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                                                                    EXHIBIT 10.4




                                            August 10, 1999



Mr. Carey F. Daly II
The Pathways Group, Inc.
14201 N.E. 200th Street
Woodinville, WA 98072

Dear Mr. Daly:

                  We are pleased to confirm our mutual understanding concerning
the retention by The Pathways Group, Inc. (collectively with its subsidiaries
and affiliates, the "Company") of Mitchum, Jones & Templeton, Inc. ("Mitchum")
to act as the Company's private placement agent with respect to a preferred
stock with warrants offering.

                  1. SCOPE OF ENGAGEMENT

                           (a)      In connection with the engagement, Mitchum
                                    will assist the Company in raising capital
                                    as described in Exhibit "A" to this
                                    Agreement, made a part hereto by this
                                    reference.

                  2. FEES AND EXPENSES: In consideration for the services
                  described in paragraph 1(a), the Company shall pay to Mitchum
                  fees described in Exhibit "A" hereto.

                           In addition to any fees described above, whether or
                  not any transaction is consummated, the Company shall
                  reimburse Mitchum, upon request, for all reasonable,
                  previously approved, out-of-pocket expenses incurred pursuant
                  in our engagement hereunder, including fees and disbursements
                  of our counsel, as well as any other consultants and advisors
                  retained by us with your company.

                  3. TERM AND TERMINATION. The term of this engagement shall be
                  for a period of seventy-five days from the date hereof. Any
                  termination of this engagement shall be without liability or
                  continuing obligation for either party, except for fees or
                  other compensation earned or expenses incurred by Mitchum up
                  to the date of termination. The provisions of paragraph 6
                  relating to indemnification and contribution shall be


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                  operative and in full force and effect, notwithstanding the
                  termination of this engagement of the completion of any or all
                  assignments hereunder.

                  4. PUBLIC ANNOUNCEMENTS. Prior to any press release or other
                  public disclosure relating to our services hereunder, the
                  Company and Mitchum shall confer and reach an agreement upon
                  the contents of any such disclosure. Notwithstanding the
                  foregoing, except as required by any applicable law, rule or
                  regulation, no party shall make any public announcement
                  regarding this engagement or our relationship with the Company
                  hereunder without the prior consent of the other party.

                  5. RESPONSIBILITY FOR DISCLOSURE. The Company shall provide
                  Mitchum all information material to its business is well as
                  any other relevant information that Mitchum reasonably
                  requests in connection with the performance of its services
                  hereunder. The Company represent and warrants to Mitchum that
                  all such information, and all information released to the
                  public or filed by the Company with any government agency or
                  regulatory body will be accurate and complete at the time it
                  is furnished or filed, and the Company agrees to keep Mitchum
                  fully apprised of all material developments affecting the
                  Company through the length of the term of our engagement or
                  the completion of any transaction in which Mitchum is
                  involved. The Company understands that Mitchum, in performing
                  its obligation to represent the Company, will be providing
                  prospective purchasers or other appropriate parties with
                  information supplied by the Company, but that Mitchum shall
                  not in any respect be responsible for the accuracy or
                  completeness of any and all such information. The Company
                  acknowledges that Mitchum, in rendering services to the
                  Company, will be relying on information provided by the
                  Company and the other parties to any purposed transaction, as
                  well as public source information deemed reliable by Mitchum,
                  without independent verification by Mitchum. Mitchum does not
                  assume responsibility for the accuracy or completeness of any
                  such information.

                  6. IDENTIFICATION AND CONTRIBUTION. The Company agrees that in
                  the event Mitchum or any of Mitchum's officers, employees,
                  agents, affiliates or controlling persons, if any (each of the
                  foregoing, including Mitchum an "Indemnified Person"), becomes
                  involved in any capacity (whether or not as a party) in any
                  action, claim, proceeding or investigation (including any
                  security holder action or claim or any action brought by or in
                  the right of the Company) related to or arising out of our
                  engagement, including any related services already performed
                  and any indemnifications or future additions to such
                  engagements, the Company will promptly reimburse each such
                  Indemnified Person for its legal and other expenses (including
                  the cost of any investigation and preparation) as and when
                  they are incurred in connection therewith.

                           The Company will indemnify and hold harmless each
                  indemnified Person from and against, and no Indemnified Person
                  shall have any liability (whether direct or


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                  indirect, in contract or tort or otherwise) in the Company or
                  its security holders or creditors for, any losses, claims,
                  damages, liabilities or expenses related to or arising out of
                  our engagement, any services provided thereunder or any
                  transaction or proposed transactions related thereto,
                  including any related services already performed and any
                  modifications or future additions to such engagement, whether
                  or not any pending or threatened action, claim, proceeding or
                  investigation giving rise to such losses, claims, damages,
                  liabilities or expenses is initiated or brought by or on
                  behalf of the Company and whether or not in connection with
                  any action, claim, proceeding or investigation in which the
                  Company or any Indemnified Person is a party, except to the
                  extent that any such loss, claim, damage, liability or expense
                  is found by a court of competent jurisdiction in a judgment
                  that has become final in that it is no longer subject to
                  appeal or review to have resulted directly and primarily form
                  such Indemnified Person's bad faith, willful misconduct or
                  gross negligence.

                           If for any reason the foregoing indemnification is
                  held unenforceable, then the Company shall contribute to the
                  loss, claim, damage, liability or expense for which such
                  indemnification is held unenforceable in such proportion as is
                  appropriate to reflect the relative benefits received, or
                  sought to be received, by the Company and its security holders
                  on the one hand and the party entitled to contribution on the
                  other hand in the matters contemplated by this engagement, as
                  well as the relative fault of the Company and such party with
                  respect to such loss, claim, damage, liability or expense and
                  any other relevant equitable considerations. The Company
                  agrees that, to the extent permitted by applicable law, in no
                  event shall the Indemnified Persons be responsible for or be
                  required to contribute amounts which in the aggregate exceed
                  the fees actually received by Mitchum for such investment
                  banking services.

                           The Company's reimbursement, indemnity and
                  contribution obligations under this letter shall be in
                  addition to any liability that the Company may otherwise have
                  and shall not be limited by any rights Mitchum or any other
                  Indemnified Person may otherwise have. The Company agrees
                  that, without Mitchum's prior written consent, which will not
                  be unreasonably withheld, the Company will not settle,
                  compromise or consent to the entry of any judgment in any
                  pending or threatened claim, action, proceeding or
                  investigation in respect of which indemnification or
                  contribution could be sought hereunder (whether or not Mitchum
                  or any other Indemnified Person is an actual or potential
                  party to such claim, action, proceeding or investigation),
                  unless, such settlement, compromise or consent includes an
                  unconditional release of each Indemnified Person from all
                  liability arising out of such claim, action, proceeding or
                  investigation.

                           The provisions of this paragraph 6 shall remain in
                  effect indefinitely, notwithstanding the completion of this
                  engagement, the expiration of the term hereof or any
                  termination of this engagement.


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                  7. MISCELLANEOUS. No waiver, amendment or other modification
                  of this agreement shall be effective unless it is in writing
                  and signed by each party to be bound hereby. The laws of the
                  State of California shall govern this agreement, and any claim
                  related directly or indirectly to this agreement. No such
                  claim shall be commenced, prosecuted or continued in any court
                  other than the courts of this State of California. The
                  obligations of this agreement shall be binding upon and shall
                  inure to the benefit of the parties hereto, the Indemnified
                  Persons hereunder and any of their successors, assigns, heirs
                  and personal representatives.

                  Please confirm that the foregoing represents your
                  understanding of the terms of our engagement with your
                  signature below.



                                     Sincerely,


                                     MITCHUM, JONES & TEMPLETON, INC.


                                     By:  /s/ GLENN A. OKUN
                                          --------------------------------------
                                           Glenn A. Okun
                                           President and Chief Executive Officer


Accepted and agreed to by:

The Pathways Group, Inc.

By:  /s/ CAREY F. DALY II
   ----------------------------------------
      Carey F. Daly II
      President and Chief Executive Officer