other means,
give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of,
or to obtain
a protective order for, such information.
j. The
Company shall use its best efforts either to (i) cause all of the
Registrable
Securities covered by a Registration Statement to be listed on each
securities
exchange on which securities of the same class or series issued by
the Company
are then listed, if any, if the listing of such Registrable Securities
is then
permitted under the rules of such exchange, or (ii) secure designation
and
quotation of all of the Registrable Securities covered by a Registration
Statement on The NASDAQ Capital Market, or (iii) if, despite the
Company's best
efforts to satisfy, the preceding clauses (i) and (ii) the Company
is
unsuccessful in satisfying the preceding clauses (i) and (ii), to
secure the
inclusion for quotation on The NASDAQ Capital Market or the American
Stock
Exchange for such Registrable Securities and, without limiting the
generality of
the foregoing, to use its best efforts to arrange for at least two
market makers
to register with the National Association of Securities Dealers,
Inc.
("NASD")
as
such with respect to such Registrable Securities. The Company shall
pay all fees
and expenses in connection with satisfying its obligation under this
Section
3(j).
k. The
Company shall cooperate with the Investors who hold Registrable Securities
being
sold pursuant to the Registration Statement and, to the extent applicable,
facilitate the timely preparation and delivery of certificates (not
bearing any
restrictive legend) representing the shares that were Registrable
Securities
prior to their sale under the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case
may be, as the
Investors may reasonably request and registered in such names as
the Investors
may request.
l. If
requested by an Investor, the Company shall (i) as soon as practicable
incorporate in a prospectus supplement or post-effective amendment
such
information as an Investor reasonably requests to be included therein
relating
to the sale and distribution of Registrable Securities, including,
without
limitation, information with respect to the number of Registrable
Securities
being offered or sold, the purchase price being paid therefor and
any other
terms of the offering of the Registrable Securities to be sold in
such offering;
(ii) as soon as practicable make all required filings of such prospectus
supplement or post-effective amendment after being notified of the
matters to be
incorporated in such prospectus supplement or post-effective amendment;
and
(iii) as soon as practicable, supplement or make amendments to any
Registration
Statement if reasonably requested by an Investor holding any Registrable
Securities.
m. The
Company shall use its best efforts to cause the Registrable Securities
covered
by a Registration Statement to be registered with or approved by
such other
governmental agencies or authorities as may be necessary to consummate
the
disposition of such Registrable Securities.
n. The
Company shall make generally available to its security holders as
soon as
practical, but not later than ninety days after the close of the
period covered
thereby, an earnings statement (in form complying with, and in the
manner
provided by, the provisions of Rule 158 under the 1933 Act) covering
a
twelve-month period.
o. The
Company shall otherwise use its best efforts to comply with all applicable
rules
and regulations of the SEC in connection with any registration
hereunder.
p. Notwithstanding
anything to the contrary herein, at any time after the Effective
Date, the
Company may delay the disclosure of material, non-public information
concerning
the Company the disclosure of which at the time is not, in the good
faith
opinion of the Board of Directors of the Company and its counsel,
in the best
interest of the Company and, in the opinion of counsel to the Company,
otherwise
required (a "Grace
Period");
provided, that the Company shall promptly (i) notify the Investors
in writing of
the existence of material, non-public information giving rise to
a Grace Period
(provided that in each notice the Company will not disclose the content
of such
material, non-public information to the Investors) and the date on
which the
Grace Period will begin, and (ii) notify the Investors in writing
of the date on
which the Grace Period ends; and, provided further, that no Grace
Period shall
exceed five consecutive days and during any three-hundred-sixty-five
day period
such Grace Periods shall not exceed an aggregate of twenty days and
the first
day of any Grace Period must be at least five trading days after
the last day of
any prior Grace Period (each, an "Allowable
Grace Period").
For
purposes of determining the length of a Grace Period above, the Grace
Period
shall begin on and include the date the Investors receive the notice
referred to
in clause (i) and shall end on and include the later of the date
the Investors
receive the notice referred to in clause (ii) and the date referred
to in such
notice. The provisions of Section 3(e) hereof shall not be applicable
during the
period of any Allowable Grace Period. Upon expiration of the Grace
Period, the
Company shall again be bound by the first sentence of Section 3(e)
with respect
to the information giving rise thereto unless such material, non-public
information is no longer applicable. Notwithstanding anything to
the contrary,
the Company shall cause its transfer agent to deliver unlegended
shares of
Common Stock to a transferee of an Investor in accordance with the
terms of the
Securities Purchase Agreement in connection with any sale of Registrable
Securities with respect to which an Investor has entered into a contract
for
sale, and delivered a copy of the prospectus included as part of
the applicable
Registration Statement (unless an exemption from such prospectus
delivery
requirements exists), prior to the Investor's receipt of the notice
of a Grace
Period and for which the Investor has not yet settled.
4. Obligations
of the Investors.
a. At
least
five Business Days prior to the first anticipated filing date of
a Registration
Statement, the Company shall notify each Investor in writing of the
information
the Company requires from each such Investor if such Investor elects
to have any
of such Investor's Registrable Securities included in such Registration
Statement. It shall be a condition precedent to the obligations of
the Company
to complete the registration pursuant to this Agreement with respect
to the
Registrable Securities of a particular Investor that such Investor
shall furnish
to the Company such information regarding itself, the Registrable
Securities
held by it and the intended method of disposition of the Registrable
Securities
held by it as shall be reasonably required to effect the effectiveness
of the
registration of such Registrable Securities and shall execute such
documents in
connection with such registration as the Company may reasonably request.
b. Each
Investor, by such Investor's acceptance of the Registrable Securities,
agrees to
cooperate with the Company as reasonably requested by the Company
in connection
with the preparation and filing of any Registration Statement hereunder,
unless
such Investor has notified the Company in writing of such Investor's
election to
exclude all of such Investor's Registrable Securities from such Registration
Statement.
c. Each
Investor agrees that, upon receipt of any notice from the Company
of the
happening of any event of the kind described in Section 3(f) or the
first
sentence of 3(e), such Investor will immediately discontinue disposition
of
Registrable Securities pursuant to any Registration Statement(s)
covering such
Registrable Securities until such Investor's receipt of the copies
of the
supplemented or amended prospectus contemplated by Section 3(e) or
Section 3(f)
or receipt of notice that no supplement or amendment is required.
Notwithstanding anything to the contrary, the Company shall cause
its transfer
agent to deliver unlegended shares of Common Stock to a transferee
of an
Investor in connection with any sale of Registrable Securities covered
by the
Registration Statement and with respect to which an Investor has
entered into a
contract for sale prior to the Investor's receipt of a notice from
the Company
of the happening of any event of the kind described in Section 3(e)
or Section
3(f) and for which the Investor has not yet settled.
d. Each
Investor covenants and agrees that it will comply with the prospectus
delivery
requirements of the 1933 Act as applicable to it or an exemption
therefrom in
connection with sales of Registrable
Securities pursuant to the Registration Statement.
5. Expenses
of Registration.
All
reasonable expenses, other than underwriting discounts and commissions,
incurred
in connection with registrations, filings or qualifications pursuant
to Sections
2 and 3, including, without limitation, all registration, listing
and
qualifications fees, printers and accounting fees, and fees and disbursements
of
counsel for the Company shall be paid by the Company.
6. Indemnification.
In
the
event any Registrable Securities are included in a Registration Statement
under
this Agreement:
a. To
the
fullest extent permitted by law, the Company will, and hereby does,
indemnify,
hold harmless and defend each Investor, the directors, officers,
members,
partners, employees, agents, representatives of, and each Person,
if any, who
controls any Investor within the meaning of the 1933 Act or the 1934
Act (each,
an "Indemnified
Person"),
against any losses, claims, damages, liabilities, judgments, fines,
penalties,
charges, costs, reasonable attorneys' fees, amounts paid in settlement
or
expenses, joint or several, (collectively, "Claims")
incurred in investigating, preparing or defending any action, claim,
suit,
inquiry, proceeding, investigation or appeal taken from the foregoing
by or
before any court or governmental, administrative or other regulatory
agency,
body or the SEC, whether pending or threatened, whether or not an
indemnified
party is or may be a party thereto ("Indemnified
Damages"),
to
which any of them may become subject insofar as such Claims (or actions
or
proceedings, whether commenced or threatened, in respect thereof)
arise out of
or are based upon: (i) any untrue statement or alleged untrue statement
of a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification
of the
offering under the securities or other "blue sky" laws of any jurisdiction
in
which Registrable Securities are offered ("Blue
Sky Filing"),
or
the omission or alleged omission to state a material fact required
to be stated
therein or necessary to make the statements therein not misleading,
(ii) any
untrue statement or alleged untrue statement of a material fact contained
in any
preliminary prospectus if used prior to the effective date of such
Registration
Statement, or contained in the final prospectus (as amended or supplemented,
if
the Company files any amendment thereof or supplement thereto with
the SEC) or
the omission or alleged omission to state therein any material fact
necessary to
make the statements made therein, in the light of the circumstances
under which
the statements therein were made, not misleading, or (iii) any violation or
alleged violation by the Company of the 1933 Act, the 1934 Act, any
other law,
including, without limitation, any state securities law, or any rule
or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement or (the matters in
the foregoing
clauses (i) through (iii) being, collectively, "Violations").
Subject to Section 6(c), the Company shall reimburse the Indemnified
Persons,
promptly as such expenses are incurred and are due and payable, for
any legal
fees or other reasonable expenses incurred by them in connection
with
investigating or defending any such Claim. Notwithstanding anything
to the
contrary contained herein, the indemnification agreement contained
in this
Section 6(a): (A) shall not apply to a Claim by an Indemnified Person
arising
out of or based upon a Violation which occurs in reliance upon and
in conformity
with information furnished in writing to the Company by such Indemnified
Person
for such Indemnified Person expressly for use in connection with
the preparation
of the Registration Statement or any such amendment thereof or supplement
thereto, if such prospectus was timely made available by the Company
pursuant to
Section 3(d) and (B) shall not be available to the extent such Claim
is based on
a failure of the Investor to deliver or to cause to be delivered
the prospectus
made available by the Company, including a corrected prospectus,
if such
prospectus or corrected prospectus was timely made available by the
Company
pursuant to Section 3(d); and (C) shall not apply to amounts paid
in settlement
of any Claim if such settlement is effected without the prior written
consent of
the Company, which consent shall not be unreasonably withheld or
delayed. Such
indemnity shall remain in full force and effect regardless of any
investigation
made by or on behalf of the Indemnified Person and shall survive
the transfer of
the Registrable Securities by the Investors pursuant to Section 9.
b. In
connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to severally and not jointly
indemnify,
hold harmless and defend, to the same extent and in the same manner
as is set
forth in Section 6(a), the Company, each of its directors, each of
its officers
who signs the Registration Statement and each Person, if any, who
controls the
Company within the meaning of the 1933 Act or the 1934 Act (each,
an
"Indemnified
Party"),
against any Claim or Indemnified Damages to which any of them may
become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as
such Claim or
Indemnified Damages arise out of or are based upon any Violation,
in each case
to the extent, and only to the extent, that such Violation occurs
in reliance
upon and in conformity with written information furnished to the
Company by such
Investor expressly for use in connection with such Registration Statement;
and,
subject to Section 6(c), such Investor will reimburse any legal or
other
expenses reasonably incurred by an Indemnified Party in connection
with
investigating or defending any such Claim; provided, however, that
the indemnity
agreement contained in this Section 6(b) and the agreement with respect
to
contribution contained in Section 7 shall not apply to amounts paid
in
settlement of any Claim if such settlement is effected without the
prior written
consent of such Investor, which consent shall not be unreasonably
withheld or
delayed; provided, further, however, that the Investor shall be liable
under
this Section 6(b) for only that amount of a Claim or Indemnified
Damages as does
not exceed the net proceeds to such Investor as a result of the sale
of
Registrable Securities pursuant to such Registration Statement. Such
indemnity
shall remain in full force and effect regardless of any investigation
made by or
on behalf of such Indemnified Party and shall survive the transfer
of the
Registrable Securities by the Investors pursuant to Section 9.
c. Promptly
after receipt by an Indemnified Person or Indemnified Party under
this Section 6
of notice of the commencement of any action or proceeding (including
any
governmental action or proceeding) involving a Claim, such Indemnified
Person or
Indemnified Party shall, if a Claim in respect thereof is to be made
against any
indemnifying party under this Section 6, deliver to the indemnifying
party a
written notice of the commencement thereof, and the indemnifying
party shall
have the right to participate in, and, to the extent the indemnifying
party so
desires, jointly with any other indemnifying party similarly noticed,
to assume
control of the defense thereof with counsel mutually satisfactory
to the
indemnifying party and the Indemnified Person or the Indemnified
Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified
Party
shall have the right to retain its own counsel with the fees and
expenses of not
more than one counsel for such Indemnified Person or Indemnified
Party to be
paid by the indemnifying party, if, in the reasonable opinion of
counsel
retained by the indemnifying party, the representation by such counsel
of the
Indemnified Person or Indemnified Party and the indemnifying party
would be
inappropriate due to actual or potential differing interests between
such
Indemnified Person or Indemnified Party and any other party represented
by such
counsel in such proceeding. In the case of an Indemnified Person,
legal counsel
referred to in the immediately preceding sentence shall be selected
by the
Investors holding at least a majority in
interest of the Registrable Securities included in the Registration
Statement to
which the Claim relates. The Indemnified Party or Indemnified Person
shall
cooperate fully with the indemnifying party in connection with any
negotiation
or defense of any such action or Claim by the indemnifying party
and shall
furnish to the indemnifying party all information reasonably available
to the
Indemnified Party or Indemnified Person which relates to such action
or Claim.
The indemnifying party shall keep the Indemnified Party or Indemnified
Person
reasonably apprised at all times as to the status of the defense
or any
settlement negotiations with respect thereto. No indemnifying party
shall be
liable for any settlement of any action, claim or proceeding effected
without
its prior written consent, provided, however, that the indemnifying
party shall
not unreasonably withhold, delay or condition its consent. No indemnifying
party
shall, without the prior written consent of the Indemnified Party
or Indemnified
Person, consent to entry of any judgment or enter into any settlement
or other
compromise which does not include as an unconditional term thereof
the giving by
the claimant or plaintiff to such Indemnified Party or Indemnified
Person of a
release from all liability in respect to such Claim or litigation,
and such
settlement shall not include any admission as to fault on the part
of the
Indemnified Party. Following indemnification as provided for hereunder,
the
indemnifying party shall be subrogated to all rights of the Indemnified
Party or
Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The
failure to
deliver written notice to the indemnifying party within a reasonable
time of the
commencement of any such action shall not relieve such indemnifying
party of any
liability to the Indemnified Person or Indemnified Party under this
Section 6,
except to the extent that the indemnifying party is prejudiced in
its ability to
defend such action.
d. The
indemnification required by this Section 6 shall be made by periodic
payments of
the amount thereof during the course of the investigation or defense,
as and
when bills are received or Indemnified Damages are incurred.
e. The
indemnity agreements contained herein shall be in addition to (i)
any cause of
action or similar right of the Indemnified Party or Indemnified Person
against
the indemnifying party or others, and (ii) any liabilities the indemnifying
party may be subject to pursuant to the law.
7. Contribution.
To
the
extent any indemnification by an indemnifying party is prohibited
or limited by
law, the indemnifying party agrees to make the maximum contribution
with respect
to any amounts for which it would otherwise be liable under Section
6 to the
fullest extent permitted by law; provided, however, that: (i) no
Person involved
in the sale of Registrable Securities which Person is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933
Act) in
connection with such sale shall be entitled to contribution from
any Person
involved in such sale of Registrable Securities who was not guilty
of fraudulent
misrepresentation; and (ii) contribution by any seller of Registrable
Securities
shall be limited in amount to the net amount of proceeds received
by such seller
from the sale of such Registrable Securities pursuant to such Registration
Statement.
8. Reports
Under the 1934 Act.
With
a
view to making available to the Investors the benefits of Rule 144
promulgated
under the 1933 Act or any other similar rule or regulation of the
SEC that may
at any time permit the Investors to sell securities of the Company
to the public
without registration ("Rule
144"),
the
Company agrees to:
a. make
and
keep public information available, as those terms are understood
and defined in
Rule 144;
b. file
with
the SEC in a timely manner all reports and other documents required
of the
Company under the 1933 Act and the 1934 Act so long as the Company
remains
subject to such requirements and the filing of such reports and other
documents
is required for the applicable provisions of Rule 144; and
c. furnish
to each Investor so long as such Investor owns Registrable Securities,
promptly
upon request, (i) a written statement by the Company, if true, that
it has
complied with the reporting requirements of Rule 144, the 1933 Act
and the 1934
Act, (ii) a copy of the most recent annual or quarterly report of
the Company
and such other reports and documents so filed by the Company, and
(iii) such
other information as may be reasonably requested to permit the Investors
to sell
such securities pursuant to Rule 144 without registration.
9. Assignment
of Registration Rights.
The
rights under this Agreement shall be automatically assignable by
the Investors
to any transferee of all or any portion of such Investor's Registrable
Securities if: (i) the Investor agrees in writing with the transferee
or
assignee to assign such rights, and a copy of such agreement is furnished
to the
Company within a reasonable time after such assignment; (ii) the
Company is,
within a reasonable time after such transfer or assignment, furnished
with
written notice of (a) the name and address of such transferee or
assignee, and
(b) the securities with respect to which such registration rights
are being
transferred or assigned; (iii) immediately following such transfer
or assignment
the further disposition of such securities by the transferee or assignee
is
restricted under the 1933 Act and applicable state securities laws;
(iv) at or
before the time the Company receives the written notice contemplated
by clause
(ii) of this sentence the transferee or assignee agrees in writing
with the
Company to be bound by all of the provisions contained herein; and
(v) such
transfer shall have been made in accordance with the applicable requirements
of
the Securities Purchase Agreement.
10. Amendment
of Registration Rights.
Provisions
of this Agreement may be amended and the observance thereof may be
waived
(either generally or in a particular instance and either retroactively
or
prospectively), only with the written consent of the Company and
the Required
Holders. Any amendment or waiver effected in accordance with this
Section 10
shall be binding upon each Investor and the Company. No such amendment
shall be
effective to the extent that it applies to less than all of the holders
of the
Registrable Securities. No consideration shall be offered or paid
to any Person
to amend or consent to a waiver or modification of any provision
of any of this
Agreement unless the same consideration also is offered to all of
the parties to
this Agreement.
11. Miscellaneous.
a. A
Person
is deemed to be a holder of Registrable Securities whenever such
Person owns or
is deemed to own of record such Registrable Securities. If the Company
receives
conflicting instructions, notices or elections from two or more Persons
with
respect to the same Registrable Securities, the Company shall act
upon the basis
of instructions, notice or election received from such record owner
of such
Registrable Securities.
b. Any
notices, consents, waivers or other communications required or permitted
to be
given under the terms of this Agreement must be in writing and will
be deemed to
have been delivered: (i) upon receipt, when delivered personally;
(ii) upon
receipt, when sent by facsimile (provided confirmation of transmission
is
mechanically or electronically generated and kept on file by the
sending party);
or (iii) one Business Day after deposit with a nationally recognized
overnight
delivery service, in each case properly addressed to the party to
receive the
same. The addresses and facsimile numbers for such communications
shall
be:
If
to
Company (prior to consummation of the transactions contemplated by
the Exchange
Agreement):
AeroGrow
International, Inc.
6075
Longbow Drive, Suite 200
Boulder,
CO 80307
Telephone: (303)
444-7755
Facsimile: (303)
444-0406
Attention:
Michael
Bissonette, President
and
with
a
copy to:
Gibson,
Dunn & Crutcher
1801
California, Suite 4200
Denver,
CO 80203
Telephone: 303-298-5700
Facsimile: 303-296-5310
Attention: Steven
K.
Talley
If
to an
Investor, to its address and facsimile number set forth on the Schedule
of
Investors attached hereto, with copies to such Investor's representatives
as set
forth on the Schedule of Investors, or to such other address and/or
facsimile
number and/or to the attention of such other Person as the recipient
party has
specified by written notice given to each other party five days prior
to the
effectiveness of such change. Written confirmation of receipt (A)
given by the
recipient of such notice, consent, waiver or other communication,
(B)
mechanically or electronically generated by the sender's facsimile
machine
containing the time, date, recipient facsimile number and an image
of the first
page of such transmission or (C) provided by a courier or overnight
courier
service shall be rebuttable evidence of personal service, receipt
by facsimile
or receipt from a nationally recognized overnight delivery service
in accordance
with clause (i), (ii) or (iii) above, respectively.
c. Failure
of any party to exercise any right or remedy under this Agreement
or otherwise,
or delay by a party in exercising such right or remedy, shall not
operate as a
waiver thereof.
d. This
Agreement shall be governed by and construed in accordance with the
laws of the
State of Colorado as such laws are applied to contracts made and
to be fully
performed entirely within that state between residents of that state.
The
parties hereto (i) agree that any legal suit, action or proceeding
arising out
of or relating to the transactions contemplated by this Agreement
shall be
instituted exclusively in the federal courts located in Denver, Colorado,
U.S.A., (ii) waive any objection to the venue of any such suit, action
or
proceeding and the right to assert that such forum is not a convenient
forum,
and (iii) irrevocably consent to the jurisdiction of the federal
courts located
in Denver, Colorado, U.S.A. in any such suit, action or proceeding,
and each
party further agrees to accept and acknowledge service or any and
all process
that may be served in any such suit, action or proceeding in the
federal courts
located in Denver, Colorado, U.S.A. in person or by certified mail
addressed as
provided in Section 11(b).
e. This
Agreement, the other Transaction Documents (as defined in the Securities
Purchase Agreement) and the instruments referenced herein and therein
constitute
the entire agreement among the parties hereto with respect to the
subject matter
hereof and thereof. There are no restrictions, promises, warranties
or
undertakings, other than those set forth or referred to herein and
therein. This
Agreement, the other Transaction Documents and the instruments referenced
herein
and therein supersede all prior agreements and understandings among
the parties
hereto with respect to the subject matter hereof and thereof.
f. Subject
to the requirements of Section 9, this Agreement shall inure to the
benefit of
and be binding upon the permitted successors and assigns of each
of the parties
hereto.
g. The
headings in this Agreement are for convenience of reference only
and shall not
limit or otherwise affect the meaning hereof.
h. This
Agreement may be executed in identical counterparts, each of which
shall be
deemed an original but all of which shall constitute one and the
same agreement.
This Agreement, once executed by a party, may be delivered to the
other party
hereto by facsimile transmission of a copy of this Agreement bearing
the
signature of the party so delivering this Agreement.
i. Each
party shall do and perform, or cause to be done and performed, all
such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes
of this
Agreement and the consummation of the transactions contemplated
hereby.
j. All
consents and other determinations required to be made by the Investors
pursuant
to this Agreement shall be made, unless otherwise specified in this
Agreement,
by the Required Holders.
k. The
language used in this Agreement will be deemed to be the language
chosen by the
parties to express their mutual intent and no rules of strict construction
will
be applied against any party.
l. This
Agreement is intended for the benefit of the parties hereto and their
respective
permitted successors and assigns, and is not for the benefit of,
nor may any
provision hereof be enforced by, any other Person.
m. The
obligations of each Investor hereunder are several and not joint
with the
obligations of any other Investor, and no provision of this Agreement
is
intended to confer any obligations on any Investor vis-à-vis any other Investor.
Nothing contained herein, and no action taken by any Investor pursuant
hereto,
shall be deemed to constitute the Investors as a partnership, an
association, a
joint venture or any other kind of entity, or create a presumption
that the
Investors are in any way acting in concert or as a group with respect
to such
obligations or the transactions contemplated herein.
n. Currency.
As used
herein, "Dollar", "US Dollar" and "$" each mean the lawful money
of the United
States.
*
* * * *
*
IN
WITNESS WHEREOF,
each
Investor and the Company have caused their respective signature page
to this
Registration Rights Agreement to be duly executed as of the date
first written
above.
| |
|
|
| |
COMPANY:
AEROGROW
INTERNATIONAL, NC.
|
|
|
|
| |
By: |
|
| |
|
| |
Name:
Title:
|
IN
WITNESS WHEREOF,
each
Investor and the Company have caused their respective signature page
to this
Registration Rights Agreement to be duly executed as of the date
first written
above.
IN
WITNESS WHEREOF,
each
Investor and the Company have caused their respective signature page
to this
Registration Rights Agreement to be duly executed as of the date
first written
above.
SCHEDULE
OF BUYERS
|
Investor
|
Investor's
Address
and
Facsimile Number
|
Investor's
Representative's Address
and
Facsimile Number
|
EXHIBIT
B
SELLING
STOCKHOLDERS
The
shares of common stock being offered by the selling stockholders
are those
previously issued to the Selling Stockholders and those issuable
to the Selling
Stockholders upon exercise of the warrants. For additional information
regarding
the issuances of common stock and the warrants, see "Private Placement
of Common
Stock and Warrants" above. We are registering the shares of common
stock in
order to permit the selling stockholders to offer the shares for
resale from
time to time. Except for the ownership of the shares of common stock
and the
warrants, the selling stockholders have not had any material relationship
with
us within the past three years.
The
table
below lists the selling stockholders and other information regarding
the
beneficial ownership of the shares of common stock by each of the
selling
stockholders. The second column lists the number of shares of common
stock
beneficially owned by each selling shareholder, based on its ownership
of the
shares of common stock and the warrants, as of ________, 2007, assuming
exercise
of the warrants held by the selling stockholders on that date, without
regard to
any limitations on exercise.
The
third
column lists the shares of common stock being offered by this prospectus
by the
selling stockholders.
In
accordance with the terms of registration rights agreements with
the holders of
the shares of common stock and the warrants, this prospectus generally
covers
the resale of at least the sum of (i) the number of shares of common
stock
issued and (ii) 150% of the number of shares of common stock issued
and issuable
upon exercise of the related warrants, determined as if the outstanding
warrants
were exercised, as applicable, in full, as of the trading day immediately
preceding the date this registration statement was initially filed
with the SEC.
The fourth column assumes the sale of all of the shares offered by
the selling
stockholders pursuant to this prospectus.
Under
the
terms of the warrants, a selling stockholder may not exercise the
warrants, to
the extent such exercise would cause such selling stockholder, together
with its
affiliates, to beneficially own a number of shares of common stock
which would
exceed 4.99% of our then outstanding shares of common stock following
such
exercise, excluding for purposes of such determination shares of
common stock
issuable upon exercise of the warrants which have not been exercised.
The number
of shares in the second column does not reflect this limitation.
The selling
stockholders may sell all, some or none of their shares in this offering.
See
"Plan of Distribution."
|
Name
of Selling Stockholder
|
Number
of Shares of
Common
Stock Owned
Prior
to Offering
|
Maximum
Number of Shares
of
Common Stock to be Sold
Pursuant
to this Prospectus
|
Number
of Shares of
Common
Stock Owned
After
Offering
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PLAN
OF DISTRIBUTION
We
are
registering the shares of common stock previously issued and the
shares of
common stock issuable upon exercise of the warrants to permit the
resale of
these shares of common stock by the holders of the common stock and
warrants
from time to time after the date of this prospectus. We will not
receive any of
the proceeds from the sale by the selling stockholders of the shares
of common
stock. We will bear all fees and expenses incident to our obligation
to register
the shares of common stock.
The
selling stockholders may sell all or a portion of the shares of common
stock
beneficially owned by them and offered hereby from time to time directly
or
through one or more underwriters, broker-dealers or agents. If the
shares of
common stock are sold through underwriters or broker-dealers, the
selling
stockholders will be responsible for underwriting discounts or commissions
or
agent's commissions. The shares of common stock may be sold in one
or more
transactions at fixed prices, at prevailing market prices at the
time of the
sale, at varying prices determined at the time of sale, or at negotiated
prices.
These sales may be effected in transactions, which may involve crosses
or block
transactions,
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on
any national securities exchange or quotation service on
which the
securities may be listed or quoted at the time of
sale;
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in
the over-the-counter market;
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in
transactions otherwise than on these exchanges or systems
or in the
over-the-counter market;
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through
the writing of options, whether such options are listed
on an options
exchange or otherwise;
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ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
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block
trades in which the broker-dealer will attempt to sell
the shares as agent
but may position and resell a portion of the block as principal
to
facilitate the transaction;
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purchases
by a broker-dealer as principal and resale by the broker-dealer
for its
account;
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an
exchange distribution in accordance with the rules of the
applicable
exchange;
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privately
negotiated transactions;
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sales
pursuant to Rule 144;
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broker-dealers
may agree with the selling securityholders to sell a specified
number of
such shares at a stipulated price per
share;
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a
combination of any such methods of sale;
and
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any
other method permitted pursuant to applicable
law.
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If
the
selling stockholders effect such transactions by selling shares of
common stock
to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling stockholders or commissions
from
purchasers of the shares of common stock for whom they may act as
agent or to
whom they may sell as principal (which discounts, concessions or
commissions as
to particular underwriters, broker-dealers or agents may be in excess
of those
customary in the types of transactions involved). In connection with
sales of
the shares of common stock or otherwise, the selling stockholders
may enter into
hedging transactions with broker-dealers, which may in turn engage
in short
sales of the shares of common stock in the course of hedging in positions
they
assume. The selling stockholders may also sell shares of common stock
short and
deliver shares of common stock covered by this prospectus to close
out short
positions and to return borrowed shares in connection with such short
sales. The
selling stockholders may also loan or pledge shares of common stock
to
broker-dealers that in turn may sell such shares.
The
selling stockholders may pledge or grant a security interest in some
or all of
the warrants or shares of common stock owned by them and, if they
default in the
performance of their secured obligations, the pledgees or secured
parties may
offer and sell the shares of common stock from time to time pursuant
to this
prospectus or any amendment to this prospectus under Rule 424(b)(3)
or other
applicable provision of the Securities Act, amending, if necessary,
the list of
selling stockholders to include the pledgee, transferee or other
successors in
interest as selling stockholders under this prospectus. The selling
stockholders
also may transfer and donate the shares of common stock in other
circumstances
in which case the transferees, donees, pledgees or other successors
in interest
will be the selling beneficial owners for purposes of this
prospectus.
The
selling stockholders and any broker-dealer participating in the distribution
of
the shares of common stock may be deemed to be "underwriters" within
the meaning
of the Securities Act, and any commission paid, or any discounts
or concessions
allowed to, any such broker-dealer may be deemed to be underwriting
commissions
or discounts under the Securities Act. At the time a particular offering
of the
shares of common stock is made, a prospectus supplement, if required,
will be
distributed which will set forth the aggregate amount of shares of
common stock
being offered and the terms of the offering, including the name or
names of any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to
broker-dealers.
Under
the
securities laws of some states, the shares of common stock may be
sold in such
states only through registered or licensed brokers or dealers. In
addition, in
some states the shares of common stock may not be sold unless such
shares have
been registered or qualified for sale in such state or an exemption
from
registration or qualification is available and is complied with.
There
can
be no assurance that any selling stockholder will sell any or all
of the shares
of common stock registered pursuant to the registration statement,
of which this
prospectus forms a part.
The
selling stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange
Act of 1934,
as amended, and the rules and regulations thereunder, including,
without
limitation, Regulation M of the Exchange Act, which may limit the
timing of
purchases and sales of any of the shares of common stock by the selling
stockholders and any other participating person. Regulation M may
also restrict
the ability of any person engaged in the distribution of the shares
of common
stock to engage in market-making activities with respect to the shares
of common
stock. All of the foregoing may affect the marketability of the shares
of common
stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of common stock.
We
will
pay all expenses of the registration of the shares of common stock
pursuant to
the registration rights agreement, estimated to be
$[ ] in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance
with
state securities or "blue sky" laws; provided, however, that a selling
stockholder will pay all underwriting discounts and selling commissions,
if any.
We will indemnify the selling stockholders against liabilities, including
some
liabilities under the Securities Act, in accordance with the registration
rights
agreements, or the selling stockholders will be entitled to contribution.
We may
be indemnified by the selling stockholders against civil liabilities,
including
liabilities under the Securities Act, that may arise from any written
information furnished to us by the selling stockholder specifically
for use in
this prospectus, in accordance with the related registration rights
agreements,
or we may be entitled to contribution.
Once
sold
under the registration statement, of which this prospectus forms
a part, the
shares of common stock will be freely tradable in the hands of persons
other
than our affiliates.
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PRO
FORMA CONDENSED BALANCE SHEET (Unaudited)
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December
31, 2006
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Adjustments
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As
Reported
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DR
(CR)
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Pro
Forma
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ASSETS
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Current
assets
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Cash
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$
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1,740,327
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$
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4,399,980
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$
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6,140,307
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Restricted
cash
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161,609
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161,609
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Accounts
receivable, net
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1,636,722
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1,636,722
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Inventory
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1,334,126
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1,334,126
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Prepaid
expenses and other
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343,898
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343,898
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Total
current assets
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5,216,682
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9,616,662
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Property
and equipment, net
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873,344
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873,344
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Other
assets, net
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59,134
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59,134
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Total
Assets
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$
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6,149,160
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$
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10,549,140
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LIABILITIES
AND STOCKHOLDERS' EQUITY
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Current
liabilities
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Accounts
payable
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$
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1,534,410
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$
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1,534,410
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Accrued
expenses
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1,255,888
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1,255,888
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Deferred
rent
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22,039
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22,039
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Convertible
debentures, net of discounts
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840,000
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840,000
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Total
current liabilities
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3,652,337
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3,652,337
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Stockholders’
equity
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Common
stock
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9,607
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(833
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10,440
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Additional
paid-in capital
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30,282,821
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(4,399,147
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34,681,968
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Accumulated
deficit
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(27,795,605
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(27,795,605
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Total
Stockholders' Equity
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2,496,823
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6,896,803
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Total
Liabilities and Stockholders' Equity
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$
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6,149,160
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$
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-
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$
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10,549,140
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FOR
IMMEDIATE RELEASE
AeroGrow
Completes $5.0 Million Private Placement
Boulder,
CO
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March
16, 2007
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AeroGrow
International, Inc. (OTC
BB:
AGWI
-
News)
(the
“Company” or “AeroGrow”) today announced that it has successfully completed a
$5.0 million private offering to certain institutions and accredited
investors.
The offering consisted of $6.00 units with one share of common
stock and one
five-year warrant to purchase one share of common stock at
an exercise price of
$7.50 per share.
The
Company intends to use the net proceeds of the private offering
to increase
working capital for new product introductions into new specialty
channels, and
to extend its product distribution into the lawn and garden
and hydroponics
channels. The Company also intends to utilize the net proceeds
of the private
offering to increase inventory levels to support the foregoing
additional
product distribution and for general corporate purposes. The
Company also
requires an increase in shareholder’s equity to assist it in satisfying the
capital requirements of the NASDAQ Capital Market. The Company
is not currently
listed on the NASDAQ Capital Market and does not currently
satisfy its listing
criteria.
The
shares sold were not registered under the Securities Act of
1933, as amended
(the "Securities Act"), and were sold in reliance upon exemptions
from the
registration requirements of the Securities Act pursuant to
Regulation D
promulgated under the Securities Act. Unless the shares are
registered, they may
not be offered or sold in the United States except pursuant
to an exemption from
the registration requirements of the Securities Act and applicable
state laws.
About
AeroGrow
International, Inc.
Founded
in 2002 in Boulder, Colorado, AeroGrow
International, Inc.
is
dedicated to the research, development and marketing of the
AeroGarden™, the
world's first kitchen garden appliance. The AeroGarden features
NASA-proven,
dirt-free aeroponic technology, allowing anyone to grow farmer's
market fresh
herbs, salad greens, tomatoes, chili peppers, strawberries
and more, indoors,
year-round, so simply and easily that no green thumb is required.
See
www.aerogrow.com.
CONTACTS:
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Corporate
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Investor
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John
Thompson
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Justin
Davis
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AeroGrow
International, Inc.
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After
Market Support, LLC
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(303)
444-7755
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Toll
Free: (800) 979-AGWI (2494)
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john@aerogrow.com
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justin.davis@aftermarketsupport.com
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FORWARD-LOOKING
STATEMENTS
"Safe
Harbor" Statement under the Private Securities Litigation Reform
Act of 1995:
Statements regarding growth of the AeroGarden product line,
optimism related to
the business, expanding sales and other statements in this
press release are
forward-looking statements within the meaning of the Securities
Litigation
Reform Act of 1995. Such statements are based on current expectations,
estimates
and projections about the Company's business. Words such as
expects,
anticipates, intends, plans, believes, sees, estimates and
variations of such
words and similar expressions are intended to identify such
forward-looking
statements. These statements are not guarantees of future performance
and
involve certain risks and uncertainties that are difficult
to predict. Actual
results could vary materially from the description contained
herein due to many
factors including continued market acceptance of the Company's
products or the
need to raise additional capital. In addition, actual results
could vary
materially based on changes or slower growth in the kitchen
garden appliance
market; the potential inability to realize expected benefits
and synergies;
domestic and international business and economic conditions;
changes in customer
demand or ordering patterns; changes in the competitive environment
including
pricing pressures or technological changes; technological advances;
shortages of
manufacturing capacity; future production variables impacting
excess inventory
and other risk factors listed from time to time in the Company's
Securities and
Exchange Commission (SEC) filings under "risk factors" and
elsewhere. The
forward-looking statements contained in this press release
speak only as of the
date on which they are made, and the Company does not undertake
any obligation
to update any forward-looking statement to reflect events or
circumstances after
the date of this press release.
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