Unassociated Document


    SUBSCRIPTION
      AGREEMENT

     

    THIS
      SUBSCRIPTION AGREEMENT (the “Agreement”)
      is
      made as of this ___ day of ____________ 2006 by and among Aero Grow
      International, Inc., a Nevada corporation (the “Company”)
      and
      the investor identified on the signature page to this Agreement which Agreement
      is one of like agreements with other investors participating in an offering
      of
      securities described herein (the
      “Investors”
and
      individually an “Investor”).

     

    RECITALS

     

    WHEREAS,
      upon the terms and conditions and subject to the provisions hereinafter set
      forth, the Company desires to issue and sell and each Investor desires to
      purchase, units (“Units”),
      each
      unit consisting of one share of common stock (“Common
      Stock”)
      and one
      common stock purchase warrant (“Warrant”)
      which
      will be exercisable for one share of Common Stock (“Warrant
      Share”
      or
“Warrant
      Shares”).
      The
      Unit price will be $5.00. The Warrants will be exercisable for five years from
      the Closing Date at an exercise price of $6.25 per share. The offering of the
      Units is being made on a “$5,000,000 minimum and $12,000,000 maximum, best
      efforts basis.” There will be one closing of the offering. The Warrants will be
      in substantially the form attached to this Agreement as Exhibit
      A.
      The
      Common Stock and the Warrants and the common stock issuable upon exercise
      thereof are collectively referred to herein as the “Securities.”

     

    Whereas,
      the offering is being made through Keating Securities LLC (“Keating”) and other
      broker-dealers, foreign banks, dealers and institutions selected by Keating
      (“Participating Agents”). Keating and the Participating Agents will receive cash
      compensation from the Company, and Keating will be issued placement agent
      warrants (“Agent
      Warrants”)
      as more
      fully described in the Private Place Memorandum dated as of February 6, 2006
      (“Memorandum”).

     

    NOW,
      THEREFORE, for and in consideration of the mutual premises contained herein
      and
      for other good and valuable consideration, the receipt and sufficiency of which
      are hereby acknowledged, the parties hereto agree as follows:

     

    1. Accredited
      Investors.
      This
      offering is limited to accredited investors (whether residents or entities
      within or without the United States) as defined in Section 2(15) of the
      Securities Act of 1933, as amended (“Securities
      Act”),
      Regulation D and Rule 501 promulgated thereunder, and is being made without
      registration under the Securities Act in reliance upon certain exemptions
      including, without limitation, the exemptions under Sections 3(b), 4(2) and/or
      4(6) of the Securities Act, Regulation S promulgated under the Securities Act,
      Rule 506 of Regulation D promulgated under the Securities Act and applicable
      state securities laws. As indicated by the responses on the signature page
      hereof, the Investor is an accredited investor within the meaning of Section
      2(15) of the Securities Act and Rule 501 promulgated thereunder.

     

    2. Purchase
      and Sale of the Units.
      Subject
      to the terms and conditions of this Agreement, each Investor agrees to purchase
      at the Closing (as defined below) and the Company agrees to sell and issue
      to
      each Investor, the Units, in the manner set forth in Section
      2
      hereof,
      in the number set forth on the signature page hereto, at $5.00 per Unit (the
      “Purchase
      Price”).
      The
      Units are offered for sale in a private placement in accordance with the terms
      set forth in the Memorandum, as amended or supplemented from time to time,
      which
      has been delivered to each Investor and of which the Investor acknowledges
      receipt. The Common Stock and Warrants shall have the terms as set forth in
      the
      Memorandum, in this Agreement and in Exhibit A. In the event of any
      inconsistency between the terms of the Common Stock and Warrants set forth
      herein and in the exhibits hereto and the terms set forth in the Memorandum,
      the
      terms contained herein and in the exhibit hereto shall supercede and be
      controlling.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    3. Terms
      of Purchase and Sale of the Common Stock.
      The
      closing of the transactions contemplated hereby (the “Closing”)
      shall
      take place on or before the second full business day after the Notice Date
      (as
      such term is defined in the Placement Agreement dated as of February 6, 2006
      (the “Placement
      Agreement”),
      between the Company and Keating Securities, LLC (the “Placement
      Agent”)),
      at
      the offices of the Placement Agent, or at such other time and place as the
      Company and the Placement Agent may agree upon. Contemporaneously with the
      delivery of this Agreement, each Investor shall deliver to Steele Street State
      Bank, Denver, Colorado (the “Escrow
      Agent”)
      the
      Purchase Price by wire transfer of immediately available funds pursuant to
      wire
      transfer instructions given to the Investor by the Company and/or the Placement
      Agent. At the Closing, the Escrow Agent shall deliver to the Company the
      Purchase Price by wire transfer of immediately available funds pursuant to
      wire
      transfer instructions given to the Escrow Agent by the Company and the Placement
      Agent. As soon as reasonably practicable following Closing, the Company shall
      deliver to each Investor the duly executed certificates representing the Common
      Stock and Warrants, each registered in the name of the Investor. Notwithstanding
      the foregoing, the obligations of the Company and each Investor hereunder are
      subject to the Company’s receipt of aggregate subscriptions for a minimum of
      $5,000,000 in
      aggregate gross proceeds for the Units on or prior to March 1, 2006 (or such
      closing date as may be agreed by the Company and the Placement Agent), which
      date may be extended by the Company and the Placement Agent up to 30 additional
      days, without notice to the Investor. The subscription funds will be held in
      an
      Escrow Account maintained by the Escrow Agent under the name Keating - AeroGrow
      Escrow Account (Account Number 10003975). Prior to the earlier of the Closing
      or
      the termination date of the Offering, the subscription account will be held
      in a
      non-interest bearing segregate account, subject to the terms and conditions
      herein and a separate escrow agreement among Keating, the Company and Escrow
      Agent. 

     

    The
      Company and Keating have the right to reject this subscription, in whole or
      in
      part for any reason and at any time prior to the Closing, notwithstanding prior
      receipt by the Investor of notice of acceptance of the Investor’s subscription.
      In the event the Investor’s subscription is rejected, which may be for any
      reason, the subscription payment will be returned promptly to the Investor,
      without interest or deduction, and this Subscription Agreement will have no
      force or effect. The Units subscribed for herein will not be deemed issued
      to or
      owned by the Investor until one copy of this Subscription Agreement has been
      executed by the Investor and countersigned by the Company, and the Closing
      with
      respect to the Investor’s subscription has occurred.

     

    
      
         

      

      
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    4. Representations
      and Warranties of the Company.
      In order
      to induce the Investor to enter into this Agreement, the Company represents
      and
      warrants to the Investor the following:

     

    4.1 Authority.
      The
      Company is a corporation duly organized, validly existing, and in good standing
      under the laws of the State of Nevada. The Company is a registered foreign
      corporation in all other jurisdictions in which it is either required to be
      registered or where the failure to be registered would have a material adverse
      effect on the operations or assets of the Company. The Company has all requisite
      right, power, and authority to execute, deliver and perform this Agreement,
      the
      Warrants, the Placement Agreement, Agent Warrants and Escrow Agreement. The
      Company has the requisite authorized capital and the power and authority,
      without shareholder approval, and taken action to issue the shares of Common
      Stock included in the Units and, to issue, upon exercise of the Warrants and
      Agent Warrants in accordance with the terms of such agreements, the shares
      of
      Common Stock underlying such warrants, and all of such shares of Common stock,
      when issued, will be deemed fully paid and non-accessible at the time of
      issuance.

     

    4.2 Subsidiary.
      The
      Company has no direct or indirect subsidiaries. 

     

    4.3 Enforceability.
      The
      execution, delivery, and performance of this Agreement, the Warrants, the
      Placement Agreement, the Agent Warrants and the Escrow Agreement by the Company
      have been duly authorized by all requisite corporate action. This Agreement,
      the
      Warrants, the Placement Agreement, the Agent Warrants and the Escrow Agreement
      have been duly executed and delivered by the Company, and, upon their execution
      by the Investor, shall constitute the legal, valid, and binding obligations
      of
      the Company, enforceable in accordance with the respective terms, except to
      the
      extent that enforceability is limited by bankruptcy, insolvency, reorganization,
      or other laws relating to or affecting the enforcement of creditors’ rights
      generally and by general principles of equity.

     

    4.4 No
      Violations.
      The
      execution, delivery, and performance of this Agreement, the Warrants, the
      Placement Agreement, the Agent Warrants and the Escrow Agreement by the Company
      do not and will not violate or conflict with any provision of the Company’s
      Articles of Incorporation or Bylaws and do not and will not, with or without
      the
      passage of time or the giving of notice, result in the breach of, or constitute
      a default, cause the acceleration of performance, or require any consent under
      (except such consents as have been obtained as of the date hereof), or result
      in
      the creation of any lien, charge or encumbrance upon any property or assets
      of
      the Company pursuant to, any material instrument or agreement to which the
      Company is a party or by which the Company or its properties are bound, except
      such consents as have been obtained as of the date hereof. Assuming the accuracy
      of the representations and warranties of the Investor and all other purchasers
      of the Common Stock in the offering contemplated by the Placement Agreement,
      will be issued in accordance with a valid exemption from the registration or
      qualification provisions of the Securities Act and any applicable state
      securities laws (the “State
      Acts”).

     

    
      
         

      

      
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    4.5 Capitalization.
      The
      authorized capital stock of the Company consists of: (i) 75,000,000
      shares of Common Stock and 20,000,000 shares of preferred stock, par value
      of
      $0.001 (“Preferred Stock”).
      Immediately prior to the Closing, the Company will have 6,270,740 shares of
      Common Stock issued and outstanding, and options, warrants, convertible
      securities and commitments outstanding to purchase an aggregate of 2,717,546
      shares of Common Stock, provided, however, that the foregoing includes
      conversions of certain convertible notes of the Company only though January
      31,
      2006. 

     

    4.6 Financial
      Statements. The
      audited financial statements for fiscal years ended December 31, 2003 and 2004
      and unaudited financial statements for the nine-month periods ended September
      30, 2004 and 2005, copies of which have been provided to the Investor as part
      of
      the Memorandum (collectively, the “Financial
      Statements”),
      respectively, fairly present in all material respects, on the basis stated
      therein and on the date thereof, the financial position of the Company at the
      respective dates therein specified and its results of operations and cash flows
      for the periods then ended. Such statements and related notes have been prepared
      in accord-ance with general-ly accepted accounting principles in the United
      States applied on a consistent basis and audited in accordance with the
      standards of the U.S. Public Company Accounting Oversight Board (“PCAOB”),
      except as expressly noted therein.

     

    4.7 No
      Material Liabilities. Since
      September 30, 2005, the Company has not incurred any material liabilities or
      obligations, direct or contingent, except in the ordinary course of business
      and
      except for liabilities or obligations reflected or reserved against on their
      respective balance sheets as of September 30, 2005, and there has not been
      any
      change, or to the knowledge of the Company, development or effect (individually
      or in the aggregate) that is or is reasonably likely to be, materially adverse
      to the condition (financial or otherwise), business, prospects, or results
      of
      operations of the Company (a “Material
      Adverse Effect”)
      or any
      change in the capital or material increase in the long-term debt of the Company,
      nor has the Company declared, paid, or made any dividend or distribution of
      any
      kind on its capital stock.

     

    4.8 No
      Disputes Against the Company.
      Except
      as disclosed in this Memorandum, there is no material pending or, to the
      knowledge of the Company, threatened (a) action, suit, claim, proceeding, or
      investigation against the Company, at law or in equity, or before or by any
      Federal, state, municipal, or other governmental department, commission, board,
      bureau, agency or instrumentality, domestic or foreign, (b) arbitration
      proceeding against the Company, (c) governmental inquiry against the Company,
      or
      (d) any action or suit by or on behalf of the Company pending or threatened
      against others.

     

    4.9 Approvals.
      (i) The
      execution, delivery, and performance by the Company of this Agreement and the
      Warrants, the Agent Warrants, the Placement Agreement and the Escrow Agreement,
      (ii) the offer and sale of the Common Stock and Warrants, and (iii) the issuance
      of the Common Stock and the Warrant Shares upon due exercise of the Warrants
      require no consent of, action by or in respect of, or filing with, any Person,
      governmental body, agency, or official other than those consents that have
      been
      obtained and filings that have been made pursuant to applicable state securities
      laws and post-sale filings pursuant to applicable state and federal securities
      laws, which the Company undertakes to file within the applicable time
      period.

     

    
      
         

      

      
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    4.10 Compliance.
      Except
      as set forth in the Memorandum, the Company (i) is not in default under or
      in
      violation of (and no event has occurred that has not been waived that, with
      notice or lapse of time or both, would result in a default by the Company),
      nor
      has the Company received notice of a claim that it is in default under or that
      it is in violation of, any indenture, loan or credit agreement, or any other
      agreement or instrument to which it is a party or by which it or any of its
      properties is bound (whether or not such default or violation has been waived),
      (ii) is not in violation of any order of any court, arbitrator, or governmental
      body, or (iii) is not or has not been in violation of any statute, rule, or
      regulation of any governmental authority, including without limitation all
      foreign, federal, state, and local laws relating to taxes, environmental
      protection, occupational health and safety, product quality and safety and
      employment and labor matters, except in each case as could not, individually
      or
      in the aggregate, have or reasonably be expected to result in a Material Adverse
      Effect. 

     

    4.11 Patents
      and Trademarks.
      The
      Company has, or 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 as described in the Memorandum and which the failure to have such
      rights could, individually or in the aggregate, have or reasonably be expected
      to result in a Material Adverse Effect (collectively, the “Intellectual
      Property Rights”).
      The
      Company has not received a written notice that the Intellectual Property Rights
      used by the Company violates or infringes upon the rights of any Person. Except
      as set forth in this Memorandum, to the knowledge of the Company, all such
      Intellectual Property Rights are enforceable and there is no existing
      infringement by another person of any of the Intellectual Property Rights,
      except where such infringement could not have or reasonably be expected to
      result in a Material Adverse Effect.

     

    4.12 Transactions
      With Affiliates and Employees.
      Except
      as set forth in the Memorandum, none of the officers or directors of the Company
      and, to the knowledge of the Company, none of the employees of the Company
      is
      presently a party to any transaction with the Company (other than for services
      as employees, officers, and directors), including any contract, agreement,
      or
      other arrangement providing for the furnishing of services to or by, providing
      for rental of real or personal property to or from, or otherwise requiring
      payments to or from any officer, director, or such employee or, to the knowledge
      of the Company, any entity in which any officer, director, or any such employee
      has a substantial interest or is an officer, director, trustee, or
      partner.

     

    4.13 Internal
      Accounting Controls.
      The
      Company maintain a system of internal accounting controls sufficient to provide
      reasonable assurance that (i) transactions are executed in accordance with
      management’s general or specific authorizations, (ii) transactions are recorded
      as necessary to permit preparation of financial statements in conformity with
      generally accepted accounting principles and to maintain asset accountability,
      (iii) access to assets is permitted only in accordance with management’s general
      or specific authorization, and (iv) the recorded accountability for assets
      is
      compared with the existing assets at reasonable intervals and appropriate action
      is taken with respect to any differences. The Company has established disclosure
      controls and procedures (as defined in Exchange Act rules 13a-14 and 15d-14)
      for
      the Company and designed such disclosure controls and procedures to ensure
      that
      material information relating to the Company is made known to the certifying
      officers by others within those entities .

     

    
      
         

      

      
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    4.14 Certain
      Fees.
      Except
      as may be due to the Placement Agent (and Participating Agents approved by
      the
      Placement Agent) from the Company under the Placement Agreement and except
      for
      an advisory fee of $350,000 payable to Placement Agent in connection with
      advisory services rendered in connection with the Merger (as defined herein)
      which advisory fee is payable only if a minimum of $10,000,000 of gross proceeds
      are raised in the offering, no brokerage or finder’s fees or commissions are or
      will be payable by the Company to any broker, financial advisor or consultant,
      finder, placement agent, investment banker, bank, or other person with respect
      to the transactions contemplated by this Agreement. The Investor shall have
      no
      obligation with respect to any Placement Agent (or Participating Agent) fees
      or
      with respect to any claims (other than such fees or commissions owed by an
      Investor pursuant to written agreements executed by the Investor which fees
      or
      commissions shall be the sole responsibility of such Investor) made by or on
      behalf of other Persons for fees of a type contemplated in this Section 4 that
      may be due in connection with the transactions contemplated by this Agreement.
      

     

    4.15 Certain
      Registration Matters.
      Assuming the accuracy of the Investor’s representations and warranties set forth
      in Section
      6,
      no
      registration under the Securities Act is required for the offer and sale of
      the
      Common Stock and Warrants by the Company to the Investor hereunder.

     

    4.16 Investment
      Company.
      The
      Company is not, and is not an “affiliate” of, an “investment company” within the
      meaning of the Investment Company Act of 1940, as amended.

     

    4.17 No
      Additional Agreements.
      The
      Company does not have any agreement or understanding with any Investor with
      respect to the transactions contemplated by this Agreement on terms that differ
      from those set forth in this Agreement.

     

    4.18 Disclosure.
      All
      disclosure provided to the Investor regarding the Company, its businesses and
      the transactions contemplated hereby, furnished by or on behalf of the Company
      (including the Company’s representations and warranties set forth in this
      Agreement) are true and correct and do not contain any untrue statement of
      a
      material fact or omit to state any material fact necessary in order to make
      the
      statements made therein, in light of the circumstances under which they were
      made, not misleading. 

     

    5. Reserved.
      

     

    
      
         

      

      
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    6. Representations
      and Warranties of the Investor.
      In order
      to induce the Company to enter into this Agreement, the Investor represents
      and
      warrants to the Company the following:

     

    6.1 Authority.
      If a
      corporation, partnership, limited partnership, limited liability company, or
      other form of entity, the Investor is duly organized or formed, as the case
      may
      be, validly existing, and in good standing under the laws of its jurisdiction
      of
      organization or formation, as the case may be. The Investor has all requisite
      individual or entity right, power, and authority to execute, deliver, and
      perform this Agreement.

     

    6.2 Enforceability.
      The
      execution, delivery, and performance of this Agreement by the Investor have
      been
      duly authorized by all requisite partnership, corporate or entity action, as
      the
      case may be. This Agreement has been duly executed and delivered by the
      Investor, and, upon its execution by the Company, shall constitute the legal,
      valid, and binding obligation of the Investor, enforceable in accordance with
      its terms, except to the extent that its enforceability is limited by
      bankruptcy, insolvency, reorganization, moratorium, or other laws relating
      to or
      affecting the enforcement of creditors’ rights generally and by general
      principles of equity.

     

    6.3 No
      Violations.
      The
      execution, delivery, and performance of this Agreement by the Investor do not
      and will not, with or without the passage of time or the giving of notice,
      result in the breach of, or constitute a default, cause the acceleration of
      performance, or require any consent under, or result in the creation of any
      lien, charge or encumbrance upon any property or assets of the Investor pursuant
      to, any material instrument or agreement to which the Investor is a party or
      by
      which the Investor or its properties may be bound or affected, and, do not
      or
      will not violate or conflict with any provision of the articles of incorporation
      or bylaws, partnership agreement, operating agreement, trust agreement, or
      similar organizational or governing document of the Investor, as applicable.
      

     

    6.4 Knowledge
      of Investment and its Risks.
      The
      Investor has knowledge and experience in financial and business matters as
      to be
      capable of evaluating the merits and risks of Investor’s investment in the
      Common Stock and Warrants. The Investor is an investor in securities of
      companies in the development stage and acknowledges that the Investor is able
      to
      fend for itself and bear the economic risk of the Investor’s investment,
      including the complete loss thereof. Investor has a preexisting personal or
      business relationship with the Company or one or more of its officers, directors
      or other persons in control of the Company, or Investor has such knowledge
      and
      experience in financial or business matters that it is capable of evaluating
      the
      merits and risks of the investment in the Common Stock and the Warrants. If
      an
      entity, the Investor has not been organized for the purpose of acquiring Common
      Stock and Warrants. The Investor understands that an investment in the Company
      represents a high degree of risk and there is no assurance that the Company’s
      business or operations will be successful. The Investor has considered carefully
      the risks attendant to an investment in the Company, and that, as a consequence
      of such risks, the Investor could lose Investor’s entire investment in the
      Company.

     

    
      
         

      

      
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    6.5 Investment
      Intent.
      The
      Investor hereby represents and warrants that (i) the Common Stock and Warrants
      are being acquired for investment for the Investor’s own account, and not as a
      nominee or agent and not with a view to the resale or distribution of all or
      any
      part of the Common Stock or Warrants, and the Investor has no present intention
      of selling, granting any participation in, or otherwise distributing any of
      the
      Common Stock or Warrants within the meaning of the Securities Act, (ii) the
      Common Stock and Warrants are being acquired in the ordinary course of the
      Investor’s business, and (iii) the Investor does not have any contracts,
      understandings, agreements, or arrangements, directly or indirectly, with any
      person and/or entity to distribute, sell, transfer, or grant participations
      to
      such person and/or entity with respect to, any of the Common Stock or Warrants.
      The Investor is not purchasing the Common Stock and Warrants as a result of
      any
      advertisement, article, notice or other communication regarding the Common
      Stock
      or Warrants published in any newspaper, magazine or similar media or broadcast
      over television or radio or presented at any seminar or any other general
      solicitation or general advertisement.

     

    6.6 Investor
      Status.
      Whether
      or not the Investor is a United States resident, the Investor is an “accredited
      investor” as that term is defined by Rule 501 of Regulation D promulgated under
      the Securities Act and the information provided by the Investor in the
      Investor’s Questionnaire, a copy of which is attached hereto as Exhibit
      B,
      is
      truthful, accurate, and complete. The Investor is not registered as a
      broker-dealer under Section 15 of the Exchange Act. The Investor has provided
      or
      will provide prior to the Closing, a United States tax identification number
      or
      a completed and signed copy of a W-8 United States Tax Form.

     

    6.7 Disclosure.
      The
      Investor has reviewed information provided by the Company in connection with
      the
      decision to purchase the Common Stock and Warrants, consisting of the Company’s
      Memorandum which includes the Financial Statements. The Company has provided
      the
      Investor with all other information that the Investor reasonably has requested
      in connection with the decision to purchase the Common Stock and Warrants and
      is
      readily available to the Company and does not breach any confidentiality
      agreements or other restrictions and is not a trade secret of the Company.
      The
      Investor further represents that the Investor has had an opportunity to ask
      questions and receive adequate answers from the Company regarding the business,
      properties, prospects, and financial condition of the Company. All such
      questions have been answered to the full satisfaction of the Investor. Neither
      such inquiries nor any other investigation conducted by or on behalf of the
      Investor or its representatives or counsel shall modify, amend, or affect the
      Investor’s right to rely on the truth, accuracy, and completeness of the
      disclosure materials and the Company’s representations and warranties contained
      herein.

     

    6.8 No
      Registration.
      The
      Investor understands that Investor may be required to bear the economic risk
      of
      Investor’s investment in the Company for an indefinite period of time. The
      Investor further understands that (i) neither the offering nor the sale of
      the Common Stock and Warrants has been registered under the Securities Act
      or
      any applicable State Acts in reliance upon exemptions from the registration
      requirements of such laws, (ii) the Common Stock, the Warrants, and the
      Warrant Shares (collectively, the “Securities”)
      must
      be held by the Investor indefinitely unless the sale or transfer thereof is
      subsequently registered under the Securities Act and any applicable State Acts,
      or an exemption from such registration requirements is available, (iii) except
      as set forth in the registration rights provisions in this Agreement, the
      Company is under no obligation to register any of the Securities on the
      Investor’s behalf or to assist the Investor in complying with any exemption from
      registration, and (iv) the Company will rely upon the representations and
      warranties made by the Investor in this Subscription Agreement in order to
      establish such exemptions from the registration requirements of the Securities
      Act and any applicable State Acts. 

     

    
      
         

      

      
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    6.9 Transfer
      Restrictions.
      The
      Investor will not transfer any of the Securities unless such transfer is
      registered or exempt from registration under the Securities Act and such State
      Acts, and, if requested by the Company in the case of an exempt transaction,
      the
      Investor has furnished an opinion of counsel reasonably satisfactory to the
      Company that such transfer is so exempt. The Investor understands and agrees
      that (i) the instruments or certificates evidencing the Securities will bear
      appropriate legends indicating such transfer restrictions placed upon the
      Securities, (ii) the Company shall have no obligation to honor transfers of
      any
      of the Securities in violation of such transfer restrictions, and (iii) the
      Company shall be entitled to instruct any transfer agent or agents for the
      securities of the Company to refuse to honor such transfers.

     

    6.10 Principal
      Address.
      The
      Investor’s principal residence, if an individual, or principal executive office,
      if an entity, is set forth on the signature page of this Subscription
      Agreement.

     

    7. Independent
      Nature of Investor’s Obligations and Rights.
      The
      obligations of the Investor under this Agreement and any other documents
      delivered in connection herewith (collectively, the “Transaction
      Documents”)
      are
      several and not joint with the obligations of any other purchaser of the Common
      Stock and Warrants, and the Investor shall not be responsible in any way for
      the
      performance of the obligations of any other purchaser of the Common Stock and
      Warrants under any Transaction Document. The decision of the Investor to
      purchase the Common Stock and Warrants pursuant to the Transaction Documents
      has
      been made by the Investor independently of any other purchaser of the Common
      Stock and Warrants. Nothing contained herein or in any Transaction Document,
      and
      no action taken by any purchaser of the Common Stock and Warrants pursuant
      thereto, shall be deemed to constitute such purchasers as a partnership, an
      association, a joint venture, or any other kind of entity, or create a
      presumption that the purchasers of the Common Stock and Warrants are in any
      way
      acting in concert or as a group with respect to such obligations or the
      transactions contemplated by the Transaction Document. The Investor acknowledges
      that no other purchaser of the Common Stock and Warrants has acted as agent
      for
      the Investor in connection with making its investment hereunder and that no
      other purchaser of the Common Stock and Warrants will be acting as agent of
      the
      Investor in connection with monitoring its investment in the Common Stock and
      Warrants or enforcing its rights under the Transaction Documents. The Investor
      shall be entitled to independently protect and enforce its rights, including
      without limitation the rights arising out of this Agreement or out of the other
      Transaction Documents, and it shall not be necessary for any other purchaser
      of
      the Common Stock and Warrants to be joined as an additional party in any
      proceeding for such purpose.

     

    
      
         

      

      
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    8. Prospectus
      Delivery Requirement.
      The
      Investor hereby covenants with the Company not to make any sale of the
      Securities without complying with the provisions hereof and without effectively
      causing the prospectus delivery requirement under the Securities Act to be
      satisfied (unless the Investor is selling such Securities in a transaction
      not
      subject to the prospectus delivery requirement). 

     

    9. Merger
      Agreement and Related Matters.

     

    9.1 Merger.
      As a
      condition to Closing, the Company shall have completed the transactions under
      a
      certain Agreement and Plan of Merger (“Merger Agreement”) entered into by and
      among the Company and Wentworth I, Inc. (“Wentworth”), a Delaware corporation,
      and dated as of January 12, 2006. Pursuant to the Merger Agreement the Company
      intends to complete a business combination transaction by means of a merger
      (“Merger”) between itself and Wentworth in which Wentworth will merge with the
      Company and the Company will be the surviving entity, through an exchange of
      all
      the issued and outstanding shares of common and preferred stock of Wentworth
      for
      shares of the Company’s Common Stock. A copy of the Merger Agreement has been
      made available to the Investor.

     

    9.2 Covenant
      Not to Sue.
      From
      and after the Closing, the Investor agrees, on behalf of itself and its
      officers, directors, shareholders and affiliates, that none of the Investor
      or
      its officers, directors, shareholders and affiliates will assert, or assist
      in
      the assertion of, any claim or action before any federal, state, local or
      foreign judicial, arbitration, administrative, executive or other type of body
      or tribunal against the officers, directors and advisors of Wentworth in such
      positions prior to completion of the Merger and each of their respective
      affiliates, subsidiaries, partners, successors and assigns and all of their
      respective employees, officers, directors, agents and representatives
      (collectively, “Wentworth
      Persons”)
      that
      is based in whole or in part on their actions as an officer, director or advisor
      of Wentworth or by reason of their conduct in respect of the business of
      Wentworth, unless such claim or action is based on the gross negligence or
      commission of fraud. The grants of immunity set forth in this section (i) are
      irrevocable, (ii) shall survive indefinitely, and (iii) are binding on all
      successors and assigns of the Investor.

     

    9.3 Release.
      The
      Investor hereby agrees to unconditionally and irrevocably release, exonerate,
      acquit and discharge the Wentworth Persons, from any and all actions, causes
      of
      action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills,
      specialties, covenants, contracts, controversies, agreements, promises,
      variances, trespasses, judgments, executions, claims, demands, counterclaims,
      rights to damages and liabilities (collectively, “Claims”),
      that
      the Investor ever had, now has, or hereafter might, can or shall have against
      Wentworth Persons under statute, common law or otherwise, for or by reason
      of
      any matter, cause or thing whatsoever from the beginning of the world to, and
      including, the date of the consummation of the Merger, other than Claims that
      are for gross negligence or the commission of fraud as an officer, director
      or
      advisor in their conduct of the business of Wentworth.

     

    
      
         

      

      
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    9.4 Third
      Party Beneficiaries.
      The
      Wentworth Persons are third-party beneficiaries with respect to this
Section
      9
      and may
      enforce the foregoing provisions as if they were a signatory
      hereto.

     

    10. Registration
      of the Shares; Compliance with the Securities Act.

     

    10.1 Registration
      Procedures and Other Matters.
      The
      Company shall:

     

    (a) subject
      to receipt of necessary information from the Investor after prompt request
      from
      the Company to the Investor to provide such information, prepare and file with
      the SEC, within 45 days after the Closing Date, a registration statement (the
      “Registration
      Statement”)
      to
      enable the resale of the shares of Common Stock sold in the Offering and the
      shares of Common Stock underlying the Warrants (collectively the “Registrable
      Securities”)
      by the
      Investors from time to time through a securities exchange, the automated
      quotation system of the Nasdaq National Market or Nasdaq Capital Markets, in
      the
      Over-the-Counter Bulletin Board, the Pink Sheets or in privately-negotiated
      transactions;

     

    (b) subject
      to receipt of necessary information from the Investor after prompt request
      from
      the Company to the Investor to provide such information, use its reasonable
      commercial efforts to cause the Registration Statement to become effective
      on or
      prior to the 150th
      day
      after the Closing Date (the “Effective
      Date”);

     

    (c) use
      its
      reasonable commercial efforts to prepare and file with the SEC such amendments
      and supplements to the Registration Statement and the Prospectus used in
      connection therewith as may be necessary to keep the Registration Statement
      current, effective and free from any material misstatement or omission to state
      a material fact for a period not exceeding, with respect to each Investor’s
      Registrable Securities , the earlier of (i)  the date on which the Investor
      may sell all the Registrable Securities then held by the Investor without
      restriction by the volume limitations of Rule 144(e) of the Securities Act,
      or (ii) such time as all the Registrable Securities purchased by such
      Investor in this Offering have been sold pursuant to a registration statement.
      Notwithstanding the foregoing, if any Investor is not able to immediately,
      freely resell all Registrable Securities that it owns, the Company will continue
      to keep the Registration Statement current, effective and free from any material
      misstatement or omission to state a material fact for such period as is
      necessary;

     

    (d) furnish
      to the Investor with respect to the Registrable Securities registered under
      the
      Registration Statement such number of copies of the Registration Statement,
      Prospectuses and Preliminary Prospectuses in conformity with the requirements
      of
      the Securities Act and such other documents as the Investor may reasonably
      request, in order to facilitate the public sale or other disposition of all
      or
      any of the Registrable Securities by the Investor; provided, however, that
      the
      obligation of the Company to deliver copies of Prospectuses or Preliminary
      Prospectuses to the Investor shall be subject to the receipt by the Company
      of
      reasonable assurances from the Investor that the Investor will comply with
      the
      applicable provisions of the Securities Act and of such other securities or
      blue
      sky laws as may be applicable in connection with any use of such Prospectuses
      or
      Preliminary Prospectuses;

     

    
      
         

      

      
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    (e) file
      documents required of the Company for normal blue sky clearance in states
      specified in writing by the Investor and use its reasonable commercial efforts
      to maintain such blue sky qualifications during the period the Company is
      required to maintain the effectiveness of the Registration Statement pursuant
      to
      Section 10.1(c); provided,
      however,
      that
      the Company shall not be required to qualify to do business or consent to
      service of process in any jurisdiction in which it is not now so qualified
      or
      has not so consented;

     

    (f) bear
      all
      expenses in connection with the procedures in paragraph (a) through (e) of
      this
      Section 10.1 (other than underwriting discounts or commissions, brokers’
fees and similar selling expenses, and any other fees or expenses incurred
      by
      the Investor, including attorney fees of the Investor) and the registration
      of
      the Registrable Securities pursuant to the Registration Statement;
      and

     

    (g) advise
      the Investor, promptly after it shall receive notice or obtain knowledge of
      the
      issuance of any stop order by the SEC delaying or suspending the effectiveness
      of the Registration Statement or of the initiation or threat of any proceeding
      for that purpose; and it will promptly use its reasonable commercial efforts
      to
      prevent the issuance of any stop order or to obtain its withdrawal at the
      earliest possible moment if such stop order should be issued.

     

    Notwithstanding
      anything to the contrary herein, the Registration Statement shall cover only
      the
      Registrable Securities and certain other securities of the Company issuable
      in
      connection with the private offering of debt securities during the period
      commencing July 2005 and ending September 2005, the Agent Warrants and
      securities to be issued to the stockholders of Wentworth in the Merger. In
      no
      event at any time before the Registration Statement becomes effective with
      respect to the Registrable Securities shall the Company publicly announce or
      file any other registration statement, other than registrations on
      Form S-8, without the prior written consent of a majority in interest of
      the Investors.

     

    The
      Company understands that the Investor disclaims being an underwriter, but if
      the
      SEC deems the Investor to be an underwriter the Company shall not be relieved
      of
      any obligations it has hereunder; provided,
      however
      that if
      the Company receives notification from the SEC that the Investor is deemed
      an
      underwriter, then the period by which the Company is obligated to submit an
      acceleration request to the SEC shall be extended to the earlier of (i) the
      90th day after such SEC notification, or (ii) 120 days after the initial
      filing of the Registration Statement with the SEC.

     

    The
      Plan
      of Distribution section of the Registration Statement shall be approved by
      the
      Placement Agent on behalf of the Investors whose Registrable Securities are
      to
      be included in the Registration Statement. If the Placement Agent, after being
      provided a copy of the Registration Statement as to be filed, does not respond
      or make comments to the Plan of Distribution section within five business days,
      then the form of Plan of Distribution as submitted shall be deemed
      approved.

     

    
      
         

      

      
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    10.2 Transfer
      of Registrable Securities After Registration;
      Suspension.

     

    (a) The
      Investor agrees that it will not effect any disposition of the Registrable
      Securities or its right to purchase the Registrable Securities that would
      constitute a sale within the meaning of the Securities Act except as
      contemplated in the Registration Statement referred to in Section 10.1 and
      as described below or as otherwise permitted by law, and that it will promptly
      notify the Company of any changes in the information set forth in the
      Registration Statement regarding the Investor or its plan of
      distribution.

     

    (b) Except
      in
      the event that paragraph (c) below applies, the Company shall (i) if deemed
      necessary by the Company, prepare and file from time to time with the SEC a
      post-effective amendment to the Registration Statement or a supplement to the
      related Prospectus or a supplement or amendment to any document incorporated
      therein by reference or file any other required document so that such
      Registration Statement will not contain an untrue statement of a material fact
      or omit to state a material fact required to be stated therein or necessary
      to
      make the statements therein not misleading, and so that, as thereafter delivered
      to purchasers of the Registrable Securities being sold thereunder, such
      Prospectus will not contain an untrue statement of a material fact or omit
      to
      state a material fact required to be stated therein or necessary to make the
      statements therein, in light of the circumstances under which they were made,
      not misleading; (ii) provide the Investor copies of any documents filed
      pursuant to Section 10.2(b) as the Investor may reasonably request; and
      (iii) inform each Investor that the Company has complied with its
      obligations in Section 10.2(b) (or that, if the Company has filed a
      post-effective amendment to the Registration Statement which has not yet been
      declared effective, the Company will notify the Investor to that effect, will
      use its reasonable commercial efforts to secure the effectiveness of such
      post-effective amendment as promptly as possible and will promptly notify the
      Investor pursuant to Section 10.2(b) hereof when the amendment has
      become effective).

     

    (c) Subject
      to paragraph (d) below, in the event (i) of any request by the SEC or any
      other federal or state governmental authority during the period of effectiveness
      of the Registration Statement for amendments or supplements to a Registration
      Statement or related Prospectus or for additional information; (ii) of the
      issuance by the SEC or any other federal or state governmental authority of
      any
      stop order suspending the effectiveness of a Registration Statement or the
      initiation of any proceedings for that purpose; (iii) of the receipt by the
      Company of any notification with respect to the suspension of the qualification
      or exemption from qualification of any of the Registrable Securities for sale
      in
      any jurisdiction or the initiation or threatening of any proceeding for such
      purpose; or (iv) of any event or circumstance which, upon the advice of its
      counsel, necessitates the making of any changes in the Registration Statement
      or
      Prospectus, or any document incorporated or deemed to be incorporated therein
      by
      reference, so that, in the case of the Registration Statement, it will not
      contain any untrue statement of a material fact or any omission to state a
      material fact required to be stated therein or necessary to make the statements
      therein not misleading, and that in the case of the Prospectus, it will not
      contain any untrue statement of a material fact or any omission to state a
      material fact required to be stated therein or necessary to make the statements
      therein, in the light of the circumstances under which they were made, not
      misleading; then the Company shall deliver a certificate in writing to the
      Investor (the “Suspension
      Notice”)
      to the
      effect of the foregoing and, upon receipt of such Suspension Notice, the
      Investor will refrain from selling any of the Registrable Securities pursuant
      to
      the Registration Statement (a “Suspension”)
      until
      the Investor’s receipt of copies of a supplemented or amended Prospectus
      prepared and filed by the Company, or until it is advised in writing by the
      Company that the current Prospectus may be used, and has received copies of
      any
      additional or supplemental filings that are incorporated or deemed incorporated
      by reference in any such Prospectus. In the event of any Suspension, the Company
      will use its reasonable commercial efforts to cause the use of the Prospectus
      so
      suspended to be resumed as soon as reasonably practicable within 20 business
      days after the delivery of a Suspension Notice to the Investor. In addition
      to
      and without limiting any other remedies (including, without limitation, at
      law
      or at equity) available to the Investor, the Investor shall be entitled to
      specific performance in the event that the Company fails to comply with the
      provisions of this Section  10.2(c).

     

    
      
         

      

      
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    (d) Notwithstanding
      the foregoing paragraphs of this Section 10.2, the Investor shall not be
      prohibited from selling the Registrable Securities under the Registration
      Statement as a result of Suspensions on more than two occasions of not more
      than
      30 days each in any twelve month period, unless, in the good faith judgment
      of
      the Company’s Board of Directors, upon the written opinion of counsel of the
      Company, the sale of the Registrable Securities under the Registration Statement
      in reliance on this Section 10.2(d) would be reasonably likely to cause a
      violation of the Securities Act or the Exchange Act and result in liability
      to
      the Company.

     

    (e) Provided
      that a Suspension is not then in effect, the Investor may sell the Registrable
      Securities under the Registration Statement, provided that it arranges for
      delivery of a current Prospectus to the transferee of such the Registrable
      Securities. Upon receipt of a request therefor, the Company has agreed to
      provide an adequate number of current Prospectuses to the Investor and to supply
      copies to any other parties requiring such Prospectuses.

     

    (f) In
      the
      event of a sale of the Registrable Securities by the Investor pursuant to the
      Registration Statement, the Investor must also deliver to the Company’s transfer
      agent such documentation as is reasonably necessary so that the Registrable
      Securities may be properly transferred.

     

    10.3 Indemnification.
      For the
      purpose of this Section 10.3:

     

    (a) the
      term
“Selling
      Stockholder”
means
      the Investor and any affiliate of such Investor;

     

    (b) the
      term
“Registration
      Statement”
shall
      include the Prospectus in the form first filed with the SEC pursuant to
      Rule 424(b) of the Securities Act or filed as part of the Registration
      Statement at the time of effectiveness if no Rule 424(b) filing is
      required, and any exhibit, supplement or amendment included in or relating
      to
      the Registration Statement referred to in Section 10.1; and

     

    
      
         

      

      
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    (c) the
      term
“Untrue
      Statement”
means
      any untrue statement or alleged untrue statement, or any omission or alleged
      omission to state in the Registration Statement a material fact required to
      be
      stated therein or necessary to make the statements therein, in the light of
      the
      circumstances under which they were made, not misleading.

     

    (d) the
      Company agrees to indemnify and hold harmless each Selling Stockholder from
      and
      against any losses, claims, damages or liabilities to which such Selling
      Stockholder may become subject (under the Securities Act or otherwise) insofar
      as such losses, claims, damages or liabilities (or actions or proceedings in
      respect thereof) arise out of, or are based upon (i) any breach of the
      representations or warranties of the Company contained herein or failure to
      comply with the covenants and agreements of the Company contained herein,
      (ii) any Untrue Statement, or (iii) any failure by the Company to
      fulfill any undertaking included in the Registration Statement as amended or
      supplemented from time to time, and the Company will reimburse such Selling
      Stockholder for any reasonable legal or other expenses reasonably incurred
      in
      investigating, defending or preparing to defend any such action, proceeding
      or
      claim, or preparing to defend any such action, proceeding or claim, provided,
      however,
      that
      the Company shall not be liable in any such case to the extent that such loss,
      claim, damage or liability arises out of, or is based upon, an Untrue Statement
      made in reliance upon and in conformity with written information furnished
      to
      the Company by or on behalf of such Selling Stockholder specifically for use
      in
      preparation of the Registration Statement, as amended or supplemented from
      time
      to time (including, without limitation, information set forth in the Investor
      Questionnaire), or the failure of such Selling Stockholder to comply with its
      covenants and agreements contained in Section 10.2 hereof respecting sale of
      the
      Registrable Securities or any statement or omission in any Prospectus that
      is
      corrected in any subsequent Prospectus that was delivered to the Selling
      Stockholder prior to the pertinent sale or sales by the Selling Stockholder.
      The
      Company shall reimburse each Selling Stockholder for the indemnifiable amounts
      provided for herein on demand as such expenses are incurred.

     

    (e) The
      Investor agrees to indemnify and hold harmless the Company (and each person,
      if
      any, who controls the Company within the meaning of Section 15 of the
      Securities Act, each officer of the Company who signs the Registration Statement
      and each director of the Company) from and against any losses, claims, damages
      or liabilities to which the Company (or any such officer, director or
      controlling person) may become subject (under the Securities Act or otherwise),
      insofar as such losses, claims, damages or liabilities (or actions or
      proceedings in respect thereof) arise out of, or are based upon, (i) any
      failure to comply with the covenants and agreements contained in
      Section 10.2 hereof respecting sale of the Registrable Securities, or
      (ii) any Untrue Statement if such Untrue Statement was made in reliance
      upon and in conformity with written information furnished by or on behalf of
      the
      Investor specifically for use in preparation of the Registration Statement,
      as
      amended or supplemented from time to time (including, without limitation,
      information set forth in the Investor Questionnaire), and the Investor will
      reimburse the Company (or such officer, director or controlling person), as
      the
      case may be, for any legal or other expenses reasonably incurred in
      investigating, defending or preparing to defend any such action, proceeding
      or
      claim. The Investor shall reimburse the Company or such officer, director or
      controlling person, as the case may be, for the indemnifiable amounts
provided
      for
      herein on demand as such expenses are incurred. Notwithstanding the foregoing,
      the Investor’s aggregate obligation to indemnify the Company and such officers,
      directors and controlling persons shall be limited to the net amount received
      by
      the Investor from the sale of the Registrable Securities.

     

    
      
         

      

      
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    (f) Promptly
      after receipt by any indemnified person of a notice of a claim or the beginning
      of any action in respect of which indemnity is to be sought against an
      indemnifying person pursuant to this Section 10.3, such indemnified person
      shall notify the indemnifying person in writing of such claim or of the
      commencement of such action, but the omission to so notify the indemnifying
      person will not relieve it from any liability which it may have to any
      indemnified person under this Section 10.3 (except to the extent that such
      omission materially and adversely affects the indemnifying person’s ability to
      defend such action) or from any liability otherwise than under this
      Section 10.3. Subject to the provisions hereinafter stated, in case any
      such action shall be brought against an indemnified person, the indemnifying
      person shall be entitled to participate therein, and, to the extent that it
      shall elect by written notice delivered to the indemnified person promptly
      after
      receiving the aforesaid notice from such indemnified person, shall be entitled
      to assume the defense thereof, with counsel reasonably satisfactory to such
      indemnified person. After notice from the indemnifying person to such
      indemnified person of its election to assume the defense thereof, such
      indemnifying person shall not be liable to such indemnified person for any
      legal
      expenses subsequently incurred by such indemnified person in connection with
      the
      defense thereof, provided,
      however,
      that if
      there exists or shall exist a conflict of interest that would make it
      inappropriate, in the opinion of counsel to the indemnified person, for the
      same
      counsel to represent both the indemnified person and such indemnifying person
      or
      any affiliate or associate thereof, the indemnified person shall be entitled
      to
      retain its own counsel at the expense of such indemnifying person; provided,
      however, that no indemnifying person shall be responsible for the fees and
      expenses of more than one separate counsel (together with appropriate local
      counsel) for all indemnified parties. In no event shall any indemnifying person
      be liable in respect of any amounts paid in settlement of any action unless
      the
      indemnifying person shall have approved the terms of such settlement;
provided
      that
      such consent shall not be unreasonably withheld or delayed. No indemnifying
      person shall, without the prior written consent of the indemnified person,
      effect any settlement of any pending or threatened proceeding in respect of
      which any indemnified person is or could have been a party and indemnification
      could have been sought hereunder by such indemnified person, unless such
      settlement includes an unconditional release of such indemnified person from
      all
      liability on claims that are the subject matter of such proceeding.

     

    
      
         

      

      
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    (g) If
      the
      indemnification provided for in this Section 10.3 is unavailable to or
      insufficient to hold harmless an indemnified person under subsection (a) or
      (b)
      above in respect of any losses, claims, damages or liabilities (or actions
      or
      proceedings in respect thereof) referred to therein, then each indemnifying
      person shall contribute to the amount paid or payable by such indemnified person
      as a result of such losses, claims, damages or liabilities (or actions in
      respect thereof) in such proportion as is appropriate to reflect the relative
      fault of the Company on the one hand and the Investor, as well as any other
      Selling Shareholders under such Registration Statement on the other in
      connection with the statements or omissions or other matters which resulted
      in
      such losses, claims, damages or liabilities (or actions in respect thereof),
      as
      well as any other relevant equitable considerations. The relative fault shall
      be
      determined by reference to, among other things, in the case of an Untrue
      Statement, whether the Untrue Statement relates to information supplied by
      the
      Company on the one hand or an Investor or other Selling Shareholder on the
      other
      and the parties’ relative intent, knowledge, access to information and
      opportunity to correct or prevent such Untrue Statement. The Company and the
      Investor agree that it would not be just and equitable if contribution pursuant
      to this subsection (d) were determined by pro rata allocation (even if the
      Investor and other Selling Shareholders were treated as one entity for such
      purpose) or by any other method of allocation which does not take into account
      the equitable considerations referred to above in this subsection (d). The
      amount paid or payable by an indemnified person as a result of the losses,
      claims, damages or liabilities (or actions in respect thereof) referred to
      above
      in this subsection (d) shall be deemed to include any legal or other expenses
      reasonably incurred by such indemnified person in connection with investigating
      or defending any such action or claim. Notwithstanding the provisions of this
      subsection (d), the Investor shall not be required to contribute any amount
      in
      excess of the amount by which the net amount received by the Investor from
      the
      sale of the Registrable Securities to which such loss relates exceeds the amount
      of any damages which such Investor has otherwise been required to pay by reason
      of such Untrue Statement. No person guilty of fraudulent misrepresentation
      (within the meaning of Section 11(f) of the Securities Act) shall be
      entitled to contribution from any person who was not guilty of such fraudulent
      misrepresentation. The Investor’s obligations in this subsection to contribute
      shall be in proportion to its Investor sale of the Registrable Securities to
      which such loss relates and shall not be joint with any other Selling
      Shareholders.

     

    (h) The
      parties to this Agreement hereby acknowledge that they are sophisticated
      business persons who were represented by counsel during the negotiations
      regarding the provisions hereof including, without limitation, the provisions
      of
      this Section 10.3, and are fully informed regarding said provisions. They
      further acknowledge that the provisions of this Section 10.3 fairly
      allocate the risks in light of the ability of the parties to investigate the
      Company and its business in order to assure that adequate disclosure is made
      in
      the Registration Statement as required by the Securities Act and the Exchange
      Act. The parties are advised that federal or state public policy as interpreted
      by the courts in certain jurisdictions may be contrary to certain of the
      provisions of this Section 10.3, and the parties hereto hereby expressly
      waive and relinquish any right or ability to assert such public policy as a
      defense to a claim under this Section 10.3 and further agree not to attempt
      to assert any such defense.

     

    10.4 Termination
      of Conditions and Obligations.
      The
      conditions precedent imposed by this Section 10 upon the transferability of
      the Registrable Securities shall cease and terminate as to any particular number
      of the Registrable Securities when such Registrable Securities shall have been
      effectively registered under the Securities Act and sold or otherwise disposed
      of in accordance with the intended method of disposition set forth in the
      Registration Statement covering such Registrable Securities or at such time
      as
      an opinion of counsel reasonably satisfactory to the Company shall have been
      rendered to the effect that such conditions are not necessary in order to comply
      with the Securities Act.

     

    
      
         

      

      
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    10.5 Information
      Available.
      So long
      as the Registration Statement is effective covering the resale of the
      Registrable Securities owned by the Investor, the Company will furnish to the
      Investor:

     

    (a) as
      soon
      as practicable after it is available, one copy of (i) its Annual Report to
      Stockholders (which Annual Report shall contain financial statements audited
      in
      accordance with generally accepted accounting principles by a national firm
      of
      certified public accountants), (ii) its Annual Report on Form 10-KSB and
      (iii) its Quarterly Reports on Form 10-QSB (the foregoing, in each
      case, excluding exhibits);

     

    (b) upon
      the
      request of the Investor, all exhibits excluded by the parenthetical to
      subparagraph (a) of this Section 10.5 as filed with the SEC and all
      other information that is made available to shareholders; and

     

    (c) upon
      the
      reasonable request of the Investor, the President or the Chief Financial Officer
      of the Company (or an appropriate designee thereof) will meet with the Investor
      or a representative thereof at the Company’s headquarters to discuss all
      information relevant for disclosure in the Registration Statement covering
      the
      Registrable Securities and will otherwise cooperate with any Investor conducting
      an investigation for the purpose of reducing or eliminating such Investor’s
      exposure to liability under the Securities Act, including the reasonable
      production of information at the Company’s headquarters; provided, that the
      Company shall not be required to disclose any confidential information to or
      meet at its headquarters with any Investor until and unless the Investor shall
      have entered into a confidentiality agreement in form and substance reasonably
      satisfactory to the Company with the Company with respect thereto.

     

    10.6 Legend;
      Restrictions on Transfer.
      The
      certificate or certificates for the Registrable Securities (and any securities
      issued in respect of or exchange for the Registrable Securities) shall be
      subject to a legend or legends restricting transfer under the Securities Act
      and
      referring to restrictions on transfer herein, such legend to be substantially
      as
      follows:

     

    THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
      ACT
      OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, OR
      HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF
      COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES,
      SUCH OFFER, SALE OR TRANSFER OR HYPOTHECATION IS IN COMPLIANCE
      THEREWITH.

     

    The
      Company and the Investor acknowledge and agree that the Investor may, as
      permitted by law, from time to time pledge pursuant to a bona fide margin
      agreement or grant a security interest in some or all of the Registrable
      Securities and, if required under the terms of such arrangement, Investor may,
      as permitted by law, transfer pledged or secured Registrable Securities to
      the
      pledgees or secured parties. So long as Investor is not an affiliate of the
      Company, such a pledge or transfer would not be subject to approval or consent
      of the Company, provided that, upon the request of the Company, a legal opinion
      of legal counsel to the pledgee, secured party or pledgor shall be obtained.
      At
      the Investor’s expense, so long as the Registrable Securities are subject to the
      legend required by this Section 10.6, the Company will use its reasonable
      commercial efforts to execute and deliver such reasonable documentation as
      a
      pledgee or secured party of Registrable Securities may reasonably request in
      connection with a pledge or transfer of the Registrable Securities including
      such amendments or supplements to the Registration Statement and Prospectus
      as
      may be reasonably required. The foregoing does not affect Investor’s obligations
      pursuant to Section 10.2(a).

     

    
      
         

      

      
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    10.7 Liquidated
      Damages.
      The
      Company and Investor agree that Investor will suffer damages if the Company
      fails to fulfill its obligations pursuant to Section 10.1 and 10.2 hereof and
      that it would not be possible to ascertain the extent of such damages with
      precision. Accordingly, the Company hereby agrees to pay liquidated damages
      (“Liquidated
      Damages”)
      to
      Investor under the following circumstances: (a) if the Registration Statement
      is
      not filed by the Company on or prior to 45 days after the Closing Date (such
      an
      event, a “Filing
      Default”);
      (b)
      if the Registration Statement is not declared effective by the SEC on or prior
      to the 150th
      day
      after the Closing Date (such an event, an “Effectiveness
      Default”);
      and/or (c) if the Registration Statement (after its effectiveness date) ceases
      to be effective and available to Investor for any continuous period that exceeds
      30 days or for one or more period that exceeds in the aggregate 60 days in
      any
      12-month period (such an event, a “Suspension
      Default”
and
      together with a Filing Default and an Effectiveness Default, a “Registration
      Default”).
      In
      the event of a Registration Default, the Company shall as Liquidated Damages
      pay
      to Investor, for each 30-day period of a Registration Default, an amount equal
      to 1% of the aggregate purchase price paid by Investor pursuant to this
      Agreement up to a maximum of 18% of the aggregate purchase price paid by the
      Investor, provided that Liquidation Damages in respect of a Suspension Default
      shall not be payable in relation to any Registrable Securities not owned by
      the
      Investor at the time of the Suspension Default and, provided
      further,
      that no
      Liquidated Damages are due in respect of the Warrants. In the event of a Filing
      Default or an Effectiveness Default, the Liquidated Damages shall be paid by
      the
      issuance of additional Common Stock at the rate of the amount of the Liquidated
      Damages due divided by $2.00 (“Penalty
      Shares”).
      To
      the extent any Penalty Shares are issued or may be issuable, the Penalty Shares
      shall be included in the Registration Statement. In the event of a Suspension
      Default, the Liquidated Damages shall be paid in cash. The Company shall pay
      the
      Liquidated Damages as follows: (i) in connection with a Filing Default, on
      the
      46th day after the Closing Date, and each 30th day thereafter until the
      Registration Statement is filed with the SEC; (ii) in connection with an
      Effectiveness Default, on the 150th
      day
      after the Closing Date and each 30th day thereafter until the Registration
      Statement is declared effective by the SEC; or (iii) in connection with a
      Suspension Default, on either (x) the 31st
      consecutive day of any Suspension or (y) the 61st
      day (in
      the aggregate) of any Suspensions in any 12-month period, and each
      30th
      day
      thereafter until the Suspension is terminated in accordance with Section 10.2.
      Notwithstanding the foregoing, all periods shall be tolled during delays
      directly caused by the action or inaction of any Investor, and the Company
      shall
      have no liability to any Investor in respect of any such delay. The Liquidated
      Damages payable herein shall apply on a pro rata basis for any portion of a
      30-day period of a Registration Default.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    11. Indemnification
      of Investor.
      In
      addition to the indemnity provided in the registration rights provisions of
      this
      Agreement, the Company will indemnify and hold the Investor and its directors,
      officers, shareholders, partners, employees and agents (each, an “Investor
      Party”)
      harmless from any and all losses, liabilities, obligations, claims,
      contingencies, damages, costs and expenses, including all judgments, amounts
      paid in settlements, court costs, and reasonable attorneys’ fees and costs of
      investigation (collectively, “Losses”)
      that
      any such Investor Party may suffer or incur as a result of or relating to any
      misrepresentation, breach, or inaccuracy of any representation, warranty,
      covenant, or agreement made by the Company in any Transaction Document. In
      addition to the indemnity contained herein, the Company will reimburse each
      Investor Party for its reasonable legal and other expenses (including the cost
      of any investigation, preparation, and travel in connection therewith) incurred
      in connection therewith, as such expenses are incurred.

     

    12. Non-Public
      Information.
      Subsequent to the Closing, the Company covenants and agrees that neither it
      nor
      any other person acting on its behalf will provide Investor or its agents or
      counsel with any information that the Company believes constitutes material
      non-public information, unless prior thereto Investor shall have executed a
      written agreement regarding the confidentiality and use of such information.
      The
      Company understands and confirms that Investor shall be relying on the foregoing
      representations in effecting transactions in securities of the
      Company.

     

    13. Further
      Assurances.
      The
      parties hereto will, upon reasonable request, execute and deliver all such
      further assignments, endorsements and other documents as may be necessary in
      order to perfect the purchase by the Investor of the Common Stock and
      Warrants.

     

    14. Entire
      Agreement; No Oral Modification.
      This
      Agreement contains the entire agreement among the parties hereto with respect
      to
      the subject matter hereof and supersedes all prior agreements and understandings
      with respect thereto and may not be amended or modified except in a writing
      signed by both of the parties hereto.

     

    15. Binding
      Effect; Benefits.
      This
      Agreement shall inure to the benefit of and be binding upon the parties hereto
      and their respective heirs, successors and assigns; however, nothing in this
      Agreement, expressed or implied, is intended to confer on any other person
      other
      than the parties hereto, or their respective heirs, successors or assigns,
      any
      rights, remedies, obligations or liabilities under or by reason of this
      Agreement.

     

    16. Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed to be an original and all of which together shall be deemed to be one
      and
      the same instrument. The execution of this Agreement may be evidenced by
      facsimile or electronic signature, and such signature shall for all purposes
      be
      treated as an original signature of such party. 

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

    17. Governing
      Law.
      This
      Agreement shall be governed by, and construed and enforced in accordance with,
      the laws of the United States of America and the State of Colorado, both
      substantive and remedial. Any
      judicial proceeding brought against either of the parties to this agreement
      or
      any dispute arising out of this Agreement or any matter related hereto shall
      be
      brought in the courts of the State of Colorado, or in the United States District
      Court located in Denver, Colorado and, by its execution and delivery of this
      agreement, each party to this Agreement accepts the jurisdiction of such courts.
      

     

    18. Prevailing
      Parties.
      In any
      action or proceeding brought to enforce any provision of this Agreement, or
      where any provision hereof is validly asserted as a defense, the prevailing
      party shall be entitled to receive and the non-prevailing party shall pay upon
      demand reasonable attorneys’ fees in addition to any other remedy.

     

    19. Notices.
      All
      communication hereunder shall be in writing and, if sent to you shall be mailed,
      delivered, telegraphed or sent by facsimile or electronic mail, and confirmed
      to
      an Investor at the address set forth on the signature page of this Agreement,
      or
      if sent to the Company, shall be mailed, delivered, telegraphed or sent by
      facsimile or electronic mail and confirmed to the Company at 900 28th
      Street,
      Suite 201, Boulder, CO 80303, Attention: CEO, telephone number: (303) 444-7755,
      fax number: (303) 444-0406.

     

    20. Headings.
      The
      section headings herein are included for convenience only and are not to be
      deemed a part of this Agreement.

     

    [Signature
      on following page]

    


    
      
         

      

      
        21

        
          

        

      

      
         

      

       

    

    IN
      WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
      date
      first written above.

    


    AERO
      GROW INTERNATIONAL, INC. 

    a
      Nevada
      corporation

    


    


    By:
      __________________________     

    Michael
      Bissonnette, CEO

     

    


    


    


    
 

    


    


    [INVESTOR
      SIGNATURE PAGE FOLLOWS]

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

       

    

    [INVESTOR
      SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT]

     

    

      
        	
                INVESTOR
                  (for Entities, Trusts and IRAs):

              	 	
                INVESTOR
                  (for Individuals):

              
	 	 	 
	
                ___________________________________

              	 	
                ____________________________________

              
	
                Print
                  Name of Entity (full legal name)

              	 	
                Print
                  Name of Individual (full legal name)

              
	 	 	 
	 	 	 
	
                By:
                  _________________________________

              	 	________________________________
	
                Signature
                  of Authorized Person

              	 	
                Signature

              
	 	 	 
	
                ____________________________________

              	 	 
	
                Print
                  Name and Title

              	 	 
	 	 	 
	
                ____________________________________

              	 	
                ____________________________________

              
	
                ____________________________________

              	 	
                ____________________________________

              
	
                ____________________________________

              	 	
                ____________________________________

              
	
                Executive
                  Office Address

              	 	
                Principal
                  Residence Address

              
	
                ____________________________________

              	 	 
	
                IRS
                  Tax Identification No.

              	 	
                IRS
                  Tax Identification No.

              
	 	 	 
	
                ____________________________________

              	 	
                ____________________________________

              
	
                Telephone
                  Number

              	 	
                Telephone
                  Number

              
	 	 	 
	
                ____________________________________

              	 	
                ____________________________________

              
	
                Fax
                  Number

              	 	
                Fax
                  Number

              
	 	 	 
	
                ____________________________________

              	 	
                ____________________________________

              
	
                E-mail
                  Address

              	 	
                E-mail
                  Address

              


      

       

    

    Number
      of
      Units subscribed to (Minimum 5,000 Units): ____________

    


    Subscription
      Amount: Number of Units subscribed to multiplied by $5.00 = $__________


    


    
      
         

      

      
        23

        
          

        

      

      
         

      

       

    

    INSTRUCTIONS
      TO INVESTORS:

    


    Subscription
      Documents:

    


    Please
      send the completed and signed Subscription Agreement, Investor Questionnaire,
      NASD Questionnaire and, if you are a non-U.S. person, a Form W-8, to the
      following person:

    


    
      
        	 	
                Keating
                  Securities, LLC

                5251
                  DTC Parkway, Suite 1090

                Greenwood
                  Village, CO 80111

                Attn:
                  Kelley Boland, Operations Associate 

                (720)
                  489-4914

                (303)
                  728-3538 telecopy

                kb@keatinginvestments.com
                  e-mail

              


      

    

    
       

    

    Payment
      of Funds:

    


    All
      wire
      transfers of subscription funds should be sent to the Escrow Account. All
      subscribers' checks should be made payable to “Keating - AeroGrow Escrow
      Account” and sent directly
      to the
      Escrow Agent. The deposit and wire instructions for the Escrow Account are
      as
      follows:

     

    

      
        	 	
                Steele
                  Street State Bank

              	 
	 	
                88
                  Steele Street, Suite 50

              	 
	 	
                Denver,
                  CO 80206

              	 
	 	
                Attn:
                  Jason Flynn

              	 
	 	
                For
                  Benefit to: Keating - AeroGrow Escrow Account

              	 
	 	
                Account
                  #: 10003975

              	 
	 	 	 
	 	
                Wire
                  Instructions:

              	 
	 	
                Receiving
                  Bank Name:

              	
                Wells
                  Fargo Bank, N.A.

              
	 	
                Receiving
                  Bank ABA#:

              	
                121000248

              
	 	
                Receiving
                  Bank City/State:

              	
                San
                  Francisco, CA

              
	 	
                Beneficiary:

              	
                Steele
                  Street State Bank

              
	 	
                Beneficiary’s
                  Account #:

              	
                4100059286

              
	 	
                For
                  Further Benefit to: 

              	
                Keating-AeroGrow
                  Escrow Account

              
	 	
                Account
                  #: 

              	
                10003975

              


      

    

      

    
      
         

      

      
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    EXHIBIT
      A
      - COMMON STOCK PURCHASE WARRANT

    


    EXHIBIT
      B
      - INVESTOR QUESTIONNAIRE

    


    EXHIBIT
      C
      - NASD QUESTIONNAIRE

     

     

    
      
         

      

      
        25