ex10-3.htm


    Exhibit
10.3

     

    PROMISSORY
NOTE

     

    US$180,000.00                                                                                                November 1,
2009

     

    
      	
               
      

            	
              1.

            	
              Principal.

            


    

     

    For value
received, in installments as herein provided, AEROGROW INTERNATIONAL, INC.
(“Maker”),
promises to pay to the order of GRAD WURN LLC, or assignee (“Holder”), the
principal sum of One Hundred Eighty Thousand U.S. Dollars ($180,000.00),
together with accrued interest from the date of disbursement hereunder on the
unpaid principal balance at the rate of twenty percent (20.0%) 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 February 1,
2010.

     

    (c)           Guarantor

     

    Payment
of principal and interest is guaranteed by Jack J. Walker
(“Guarantor”).

     

    
      	
               
      

            	
              3.

            	
              Warrants.

            


    

     

    Maker
shall issue to the Holder a warrant to purchase 180,000 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:                                              
            


    Name:  H.
MacGregor Clarke

    Title:  Chief
Financial Officer

    


    “Guarantor”

    


    JACK
J. WALKER

    


    


    By:                                                         

    Name: Jack
J. Walker