Exhibit 10.7
 
WAIVER AND FIRST AMENDMENT TO PROMISSORY NOTE
 
This Waiver and First Amendment ("Amendment") to that certain Promissory Note
dated December 31, 2010, issued by AeroGrow International, Inc. (“Maker”) to
Main Power Electrical Factory Ltd (“Holder”), is made and effective as of the
31st day of December, 2011 (“Effective Date”).

WHEREAS, Maker issued to Holder a Promissory Note (the “Note”) dated December
31, 2010 in the original principal amount of US$2,162,046.02; and

WHEREAS, Maker has made interest payments to Holder and the amount outstanding
under the Note is US$2,162,046.02 as of December 31, 2011; and

WHEREAS, a default is in existence under the Note as a result of Maker’s breach
of Paragraph 2 and Paragraph 6(e) of the Note (the “Existing Defaults”), and
Maker has requested Holder to waive the Existing Defaults; and

WHEREAS, the parties desire to amend the Note as hereinafter set forth;

NOW THEREFORE, in consideration of the mutual conditions and agreements set
forth in the Note and this Amendment, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

1.           Amendment. Subject to the conditions set forth below, effective as
of the Effective Date, the Note is amended as follows:

(a)           Paragraph 2 of the Note is deleted in its entirety and replaced by
the following:

“2.          Payments of Interest and Principal

(a)             Payment Dates

Payments of interest and principal shall be made monthly on the 15th day of each
month beginning in January 2012 and continue until such time as the principal
balance and all accrued interest has been repaid in full, as provided in
Schedule 1 attached hereto.  In the event that the 15th day of a month falls on
a Saturday, Sunday, or other day when banks in the United States are closed for
business, then the payment for that month will be due on the next day that banks
in the United States are open for business. Time shall be of the essence of this
Amendment and the Note.

(b)             Payment Schedule

Subject to Paragraph 2(c) below, payments of interest and principal shall be
made by Maker to Holder in accordance with the attached Schedule 1.

(c)             Inventory-Based Payments

In the event that inventory held as collateral for this Note (the “Collateral
Inventory”) is purchased by Maker from Holder, including but not limited to the
component parts inventory that is used by Holder in manufacturing the finished
goods that are purchased by Maker, then the amount of such Collateral Inventory
purchased will reduce the outstanding principal amount of this Note.

In the event that prepayments of principal are made pursuant to Paragraph 2(c)
of this Note, then the amount of future interest payment due pursuant to
Schedule 1 shall be adjusted to reflect the actual amount of principal
outstanding and for the actual number of days in the period for which interest
is due, as further detailed in Paragraph 4 hereto.
 
 
 

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  It is further agreed that, with reference to Paragraph 3 (Inventory
Ownership) in the Agreement Relating to Certain Obligations owed by AeroGrow
International, Inc. to Main Power Electrical Factory Ltd. dated 31 December
2010, the amount of inventories level reduction pursuant to Paragraph 2(c) of
this Note will reduce the principal amount outstanding under this Note.  Any
such principal amount reduction pursuant to Paragraph 2(c) of this Note will
also reduce the monthly principal repayment amounts set out in Schedule 1 hereto
in reverse order, such that the reductions will first be applied to installment
number 48 on Schedule 1.  When installment number 48 has been reduced to zero,
then any further reductions will be made to installment number 47, and so
on.  For the avoidance of doubt and as an example, if the Maker uses
US$200,000.00 of inventory held as collateral for this Note, then principal
repayment for installment number 48 of Schedule 1 would be reduced from
US$120,046.02 to zero, principal repayment for installment number 47 would be
reduced from US$75,000.00 to zero, and principal repayment for installment
number 46 would be reduced from US$75,000.00 to $70,046.02.”

(b)           Schedule 1 attached to this Amendment is hereby made a part of the
Note as of the Effective Date.

2.           Waiver.  Holder hereby waives the Existing Defaults as of the
Effective Date.

3.           Other Note Terms and Conditions.  The terms and conditions set
forth in this Amendment shall modify and supersede only those terms and
conditions of the Note that are specifically mentioned herein but not further or
otherwise, and the waiver herein is a limited waiver and shall not be deemed to
be a consent to the modification or waiver of any other term or condition of the
Note or any future breach of the Note.  Except as expressly modified and
superseded by this Amendment, the terms and conditions of the Note are ratified
and confirmed and shall continue in full force and effect.
 
 
Accepted and agreed to as of December 31, 2011:
 
 
AEROGROW INTERNATIONAL, INC.
     
/s/ H. MacGregor Clarke
By:
H. MacGregor Clarke
Title:
Chief Financial Officer
       
MAIN POWER ELECTRICAL FACTORY LTD
     
/s/ Wanald Wun
By:
Wanald Wun
Title:
Financial Controller

 
 
 

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Schedule 1
 
No. of installment
 
Payment Due Date
 
Beginning Principal Outstanding
   
Principal Repayment
   
Interest Payment
   
Total Installment Paid
   
Ending Principal Outstanding
         
USD
   
USD
   
USD
   
USD
   
USD
                                      1  
15-Jan-12
    2,162,046.02       1,000.00       14,413.64       15,413.64      
2,161,046.02   2  
15-Feb-12
    2,161,046.02       1,000.00       14,406.97       15,406.97      
2,160,046.02   3  
15-Mar-12
    2,160,046.02       1,000.00       14,400.31       15,400.31      
2,159,046.02   4  
15-Apr-12
    2,159,046.02       1,000.00       14,393.64       15,393.64      
2,158,046.02   5  
15-May-12
    2,158,046.02       1,000.00       14,386.97       15,386.97      
2,157,046.02   6  
15-Jun-12
    2,157,046.02       1,000.00       14,380.31       15,380.31      
2,156,046.02   7  
15-Jul-12
    2,156,046.02       1,000.00       14,373.64       15,373.64      
2,155,046.02   8  
15-Aug-12
    2,155,046.02       1,000.00       14,366.97       15,366.97      
2,154,046.02   9  
15-Sep-12
    2,154,046.02       1,000.00       14,360.31       15,360.31      
2,153,046.02   10  
15-Oct-12
    2,153,046.02       1,000.00       14,353.64       15,353.64      
2,152,046.02   11  
15-Nov-12
    2,152,046.02       1,000.00       14,346.97       15,346.97      
2,151,046.02   12  
15-Dec-12
    2,151,046.02       1,000.00       14,340.31       15,340.31      
2,150,046.02   13  
15-Jan-13
    2,150,046.02       50,000.00       14,333.64       64,333.64      
2,100,046.02   14  
15-Feb-13
    2,100,046.02       50,000.00       14,000.31       64,000.31      
2,050,046.02   15  
15-Mar-13
    2,050,046.02       50,000.00       13,666.97       63,666.97      
2,000,046.02   16  
15-Apr-13
    2,000,046.02       50,000.00       13,333.64       63,333.64      
1,950,046.02   17  
15-May-13
    1,950,046.02       50,000.00       13,000.31       63,000.31      
1,900,046.02   18  
15-Jun-13
    1,900,046.02       30,000.00       12,666.97       42,666.97      
1,870,046.02   19  
15-Jul-13
    1,870,046.02       30,000.00       12,466.97       42,466.97      
1,840,046.02   20  
15-Aug-13
    1,840,046.02       30,000.00       12,266.97       42,266.97      
1,810,046.02   21  
15-Sep-13
    1,810,046.02       30,000.00       12,066.97       42,066.97      
1,780,046.02   22  
15-Oct-13
    1,780,046.02       30,000.00       11,866.97       41,866.97      
1,750,046.02   23  
15-Nov-13
    1,750,046.02       30,000.00       11,666.97       41,666.97      
1,720,046.02   24  
15-Dec-13
    1,720,046.02       50,000.00       11,466.97       61,466.97      
1,670,046.02   25  
15-Jan-14
    1,670,046.02       75,000.00       11,133.64       86,133.64      
1,595,046.02   26  
15-Feb-14
    1,595,046.02       75,000.00       10,633.64       85,633.64      
1,520,046.02   27  
15-Mar-14
    1,520,046.02       75,000.00       10,133.64       85,133.64      
1,445,046.02   28  
15-Apr-14
    1,445,046.02       75,000.00       9,633.64       84,633.64      
1,370,046.02   29  
15-May-14
    1,370,046.02       50,000.00       9,133.64       59,133.64      
1,320,046.02   30  
15-Jun-14
    1,320,046.02       50,000.00       8,800.31       58,800.31      
1,270,046.02   31  
15-Jul-14
    1,270,046.02       50,000.00       8,466.97       58,466.97      
1,220,046.02   32  
15-Aug-14
    1,220,046.02       50,000.00       8,133.64       58,133.64      
1,170,046.02  

 
 
 

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No. of installment
 
Payment Due Date
 
Beginning Principal Outstanding
   
Principal Repayment
   
Interest Payment
   
Total Installment Paid
   
Ending Principal Outstanding
  33  
15-Sep-14
    1,170,046.02       50,000.00       7,800.31       57,800.31      
1,120,046.02   34  
15-Oct-14
    1,120,046.02       50,000.00       7,466.97       57,466.97      
1,070,046.02   35  
15-Nov-14
    1,070,046.02       50,000.00       7,133.64       57,133.64      
1,020,046.02   36  
15-Dec-14
    1,020,046.02       75,000.00       6,800.31       81,800.31       945,046.02
  37  
15-Jan-15
    945,046.02       75,000.00       6,300.31       81,300.31       870,046.02  
38  
15-Feb-15
    870,046.02       75,000.00       5,800.31       80,800.31       795,046.02  
39  
15-Mar-15
    795,046.02       75,000.00       5,300.31       80,300.31       720,046.02  
40  
15-Apr-15
    720,046.02       75,000.00       4,800.31       79,800.31       645,046.02  
41  
15-May-15
    645,046.02       75,000.00       4,300.31       79,300.31       570,046.02  
42  
15-Jun-15
    570,046.02       75,000.00       3,800.31       78,800.31       495,046.02  
43  
15-Jul-15
    495,046.02       75,000.00       3,300.31       78,300.31       420,046.02  
44  
15-Aug-15
    420,046.02       75,000.00       2,800.31       77,800.31       345,046.02  
45  
15-Sep-15
    345,046.02       75,000.00       2,300.31       77,300.31       270,046.02  
46  
15-Oct-15
    270,046.02       75,000.00       1,800.31       76,800.31       195,046.02  
47  
15-Nov-15
    195,046.02       75,000.00       1,300.31       76,300.31       120,046.02  
48  
15-Dec-15
    120,046.02       120,046.02       800.31       120,846.33       -