Contract
EXHIBIT
4.6
THIS
NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (“SECURITIES ACT”), OR APPLICABLE STATE
SECURITIES LAWS. THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF
THIS
NOTE (“CONVERSION SECURITIES”) MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR PURSUANT TO AN EXEMPTION THEREFROM
UNDER
THE SECURITIES ACT AND SUCH STATE LAWS, SUPPORTED BY AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION
IS NOT REQUIRED. THIS NOTE AND THE COMPANY'S SUBSCRIPTION AGREEMENT WITH
THE
HOLDER SET FORTH THE COMPANY’S OBLIGATIONS TO REGISTER FOR RESALE THE CONVERSION
SECURITIES. A COPY OF SUCH SUBSCRIPTION AGREEMENT IS AVAILABLE FOR INSPECTION
AT
THE COMPANY’S OFFICE.
THIS
NOTE MAY NOT, IN ANY EVENT, BE TRANSFERRED TO ANY PERSON OR ENTITY THAT IS
NOT
AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501, PROMULGATED UNDER
THE
ACT.
10%
Unsecured Convertible Note
| No. _____________ |
Principal
Amount: $ _____________
|
|
Issue
Date: _____________, 2005
|
|
AEROGROW
INTERNATIONAL, INC.,
a
Nevada corporation (“Company”), promises to pay to
_________________________________________________________ or registered assigns,
the principal amount of ______________________________ ($_______________)
on
June 30, 2006. This Note is one of the duly authorized issue of Notes of
the
Company, limited in aggregate principal amount to $3,000,000, issued or to
be
issued by the Company pursuant to a certain private placement memorandum
dated
June 6, 2005.
1. Interest.
The
Company promises to pay interest on the principal amount of this Note at
the
interest rate of 10% per annum. The Company will pay interest on September
30,
December 31, March 31 and June 30 of each year and at final maturity, beginning
September 30, 2005. Interest on this Note will accrue from the most recent
date
to which interest has been paid or, if no interest has been paid, from the
Issue
Date above. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
2. Method
of Payment.
The
Company will pay interest on the Notes (except defaulted interest) to the
persons who are registered holders of Notes at the close of business on the
15th
day of
the month next preceding the interest payment date. If the Company defaults
in a
payment of interest on the Notes, it shall pay the defaulted interest to
the
persons who are holders on a subsequent special record date selected by the
Company. Holders must surrender Notes to a Paying Agent to collect principal
payments. The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public
and
private debts. However, the Company may pay principal and interest by its
check
payable in such money. It may mail an interest check to a holder’s registered
address.
3. Paying
Agent, Registrar, Conversion Agent.
Initially, the Company, 000 00xx
Xxxxxx,
Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000, will act as Paying Agent, Registrar and
Conversion Agent. The Company may change any Paying Agent, Registrar, or
Conversion Agent by notice to the Noteholders.
All
notices required under this Note shall be deemed to have been given or made
for
all purposes (i) upon personal delivery, (ii) upon confirmation
receipt that the communication was successfully sent to the applicable number
if
sent by facsimile; (iii) one day after being sent, when sent by
professional overnight courier service, or (iv) five days after posting
when sent by registered or certified mail. Notices to the Company shall be
sent
to the principal office of the Company (or at such other place as the Company
shall notify the holder hereof in writing). Notices to the holder shall be
sent
to the address of the holder on the books of the Company (or at such other
place
as the holder shall notify the Company hereof in writing).
4. Unsecured
Obligations.
The
Notes are unsecured obligations of the Company.
5. Conversion;
Registration.
The
principal amount of this Note will be convertible, at the holder’s election,
into shares of the Company’s common stock, par value $0.001 per share (“Common
Stock”) at a conversion price (“Conversion Price”) equal to the lesser of: (i)
$4.00 per share, or (ii) if a registered public offering of securities by
the
Company is declared effective under the Securities Act prior to the payment
or
conversion of the Notes (“Registered Offering”), 80% of the per share offering
price of Common Stock in the first such Registered Offering (“Public Offering
Price”). During
the fifteen (15) day period following the date upon which the Registered
Offering is declared effective and the Company has received the funds from
such
Registered Offering, each holder of Notes may, on one occasion only, demand
full
and complete payment in cash of the outstanding principal amount of all Notes
held by such holder, together with all accrued interest thereon. Upon conversion
of this Note, the holder shall receive additional five-year warrants to purchase
2,000 shares of Common Stock for each $10,000 of principal amount so converted
(“Conversion Warrants”). The Conversion Warrants may be exercised at any time at
an exercise price equal to the lesser of: (i) $6.00 per share, or (ii) 120%
of
the Public Offering Price in the Registered Offering. The
Company has agreed to file and to use its best efforts to have declared
effective a registration statement with the U.S. Securities and Exchange
Commission (“Commission”) to register for resale the Common
Stock into which the Note may be converted and the Common Stock underlying
the
Conversion Warrants (“Conversion Securities”), in
accordance with and subject to the terms and conditions of the registration
rights discussed in Section 8 of the Subscription Agreement signed by the
original holder of this Note and accepted by the Company in connection with
the
offering to which this Note relates. These registration rights shall inure
to
the benefit of the transferees of this Notes and the Conversion Shares.
The
principal amount of this Note may be converted, in whole or in part (as limited
herein), by the holder at any time until the Note is paid in full by the
Company. The Company may not redeem the Note and will have no right to pre-pay
the Note without the prior written consent of the holder.
To
convert a Note a holder must: (1) complete and sign the conversion notice
appearing on the Note, (2) surrender the Note to the Conversion Agent, (3)
furnish appropriate endorsements or transfer documents required by the Registrar
or Conversion Agent, and (4) pay any transfer or similar tax if required.
A
holder may convert a portion of a Note if the portion is $1,000 or an integral
multiple thereof.
The
conversion price may be adjusted by the Company, with notice to the Noteholders,
for stock splits, stock dividends, reorganizations and reclassifications.
No
adjustment will be made for accrued interest on a converted Note or for
dividends or distributions on common stock issued upon conversion of a
Note.
The
Company shall reserve out of its authorized but unissued common stock or
its
common stock held in treasury enough shares of common stock to permit the
conversion of the Notes. All shares of common stock which may be issued upon
conversion of the Notes shall be fully paid and non-assessable.
The
Notes
will not entitle the Noteholders to vote on any matter voted on at a meeting
of
the Company’s shareholders.
6. Denominations,
Transfer.
The
Notes are in registered form without coupons in denominations of $10,000
or
integral multiples thereof. A holder may transfer or exchange the Notes at
the
principal office of the Company. The Notes cannot be transferred by a holder
unless the Notes are registered under the Securities Act or an exemption
from
registration is available. In order for a holder to transfer the Notes pursuant
to an exemption, the request for transfer must be accompanied by evidence
satisfactory to the Company that an exemption is available for the transfer,
which may include an opinion of counsel or a no-action letter from the
Commission. In addition, the Registrar may require a holder, among other
things,
to furnish appropriate endorsements and transfer documents and to pay any
required taxes and fees.
7. Persons
Deemed Owners.
The
registered holder of a Note may be treated as its owner for all
purposes.
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8. Unclaimed
Money.
If
money for the payment of principal or interest remains unclaimed for two
years,
the Paying Agent, if other than the Company, will pay the money back to the
Company at its request. After that, holders entitled to the money must look
to
the Company for payment unless an abandoned property law designates another
person.
9. Amendment,
Supplement, Waiver.
The
Notes may be amended or supplemented, and any past default or compliance
with
any provision may be waived, with the consent of the holders of at least
a
majority in principal amount of the Notes. Without the consent of any holder,
the Company may amend or supplement the Notes to cure any ambiguity, defect
or
inconsistency or to make any change that does not materially adversely affect
the rights of any holder.
Without
the consent of each holder affected, an amendment, supplement or waiver may
not:
(1) reduce the amount of Notes whose holders must consent to an amendment,
supplement or waiver, (2) reduce the rate of or extend the time for payment
of
interest on any Note, (3) reduce the principal of or extend the fixed maturity
of any Note, (4) waive a default in the payment of the principal of or interest
on any Note, (5) make any Note payable in money other than that stated in
the
Note, or (6) make any change that materially adversely affects the right
to
convert any Note.
10. Defaults
and Remedies.
An
“Event of Default” occurs if:
(1)
the
Company defaults in the payment of interest on any Note when the same becomes
due and payable and the default continues for a period of 15 days;
(2)
the
Company defaults in the payment of the principal of any Note when the same
becomes due and payable at maturity, upon redemption or otherwise;
(3)
the
Company fails to comply with any of its other agreements in the Note and
the
default continues for the period and after the notice specified below;
(4)
the
Company pursuant to or within the meaning of any Bankruptcy Law (a) commences
a
voluntary case, (b) consents to the entry of an order for relief against
it in
an involuntary case, (c) consents to the appointment of a Custodian of it
or for
all or substantially all of its property, or (d) makes a general assignment
for
the benefit of its creditors; or
(5)
a
court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that (a) is for relief against the Company in an involuntary case, (b)
appoints a Custodian of the Company or for all or substantially all of its
property, or (c) orders the liquidation of the Company, and the order or
decree
remains unstayed and in effect for 90 days.
The
term
“Bankruptcy Law” means title 11, U.S. Code or any similar Federal or State law
for the relief of debtors. The term “Custodian” means any receiver, trustee,
assignee, liquidator or similar official under any Bankruptcy Law.
A
default
under clause (3) is not an Event of Default until the holders of at least
25% in
principal amount of the Notes notify the Company of the default and the Company
does not cure the default within 45 days after receipt of the notice. The
notice
must specify the default, demand that it be remedied and state that the notice
is a “Notice of Default.”
If
an
Event of Default occurs and is continuing, the holders of at least 25% in
principal amount of the Notes by notice to the Company may declare the principal
of and accrued interest on all the Notes to be due and payable immediately.
Upon
a declaration such principal and interest shall be due and payable immediately.
The holders of a majority in principal amount of the Notes by notice to the
Company may rescind an acceleration and its consequences if all existing
Events
of Default have been cured or waived and if the rescission would not conflict
with any judgment or decree.
If
an
Event of Default occurs and is continuing, the Noteholders may pursue any
available remedy by proceeding at law or in equity to collect the payment
of
principal or interest on the Notes or to enforce the performance of any
provision of the Notes.
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A
delay
or omission by any holder in exercising any right or remedy accruing upon
an
Event of Default shall not impair the right or remedy or constitute a waiver
of
or acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative.
The
holders of a majority in principal amount of the Notes by notice to the Company
may waive an existing Default and its consequences. When a Default is waived,
it
is cured and stops continuing.
11. Financial
Statements.
As long
as the Notes are outstanding, the Company will furnish to holders, upon request:
(i) quarterly unaudited financial statements (including balance sheets, income
statements and cash flow statements) within 45 days following the end of
each
fiscal quarter of the Company, except for the last fiscal quarter of the
Company
in any fiscal year of the Company, and (ii) annual financial statements
(including balance sheets, income statements, changes in financial position
and
related notes thereto) which have been audited by an independent auditor
no
later than 90 days after the end of each fiscal year of the Company,
unless
such financial statements are included in periodic reports under the Exchange
Act, which are timely filed by the Company.
The
Company currently is not required to be a reporting company under the federal
securities laws.
12. Legal
Holidays.
A
“Legal Holiday” is a Saturday, a Sunday, a legal holiday or a day on which
banking institutions in the U.S. are not required to be open. If a payment
date
is a Legal Holiday at a place of payment, payment may be made at that place
on
the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
13. No
Recourse Against Others.
A
director, officer, employee or shareholder, as such, of the Company shall
not
have any liability for any obligations of the Company under the Notes or
for any
claim based on, in respect of or by reason of, such obligations or their
creation. Each holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issue
of
the Notes.
14. Abbreviations.
Customary abbreviations may be used in the name of a holder or an assignee,
such
as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT
TEN
(=joint tenants with right of survivorship and not as tenants in common),
CUST
(=custodian), and U/G/M/A (=Uniform Gift to Minors Act).
15. Consent
to Jurisdiction; Forum Selection; Governing Law; Waiver of Jury
Trial.
(i) THE
COMPANY AND THE HOLDER
AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS NOTE
SHALL
BE TRIED AND LITIGATED EXCLUSIVELY IN THE FEDERAL COURTS LOCATED IN DENVER,
COLORADO, U.S.A. THE AFOREMENTIONED CHOICE OF VENUE IS INTENDED BY THE COMPANY
AND THE HOLDER TO BE MANDATORY AND NOT PERMISSIVE IN NATURE, THEREBY PRECLUDING
THE POSSIBILITY OF LITIGATION BETWEEN THE COMPANY AND THE HOLDER WITH RESPECT
TO
OR ARISING OUT OF THIS NOTE IN ANY JURISDICTION OTHER THAN THOSE SPECIFIED
IN
THIS SECTION
15.
THE
COMPANY AND THE HOLDER EACH WAIVE ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE
OF FORUM NON-CONVENIENS OR SIMILAR DOCTRINE OR TO OBJECT TO VENUE WITH RESPECT
TO ANY PROCEEDING BROUGHT IN ACCORDANCE WITH THIS SECTION
15,
AND
STIPULATES THAT THE FEDERAL COURTS LOCATED IN DENVER, COLORADO, U.S.A. SHALL
HAVE IN PERSONAM JURISDICTION AND VENUE OVER EACH OF THEM FOR THE PURPOSE
OF
LITIGATING ANY DISPUTE, CONTROVERSY OR PROCEEDING ARISING OUT OF OR RELATED
TO
THIS NOTE. THE COMPANY AND THE HOLDER EACH AUTHORIZE AND ACCEPT SERVICE OF
PROCESS SUFFICIENT FOR PERSONAL JURISDICTION IN ANY ACTION AGAINST IT AS
CONTEMPLATED BY THIS SECTION
15
BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID,
TO ITS
ADDRESS FOR THE GIVING OF NOTICES. ANY FINAL JUDGMENT RENDERED AGAINST THE
COMPANY OR THE HOLDER IN ANY ACTION OR PROCEEDING SHALL BE CONCLUSIVE AS
TO THE
SUBJECT OF SUCH FINAL JUDGMENT AND MAY BE ENFORCED IN OTHER JURISDICTIONS
IN ANY
MANNER PROVIDED BY LAW. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE COMPANY
AND THE HOLDER HEREUNDER SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY,
INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF COLORADO, U.S.A.,
WITHOUT
REGARD TO ITS RULES OF CONFLICTS OF LAW.
(ii) THE
COMPANY AND THE HOLDER HEREBY EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY
IN
ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT, POWER, OR REMEDY
UNDER
OR IN CONNECTION WITH THIS NOTE OR ANY OF THE CONTEMPLATED TRANSACTIONS OR
UNDER
OR IN CONNECTION WITH ANY AMENDMENT, INSTRUMENT, DOCUMENT, OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH
OR
THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS
NOTE
OR ANY TRANSACTION CONTEMPLATED BY THIS NOTE, AND AGREE THAT ANY SUCH ACTION
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THE TERMS AND PROVISIONS
OF
THIS SECTION
15
CONSTITUTE A MATERIAL INDUCEMENT FOR THE COMPANY ISSUING THIS NOTE.
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IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed under
its
corporate seal (if any).
Dated:
________________
| AEROGROW INTERNATIONAL, INC. | ||
| [CORPORATE SEAL] |
|
|
| By: | ||
|
Name:
W.
Xxxxxxx Xxxxxxxxxxx
Its:
President
and CEO
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ASSIGNMENT
FORM
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CONVERSION
NOTICE
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To
assign this Note, fill in the form below:
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To
convert this Note, check the box o.
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I
or we assign and transfer this Note to
(Insert
assignee’s soc. sec. or tax ID no.)
(Print
or type assignee’s name, address and zip code)
and
irrevocably appoint _________________________ agent
to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
|
To
convert only part of this Note, state the principal amount to be
converted
(which must be $1,000 or an integral multiple of $1,000):
If
you want the stock certificate made out in another person’s name fill in
the form below:
(Insert
the other person’s soc. sec. tax ID no.)
(Print
or type other person’s name, address and zip code)
|
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Dated:
____________________, 200_
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Signature:
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Signature
Guaranteed:
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||
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Participant
in a Recognized Signature
Guarantee Medallion Program
|
Signature:
|
(Sign
exactly as your name(s) first appear(s)s on this
Note)
|
| By: |
Authorized
Signatory
|
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