Form of Consent Letter 8% Subordinated Secured Convertible Promissory Notes, effective April 11, 2012

 

January 27, 2012

AeroGrow International, Inc.

6075 Longbow Drive # 200

Boulder, CO  80301

 

 

The undersigned is a beneficial owner of Subordinated Secured 8% Convertible Promissory Notes (“Notes”) of AeroGrow International, Inc., a Nevada corporation (the “Company”). The obligation of the Company to repay the Notes is secured by a Security Agreement and UCC-1 financing statement (the “Security Agreement”).  The Security Agreement is held by GVC Capital, LLC (“GVC”), as Collateral Agent, under the terms of a Collateral Agent Agreement dated May 6, 2010 (the “Collateral Agent” and “Collateral Agent Agreement”, respectively).

The Company has advised the undersigned that, subject to the consent of the affected parties and compliance with applicable legal requirements, it proposes to restructure the Company’s equity and debt as follows:

Subordinated Secured 8% Convertible Promissory Notes: (“Note Restructure”)

 

Restructure:

·	Reset conversion price from $0.10 per share to $0.025 per share (“Reset Note Conversion Price”), conditioned upon;

·	noteholders agreeing to convert all outstanding and unpaid principal and accrued and unpaid interest into shares of common stock; and

·	noteholders agreeing to defer the interest payment due January 31, 2012.

Series A Preferred Stock: (“Series A Preferred Restructure”)

7,526 shares issued and outstanding

·	Reset conversion price from $0.18 per share to $0.09 per share (“Reset Series A Conversion Price”), conditioned upon;

·	holders of Series A Preferred Stock agreeing to convert all outstanding shares into shares of common stock; and

·	automatic conversion of warrants exercisable to purchase shares of Series A Preferred Stock (“Preferred Warrants”) into warrants exercisable to purchase shares of common stock (“Common Warrants”) (pursuant to Section 5.2 of Warrant Certificate); and

·

action by the Company’s Board of Directors to (i) reduce the exercise price of the Common Warrants to $0.07 per share and (ii) declare a dividend on each outstanding Common Warrant consisting of an additional one-half Common Warrant (with the effect of increasing the number of Common Warrants by 50% post-dividend).

 

In order to facilitate the Note Restructure and Series A Preferred Restructure, the undersigned agrees, and hereby votes all shares of voting securities owned by the undersigned in favor of, the following:

1.	The undersigned consents to the amendment of Section 7 of the Note to provide for a conversion price of $0.025 per share.

2.

Subject to the conditions set forth below, the undersigned agrees to convert the entire outstanding principal balance together with all accrued and unpaid interest thereon due to the undersigned under the Note into shares of common stock (the “Conversion Shares”) at a conversion price of $0.025 per share.

3.	The undersigned agrees to defer payment of accrued interest due under the Note and payable on or before January 31, 2012.

4.	The undersigned consents to the increase of the Company’s authorized capital shares to consist of 750,000,000 shares of common stock (the “Share Increase”).

5.	The undersigned consents to the Company undertaking a reverse split of all outstanding securities by a factor of up to one-for-three hundred (1-for-300)  (“the Reverse Split”), at the discretion of the Board of Directors, when and as determined by the Board of Directors.

6.

Upon conversion of the Notes by the undersigned, the undersigned hereby releases, acquits and forever discharges GVC from any claim, debt, demand, liability or obligation arising from or in connection with the Collateral Agent Agreement and any act or omission taken in its capacity as Collateral Agent.  The undersigned hereby authorizes and instructs the Collateral Agent that, upon the consummation of the Note Restructure and the conversion of all outstanding Notes into shares of common stock, the Collateral Agent shall file and record a termination of the UCC-1 in the appropriate offices; and upon such recordation, the Collateral Agent shall be discharged as Collateral Agent and released from any further obligation under the Collateral Agent Agreement.

The foregoing agreements are subject to and conditioned upon (i) the consent of the holders of the Notes to the Note Restructure in sufficient number to result in all outstanding Notes participating in the Note Restructure under the terms of the Notes and Collateral Agent Agreement; and (ii) the consent of the holders of the Series A Preferred Stock to the Series A Preferred Restructure in sufficient number to result in all outstanding shares of Series A Preferred participating in the Series A Preferred Restructure.

In consideration of the foregoing agreements, the undersigned hereby releases, acquits and forever discharges the Company, together with its officers, directors, agents, representatives, attorneys, affiliates, both past and present, from any claim, demand, obligation or liability, known or unknown, direct or indirect, arising out of or in connection with the Note Restructure, Series A Restructure, Share Increase or Reverse Split, as well as any act or omission in connection therewith.

The undersigned has been provided with information and materials concerning the subject matter of the Note Restructure and Series A Restructure.  In addition, the undersigned has had access to the Company’s reports and information filed with the United States Securities and Exchange Commission (“SEC Documents”).  The information and materials provided by the Company and the SEC Documents are referred to herein as the “Documents.”  The undersigned has carefully reviewed and is familiar with all of the terms of the Documents.  The undersigned has been given access to full and complete information regarding the Company and has utilized such access to the undersigned’s satisfaction for the purpose of obtaining such information regarding the Company as the undersigned has reasonably requested; and, particularly, the undersigned has been given reasonable opportunity to ask questions of, and receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Conversion Shares and to obtain any additional information, to the extent reasonably available. The undersigned has relied on nothing other than the Documents (including any exhibits thereto) in deciding whether to convert the Notes into Conversion Shares.  Except as set forth in the Documents, no representations or warranties have been made to the undersigned by the Company, any selling agent of the Company, or any agent, employee, or affiliate of the Company or such selling agent. The undersigned, in reaching a decision to convert the Notes into Conversion Shares, has such knowledge and experience in financial and business matters that the undersigned is capable of reading and interpreting financial statements and evaluating the merits and risk of the agreements contained herein and has the net worth to undertake such risks.

Sincerely,

 

By: _______________________________

       (Signature)

By: _______________________________

       (Joint Holder Signature)

Print Name: ________________________

Date:  _____________________________

Note Amount: ______________________