ex10-4.htm


    Exhibit
10.4

     

    PROMISSORY
NOTE

                             

    
      	US$250,000.00    	September 1,
      2009


    

     

    1.        
Principal.

     

    For value received, in
installments as herein provided, AEROGROW INTERNATIONAL, INC. (“Maker”),
promises to pay to the order of LAZARUS INVESTMENT PARTNERS LLLP, or assignee
(“Holder”), the principal sum of Two Hundred and Fifty Thousand U.S. Dollars
($250,000.00), together with accrued interest from the date of disbursement
hereunder on the unpaid principal balance at the rate of fifteen percent (15.0%)
per annum.  As used herein, the term “Holder” shall mean Holder and any
subsequent holder of this Note (this “Note”), whichever is applicable from time
to time.  

     

    2.        
Payment of Interest and
Principal.

     

    (a)       
Interest

     

    Payment of interest shall
be made concurrently with the payment of principal, in an amount equal to the
accrued interest due on the portion of the principal balance being paid. 


     

    (b)      
Principal Payments

     

    Maker shall pay the
principal balance of this Note in full on November 16, 2009.

     

    3.        
Warrants.

     

    Maker shall issue to the
Holder a warrant to purchase 250,000 common shares of AeroGrow International,
Inc. at a purchase price of $0.25 per common share.  The terms and
conditions of the warrant will be documented in a Common Stock Purchase Warrant
to be issued by the Maker in favor of the Holder, in a form and substance
mutually agreed between the parties.

     

    4.        
Prepayment.

     

    This Note may be prepaid
in full or in part, at any time and from time to time, without premium or
penalty.  Maker shall have no right to reborrow any such prepaid amounts.
 All prepayments shall be applied by Holder first, to the payment of
accrued and unpaid interest; and last to the payment of principal.

     

    5.        
Interest Rate
Calculation.

     

    Throughout the term of
this Note, interest shall be calculated on the basis of a 365-day year, but
shall be computed for the actual number of days in the period for which interest
is charged.  If any payment of interest or principal to be made by Maker
shall become due on a day other than a Business Day (as hereinafter defined),
such payment shall be made on the next succeeding Business Day and, in the case
of a principal payment, such extension of time shall be included in computing
any interest with respect to such payment.  As used herein, the term
“Business Day” shall mean a day other than Saturday or Sunday on which banks are
open for business in Boulder, Colorado.

     

    6.        
Manner of Payment.

     

    Principal and interest are
payable in lawful money of the United States of America.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    7.        
Event of Default.

     

    The occurrence of any of
the following shall be deemed to be an event of default (“Event of Default”)
hereunder:

     

    
      (a)           Maker’s
failure to pay any payment of principal or interest due pursuant to the terms
hereof within ten (10) Business Days after receipt of notice from Holder of a
breach of the obligation to make such payment;

       

      (b)           any
indebtedness for money borrowed by Maker in an aggregate principal amount in
excess of US$250,000 is not paid at final maturity or upon acceleration, if such
acceleration is not cured or rescinded;

       

      (c)           a
decree or order by a court having jurisdiction in the premises shall have been
entered adjudging Maker bankrupt or insolvent, or approving as properly filed a
petition seeking liquidation or reorganization of Maker under any applicable
bankruptcy, insolvency, reorganization or other similar law, and such decree or
order shall have continued unvacated and unstayed for a period of 90 days; an
involuntary case shall be commenced under any applicable bankruptcy, insolvency,
reorganization or other similar law in respect of Maker and shall continue
undismissed for a period of 90 days or an order for relief in such case shall
have been entered and such order shall have remained in force unvacated and
unstayed for a period of 90 days; or a decree or order of a court having
jurisdiction in the premises shall have been entered for the appointment on the
ground of insolvency or bankruptcy of a receiver, custodian, liquidator, trustee
or assignee in bankruptcy or insolvency of Maker or of its property, or for the
winding up or liquidation of its affairs, and such decree or order shall have
remained in force unvacated and unstayed for a period of 90 days;
or

       

      (d)           Maker
shall institute proceedings to be adjudicated a voluntary bankrupt, shall
consent to the filing of a bankruptcy proceeding against it, shall file a
petition or answer or consent seeking liquidation or reorganization under any
applicable bankruptcy, insolvency, reorganization or other similar law, shall
consent to the filing of any such petition or shall consent to the appointment
on the ground of insolvency or bankruptcy of a receiver or custodian or
liquidator or trustee or assignee in bankruptcy or insolvency of it or of its
property, or shall make a general assignment for the benefit of
creditors.

       

    

    8.        
Remedies.

     

    Upon the occurrence of an
Event of Default and without demand or notice, Holder shall have the option to
declare the entire principal balance of this Note together with all accrued and
unpaid interest thereon immediately due and payable; provided, however, that
upon the occurrence of an Event of Default under clauses (c) or (d) of
Paragraph 7 above, the entire principal balance of this Note together with
all accrued and unpaid interest thereon shall immediately become due and payable
without any action on the part of Holder.  No delay or omission on the part
of Holder in exercising any right under this Note shall operate as a waiver of
such right.

     

    9.        
Waiver.

     

    Maker hereby waives
diligence, presentment, protest and demand, notice of protest, dishonor and
nonpayment of this Note, and expressly agrees that, without in any way affecting
the liability of Maker hereunder, Holder may extend any maturity date or the
time for payment of any installment due hereunder, accept additional security,
release any party liable hereunder and release any security now or hereafter
securing this Note.  Maker further waives, to the fullest extent permitted
by law, the right to plead any and all statutes of limitations as a defense to
any demand on this Note, or on any deed of trust, security agreement, lease
assignment, guaranty or other agreement now or hereafter securing this
Note.

     

    10.      
Severability.

     

    Every provision of this
Note is intended to be severable.  In the event any term or provision
hereof is declared by a court of competent jurisdiction to be illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
balance of the terms and provisions hereof, which terms and provisions shall
remain binding and enforceable.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    11.      
Interest Rate
Limitation.

     

    In no event shall the rate
of interest payable on the indebtedness evidenced hereby exceed the maximum rate
permissible under applicable law.  If the rate of interest payable
hereunder is ever reduced as a result of this Paragraph 11 and at any time
thereafter the maximum rate permitted by applicable law shall exceed the rate of
interest  provided for in this Note, then the rate provided for in this
Note shall be increased to the maximum rate provided by applicable law for such
period as is required so that the total amount of interest received by Holder is
that which would have been received by Holder but for the operation of the first
sentence of this Paragraph 11.

     

    12.      
Number and Gender.

     

    In this Note the singular
shall include the plural and masculine shall include the feminine and neuter
gender, and vice versa, if the context so requires.

     

    13.       Headings.

     

    Headings at the beginning
of each numbered Paragraph of this Note are intended solely for convenience and
are not to be deemed or construed to be a part of this Note.

     

    14.      
Choice of Law.

     

    This Note shall be
governed by and construed in accordance with the laws of the State of
Colorado.

     

     

     

    “Maker”

     

    AEROGROW INTERNATIONAL,
INC. 

    


 

    
      By:           /s/ H. MacGregor
Clarke

      Name:      H.
MacGregor Clarke

      Title:        Chief
Financial Officer