EXHIBIT
      10.12

      INNOTRAC
        CORPORATION

      


      MASTER
        SERVICE AGREEMENT

      


      


      This
        Service Agreement (this “Agreement”) is made this 7th day of October, 2005 (the
“Agreement Date”) by and between the following parties:

      


      
        	 	
                “Innotrac”:

              	
                Innotrac
                  Corporation, a Georgia corporation

              
	 	 	
                6655
                  Sugarloaf Parkway

              
	 	 	
                Duluth,
                  Georgia 30097-4916

              
	 	 	
                Attn:Suzanne
                  Vesper

              
	 	 	
                Fax:678-475-5884

              
	 	 	
                Phone:678-584-4234

              
	 	 	
                Email:svesper@innotrac.com

              
	 	 	 
	 	
                 

              	and
	 	 	 
	 	
                “Client”:

              	
                AeroGrow
                  International, Inc.

              
	 	 	
                900
                  28th
                  Street, Suite 201

              
	 	 	
                Boulder,
                  Colorado 80303

              
	 	 	
                Attn:
                  Randy
                  Seffren

              
	 	 	
                Fax:
                  303-444-0406

              
	 	 	
                Phone:
                  303-444-7755

              
	 	 	
                Email:
                  randy@aerogrow.com

              


      

      


      for
        Services (defined below) for a duration of three (3) years from the date
        of the
        first shipment to a bona fide customer in the regular course of business
        (the
“Go Live” date). These first three years will be known as the “Initial
        Term.”

       

      RECITALS

      


      A.    Innotrac
        is a provider of fulfillment, customer care and technology services from
        various
        locations in the United States;

      


      B.    Client
        desires to purchase, and Innotrac desires to furnish, certain of Innotrac’s
        services in accordance with the terms and conditions of this
        Agreement.

       

      NOW,
        THEREFORE, in consideration of the mutual covenants and agreements set forth
        below, and other good and valuable consideration, the adequacy and receipt
        of
        all such consideration being hereby acknowledged, the parties hereto agree
        as
        follows:

       

      
        
          
          

        

        
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            1

          
            

          

        

        
          
          

        

      

      


      Article
        I

      Services
        and Prices

      


      Section
        1.1. Scope
        of Services. 

      


      Commencing
        on the Agreement Date, Innotrac agrees to provide to Client those services
        commercially reasonable and necessary to fulfill the client’s requirements (the
“Services”) more fully described in Exhibits
        A & B. 
        Innotrac promises to work with due diligence commencing on the Agreement
        Date to
        complete a document (a “Statement of Work”) outlining the scope of work and
        describing the particular additional services to be purchased by Client and
        provided by Innotrac, together with final information on pricing, and time
        lines
        for design, development and delivery, as applicable, and will be added as
        Exhibit A to the Agreement upon signature by both Client and Innotrac. 
        By
        signing this Agreement, Client agrees to pay for the Services furnished by
        Innotrac at the rates set forth in Exhibit B. Client promises to provide
        Innotrac with information and assistance as required to complete
        the
        Statement of Work.  When the parties execute the Statement of Work,
        and it
        has been identified to this Agreement, it shall become part of this Agreement,
        and subject to the terms hereof, and the additional services and/or products
        described in the Statement of Work shall thereafter be included in the Services
        as
        defined in
        this
        Agreement.  

      


      Section
        1.2.  Prices.

      


      (a)
        Client agrees to pay for the fulfillment Services furnished by Innotrac at
        the
        rates set forth in the Exhibit B. with Services described in Exhibit A. Subject
        to Sections 1.2(b) and 1.2(c) below with regard to the amount of a Price
        increase, Innotrac will not increase the Prices the first twelve (12) months
        after the Go Live date. Innotrac may not increase the Prices more than once
        every twelve (12) months. Innotrac will provide Client with written notice
        of
        such increase in Prices (an “Adjustment Notice”) at least ninety (90) calendar
        days prior to the commencement of the twelve (12) month period for which
        such
        increase in Prices shall be effective. Any new service and/or change to services
        described in Exhibits A and B will be priced and agreed to by both parties
        and
        pricing for the new service will be effective at the time that any necessary
        addendums to Exhibits A and B are executed by both parties.

      


      (b)
        Innotrac shall not increase the Prices by more than the lesser of (i) five
        percent (5%) or, (ii) the increase in CPI-W for each Adjustment Notice. For
        purposes of this Agreement, “CPI-W” shall mean the official Consumer Price Index
        for Urban Wage Earners and Clerical Worker, U.S. City Average, All Items
        1982-84
        (U.S. Department of Labor). 

      


      (c)
        Notwithstanding anything to the contrary contained herein, Innotrac may increase
        Prices for postage, freight, shipping services, or telephone service upon
        prior
        written notice Client. In the event that Innotrac’s third party vendors increase
        Prices to Innotrac, notice of such price increase will be provided to Client
        immediately following notice given to Innotrac and will be effective at the
        time
        the increase is imposed upon Innotrac. Such increases will be limited to
        increases provided to Innotrac by third-party vendors and providers. Innotrac
        will provide Client with written documentation of such increases. Such increases
        will be passed on to Client at cost, which may include administrative fees
        from
        such third-party vendors. Innotrac shall provide prior written notice to
        Client
        of such third party vendor increases. If the revised third party vendor prices
        are unacceptable to Client, Client shall stipulate to Innotrac, in writing,
        an
        alternate third party vendor source to be used for Client. Additionally,
        in the
        event Innotrac receives any price decrease from a third party vendor providing
        postage, freight, other shipping services, or telephone service, for Client’s
        account, Innotrac shall pass the amount of such decrease to Client.

       

      
        
          
          

        

        
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      Article
        II

      Innotrac’s
        Representations and Responsibilities

      


      Section
        2.1. Corporate
        Power and Authority.

      


      Innotrac
        represents that it is a corporation duly organized and existing under the
        laws
        of the State of Georgia with lawful power and authority to enter into this
        Agreement. This Agreement shall not be binding on Innotrac unless it is executed
        by an Innotrac corporate officer having full power and authority to bind
        Innotrac.

      


      Section
        2.2. Performance.

      


      Innotrac
        will perform the Services in accordance with the terms of this Agreement,
        subject to Client’s compliance with all of its precedent obligations hereunder.
        If Innotrac causes an error in the course of its performance of the Services,
        then Innotrac will correct such error at its expense, not to exceed the
        aggregate amount of the fulfillment fee that Innotrac charged for the
        deficiently performed Service plus freight. This limitation applies to all
        errors in the aggregate. Notwithstanding the foregoing, Innotrac shall not
        be
        responsible for any loss, damage, cost or expense to Client or to any purchaser
        or recipient of Products that result from any delay by Innotrac in performing
        or
        any failure to perform any of its obligation hereunder if such delay or failure
        to perform results directly or indirectly from the failure by Client or its
        representatives or suppliers to provide to Innotrac all or any of the following:
        (i) sufficient quantities of Product to meet order and shipping demand in
        a
        timely manner; (ii) Products of proper quality that are free of defects;
        (iii)
        Products with proper packaging; (iv) timely, complete and accurate order
        and
        shipping information; (v) sufficient time to allow for changes in procedure,
        product packaging or changes to Services requirements; (vi) timely approvals
        and
        consents. 

      


      Section
        2.3. Lost
        Goods.

      


      If
        any of
        Client’s Products are lost, damaged and/or destroyed as a result of Innotrac’s
        negligent acts or omissions, beyond .5% (the “Shrinkage Allowance”), of the
        value of the Products, calculated on an annual basis, based on Client’s actual
        cost of such Products, Client agrees that, as its sole remedy, Innotrac shall
        reimburse Client for the actual replacement cost to Client for such excess
        lost,
        damaged and/or destroyed Products above the Shrinkage Allowance, together
        with
        the freight costs to Innotrac’s fulfillment center. Inventory accuracy is
        calculated based on number of units in stock at the beginning of the year,
        additions for receipts, subtraction for shipments and any cycle count or
        reconciliation adjustments, then compared to actual number of units in stock
        at
        the time of the physical count.

       

      
        
          
          

        

        
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      Section
        2.4. Disclaimer.

      


      EXCEPT
        AS
        EXPRESSLY SET FORTH IN THIS ARTICLE 2, INNOTRAC MAKES NO REPRESENTATIONS
        OR
        WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO SERVICES OR THE PRODUCTS,
        AND
        ANY AND ALL WARRANTIES ARE HEREBY DISCLAIMED AND EXCLUDED. INNOTRAC SHALL
        NOT BE
        LIABLE TO CLIENT OR ANY OTHER THIRD PARTY FOR DAMAGE OR INJURIES ON ACCOUNT
        OF
        DEFECTS IN ANY OF THE PRODUCTS, OR ON ACCOUNT OF DAMAGE OR INJURIES RESULTING
        IN
        WHOLE OR IN PART FROM PRODUCT USE OR MISUSE. 

      


      Section
        2.5. Limitation
        of Liability.

      


      INNOTRAC’S
        LIABILITY FOR CLAIMS ARISING OUT OF, RESULTING FROM, OR IN ANY WAY CONNECTED
        WITH THIS AGREEMENT SHALL BE LIMITED TO THE AMOUNTS ACTUALLY PAID BY CLIENT
        ALLOCABLE TO THE SERVICES INVOLVED IN THE CLAIM FOR THE THREE (3) MONTHS
        PRECEDING THE EVENT OR EVENTS FIRST GIVING RISE TO SUCH CLAIM. IN NO EVENT
        SHALL
        INNOTRAC BE LIABLE TO CLIENT FOR ANY CONTINGENT, INDIRECT, INCIDENTAL,
        CONSEQUENTIAL, EXTRA-CONTRACTUAL OR EXEMPLARY OR PUNITIVE DAMAGES, OR FOR
        DAMAGES FOR LOST SALES OR PROFITS OR COST OF COVER, REGARDLESS OF WHETHER
        INNOTRAC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE LIMITATIONS
        ABOVE APPLY TO ALL CAUSES OF ACTION IN THE AGGREGATE, WHETHER BASED IN CONTRACT,
        TORT (INCLUDING NEGLIGENCE) OR ANY OTHER LEGAL THEORY (INCLUDING STRICT
        LIABILITY).

      


      Article
        III

      Client’s
        Representations and Responsibilities 

      


      Section
        3.1. Corporate
        Power and Authority.

      


      Client
        represents that it is a business entity duly organized and existing under
        the
        laws of the State of Nevada, with lawful power and authority to enter into
        this
        Agreement. Client is duly qualified and in good standing and is authorized
        to do
        business in each jurisdiction where such qualification is required. The
        individual executing this Agreement on behalf of the Client has full power
        and
        authority to bind Client.

      


      Section
        3.2. Payment
        Obligation.

      


      Client
        agrees to pay Innotrac as follows:

       

      
        
          
          

        

        
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      (a)     Payment
        for Services

      


      (i)     Client
        agrees to pay Innotrac for Services provided hereunder in accordance with
        the
        Prices set forth In the Statement of Work (subject to revision in accordance
        with Section 1.2 above). Innotrac shall prepare invoices to Client on the
        first
        and fifteenth day of each month to be sent within five (5) business days.
        Client
        shall make payment of the undisputed portion of each invoice within thirty
        (30)
        calendar days of the date of the invoice. If Client does not pay any undisputed
        portion of an invoice within said 30 day period, (1) Innotrac may, upon 30
        calendar days’ written notice, discontinue providing all or any Services until
        payment of the undisputed portion of the invoice is made in full, and (2)
        Client
        shall pay Innotrac interest on all unpaid undisputed portions at the rate
        of
        1.5% per month or the maximum amount allowed by law. 

      


      (ii)     Notwithstanding
        anything to the contrary contained herein, upon termination of this Agreement
        for any reason, Client shall remain fully responsible for payment of all
        outstanding invoices, including any disputed amounts, as well as invoices
        not
        yet prepared respecting Services furnished prior to the date of
        termination.

      


      (iii)     In
        the
        event of a dispute over any invoice, Client shall pay the undisputed portion
        of
        the invoice and notify Innotrac in writing within twenty (20) calendar days
        of
        receipt of invoice and provide back-up material to support dispute. Client
        shall
        use commercial reasonability in reviewing and disputing charges. The parties
        shall attempt to resolve such dispute through good faith negotiations within
        a
        timely manner, without prejudice to any of their rights or remedies under
        this
        Agreement or applicable law. 

      


      (iv)     If
        at any
        time Client has an outstanding balance in excess of twenty-thousand dollars
        ($20,000.00), Innotrac may, with seven days written notice, immediately
        discontinue providing all or any Services until payment of the excess balance
        is
        made in full. 

      


      (b)     Expenses.
        Client
        shall be solely responsible for payment of all costs and expenses set forth
        in
        Exhibit B or that Innotrac otherwise incurs on behalf of Client that are
        not
        specifically set forth in Exhibit B, other than expenses payable by Innotrac
        under Sections 2.2 and 2.3 above. Such costs and expenses may include, but
        are
        not limited to, facsimile charges, postage, express delivery service used
        to
        transmit labels, listings and reports to Client, taxes, and import duties.
        Such
        costs and expenses will reflect reasonable and customary rates. Where possible,
        Innotrac shall obtain Client’s written approval in advance for such costs and
        expenses.

       

      
        
          
          

        

        
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      (c)     Freight
        Deposit.
        Client
        shall pay a freight deposit (the “Freight Deposit”) to Innotrac in an amount
        equal to the freight expenses for one month, as estimated by the Forecast
        (defined in Section 3.4) provided by Client and the average outbound freight
        cost per shipment, as security for Client’s payment obligations hereunder.
        Innotrac reserves the right to request an additional Freight Deposit should
        Client’s freight expenses exceed the initial Freight Deposit. If Client defaults
        in any of its payment obligations hereunder, and such default continues beyond
        the applicable notice and cure period, then Innotrac may use all or part
        of the
        Freight Deposit for the payment of outstanding amounts to Innotrac. If Innotrac
        uses such Freight Deposit as provided herein, then Client shall restore the
        Freight Deposit to its original amount within fifteen (15) days after written
        demand from Innotrac. The Freight Deposit is not a limitation on any of
        Innotrac’s rights and remedies hereunder or at law, or liquidated damages, or an
        advance payment of expenses. Client shall not be entitled to any interest
        on any
        amounts held by Innotrac as the Freight Deposit. Following the termination
        of
        this Agreement, Innotrac shall refund to Client any Freight Deposit not used
        by
        Innotrac as provided herein.

      


      Section
        3.3. Product
        Supply.

      


      Client
        shall be solely responsible for acquiring and delivering to Innotrac an
        inventory of Products sufficient in quantity to meet order demand, and all
        such
        Products shall be free of defects. Client shall ship Products to Innotrac
        in a
        timely manner and in quantities sufficient to allow Innotrac to fill orders
        as
        customer and order demand dictates. If a Product shortage exceeds thirty
        (30)
        days, Client shall be solely responsible for any and all additional expenses
        incurred by Innotrac to notify customers (as may be required by regulations
        of
        the Federal Trade Commission or otherwise by law) regarding delayed orders.
        Should any Federal Trade Commission notifications be required, they must
        be
        approved by Client prior to distribution. Client must review and approve
        the
        notification in a timely manner to meet any legally-imposed deadlines. In
        the
        event Products are received late or packaged improperly for shipment to Client’s
        customers, Client shall be responsible for all costs and expenses, at Innotrac’s
        retail prices, for expediting orders, repackaging Products or providing
        workarounds as deemed necessary by Innotrac. Client shall notify Innotrac
        promptly if any Products have been recalled by Client or any governmental
        authority or are defective in any manner. 

      


      Section
        3.4. Forecasts.

      


      Client
        will provide Innotrac with forecasts (“Forecasts”) for inbound and outbound
        activity (“Activity”) for each ninety (90) day period during the Term. Client
        will deliver each such forecast to Innotrac thirty (30) days before the
        beginning of the 90-day period to which it pertains. Forecasts will specify
        Activity on a daily basis or, alternatively, on a weekly basis to be converted
        by Innotrac to a daily basis, subject to Client approval

       

      Both
        parties agree to participate in a weekly phone conference to discuss the
        upcoming week’s anticipated Forecast variance (the “Forecast Call”). During the
        Forecast Call or a reasonable time after the Forecast Call, Client may request
        that Innotrac utilize all those labor resources necessary, including overtime,
        to accommodate volumes above the Forecast and Innotrac will make best efforts
        to
        accommodate such a request. Should a downturn in volume be anticipated, Innotrac
        will make all reasonable efforts to adjust and/or downsize labor and staffing
        levels. . Innotrac makes no guarantees for service levels but does agree
        to make
        all reasonable and best efforts to provide adequate service levels based
        upon
        information provided by Client.

       

      
        
          
          

        

        
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      Section
        3.5. Tax
        Matters.

      


      Client
        agrees that it is solely responsible for the payment of any and all taxes
        of any
        and all taxing jurisdictions that may be imposed as a result of the sale,
        storage and/or distribution of Products under the terms of this Agreement.
        Client, prior to or promptly following the execution of this Agreement, shall
        provide Innotrac with a schedule setting forth the jurisdictions in which
        taxes
        are payable and the amount of rate of such taxes. Client further agrees that
        it
        will reimburse Innotrac for or indemnify Innotrac against ad valorem taxes
        on
        inventory stored in any of Innotrac’s facilities. 

      


      Section
        3.6. Title
        and Insurance.

      


      The
        Products are solely the products of Client. Title to the Products, whether
        such
        Products are in transit or stored in Innotrac’s facilities, shall at all times
        remain with Client until sold by Client in the ordinary course of business.
        Client agrees that it is solely responsible, at its own expense, for insuring
        the Products against loss and casualty however caused during the performance
        of
        the Service(s) under this Agreement, and Client’s insurance shall be primary to
        any insurance carried by Innotrac, if any. Client shall furnish to Innotrac
        Certificates of Coverage evidencing sufficient coverage no later than five
        (5)
        days prior to Innotrac’s initial receipt of Product. Client will also provide
        Innotrac with proof of workers’ compensation insurance annually.

      


      Section
        3.7. Indemnification.

       

      Client
        shall indemnify, defend and hold Innotrac and its divisions, subsidiaries,
        and
        affiliates and their respective officers, directors, employees, agents,
        successors and assigns harmless from and against any and all claims, liability,
        loss, damage or injury and costs and expenses (including reasonable attorneys’
        fees, costs of any suit, and amounts paid in settlement of any such claims)
        (“Claims”) arising out of, relating to, or in connection with (a) the breach of
        any warranty, representation or covenant on the part of Client hereunder;
        (b)
        the performance or nonperformance of this Agreement by Client, and any negligent
        acts or omissions associated therewith; (c) the Services or the Products,
        including, without limitation, Claims for personal injury, death, property
        damage, environmental harm, product liability, or breach of warranty, (d)
        violations of any regulations, laws, ordinances, statues or rules applicable
        to
        the Products or Services, including without limitation FTC or FDA; (e) unpaid
        taxes, customs, or transportation charges; or (f) violations of any patent,
        trademark, copyright, trade secret or other intellectual property rights
        relating to the Services, the Products or Client’s marketing, labeling, sale or
        distribution of any of the Products. The foregoing indemnification shall
        not
        apply to any Claims resulting solely from the gross negligence or willful
        misconduct of Innotrac.

       

      
        
          
          

        

        
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      Section
        3.8. Client
        Inventory and Payment..

      


      (a)      Client
        hereby agrees to and acknowledges Innotrac’s rights under the Georgia Uniform
        Commercial Code, including Section 7-209. Client hereby further agrees and
        acknowledges that, pursuant to Section 7-209 of the Georgia Uniform Commercial
        Code, Innotrac also has a right to all of Client’s goods now or hereafter in the
        possession of Innotrac, and on the proceeds thereof, for charges and expenses
        in
        relation to other goods of Client (whenever such other goods were deposited
        with
        Innotrac) and for expenses necessary for preservation of such other goods
        or
        reasonably incurred in their sale pursuant to law. The Client hereby
        acknowledges that this Agreement and each invoice of Innotrac issued hereunder
        constitute “warehouse receipts” under Article 7 of the Georgia Uniform
        Commercial Code.

      


      (b)      If
        the
        Client fails to pay all outstanding amounts due under this Agreement within
        30
        days after termination of this Agreement and demand for final payment by
        Innotrac, then Innotrac, at its option, may (but shall not have any obligation
        to) exercise any and all rights of a warehouse under and in accordance with
        the
        Georgia Uniform Commercial Code. Costs incurred by Innotrac in the sale of
        Products under this Section are the responsibility of Client and shall be
        deducted from the proceeds of such sale. Sale of Product under this Section
        does
        not relieve Client of its obligation to pay the full amount of the outstanding
        balance of any amounts due Innotrac under this Agreement or any other
        contract.

      


      Section
        3.9. Client
        Obligations Precedent to Innotrac Performance.

      


      Innotrac’s
        performance of its obligations under this Agreement is contingent upon Client’s
        satisfactory completion of its precedent obligations that include provision
        of
        Products in sufficient quantity and quality to meet order and fulfillment
        demand, provision of accurate order data, shipping data, and other information
        necessary for Innotrac to provide the Services and the timely acceptance
        and
        approval of all documentation provided by Innotrac, and Client’s compliance with
        all other terms and conditions of this Agreement. Innotrac will confirm Client’s
        satisfactory completion of it obligations either in writing as set forth
        in
        Article VI or by e-mail communication. Client’s failure to satisfactorily
        complete any or all of the aforementioned precedent obligations causes Innotrac
        to incur expenses beyond those inherent in providing the Services, Client
        shall
        be liable for Innotrac’s hourly rates as set forth in the Special Projects
        section of Exhibit B for fulfillment and call center activities and in the
        Custom Programming section of Exhibit B for information technology activities,
        whichever shall apply.

      


      Article
        IV

      Publicity

      


      Neither
        party shall advertise, disclose or otherwise publicize the terms of this
        Agreement or the Services without prior written consent of the other party,
        provided that the parties may, however, disclose the fact that they have
        entered
        into a business agreement with one another after the execution of the Statement
        of Work and its incorporation into this Agreement.

       

      
        
          
          

        

        
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      Article
        V

      Term
        and
        Termination

      


      Section
        5.1. Term
        of Agreement.

      


      The
        term
        of this Agreement shall commence on the Agreement Date and shall continue
        until
        the expiration of the Initial Term. Thereafter, this Agreement shall be
        automatically renewed for additional twelve (12) month periods (each such
        period
        being a “Renewal Term”) unless one party delivers written notice of non-renewal
        to the other party at least one hundred twenty (120) days before the last
        day of
        the initial term or Renewal Term then in effect. 

      


      Both
        Client and Innotrac reserve the right to cancel this Agreement, and will
        provide
        the other Party with ninety (90) days written notice, should either Party
        determine, in its sole discretion, that there is a significant change in
        business that materially alters the Party’s ability to perform under the terms
        of the Agreement. 

      


      Section
        5.2. Default.

      


      The
        occurrence of any of the following events shall constitute an “Event of Default”
        unless waived by the non-breaching party:

      


      (a)     the
        failure of a party to observe or perform any of its material obligations
        in this
        Agreement or any of its obligations under the Confidentiality Agreement,
        including, but not limited to Client’s obligations of payment; or

      


      (b)     any
        material representation made by a party in this Agreement shall prove to
        have
        been untrue in any respect when made.

      


        Section
        5.3 Remedies.

      


      Upon
        the
        occurrence of an Event of Default, the non-breaching party shall provide
        written
        notice to the breaching party of, and outlining the extent of, the Event
        of
        Default and providing (i) ten (10) days right of cure if the Event of Default
        is
        the nonpayment of monies; and (ii) thirty (30) days right of cure if the
        Event
        of Default is for reasons other than the nonpayment of monies (provided,
        however, said thirty (30) day cure period shall be extended at the discretion
        of
        the non-breaching party by an additional thirty (30) days if the breaching
        party
        has implemented efforts to cure the non-monetary breach in the initial thirty
        (30) day cure period and is diligently pursuing such cure in good faith).
        Should
        the Event of Default in the notice not be cured within the applicable cure
        period, then, in addition to all other rights and remedies at law or equity
        or
        otherwise, the non-breaching party may terminate this Agreement without any
        further obligation or liability whatsoever, except for Client’s obligations of
        full payment for Services provided as of the date of termination and the
        costs
        of shipping Product inventory to another location. Notwithstanding anything
        to
        the contrary contained herein, this Agreement may be terminated by either
        party
        effective upon ten (10) business days prior written notice to the other party
        in
        the event that the party so notified becomes the subject of any proceeding
        under
        any law relating to bankruptcy, insolvency, reorganization or relief of debtors
        or becomes or is declared insolvent.

       

      
        
          
          

        

        
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      Section
        5.4. Return
        of Product Following Termination.

      


      Upon
        termination of this Agreement and payment in full of all outstanding amounts
        due
        and payable to Innotrac hereunder (plus payment by Client in advance of all
        shipping costs), Innotrac shall, subject to its lien and other rights hereunder
        and at law, return all remaining Product to Client at Client’s expense, and
        shall provide Client an accounting of the remaining Product inventory. Until
        payment in full of all amounts due to Innotrac under this Agreement are received
        (plus payment by Client in advance of all shipping costs), Client agrees
        that
        Innotrac may retain the inventory of Products and that such inventory shall
        be
        subject to the lien of Innotrac pursuant to Section 3.8 above.

      


      Article
        VI

      Notices

      


      Unless
        otherwise stated in this Agreement, all notices, consents, requests, and
        waivers
        required or permitted under this Agreement shall be given in writing, delivered
        personally or by Federal Express or facsimile (receipt confirmed), to the
        addresses and facsimile numbers set forth on the first page of this Agreement,
        with copy to the office of the General Counsel of Innotrac Corporation. Notices
        shall be deemed given upon receipt.

      


      Article
        VII

      Arbitration

       

      The
        parties hereto will attempt in good faith to resolve any dispute, controversy
        or
        claim (“Dispute”) arising out of or relating to this Agreement promptly by
        negotiations first between the parties and then between senior executives
        of the
        Parties. In the event that such negotiations are unsuccessful, Disputes shall
        be
        settled by binding arbitration conducted in accordance with the Commercial
        Arbitration Rules of the American Arbitration Association. The arbitration
        procedure shall be governed by the United States Arbitration Act, 9 U.S.C.
§§
        1-16, and the award rendered by the arbitrator (s) shall be final and binding
        on
        the parties and may be entered in any court having jurisdiction thereof.
        Such
        arbitration shall be held in a location agreed upon by the parties or, if
        no
        location can be agreed upon, in a location selected by the arbitrator(s).
        Any
        judgment upon the award rendered by the arbitrator(s) may be entered in any
        court having jurisdiction thereof. The non-prevailing party shall pay all
        costs
        of the proceedings, including the fees and expenses of the arbitrator and
        the
        reasonable attorneys’ fees and expenses of the prevailing party, unless the
        arbitrator(s) determine(s) that there is not a prevailing party, in which
        event
        each party shall bear its own costs and to share equally the fees and expenses
        of the arbitrator(s). The foregoing dispute resolution procedures, however,
        do
        not apply to Disputes arising under or relating to the confidentiality and
        non-recruitment provisions in Article III above or the Confidentiality Agreement
        attached hereto and incorporated herein as Exhibit C, which may be brought
        in
        any court of competent jurisdiction.

       

      
        
          
          

        

        
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            10

          
            

          

        

        
          
          

        

      

      


      Article
        VIII

      Miscellaneous
        Provisions

      


      Section
        8.1. Governing
        Law.

      


      This
        Agreement shall be governed and interpreted in accordance with the laws of
        the
        State of Georgia (without regard to the choice of law principles
        thereof).

      


      Section
        8.2. Force
        Majeure.

      


      Neither
        party shall be liable to the other for any loss, injury, delay or damage
        whatsoever suffered or incurred by the other party due to causes beyond such
        party’s reasonable control, including but not limited to, acts of God, strikes
        or other labor disturbances, war, sabotage, casualty, embargo, flood, explosion,
        act of terrorism and responses thereto, and any other cause or causes, whether
        similar or dissimilar to those herein specified, which cannot be controlled
        by
        such party (each hereinafter called a “Condition”). If any Condition occurs,
        this Agreement shall be suspended for the duration of the Condition as to
        the
        affected Services, and the party affected by the delay may during such
        suspension buy or sell elsewhere services comparable to those to be obtained
        under this Agreement, and performance of this Agreement shall resume once
        the
        Condition ceases. Regardless of the occurrence of a Condition, neither party
        shall be relieved of the obligation to make payments to the other on account
        of
        Services provided, or for pricing adjustments pertaining to Services furnished,
        prior to the event constituting the Condition.

      


      Section
        8.3. Compliance
        with Laws.

      


      Client
        and Innotrac shall comply with all federal, state and local laws and regulations
        applicable to the performance of their respective obligations under this
        Agreement.

      


      Section
        8.4. Severability.

      


      If
        any
        provision of this Agreement is inconsistent or contrary to any applicable
        law,
        rule or regulation, then such provisions shall be deemed to be modified to
        the
        extent required to comply with such law, rule or regulation and as so modified,
        such provision and this Agreement shall continue in full force and
        effect.

      


      Section
        8.5. No
        Waiver.

      


      The
        failure to enforce at any time any of the provisions of this Agreement or
        to
        require at any time performance by any party of any of the provisions of
        this
        Agreement shall in no way be construed to be a waiver of such provisions
        or to
        affect the validity of this Agreement, or any part hereof, or the right of
        any
        party thereafter to enforce each and every such provision in accordance with
        the
        terms of this Agreement. Each payment provision of this Agreement shall survive
        the termination of this Agreement for any reason.

       

      
        
          
          

        

        
          Page
            11

          
            

          

        

        
          
          

        

      

      


      Section
        8.6. Limitation
        on Assignment; Binding Effect.

      


      This
        Agreement shall not be binding on either Party unless it is executed by a
        corporate officer having full power and authority to bind the Party. This
        Agreement may not be assigned by either Party (by contract or by operation
        of
        law) without the prior written consent of the other Party; provided, however,
        no
        consent shall be required for the merger, consolidation, or other business
        reorganization of any party with an entity affiliated with, controlling,
        controlled by or under common control with the assigning Party, provided
        that
        the proposed assignee is not a competitor or an affiliate of a competitor
        of the
        non-assigning party and so long as the obligations hereunder are assumed
        by the
        reorganized entity. This Agreement shall be binding upon and inure to the
        benefit of the Parties hereto and their respective permitted assigns and
        successors. 

      


      Section
        8.7. Entire
        Agreement.

      


      All
        exhibits referenced in this Agreement and attached hereto are incorporated
        herein by this reference. This Agreement and the Confidentiality Agreement
        completely set forth the agreements between the parties and fully supersede
        all
        prior agreements, both written and oral, between the parties with respect
        to the
        matters set forth herein and in the Confidentiality Agreement. No terms of
        any
        purchase order, confirmation, invoice, or other document from a party (even
        though receipted for or executed on behalf of the other party) that are in
        addition to or inconsistent with the terms of this Agreement shall be effective
        with respect to the provision of Services hereunder absent the express written
        acceptance (other than on such document) signed by an authorized representative
        of such other party.

      


      Section
        8.8. Amendments.

      


      This
        Agreement may only be amended or modified by written instrument expressly
        referencing this Agreement and executed by both parties.

      


      Section
        8.9. Nature
        of Relationship.

      


      Innotrac
        and Client, in the performance of their obligations hereunder, are acting
        as
        independent contractors. No agency, partnership, joint venture or other
        employer-employee relationship, express or implied, is intended or created.
        Client and Innotrac are not, by reason of this Agreement, granted any right
        or
        authority to assume or create any obligation or responsibility, express or
        implied, on behalf of or in the name of the other party, or to bind the other
        party in any manner. All persons furnished by Innotrac shall be employees
        or
        agents of Innotrac and shall not be deemed to be employees of Client for
        any
        purpose whatsoever. Innotrac shall furnish, employ, and have exclusive control
        of all persons to be engaged in performing Services under this Agreement
        and
        shall prescribe and control the means and methods of performing such
        Services.

       

      
        
          
          

        

        
          Page
            12

          
            

          

        

        
          
          

        

      

      


      Section
        8.10. Solicitation
        of Employees

      


      Both
        parties agree, during the term of this Agreement and for a period of one
        (1)
        year after termination, not to solicit, recruit, or hire, either directly
        or
        indirectly, any employees of the other party who are directly involved in
        the
        Service(s) covered by this Agreement without prior written approval from
        the
        other party.

      


      Section
        8.11  Confidentiality

      


      As
        a
        condition to Innotrac assuming any obligations hereunder, the parties have
        executed or shall execute simultaneously with this Agreement, Innotrac’s
        standard form of Confidentiality Agreement attached hereto and incorporated
        herein as Exhibit C.

      


      Section
        8.12. Attorneys’
        Fees.

      


      In
        the
        event of any proceeding or action between Innotrac and Client arising under
        or
        in connection with this Agreement, the prevailing party shall be entitled
        to
        recover its legal costs and expenses, including reasonable attorneys’ fees, and
        reasonable attorneys’ fees incurred in collection or enforcement of any judgment
        or award in favor of the prevailing party.

      


      Section
        8.13. No
        Grant of Rights.

      


      Each
        party shall have and retain exclusive ownership of all intellectual property
        owned by it and nothing contained in this Agreement will be deemed to grant,
        either expressly or impliedly, any rights, licenses or interests in or to
        any
        intellectual property of the other party. 

      


      Section
        8.14. Counterparts.

      


      This
        Agreement may be executed in one or more counterparts for the convenience
        of the
        parties, all of which together shall constitute one and the same
        instrument.

      


      Section
        8.15 Survival

      


      Any
        provision of this Agreement which contemplates performance or observance
        subsequent to any termination of this Agreement shall survive termination,
        including without limitation, Articles II, III, V, VII, VIII and all Exhibits
        hereof.

      


      Section
        8.16. Headings.

      


      The
        headings contained in this Agreement are for reference only and shall not
        affect
        the interpretation of this Agreement.

       

      
        
          
          

        

        
          Page
            13

          
            

          

        

        
          
          

        

      

      


      IN
        WITNESS THEREOF, this Service Agreement is executed by the parties as of
        the
        date first set forth above.

      


      
        	
                INNOTRAC
                  CORPORATION

              	 	
                AEROGROW
                  INTERNATIONAL, INC.

              
	 	 	 	 	 
	
                By: 

              	
                /s/
                  Scott Dorfman

              	 	
                By:
                  

              	
                /s/
                  Randy Seffren

              
	 	 	 	 	 
	
                Name:

              	
                Scott
                  Dorfman

              	 	
                Name:

              	
                Randy
                  Seffren

              
	 	 	 	 	 
	
                Title: 

              	
                CEO

              	 	
                Title:
                  

              	
                Chief
                  Marketing Officer

              


      

      
         

        
          
            
            

          

          
            Page
              14

            
              

            

          

          
            
            

          

        

      


      EXHIBIT
        B

       

      
        PRICING
          PROPOSAL
          SUMMARY

         

      

      Innotrac
        is pleased to furnish pricing to AeroGrow International. The following
        assumptions apply:

      Innotrac
        will begin implementation the second half of October with a launch date for
        the
        test group only of November 2005. 

      All
        pricing is based upon the program assumptions and characteristics provided
        to
        Innotrac by AeroGrow International.

      Program
        Assumptions:

      Number
        of
        SKUs

      Dimensions
        and weights 

      Expected
        shipment volume 

      Shipment
        options: we will offer both standard and expedited shippingSpecial storage
        and
        handling requirements

      Basic
        requirements:

      AG
        order
        number

      Recipient
        name and address

      SKU(s)
        and quantities

      Shipping
        priority (shipping priority rules will be set by AG in advance)

      Pull
        one
        or two seed kits per the customer order, on a FIFO basis

      Make
        the
        Piggy Back Seed kit box and ship the seed kit(s) with the base product. The
        Kitchen Garden box and Piggy Back Seed box will be strapped together for
        shipment or combined into one outer box, which ever is the most cost effective.
        

      Scan
        the
        barcode lot numbers and item numbers of each shipment package at shipment
        time
        and associate them with the order number. Each package will have a) one label
        with 2 bar codes (lot number and SKU number) for the Kitchen Garden, and
        b) one
        or two labels for included seed kits, each label containing a lot number
        and a
        SKU number.

      AG
        order
        number

      Scanned
        SKU number(s)

      Scanned
        lot number(s)

      Date
        shipped 

      Shipped-via
        

      Tracking
        number, if applicable

      (We
        may
        also ask for confirmation of the ship-to name and address)

      No
        data
        or order history is required to convert. This is a new program.

      The
        project will first launch their product via DRTV in November of 2005.


      Program
        Partners: Must be a provider already integrated with Innotrac.

      Telemarketer
        - __________

      Credit
        Card Processor - ___________

      Media
        -
        _____________

      Fulfillment
        and customer care will be provided from Innotrac’s Reno, Nevada
        facility.

      Client
        will provide Innotrac will expected media spend two weeks in
        advance.

       


      
        
          
          

        

        
          Page
            15

          
            

          

        

        
          
          

        

      

       

      The
        Service Level Goals herein shall be effective between the parties commencing
        90
        days after go live. All service levels will be measured over a two week
        period.

      Innotrac’s
        obligation to meet Service Level Goals is dependent upon Client’s actual volumes
        being within allowances as defined in Section 3.4 Forecasts of the Agreement.
        

      Service
        levels may also be dictated by carrier holidays and/or pick-up and delivery
        schedules.

      Business
        Day is defined as Monday through Friday excluding the day in which the following
        Holiday’s are recognized. Christmas, New Years Day, Memorial Day, Independence
        Day, Labor Day and Thanksgiving. 

       

      
        	·  	
                All
                  complete error free orders will be shipped within two business
                  days of
                  receipt.

              


      

      
        	·  	
                All
                  returns will be processed within two business days of
                  receipt.

              


      

      
        	·  	
                All
                  inbound product will be processed within one business day of
                  receipt.

              


      

      
        	·  	
                A
                  4
                  week freight deposit is required if using Innotrac carrier
                  accounts.

              


      

       

      The
        below
        pricing proposal is not final and/or complete until such time that all business
        rules, actual product and program requirements are confirmed between Innotrac
        and AeroGrow International.

      
        
           

          
            
              
                	START-UP
                        FEE
	 	
                        Start-up
                          Fee- Standard

                      	 	
                        $2,500
                          *

                      
	 	
                        *
                          this includes standard Innotrac systems offering. Enhancements
                          will be
                          done in a phased approach to be agreed upon by AeroGrow
                          and
                          Innotrac.

                      
	 	
                        Shopping
                          Cart

                      	 	
                        TBD

                      
	MONTHLY
                        MINIMUM
                        (BEGINNING
                        THREE
                        MONTHS
                        AFTER
                        GO
                        LIVE)
	 	
                        Monthly
                          Minimum

                      	 	
                        $2,500

                      
	ORDER
                        PROCESSING
	 	
                        Electronic
                          Order Receipt

                      	 	
                        $.08/order

                      
	 	
                        Order
                          Processing Fee

                      	 	
                        $.08/order

                      
	 	
                        Continuity
                          Order Release 

                      	 	
                        $.08/order

                      
	 	
                        Credit
                          Card Processing 

                      	 	
                        $.07/touchpoint

                      
	 	
                        ·

                      	
                        Touchpoint
                          is a authorization attempt, debit attempt, etc.

                      
	 	
                        Mail/Fax
                          Orders Entry in CRMS

                      	 	
                        $1.25/order

                      
	 	
                        Check
                          Deposit 

                      	 	
                        $.35
                          /check

                      
	 	
                        Auto
                          email Notification (shipment &order confirmation)

                      	 	
                        $.05
                          /email

                      
	 	
                        Order
                          Cancellation

                      	 	
                        $.19/order

                      
	FULFILLMENT
                        FEES
	 	
                        Product
                          Receipts 

                      	 	
                        $25.00
                          per labor hour

                      
	 	
                        Base
                          AeroGrow Order*

                      	 	
                        $1.05/shipment
                          of 1

                      
	 	
                        First
                          Additional Seed Kit *

                      	 	
                        $.18/unit

                      
	 	
                        ·

                      	
                        *(Including
                          making box and combining with base order)

                      
	 	
                        Second
                          and Beyond Seed Kit inserted into Same Box

                      	 	
                        $.18/unit

                      
	 	
                        Continuity
                          Seed Kit 

                      	 	
                        $.85/shipment
                          of 1

                      
	 	
                        Package
                          Inserts- Generic

                      	 	
                        $.05
                          /insert 

                      
	 	
                        Returns

                      	 	
                        $1.35/returned
                          unit*

                      
	 	
                        ·

                      	
                        *Processing
                          of returns and appropriate disposition of product –
                          Product
                          refurbishment and all other re-stocking services will be
                          performed on an
                          hourly basis

                      


              

               

              
                
                  
                  

                

                
                  Page
                    16

                  
                    

                  

                

                
                  
                  

                

              

               

              
                	 	
                        Fulfillment
                          Center Project Work

                      	 	
                        $25.00/labor
                          hour 

                      
	 	
                        ·

                      	
                        Projects
                          charged at this rate include inspection of returned product
                          for
                          functionality, re-boxing / refurbishing of returned product,
                          preparation
                          of returned product to be sent to manufacturer or trash
                          disposal, client
                          requested physical inventory counts or other client requested
                          projects

                      
	 	
                        Pallet
                          Storage 

                      	 	
                        $8.00/pallet/month

                      
	 	
                        Bin
                          Storage

                      	 	
                        $2.45/bin/month

                      
	 	
                        Climate
                          Controlled for Seed Kits

                      	 	
                        TBD
                          

                      
	 	
                        Packaging
                          Materials and Supplies

                      	 	
                        Cost
                          plus 10%

                      
	 	
                        ·

                      	
                        Includes
                          items such as boxes, bags, dunnage, pack slips,
                          etc.

                      
	 	
                        Retail
                          Distribution- Work Orders

                      	 	
                        $25.00/labor
                          hour

                      
	 	
                        New
                          SKU Set-Up

                      	 	
                        $3.50/SKU

                      
	CUSTOMER
                        SERVICE
	 	
                        Per
                          Minute Fee (talk time)

                      	 	
                        $.69
                          /minute

                      
	 	
                        Call
                          Disposition

                      	 	
                        $.69/minute

                      
	 	
                        ·

                      	
                        (if
                          client requests posting to customer record after the call
                          ends)

                      
	 	
                        Toll
                          Charge

                      	 	
                        $.03
                          /minute

                      
	 	
                        ·

                      	
                        Includes
                          toll charge and T-1 usage fee’s

                      
	 	
                        Outbound
                          Calls

                      	 	
                        $28.00/labor
                          hour

                      
	 	
                        ·

                      	
                        Includes
                          labor, toll charge and T-1 usage fee’s

                      
	 	
                        Form
                          Letters (includes postage)

                      	 	
                        $.74
                          / letter

                      
	 	
                        Customer
                          Service Support

                      	 	
                        $25.00
                          /labor hour

                      
	 	
                        ·

                      	
                        Includes
                          chargebacks, email, customer service white mail, customer
                          call backs,
                          customer service correspondence, etc.

                      
	 	
                        Agent
                          Training

                      	 	
                        $22.00
                          /labor hour

                      
	 	
                        ·

                      	
                        Includes
                          initial and ongoing training on products 

                      
	 	
                        Curriculum
                          Development

                      	 	
                        $55.00
                          /labor hour

                      
	INFORMATION
                        TECHNOLOGY
                        /
                        ORDER
                        PROCESSING
	 	
                        On-Line
                          Reporting (3 concurrent users)

                      	 	
                        waived

                      
	 	
                        Reporting

                      	 	
                        $85
                          / labor hour

                      
	 	
                        Information
                          Technology Projects (client requested projects)

                      	 	
                        $125
                          /labor hour

                      
	MISCELLANEOUS
	 	
                        Client
                          Services / Account Management

                      	 	
                        See
                          Below

                      
	 	
                        ·

                      	
                        Fulfillment
                          pricing includes 4 hours per week of account management
                          

                      
	 	
                        Additional
                          hourly support 

                      	 	
                        $39.00
                          /labor hour

                      
	 	
                        Travel
                          and Out of Pocket Expense

                      	 	
                        At
                          Cost

                      
	 	
                        Special
                          Projects

                      	 	
                        $25.00/labor
                          hour

                      
	 	
                        Overtime

                      	 	
                        $37.50/labor
                          hour

                      
	POSTAGE/FREIGHT
	 	
                        PO
                          Box Rental

                      	 	
                        At
                          Published Rates

                      
	 	
                        USPS
                          First Class Postage 

                      	 	
                        At
                          Published Rates

                      
	 	
                        Freight
                          (if Innotrac Shipping Account)

                      	 	
                        4
                          Week Deposit

                      
	OTHER
                        PRICING&
                        ASSUMPTIONS
	 	
                        Services
                          not specifically addressed above can be quoted upon
                          request.

                      
	MISCELLANEOUS
	 	
                        Travel
                          & Out of Pocket Expense

                      	 	
                        At
                          Cost 

                      


              

            

          

        

      

       

       

      
        
          
          

        

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          17