EXHIBIT 10.8
 
PLACEMENT AGREEMENT
 
May 27, 2005
 
Keating Securities, LLC
5251 DTC Parkway, Suite 1090 Greenwood Village, CO 80111
 

 
Re:
Private placement offering of up to $3,000,000 of securities ("Offering"),
consisting of up to 300 units at an offering price of $10,000 per unit, each
unit comprised of a 10% unsecured convertible promissory note of AeroGrow
International, Inc. in the principal amount of $10,000 and 2,000 five-year
warrants, each warrant providing for the purchase of one share of the Company's
common stock at the exercise price of $5.01 per share

 
Dear Sirs:
 
AeroGrow International, Inc. ("Company") proposes to offer, offer for sale and
sell up to $3,000,000 of securities, consisting of 300 units ("Units") at an
offering price of $10,000 per Unit, to accredited investors. Each Unit will be
comprised of a 10% unsecured convertible promissory note in the principal amount
of $10,000 due June 30, 2006 ("Note") and 2,000 five-year warrants, each warrant
providing for the purchase of one share of the Company's common stock at the
exercise price of $5.01 per share ("Warrants").
 
In the event the Company completes a registered public offering of its
securities ("Primary Offering") under the Securities Act of 1933, as amended
("Securities Act") on or before June 30, 2006, the principal amount of the Note
will be convertible, at the holder's election, into the same securities
(including securities which are part of any unit) and at the same price as those
being offered in the Primary Offering. The Company agrees to register for
re-offer and re-sale, the securities into which the Note may be converted
("Conversion Securities"), on the registration statement filed by the Company
with respect to the securities being offered in the Primary Offering. The Note
may be converted, in whole or in part, by the Holder at any time commencing on
the earlier of: (i) the date 45 days after the effectiveness of the Primary
Offering, or (ii) the date thirty days prior to the maturity date of the Note
("Commencement Date"), and ending on the date the Note is paid in full by the
Company. The Company may not redeem the Note and will have no right to pre-pay
the Note without the prior consent of the holder.
 
The Company agrees to file, on one occasion, a registration statement under the
Securities Act to register the common stock underlying the Warrants ("Underlying
Common Stock") and, to the extent the Company files a registration statement
with respect to the Primary Offering, the Underlying Common Stock shall be
included on such registration statement. The Warrants will be exercisable, in
whole or in part, beginning on the earlier of (i) the date 45 days after the
effectiveness of the Primary Offering, (ii) the date any other registration
statement on which Underlying Common Stock is registered for re-offer and
re-sale are included becomes effective; or (iii) the maturity date of the Note
("Commencement Date"), and ending on the fifth anniversary of the final closing
of the Offering.
 

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The Company, the Units, the Note and the Warrants will be more fully described
in a private placement memorandum to completed by the Company prior to
commencement of the Offering and any supplements or amendments thereto (the
"Memorandum"). The Company desires to employ Keating Securities, LLC (the
"Placement Agent") as its exclusive placement agent to offer, offer for sale and
sell the Units subject to all of the terms and conditions of this Agreement and
subject to the terms and conditions contained in the Memorandum.
 
For purposes of this Agreement, the terms and conditions of the Units and
underlying Note and Warrants assume that the Company has completed, and
therefore gives effect to, the proposed 1-for-5 reverse stock split of the
Company's common stock. The Company agrees that it will complete the reverse
stock split prior to the initial closing of this Offering.
 
1.    Description of Offering and Appointment of Agent.
 
(a)     Appointment. On the basis of the representations, warranties and
covenants herein contained, but subject to the terms and conditions herein set
forth, the Placement Agent is hereby appointed the exclusive agent of the
Company during the Offering Period (as defined herein) for the purpose of
finding subscribers for sale of up to $3,000,000 of Units on a "best efforts"
basis. The Placement Agent may, in its sole discretion, appoint participating
agents to offer and sell the Units as subagents of the Placement Agent (the
"Participating Agents") pursuant a certain dealer agreement between the
Placement Agent and each Participating Agent ("Dealer Agreement"). A minimum
purchase of three Unit per investor is required, unless the Company and
Placement Agent agree to allow a minimum purchase of one or two Units per
investor, provided, in no case, shall any fractional Units be sold in the
Offering. The Placement Agent acknowledges that the Company may limit its
acceptance of subscriptions in any manner it deems prudent in order to provide
for the timely use of subscriber funds and may reject any subscription for any
reason, and the Placement Agent agrees that any such rejection of a subscription
obtained by the Placement Agent or by the Participating Agents shall be deemed
not to be a sale made by the Placement Agent or by the Participating Agents. The
Placement Agent further acknowledges that (i) all wire transfers of subscription
funds will be sent to a segregated account maintained by the Company at Steele
Street State Bank ("Segregated Account"), (ii) all subscribers' checks shall be
made payable to and deposited into the Segregated Account, (iii) all
subscribers' check will be transmitted directly to Steele Street State Bank by
noon of the next business day after receipt by the Placement Agent or the
Participating Agents, (iv) all executed subscription documents shall be promptly
sent to the Placement Agent, (v) no funds shall be disbursed from the Segregated
Account until such time as the subscription has been accepted by the Company and
approved by the Placement Agent, and (vi) Steele Street State Bank shall
disburse funds from the Segregated Account only upon the written direction
signed by the Company and the Placement Agent.
 
(b)     Offering Period. The "Offering Period" shall mean that period during
which the Units are offered for sale, commencing on the date of the Memorandum
and continuing for forty-five (45) days thereafter, or such later date mutually
agreed to by the Company and Placement Agent but not later than August 15, 2005
(the "Termination Date"); provided, however, that the Offering Period shall in
all events terminate upon the sale of all of the Units.
 
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(c)     Acceptance. The Placement Agent hereby accepts such agency and agrees on
the terms an conditions herein set forth to use the Placement Agent's best
efforts during the Offering Period to find subscribers for the Units.
 
(d)     Private Placement Offering. The Offering will not be registered under
federal securities laws or the securities laws of any state. The Company will
rely upon exemptions from registration under federal securities laws and state
securities acts (the "State Acts"). With respect to federal securities laws, the
Company will rely on one or more exemptions from registration for sales to
accredited investors (as defined in Section 2(15) of the Securities Act and Rule
501 promulgated thereunder), including, without limitation, exemptions from
registration provided by Sections 3(b), 4(2) and/or 4(6) of the Securities Act,
and Rule 506 of Regulation D, promulgated as part of the rules and regulations
under the Securities Act (the "Rules and Regulations"). With respect to the
State Acts, the Company will not be subject to them pursuant to preemption based
on Section 18 of the Securities Act or will rely upon limited offering
exemptions of certain states approved by the Company. The Company shall use its
best efforts to qualify or register the Units for sale, or exempt the Units from
qualification of registration, under the State Acts as requested by the
Placement Agent, and the Company shall continue such qualifications in effect
for so long as may be necessary to complete the Offering. The Company or its
counsel shall provide Placement Agent with all applications, forms and documents
filed in each jurisdiction where the Units are to be qualified or registered or
qualified or offered in an exempt transaction under the State Acts. The Offering
of the Units shall be at the offering price and upon the terms and conditions
set forth in the Memorandum and the subscription agreement which is included in
the subscription documents to be delivered with the Memorandum, and on the basis
of the representations and warranties therein contained, and subject to the
terms and conditions herein set forth.
 
(e)     Closing. All cash proceeds from the subscriptions (the "Funds") will be
deposited into the Segregated Account maintained by the Company at Steele Street
State Bank. After the Company's acceptance of subscriptions in such amount as
mutually determined by the Company and the Placement Agent, and subject to the
Placement Agent's approval of such subscriptions, on a date to be determined by
the Company and Placement Agent (the "First Closing Date"), a closing will take
place at the offices of the Company's legal counsel or another location as
determined by the Company, and the Notes and Warrants evidencing the
subscriptions in the forms shown in the Memorandum will be duly executed and
issued by the Company in accordance with the terms of the Memorandum and
promptly delivered to the investors (the "First Closing"). If the First Closing
Date shall precede the Termination Date, all further proceeds from subscriptions
will be deposited into the Segregated Account and any additional closings will
take place at the offices of the Company's legal counsel or another location as
determined by the Company and the Placement Agent (the "Additional Closings"),
on a date or dates determined by the Company and the Placement Agent (the
"Additional Closing Date(s)"). The Notes and the Warrants will be executed,
issued and delivered in the same manner as at the First Closing.
 
(f)     Other Covenants. In connection with the Offering, the Company and
Placement Agent each agree as follows: (i) the Units will be offered and sold
only to accredited investors pursuant to the registration exemption provided by
Sections 3(b), 4(2) and/or 4(6) of the Securities Act and Rule 506 of Regulation
D, as and to the extent applicable to the Offering, and will otherwise comply
with the applicable laws and regulations of any jurisdictions in which the Units
are offered or sold, (ii) neither the offer, sale nor delivery of the Units in
conformity with the terms hereof will violate Section 5 of the Securities Act,
as currently in effect, and (iii) neither the Company nor Placement Agent has
taken, nor will either party take any action which conflicts with the conditions
and requirements of, or which would make unavailable with respect to the sale of
the Units, the exemptions from registration available pursuant to Rule 506 of
Regulation D or Section 3(b), 4(2) and/or 4(6) of the Securities Act and neither
the Company nor Placement Agent knows of any reason why any such exemption would
be otherwise unavailable to it.
 
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(g)     Information to be Supplied. The Company will furnish or cause to be
furnished to Placement Agent such information as Placement Agent reasonably
believes appropriate to its assignment or necessary in connection with its
assistance in the preparation of, review of, or inclusion in, the Memorandum. It
is also understood that the Company may make available to Placement Agent and
the offerees of the Units additional material, data or other information
relating to the Company to the extent such information can be obtained without
unreasonable effort or expense and is not otherwise confidential or a trade
secret of the Company (collectively, as limited the "Company Data"). The Company
recognizes and confirms that (a) in performing the services contemplated by this
Agreement, Placement Agent will use and rely primarily on the Memorandum and
Company Data made available to Placement Agent and on other information
available from generally recognized public sources without having independently
verified the same; (b) the contents of the Memorandum and the Company Data are
the sole responsibility of the Company, and Placement Agent does not assume any
responsibility for the accuracy or completeness of the Memorandum or the Company
Data, and will not undertake to verify independently any of their accuracy or
completeness; and (c) Placement Agent will furnish a copy of the Memorandum, and
each supplement or amendment thereto, to each purchaser of Units, and Placement
Agent will not employ any written material other than the Memorandum, each
supplement and amendment thereto and the Company Data.
 
2.    Representations and Warranties of the Company. The Company represents and
warrants to, and agrees with, the Placement Agent and the Participating Agents
(if any) as follows:
 
(a)     The Company has been duly incorporated, and validly exists as a
corporation in good standing under the laws of the state of Nevada.
 
(b)     The Company has complied or will comply with Sections 3(b), 4(2) and/or
4(6) of the Securities Act, with all of the provisions of the Rules and
Regulations promulgated under the Securities Act, specifically including the
provisions of Regulation D and Rule 506 thereunder, applicable to them in
connection with the offering and sale of the Units, and with all States Acts and
regulations applicable to them in connection with the offering and the sale of
the Units.
 
(c)     The Memorandum, and any amendments or supplements thereto, as of the
date hereof, and at all subsequent times through the First Closing Date and any
Additional Closing Dates, shall in all material respects conform to all
applicable provisions of the Securities Act, the Rules and Regulations and the
State Acts, and shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; provided however, that this
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Placement Agent and any Participating Agents for
use with reference to the Placement Agent and any Participating Agents in
connection with preparation of the Memorandum.
 
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(d)     The execution on performance of this Agreement, and the consummation of
the transactions contemplated hereby, have been duly authorized by the Company
and, at the time of its execution and performance, shall not constitute or
result in any breach or violation (other than any breach or violation which
shall have been waived or consented to in writing) of any of the terms,
provisions or conditions of, or constitute a default under, any indenture,
mortgage, deed of trust, note, contract, commitment, instrument or document to
which it or any of its properties is subject, the Articles of Incorporation or
Bylaws or corresponding documents of the Company, or any order, arbitration
award, or judgment, of any court of governmental agency or body having
jurisdiction over the Company or any of its activities or properties; and no
consent, approval, authorization or order of any court or governmental agency or
body is required for the consummation of the transactions contemplated hereby.
 
(e)     The Units, the Notes, the Warrants and the Agent Warrants shall be duly
authorized and shall be validly issued and binding obligations of the Company,
and shall conform to the description thereof contained in the Memorandum.
 
(f)     The Company has not been subject to any order, judgment or decree of any
court of competent jurisdiction temporarily, preliminary or permanently
enjoining such person for failing to comply with Section 503 of Regulation D.
 
(g)     The Company represents and warrants that at all times from the
respective dates that the Memorandum (including, without limitation, any
supplement or amendment thereto) and the Company Data, if any, are furnished or
made available by the Company to Placement Agent or, either directly or through
Placement Agent, to offerees or any of their representatives, such Memorandum
(including, without limitation, any supplement or amendment thereto) and Company
Data will not, taken separately or in any combination as provided to Placement
Agent or any offeree or its representatives, contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading,
 
(h)     The Company will furnish Placement Agent from time to time, such number
of copies of the Memorandum and Company Data, any exhibits thereto and
agreements and documents referred to therein, as Placement Agent may reasonably
request.
 
(i)     If any event shall occur or condition exist as a result of which it is
necessary or advisable, in the opinion of the Company or Placement Agent, to
amend or supplement the Memorandum in order that the Memorandum will not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statement therein not misleading in light of the
circumstances existing at the time it is delivered to prospective purchasers,
the Company will forthwith prepare and furnish to Placement Agent such number of
copies as Placement Agent may reasonably request of an amendment or supplement
to the Memorandum (in form and substance satisfactory to Placement Agent and its
counsel) that will ensure that the Memorandum does not contain any misstatements
or omissions and is not in any respect misleading and provide the same to
offerees.
 
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(j)     The Company will advise Placement Agent promptly of (A) the occurrence
of any event or the existence of any condition known to the Company referred to
in Section 2(i) hereof; (B) the receipt by the Company of any communication,
stop order or any order from the SEC, any state securities commissioner or any
other domestic or foreign securities or financial regulatory authority or
self-regulatory organization concerning the offering of the Units; and (C) the
commencement of any lawsuit or proceeding to which the Company is a party
relating to the Units or the Offering. The Company shall make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof as promptly as possible.
 
(k)     The Company will (A) make available to each offeree of the Units the
Memorandum; and (B) provide each offeree the opportunity to ask questions of,
and receive answers from, the officers and employees of the Company concerning
the terms and conditions of the Offering and to obtain any other additional
information about the Company and the Units to the extent the officers and
employees of the Company possess the same or can acquire it without unreasonable
effort or expense and it is not otherwise confidential or trade secret
information. The Company may require appropriate confidentiality and
non-disclosure agreements as it is advised by counsel prior to the disclosure of
any information not otherwise contained in the Memorandum.
 
(l)     The Company is not in default in the performance or observance of any
material obligation (A) under its charter or its by-laws, or any indenture,
mortgage, contract, purchase order or other agreement or instrument to which the
Company is a party or by which it or any of its property is bound or affected;
or (B) with respect to any order, writ injunction or decree of any court of any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, and there exists no
condition, event or act which constitutes, nor which after notice, the lapse of
time or both, could constitute a default under any of the foregoing, which in
either case would have a material adverse effect on the current business of the
Company.
 
(m)     The Company has full right, power and authority to execute and deliver
this Agreement, and any document, certificate or instrument required hereunder
or to be executed or delivered at any Closing in connection with the Offering
(collectively, the "Documents"), and to perform all of its obligations hereunder
and thereunder or contemplated hereby or thereby. The Documents have been, or
will be, duly executed and delivered by the Company and the execution and
delivery by the Company of the Documents and the performance of all of its
obligations have been duly authorized by all requisite corporate action by the
Company, and each Document (assuming the due authorization and execution of the
other parties thereto) executed and delivered and obligation performed
constitutes, or will constitute, the legal, valid and binding obligation of the
Company enforceable in accordance with its respective terms.
 
(n)     The (A) authorization, execution, delivery and performance of the
Documents; and (B) authorization, issuance, sale and delivery of the Units, the
Note, the Warrants and the Agent Warrants will not (1) violate any provision of
law or statute or any order of any court or other governmental agency applicable
to the Company; or (Z) conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute (with due notice or lapse of
time or both) a default under, or result in the creation of any material lien,
security interest, charge or encumbrance upon any of the properties or assets of
the Company under its charter or by-laws, or any indenture, mortgage, lease
agreement or other material agreement or instrument to which the Company is a
party or by which it or any or its property is bound or affected except for
violations, conflicts breaches and defaults that would not, individually or in
the aggregate materially and adversely affect the Company, Placement Agent or
any investor in this Offering.
 
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(o)     The Company has all requisite corporate power and authority to issue,
sell and deliver the Units, the Note, the Warrants and the Agent Warrants and
such issuances, sales and deliveries have been duly authorized by all requisite
corporate action of the Company and when so issued, sold and delivered the
Units, the Note, the Warrants and the Agent Warrants will be duly and validly
issued and outstanding, valid and binding obligations of the Company, fully paid
and nonassessable, with no personal liability attaching to the ownership thereof
and will be free and clear of all liens, charges, claims, encumbrances,
restrictions or preemptive or any other similar rights imposed by or through the
Company, except as waived prior to the Closing or as disclosed herein and as
shall be disclosed in the Memorandum, and the Company shall have paid all taxes,
if any, in respect of the issuance thereof. Assuming that the investors met such
suitability standards as are specified by the Company and the representations
and warranties of Placement Agent are accurate as to the method of offering, the
offer and sale of the Units, the Note, the Warrants and the Agent Warrants are
exempt from the registration requirements of the Securities Act and the rules
and regulations promulgated thereunder and the state "blue sky" laws and the
Units Securities will be issued in compliance with all applicable Federal and
state securities laws.
 
(p)     No permit, consent, approval, authorization, order of, or filing with,
any court or governmental authority is required in connection with the execution
and delivery by the Company of this Agreement or to consummate the Offering,
except that the offer and sale of the Units in certain jurisdictions may be
subject to the provisions of the securities or "blue sky" laws of such
jurisdictions and the federal securities laws.
 
(q)     There is no action suit proceeding before or by any United States court
or governmental agency or body, now pending or threatened, against or affecting
the Company, or any of its properties, which would reasonably be anticipated to
result in any material adverse change in the condition (financial or otherwise)
or in the earnings, current business, current business plan as described in the
Memorandum, properties or assets of the Company and its subsidiaries (a
"Material Adverse Effect").
 
(r)     The Company has (A) duly and timely filed all tax returns required to be
filed by the Company under applicable law that include or relate to the Company,
its income, assets, payroll, operations or business, which tax returns are true,
correct and complete in all material respects; (B) duly and timely paid, in
full, all taxes which are currently due and payable and for which the Company is
liable; or (C) adequately reserved for taxes that have not been paid or are in
dispute.
 
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(s)     The Company is not in default under any agreement, lease, license
contract or commitment, whether oral or written including, without limitation,
agreements with employees and consultants ("Company Agreements") to which the
Company is a party or by which any of its assets are bound, and there is no
event known to the Company that, with notice, or lapse of time, or both, would
constitute a default by any party to any Company Agreement or give any party the
right to terminate or modify any of the same and the Company has not received
notice that any party to any Company Agreement intends to cancel or terminate
any Company Agreement or to exercise or not to exercise any renewal or extension
options under any Company Agreement, except as to any events described in this
subparagraph that would not have a Material Adverse Effect.
 
(t)     The Company holds, and is in compliance with, all permits, licenses,
registrations and authorizations required by it in connection with the conduct
of the business of the Company as currently conducted under all Federal, state
and local laws, rules and regulations (the "Permits"), except where the failure
to be in compliance has not had, and is not reasonably expected to have, a
Material Adverse Effect.
 
(u)     The Company's financial statements, which may be unaudited, that will be
included in the Memorandum, will be true and correct and fairly present, in
accordance with generally accepted accounting principles, consistently applied,
the financial condition of the Company as of the dates specified.
 
(v)     Since December 31, 2004, the Company has conducted its business in the
ordinary course and has not suffered any Material Adverse Effect. The Company
does not have any liabilities or obligations (whether actual or accrued,
accruing or contingent, or otherwise) which, individually or in aggregate, would
be deemed material, other than those set forth in the balance sheet included
within the financial statements included in the Memorandum, and those incurred,
in the ordinary course of its business, since December 31, 2004.
 
(w)     The capitalization of the Company shall be correctly and completely
described in the Memorandum and, except as shall be disclosed therein, no person
has any right of first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by the Documents.
There are no outstanding options, warrants, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any person any right
to subscribe for or acquire, any shares of capital stock of the Company, or
contracts, commitments, understandings or arrangements by which the Company is
or may become bound to issue shares of capital stock, except as shall be
reflected in the Memorandum. All of the outstanding shares of capital stock of
the Company are validly issued, fully paid and nonassessable, have been issued
in compliance with all federal and state securities laws, and none of such
outstanding shares of capital stock was issued in violation of any pre-emptive
rights or similar rights to subscribe for or purchase securities.
 
(x)     The Company has rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
licenses and other similar rights that are necessary or material for use in
connection with its business (collectively, the "Intellectual Property Rights"),
except to the extent that the failure to have such Intellectual Property Rights,
individual or in the aggregate, would not have or reasonably be expected to
result in a Material Adverse Effect. No claims have been made or threatened by
any third party to the effect that Intellectual Property Rights used by the
Company violate or infringe upon the rights of such claimant. To the actual
knowledge of the Company, all of the Intellectual Property Rights are
enforceable and there is no existing infringement by another person of any of
the Intellectual Property Rights.
 
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(y)     At each Closing, the Company will deliver, or cause to be delivered, to
Placement Agent, in each case in form and substance satisfactory to Placement
Agent and its counsel: (A) a certificate of the Company signed by the Chief
Executive Officer and the Chief Financial Officer thereof certifying (1) that
the representations and warranties of the Company contained in this Agreement
are true and accurate in all material respects as of the Closing; and, (2) that
the representations and warranties of the Company contained in each subscription
agreement entered into with a prospective purchaser of the Units are true and
correct in all material respects as of the date of such certificate, except to
the extent any such representation or warranty was expressly made as of any
other date, in which case such representation and warranty was true anal correct
in all material respects as of such other date; and at the Closing, and (B) an
opinion of the Company's counsel, as to matters reasonably requested by the
Placement Agent. In rendering the opinions required herein, counsel and special
securities counsel to the Company may, as to factual matters, rely upon
certificates, statements, letters, representations and affidavits of officers of
the Company, its officers, any other records of the Company, certificates of
public officials, and letters of independent certified public accountants. With
respect to the opinions required herein, "known to such counsel", "to the best
knowledge of such counsel" or any like phrase or reference shall mean to the
best of knowledge of such counsel after due inquiry and investigation; "due
inquiry and investigation" shall include only (i) discussions, inquiries and
conferences with officials and agents of the Company occurring in connection
with such counsel's representation of the Company, (ii) review of certain
corporate records documents and proceedings of the Company as provided to such
counsel by the Company and (iii) review of files maintained by such counsel
relating to the Company; "due inquiry and investigation" shall not mean or imply
any independent verification of any factual matter of which such counsel becomes
aware as a result of the foregoing discussions, inquiries and reviews.
 
(z)     The Company further agrees that it will not consummate the Offering
unless it delivers or causes to be delivered the items described in Section 2(m)
to Placement Agent at each Closing. The consummation of the Offering and the
release of the investor funds from the Segregated Account shall be further
subject to any other conditions set forth in the Memorandum or the subscription
agreement entered into by each purchaser of Units.
 
(aa)     The Company will be responsible for and comply with all applicable
notification and fee requirements to qualify the offering and sale under the
state securities or "blue sky" laws of such jurisdiction in which any sales
pursuant to the offering may be transacted and as may otherwise be required or
as requested by Placement Agent provided that, in connection therewith, the
Company shall not be required to qualify as a foreign corporation.
 
3.    Representations and Warranties of the Placement Agent. The Placement Agent
represents and warrants to, and agrees with, the Company as follows:
 
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(a)  The Placement Agent is a limited liability duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it was formed,
with all requisite power and authority to enter into this Agreement and to carry
out your obligations hereunder. This Agreement (i) has been duly authorized,
executed and delivered by the Placement Agent, (ii) constitutes legal, valid and
binding obligation of the Placement Agent, and (iii) subject to applicable
bankruptcy, insolvency and other laws affecting the enforceability of creditors'
rights generally, is enforceable as to the Placement Agent in accordance with
its terms, specific performance hereof being limited by general principles of
equity and the enforceability of the indemnification provisions hereof.
 
(b)  The execution, delivery and performance of this Agreement by the Placement
Agent and the consummation by the Placement Agent of the transactions
contemplated hereby and by the Memorandum will not conflict with or result in
the Placement Agent's breach or violation of any of the terms or provisions of,
or constitute a default in any material respect under, (i) any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which the Placement Agent is a party or to which the Placement Agent or its
property is subject, (ii) the Placement Agent's charter or its operating
agreement or (iii) any statute, judgment, decree, order, rule or regulation
applicable to the Placement Agent of any court or governmental agency or body
having jurisdiction over the Placement Agent.
 
(c)  The Placement Agent is, and at all times through the date of the final sale
of a Unit shall remain, duly registered pursuant to the provisions of the
Securities Exchange Act of 1934, as amended ("Exchange Act") as a broker-dealer
and duly registered as a broker-dealer in those states in which the Placement
Agent is required to be so registered in order to carry out the Offering as
contemplated by the Memorandum; the Placement Agent is, and at all times through
the date of the final sale of a Unit shall remain, a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD"); the Placement
Agent will not reallow discounts or pay commissions or other compensation for
participation in the distribution of the Offering in the United States to any
broker-dealer which is not a member of the NASD, the Placement Agent shall act
as independent contractor, and nothing herein shall constitute the Placement
Agent an employee of the Company; the Placement Agent shall not make sales of
Units to discretionary accounts.
 
(d)  In connection with the offer, offer for sale and sale of the Units, the
Placement Agent (and its representatives and agents) shall conform to and comply
with (i) the provisions of the Rules of Fair Practice of the NASD, (ii)
applicable provisions of federal law, including without limitation the
Securities Act, the Exchange Act and the Rules and Regulations, and (iii) the
State Acts and the rules and regulations thereunder, including without
limitation those referred to in such letters regarding state securities and
"blue sky" matters ("Blue Sky Letters") as are prepared by counsel for the
Company and sent to the Placement Agent from time to time, with regard to, among
other things, the period during which and conditions under which the Units may
be offered, offered for sale and sold in various states; the Placement Agent
shall not distribute the Memorandum or otherwise commence the Offering in any
jurisdiction without prior confirmation from the Company or its counsel that the
Offering may be commenced under applicable securities laws, rules and
regulations.
 
(e)  The Placement Agent will use its best efforts to procure subscribers for
the Units and will conduct the Offering in compliance with the suitability
standards set forth in the Memorandum and with the requirements of Sections
3(b), 4(2) and/or 4(6) of the Securities Act and Rule 506 of Regulation D, as
and to the extent applicable to the Offering; accordingly, at all times through
the date of the final sale of a Unit, the Placement Agent will have:
 
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(i)  not made any untrue statement of a material fact and not omitted to state a
material fact required to be stated or necessary to make any statement made not
misleading, to the extent any representations are made by the Placement Agent
concerning the Offering or matters set forth in the Memorandum and Company Data
other than those set forth in the Memorandum and Company Data;
 
(ii)  not offered, offered for sale, or sold the Units by means of: (A) any
advertisement, article, notice, or other communication mentioning the Units
published in any newspaper, magazine or similar medium or broadcast over
television or radio; (B) any seminar or meeting, the attendees of which have
been invited by any general solicitation or general advertising; or (C) any
letter, circular, notice, or other written communication, unless the
communication is accompanied or preceded by the Memorandum;
 
(iii)     prior to the sale of any of the Units, reasonably believed that each
subscriber and his or her purchaser representative, if any, met the suitability
and other investor standards set forth in the Memorandum and the Blue Sky
Letters, and the Placement Agent will have prepared and maintained, for your
benefit and the benefit of the Company, file memoranda and other appropriate
records substantiating the foregoing;
 
(iv)     only used sales materials other than the Memorandum and Company Data
which have been approved for use in the Offering by the Company, and refrained
from providing any such materials to any offeree unless such materials were
accompanied or preceded by the Memorandum;
 
(v)     provided each offeree with a copy of the Memorandum;
 
(vi)     promptly distributed any amendment or supplement to the Memorandum
provided to the Placement Agent by the Company under this Agreement to persons
who had previously received a copy of the Memorandum from the Placement Agent
and who the Placement Agent believed continued to be interested in the Units and
have included such amendment or supplement in all deliveries of the Memorandum
made after receipt of any such amendment or supplement; and
 
(vii)     not made any representations on behalf of the Company other than those
contained in the Memorandum and the Company Data, nor shall the Placement Agent
have acted as an agent of the Company or for the Company in any other capacity,
except as expressly set forth herein.
 
4.    Compensation and Expenses.
 
(a)     The Company agrees to pay to the Placement Agent a placement fee of ten
percent (10%) of the aggregate gross offering proceeds of all of the Units sold.
The Placement Agent may instruct the Company to pay a portion of any placement
fee due directly to Participating Agents. Such placement fee shall be due and
payable at each closing. The Company also agrees to pay to the Placement Agent,
as warrant placement agent for transactions involving the exercise of any
Warrants after the first anniversary of the closing of this Offering, which
exercise is solicited by the Placement Agent, a warrant solicitation fee of five
percent (5%) of the aggregate exercise price received. Notwithstanding the
foregoing, the warrant solicitation fee shall immediately terminate without
further action by any party in the event the Company commences a registered
offering of its securities which is declared effective by the U.S. Securities
and Exchange Commission ("SEC") prior the first anniversary of the closing of
this Offering.
 
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(b)     In addition, the Company shall issue and sell, at each closing, to the
Placement Agent or its designees 200 warrants for each Unit sold in the Offering
at a price of $0.0001 per warrant ("Agent Warrants"). Each Agent Warrant shall
entitle the holder thereof to purchase one share of the Company's common stock.
The Agent Warrants shall be exercisable at any time alter the first anniversary
of the closing of this Offering at a price equal $6.00 per share, on a
net-issuance or cashless basis. The Company hereby grants the same registration
rights to the Placement Agent with respect to the shares of common stock
underlying the Agent Warrants as are granted to investors with respect to the
Warrants as set forth in this Agreement. The Agent Warrants will expire five (5)
years from the date of issuance. Notwithstanding the foregoing, the Agent
Warrants shall immediately terminate and be canceled without further action by
any party in the event the Company commences a registered offering of its
securities which is declared effective by the SEC prior the first anniversary of
the closing of this Offering.
 
(c)     The Company will pay all costs and expenses related to the Offering
and/or the performance of the Company's obligations under this Agreement,
including preparation of the Memorandum, preparation of related documentation,
accounting fees, legal fees, experts fees, consultants' fees, escrow fees,
filing fees with the SEC and applicable states, any costs and expenses to
qualify the Units for sale in any state, and any all costs and expenses for
investor or road show presentations. Notwithstanding the foregoing, the Company
shall not be responsible for any expenses of the Placement Agent or
Participating Agents incurred in connection with the Offering, including, but
without limitation, attorneys' fee, operating expenses, travel expenses and
other incidental expenses incurred by the Placement Agent or the Participating
Agents; except that the Company shall pay the Placement Agent a non-accountable
expense allowance equal to three percent (3%) of the aggregate gross offering
proceeds of all of the Units sold ("Allowance"). Upon execution of this
Agreement, the Company shall pay the Placement Agent a non-refundable advance of
$15,000, which such advance being credited against the Allowance earned with
respect to the first $500,000 of gross offering proceeds raised in the Offering.
 
5.    Covenants of the Company. The Company covenants and agrees that it will:
 
(a)     Comply with all requirements imposed upon it by the Securities Act, as
now and hereafter amended, by the Rules and Regulations from time to time in
force, and by all State Acts, to permit the continuance of offers and sales of
the Units in accordance with the provisions of Sections 3(b), 4(2) and/or 4(6)
of the Securities Act and of Rule 506 of Regulation D, as and to the extent
applicable to the Offering, and the Memorandum. During the Offering Period, the
Company will amend or supplement the Memorandum in order to make such Memorandum
comply with the requirements of the Securities Act, the Rules and Regulations
and the State Acts.
 
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(b)     Until the termination of the Offering Period, furnish to the Placement
Agent information necessary to keep the Memorandum fair, accurate and complete
in all material respects.
 
(c)     If at any time any event occurs as a result of which the Memorandum
would include an untrue statement of a material fact or, in view of the
circumstances under which they were made, omit to state any material fact
necessary to make the statements therein not misleading, the Company will notify
the Placement Agent thereof (unless the information shall have been received
from the Placement Agent) and will effect the preparation of an amended or
supplemental Memorandum which will correct such statement or omission.
 
(d)     Upon the Placement Agent's reasonable request, the Company will prepare
an amended or supplemental Memorandum and take any other action which may be
necessary of advisable in connection with the offer and sale of the Units.
 
(e)     Not offer, offer to sell, offer for sale or sell any of the Units of the
Company or other securities, except and to the extent any such offer, offer to
sell, offer for sale or sale shall not render unavailable the exemptions from
registration and qualification requirements of the Securities Act and the State
Acts relied upon the respect to the offering and sale of the Units contemplated
by this Agreement.
 
(f)     Provided their subscriptions are accepted by the Company and approved by
the Placement Agent, issue the Notes and Warrants with respect to the Units to
the holders in accordance with the description of the procedures as set forth in
the Memorandum and the subscription documents to be delivered with the
Memorandum.
 
(g)     Prepare, execute and file a Form D (and any and all amendments or
supplements thereto) with the SEC in timely manner and deliver copies thereof to
the placement Agent, together with copies of all forms (including without
limitation, Form Ds) and other documents and/or materials filed either before or
after the First Closing Date and the Additional Closing Dates, and comply with
Regulation D and the State Acts and make any fillings required by the SEC and
state securities authorities in a timely manner.
 
(h)     The Company will make available for inspection by the Placement Agent or
its authorized representatives, at the Company's principal office during normal
business hours, any information and documents relating to the business and
operations of the Company as the Placement Agent may reasonably request and as
are available to the Company or obtainable by it without unreasonable effort or
expense.
 
(j)     The Company shall at all times reserve and keep available such number of
authorized shares of its common stock as are sufficient to permit the exercise
of the Warrants and Agent Warrants; all shares of common stock issued upon the
exercise of Warrants and Agent Warrants, upon receipt of full payment therefore,
will be duly authorized, validly and legally issued, fully paid and
nonassessable, and such common stock will not have been issued in violation of
or subject to any preemptive rights provided for by law or by the Company's
corporate charter or bylaws or be subject to any lien, claim, encumbrance,
security interest, preemptive rights or any other claim of any third party.
 
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(k)     The Company shall file such registration statements and include such
securities of the Company in such registration statements filed under the
Securities Act as specifically provided in the Memorandum and the subscription
agreement entered into by the purchaser of the Units.
 
6.    Covenants of Placement Agent. The Placement Agent covenants and agrees
that it will:
 
(a)     Comply with all requirements imposed upon it by the Securities Act, as
now and hereafter amended, by the Rules and Regulations from time to time in
force, and by all State Acts, to permit the continuance of offers and sales of
the Units in accordance with Sections 3(b), 4(2) and/or 4(6) of the Securities
Act and of Rule 506 of Regulation D, as and to the extent applicable to the
Offering, and the Memorandum.
 
(b)     Comply with all applicable rules of the NASD and any other laws, rules
and regulations applicable to broker-dealers.
 
(c)     Not offer, offer to sell, offer for sale or sell any of the Units of the
Company or other securities, except and to the extent any such offer, offer to
sell, offer for sale or sale shall nor render unavailable the exemptions from
registration and qualification requirements of the Securities Act and the State
Acts relied upon with respect to the offering and sale of the Units contemplated
by this Agreement.
 
7.    Conditions of Closing. The purchase of, and payment for, the Units on the
First Closing Date and any Additional Closing Dates shall be subject to the
continuing accuracy of the representations and warranties of the Company and the
Placement Agent as of the date hereof and as of the First Closing and any
Additional Closings, to the performance by the Company and Placement Agent of
their respective obligations hereunder, and to the following conditions:
 
(a)     The Placement Agent's obligations as provided herein shall be subject to
the accuracy of the representations, warranties and covenants of the Company
herein contained as of the date hereof and as of the Closing Date and any
Additional Closing Dates, and to the performance by the Company of its
obligations hereunder to be performed.
 
(b)     At the First Closing and the Additional Closing, if any, the Company
shall:
 
(1)     Accept subscriptions of qualifying potential purchasers that the Company
reasonably believes to be qualified investors under Regulation D and the State
Acts, in accordance with the Memorandum.
 
(2)     Issue and deliver the Notes and Warrants with respect to the Units to
subscribers as described in the Memorandum.
 
(c)     At the First Closing and the Additional Closing, if any, the Placement
Agent shall:
 
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(1)     Deliver to the Company all subscription agreements that the Company
agrees are acceptable.
 
(2)     Receive from the Company or give assignment instructions for all
compensation, including Agent Warrants, payable to the Placement Agent.
 
8.    Indemnification.
 
(a)     The Placement Agent and each of the Participating Agents, severally and
not jointly, agree to indemnify and hold the Company and the directors,
officers, employees, agents, attorneys, shareholders and control persons (as
defined under federal and state securities laws) of the Company, and the
respective heirs, personal representatives and assigns of each of the foregoing
(collectively, the "Company Indemnified Persons") harmless from and against any
loss, liability, claim, damage and expense (including, but not limited to,
expenses reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever based upon) to
which the Company Indemnified Persons may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages, liabilities, costs
and expenses (including reasonable attorneys' and experts' fees) arise solely
out of (i) any breach of any representation, warranty, agreement or covenant
under this Agreement by Placement Agent or under the Dealer Agreement by
Participating Agents, (ii) any untrue statement or alleged untrue statement of
any material fact contained in the Memorandum, or any amendment or supplement
thereto, or arise out of or are based upon 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; in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Memorandum or such supplement or such
amendment in reliance upon and in conformity with information furnished to the
Company by the Placement Agent, (iii) any statement made, either orally or in a
writing other than the Memorandum or the Company Data, by the Placement Agent or
the Participating Agents containing an untrue statement or alleged untrue
statement of any material fact or the omission or alleged omission to state a
material fact required to be stated or necessary to make the statements not
misleading, unless such statements or omissions are made in reliance upon or in
conformity with statements made or information provided by the Company and/or
the actions of the Company, and/or (iv) any amount paid in settlement of any
litigation, commenced or threatened, or of any claim based upon any of the
matters under (i) through (iii) (including, but not limited to, expenses
reasonably incurred in investigating, preparing or defending against any such
litigation or claim) if such settlement is affected with the written consent of
the Placement Agent and/or the effected Participating Agents.
 
If for any reason, the foregoing indemnification is unavailable to any Company
Indemnified Persons, then the Placement Agent or Participating Agents shall
contribute to the amount paid or payable by any such Company Indemnified Person
as a result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the Placement Agent or
Participating Agents and any Company Indemnified Person.
 
Promptly after a Company Indemnified Person receives notice of the commencement
of any action, claim, proceeding or investigation ("Action"), such Company
Indemnified Person, if a claim in respect thereof is to be made against the
Placement Agent or Participating Agents under this Section 8(a), will notify the
Placement Agent or Participating Agents of the commencement thereof. The
omission to so notify the Placement Agent or Participating Agents will relieve
the Placement Agent and Participating Agents from any liability which they may
have to any Company Indemnified Person under this Section 8(a) if the Placement
Agent or Participating Agents have been prejudiced in asserting, or shall have
lost the right to assert, a legal defense by reason of such omission. The
Placement Agent or Participating Agents will be entitled to participate in, and,
to the extent that they may wish, to assume the defense thereof subject to the
provisions herein stated, with counsel reasonably satisfactory to such Company
Indemnified Person. The Company Indemnified Person will have the right to employ
separate counsel in any such Action and to participate in the defense thereof
but the fees and expenses of such counsel will be at the expense of the Company
Indemnified Person if the Placement Agent or Participating Agents have assumed
the defense of the Action with counsel reasonably satisfactory to the Company
Indemnified Person. No settlement of any Action against a Company Indemnified
Person for which indemnification from the Placement Agent or Participating
Agents is sought will be made without the consent of the Placement Agent or
Participating Agents.
 
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(b)     The Company agrees to indemnify and hold the Placement Agent and
Participating Agents, and the directors, officers, employees, agents, attorneys,
shareholders and control persons (as defined under federal and state securities
laws) of the Placement Agent and Participating Agents, and the respective heirs,
personal representatives and assigns of each of the foregoing (collectively, the
"Agent Indemnified Persons") harmless from and against any loss, liability,
claim, damage and expense (including, but not limited to, expenses reasonably
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever based upon) to which the Agent
Indemnified Persons may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages, liabilities, costs and expenses
(including reasonable attorneys' and experts' fees) arise out of or relate to:
(i) any breach of any representation, warranty, agreement or covenant under this
Agreement by the Company, (ii) any untrue statement or alleged untrue statement
of any material fact contained in the Memorandum, or any amendment or supplement
thereto, or the Company Data, or arise out of or are based upon 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, (iii) any statement
made, either orally or in a writing other than the Memorandum or the Company
Data, by the Company containing an untrue statement or alleged untrue statement
of any material fact or the omission or alleged omission to state a material
fact required to be stated or necessary to make the statements not misleading,
and/or (iv) any amount paid in settlement of any litigation, commenced or
threatened, or of any claim based upon any of the matters under (i) through
(iii) (including, but not limited to, expenses reasonably incurred in
investigating, preparing or defending against any such litigation or claim) if
such settlement is affected with the written consent of the Company; provided,
however, that the Company shall not be liable to any Agent Indemnified Persons
to the extent that any such losses, claims, damages, liabilities, costs or
expenses, or any actions in respect thereof, arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in the Memorandum or such amendment or such supplement in reliance upon and
in conformity with information furnished to the Company by or on behalf of the
Placement Agent.
 
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If for any reason, the foregoing indemnification is unavailable to any Agent
Indemnified Persons, then the Company shall contribute to the amount paid or
payable by any such Agent Indemnified Persons as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect the relative
fault of the Company and any Agent Indemnified Person.
 
Promptly after an Agent Indemnified Person receives notice of the commencement
of any action, claim, proceeding or investigation ("Action"), such Agent
Indemnified Person, if a claim in respect thereof is to be made against the
Company under this Section 8(b), will notify the Company of the commencement
thereof. The omission to so notify the Company will relieve the Company from any
liability which it may have to any Agent Indemnified Person under this Section
8(b) if the Company has been prejudiced in asserting, or shall have lost the
right to assert, a legal defense by reason of such omission. The Company will be
entitled to participate in, and, to the extent that they may wish, to assume the
defense thereof subject to the provisions herein stated, with counsel reasonably
satisfactory to such Agent Indemnified Person. The Agent Indemnified Person will
have the right to employ separate counsel in any such Action and to participate
in the defense thereof but the fees and expenses of such counsel will be at the
expense of the Agent Indemnified Person if the Company has assumed the defense
of the Action with counsel reasonably satisfactory to the Agent Indemnified
Person. No settlement of any Action against an Agent Indemnified Person for
which indemnification from the Company is sought will be made without the
consent of the Company.
 
9.    Representations, Indemnities and Agreements to Survive Sale and Payment.
The respective representations, indemnities, warranties, covenants and other
agreements of the Company and the Placement Agent set forth in or made pursuant
to this Agreement, shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Placement Agent, the Company, or any
Agent Indemnified Person or Company Indemnified Person, and shall survive
closing, delivery of, and payment for the Units.
 
10.    Termination of Agreement. Notwithstanding any of the terms and provisions
thereof, this Agreement may be terminated by the Placement Agent based on a
material breach of this Agreement by the Company. The Placement Agent shall give
fifteen (15) days' prior written notice to the Company of such material breach,
and the Company shall have thirty (30) days to cure such material breach before
the Placement Agent may terminate the Agreement. In the event the Placement
Agent reasonably determines that the Units are not marketable, notwithstanding
its best efforts to sell the Units, the Placement Agent may terminate this
Agreement with thirty (30) days' prior written notice to the Company.
 
In the event of any termination this Agreement or the expiration of the Offering
Period, the Placement Agent shall be entitled to: (i) any fees and compensation
to which it was entitled as of the date of termination or expiration, and (ii)
the fees and compensation as set forth in Section 4 for any securities sold by
Company during the one (1) year period following such expiration or termination
to any investor introduced by Placement Agent and/or any Participating Agent.
 
Additionally, Sections 4, 8, 9, 10, 11, 12 and 14 shall survive any termination
or survive closing, delivery of, and payment for the Units.
 
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11.    Notices. All notices, requests, demands or other communications with
respect to this Agreement shall be in writing and shall be personally delivered
or mailed, postage prepaid, certified mail, or delivered by facsimile or a
nationally recognized express courier service, charges prepaid, to the Company
or Placement Agent at the addresses set forth in this Agreement (or such other
addresses as the parties may specify from time to time in accordance with this
section). Any such notice shall, when sent in accordance with the preceding
sentence, be deemed to have been given and received, on the earliest of: (i) on
the day personally delivered including by facsimile, (ii) on the third day
following the date mailed, or (iii) twenty-four hours after shipment by such
courier service.
 
12.    Successors. This Agreement shall be binding upon and inure solely to the
benefit of the Placement Agent and the Company and, to the extent provided in
Section 8, an Agent Indemnified Person or Company Indemnified Person, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Units shall be construed a successor,
representative or assignee by reason of such purchase.
 
13.    Right of Exclusive Representation. During the one year period following
the date hereof, the Company grants Placement Agent the right to act as the
Company's exclusive placement agent and/or managing underwriter for any private
placement or public offering of securities by the Company. This provision will
not apply to any sale of securities to employees.
 
14.    Miscellaneous Provisions.
 
(a) Construction. This agreement shall be governed by, subject to and construed
in accordance with the laws of the state of Colorado without regard to such
state's conflicts of law principles.
 
(b) Severability. If any portion of this Agreement shall be held invalid or
inoperative, then, so far as is reasonable and possible (i) the remainder of
this Agreement shall be considered valid and operative, and (ii) effect shall be
given to the intent manifested by the portion held invalid or inoperative.
 
(c) Modification or Amendment. This Agreement may not be modified or amended
except by written agreement executed by the parties hereto.
 
(d) Number and Gender of Words. Whenever the context so requires, the masculine
shall include the feminine and neuter, and the singular shall include the
plural, and conversely,
 
(e) Other Instruments; Counterparts. The parties hereto covenant and agree that
they will execute such other and further instruments and documents are or may
become necessary or convenient to effect and carry out the terms of this
Agreement. This Agreement may be executed by facsimile signatures and in
multiple counterparts, each of which shall be deemed an original. It shall not
be necessary that each party executes each counterpart, or that any one
counterpart be executed by more than one party so long as each party executes at
least one counterpart.
 
(f) No Partnership. The Placement Agent is not a principal of or a partner with,
or does not control in any way, the Company or its employees or agents.
 
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(g) Announcements. Before the Company releases any information referring to the
Placement Agent's role under this Offering or uses Placement Agent's name in a
manner which may result in public dissemination thereof, the Company shall
furnish drafts of all documents or prepared oral statements to Placement Agent
for comments, and shall not release any information relating thereto without the
prior written consent of the Placement Agent. Nothing herein shall prevent the
Company from releasing any information to the extent that such release is
required by law, rule or regulation. The Company agrees that, following the
completion of the Offering, the Placement Agent shall have the right to place
"tomb stone" advertisements in financial and other newspapers and journals, at
the Company's cost, describing its services to the Company hereunder, provided
that Placement Agent will submit a copy of any such advertisements to the
Company for its prior approval, which approval shall not be unreasonably
withheld.
 
(h) Assignment. The Placement Agent may assign this Agreement to another company
or firm under its common control. Otherwise, this Agreement shall not be
assignable by any party to this Agreement without the express prior written
consent of the other party to the Agreement, and in the event of an attempted
assignment by one party to this Agreement without such consent, such attempted
assignment shall be void and without effect.
 
(i) Parties. This Agreement shall be binding upon and inure solely to the
benefit of the parties hereto and any permitted assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provision herein
contained, except that the Participating Dealers shall be a third party
beneficiary of the provisions of Section 8(b) hereof.
 
(j) Entire Agreement. This Agreement contains the entire understanding between
the parties and supersedes any prior understandings or written or oral
agreements between them respecting the subject matter hereof.
 
(k) Consent to Jurisdiction and Waiver of Trial by Jury. Each party hereto: (i)
consents to personal jurisdiction and service and venue in any court in which a
claim subject to this agreement is brought against the other party hereto or any
other Indemnified Party; and (ii) waives all right to trial by jury in any
action, proceeding or counterclaim (whether based upon contract, tort or
otherwise) related to or arising out of the engagement of Placement Agent
pursuant to, or the performance by Placement Agent of the services contemplated
by, this Agreement.
 
(1) Attorneys' Fees. In the event any party hereto shall commence legal
proceedings against the other to enforce the terms hereof, or to declare rights
hereunder, as the result of a breach of any covenant or condition of this
Agreement, the prevailing party in any such proceeding shall be entitled to
recover from the losing party its costs of suit, including reasonable attorneys'
fees, as may be fixed by the court.
 
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If the foregoing is in accordance with your understanding, please sign and
return to us a counterpart hereof, whereupon this Agreement and the Placement
Agent's acceptance thereof shall constitute a binding agreement between you, as
the Placement Agent, and the Company.
 

    AeroGrow International, Inc.       By:   /s/ Michael Bissonnette, President
 

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ACCEPTED AND AGREED TO:               /s/ Timothy J. Keating, President      

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    Date: May 27, 2005      

 
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