UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
________________________
FORM
8-K
________________________
CURRENT
REPORT PURSUANT
TO
SECTION 13 OR 15 (d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of report (Date of earliest event reported): September 4,
2007
AEROGROW
INTERNATIONAL, INC.
(Exact
name of registrant as specified in its charter)
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Nevada
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000-50888
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46-0510685
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(State
or Other Jurisdiction of
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(Commission
File Number)
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(I.R.S.
Employer
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Incorporation)
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Identification
No.)
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6075
Longbow Dr., Suite 200, Boulder, Colorado
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80301
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Registrant's
Telephone Number, Including Area Code: (303)
444-7755
Check
the
appropriate box below if the Form 8-K is intended to simultaneously satisfy
the
filing obligation of the registrant under any of the following
provisions:
o
Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
3.02. Unregistered Sales of Equity Securities
On
September 4, 2007, AeroGrow
International, Inc. (the “Company” or “we”) agreed to sell in a private offering
760,000 units of its common stock and warrants to purchase common stock
(“Private Offering”). Each unit consists of one share of common
stock, par value $0.001, and one seven-year warrant to purchase one share
of
common stock at an exercise price of $8.00 per share. The units were
sold at a per unit price of $6.25. Upon closing of the Private
Offering, we will receive gross proceeds of $4,750,000, less a placement
agent
fee in the amount of $380,000 and approximately $200,000 in other expenses
related to the Private Offering.
In
connection with the Private
Offering, the Company has agreed to sell to its placement agent, for nominal
consideration, five-year warrants to purchase 76,000 shares of common stock
at
an exercise price of $8.25 per share.
The
Private Offering is being conducted
in reliance upon exemptions from registration under the Securities Act of
1933,
as amended (the “Securities Act”), including, without limitation, those
under Regulation D promulgated under the Securities Act. The units
were offered and sold only to investors who are “accredited investors,” as
defined in Rule 501 under the Securities Act.
Item
9.01. Financial Statements and Exhibits
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Exhibit
No.
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Description
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4.1
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Form
of $8.00 Investor Warrant
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4.2
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Form
of $8.25 Agent Warrant
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10.1
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Registration
Rights Agreement, dated as of September 4, 2007, by and between
AeroGrow International, Inc. and the other parties
thereto.
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Portions
of this report may constitute “forward-looking statements” as defined by federal
law. Although the Company believes any such statements are based on
reasonable assumptions, there is no assurance that actual outcomes will not
be
materially different. Any such statements are made in reliance on the
“safe harbor” protections provided under the Private Securities Litigation
Reform Act of 1995. Additional information about issues that could lead to
material changes in the Company’s performance is contained in the Company’s
filings with the Securities and Exchange Commission.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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AeroGrow
International, Inc.
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By:
/s/ Mitchell B.
Rubin
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Mitchell
B. Rubin
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Chief
Financial Officer
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DATED: September 4,
2007
EXHIBIT
INDEX
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Exhibit
No.
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Description
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4.1
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Form
of $8.00 Investor Warrant
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4.2
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Form
of $8.25 Agent Warrant
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10.1
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Registration
Rights Agreement, dated as of September 4, 2007, by and between
AeroGrow International, Inc. and the other parties
thereto
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Exhibit
4.1
NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE
HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS
AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR
OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON
STOCK PURCHASE WARRANT
AEROGROW
INTERNATIONAL, INC.
| Warrant
Shares: [_______] |
Initial
Exercise Date: September 4,
2007
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THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value
received, [_____________] (the “Holder”) is entitled, upon the terms and
subject to the limitations on exercise and the conditions hereinafter set
forth,
at any time on or after the date hereof (the “Initial Exercise Date”) and
on or prior to the close of business on the seven year anniversary of the
Initial Exercise Date (the “Termination Date”) but not thereafter, to
subscribe for and purchase from Aerogrow International, Inc., a Nevada
corporation (the “Company”), up to [______] shares (the “Warrant
Shares”) of Common Stock. The purchase price of one share of
Common Stock under this Warrant shall be equal to the Exercise Price, as
defined
in Section 2(b).
Section
1. Definitions. Capitalized terms used
and not otherwise defined herein shall have the meanings set forth in that
certain Securities Purchase Agreement (the “Purchase Agreement”), dated
August 31, 2007, among the Company and the purchasers signatory
thereto.
Section
2. Exercise.
a) Exercise
of Warrant. Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after
the
Initial Exercise Date and on or before the Termination Date by delivery
to the
Company of a duly executed facsimile copy of the Notice of Exercise Form
annexed
hereto (or such other office or agency of the Company as it may designate
by
notice in writing to the registered Holder at the address of the Holder
appearing on the books of the Company); and, within 3 Trading Days of the
date
said Notice of Exercise is delivered to the Company, the Company shall
have
received payment of the aggregate Exercise Price of the shares
thereby purchased by wire transfer or cashier’s check drawn on a United States
bank. Notwithstanding anything herein to the contrary, the Holder
shall not be required to physically surrender this Warrant to the Company
until
the Holder has purchased all of the Warrant Shares available hereunder
and the
Warrant has been exercised in full, in which case, the Holder shall surrender
this Warrant to the Company for cancellation within 3 Trading Days of the
date
the final Notice of Exercise is delivered to the Company. Partial
exercises of this Warrant resulting in purchases of a portion of the total
number of Warrant Shares available hereunder shall have the effect of lowering
the outstanding number of Warrant Shares purchasable hereunder in an amount
equal to the applicable number of Warrant Shares purchased. The
Holder and the Company shall maintain records showing the number of Warrant
Shares purchased and the date of such purchases. The Company shall
deliver any objection to any Notice of Exercise Form within 1 Business
Day of
receipt of such notice. The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following the purchase of a portion of the
Warrant
Shares hereunder, the number of Warrant Shares available for purchase hereunder
at any given time may be less than the amount stated on the face
hereof.
b) Exercise
Price. The exercise price per share of the Common Stock under
this Warrant shall be $8.00, subject to adjustment hereunder
(the “Exercise Price”).
c) Cashless
Exercise. If at any time after the completion of the
then-applicable holding period required by Rule 144, or any successor provision
then in effect, which would allow “tacking” of the holding period of this
Warrant and the Warrant Shares pursuant to the SEC Manual of Publicly Available
Telephone Interpretations or other Commission rule or guidance, there is
no
effective Registration Statement registering, or no current prospectus
available
for, the resale of the Warrant Shares by the Holder at a time when such
Registration Statement is required to be effective pursuant to the Registration
Rights Agreement, then this Warrant may also be exercised at such time
by means
of a “cashless exercise” in which the Holder shall be entitled to receive a
certificate for the number of Warrant Shares equal to the quotient obtained
by
dividing [(A-B) (X)] by (A), where:
(A)
= the VWAP on the
Trading Day immediately preceding the date of such election;
(B)
= the
Exercise Price of this Warrant, as adjusted; and
(X)
= the number of
Warrant Shares issuable upon exercise of this Warrant in accordance
with the
terms of this Warrant by means of a cash exercise rather than a cashless
exercise.
.
d) Holder’s
Restrictions. The Company shall not effect any exercise of this
Warrant, and a Holder shall not have the right to exercise any portion
of this
Warrant, pursuant to Section 2 or otherwise, to the extent that after giving
effect to such issuance after exercise as set forth on the applicable Notice
of
Exercise, the Holder (together with the Holder’s Affiliates, and any other
person or entity acting as a group together with the Holder or any of the
Holder’s Affiliates), would beneficially own in excess of the Beneficial
Ownership Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned by the
Holder
and its Affiliates shall include the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which such determination
is being
made, but shall exclude the number of shares of Common Stock which would
be
issuable upon (A) exercise of the remaining, nonexercised portion of this
Warrant beneficially owned by the Holder or any of its Affiliates and (B)
exercise or conversion of the unexercised or nonconverted portion of any
other
securities of the Company (including, without limitation, any
other Common Stock Equivalents) subject to a limitation on conversion
or exercise analogous to the limitation contained herein beneficially owned
by
the Holder or any of its affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 2(d), beneficial ownership shall
be
calculated in accordance with Section 13(d) of the Exchange Act and the
rules
and regulations promulgated thereunder, it being acknowledged by the Holder
that
the Company is not representing to the Holder that such calculation is
in
compliance with Section 13(d) of the Exchange Act and the Holder is solely
responsible for any schedules required to be filed in accordance
therewith. To the extent that the limitation contained in this
Section 2(d) applies, the determination of whether this Warrant is exercisable
(in relation to other securities owned by the Holder together with any
Affiliates) and of which portion of this Warrant is exercisable shall be
in the
sole discretion of the Holder, and the submission of a Notice of Exercise
shall
be deemed to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder together
with
any Affiliates) and of which portion of this Warrant is exercisable, in
each
case subject to the Beneficial Ownership Limitation, and the Company shall
have
no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. For purposes of this Section 2(d), in determining the
number of outstanding shares of Common Stock, a Holder may rely on the
number of
outstanding shares of Common Stock as reflected in (x) the Company’s most recent
Form 10-Q or Form 10-K, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company’s Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of a Holder, the Company
shall within two Trading Days confirm orally and in writing to the Holder
the
number of shares of Common Stock then outstanding. In any case, the number
of outstanding shares of Common Stock shall be determined after giving
effect to
the conversion or exercise of securities of the Company, including this
Warrant,
by the Holder or its Affiliates since the date as of which such number
of
outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation” shall be 4.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance of shares of
Common Stock issuable upon exercise of this Warrant. The Beneficial
Ownership Limitation provisions of this Section 2(d) may be waived by the
Holder, at the election of the Holder, upon not less than 61 days’ prior notice
to the Company to change the Beneficial Ownership Limitation to 9.99% of
the
number of shares of the Common Stock outstanding immediately after giving
effect
to the issuance of shares of Common Stock upon exercise of this Warrant,
and the
provisions of this Section 2(d) shall continue to apply. Upon such a
change by a Holder of the Beneficial Ownership Limitation from such 4.99%
limitation to such 9.99% limitation, the Beneficial Ownership Limitation
may not
be further waived by the Holder. The provisions of this paragraph
shall be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 2(d) to correct this paragraph
(or any
portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a successor
holder of
this Warrant.
e) Mechanics
of Exercise.
i. Delivery
of Certificates Upon Exercise. Certificates for shares purchased
hereunder shall be transmitted by the transfer agent of the Company to
the
Holder by crediting the account of the Holder’s prime broker with the Depository
Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”)
system if the Company is a participant in such system and there is an effective
Registration Statement permitting the resale of the Warrant Shares by the
Holder, and otherwise by physical delivery to the address specified by
the
Holder in the Notice of Exercise within 3 Trading Days from the delivery
to the
Company of the Notice of Exercise Form, surrender of this Warrant (if required)
and payment of the aggregate Exercise Price as set forth above (“Warrant
Share Delivery Date”). This Warrant shall be deemed to have been
exercised on the date the Exercise Price is received by the
Company. The Warrant Shares shall be deemed to have been issued, and
Holder or any other person so designated to be named therein shall be deemed
to
have become a holder of record of such shares for all purposes, as of the
date
the Warrant has been exercised by payment to the Company of the Exercise
Price
(or by cashless exercise, if permitted) and all taxes required to be paid
by the
Holder, if any, pursuant to Section 2(e)(vi) prior to the issuance of such
shares, have been paid. If the Company fails for any reason to deliver
to the
Holder certificates evidencing the Warrant Shares subject to a Notice of
Exercise by the second Trading Day following the Warrant Share Delivery
Date,
the Company shall pay to the Holder, in cash, as liquidated damages and
not as a
penalty, for each $1,000 of Warrant Shares subject to such exercise (based
on
the VWAP of the Common Stock on the date of the applicable Notice of Exercise),
$10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading
Day
after such liquidated damages begin to accrue) for each Trading Day after
such
Warrant Share Delivery Date until such certificates are delivered.
ii. Delivery
of New Warrants Upon Exercise. If this Warrant shall have been
exercised in part, the Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, at the time of delivery of the
certificate or certificates representing Warrant Shares, deliver to Holder
a new
Warrant evidencing the rights of Holder to purchase the unpurchased Warrant
Shares called for by this Warrant, which new Warrant shall in all other
respects
be identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause its transfer agent to
transmit to the Holder a certificate or certificates representing the Warrant
Shares pursuant to this Section 2(e)(i) by the second Trading Day following
the
Warrant Share Delivery Date, then the Holder will have the right to rescind
such
exercise.
iv. Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise. In addition to any other rights available to the
Holder, if the Company fails to cause its transfer agent to transmit to
the
Holder a certificate or certificates representing the Warrant Shares pursuant
to
an exercise on or before the second Trading Day following the Warrant Share
Delivery Date, and if after such date the Holder is required by its broker
to
purchase (in an open market transaction or otherwise) or the Holder’s brokerage
firm otherwise purchases, shares of Common Stock to deliver in satisfaction
of a
sale by the Holder of the Warrant Shares which the Holder anticipated receiving
upon such exercise (a “Buy-In”), then the Company shall (1) pay in cash
to the Holder the amount by which (x) the Holder’s total purchase price
(including brokerage commissions, if any) for the shares of Common Stock
so
purchased exceeds (y) the amount obtained by multiplying (A) the number
of
Warrant Shares that the Company was required to deliver to the Holder in
connection with the exercise at issue times (B) the price at which the
sell
order giving rise to such purchase obligation was executed, and (2) at
the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored or deliver
to
the Holder the number of shares of Common Stock that would have been issued
had
the Company timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving
rise to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000.
The
Holder shall provide the Company written notice indicating the amounts
payable
to the Holder in respect of the Buy-In and, upon request of the Company,
evidence of the amount of such loss. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law
or
in equity including, without limitation, a decree of specific performance
and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant
as
required pursuant to the terms hereof.
v. No
Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise
be entitled to purchase upon such exercise, the Company shall at its election,
either pay a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up to
the next
whole share.
vi. Charges,
Taxes and Expenses. Issuance of certificates for Warrant Shares
shall be made without charge to the Holder for any issue or transfer tax
or
other incidental expense in respect of the issuance of such certificate,
all of
which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may
be
directed by the Holder; provided, however, that in the event
certificates for Warrant Shares are to be issued in a name other than the
name
of the Holder, this Warrant when surrendered for exercise shall be accompanied
by the Assignment Form attached hereto duly executed by the Holder; and
the
Company may require, as a condition thereto, the payment of a sum sufficient
to
reimburse it for any transfer tax incidental thereto.
vii. Closing
of Books. The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.
Section
3. Certain
Adjustments.
a) Stock
Dividends and Splits. If the Company, at any time while this Warrant is
outstanding: (A) pays a stock dividend or otherwise make a distribution
or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock (which, for avoidance
of
doubt, shall not include any shares of Common Stock issued by the Company
upon
exercise of this Warrant), (B) subdivides outstanding shares of Common
Stock
into a larger number of shares, (C) combines (including by way of reverse
stock
split) outstanding shares of Common Stock into a smaller number of shares,
or
(D) issues by reclassification of shares of the Common Stock any shares
of
capital stock of the Company, then in each case the Exercise Price shall
be
multiplied by a fraction of which the numerator shall be the number of
shares of
Common Stock (excluding treasury shares, if any) outstanding immediately
before
such event and of which the denominator shall be the number of shares of
Common
Stock outstanding immediately after such event and the number of shares
issuable
upon exercise of this Warrant shall be proportionately adjusted such that
the
aggregate Exercise Price of this Warrant shall remain unchanged. Any
adjustment made pursuant to this Section 3(a) shall become effective immediately
after the record date for the determination of stockholders entitled to
receive
such dividend or distribution and shall become effective immediately after
the
effective date in the case of a subdivision, combination or
re-classification.
b) Subsequent
Equity Sales. If the Company or any Subsidiary thereof, as applicable, at
any time on or before the one year anniversary of the Initial Exercise
Date,
shall sell or grant any option to purchase, or sell or grant any right
to
reprice, or otherwise dispose of or issue (or announce any offer, sale,
grant or
any option to purchase or other disposition) any Common Stock or Common
Stock
Equivalents entitling any Person to acquire shares of Common Stock, at
an
effective price per share less than the then Exercise Price (such lower
price,
the “Base Share Price” and such issuances collectively, a “Dilutive
Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so
issued shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise,
or due to warrants, options or rights per share which are issued in connection
with such issuance, be entitled to receive shares of Common Stock at an
effective price per share which is less than the Exercise Price, such issuance
shall be deemed to have occurred for less than the Exercise Price on such
date
of the Dilutive Issuance), then the Exercise Price shall be reduced and
only
reduced to equal the Base Share Price. Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are
issued. Notwithstanding the foregoing, no adjustments shall be made,
paid or issued under this Section 3(b) in respect of an Exempt
Issuance. The Company shall notify the Holder in writing, no later
than the Trading Day following the issuance of any Common Stock or Common
Stock
Equivalents subject to this Section 3(b), indicating therein the applicable
issuance price, or applicable reset price, exchange price, conversion price
and
other pricing terms (such notice the “Dilutive Issuance
Notice”). For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 3(b),
upon
the occurrence of any Dilutive Issuance, after the date of such Dilutive
Issuance the Exercise Price Holder shall be the Base Share Price regardless
of
whether the Holder accurately refers to the Base Share Price in the Notice
of
Exercise. In no event shall the number of shares issuable upon
exercise of this Warrant be changed pursuant to Section 3(b), 3(c) or
3(d).
c) Subsequent
Rights Offerings. If the Company, at any time while the Warrant
is outstanding, shall issue rights, options or warrants to all holders
of Common
Stock (and not to Holders) entitling them to subscribe for or purchase
shares of
Common Stock at a price per share less than the VWAP at the record date
mentioned below, then the Exercise Price shall be multiplied by a fraction,
of
which the denominator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the
number
of additional shares of Common Stock offered for subscription or purchase,
and
of which the numerator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the
number
of shares which the aggregate offering price of the total number of shares
so
offered (assuming receipt by the Company in full of all consideration payable
upon exercise of such rights, options or warrants) would purchase at such
VWAP. Such adjustment shall be made whenever such rights or warrants
are issued, and shall become effective immediately after the record date
for the
determination of stockholders entitled to receive such rights, options
or
warrants. No further adjustment to the Exercise Price shall be made upon
the
actual issuance of such Common Stock upon the exercise of such rights.
To the
extent that shares of Common Stock are not delivered pursuant to such rights,
upon the expiration or termination of such rights, the Exercise Price shall
be
readjusted to the Exercise Price that would then be in effect had the
adjustments made upon the issuance of such rights been made on the basis
of
delivery of only the number of shares of Common Stock actually
delivered.
d) Pro
Rata Distributions. If the Company, at any time while this
Warrant is outstanding, shall distribute to all holders of Common Stock
(and not
to Holders of the Warrants) evidences of its indebtedness or assets (including
cash and cash dividends) or rights or warrants to subscribe for or purchase
any
security other than the Common Stock (which shall be subject to Section
3(b)),
then in each such case the Exercise Price shall be adjusted by multiplying
the
Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by
a
fraction of which the denominator shall be the VWAP determined as of the
record
date mentioned above, and of which the numerator shall be such VWAP on
such
record date less the then per share fair market value at such record date
of the
portion of such assets or evidence of indebtedness so distributed applicable
to
one outstanding share of the Common Stock as determined by the Board of
Directors in good faith. In either case the adjustments shall be
described in a statement provided to the Holder of the portion of assets
or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after
the
record date mentioned above.
e) Fundamental
Transaction. If, at any time while this Warrant is outstanding, (A) the
Company effects any merger or consolidation of the Company with or into
another
Person, (B) the Company effects any sale of all or substantially all of
its
assets in one or a series of related transactions, (C) any tender offer
or
exchange offer (whether by the Company or another Person) is completed
pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company effects
any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for
other
securities, cash or property (each “Fundamental Transaction”), then, upon
any subsequent exercise of this Warrant, the Holder shall have the right
to
receive, for each Warrant Share that would have been issuable upon such
exercise
immediately prior to the occurrence of such Fundamental Transaction, the
number
of shares of Common Stock of the successor or acquiring corporation or
of the
Company, if it is the surviving corporation, and any additional consideration
(the “Alternate Consideration”) receivable as a result of such merger,
consolidation or disposition of assets by a holder of the number of shares
of
Common Stock for which this Warrant is exercisable immediately prior to
such
event. For purposes of any such exercise, the determination of the Exercise
Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of one
share
of Common Stock in such Fundamental Transaction, and the Company shall
apportion
the Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder’s right to exercise such warrant
into Alternate Consideration. The terms of any agreement pursuant to which
a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section
3(e)
and insuring that this Warrant (or any such replacement security) will
be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.
f) Calculations.
All calculations under this Section 3 shall be made to the nearest cent
or the
nearest 1/100th of a share, as the case may be. For purposes of this Section
3,
the number of shares of Common Stock deemed to be issued and outstanding
as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.
g) Notice
to Holder.
i. Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any
provision of this Section 3, the Company shall promptly mail to the Holder
a
notice setting forth the Exercise Price after such adjustment and setting
forth
a brief statement of the facts requiring such adjustment. If the Company
enters
into a Variable Rate Transaction (as defined in the Purchase Agreement),
despite
the prohibition thereon in the Purchase Agreement, the Company shall be
deemed
to have issued Common Stock or Common Stock Equivalents at the lowest possible
conversion or exercise price at which such securities may be converted
or
exercised.
ii. Notice
to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or
any other distribution in whatever form) on the Common Stock; (B) the Company
shall declare a special nonrecurring cash dividend on or a redemption of
the
Common Stock; (C) the Company shall authorize the granting to all holders
of the
Common Stock rights or warrants to subscribe for or purchase any shares
of
capital stock of any class or of any rights; (D) the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which
the
Company is a party, any sale or transfer of all or substantially all of
the
assets of the Company, of any compulsory share exchange whereby the Common
Stock
is converted into other securities, cash or property; (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding
up of
the affairs of the Company; then, in each case, the Company shall cause
to be
mailed to the Holder at its last address as it shall appear upon the Warrant
Register of the Company, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the
date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the
date as
of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined
or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and
the
date as of which it is expected that holders of the Common Stock of record
shall
be entitled to exchange their shares of the Common Stock for securities,
cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided that the failure to mail such
notice
or any defect therein or in the mailing thereof shall not affect the validity
of
the corporate action required to be specified in such notice. The
Holder is entitled to exercise this Warrant during the period commencing
on the
date of such notice to the effective date of the event triggering such
notice.
Section
4. Transfer
of Warrant.
a) Transferability. Subject
to compliance with any applicable securities laws and the conditions set
forth
in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase
Agreement, this Warrant and all rights hereunder (including, without limitation,
any registration rights) are transferable, in whole or in part, upon surrender
of this Warrant at the principal office of the Company or its designated
agent,
together with a written assignment of this Warrant substantially in the
form
attached hereto duly executed by the Holder or its agent or attorney and
funds
sufficient to pay any transfer taxes payable upon the making of such
transfer. Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name
of the
assignee or assignees and in the denomination or denominations specified
in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant
shall
promptly be cancelled. A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having
a
new Warrant issued.
b) New
Warrants. This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together with
a
written notice specifying the names and denominations in which new Warrants
are
to be issued, signed by the Holder or its agent or attorney. Subject
to compliance with Section 4(a), as to any transfer which may be involved
in
such division or combination, the Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or
combined in accordance with such notice. All Warrants issued on transfers
or
exchanges shall be dated the original Issue Date and shall be identical
with
this Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant
Register. The Company shall register this Warrant, upon records to be
maintained by the Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the absolute
owner
hereof for the purpose of any exercise hereof or any distribution to the
Holder,
and for all other purposes, absent actual notice to the contrary.
d) Transfer
Restrictions. If, at the time of the surrender of this Warrant in connection
with any transfer of this Warrant, the transfer of this Warrant shall not
be
registered pursuant to an effective registration statement under the Securities
Act and under applicable state securities or blue sky laws, the Company
may
require, as a condition of allowing such transfer, that the Holder or transferee
of this Warrant, as the case may be, comply with the provisions of Section
5.7
of the Purchase Agreement.
Section
5. Miscellaneous.
a) No
Rights as Shareholder Until Exercise. This Warrant does not
entitle the Holder to any voting rights or other rights as a shareholder
of the
Company prior to the exercise hereof as set forth in Section
2(e)(i).
b) Loss,
Theft, Destruction or Mutilation of Warrant. The Company covenants that upon
receipt by the Company of evidence reasonably satisfactory to it of the
loss,
theft, destruction or mutilation of this Warrant or any stock certificate
relating to the Warrant Shares, and in case of loss, theft or destruction,
of
indemnity or security reasonably satisfactory to it (which, in the case
of the
Warrant, shall not include the posting of any bond), and upon surrender
and
cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new Warrant or stock certificate of like tenor
and dated
as of such cancellation, in lieu of such Warrant or stock
certificate.
c) Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted
herein
shall not be a Business Day, then such action may be taken or such right
may be
exercised on the next succeeding Business Day.
d) Authorized
Shares.
The
Company covenants that during the period the Warrant is outstanding, it
will
reserve from its authorized and unissued Common Stock a sufficient number
of
shares to provide for the issuance of the Warrant Shares upon the exercise
of
any purchase rights under this Warrant. The Company further covenants
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates
to
execute and issue the necessary certificates for the Warrant Shares upon
the
exercise of the purchase rights under this Warrant. The Company will
take all such reasonable action as may be necessary to assure that such
Warrant
Shares may be issued as provided herein without violation of any applicable
law
or regulation, or of any requirements of the Trading Market upon which
the
Common Stock may be listed. The Company covenants that all Warrant
Shares which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented
by this
Warrant, be duly authorized, validly issued, fully paid and nonassessable
and
free from all taxes, liens and charges created by the Company in respect
of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the Company
shall not
by any action, including, without limitation, amending 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
of this
Warrant, but will at all times in good faith assist in the carrying out
of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant
against
impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any Warrant Shares above
the
amount payable therefor upon such exercise immediately prior to such increase
in
par value, (b) take all such action as may be necessary or appropriate
in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this
Warrant.
Before
taking any action which would result in an adjustment in the number of
Warrant
Shares for which this Warrant is exercisable or in the Exercise Price,
the
Company shall obtain all such authorizations or exemptions thereof, or
consents
thereto, as may be necessary from any public regulatory body or bodies
having
jurisdiction thereof.
e) Jurisdiction.
All questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance with the
provisions of the Purchase Agreement.
f) Restrictions. The
Holder acknowledges that the Warrant Shares acquired upon the exercise
of this
Warrant, if not registered, will have restrictions upon resale imposed
by state
and federal securities laws.
g) Nonwaiver
and Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver
of
such right or otherwise prejudice Holder’s rights, powers or remedies,
notwithstanding the fact that all rights hereunder terminate on the Termination
Date. If the Company willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the
Holder,
the Company shall pay to Holder such amounts as shall be sufficient to
cover any
costs and expenses including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by Holder in collecting
any
amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers
or remedies hereunder.
h) Notices. Any
notice, request or other document required or permitted to be given or
delivered
to the Holder by the Company shall be delivered in accordance with the
notice
provisions of the Purchase Agreement.
i) Limitation
of Liability. No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder,
shall
give rise to any liability of Holder for the purchase price of any Common
Stock
or as a stockholder of the Company, whether such liability is asserted
by the
Company or by creditors of the Company.
j) Remedies. Holder,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Warrant. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach
by it
of the provisions of this Warrant and hereby agrees to waive and not to
assert
the defense in any action for specific performance that a remedy at law
would be
adequate.
k) Successors
and Assigns. Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit
of
and be binding upon the successors of the Company and the successors and
permitted assigns of Holder. The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this
Warrant
and shall be enforceable by any the Holder or holder of Warrant
Shares.
l) Amendment. This
Warrant may be modified or amended or the provisions hereof waived with
the
written consent of the Company and the Holder.
m) Severability. Wherever
possible, each provision of this Warrant shall be interpreted in such manner
as
to be effective and valid under applicable law, but if any provision of
this
Warrant shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions
of
this Warrant.
n) Headings. The
headings used in this Warrant are for the convenience of reference only
and
shall not, for any purpose, be deemed a part of this Warrant.
********************
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its
officer thereunto duly authorized as of the date first above
indicated.
|
AEROGROW
INTERNATIONAL, INC.
|
|
By:__________________________________________
Name:
Title:
|
NOTICE
OF EXERCISE
TO: AEROGROW
INTERNATIONAL, INC.
(1) The
undersigned hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in full),
and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.
(2) Payment
shall take the form of (check applicable box):
o in
lawful money of
the United States; or
o [if
permitted] the
cancellation of such number of Warrant Shares as is necessary, in accordance
with the formula set forth in subsection 2(c), to exercise this Warrant
with
respect to the maximum number of Warrant Shares purchasable pursuant to
the
cashless exercise procedure set forth in subsection 2(c).
(3) Please
issue a certificate or certificates representing said Warrant Shares in
the name
of the undersigned or in such other name as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account Number
or by
physical delivery of a certificate to:
_______________________________
_______________________________
_______________________________
(4) Accredited
Investor. The undersigned is an “accredited investor” as defined
in Regulation D promulgated under the Securities Act of 1933, as
amended.
[SIGNATURE
OF HOLDER]
Name
of
Investing Entity:
________________________________________________________________________
Signature
of Authorized Signatory of Investing Entity:
_________________________________________________
Name
of
Authorized Signatory:
___________________________________________________________________
Title
of
Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________
ASSIGNMENT
FORM
(To
assign the foregoing warrant, execute
this
form
and supply required information.
Do
not
use this form to exercise the warrant.)
FOR
VALUE
RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and
all
rights evidenced thereby are hereby assigned to
_______________________________________________
whose address is
______________________________________________________________.
_______________________________________________________________
Dated: ______________,
_______
Holder’s
Signature: _____________________________
Holder’s
Address: _____________________________
_____________________________
Signature
Guaranteed: ___________________________________________
NOTE: The
signature to this Assignment Form must correspond with the name as it appears
on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust
company. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority
to assign
the foregoing Warrant.
Exhibit
4.2
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 September 3, 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 Placement Agent
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 issued under that certain
Placement Agent Agreement, dated August 30, 2007, between the Company and
Keating Securities, LLC (the "Placement Agent Agreement"), entered into
in
connection with the issuance of up to 800,000 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 August 31, 2007
between the Buyers (as defined therein) and the Company (the “Securities
Purchase Agreement”). The warrants issued pursuant to the Placement
Agent 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 September 4, 2007
(“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 September 3, 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, 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 September, 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.
|
Dated:
_______________
|
__________________________________________
(Signature
of Registered Holder)
|
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.
|
Dated:
_______________
|
__________________________________________
(Signature
of Registered Holder)
|
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.
|
Dated:
_______________
|
__________________________________________
(Signature
of Transferee)
|
Exhibit
10.1
REGISTRATION
RIGHTS AGREEMENT
This
Registration Rights Agreement
(this “Agreement”) is made and entered into as of September 4, 2007,
between Aerogrow International, Inc., a Nevada corporation (the
“Company”) and each of the several purchasers signatory hereto (each such
purchaser, a “Purchaser” and, collectively, the
“Purchasers”).
This
Agreement is made pursuant to the Securities Purchase Agreement, dated
as of the
date hereof, between the Company and each Purchaser (the “Purchase
Agreement”).
The
Company and each Purchaser hereby agrees as follows:
1. Definitions
Capitalized
terms used and not otherwise defined herein that are defined in the Purchase
Agreement shall have the meanings given such terms in the Purchase
Agreement. As used in this Agreement, the following terms shall have
the following meanings:
“Advice”
shall have the meaning set forth in Section 6(d).
“Effectiveness
Date” means, with respect to the Initial Registration Statement required
to
be filed hereunder, the 90th calendar
day
following the date hereof (or, in the event of a “full review” by the
Commission, the 120th calendar
day
following the date hereof) and with respect to any additional Registration
Statements which may be required pursuant to Section 3(c), the 90th calendar
day
following the date on which an additional Registration Statement is required
to
be filed hereunder; provided, however, that in the event the
Company is notified by the Commission that one or more of the above Registration
Statements will not be reviewed or is no longer subject to further review
and
comments, the Effectiveness Date as to such Registration Statement shall
be the
fifth Trading Day following the date on which the Company is so notified
if such
date precedes the dates otherwise required above. In the event that,
after the Closing Date and before a Registration Statement is declared
effective, the offices of the Commission are closed due to acts of God,
war or
terror, the Effectiveness Date will be extended by a number of days equal
to the
days of any such closure.
“Effectiveness
Period” shall have the meaning set forth in Section 2(a).
“Event”
shall have the meaning set forth in Section 2(b).
“Event
Date” shall have the meaning set forth in Section 2(b).
“Filing
Date” means, with respect to the Initial Registration Statement required
hereunder, the 30th calendar
day
following the date hereof and, with respect to any additional Registration
Statements which may be required pursuant to Section 3(c), the earliest
practical date on which the Company is permitted by SEC Guidance to file
such
additional Registration Statement related to the Registrable
Securities.
“Holder”
or “Holders” means the holder or holders, as the case may be, from time
to time of Registrable Securities.
“Indemnified
Party” shall have the meaning set forth in Section 5(c).
“Indemnifying
Party” shall have the meaning set forth in Section 5(c).
“Initial
Registration Statement” means the initial Registration Statement filed
pursuant to this Agreement.
“Initial
Shares” means a number of Registrable Securities equal to the lesser of (i)
the total number of Registrable Securities and (ii) one-third of the number
of
issued and outstanding shares of Common Stock that are held by non-affiliates
of
the Company on the day immediately prior to the filing date of the Initial
Registration Statement.
“Losses”
shall have the meaning set forth in Section 5(a).
“Plan
of Distribution” shall have the meaning set forth in Section
2(a).
“Prospectus”
means the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted
from a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated by the Commission pursuant to the Securities Act),
as
amended or supplemented by any prospectus supplement, with respect to the
terms
of the offering of any portion of the Registrable Securities covered by
a
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such
Prospectus.
“Registrable
Securities” means (i) all Shares, (ii) all Warrant Shares (assuming on the
date of determination the Warrants are exercised in full without regard
to any
exercise limitations therein), (iii) any additional shares of Common Stock
issuable in connection with any anti-dilution provisions in the Warrants
(without giving effect to any limitations on exercise set forth in the
Warrant)
and (iv) any securities issued or issuable upon any stock split, dividend
or
other distribution, recapitalization or similar event with respect to
the foregoing.
“Registration
Statement” means the registration statement required to be filed hereunder
and any additional registration statements contemplated by Section 3(c),
including (in each case) the Prospectus, amendments and supplements to
such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference
or
deemed to be incorporated by reference in such registration
statement.
“Rule
415” means Rule 415 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
“Rule
424” means Rule 424 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
“Selling
Shareholder Questionnaire” shall have the meaning set forth in Section
3(a).
“SEC
Guidance” means (i) any publicly-available written or oral guidance,
comments, requirements or requests of the Commission staff and (ii) the
Securities Act.
2. Shelf
Registration
(a) On
or
prior to each Filing Date, the Company shall prepare and file with the
Commission a Registration Statement covering the resale of all or such
maximum
portion of the Registrable Securities as permitted by SEC Guidance (provided
that the Company shall use commercially reasonable efforts to advocate
with the
Commission for the registration of all of the Registrable Securities in
accordance with the SEC Guidance, including without limitation, the Manual
of
Publicly Available Telephone Interpretations D.29) that are not then registered
on an effective Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415. The Registration Statement
shall be on Form S-3 (except if the Company is not then eligible to register
for
resale the Registrable Securities on Form S-3, in which case such registration
shall be on another appropriate form in accordance herewith) and shall
contain
(unless otherwise directed by at least an 85% majority in interest of the
Holders) substantially the “Plan of Distribution” attached hereto as
Annex A. Subject to the terms of this Agreement, the Company
shall use its commercially reasonable efforts to cause a Registration Statement
to be declared effective under the Securities Act as promptly as possible
after
the filing thereof, but in any event prior to the applicable Effectiveness
Date,
and shall use its commercially reasonable efforts to keep such Registration
Statement continuously effective under the Securities Act until all Registrable
Securities (other than any held by Holders that are Affiliates of the Company)
covered by such Registration Statement have been sold, or may be sold without
volume restrictions pursuant to Rule 144(k) (assuming any Warrants then
outstanding are exercised pursuant to the cashless exercise provisions
thereof),
as determined by the counsel to the Company pursuant to a written opinion
letter
to such effect, addressed and acceptable to the Transfer Agent and the
affected
Holders (the “Effectiveness Period”). The Company shall
telephonically request effectiveness of a Registration Statement as of
5:00 p.m.
New York City time on a Trading Day. The Company shall
immediately notify the Holders via facsimile or by e-mail of the effectiveness
of a Registration Statement on the same Trading Day that the Company
telephonically confirms effectiveness with the Commission, which shall
be the
date requested for effectiveness of such Registration Statement. The
Company shall, by 9:30 a.m. New York City time on the Trading Day after
the
effective date of such Registration Statement, file a final Prospectus
with the
Commission as required by Rule 424. Failure to so notify the Holder
within 1 Trading Day of such notification of effectiveness or failure to
file a
final Prospectus as foresaid shall be deemed an Event under Section
2(b). Notwithstanding any other provision of this Agreement and
subject to the payment of liquidated damages pursuant to Section 2(b),
if any
SEC Guidance sets forth a limitation on the number of Registrable Securities
permitted to be registered on a particular Registration Statement (and
notwithstanding that the Company used commercially reasonable efforts to
advocate with the Commission for the registration of all or a greater portion
of
Registrable Securities), unless otherwise directed in writing by a Holder
as to
its Registrable Securities, the number of Registrable Securities to be
registered on such Registration Statement will first be reduced by Registrable
Securities represented by Warrant Shares (applied, in the case that some
Warrant
Shares may be registered, to the Holders on a pro rata basis based on the
total
number of unregistered Warrant Shares held by such Holders), and second
by
Registrable Securities represented by the Shares (applied, in the case
that some
Conversion Shares may be registered, to the Holders on a pro rata basis
based on
the total number of unregistered Shares held by such
Holders) .
(b) If:
(i)
the Initial Registration Statement is not filed on or prior to its Filing
Date
(if the Company files the Initial Registration Statement without affording
the
Holders the opportunity to review and comment on the same as required by
Section
3(a) herein, the Company shall be deemed to have not satisfied this clause
(i)),
or (ii) the Company fails to file with the Commission a request for acceleration
of a Registration Statement in accordance with Rule 461 promulgated by
the
Commission pursuant to the Securities Act, within five Trading Days of
the date
that the Company is notified (orally or in writing, whichever is earlier)
by the
Commission that such Registration Statement will not be “reviewed” or will not
be subject to further review, or (iii) as to, in the aggregate among all
Holders
on a pro-rata basis based on their purchase of the Securities pursuant
to the
Purchase Agreement, a Registration Statement registering for resale all
of the
Initial Shares is not declared effective by the Commission by the Effectiveness
Date of the Initial Registration Statement, or (iv) all of the Registrable
Securities are not registered for resale pursuant to one or more effective
Registration Statements on or before March 31, 2008 or (v) after the effective
date of a Registration Statement, such Registration Statement ceases for
any
reason to remain continuously effective as to all Registrable Securities
included in such Registration Statement, or the Holders are otherwise not
permitted to utilize the Prospectus therein to resell such Registrable
Securities (a) because the Company is negotiating a merger,
consolidation, acquisition or sale of all or substantially all of its assets
or
a similar transaction which, in the good faith judgment of the Company’s board
of directors, requires the Registration Statement to be amended to include
information in connection with such pending transaction (including the
parties
thereto) and such information is not yet available or publicly disclosable,
for
more than an aggregate of 30 calendar days (which need not be consecutive
days)
during any 12-month period or (b) for any other reason, more than an aggregate
of 60 calendar days (which need not be consecutive days) during any 12-month
period (any such failure or breach being referred to as an “Event”, and
for purposes of clause (i), (iii) and (iv) the date on which such Event
occurs,
and for purpose of clause (ii) the date on which such five Trading Day
period is
exceeded, and for purpose of clause (v) the date on which such 30 or 60
calendar
day period, as applicable, is exceeded being referred to as “Event
Date”), then, in addition to any other rights the Holders may have hereunder
or under applicable law, on each such Event Date and on each monthly anniversary
of each such Event Date (if the applicable Event shall not have been cured
by
such date) until the applicable Event is cured, the Company shall pay to
each
Holder an amount in cash, as partial liquidated damages and not as a penalty,
equal to 1% of the aggregate purchase price paid by such Holder pursuant
to the
Purchase Agreement for any unregistered Registrable Securities then held
by such
Holder. The parties agree that the Company shall not be liable for
liquidated damages under this Agreement with respect to any Warrants or
Warrant
Shares. If the Company fails to pay any partial liquidated damages
pursuant to this Section in full within seven days after the date payable,
the
Company will pay interest thereon at a rate of 18% per annum (or such lesser
maximum amount that is permitted to be paid by applicable law) to the Holder,
accruing daily from the date such partial liquidated damages are due until
such
amounts, plus all such interest thereon, are paid in full. The partial
liquidated damages pursuant to the terms hereof shall apply on a daily
pro rata
basis for any portion of a month prior to the cure of an Event.
3. Registration
Procedures.
In
connection with the Company’s registration obligations hereunder, the Company
shall:
(a) Not
less
than 5 Trading Days prior to the filing of each Registration Statement
and not
less than one Trading Day prior to the filing of any related Prospectus
or any
amendment or supplement thereto , the Company shall (i) furnish to each
Holder
copies of all such documents proposed to be filed, which documents (other
than
those incorporated or deemed to be incorporated by reference) will be subject
to
the review of such Holders and (ii) cause its officers and directors, counsel
and independent certified public accountants to respond to such inquiries
as
shall be necessary, in the reasonable opinion of respective counsel to
each
Holder, to conduct a reasonable investigation within the meaning of the
Securities Act. The Company will consider in good faith any comments or
objections to a Registration Statement or any such Prospectus or any amendments
or supplements thereto made in good faith by the Holders, provided that
the
Company is notified of such objection in writing no later than 5 Trading
Days
after the Holders have been so furnished copies of a Registration Statement
or 1
Trading Day after the Holders have been so furnished copies of any related
Prospectus or amendments or supplements thereto. Each Holder agrees to
furnish
to the Company a completed questionnaire in the form attached to this Agreement
as Annex B (a “Selling Shareholder Questionnaire”) not less than
three Trading Days prior to the Filing Date or by the end of the fourth
Trading
Day following the date on which such Holder receives draft materials in
accordance with this Section.
(b) (i)
Prepare and file with the Commission such amendments, including post-effective
amendments, to a Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep a Registration Statement continuously
effective as to the applicable Registrable Securities for the Effectiveness
Period and prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act all
of the
Registrable Securities; (ii) cause the related Prospectus to be amended
or
supplemented by any required Prospectus supplement (subject to the terms
of this
Agreement), and, as so supplemented or amended, to be filed pursuant to
Rule
424; (iii) respond as promptly as reasonably possible to any comments received
from the Commission with respect to a Registration Statement or any amendment
thereto and provide as promptly as reasonably possible to the Holders true
and
complete copies of all correspondence from and to the Commission relating
to a
Registration Statement (provided that the Company may excise any information
contained therein which would constitute material non-public information
as to
any Holder which has not executed a confidentiality agreement with the
Company);
and (iv) comply in all material respects with the provisions of the Securities
Act and the Exchange Act with respect to the disposition of all Registrable
Securities covered by a Registration Statement during the applicable period
in
accordance (subject to the terms of this Agreement) with the intended methods
of
disposition by the Holders thereof set forth in such Registration Statement as
so amended or in such Prospectus as so supplemented.
(c) If
during
the Effectiveness Period, the number of Registrable Securities at any time
exceeds 100% of the number of shares of Common Stock then registered in
a
Registration Statement, then the Company shall file as soon as reasonably
practicable, but in any case prior to the applicable Filing Date, an additional
Registration Statement covering the resale by the Holders of not less than
the
number of such Registrable Securities.
(d) Notify
the Holders of Registrable Securities to be sold (which notice shall, pursuant
to clauses (iii) through (vi) hereof, be accompanied by an instruction
to
suspend the use of the Prospectus until the requisite changes have been
made) as
promptly as reasonably possible (and, in the case of (i)(A) below, not
less than
one Trading Day prior to such filing) and (if requested by any such Person)
confirm such notice in writing no later than one Trading Day following
the day
(i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to a Registration Statement is proposed to be filed; (B) when
the
Commission notifies the Company whether there will be a “review” of such
Registration Statement and whenever the Commission comments in writing
on such
Registration Statement; and (C) with respect to a Registration Statement
or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other federal or state governmental authority
for amendments or supplements to a Registration Statement or Prospectus
or for
additional information; (iii) of the issuance by the Commission or any
other
federal or state governmental authority of any stop order suspending the
effectiveness of a Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose; (iv)
of the
receipt by the Company of any notification with respect to the suspension
of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening
of any
Proceeding for such purpose; (v) of the occurrence of any event or passage
of
time that makes the financial statements included in a Registration Statement
ineligible for inclusion therein or any statement made in a Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to a Registration Statement, Prospectus or other
documents so that, in the case of a Registration Statement or the Prospectus,
as
the case may be, it will not contain any untrue statement of a material
fact or
omit to state any material fact required to be stated therein or necessary
to
make the statements therein, in light of the circumstances under which
they were
made, not misleading; and (vi) of the occurrence or existence of any pending
corporate development with respect to the Company that the Company believes
may
be material and that, in the determination of the Company, makes it not
in the
best interest of the Company to allow continued availability of a Registration
Statement or Prospectus, provided that any and all of such information
shall
remain confidential to each Holder until such information otherwise becomes
public, unless disclosure by a Holder is required by law; provided,
further, that notwithstanding each Holder’s agreement to keep such
information confidential, each such Holder makes no acknowledgement that
any
such information is material, non-public information.
(e) Use
its
commercially reasonable efforts to avoid the issuance of, or, if issued,
obtain
the withdrawal of (i) any order stopping or suspending the effectiveness
of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for
sale in
any jurisdiction, at the earliest practicable moment.
(f) Furnish
to each Holder, without charge, at least one conformed copy of each such
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference to the extent requested by such Person,
and
all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission; provided, that any such item which is available
on the EDGAR system need not be furnished in physical form.
(g) Subject
to the terms of this Agreement, the Company hereby consents to the use
of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto, except
after
the giving of any notice pursuant to Section 3(d).
(h) The
Company shall cooperate with any broker-dealer through which a Holder proposes
to resell its Registrable Securities in effecting a filing with the NASD
Regulation, Inc. Corporate Financing Department pursuant to NASD Rule 2710,
as
requested by any such Holder, and the Company shall pay the filing fee
required
by such filing within 2 Business Days of request therefor.
(i) Prior
to
any resale of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the selling
Holders
in connection with the registration or qualification (or exemption from
the
Registration or qualification) of such Registrable Securities for the resale
by
the Holder under the securities or Blue Sky laws of such jurisdictions
within
the United States as any Holder reasonably requests in writing, to keep
each
registration or qualification (or exemption therefrom) effective during
the
Effectiveness Period and to do any and all other acts or things reasonably
necessary to enable the disposition in such jurisdictions of the Registrable
Securities covered by each Registration Statement; provided, that the Company
shall not be required to qualify generally to do business in any jurisdiction
where it is not then so qualified, subject the Company to any material
tax in
any such jurisdiction where it is not then so subject or file a general
consent
to service of process in any such jurisdiction.
(j) If
requested by a Holder, cooperate with such Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
to
be delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted under applicable law
and by
the Purchase Agreement, of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such
names
as any such Holder may request.
(k) Upon
the
occurrence of any event contemplated by Section 3(d), as promptly as reasonably
possible under the circumstances taking into account the Company’s good faith
assessment of any adverse consequences to the Company and its stockholders
of
the premature disclosure of such event, prepare a supplement or amendment,
including a post-effective amendment, to a Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed
to
be incorporated therein by reference, and file any other required document
so
that, as thereafter delivered, neither a Registration Statement nor such
Prospectus will contain an 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 light of the circumstances under which they were
made,
not misleading. If the Company notifies the Holders in accordance with
clauses (iii) through (vi) of Section 3(d) above to suspend the use of
any
Prospectus until the requisite changes to such Prospectus have been made,
then
the Holders shall suspend use of such Prospectus. The Company will
use its commercially reasonable efforts to ensure that the use of the Prospectus
may be resumed as promptly as is practicable. The Company shall be
entitled to exercise its right under this Section 3(k) to suspend the
availability of a Registration Statement and Prospectus, subject to the
payment
of partial liquidated damages otherwise required pursuant to Section 2(b),
for a
period not to exceed 60 calendar days (which need not be consecutive days)
in
any 12 month period.
(l) Comply
with all applicable rules and regulations of the Commission.
(m) The
Company may require each selling Holder to furnish to the Company a certified
statement as to the number of shares of Common Stock beneficially owned
by such
Holder and, if required by the Commission, the natural persons thereof
that have
voting and dispositive control over the shares. During any periods that
the
Company is unable to meet its obligations hereunder with respect to the
registration of the Registrable Securities solely because any Holder fails
to
furnish such information within three Trading Days of the Company’s request, or
fails to deliver the Selling Shareholder Questionnaire within the time
periods
required hereunder, any liquidated damages that are accruing at such time
as to
such Holder only shall be tolled and any Event that may otherwise occur
solely
because of such delay shall be suspended as to such Holder only, until
such
information is delivered to the Company.
(n) Each
Holder shall notify the Company in the event that any information supplied
by
such Holder in writing for inclusion in a Registration Statement or related
prospectus or amendment or supplement is materially untrue or omits to
state a
material fact required to be stated therein or necessary to make such
information not misleading in light of the circumstances then existing;
immediately discontinue any sale or other disposition of such Registrable
Securities pursuant to such Registration Statement until the filing of
an
amendment or supplement to such prospectus as may be necessary so that
such
prospectus does not contain an untrue statement of material fact or omit
to
state a material fact required to be stated therein or necessary to make
the
statements therein not misleading in light of the circumstances then existing;
and use reasonable efforts to assist the Company as may be appropriate
to make
such amendment or supplement effective for such purpose.
4. Registration
Expenses. All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company whether
or not
any Registrable Securities are sold pursuant to a Registration Statement.
The
fees and expenses referred to in the foregoing sentence shall include,
without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses of the Company’s counsel and auditors) (A) with respect to
filings made with the Commission, (B) with respect to filings required
to be
made with any Trading Market on which the Common Stock is then listed for
trading, (C) in compliance with applicable state securities or Blue Sky
laws
reasonably agreed to by the Company in writing (including, without limitation,
fees and disbursements of counsel for the Company in connection with Blue
Sky
qualifications or exemptions of the Registrable Securities) and (D) if
not
previously paid by the Company in connection with an Issuer Filing, with
respect
to any filing that may be required to be made by any broker through which
a
Holder intends to make sales of Registrable Securities with the NASD pursuant
to
NASD Rule 2710, so long as the broker is receiving no more than a customary
brokerage commission in connection with such sale, (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities), (iii) messenger, telephone and delivery expenses,
(iv)
fees and disbursements of counsel for the Company, (v) Securities Act liability
insurance, if the Company so desires such insurance, and (vi) fees and
expenses
of all other Persons retained by the Company in connection with the consummation
of the transactions contemplated by this Agreement. In addition, the
Company shall be responsible for all of its internal expenses incurred
in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of
its
officers and employees performing legal or accounting duties), the expense
of
any annual audit and the fees and expenses incurred in connection with
the
listing of the Registrable Securities on any securities exchange as required
hereunder. In no event shall the Company be responsible for any
broker or similar commissions of any Holder or, except to the extent provided
for in the Transaction Documents, any legal fees or other costs of the
Holders.
5. Indemnification.
(a) Indemnification
by the Company. The Company shall, notwithstanding any termination of this
Agreement, indemnify and hold harmless each Holder, the officers, directors,
members, partners, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure
to
perform under a margin call of Common Stock), investment advisors and employees
(and any other Persons with a functionally equivalent role of a Person
holding
such titles, notwithstanding a lack of such title or any other title) of
each of
them, each Person who controls any such Holder (within the meaning of Section
15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, members, shareholders, partners, agents and employees (and any
other
Persons with a functionally equivalent role of a Person holding such titles,
notwithstanding a lack of such title or any other title) of each such
controlling Person, to the fullest extent permitted by applicable law,
from and
against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable attorneys’ fees) and expenses (collectively,
“Losses”), as incurred, arising out of or relating to (1) any untrue or
alleged untrue statement of a material fact contained in a Registration
Statement, any Prospectus or any form of prospectus or in any amendment
or
supplement thereto or in any preliminary prospectus, or arising out of
or
relating to any omission or alleged omission of a material fact required
to be
stated therein or necessary to make the statements therein (in the case
of any
Prospectus or supplement thereto, in light of the circumstances under which
they
were made) not misleading or (2) any violation or alleged violation by
the
Company of the Securities Act, the Exchange Act or any state securities
law, or
any rule or regulation thereunder, in connection with the performance of
its
obligations under this Agreement, except to the extent, but only to the
extent,
that (i) such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information relates
to
such Holder or such Holder’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
or
its counsel expressly for use in a Registration Statement, such Prospectus
or in
any amendment or supplement thereto (it being understood that the Holder
has
approved Annex A hereto for this purpose) or (ii) in the case of an occurrence
of an event of the type specified in Section 3(d)(iii)-(vi), the use by
such
Holder of an outdated or defective Prospectus after the Company has notified
such Holder in writing that the Prospectus is outdated or defective and
prior to
the receipt by such Holder of the Advice contemplated in Section
6(d). The Company shall notify the Holders promptly of the
institution, threat or assertion of any Proceeding arising from or in connection
with the transactions contemplated by this Agreement of which the Company
is
aware.
(b) Indemnification
by Holders. Each Holder shall, severally and not jointly, indemnify and hold
harmless the Company, its directors, officers, agents and employees, (and
any
other Persons with a functionally equivalent role of a Person holding such
titles, notwithstanding a lack of such title or any other title), each
Person
who controls the Company (within the meaning of Section 15 of the Securities
Act
and Section 20 of the Exchange Act), and the directors, officers, members,
shareholders, partners, agents or employees of such controlling Persons,
(and
any other Persons with a functionally equivalent role of a Person holding
such
titles, notwithstanding a lack of such title or any other title) to the
fullest
extent permitted by applicable law, from and against all Losses, as incurred,
to
the extent arising out of or based solely upon: (x) such Holder’s failure to
comply with the prospectus delivery requirements of the Securities Act
or (y)
any untrue or alleged untrue statement of a material fact contained in
any
Registration Statement, any Prospectus, or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating
to any
omission or alleged omission of a material fact required to be stated therein
or
necessary to make the statements therein not misleading (i) to the extent,
but
only to the extent, that such untrue statement or omission is contained
in any
information so furnished in writing by such Holder or its counsel to the
Company
specifically for inclusion in such Registration Statement or such Prospectus
or
(ii) to the extent that such information relates to such Holder’s proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in a Registration
Statement
(it being understood that the Holder has approved Annex A hereto for this
purpose), such Prospectus or in any amendment or supplement thereto or
(ii) in
the case of an occurrence of an event of the type specified in Section
3(d)(iii)-(vi), the use by such Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing that the Prospectus
is
outdated or defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(d). In no event shall the liability of any selling
Holder hereunder be greater in amount than the dollar amount of the net
proceeds
received by such Holder upon the sale of the Registrable Securities giving
rise
to such indemnification obligation.
(c) Conduct
of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Person from whom
indemnity is sought (the “Indemnifying Party”) in writing, and the
Indemnifying Party shall have the right to assume the defense thereof,
including
the employment of counsel reasonably satisfactory to the Indemnified Party
and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such
notice
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall
be
finally determined by a court of competent jurisdiction (which determination
is
not subject to appeal or further review) that such failure shall have prejudiced
the Indemnifying Party.
An
Indemnified Party shall have the right to employ separate counsel in any
such
Proceeding and to participate in the defense thereof, but the fees and
expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; (2) the Indemnifying Party shall have failed promptly
to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the
named
parties to any such Proceeding (including any impleaded parties) include
both
such Indemnified Party and the Indemnifying Party, and counsel to the
Indemnified Party shall reasonably believe, based on advice of counsel,
that a
material conflict of interest is likely to exist if the same counsel were
to
represent such Indemnified Party and the Indemnifying Party (in which case,
if
such Indemnified Party notifies the Indemnifying Party in writing that
it elects
to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof
and
the reasonable fees and expenses of no more than one separate counsel shall
be
at the expense of the Indemnifying Party). The Indemnifying Party
shall not be liable for any settlement of any such Proceeding effected
without
its written consent, which consent shall not be unreasonably withheld or
delayed. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless
such
settlement includes an unconditional release of such Indemnified Party
from all
liability on claims that are the subject matter of such Proceeding.
Subject
to the terms of this Agreement, all reasonable fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent
incurred
in connection with investigating or preparing to defend such Proceeding
in a
manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within twenty days of written notice thereof to the
Indemnifying Party; provided, that the Indemnified Party shall promptly
reimburse the Indemnifying Party for that portion of such fees and expenses
applicable to such actions for which such Indemnified Party is judicially
determined to be not entitled to indemnification hereunder. The
Indemnified Party shall cooperate fully with the Indemnifying Party in
connection with any negotiation or defense of any action or claim by the
Indemnifying Party and shall furnish to the Indemnifying Party all information
reasonably available to the Indemnified Party which relates to such action
or
claim.
(d) Contribution.
If the indemnification under Section 5(a) or 5(b) is unavailable to an
Indemnified Party or insufficient to hold an Indemnified Party harmless
for any
Losses, then each Indemnifying Party shall contribute to the amount paid
or
payable by such Indemnified Party, in such proportion as is appropriate
to
reflect the relative fault of the Indemnifying Party and Indemnified Party
in
connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The relative
fault of such Indemnifying Party and Indemnified Party shall be determined
by
reference to, among other things, whether any action in question, including
any
untrue or alleged untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party,
and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount
paid or payable by a party as a result of any Losses shall be deemed to
include,
subject to the limitations set forth in this Agreement, any reasonable
attorneys’ or other fees or expenses incurred by such party in connection with
any Proceeding to the extent such party would have been indemnified for
such
fees or expenses if the indemnification provided for in this Section was
available to such party in accordance with its terms.
The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation or
by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), no
Holder shall be required to contribute, in the aggregate, any amount in
excess
of the amount by which the net proceeds actually received by such Holder
from
the sale of the Registrable Securities subject to the Proceeding exceeds
the
amount of any damages that such Holder has otherwise been required to pay
by
reason of such untrue or alleged untrue statement or omission or alleged
omission.
The
indemnity and contribution agreements contained in this Section are in
addition
to any liability that the Indemnifying Parties may have to the Indemnified
Parties.
No
Person
involved in the sale of Registrable Securities who is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) in
connection with such sale shall be entitled to indemnification from any
Person
involved in such sale of Registrable Securities who is not guilty of fraudulent
misrepresentation.
6. Miscellaneous.
(a) Remedies. In
the event of a breach by the Company or by a Holder of any of their respective
obligations under this Agreement, each Holder or the Company, as the case
may
be, in addition to being entitled to exercise all rights granted by law
and
under this Agreement, including recovery of damages, shall be entitled
to
specific performance of its rights under this Agreement. The Company
and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any
of the
provisions of this Agreement and hereby further agrees that, in the event
of any
action for specific performance in respect of such breach, it shall not
assert
or shall waive the defense that a remedy at law would be adequate.
(b) No
Piggyback on Registrations; Prohibition on Filing Other Registration
Statements. Except as set forth on Schedule 6(b) attached hereto,
neither the Company nor any of its security holders (other than the Holders
in
such capacity pursuant hereto) may include securities of the Company in
any
Registration Statements other than the Registrable Securities. The
Company shall not file any other registration statements, other than on
Form S-4
or Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection
with
any acquisition of any entity or business or equity securities issuable
in
connection with the Company’s stock option or other employee benefit plans,
until all Registrable Securities are registered pursuant to a Registration
Statement that is declared effective by the Commission, provided that this
Section 6(b) shall not prohibit the Company from filing amendments to
registration statements filed prior to the date of this Agreement, including
filing new registration statements to register the resale of shares whose
resale
is currently registered on registration statements on Form SB-2.
(c) Compliance.
Each Holder covenants and agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection
with sales of Registrable Securities pursuant to a Registration
Statement.
(d) Discontinued
Disposition. By its acquisition of Registrable Securities, each
Holder agrees that, upon receipt of a notice from the Company of the occurrence
of any event of the kind described in Section 3(d)(iii) through (vi), such
Holder will forthwith discontinue disposition of such Registrable Securities
under a Registration Statement until it is advised in writing (the
“Advice”) by the Company that the use of the applicable Prospectus (as
it
may have been supplemented or amended) may be resumed. The Company
will use its commercially reasonable efforts to ensure that the use of
the
Prospectus may be resumed as promptly as is practicable. The Company
agrees and acknowledges that any periods during which the Holder is required
to
discontinue the disposition of the Registrable Securities hereunder shall
be
subject to the provisions of Section 2(b).
(e) Piggy-Back
Registrations. If, at any time during the Effectiveness Period, there is not
an effective Registration Statement covering all of the Registrable Securities
and the Company shall determine to prepare and file with the Commission
a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued
solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with the Company’s stock option or other
employee benefit plans, then the Company shall deliver to each Holder a
written
notice of such determination and, if within fifteen days after the date
of the
delivery of such notice, any such Holder shall so request in writing, the
Company shall include in such registration statement all or any part of
such
Registrable Securities such Holder requests to be registered; provided,
however, that the Company shall not be required to register any
Registrable Securities pursuant to this Section 6(e) that are eligible
for
resale pursuant to Rule 144(k) promulgated by the Commission pursuant to
the
Securities Act (assuming that all Registrable Securities are held by persons
that are not Affiliates
of the Company) or that are the subject of a then effective Registration
Statement. Notwithstanding anything herein to the
contrary, the Company shall have the right to postpone or withdraw
any registration effected pursuant to this Section 6(e) without
obligation to the Holders. If, in connection with any underwritten
public offering for the account of the Company or for stockholders of the
Company that have contractual rights to require the Company to register
shares
of Common Stock, the managing underwriter(s) thereof shall impose a limitation
on the number of shares of Common Stock which may be included in a registration
statement because, in the judgment of such underwriter(s), marketing or
other
factors dictate such limitation is necessary to facilitate such offering,
then
the Company shall be obligated to include in the registration statement
only
such limited portion of the Registrable Securities with respect to which
each
Holder has requested inclusion hereunder as such underwriter(s) shall
permit. Any exclusion of Registrable Securities shall be made pro
rata among the Holders seeking to include Registrable Securities in a
registration statement, in proportion to the number of Registrable Securities
sought to be included by such Holders; provided, however, that the
Company shall not exclude any Registrable Securities unless the Company
has
first excluded all outstanding securities, the holders of which are not
entitled
to inclusion of such securities in the registration statement or are not
entitled to pro rata inclusion with the Registrable Securities; and
provided, further, that, after giving effect to the immediately
preceding proviso, any exclusion of Registrable Securities shall be made
pro
rata with holders of other securities having the right to include such
securities in the registration statement.
(f) Amendments
and Waivers. The provisions of this Agreement, including the provisions of
this sentence, may not be amended, modified or supplemented, and waivers
or
consents to departures from the provisions hereof may not be given, unless
the
same shall be in writing and signed by the Company and the Holders of a
majority
of the then outstanding Registrable Securities (including, for this purpose
any
Registrable Securities issuable upon exercise or conversion of any
Security). If a Registration Statement does not register all of the
Registrable Securities pursuant to a waiver or amendment done in compliance
with
the previous sentence, then the number of Registrable Securities to be
registered for each Holder shall be reduced pro rata among all Holders
and each
Holder shall have the right to designate which of its Registrable Securities
shall be omitted from such Registration Statement. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with
respect
to a matter that relates exclusively to the rights of a Holder or some
Holders
and that does not directly or indirectly affect the rights of other Holders
may
be given by such Holder or Holders of all of the Registrable Securities
to which
such waiver or consent relates; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented
except
in accordance with the provisions of the first sentence of this
Section 6(f).
(g) Notices.
Any and all notices or other communications or deliveries required or permitted
to be provided hereunder shall be delivered as set forth in the Purchase
Agreement.
(h) Successors
and Assigns. This Agreement shall inure to the benefit of and be binding
upon the successors and permitted assigns of each of the parties and shall
inure
to the benefit of each Holder. The Company may not assign (except by merger)
its
rights or obligations hereunder without the prior written consent of all
of the
Holders of the then outstanding Registrable Securities. Each Holder may
assign
their respective rights hereunder in the manner and to the Persons as permitted
under the Purchase Agreement.
(i) [INTENTIONALLY
DELETED]
(j) Execution
and Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one
and the
same agreement and shall become effective when counterparts have been signed
by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission or by e-mail delivery
of a
“.pdf” format data file, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.
(k) Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be determined in
accordance with the provisions of the Purchase Agreement.
(l) Cumulative
Remedies. The remedies provided herein are cumulative and not exclusive of
any other remedies provided by law.
(m) Severability.
If any term, provision, covenant or restriction of this Agreement is held
by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set
forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the
same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that
may be
hereafter declared invalid, illegal, void or unenforceable.
(n) Headings.
The headings in this Agreement are for convenience only, do not constitute
a
part of the Agreement and shall not be deemed to limit or affect any of
the
provisions hereof.
(o) Independent
Nature of Holders’ Obligations and Rights. The obligations of each Holder
hereunder are several and not joint with the obligations of any other Holder
hereunder, and no Holder shall be responsible in any way for the performance
of
the obligations of any other Holder hereunder. Nothing contained herein
or in
any other agreement or document delivered at any closing, and no action
taken by
any Holder pursuant hereto or thereto, shall be deemed to constitute the
Holders
as a partnership, an association, a joint venture or any other kind of
entity,
or create a presumption that the Holders are in any way acting in concert
with
respect to such obligations or the transactions contemplated by this Agreement.
Each Holder shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement, and it shall
not be
necessary for any other Holder to be joined as an additional party in any
proceeding for such purpose.
********************
IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as
of the date first written above.
|
AEROGROW
INTERNATIONAL, INC.
|
|
By:__________________________________________
Name:
Title:
|
[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
[SIGNATURE
PAGE OF HOLDERS TO AERO RRA]
Name
of
Holder: _________________________________________________
Signature
of Authorized Signatory of Holder: __________________________
Name
of
Authorized Signatory: _____________________________________
Title
of
Authorized Signatory: ______________________________________
[SIGNATURE
PAGES CONTINUE]
Annex
A
Plan
of Distribution
Each
Selling Stockholder (the “Selling Stockholders”) of the common stock and
any of their pledgees, assignees and successors-in-interest may, from time
to
time, sell any or all of their shares of common stock on the Nasdaq Capital
Market or any other stock exchange, market or trading facility on which
the
shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. A Selling Stockholder may use any one or
more of the following methods when selling shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
|
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;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer
for its
account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
settlement
of short sales entered into after the effective date of the registration
statement of which this prospectus is a
part;
|
|
·
|
broker-dealers
may agree with the Selling Stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
|
·
|
a
combination of any such methods of sale;
or
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
Selling Stockholders may also sell shares under Rule 144 under the Securities
Act of 1933, as amended (the “Securities Act”), if available, rather than
under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers
to
participate in sales. Broker-dealers may receive commissions or
discounts from the Selling Stockholders (or, if any broker-dealer acts
as agent
for the purchaser of shares, from the purchaser) in amounts to be negotiated,
but, except as set forth in a supplement to this Prospectus, in the case
of an
agency transaction not in excess of a customary brokerage commission in
compliance with NASDR Rule 2440; and in the case of a principal transaction
a
markup or markdown in compliance with NASDR IM-2440.
In
connection with the sale of the common stock or interests therein, the
Selling
Stockholders may enter into hedging transactions with broker-dealers or
other
financial institutions, which may in turn engage in short sales of the
common
stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of the common stock short and deliver
these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The
Selling Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or
more
derivative securities which require the delivery to such broker-dealer
or other
financial institution of shares offered by this prospectus, which shares
such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
Selling Stockholders and any broker-dealers or agents that are involved
in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on
the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each Selling
Stockholder has informed the Company that it does not have any written
or oral
agreement or understanding, directly or indirectly, with any person to
distribute the Common Stock. In no event shall any broker-dealer receive
fees,
commissions and markups which, in the aggregate, would exceed eight percent
(8%).
The
Company is required to pay certain fees and expenses incurred by the Company
incident to the registration of the shares. The Company has agreed to
indemnify the Selling Stockholders against certain losses, claims, damages
and
liabilities, including liabilities under the Securities Act.
Because
Selling Stockholders may be deemed to be “underwriters” within the meaning of
the Securities Act, they will be subject to the prospectus delivery requirements
of the Securities Act including Rule 172 thereunder. In addition, any
securities covered by this prospectus which qualify for sale pursuant to
Rule
144 under the Securities Act may be sold under Rule 144 rather than under
this
prospectus. There is no underwriter or coordinating broker acting in
connection with the proposed sale of the resale shares by the Selling
Stockholders.
We
agreed
to keep this prospectus effective until the earlier of (i) the date on
which the
shares (assuming any Warrants then outstanding are exercised pursuant to
the
cashless exercise provisions thereof) may be resold by the Selling Stockholders
who are not our "affiliates" as that term is defined in Rule 144 under
the
Securities Act without registration and without regard to any volume limitations
by reason of Rule 144(k) under the Securities Act or any other rule of
similar
effect or (ii) all of the shares have been sold pursuant to this prospectus
or
Rule 144 under the Securities Act or any other rule of similar
effect. The resale shares will be sold only through registered or
licensed brokers or dealers if required under applicable state securities
laws.
In addition, in certain states, the resale shares may not be sold unless
they
have been registered or qualified for sale in the applicable state or an
exemption from the registration or qualification requirement is available
and is
complied with.
Under
applicable rules and regulations under the Exchange Act, any person engaged
in
the distribution of the resale shares may not simultaneously engage in
market
making activities with respect to the common stock for the applicable restricted
period, as defined in Regulation M, prior to the commencement of the
distribution. In addition, the Selling Stockholders will be subject
to applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases
and
sales of shares of the common stock by the Selling Stockholders or any
other
person. We will make copies of this prospectus available to the
Selling Stockholders and have informed them of the need to deliver a copy
of
this prospectus to each purchaser at or prior to the time of the sale (including
by compliance with Rule 172 under the Securities Act).
Annex
B
AEROGROW
INTERNATIONAL, INC.
Selling
Securityholder Notice and Questionnaire
The
undersigned beneficial owner of common stock (the “Registrable
Securities”) of Aerogrow International, Inc., a Nevada corporation (the
“Company”), understands that the Company has filed or intends to file
with the Securities and Exchange Commission (the “Commission”) a
registration statement (the “Registration Statement”) for the
registration and resale under Rule 415 of the Securities Act of 1933, as
amended
(the “Securities Act”), of the Registrable Securities, in accordance with
the terms of the Registration Rights Agreement (the “Registration Rights
Agreement”) to which this document is annexed. A copy of the
Registration Rights Agreement is available from the Company upon request
at the
address set forth below. All capitalized terms not otherwise defined
herein shall have the meanings ascribed thereto in the Registration Rights
Agreement.
Certain
legal consequences arise from being named as a selling securityholder in
the
Registration Statement and the related prospectus. Accordingly,
holders and beneficial owners of Registrable Securities are advised to
consult
their own securities law counsel regarding the consequences of being named
or
not being named as a selling securityholder in the Registration Statement
and
the related prospectus.
NOTICE
The
undersigned beneficial owner (the “Selling Securityholder”) of
Registrable Securities hereby elects to include the Registrable Securities
owned
by it in the Registration Statement.
The
undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
QUESTIONNAIRE
|
|
(a)
|
Full
Legal Name of Selling Securityholder
___________________________________________________________________
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|
|
(b)
|
Full
Legal Name of Registered Holder (if not the same as (a) above)
through
which Registrable Securities are held:
___________________________________________________________________
|
|
|
(c)
|
Full
Legal Name of Natural Control Person (which means a natural person
who
directly or indirectly alone or with others has power to vote
or dispose
of the securities covered by this Questionnaire):
___________________________________________________________________
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|
|
2.
|
Address
for Notices to Selling Securityholder:
______________________________________________________________________________________________________________________________________
______________________________________________________________________________________________________________________________________
Telephone:_____________________________________________________________________________________________________________________________
Fax:___________________________________________________________________________________________________________________________________
Contact Person:__________________________________________________________________________________________________________________________
|
|
|
(a)
|
Are
you a broker-dealer?
|
Yes o No o
|
|
(b)
|
If
“yes” to Section 3(a), did you receive your Registrable Securities
as
compensation for investment banking services to the
Company?
|
Yes
o No o
|
Note:
|
If
“no” to Section 3(b), the Commission’s staff has indicated that you should
be identified as an underwriter in the Registration
Statement.
|
|
|
(c)
|
Are
you an affiliate of a
broker-dealer?
|
Yes
o No o
|
|
(d)
|
If
you are an affiliate of a broker-dealer, do you certify that
you purchased
the Registrable Securities in the ordinary course of business,
and at the
time of the purchase of the Registrable Securities to be resold,
you had
no agreements or understandings, directly or indirectly, with
any person
to distribute the Registrable
Securities?
|
Yes o No
o
|
Note:
|
If
“no” to Section 3(d), the Commission’s staff has indicated that you should
be identified as an underwriter in the Registration
Statement.
|
|
|
4.
Beneficial Ownership of Securities of the Company Owned by the
Selling
Securityholder.
|
Except
as set forth below in this Item 4, the undersigned is not the beneficial
or
registered owner of any securities of the Company other than the securities
issuable pursuant to the Purchase Agreement.
|
|
(a)
|
Type
and Amount of other securities beneficially owned by the Selling
Securityholder:
_______________________________________________________________________
_______________________________________________________________________
|
|
|
5.
Relationships with the
Company:
|
Except
as set forth below, neither the undersigned nor any of its affiliates,
officers,
directors or principal equity holders (owners of 5% of more of the equity
securities of the undersigned) has held any position or office or has had
any
other material relationship with the Company (or its predecessors or affiliates)
during the past three years.
|
|
State
any exceptions here:
_______________________________________________________________________
_______________________________________________________________________
|
The
undersigned agrees to promptly notify the Company of any inaccuracies or
changes
in the information provided herein that may occur subsequent to the date
hereof
at any time while the Registration Statement remains effective.
By
signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 5 and the inclusion
of such
information in the Registration Statement and the related prospectus and any amendments or supplements
thereto. The undersigned understands that such information
will be relied upon by the Company in connection with the preparation or
amendment of the Registration Statement and the related prospectus.
IN
WITNESS WHEREOF the undersigned, by authority duly given, has caused this
Notice
and Questionnaire to be executed and delivered either in person or by its
duly
authorized agent.
Date: ______________________ Beneficial
Owner:
By:
Name:
Title:
PLEASE
FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN
THE ORIGINAL BY OVERNIGHT MAIL, TO: