Document:

ex4-19.htm

    Exhibit
4.19

     

    THIS
WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”).  THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.

    

    AeroGrow
International, Inc.

    

    WARRANT

    

    TO
PURCHASE

    

    SERIES
A PREFERRED STOCK

     

    
      	 No.
    WSA-[__] 	
               June ___,
      2009

            

    

     

    Void
After June ___,
2014

    

    This
certifies that, for value received, [_________], whose address is at
[________________________], or its assigns (the “Holder” or
“Purchaser”),
is entitled to subscribe for and purchase at the Exercise Price (defined below)
from AeroGrow International, Inc., a Nevada corporation, with its office at 6075
Longbow Drive, Suite 200, Boulder, CO 80301 (the “Corporation”),
shares of the Corporation’s Series A Preferred Stock (the “Series A
Preferred Stock”) upon the terms and subject to the adjustments as
provided herein.

     

    This
Warrant is being issued pursuant to the terms of the Series A Stock and Warrant
Purchase Agreement, dated June ___, 2009 (the “Purchase
Agreement”), by and among the Corporation and the parties set forth on
Exhibit A
thereto.  Capitalized terms used herein but not otherwise defined
shall have the meanings given to them in the Purchase Agreement.

     

    1.           Definitions.  As
used herein, the following terms shall have the following respective
meanings:

     

    (a)           “Exercise
Period” shall mean the time period commencing with the date of this
Warrant and ending five (5) years from date of this Warrant, unless sooner
terminated as provided below.

     

    (b)           “Exercise
Price” shall mean $1,250.00 per share subject to adjustment pursuant to
the terms herein, including Section 5 below (including adjustments for stock
splits, stock dividends, reclassifications, recapitalizations, combinations or
exchanges of shares, separations, reorganizations, liquidations or the
like).

     

    (c)           “Exercise
Shares” shall mean [____] shares of Series A Preferred Stock, subject to
adjustment pursuant to the terms herein, including Section 5 below.

     

    (d)           “Conversion
Shares” shall mean any shares of the Corporation’s common stock which may
be issued upon the conversion of shares of Series A Preferred
Stock.

     

    2.           Exercise of
Warrant.  The rights represented by this Warrant may be
exercised in whole or in part at any time during the Exercise Period, by
delivery of the following to the Corporation at its address set forth above (or
at such other address as it may designate by notice in writing to the
Holder):

     

    (a)           an
executed Notice of Exercise in the form attached hereto;

     

    (b)           payment
of the Exercise Price in cash or by check; and

     

    (c)           this
Warrant.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    Upon the
exercise of the rights represented by this Warrant, a certificate or
certificates for the Exercise Shares so purchased, registered in the name of the
Holder or persons affiliated with the Holder, if the Holder so designates, shall
be issued and delivered to the Holder as soon as practicable after the rights
represented by this Warrant shall have been so exercised.

     

    The
person in whose name any certificate or certificates for Exercise Shares are to
be issued upon exercise of this Warrant shall be deemed to have become the
holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Exercise Price was made, irrespective of the date
of delivery of such certificate or certificates, except that, if the date of
such surrender and payment is a date when the stock transfer books of the
Corporation are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.

     

    3.           Covenants
of the Corporation.

     

    3.1           Covenants as to Exercise
Shares.  The Corporation covenants and agrees that all Exercise
Shares that may be issued upon the exercise of the rights represented by this
Warrant will, upon issuance, be validly issued and outstanding, fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issuance thereof.  The Corporation further covenants and agrees that
the Corporation shall at all times during the Exercise Period, (i) have
authorized and reserved, free from preemptive rights, a sufficient number of
shares of any applicable class and series of its Common Stock and/or Series A
Preferred Stock to provide for the exercise of the rights represented by this
Warrant and (ii) if applicable, have authorized and reserved, free from
preemptive rights, a sufficient number of shares of its Common Stock to provide
for the conversion of the shares of Series A Preferred Stock issuable upon the
exercise of the rights represented by this Warrant.  If at any time
during the Exercise Period the number of authorized but unissued shares of
Common Stock and/or Series A Preferred Stock, as applicable, shall not be
sufficient to permit exercise of this Warrant and, if applicable, the conversion
of the shares of Series A Preferred Stock issuable pursuant hereto, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock and/or Series A Preferred Stock, as applicable, to such number of shares
as shall be sufficient for such purposes.

     

    3.2           No
Impairment.  Except and to the extent as waived or consented to
by the Holder, the Corporation will not, by amendment of its Articles 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 Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may be necessary or appropriate in order to
protect the exercise rights of the Holder against impairment.

     

    3.3           Notices of Record
Date.  In the event of any taking by the Corporation of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, the Corporation shall mail to the Holder, at least five (5)
business days prior to the date specified herein, a notice specifying the date
on which any such record is to be taken for the purpose of such dividend or
distribution.

     

    3.4           Notice of
Expiration.  If this Warrant has not been fully exercised
on or before the date thirty (30) days prior to the end of the Exercise Period,
the Corporation shall thereafter provide Holder with at least twenty (20) days
advance written notice of the date on which this Warrant is to
expire.  If the Corporation fails to provide such notice, the Exercise
Period shall be extended until the date twenty (20) days after the date said
notice is provided to Holder.  If this Warrant would terminate when it
could be net exercised pursuant to Section 2.1, it shall be deemed so exercised
immediately prior to such termination, unless Holder states explicitly to the
contrary in writing.

     

    4.           Representations
of Holder.

     

    4.1           Acquisition of Warrant for Personal
Account.  The Holder represents and warrants that it is
acquiring the Warrant solely for his, her or its account for investment and not
with a view to or for sale or distribution of said Warrant or any part thereof,
other than potential transfers between affiliates (including affiliate
funds).  The Holder also represents that the entire legal and
beneficial interests of the Warrant and Exercise Shares the Holder is acquiring
is being acquired for, and will be held for, his, her or its account
only.

     

    4.2           Securities Are Not
Registered.

     

    (a)           The
Holder understands that the Warrant, the Exercise Shares and the Conversion
Shares have not been registered under the Securities Act of 1933, as amended
(the “Act”) on
the basis that no distribution or public offering of the stock of the
Corporation is to be effected.  The Holder realizes that the basis for
the exemption may not be present if, notwithstanding his, her or its
representations, the Holder has a present intention of acquiring the securities
for a fixed or determinable period in the future, selling (in connection with a
distribution or otherwise), granting any participation in, or otherwise
distributing the securities.  The Holder has no such present
intention.

     

    (b)           The
Holder recognizes that the Warrant, the Exercise Shares and the Conversion
Shares must be held indefinitely unless they are subsequently registered under
the Act or an exemption from such registration is available.

     

    (c)           The
Holder is aware that none of the Warrant, the Exercise Shares or the Conversion
Shares may be sold pursuant to Rule 144 adopted under the Act unless certain
conditions are met, including, among other things, the existence of a public
market for the shares, the availability of certain current public information
about the Corporation, the resale following the required holding period under
Rule 144 and the number of shares being sold during any three month period not
exceeding specified limitations.  Holder is aware that the conditions
for resale set forth in Rule 144 have not been satisfied and that the
Corporation presently has no plans to satisfy these conditions in the
foreseeable future.

     

    
      
        
        

      

      
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    4.3           Disposition
of Warrant and Exercise Shares and Conversion Shares.

     

    (a)           The
Holder further agrees not to make any disposition of all or any part of the
Warrant or Exercise Shares or Conversion Shares in any event unless and
until:

     

    (i)           The
Corporation shall have received a letter secured by the Holder from the
Securities and Exchange Commission stating that no action will be recommended to
the Commission with respect to the proposed disposition; or

     

    (ii)           There
is then in effect a registration statement under the Act covering such proposed
disposition and such disposition is made in accordance with said registration
statement; or

     

    (iii)           The
Holder shall have notified the Corporation of the proposed disposition and shall
have furnished the Corporation with a statement of the circumstances surrounding
the proposed disposition, and if reasonably requested by the Company, the Holder
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, for the Holder to the effect that such disposition
will not require registration of such Warrant or Exercise Shares or Conversion
Shares under the Act or any applicable state securities laws; provided, however,
that such statement will not be required if the disposition is permitted under
Rule 144 of the Act, except in unusual circumstances.

     

    (b)           The
Holder agrees not to sell this Warrant or the Exercise Shares or the Conversion
Shares during a period specified by the representative of the underwriters of
the Corporation’s Common Stock (not to exceed one hundred eighty (180) days)
following the effective date of the initial registration statement of the
Corporation filed under the Act, so long as all officers, directors, and one
percent (1%) stockholders have executed similar agreements and are similarly
restricted from selling the Corporation’s stock, or pursuant to other
contractual obligations between the Holder and the Corporation.

     

    (c)           Notwithstanding
the provisions of paragraphs (a) and (b) above, the Holder may assign this
Warrant, the Exercise Shares or the Conversion Shares to (i) any partner or
retired partner of the Holder if Holder is a partnership, (ii) any member or
former member of the Holder if Holder is a limited liability company, (iii) any
affiliate, including affiliated funds or (iv) any family member or trust for the
benefit of the Holder if the Holder is an individual; provided that the
Corporation is given written notice thereof.

     

    (d)           The
Holder understands and agrees that all certificates evidencing the shares to be
issued to the Holder may bear the following legend:

     

    THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT").  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.

     

    5.           Adjustment
of Exercise Price and Exercise Shares; Effect of Organic Changes.

     

    5.1           Adjustment of Exercise
Price.  In the event of changes in the outstanding Series A
Preferred Stock by reason of stock dividends, splits, recapitalizations,
reclassifications, combinations or exchanges of shares, separations,
reorganizations, liquidations, or the like, the number and class of shares
available under the Warrant in the aggregate and the Exercise Price shall be
correspondingly adjusted to give the Holder of the Warrant, on exercise for the
same aggregate Exercise Price, the total number, class, and kind of shares as
the Holder would have owned had the Warrant been exercised prior to the event
and had the Holder continued to hold such shares until after the event requiring
adjustment.  The form of this Warrant need not be changed because of
any adjustment in the number of Exercise Shares subject to this
Warrant.

     

    5.2           Automatic Conversion. Upon the
automatic conversion of all outstanding shares of the series of equity
securities comprising the Exercise Shares, this Warrant shall become exercisable
for that number of shares of Common Stock of the Corporation into which the
Exercise Shares would then be convertible, so long as such shares, if this
Warrant had been exercised prior to such offering, would have been converted
into shares of the Corporation’s Common Stock pursuant to the Corporation’s
Articles of Incorporation.  In such case, all references to “Exercise
Shares” shall mean shares of the Corporation’s Common Stock issuable upon
exercise of this Warrant, as appropriate.

     

    6.           Fractional
Shares.  No fractional shares shall be issued upon the exercise
of this Warrant as a consequence of any adjustment pursuant
hereto.  All Exercise Shares (including fractions) issuable upon
exercise of this Warrant may be aggregated for purposes of determining whether
the exercise would result in the issuance of any fractional
share.  If, after aggregation, the exercise would result in the
issuance of a fractional share, the Corporation shall, in lieu of issuance of
any fractional share, pay the Holder otherwise entitled to such fraction a sum
in cash equal to the product resulting from multiplying the then current fair
market value of an Exercise Share by such fraction.

     

    7.           Acquisition
Or Asset Transfer.  In the event of, at any time during the
Exercise Period, an Acquisition or an Asset Transfer (each as defined in the
Corporation’s Articles of Incorporation), the Corporation shall provide to the
Holder ten (10) days advance written notice of such Acquisition or Asset
Transfer, and this Warrant shall terminate unless exercised immediately prior to
the closing of such Acquisition or Asset Transfer.

     

    
      
        
        

      

      
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    8.           No
Stockholder Rights.  This Warrant in and of itself shall not
entitle the Holder to any voting rights or other rights as a stockholder of the
Corporation.

     

    9.           Transfer Of
Warrant.  Subject to applicable laws and any restrictions on
transfer set forth in this Warrant, this Warrant and all rights hereunder are
transferable, in whole but not in part, by the Holder in person or by duly
authorized attorney, upon delivery of this Warrant and the form of assignment
attached hereto to any transferee designated by Holder.  The
transferee shall sign an investment letter in form and substance satisfactory to
the Corporation.

     

    10.           Lost,
Stolen, Mutilated Or Destroyed Warrant.  The Corporation
covenants to the holder hereof that, upon receipt of evidence reasonably
satisfactory to the Corporation of the loss, theft, destruction or mutilation of
this Warrant or any stock certificate and, in the case of any such loss, theft
or destruction, upon receipt of an indemnity reasonably satisfactory to the
Corporation, or in the case of any such mutilation, upon surrender and
cancellation of such Warrant or stock certificate, the Corporation will make and
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.

     

    11.           Notices,
Etc.  Any notice required or permitted under this Warrant shall
be given in writing and shall be deemed effectively given: (a) upon personal
delivery to the party to be notified, (b) when sent by confirmed facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day, (c) five (5) business days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one (1)
business day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of
receipt.  All communications shall be sent to the Corporation at
AeroGrow International, Inc., 6075 Longbow Drive, Suite 200, Boulder, CO 80301,
Attention: Chief Executive Officer; or to a Purchaser at the address set forth
on Exhibit
A to the Purchase Agreement, or at such other address as any such party
may designate by ten (10) days advance written notice to the other parties
hereto.

     

    12.           Acceptance.  Receipt
of this Warrant by the Holder shall constitute acceptance of and agreement to
all of the terms and conditions contained herein.

     

    13.           Governing
Law.  This Warrant and all rights, obligations and liabilities
hereunder shall be governed by the laws of the State of Colorado, without giving
effect to principles of conflicts of law.

     

    14.           Amendments
And Waivers.  This Warrant may be amended in the same manner as
provided in the Purchase Agreement.

     

    15.           Severability.  If
any provision of this Warrant is held to be unenforceable under applicable law,
such provision shall be excluded from this Warrant and the balance of the
Warrant shall be interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms.

     

    
      [Signature
Page Follows]

       

       

       

    

    
      
        
        

      

      
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    In Witness
Whereof, the Corporation has caused this Warrant to be executed by its
duly authorized officer as of the date first written above.

     

    
      
        
          	 	
                  AeroGrow
      International, Inc.

                	 
	 	 	 	 
	
                   

                	
                  By:
      

                	                                                        	 
	 	 	Name:[                                          
      ]	 
	 	 	Title: [                                           
      ]	 
	 	 	 	 

        

      

     

     

     

     

    
 

    
      
        
        

      

      
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    NOTICE
OF EXERCISE

    

    TO:  AeroGrow
International, Inc.

    

    (1)           r           The
undersigned hereby elects to purchase ________ shares of Series A Preferred
Stock of AeroGrow International, Inc. (the “Company”) pursuant to the
terms of the attached Warrant, and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if any.

    

    (2) Please
issue a certificate or certificates representing said shares of Series A
Preferred Stock in the name of the undersigned or in such other name as is
specified below:

    

    ___________________________________

    (Name)

    

    ___________________________________

     

    ___________________________________

    (Address)

    

    (3) The
undersigned represents that (i) the aforesaid shares of Series A Preferred Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares; (ii) the undersigned is aware of the Company’s business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision regarding his, her or its
investment in the Company; (iii) the undersigned is experienced in making
investments of this type and has such knowledge and background in financial and
business matters that the undersigned is capable of evaluating the merits and
risks of this investment and protecting the undersigned’s own interests; (iv)
the undersigned understands that the shares of Series A Preferred Stock issuable
upon exercise of this Warrant have not been registered under the Securities Act
of 1933, as amended (the “Securities Act”), by reason of a specific
exemption from the registration provisions of the Securities Act, which
exemption depends upon, among other things, the bona fide nature of the
investment intent as expressed herein, and, because such securities have not
been registered under the Securities Act, they must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from such
registration is available; (v) the undersigned is aware that the aforesaid
shares of Stock may not be sold pursuant to Rule 144 adopted under the
Securities Act unless certain conditions are met and until the undersigned has
held the shares for the period prescribed by Rule 144, that among the conditions
for use of the Rule is the availability of current information to the public
about the Company and the Company has not made such information available and
has no present plans to do so; (vi) the undersigned is an “accredited investor”
(as defined in Rule 501 promulgated pursuant to the Securities Act); and (vii)
the undersigned agrees not to make any disposition of all or any part of the
aforesaid shares of Series A Preferred Stock (or underlying shares of Common
Stock) unless and until there is then in effect a registration statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with said registration statement, or the undersigned has
provided the Company with an opinion of counsel satisfactory to the Company,
stating that such registration is not required.

       

     

    
      	                                                                       
      	                                                                      
      
	(Date)  	(Signature)
	 	                                                                   
         
	 	(Print
    name)

    

     

                                                                             

                                                                               

    
      
        
        

      

      
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    ASSIGNMENT
FORM

    

    (To
assign the foregoing Warrant, execute this form and supply required
information.  Do not use this form to purchase shares.)

     

    For Value
Received, the foregoing Warrant and all rights evidenced thereby are
hereby assigned to

     

    
      	Name:                                                                                                  
                                                                                                
	
               (Please
      Print)

            
	  

              Address:                                                                                                      
                                                                                       

            
	
              (Please
      Print)

            
	  

              Dated:
      _________________

            
	  

              Signature
      of Holder’s Authorized Agent:                                                                                                                                

            
	  

              Title
      of Authorized Agent:                                                                                               
                                                                

            
	  

              Holder’s
      Address:                                                                                                              
                                                                

            
	 

    

     

    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.  Officers of corporations and those acting in a fiduciary
or other representative capacity should file proper evidence of authority to
assign the foregoing Warrant.

    

     

     

     

    
 

    
      
        
        

      

      
        7ex4-20.htm

    Exhibit
4.20

    AeroGrow
International, Inc.

    

    Investor
Rights Agreement

    

    This
Investor
Rights Agreement (the “Agreement”)
is entered into as of the ___ day of June, 2009 by and among AeroGrow
International, Inc., a Nevada corporation (the “Company”)
and the investors listed on Exhibit A
hereto, referred to hereinafter as the “Investors”
and each individually as an “Investor.”

    Recitals

     

    Whereas,
the Investors are purchasers of (x) shares of the Company’s Series A
Convertible Preferred Stock (the “Series A
Stock”) and (y) warrants to purchase shares of the Company’s Series A
Stock (the “Warrants”)
pursuant to that certain Series A Convertible Preferred Stock and Warrant
Purchase Agreement (the “Purchase
Agreement”) of even date herewith (the “Financing”);

     

    Whereas, the obligations in the
Purchase Agreement are conditioned upon the execution and delivery of this
Agreement by the Company and the Investors; and

     

    Whereas, in connection with the
consummation of the Financing, the parties desire to enter into this Agreement
in order to grant registration rights, information rights and other rights to
the Investors as set forth below.

     

    Agreement

     

    Now,
Therefore, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree hereto as follows:

     

    1. GENERAL.

     

    1.1 Definitions.  As
used in this Agreement the following terms shall have the following respective
meanings:

     

    (a) “Affiliate”
means, with respect to an Investor, an “affiliate,” as defined in Rule 405 of
Regulation C of the Securities Act, of such Investor.

     

    (b) “Articles”
means the Company’s Articles of Incorporation, as such may be amended from time
to time, including any certificate of designation relating to preferred
shares.

     

    (c) “Board”
means the Board of Directors of the Company.

     

    (d) “Exchange Act”
means the Securities Exchange Act of 1934, as amended.

     

    (e) “Form S-3”
means such form under the Securities Act as in effect on the date hereof
or any successor or similar registration form under the Securities Act
subsequently adopted by the SEC that permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.

     

    (f) “Holder”
means any Investor who holds Registrable Securities and any holder of
Registrable Securities to whom the registration rights conferred by this
Agreement have been duly and validly transferred.

     

    (g) “Major
Investor” means a Holder (together with its affiliates) that owns at
least one hundred (100) Shares including shares of Common Stock issued or
issuable upon conversion thereof (as adjusted for stock dividends, stock splits,
combinations, recapitalizations and the like).

     

    (h) “Preferred
Stock” means the Series A Stock and any future series of preferred stock
issued by the Company from time to time.

     

    (i) “Register,”
“registered,” and “registration”
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or ordering
of effectiveness of such registration statement or document.

     

    
      
        
        

      

      
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    (j) “Registrable
Securities” means (i) Common Stock of the Company issuable or issued
upon conversion of the Shares, (ii) any shares of Common Stock, or Common Stock
issuable or issued upon the conversion or exercise of any other securities
acquired by the Investors pursuant to Section 4 of this Agreement or by any
other means, and (iii) any Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
that is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, such above-described
securities.  Notwithstanding the foregoing, Registrable Securities
shall not include any securities (x) sold by a person to the public either
pursuant to a registration statement or Rule 144, (y) sold in a private
transaction in which the transferor’s rights under Section 2 of this
Agreement are not assigned or (z) held by a Holder (together with its
affiliates) if, as reflected on the Company’s list of stockholders, such Holder
(together with its affiliates) holds less than 1% of the Company’s outstanding
Common Stock (treating all shares of Preferred Stock on an as converted basis)
and all shares of Common Stock of the Company issuable or issued upon conversion
of the Shares held by and issuable to such Holder (and its affiliates) may be
sold without restriction pursuant to Rule 144 during any ninety (90) day
period.

     

    (k) “Registrable
Securities then outstanding” shall be the number of shares of the
Company’s Common Stock that are Registrable Securities and either (i) are
then issued and outstanding or (ii) are issuable pursuant to then
exercisable or convertible securities.

     

    (l) “Registration
Expenses” shall mean all expenses other than Selling Expenses incurred by
the Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company); provided, however, that any expenses
related to such special audit in excess of Fifteen Thousand Dollars ($15,000)
shall be borne by the selling Holders on a pro rata basis.

     

    (m) “SEC”
means the United States Securities and Exchange Commission.

     

    (n) “Securities Act”
shall mean the Securities Act of 1933, as amended.

     

    (o) “Selling
Expenses” shall mean all transfer taxes, underwriting discounts and
selling commissions applicable to the sale.

     

    (p) “Shares”
shall mean Series A Stock now held or hereafter acquired by the Investors
and their permitted assigns including, without limitation, any Shares acquired
upon the exercise of the Warrants.

     

    (q) “Special
Registration Statement” shall mean (i) a registration statement relating
to any employee benefit plan or (ii) with respect to any corporate
reorganization or transaction under Rule 145 of the Securities Act,
including any registration statements related to the issuance or resale of
securities issued in such a transaction.

     

    2. REGISTRATION;
RESTRICTIONS ON TRANSFER.

     

    2.1 Restrictions
on Transfer.

     

    (a) Each
Holder agrees not to make any disposition of all or any portion of the Shares,
Warrants or Registrable Securities unless and until:

     

    (i) there is
then in effect a registration statement under the Securities Act covering such
proposed disposition and such disposition is made in accordance with such
registration statement; or

     

    (ii) (A) the
transferee has agreed in writing to be bound by the terms of this Agreement,
(B) such Holder shall have notified the Company of the proposed disposition
and shall have furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (C) if reasonably
requested by the Company, such Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Securities
Act.  It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144, except in unusual
circumstances.

     

    (b) Notwithstanding
the provisions of subsection (a) above, no such restriction shall apply to a
transfer by a Holder that is (A) a partnership transferring to its
Affiliates, partners or former partners in accordance with partnership
interests, (B) a corporation transferring to any affiliated entity,
including, without limitation, any subsidiary or parent corporation, or
affiliated partnership, limited liability company or investment fund, (C) a
limited liability company transferring to Affiliates, its members or former
members in accordance with their interest in the limited liability company, or
(D) an individual transferring to the Holder’s family member or trust for
the benefit of such Holder’s family member; provided that in each case the
transferee will agree in writing to be subject to the terms of this Agreement to
the same extent as if he, she or it were an original Holder
hereunder.

     

    
      
        
        

      

      
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    (c) Each
certificate representing Shares, Warrants  or Registrable Securities
shall be stamped or otherwise imprinted with legends substantially similar to
the following (in addition to any legend required under applicable state
securities laws):

     

    THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE “ACT”) AND
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED.

     

    THE SALE,
PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN INVESTOR RIGHTS
AGREEMENT BY AND BETWEEN THE STOCKHOLDER AND THE COMPANY.  COPIES OF
SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
COMPANY.

     

    (d) The
Company shall be obligated to reissue promptly unlegended certificates at the
request of any Holder thereof if the Holder shall have obtained an opinion of
counsel (which counsel may be counsel to the Company) reasonably acceptable to
the Company to the effect that the securities proposed to be disposed of may
lawfully be so disposed of without registration, qualification and
legend.

     

    (e) Any
legend endorsed on an instrument pursuant to applicable state securities laws
and the stop-transfer instructions with respect to such securities shall be
removed upon receipt by the Company of an order of the appropriate blue sky
authority authorizing such removal.

     

    2.2 Demand
Registration.

     

    (a) Subject
to the conditions of this Section 2.2, if the Company shall receive a
written request from the Holders (i) holding more than a majority of the
Registrable Securities then outstanding and (ii) proposing to sell Registrable
Securities with an anticipated aggregate offering price of at least Three
Million Dollars ($3,000,000) (the “Initiating
Holders”), that the Company file a registration statement under the
Securities Act covering the registration of such Registrable Securities, then
the Company shall, within thirty (30) days of the receipt thereof, give written
notice of such request to all Holders and, subject to the limitations of this
Section 2.2, effect, as expeditiously as reasonably possible, the
registration under the Securities Act of all Registrable Securities that all
Holders request to be registered.

     

    (b) If the
Initiating Holders intend to distribute the Registrable Securities covered by
their request by means of an underwriting, they shall so advise the Company as a
part of their request made pursuant to this Section 2.2 or any request
pursuant to Section 2.4 and the Company shall include such information in
the written notice referred to in Section 2.2(a) or Section 2.4(a), as
applicable.  In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder’s participation in such underwriting and the inclusion of such Holder’s
Registrable Securities in the underwriting to the extent provided
herein.  All Holders proposing to distribute their securities through
such underwriting shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by a
majority in interest of the Initiating Holders (which underwriter or
underwriters shall be reasonably acceptable to the
Company).  Notwithstanding any other provision of this
Section 2.2 or Section 2.4, if the underwriter advises the Company
that marketing factors require a limitation of the number of securities to be
underwritten (including Registrable Securities), then the Company shall so
advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares that may be included in
the underwriting shall be allocated first to the Initiating Holders on a pro rata basis based on the
total number of shares of Registrable Securities held by such other Initiating
Holders and second to the other Holders of such Registrable Securities on a
pro rata basis based on
the number of Registrable Securities held by all such other
Holders.  Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from the registration.

     

    (c) The
Company shall not be required to effect a registration pursuant to this
Section 2.2:

     

    (i) after the
Company has effected two (2) registrations pursuant
to this Section 2.2, and such registrations have been declared or ordered
effective;

     

    (ii) if the
Company shall furnish to Holders requesting a registration statement pursuant to
this Section 2.2 a certificate signed by the Chairman of the Board stating
that, in the good faith judgment of the Board, it would be seriously detrimental
to the Company and its stockholders for such registration statement to be
effected at such time, in which event the Company shall have the right to defer
such filing for a period of not more than ninety (90) days after receipt of the
request of the Initiating Holders; provided that such right to
delay a request shall be exercised by the Company not more than once in any
twelve (12) month period;

     

    (iii) if the
Initiating Holders propose to dispose of shares of Registrable Securities that
may be immediately registered on Form S-3 pursuant to a request made
pursuant to Section 2.4 below; or

     

    (iv) in any
particular jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting such
registration, qualification or compliance.

     

    
      
        
        

      

      
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    2.3 Piggyback
Registrations.  The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) business days prior to
the filing of any registration statement under the Securities Act for purposes
of a public offering of securities of the Company (including, without
limitation, registration statements relating to secondary offerings of
securities of the Company, but excluding Special Registration Statements) and
will afford each such Holder an opportunity to include in such registration
statement all or part of such Registrable Securities held by such
Holder.  Each Holder desiring to include in any such registration
statement all or any part of the Registrable Securities held by it shall, within
fifteen (15) business days after the above-described notice from the Company, so
notify the Company in writing.  Such notice shall state the intended
method of disposition of the Registrable Securities by such
Holder.  If a Holder decides not to include all of its Registrable
Securities in any registration statement thereafter filed by the Company, such
Holder shall nevertheless continue to have the right to include any Registrable
Securities in any subsequent registration statement or registration statements
as may be filed by the Company with respect to offerings of its securities, all
upon the terms and conditions set forth herein.

     

    (a) Underwriting.  If
the registration statement under which the Company gives notice under this
Section 2.3 is for an underwritten offering, the Company shall so advise
the Holders of Registrable Securities.  In such event, the right of
any such Holder to be included in a registration pursuant to this
Section 2.3 shall be conditioned upon such Holder’s participation in such
underwriting and the inclusion of such Holder’s Registrable Securities in the
underwriting to the extent provided herein.  All Holders proposing to
distribute their Registrable Securities through such underwriting shall enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the
Company.  Notwithstanding any other provision of this Agreement, if
the underwriter determines in good faith that marketing factors require a
limitation of the number of shares to be underwritten, the number of shares that
may be included in the underwriting shall be allocated, first, to the Company;
second, to the Holders on a pro rata basis based on the
total number of Registrable Securities held by such other Holders; and third, to
any stockholder of the Company (other than a Holder) on a pro rata basis; provided, however, that no such
reduction shall reduce the amount of securities of the selling Holders included
in the registration below thirty percent (30%) of the total amount of securities
included in such registration. In no event will shares
of any other selling stockholder be included in such registration that would
reduce the number of shares which may be included by Holders without the written
consent of Holders of not less than a majority of the Registrable Securities
proposed to be sold in the offering.  If any Holder disapproves of the
terms of any such underwriting, such Holder may elect to withdraw therefrom by
written notice to the Company and the underwriter, delivered at least ten (10)
business days prior to the effective date of the registration
statement.  Any Registrable Securities excluded or withdrawn from such
underwriting shall be excluded and withdrawn from the
registration.  For any Holder that is a partnership, limited liability
company or corporation, the partners, retired partners, members, retired members
and stockholders of such Holder, or the estates and family members of any such
partners and retired partners, members, retired members and any trusts for the
benefit of any of the foregoing person shall be deemed to be a single “Holder,”
and any pro rata
reduction with respect to such “Holder” shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such “Holder,” as defined in this sentence.

     

    (b) Right to Terminate
Registration.  The Company shall have the right to terminate or
withdraw any registration initiated by it under this Section 2.3 prior to
the effectiveness of such registration whether or not any Holder has elected to
include securities in such registration.  The Registration Expenses of
such withdrawn registration shall be borne by the Company in accordance with
Section 2.5 hereof.

     

    2.4 Form S-3
Registration.  In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor
to Form S-3) or any similar short-form registration statement and any
related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, the Company
will:

     

    (a) Promptly
give written notice of the proposed registration, and any related qualification
or compliance, to all other Holders of Registrable Securities; and

     

    (b) As soon
as reasonably practicable, effect such registration and all such qualifications
and compliances as may be so requested and as would permit or facilitate the
sale and distribution of all or such portion of such Holder’s Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any other Holder or Holders joining in such
request as are specified in a written request given within fifteen (15) days
after receipt of such written notice from the Company; provided, however, that the Company
shall not be obligated to effect any such registration, qualification or
compliance pursuant to this Section 2.4:

     

    (i) if
Form S-3 is not available for such offering by the Holders;

     

    (ii) if the
Holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public of less than One Million Dollars
($1,000,000);

     

    (iii) if within
thirty (30) days of receipt of a written request from any Holder or Holders
pursuant to this Section 2.4, the Company gives notice to such Holder or
Holders of the Company’s intention to make a public offering within
ninety (90) days, other than pursuant to a Special Registration
Statement;

     

    (iv) if the
Company shall furnish to the Holders a certificate signed by the Chairman of the
Board stating that, in the good faith judgment of the Board, it would be
seriously detrimental to the Company and its stockholders for such Form S-3
registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than ninety (90) days after receipt of the request of the
Holder or Holders under this Section 2.4; provided that such right to delay a
request shall be exercised by the Company not more than once in any twelve (12)
month period;

     

    (v) if the
Company has, within the twelve (12) month period preceding the date of such
request, already
effected two (2) registrations on
Form S-3 for the Holders pursuant to this Section 2.4 and such
registrations have been declared or ordered effective; or

     

    
      
        
        

      

      
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    (vi) in any
particular jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting such
registration, qualification or compliance.

     

    (c) Subject
to the foregoing, the Company shall file a Form S-3 registration statement
covering the Registrable Securities and other securities so requested to be
registered as soon as practicable after receipt of the requests of the
Holders.  Registrations effected pursuant to this Section 2.4
shall not be counted as demands for registration or registrations effected
pursuant to Section 2.2.

     

    2.5 Expenses of
Registration.  Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Sections 2.2, 2.3 or 2.4 herein
shall be borne by the Company.  All Selling Expenses incurred in
connection with any registrations hereunder, shall be borne by the holders of
the securities so registered pro rata on the basis of the
number of shares so registered.  The Company shall not, however, be
required to pay for expenses of any registration proceeding begun pursuant to
Section 2.2 or 2.4, the request of which has been subsequently withdrawn by
the Initiating Holders unless (a) the withdrawal is based upon material
adverse information concerning the Company of which the Initiating Holders were
not aware at the time of such request or (b) the Holders of at least a
majority of Registrable Securities agree to forfeit their right to one requested
registration pursuant to Section 2.2, in which event such right shall be
forfeited by all Holders.  If the Holders are required to pay the
Registration Expenses, such expenses shall be borne by the holders of securities
(including Registrable Securities) requesting such registration in proportion to
the number of shares for which registration was requested.  If the
Company is required to pay the Registration Expenses of a withdrawn offering
pursuant to clause (a) above, then the Holders shall not forfeit their
rights pursuant to Section 2.2 to a demand registration.

     

    2.6 Obligations of the
Company.  Whenever required to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as reasonably
possible:

     

    (a) Prepare
and file with the SEC a registration statement with respect to such Registrable
Securities and use commercially reasonable efforts to cause such registration
statement to become effective, and, upon the request of the Holders of a
majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to thirty (30) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto;
provided, however, that such thirty (30)-day period shall be extended for a
period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an underwriter of
Common Stock (or other securities) of the Company.  Notwithstanding
the foregoing, at any time, upon written notice to the participating
Holders and for a period not to exceed ninety (90) days thereafter (the “Suspension
Period”), the Company may delay the filing or effectiveness of any
registration statement or suspend the use or effectiveness of any registration
statement (and the Initiating Holders hereby agree not to offer or sell any
Registrable Securities pursuant to such registration statement during the
Suspension Period) if the Board, upon the written
advice of counsel, reasonably believes that the Company may, in the
absence of such delay or suspension hereunder, be required under state or
federal securities laws to disclose any corporate development the disclosure of
which could reasonably be expected to have a material adverse effect upon the
Company, its stockholders, a potentially significant transaction or event
involving the Company, or any negotiations, discussions, or proposals directly
relating thereto.  In the event that the Company shall exercise its
right to delay or suspend the filing or effectiveness of a registration
hereunder, the applicable time period during which the registration statement is
to remain effective shall be extended by a period of time equal to the duration
of the Suspension Period (and any extension of the
Suspension Period pursuant to the following sentence).  Upon advance
notice to the holders of the Registrable Securities registered under the
applicable registration statement, the Company may extend the Suspension
Period for one additional consecutive period not to exceed sixty (60) days, if prior to
any such extension, the Company has
solicited and received written consent to such extension from the holders
of not less than a majority of the
Registrable Securities registered under the applicable registration statement,
which consent shall not be unreasonably withheld.  If so directed by
the Company, all Holders registering shares under such registration statement
shall use their commercially reasonable best efforts to deliver to the Company
(at the Company’s expense) all copies, other than permanent file copies then in
such Holders’ possession, of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.  The Company
shall not be required to file, cause to become effective or maintain the
effectiveness of any registration statement other than a registration statement
on Form S-3 that contemplates a distribution of securities on a delayed or
continuous basis pursuant to Rule 415 under the Securities
Act.

     

    (b) Prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement
as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement for the period set forth in subsection (a) above.

     

    (c) Furnish
to the Holders such number of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.

     

    (d) Use its
best efforts to register and qualify the securities covered by such registration
statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Holders; provided that the Company
shall not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of process in any
such states or jurisdictions except as may be required by the Securities
Act.

     

    (e) In the
event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter(s) of such offering.  Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.

     

    (f) Notify
each Holder of Registrable Securities covered by such registration statement at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.  As promptly as practicable thereafter, the Company will
prepare and file with the SEC, and furnish without charge to the appropriate
Holders and managing underwriter(s), if any, an amendment or supplement
to such
registration statement or prospectus in order to cause such registration statement or prospectus not to
include any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing and will furnish such copies thereof as the Holders or
any underwriters may reasonably request.

     

    
      
        
        

      

      
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    (g) Use its
reasonable efforts to furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are being sold
through underwriters, (i) an opinion, dated as of such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and (ii) a letter, dated
as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering addressed
to the underwriters.

     

    (h) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed or to be included for trading
on any inter-dealer quotation system on which similar securities issued by the
Company are then included.

     

    (i) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.

     

    2.7 Termination of Registration
Rights.  All registration rights granted under this Section 2
shall terminate and be of no further force and effect upon the earlier of (a)
five (5) years after the date hereof and (b) in the event of an “Acquisition” or
“Asset Transfer” (each as defined in the Articles).  

     

    2.8 Delay
of Registration; Furnishing Information.

     

    (a) No Holder
shall have any right to obtain or seek an injunction restraining or otherwise
delaying any such registration as the result of any controversy that might arise
with respect to the interpretation or implementation of this
Section 2.

     

    (b) It shall
be a condition precedent to the obligations of the Company to take any action
pursuant to Sections 2.2, 2.3 or 2.4 that the selling Holders shall furnish
to the Company such information regarding themselves, the Registrable Securities
held by them and the intended method of disposition of such securities as shall
reasonably be required to effect the registration of their Registrable
Securities.

     

    (c) The
Company shall have no obligation with respect to any registration that would
otherwise be effected pursuant to Section 2.2 or 2.4 if, due to the
operation of Section 2.2(b), the anticipated aggregate offering price of
the Registrable Securities to be included in the registration does not equal or
exceed the anticipated aggregate offering price required to originally trigger
the Company’s obligation to initiate such registration as specified in
Section 2.2 or 2.4, whichever is applicable.

     

    2.9 Indemnification.  In
the event any Registrable Securities are included in a registration statement
under Sections 2.2, 2.3 or 2.4:

     

    (a) To the
extent permitted by law, the Company will indemnify and hold harmless each
Holder, the partners, members, officers and directors of each Holder, any
underwriter (as defined in the Securities Act) for such Holder and each person,
if any, who controls such Holder or underwriter within the meaning of the
Securities Act or the Exchange Act, against any expenses, losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such expenses, losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a “Violation”)
by the Company: (i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement or incorporated by
reference therein, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities
Act, the Exchange Act, any state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any state securities
law in connection with the offering covered by such registration statement; and
the Company will reimburse each such Holder, partner, member, officer, director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 2.9(a) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, which consent shall
not be unreasonably withheld or delayed, nor shall the Company be liable in any
such case for any such loss, claim, damage, liability or action to the extent
that it arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by such Holder, partner, member, officer,
director, underwriter or controlling person of such Holder.

     

    (b) To the
extent permitted by law, each Holder will, if Registrable Securities held by
such Holder are included in the securities as to which such registration
qualifications or compliance is being effected, indemnify and hold harmless the
Company, each of its directors, its officers and each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter
and any other Holder selling securities under such registration statement or any
of such other Holder’s partners, members, directors or officers or any person
who controls such Holder, against any losses, claims, damages or liabilities
(joint or several) to which the Company or any such director, officer,
controlling person, underwriter or other such Holder, or partner, member,
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such expenses, losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any of the following statements:
(i) any untrue statement or alleged untrue statement of a material fact
contained in such registration statement or incorporated by reference therein,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Securities
Act  (collectively, a “Holder
Violation”), in each case to the extent (and only to the extent) that
such Holder Violation occurs in reliance upon and in conformity with written
information furnished by such Holder under an instrument duly executed by such
Holder and stated to be specifically for use in connection with such
registration; and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, controlling
person, underwriter or other Holder, or partner, member, officer, director or
controlling person of such other Holder in connection with investigating or
defending any such loss, claim, damage, liability or action if it is judicially
determined that there was such a Holder Violation; provided, however, that the indemnity
agreement contained in this Section 2.9(b) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld or delayed; provided further, that in no
event shall any indemnity under this Section 2.9 exceed the net proceeds from the
offering received by such Holder.

     

    
      
        
        

      

      
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    (c) Promptly
after receipt by an indemnified party under this Section 2.9 of notice of
the commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 2.9, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified party
and any other party represented by such counsel in such
proceeding.  The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action, if
materially prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
Section 2.9, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 2.9.

     

    (d) If the
indemnification provided for in this Section 2.9 is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect to
any losses, claims, damages or liabilities referred to herein, the indemnifying
party, in lieu of indemnifying such indemnified party thereunder, shall to the
extent permitted by applicable law contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the Violation(s) or Holder Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations.  The relative fault of the indemnifying party and of
the indemnified party shall be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the indemnifying party or by the indemnified party and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission; provided that in no event
shall any contribution by a Holder hereunder exceed the net proceeds from the
offering received by such Holder less any amounts paid pursuant to Section
2.9(b) above.

     

    (e) The
obligations of the Company and Holders under this Section 2.9 shall survive
completion of any offering of Registrable Securities in a registration statement
and the termination of this Agreement.  No indemnifying party, in the
defense of any such claim or litigation, shall, except with the consent of each
indemnified party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.

     

    2.10 Assignment of Registration
Rights.  The rights to cause the Company to register
Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities under the following
circumstances:  (A) a partnership transferring to its partners or
former partners in accordance with partnership interests, (B) a corporation
transferring to a wholly-owned subsidiary or a parent corporation that owns all
of the capital stock of the Holder, (C) a limited liability company
transferring to its members or former members in accordance with their interest
in the limited liability company, (D) an individual transferring to the
Holder’s family member or trust for the benefit of an individual, (E) a Holder
transferring to an acquirer at least 500,000 shares of Registrable Securities
(as adjusted for stock dividends, stock splits, combinations, recapitalization
and the like), or (F) a Holder transferring to an entity affiliated by common
control (or other related entity or fund) with such Holder; provided, however, (i) the transferor
shall, within ten (10) days after such transfer, furnish to the Company written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned and (ii) such
transferee shall agree to be subject to all restrictions set forth in this
Agreement. 

     

    2.11 Amendment of Registration
Rights.  Any provision of this Section 2 may be amended
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Holders of at least a majority of the Registrable
Securities then outstanding.  Any amendment or waiver effected in
accordance with this Section 2.11 shall be binding upon each Holder and the
Company.  By acceptance of any benefits under this Section 2,
Holders of Registrable Securities hereby agree to be bound by the provisions
hereunder.

     

    2.12 Limitation on Subsequent Registration
Rights. Other than as provided in Section 5.10, after the date of
this Agreement, the Company shall not, without the prior written consent of the
Holders of at least a majority of the Registrable Securities then outstanding,
enter into any agreement with any holder or prospective holder of any securities
of the Company that would grant such holder registration rights on a parity with
or senior to those granted to the Holders hereunder, other than the right to a
Special Registration Statement.

     

    2.13 Agreement to Furnish
Information.  If requested by the Company or the representative
of the underwriters of Common Stock (or other securities) of the Company, each
Holder shall provide, within ten (10) days of such request, such
non-confidential information as may be required by the Company or such
representative in connection with the completion of any public offering of the
Company’s securities pursuant to a registration statement filed under the
Securities Act (other than a Special Registration Statement).  Each
Holder agrees that any transferee of any shares of Registrable Securities shall
agree to be bound by Sections 2.13 and 2.14.  

     

    2.14 Rule 144
Reporting.  With a view to making available to the Holders the
benefits of certain rules and regulations of the SEC that may permit the sale of
the Registrable Securities to the public without registration, or pursuant to a
registration on Form S-3, the Company agrees to use its best efforts
to:

     

    (a) Make and
keep public information available, as those terms are understood and defined in
SEC Rule 144 or any similar or analogous rule promulgated under the
Securities Act, at all times during which the Company is subject to the
reporting requirements under the Exchange Act;

     

    (b) File with
the SEC, in a timely manner, all reports and other documents required of the
Company under the Exchange Act and the Securities Act; and

     

    
      
        
        

      

      
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    (c) So long
as a Holder owns any Registrable Securities, furnish to such Holder forthwith
upon request:  a written statement by the Company as to its compliance
with the reporting requirements of said Rule 144 of the Securities Act, and of
the Exchange Act (at any time after it has become subject to such reporting
requirements); a copy of the most recent annual or quarterly report of the
Company filed with the SEC; and such other reports and documents as a Holder may
reasonably request in connection with availing itself of any rule or regulation
of the SEC allowing it to sell any such securities without
registration.

     

    2.15 “Market Stand-Off”
Agreement.  Each Holder hereby agrees that such Holder shall
not sell, transfer, make any short sale of, grant any option for the purchase
of, or enter into any hedging or similar transaction with the same economic
effect as a sale, any Common Stock (or other securities) of the Company held by
such Holder (other than those included in the registration) for a period
specified by the representative of the underwriters of Common Stock (or other
securities) of the Company not to exceed one hundred eighty (180) days following
the effective date of a registration statement of the Company filed under the
Securities Act; provided
that all officers and directors of the Company and holders of at least
one percent (1%) of the Company’s voting securities enter into similar
agreements.

     

    3. COVENANTS
OF THE COMPANY.

     

    3.1 Basic
Financial Information and Reporting.

     

    (a) The
Company will maintain true books and records of account in which full and
correct entries will be made of all its business transactions pursuant to a
system of accounting established and administered in accordance with generally
accepted accounting principles consistently applied (except as noted therein or
as disclosed to the recipients thereof), and will set aside on its books all
such proper accruals and reserves as shall be required under generally accepted
accounting principles consistently applied.

     

    (b) The
Company shall not be required to furnish any information or materials to a Major
Investor under Section 3.1(c) and Section 3.1(d) hereof so long as (i) the
Company is subject to the periodic reporting requirements under the Exchange Act
and (ii) all required reports have been timely filed by the Company with the SEC
for the preceding twelve months.

     

    (c) As soon
as practicable after the end of each fiscal year of the Company, and in any
event within one hundred twenty (120) days thereafter, the Company will furnish
each Major Investor, an audited balance sheet of the Company, as at the end of
such fiscal year, and an audited statement of income and a statement of cash
flows of the Company, for such year, all prepared in accordance with generally
accepted accounting principles consistently applied (except as noted therein or
as disclosed to the recipients thereof) and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail.  If required by the Board, such financial statements shall be
accompanied by a report and opinion thereon by independent public accountants
selected by the Board.

     

    (d) The
Company will furnish each such Major Investor: (i) within fifteen (15) days
of when such plan is approved by the Board, and in any event not less than
thirty (30) days prior to the beginning of each fiscal year, an annual budget
and operating plans for such fiscal year forecasting the Company’s revenues,
expenses and cash-position on a month-to-month basis (and as soon as available,
any subsequent written revisions thereto); (ii) as soon as practicable after the
end of the first, second and third quarterly accounting periods in each fiscal
year of the Company, and in any event within forty-five (45) days thereafter, a
balance sheet of the Company as of the end of each such quarterly period, and a
statement of income and a statement of cash flows
of the Company for such period and for the current fiscal year to date,
including a comparison to plan figures for such period, prepared in accordance
with generally accepted accounting principles consistently applied (except as
noted therein or as disclosed to the recipients thereof); and (iii) as soon as
practicable after the end of each month, and in any event within thirty (30)
days thereafter, a balance sheet of the Company as of the end of such month, and
a statement of income and a statement of cash flows of the Company for such
month and for the current fiscal year to date, including a comparison to plan
figures for such period, prepared in accordance with generally accepted
accounting principles consistently applied (except as noted thereon), with the
exception that no notes need be attached to such statements and year-end audit
adjustments may not have been made.

     

    3.2 Inspection
Rights.  Each Major Investor shall have the right upon
reasonable notice to the Company and during normal business hours to visit and
inspect any of the properties of the Company or any of its subsidiaries, and to
discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company
shall not be obligated under this Section 3.2 with respect to a competitor
of the Company or with respect to information which the Board determines in good
faith is confidential or attorney-client privileged and should not, therefore,
be disclosed.  

     

    3.3 Confidentiality of
Records.  Each Investor agrees to use the same degree of care
as such Investor uses to protect its own confidential information (but in no
event less than a reasonable degree of care) to keep confidential any
information furnished to it that the Company identifies as being confidential or
proprietary (so long as such information is not in the public domain), except
that such Investor may disclose such proprietary or confidential information (i)
to any partner, manager (in the event of a limited liability company),
subsidiary or parent of such Investor solely for the purpose of evaluating its
investment in the Company as long as such partner, manager, subsidiary or parent
is advised of and agrees to be bound by the confidentiality provisions of this
Section 3.3 and that the Company is a third party beneficiary of such
agreement; (ii) at such time as it enters the public domain through no act of
such Investor; (iii) that is communicated to it free of any obligation of
confidentiality; or (iv) that is developed by Investor or its agents
independently of and without reference to any confidential information
communicated by the Company.  The Company shall not be required to
make any disclosures pursuant to this Section 3 in any manner which would result
in a violation of applicable securities laws and regulations including, without
limitation, Regulation FD of the SEC.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    3.4 Termination of
Covenants.  All covenants of the Company contained in Section 3
of this Agreement (other than the provisions of Section 3.3) shall expire and
terminate as to each Investor upon the earlier of (i) the registration of the
Registrable Securities, or (ii) in the event of an Acquisition or Asset Transfer
(each as defined in the Articles).

     

    4. PREEMPTIVE
RIGHTS.

     

    4.1 Subsequent
Offerings.  Subject to applicable securities laws, each Major
Investor shall have the right to purchase its pro rata share of all Equity
Securities, as defined below, that the Company may, from time to time, propose
to sell and issue after the date of this Agreement, other than the Equity
Securities excluded by Section 4.6 hereof.  Each Major Investor’s
pro rata share is equal
to the ratio of (a) the number of shares of the Company’s Common Stock
(including all shares of Common Stock issuable or issued upon conversion of the
Shares and any other convertible securities held by the Major Investor and the
exercise of any options, warrants or similar securities held by the Major
Investor) of which such Major Investor is deemed to be a Major Investor
immediately prior to the issuance of such Equity Securities to (b) the
total number of shares of the Company’s outstanding Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares or other
convertible securities or upon the exercise of any outstanding warrants or
options) immediately prior to the issuance of the Equity
Securities.  The term “Equity
Securities” shall mean (i) any Common Stock, Preferred Stock or
other security of the Company, (ii) any security convertible into or
exercisable or exchangeable for, with or without consideration, any Common
Stock, Preferred Stock or other security (including any option to purchase such
a convertible security), (iii) any security carrying any warrant or right
to subscribe to or purchase any Common Stock, Preferred Stock or other security
or (iv) any such warrant or right.

     

    4.2 Exercise of
Rights.  If the Company proposes to issue any Equity
Securities, it shall give each Major Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same.  Each Major Investor
shall have fifteen (15) days from the giving of
such notice to agree to purchase such Major Investor’s pro rata share of the Equity
Securities for the price and upon the terms and conditions specified in the
notice by giving written notice to the Company and stating therein the quantity
of Equity Securities to be purchased.  Notwithstanding the foregoing,
the Company shall not be required to offer or sell such Equity Securities to any
Major Investor who would cause the Company to be in violation of applicable
federal securities laws by virtue of such offer or sale or to any Major Investor
who at such time is not an “accredited investor” as defined under Regulation D
promulgated under the Securities Act.  Each Major Investor must
furnish the Company reasonable evidence of such Major Investor’s status as an
“accredited investor”.

     

    4.3 Issuance of Equity Securities to
Other Persons.  If the Major Investors fail to exercise in full
the preemptive rights set forth in this Section 4, the Company shall have ninety
(90) days following the notice provided pursuant to Section 4.2 to sell the
Equity Securities in respect of which the Major Investors’ rights were not
exercised, at a price and upon general terms and conditions not materially more
favorable to the purchasers thereof than specified in the Company’s notice to
the Investors pursuant to Section 4.2 hereof.  If the Company has
not sold such Equity Securities within ninety (90) days of the notice provided
pursuant to Section 4.2, the Company shall not thereafter issue or sell any
Equity Securities, without first offering such securities to the Major Investors
in the manner provided above.

     

    4.4 Termination and Waiver of Preemptive
Rights.  The preemptive rights established by this Section 4
shall not apply to, and shall terminate upon the earlier of (a)  the
registration of the Registrable Securities, and (b) an Acquisition or Asset
Transfer (each as defined in the Articles).  The preemptive rights
established by this Section 4 may be amended, or any provision waived, either
prospectively or retrospectively, with the written consent of Investors holding
not less than a majority of the Registrable Securities held by all Holders, or
as permitted by Section 5.5.

     

    4.5 Transfer of Preemptive
Rights.  The preemptive rights of each Major Investor under
this Section 4 may be transferred to the same parties, subject to the same
restrictions as any transfer of registration rights pursuant to
Section 2.10, provided that the transferee would qualify as a Major
Investor (as such term is defined in this Agreement).

     

    4.6 Excluded
Securities.  The preemptive rights established by this Section
4 shall have no application to the issuance of any of the following Equity
Securities:

     

    (a) Shares of
Common Stock and/or options, warrants or other Common Stock purchase rights and
the Common Stock issued pursuant to such options, warrants or other rights
issued or issuable after the date hereof to employees, officers or directors of,
or consultants or advisors to, the Company or any of its subsidiaries pursuant
to stock purchase or stock option plans or other arrangements that are approved
by the Board;

     

    (b) stock
issued or issuable pursuant to any rights or agreements, options, warrants or
convertible securities outstanding as of the date of this Agreement; and stock
issued pursuant to any such rights or agreements granted after the date of this
Agreement, so long as the preemptive rights established by this Section 4
were complied with or were inapplicable pursuant to any provision of this
Section 4.6 with respect to the initial sale or grant by the Company of such
rights or agreements;

     

    (c) any
Equity Securities issued for consideration other than cash pursuant to a merger,
consolidation, acquisition, strategic alliance or similar business combination
approved by the Board, including a majority of the Series A Directors (as
defined in the Articles);

     

    (d) any
Equity Securities issued pursuant to any equipment loan or commercial credit or
leasing arrangement, real property leasing arrangement, or debt financing from a
bank or similar financial or lending institution unanimously approved by the
Board, including a majority of the Series A Directors (as defined in the
Articles);

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (e) shares of
Common Stock issued in connection with any stock split, stock dividend,
reclassification or similar non-economic event by the Company;

     

    (f) shares of
Common Stock issued upon conversion of shares of the Company’s Preferred Stock
or as a dividend or distribution on the Preferred Stock;

     

    (g) shares of
Series A Stock and warrants to purchase shares of Series A Stock issued pursuant
to the Purchase Agreement;

     

    (h) shares of
Series A Stock and warrants to purchase shares of Series A Stock issued pursuant
to agreements with investors entered into subsequent to the date of the Purchase
Agreement but which agreements contain terms that are substantially similar to
the Purchase Agreement; and

     

    (i) any
Equity Securities that are issued by the Company pursuant to a registration
statement filed under the Securities Act in an offering which results in the
automatic conversion of all of the Company’s Preferred Stock into Common
Stock.

     

    4.7 Immediate
Investment.  Notwithstanding Sections 4.1, 4.2 and 4.3, the
Company may issue and sell Equity Securities without first complying with
Sections 4.1, 4.2 and 4.3; provided, that the following
conditions are met: (a) the Company gives reasonable notice to each Major
Investor of such investment, which notice shall be delivered to each Major
Investor within 30 days of the issuance and shall describe the type, price and
terms of the Equity Securities sold, and (b) following the delivery of the
notice described in Section 4.7(a), each Major Investor shall have 15 days to
elect to purchase from the Company up to its pro rata share (as calculated
pursuant to Section 4.1) of the Equity Securities being offered, including the
Equity Securities sold and the Equity Securities proposed to be sold to the
electing Major Investors (at the same price and on the same terms as set forth
in the notice described in Section 4.7(a)).  The closing of such sale
shall occur within 30 days of the date of notice referred to in Section
4.7(a).

     

    5. MISCELLANEOUS.

     

    5.1 Governing Law.  This
Agreement shall be governed by and construed under the laws of the State of
Colorado in all
respects as such laws are applied to agreements among Colorado residents entered
into and to be performed entirely within Colorado, without reference to
conflicts of laws or principles thereof. 

     

    5.2 Successors and
Assigns.  Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
parties hereto and their respective successors, assigns, heirs, executors, and
administrators and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time; provided, however, that prior to the
receipt by the Company of adequate written notice of the transfer of any
Registrable Securities specifying the full name and address of the transferee,
the Company may deem and treat the person listed as the holder of such shares in
its records as the absolute owner and holder of such shares for all purposes,
including the payment of dividends or any redemption price.

     

    5.3 Entire
Agreement.  This Agreement, the exhibits and Schedules hereto,
the Purchase Agreement and the other documents delivered pursuant thereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any oral or written representations, warranties,
covenants and agreements except as specifically set forth herein and
therein.  Except as set forth in the Purchase Agreement and the other
documents delivered pursuant thereto, each party expressly represents and
warrants that it is not relying on any oral or written representations,
warranties, covenants or agreements outside of this Agreement.

     

    5.4 Severability.  In
the event one or more of the provisions of this Agreement should, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other
provisions of this Agreement, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained
herein.

     

    5.5 Amendment
and Waiver.

     

    (a) Except as
otherwise expressly provided, this Agreement may be amended or modified, either
prospectively or retrospectively and either in general or with respect to any
particular matter, only upon the written consent of the Company and the holders
of at least a majority of the Registrable Securities then
outstanding.  Any such amendment shall be binding on all parties
hereto.

     

    (b) Except as
otherwise expressly provided in this Agreement, the obligations of the Company
and the rights of the Holders under this Agreement may be waived, either
prospectively or retrospectively and either in general or with respect to any
particular matter, only with the written consent of the holders of at least a
majority of the Registrable Securities then outstanding.  Any such
waiver shall be binding on all parties hereto.

     

    (c) For the
purposes of determining the number of Holders or Investors entitled to vote or
exercise any rights hereunder, the Company shall be entitled to rely solely on
the list of record holders of its stock as maintained by or on behalf of the
Company.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    5.6 Delays or
Omissions.  It is agreed that no delay or omission to exercise
any right, power, or remedy accruing to any party, upon any breach, default or
noncompliance by another party under this Agreement shall impair any such right,
power, or remedy, nor shall it be construed to be a waiver of any such breach,
default or noncompliance, or any acquiescence therein, or of any similar breach,
default or noncompliance thereafter occurring.  Subject to the terms
of Section 5.5 above, it is further agreed that any waiver, permit, consent, or
approval of any kind or character on any party’s part of any breach, default or
noncompliance under this Agreement or any waiver on such party’s part of any
provisions or conditions of this Agreement must be in writing and shall be
effective only to the extent specifically set forth in such
writing.  All remedies, either under this Agreement, by law, or
otherwise afforded to any party, shall be cumulative and not
alternative.

     

    5.7 Notices.  All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given: (a) upon personal delivery to the party to be notified,
(b) when sent by confirmed electronic mail or facsimile if sent during
normal business hours of the recipient; if not, then on the next business day,
(c) five (5) business days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one (1)
business day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of
receipt.  All communications shall be sent to the party to be notified
at the address as set forth on the signature pages hereof or Exhibit A
hereto or at such other address or electronic mail address as such party may
designate by ten (10) days advance written notice to the other parties
hereto.

     

    5.8 Attorneys’ Fees.  In
the event that any suit or action is instituted under or in relation to this
Agreement, including without limitation to enforce any provision in this
Agreement, the prevailing party in such dispute shall be entitled to recover
from the losing party all fees, costs and expenses of enforcing any right of
such prevailing party under or with respect to this Agreement, including without
limitation, such reasonable fees and expenses of attorneys and accountants,
which shall include, without limitation, all fees, costs and expenses of
appeals.

     

    5.9 Titles and
Subtitles.  The titles of the sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.

     

    5.10 Additional
Investors.  Notwithstanding anything to the contrary contained
herein, if the Company shall issue additional shares of its Series A Stock
pursuant to agreements with investors entered into subsequent to the date of the
Purchase Agreement but which agreements contain terms that are substantially
similar to the Purchase Agreement, any purchaser of such shares of Series A
Stock shall become a party to this Agreement by executing and delivering an
additional counterpart signature page to this Agreement and shall be deemed an
“Investor,” a “Holder” and a party hereunder.  Notwithstanding
anything to the contrary contained herein, if the Company shall issue Equity
Securities in accordance with Section 4.6 of this Agreement, any purchaser
of such Equity Securities may become a party to this Agreement by executing and
delivering an additional counterpart signature page to this Agreement and shall
be deemed an “Investor,” a “Holder” and a party hereunder.

     

    5.11 Counterparts.  This
Agreement may be executed and delivered (including by PDF, fax or other means of
electronic transmission) in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one
instrument.

     

    5.12 Aggregation of
Stock.  All shares of Registrable Securities held or acquired
by affiliated entities or persons or persons or entities under common management
or control shall be aggregated together for the purpose of determining the
availability of any rights under this Agreement.

     

    5.13 Pronouns.  All
pronouns contained herein, and any variations thereof, shall be deemed to refer
to the masculine, feminine or neutral, singular or plural, as to the identity of
the parties hereto may require.

     

    [The remainder of this page is
intentionally left blank.]

     

     

     

     

     

     

     

    
      
        
        

      

      
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    In Witness
Whereof, the
parties hereto have executed this Investor
rights Agreement as of the date set forth in the first paragraph
hereof.

     

    
      	
              COMPANY:

            	
              INVESTORS:

            
	
              AeroGrow
      International, Inc.

               

               

              By:                                                               

              Name:                                                          
      

              Title:                                                            
      

               

              Address: 
      6075 Longbow Drive

                Suite
200

                Boulder, CO
      80301

            	 
      

    

     

     

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Exhibit
A

    

    SCHEDULE
OF INVESTORS

    

    
      	
              
                Name
      and Address

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