[ Letterhead ofGemstone Securities LLC ]

** **

DATE:  July 10, 2007                                                                                      www.GemStoneSecurities.com 

ENGAGEMENT AGREEMENT

**VillageEDOCS**

Mr. K. Mason Conner

CEO

VillageEDOCS

1401 N. Tustin Avenue,  Suite 230

Santa Ana, CA  92705-8686

Dear Mr. Connor:

We are pleasedthat **VillageEDOCS**(hereinafter "Company" or "The Company") has decided to engage GemstoneSecurities LLC ("GSS"), an NASD member firm in good standing, to advise TheCompany in connection with the design and execution of a financing transactionthat will enable the expansion of The Company's business model. We look forwardto working with you and are willing to provide necessary advisory, investmentbanking and placement services to The Company, which are described below. Thisletter will set forth our understanding of the terms and conditions of thisengagement.

**Scope of Engagement**

Ourservices in this matter will consist of:  

(1) **Initialor Transactional Due Diligence**: Perform a one-time overall due diligence on The Company includingthe current shareholder ownership, all aspects of the capital structure as wellas regulatory issues, if any, that must be solved so that The Company canacquire financing. Also create a report based upon the information gatheredthat is suitable for institutional investment requirements. Review all relevantprior information that might relate to the financing. Discuss possible legalstructures for these specific and future transactions and examine all potentialtransactions that you contemplate financing based on the value of thesespecific assets. 

(2) **InvestorIdentification and Contact**: Identify specific investors whose investment strategy may besatisfied through an investment in this proposed transaction. Assist in thepricing of this transaction so as to gather investor interest.
(3)  **Placement Agent Services**: To act on a "Best Efforts"basis as the Placement Agent for this specific proposed transaction (ortransactions) and to assist in securing firm investor commitments.

(4) **Advisory Services:** To provide investmentbanking and financial advisory services to support future financing andmerger/acquisition activities authored by the Company. These services, to beprovided at the election of the Company, will be activated via a specificmandate/engagement agreement.          

 

**Proposed Terms of Offering**   It is presently contemplatedthat The Company will conduct an offering (the "Offering") on abest-efforts basis to raise a total of $3,000,000 dollars at this time.

**Fees and Costs**

GSS's fees for the above-listed services are as follows:

(a)   **Due Diligence:**  For initial due diligence,payable as follows:

In order to compensate GSS forits initial due diligence efforts, the Company shall deliver to GSS (or GSS'sdesignee) 1,000,000 shares of fully paid non-assessable restricted shares ofcommon stock of the Company (the "Shares"), such shares to vest asfollows:  (i) 500,000 of such shares to vest immediately upon theexecution of this Agreement, (ii) 500,000 of such shares to vest upon theclosing of a Placement.  The Shares will be issued pursuant to anexemption from the registration requirements of the Securities Act of 1933, asamended.  The Shares will be subject to the registration rights provisionsset forth on Appendix I hereto.  Under any circumstance, the shares shallhave piggy-back registration rights and be transferable.  The Company willissue the Shares to such affiliates of GSS and in such denominations as will bedesignated by GSS.

 (It should benoted that GSS may seek to use the services of both companies and people otherthan GSS employees. These services are the responsibility of GSS and will notcause the cost of due diligence to be greater.

(b)  **Placement Agent:**

GSS Investors: GSS will not be solelyresponsible for contacting potential investors. GSS will work in conjunctionwith other contacted investors and placement agents as not to disrupt themarketplace.  For investors secured by GSS, GSS will receive the followingcompensation :

o    For an Equityinvestment, a cash fee of 7% of the gross proceeds raised plus warrants topurchase 5% of the shares issued in the offering at the offering price.  Thewarrants will be exercisable for a period of three (3) years from the time oftransaction closing.
o     For a Mezzanine investment, a cash fee of 7% of the grossproceeds plus warrants to purchase 5% of the shares issued in the offering atthe offering price.  The warrants will be exercisable for a period of three (3)years from the time of transaction closing.

o       Fora Senior Debt investment, a cash fee of 5% of the gross proceeds value of thedebt investment.

o       GSSshall be entitled to, and The Company shall be obligated to pay GSS itsPlacement Agent Fee resulting from any additional Investments made by suchInvestors (including exercising of warrants) within thirty-six (36) months oftheir initial Investment. 

**Disbursementsand Charges:**The Company will be responsible for all customary chargesand reasonable disbursements incurred by GSS on your behalf in connection withthe body of work described above, including without limitation documentreproduction, courier services, computerized research, word processing, longdistance telephone calls, facsimile transmissions, filing fees and relatedservice charges, transportation, lodging and meals. But in no case will GSS incurany individual expense item, greater than $1,000.00 without the prior approval inwriting of the designated person at The Company. 

**BillingStatements:**GSS's practice is to provide billing statements that describethe work being accomplished and the fee for that work on a periodic basis, asnecessary. 

**Payment:**DueDiligence will commence immediately after receipt of the first payment for suchservices as outlined under the Fees and Costs, Section (a) and all other fees(except reimbursement of the Disbursements and Charges above) are to be paidonly when, as and if a transaction is completed.      

 

**Preparation of Memorandum:**  The Placement Agent shallprepare a Memorandum with respect to the Offering in form and substancesatisfactory to Company.  Placement Agent and the Company will coordinate theirefforts in preparation of the memorandum.

**Documentsand Communications:**Any documents, materials or other things the Companyprovides to us shall become our property unless we receive written notice tothe contrary.  Such documents shall be treated as confidential information ofthe Company as described below.  We shall use reasonable efforts to preservesuch documents.  Our own files, including outside vendor work product,pertaining to your matters will be retained by us.  We shall have no obligationto retain any documents or files pertaining to your affairs for more than fiveyears following the completion of the work on any specific engagement.  Weshall have no obligation to turn over to the Company any of our files exceptcopies made at your request and expense and original documents that the Companyrequests in writing upon termination of our engagement and upon receipt by usof payment for any outstanding fees and charges.
 
**Covenant of the Company. **

** **

•      The Company will afford to the officers, counsel and otherrepresentatives of Placement Agent reasonable access to the properties, books,records (including tax returns filed and those in preparation) and personnel ofthe Company in order that Placement Agent may have full opportunity to makesuch investigation of the Company as it reasonably desires.

•      From and after the date until the termination of this EngagementAgreement, the Company will conduct its business only in the normal andordinary course and, without the prior written consent of Placement Agent.

**Confidentiality.** Placement Agent shall not disclose or use any information of the Companydesignated orally or in writing by the Company as "Confidential" or"Proprietary" (or in like words), except with prior written consentand then only to the extent specified in such consent.  The foregoingrestrictions shall not extend to any item of information which (i) ispublicly known at the time of its disclosure, (ii) is lawfully receivedfrom a third party not bound in a confidential relationship to the Company,(iii) is published or otherwise made known to the public by the Company,or (iv) was generated independently before its receipt.

**Conditions.** The transactions contemplated hereby shall be subject to, among other things,the following:

(a)   The absence of anymaterial adverse change in the condition or prospects of the Company; and

(b) The obtaining of all consents and approvals, or waivers of such consentsand approvals, which may be necessary or desirable to permit the Company andPlacement Agent to carry out the transactions contemplated hereby.

(c)  Placement Agent's concurrence with and agreement to the structure,management, asset contributions, liability assumptions, valuation models andother critical variables.

 

**Dispute Resolution:** Inthe event that any dispute should arise between the Company and GSS concerningour fees and expenses or the performance of our professional responsibilities,such dispute shall be submitted to arbitration at a mutually agreeablelocation.  Such arbitration is to be binding upon the parties. 

**Termination of Representation: **We expect to beengaged by The Company until the conclusion of each specific transaction.  If,however, at any time the Company wishes us to cease activities on your behalf,please so advise us in writing and we will promptly take the steps necessary toconclude our engagement.   Upon any such termination, there are certainconditions that would cause some or all of the fees that would be earned if theassignment were to be completed to be due and payable as well as all costspreviously advanced. These conditions are as follows:

•      If an investor (or investors) has beenbrought forth and that investor has completed sufficient due diligence to issuea term sheet or such other written indication of their interest to invest inThe Company; and The Company has accepted the terms of such agreement, then thePlacement Agent Fees are due and payable upon termination. 

Similarly,Gemstone reserves the right to terminate our engagement with The Company at anytime, but would only do so upon appropriate advance notice and undercircumstances that is consistent with the Rules and Regulations of the NationalAssociation of Securities Dealers. In the instance of Gemstone's notice oftermination, Gemstone would be due any unreimbursed expenses and Gemstone wouldhave five (5) business days to submit all such expenses to The Company afternotification in writing of Gemstone's desire to terminate. All fees paid toGemstone up to and including the day of termination would be the property ofGemstone and non-refundable to The Company.

**MutualIndemnification**: The parties hereto do hereby agree to indemnify each otherin the instance of law suits wherein an investor, regulatory or legal authoritydoes make a claim for monetary or other type of damages wherein the plaintiffprevails in this matter and the actions of one of the parties hereto has beenheld by the court to be responsible for this action. In that instance the otherparty ("the wronged party") has a claim against the other party for all oftheir costs in this matter, including but not limited to lawyers, executivetime billed at usual and customary charges, phone, copying, travel, court costsand expenses.

**Governing Law.**  This Letter of Intent shall be governedby and construed in accordance with the laws of the State of Florida applicableto contracts made and to be performed wholly therein.

**Binding Effect.** Except as hereinafter set forth, the understandings contained herein representa binding agreement among the parties and their intent with respect thereto forthe purpose of proceeding in good faith with the transaction and agreementscontemplated herein.  This Agreement shall be binding upon and inure to thebenefit of the parties hereto and their respective successors and assigns, butshall not be assignable without the written consent of the other party hereto.

**Contingency.** It is understood amongst the parties that the transaction contemplated hereinand specifically Placement Agent's commitment and participation therein aresubject to final terms and conditions, due diligence and approval by PlacementAgent's internal committee.

**Approval and Acceptanceof Agreement:**

We look forward to workingwith you and hope the terms of engagement set forth herein meet with yourapproval.  If so, please sign in the space provided below, and mail anoriginally signed copy to us.  You should retain a copy of this agreement foryour files as it contains our mutual contractual understanding and agreement.

Wegreatly appreciate the opportunity to work with you and to represent theCompany.

Very truly yours, 

GemStone Securities LLC

 /s/ Dale Twardowski________________

Dale TwardowskiManaging Principal

The undersigned hereby agrees to retain GemstoneSecurities LLC on the foregoing terms.

VillageEDOCS

 /s/K, Mason Conner______________________________

K. Mason ConnerCEO

DATE:   July 10, 2007

 

 

**APPENDIXIRegistration Rights**

**1.              ****Definitions.**

(a)            As used in this Appendix I, the following terms shall have the meanings:

1.              "**Affiliate**," of any specified Person means any other Person whodirectly, or indirectly through one or more intermediaries, is in control of,is controlled by, or is under common control with, such specified Person. For purposes of this definition, control of a Person means the power, directlyor indirectly, to direct or cause the direction of the management and policiesof such Person whether by contract, securities ownership or otherwise; and theterms "controlling" and "controlled" have the respective meanings correlativeto the foregoing.

2.              "**Commission**" means the Securities and Exchange Commission.

3.              "**Company**" shall mean VillageEDOCS

4.              "**Exchange Act**" means the Securities Exchange Act of 1934, asamended, and the rules and regulations of the Commission there under, or anysimilar successor statute.

5.              "**Holder**" means GSS Securities, Inc. and any permitted transfereeor assignee of Registrable Securities who agrees to become bound by all of theterms and provisions of this Appendix I.

6.              "**Person**" means any individual, partnership, corporation, limitedliability company, joint stock company, association, trust, unincorporatedorganization, or a government agency or political subdivision thereof.

7.              "**Placement**" means any offering of securities of the Companypursuant to which Holder serves as a placement agent or underwriter, whether ona best efforts basis or otherwise.   

8.              "**Prospectus**" means the prospectus (including any preliminaryprospectus and/or any final prospectus filed pursuant to Rule 424(b) under theSecurities Act and any prospectus that discloses information previously omittedfrom a prospectus filed as part of an effective registration statement inreliance on Rule 430A under the Securities Act) included in the RegistrationStatement, as amended or supplemented by any prospectus supplement with respectto the terms of the offering of any portion of the Registrable Securitiescovered by the Registration Statement and by all other amendments andsupplements to such prospectus, including all material incorporated byreference in such prospectus and all documents filed after the date of suchprospectus by the Company under the Exchange Act and incorporated by referencetherein.

9.              "**Public Offering**" means an offer registered with the Commissionand the appropriate state securities commissions by the Company of its CommonStock and made pursuant to the Securities Act.

10.           "**Registrable Securities**" means the shares of common stock issuedto GSS Securities, Inc. or its designated affiliates pursuant to the terms ofthe Placement Agency Agreement; provided, however, a share of common stockshall cease to be a Registrable Security for purposes of this Appendix I whenit no longer is a Restricted Security.

11.           "**Registration Statement**" means a registration statement of theCompany filed on Form S-3 under the Securities Act providing for theregistration of, and the sale on a continuous or delayed basis by the holdersof, all of the Registrable Securities pursuant to Rule 415 under the SecuritiesAct, including the Prospectus contained therein and forming a part thereof, anyamendments to such registration statement and supplements to such Prospectus,and all exhibits and other material incorporated by reference in suchregistration statement and Prospectus.  In the event that Form S-3 isunavailable for such a registration, the Company shall use such other form asis available for such a registration.

12.           "**Restricted Security**" means any share of common stock except anythat (i) have been registered pursuant to an effective registration statementunder the Securities Act and sold in a manner contemplated by the prospectusincluded in such registration statement, (ii) have been transferred incompliance with the resale provisions of Rule 144 under the Securities Act (orany successor provision thereto) or is transferable pursuant to paragraph (k)of Rule 144 under the Securities Act (or any successor provision thereto), or(iii) otherwise has been transferred and are not subject to transferrestrictions under the Securities Act.

13.           "**Securities Act**" means the Securities Act of 1933, as amended, andthe rules and regulations of the Commission thereunder, or any similarsuccessor statute.

(b)           All capitalized terms used and not defined herein have the respectivemeaning assigned to them in the Subscription Agreement.

**2.              ****Registration.**

(a)            Registration for ReSale 

Registration of Registrable Securities. VEDO shall use its best efforts to file a Registration Statement on or beforeDecember 31, 2007 covering the public resale of the Registrable Securities bythe Holder.

(b)           Piggyback Registration Rights.  

(i)         Whenever the Companyproposes to register any of its Common Shares or any other common shares of theCompany under the Securities Act (other than a registration (A) pursuant to ademand registration under Section 2(a) herein, (B) on Form S-4 or other appropriate,applicable form, including any successor or similar form(s), (C) relating toCommon Shares or any other common shares of the Company issuable upon exerciseof employee or consultant share options or in connection with any employeebenefit or similar plan of the Company or (D) in connection with a direct orindirect acquisition by the Company of another Person or any transaction withrespect to which Rule 145 (or any successor provision) under the Securities Actapplies), whether or not for sale for its own account, it will each such time,

 give promptwritten notice at least 20 days prior to the anticipated filing date of theregistration statement relating to such registration to the Holders, whichnotice shall set forth such Holders' rights under this Section 2(c) and shalloffer the Holders the opportunity to include in such registration statementsuch number of Registrable Securities as the Holders may request.  Uponthe written request of a Holder made within 10 days after the receipt of noticefrom the Company (which request shall specify the number of RegistrableSecurities intended to be disposed of by such Holders), the Company will useits best efforts to effect the registration under the Securities Act of allRegistrable Securities that the Company has been so requested to register bythe Holders, to the extent requisite to permit the disposition of theRegistrable Securities to be so registered; provided, however, that (A) if suchregistration involves a Public Offering, the Holders must sell theirRegistrable Securities to the underwriters on the same terms and conditions asapply to the Company and (B) if, at any time after giving written notice of itsintention to register any Registrable Securities pursuant to this Section 2(c)and prior to the effective date of the registration statement filed inconnection with such registration, the Company shall determine for any reasonnot to register such Registrable Securities, the Company shall give writtennotice to the Holders and, thereupon, shall be relieved of its obligation toregister any Registrable Securities in connection with such registration. The Company's obligations under this Section 2(c) shall terminate on the datethat the registration statement to be filed in accordance with Section 2(a) isdeclared effective by the Commission. 

(ii)        If a registrationpursuant to this Section 2(c) involves a Public Offering and the managingunderwriter thereof advises the Company that, in its view, the number of CommonShares, if any, or other Common Shares that the Company and the Holders intendto include in such registration exceeds the largest number of Common Shares(including any other Common Shares or warrants of the Company) that can be soldwithout having an adverse effect on such Public Offering (the "**MaximumOffering Size**"), the Company will include in such registration only thatnumber of Common Shares which does not exceed the Maximum Offering Size, in thefollowing order of priorities: (1) first, all securities the Company proposesto sell for its own account, (2) second, up to the full number of securitiesproposed to be registered for the account of the holders of securities entitledto inclusion of their securities in the Registration Statement by reason ofdemand registration rights, and (3) third, the securities requested to beregistered by other holders of securities entitled to participate in theregistration, drawn from them pro-rata based on the number of shares each hasrequested to be included in such registration and the Holders pursuant to thisAppendix I.

If as aresult of the proration provisions of this Section 2(c)(ii), the Holders arenot entitled to include all such Registrable Securities in such registration,such Holders may elect to withdraw their request to include any RegistrableSecurities in such registration.  

Notwithstandingthe foregoing, the Company shall have no obligations under this Section 2(c)hereof at any time that such Registrable Securities are the subject of aneffective registration statement.  

**3.              ****Obligations of the Company. **In connection withthe registration of the Registrable Securities, the Company shall use itsreasonable best efforts to:

(a)            Subject to the provisions of Section 3(r) hereof, promptly (i) prepareand file with the Commission such amendments (including post-effectiveamendments) to the Registration Statement and supplements to the Prospectus asmay be necessary to keep the Registration Statement continuously effective andin compliance with the provisions of the Securities Act applicable thereto soas to permit the Prospectus forming part thereof to be current and useable byHolders for resales of the Registrable Securities for a period of two yearsfrom the date the Registration Statement is first declared effective by the Commission(the "Effective Time") or such shorter period that will terminate when all theRegistrable Securities covered by the Registration Statement have been soldpursuant thereto in accordance with the plan of distribution provided in theProspectus, transferred pursuant to Rule 144 under the Securities Act orotherwise transferred in a manner that results in the delivery of newsecurities not subject to transfer restrictions under the Securities Act (the"Registration Period") and (ii) take all lawful action such that each of (A)the Registration Statement and any amendment thereto does not, when it becomeseffective, contain an untrue statement of a material fact or omit to state amaterial fact required to be stated therein or necessary to make the statementstherein, not misleading and (B) the Prospectus forming part of the RegistrationStatement, and any amendment or supplement thereto, does not at any time duringthe Registration Period include an untrue statement of a material fact or omitto state a material fact required to be stated therein or necessary to make thestatements therein, in light of the circumstances under which they were made,not misleading.  Notwithstanding the foregoing, the Company's obligationshereunder shall terminate as to any Holder at such time as that Holder'sRegistrable Securities can be sold under Rule 144(k);

(b)           During the Registration Period, comply with the provisions of theSecurities Act with respect to the Registrable Securities of the Companycovered by the Registration Statement until such time as all of suchRegistrable Securities have been disposed of in accordance with the intendedmethods of disposition by the Holders as set forth in the Prospectus formingpart of the Registration Statement;

(c)            (i) Prior to the filing with the Commission of any RegistrationStatement (including any amendments thereto) and the distribution or deliveryof any Prospectus (including any supplements thereto), provide draft copiesthereof (including a copy of the accountant's consent letter to be included inthe filing) to GSS Securities, Inc. ("GSS") and reflect in such documents allsuch comments as GSS reasonably may propose; and (ii) furnish to each Holderwhose Registrable Securities are included in the Registration Statement, (A) promptlyafter the same is prepared and publicly distributed, filed with the Commission,or received by the Company, one copy of the Registration Statement, eachProspectus, and each amendment or supplement thereto, and (B) such number ofcopies of the Prospectus and all amendments and supplements thereto and suchother documents, as such Holder may reasonably request in order to facilitatethe disposition of the Registrable Securities owned by such Holder;

(d)           (i) Register or qualify the Registrable Securities covered by theRegistration Statement under such securities or "Blue Sky" laws of alljurisdictions requiring Blue Sky registration or qualification, (ii) prepareand file in such jurisdictions such amendments (including post-effectiveamendments) and supplements to such registrations and qualifications as may benecessary to maintain the effectiveness thereof at all times during theRegistration Period, (iii) take all such other lawful actions as may benecessary to maintain such registrations and qualifications in effect at alltimes during the Registration Period, and (iv) take all such other lawfulactions reasonably necessary or advisable to qualify the Registrable Securitiesfor sale in such jurisdictions; provided, however, that the Company shall notbe required in connection therewith or as a condition thereto to (A) qualify todo business in any jurisdiction where it would not otherwise be required toqualify but for this Section 3(d), (B) subject itself to general taxation inany such jurisdiction or (C) file a general consent to service of process inany such jurisdiction;

(e)            As promptly as practicable after becoming aware of such event, notifyeach Holder of the occurrence of any event, as a result of which the Prospectusincluded in the Registration Statement, as then in effect, includes an untruestatement of a material fact or omits to state a material fact required to bestated therein or necessary to make the statements therein, in light of thecircumstances under which they were made, not misleading, and promptly preparean amendment to the Registration Statement and supplement to the Prospectus tocorrect such untrue statement or omission, and deliver a number of copies ofsuch supplement and amendment to each Holder as such Holder may reasonablyrequest;

(f)            Notify each Holder who holds Registrable Securities being sold (or, inthe event of an underwritten offering, the managing underwriters) of theissuance by the Commission of any stop order or other suspension of theeffectiveness of the Registration Statement on the date of receipt of any suchstop order or other suspension, and take all lawful action to effect thewithdrawal, recession or removal of such stop order or other suspension;

(g)           Cause all the Registrable Securities covered by the RegistrationStatement to be listed not later than the date that the Registration Statementis declared effective by the Commission on the principal national securitiesexchange, or included in an inter-dealer quotation system of a registerednational securities association, on or in which securities of the same class orseries issued by the Company are then listed or included;

(h)           Maintain a transfer agent and registrar, which may be a single entity,for the Registrable Securities not later than the effective date of theRegistration Statement;

(i)             Cooperate with the Holders who hold Registrable Securities being offeredto facilitate the timely preparation and delivery of certificates for theRegistrable Securities to be offered pursuant to the registration statement andenable such certificates for the Registrable Securities to be in suchdenominations or amounts, as the case may be, as the Holders reasonably mayrequest and registered in such names as the Holder may request; and, withinthree business days after a registration statement which includes RegistrableSecurities is declared effective by the Commission, deliver and cause legalcounsel selected by the Company to deliver to the transfer agent for theRegistrable Securities (with copies to the Holders whose Registrable Securitiesare included in such registration statement) an appropriate instruction and, tothe extent necessary, an opinion of such counsel;

(j)             Take all such other lawful actions reasonably necessary to expedite andfacilitate the disposition by the Holders of their Registrable Securities inaccordance with the intended methods therefor provided in the Prospectus whichare customary under the circumstances;

(k)           Make generally available to its security holders as soon as practicable,but in any event not later than three (3) months after (i) the effective date(as defined in Rule 158(c) under the Securities Act) of the RegistrationStatement, and (ii) the effective date of each post-effective amendment to theRegistration Statement, as the case may be, an earnings statement of theCompany and its subsidiaries complying with Section 11(a) of the Securities Actand the rules and regulations of the Commission thereunder (including, at theoption of the Company, Rule 158);

(l)             In the event of an underwritten offering, promptly include orincorporate in a Prospectus supplement or post-effective amendment to theRegistration Statement such information as the managers reasonably agree shouldbe included therein and to which the Company does not reasonably object andmake all required filings of such Prospectus supplement or post-effectiveamendment as soon as practicable after it is notified of the matters to beincluded or incorporated in such Prospectus supplement or post-effectiveamendment;

(m)         In connection with any underwritten offering, make such representationsand warranties to the Holders participating in such underwritten offering andto the managers, in form, substance and scope as are customarily made by theCompany to underwriters in secondary underwritten offerings;

(n)           In connection with any underwritten offering, obtain opinions of counselto the Company (which counsel and opinions (in form, scope and substance) shallbe reasonably satisfactory to the managers) addressed to the underwriters,covering such matters as are customarily covered in opinions requested insecondary underwritten offerings (it being agreed that the matters to becovered by such opinions shall include, without limitation, as of the date ofthe opinion and as of the date the Registration Statement is first declaredeffective or most recent 

post- effectiveamendment thereto, as the case may be, the absence from the RegistrationStatement and the Prospectus, including any documents incorporated by referencetherein, of an untrue statement of a material fact or the omission of amaterial fact required to be stated therein or necessary to make the statementstherein (in the case of the Prospectus, in light of the circumstances underwhich they were made) not misleading, subject to customary limitations);

(o)           In connection with any underwritten offering, obtain "cold comfort"letters and updates thereof from the independent public accountants of theCompany (and, if necessary, from the independent public accountants of anysubsidiary of the Company or of any business acquired by the Company, in eachcase for which financial statements and financial data are, or are required tobe, included in the Registration Statement), addressed to each underwriterparticipating in such underwritten offering (if such underwriter has providedsuch letter, representations or documentation, if any, required for such coldcomfort letter to be so addressed), in customary form and covering matters ofthe type customarily covered in "cold comfort" letters in connection with secondaryunderwritten offerings;

(p)           In connection with any underwritten offering, deliver such documents andcertificates as may be reasonably required by the managers, if any; and

(q)           In connection with any underwritten offering, in the event that anybroker-dealer registered under the Exchange Act shall be an "Affiliate" (asdefined in Rule 2729(b)(1) of the rules and regulations of the NationalAssociation of Securities Dealers, Inc. (the "NASD Rules") (or any successorprovision thereto)) of the Company or has a "conflict of interest" (as definedin Rule 2720(b)(7) of the NASD Rules (or any successor provision thereto)) andsuch broker-dealer shall underwrite, participate as a member of an underwritingsyndicate or selling group or assist in the distribution of any RegistrableSecurities covered by the Registration Statement, whether as a holder of suchRegistrable Securities or as an underwriter, a placement or sales agent or abroker or dealer in respect thereof, or otherwise, the Company shall assistsuch broker-dealer in complying with the requirements of the NASD Rules,including, without limitation, by (A) engaging a "qualified independentunderwriter" (as defined in Rule 2720(b)(15) of the NASD Rules (or anysuccessor provision thereto)) to participate in the preparation of theRegistration Statement relating to such Registrable Securities, to exerciseusual standards of due diligence in respect thereof and to recommend the publicoffering price of such Registrable Securities, (B) indemnifying such qualifiedindependent underwriter to the extent of the indemnification of underwritersprovided in Section 6 hereof, and (C) providing such information to suchbroker-dealer as may be required in order for such broker-dealer to comply withthe requirements of the NASD Rules.

(r)            Notwithstanding anything to the contrary in Section 3, at any time afterthe Registration Statement has been declared effective, the Company may delaythe disclosure of material non-public information concerning the Company, thedisclosure of which at the time is not, in the good faith opinion of theCompany and its counsel, in the best interest of the Company (a "GracePeriod"); provided, that the Company shall promptly (i) notify the Holders inwriting of the existence of material non-public information giving rise to aGrace Period and the date on which the Grace Period will begin, and (ii) notifythe Holders in writing in advance of, or on the same date on which, the GracePeriod ends; and, provided further, that during any consecutive 365 day period,there shall be only two Grace Periods, such Grace Periods in total not toexceed 90 days.  For purposes of determining the length of a Grace Periodabove, the Grace Period shall begin on and include the date the Holders receivethe notice referred to in clause (i) and shall end on and include the datespecified as the Grace Period ending date in the notice referred to in clause(ii).  If at any time after the Registration Statement has been declaredeffective, the Company delays disclosure of material non-public informationconcerning the Company, other than during a permitted Grace Period as describedabove, the Company shall make payments to the Holders as provided in the nextsentence as liquidated damages intended by the parties to compensate theHolders in part for the incremental costs and investment risks associated withholding the Registrable Securities as restricted securities and not as apenalty.  The amount of payments shall be calculated at the LiquidatedDamage Rate of the Purchase Price in accordance with the provisions of Section2(b), and the timing of payments shall also be determined in accordance withSection 2(b).  For the purposes of such calculations and determinations ofthe amount and timing of payments: (i) the Initial Date shall mean the firstdate that the Company delays disclosure of material non-public informationconcerning the Company other than during a permitted Grace Period and (ii) theComputation Date shall mean the date that is 90 days after the Initial Date andeach date that is 90 days after the previous Computation Date until such periodof delay has ceased and the Company has provided notice to the Holders of theend of such period in accordance with the provisions of this sectionabove.  Nothing herein shall limit the rights of any Holder to pursueactual damages for the Holder's inability to sell any of the RegistrableSecurities into the public market for any reason described in this section.

(s)             

Notwithstandingthe foregoing, the Company shall have no obligations under Section 3(l) through(q) unless it is effecting an underwritten offering pursuant to Section 2(c).

**4.              ****Obligations of the Holders**.  In connection withthe registration of the Registrable Securities, the Holders shall have thefollowing obligations, which obligations shall be several and not joint:

** **

(a)            Prior to the first anticipated filing date of the Registration Statementunder Section 2(a) hereof, the Company shall provide the Holders with a draftof the Registration Statement, including such information about the Holder ashas been provided in the  Questionnaire completed by the Holder, togetherwith whatever confirmations, certificates or consents as may be reasonablyrequested by the Company.  In connection with any other Registration Statementincluding the Holders, it shall be a condition precedent to the obligations ofthe Company to complete the registration pursuant to this Appendix I withrespect to the Registrable Securities of a particular Holder that such Holdershall furnish to the Company such information regarding itself, the RegistrableSecurities held by it and the intended method of disposition of the RegistrableSecurities held by it as shall be reasonably required to effect theregistration of such Registrable Securities and shall execute such documents inconnection with such registration as the Company may reasonably request. At least ten business days prior to the first anticipated filing date of theRegistration Statement, the Company shall notify each Holder and its counsel,whether in-house or otherwise ("Counsel") of the information the Companyrequires from each such Holder (the "Requested Information") if such Holderelects to have any of its Registrable Securities included in the RegistrationStatement.  If at least four business days prior to the anticipated filingdate the Company has not received the Requested Information from a Holder (a"Non-Responsive Holder") or its Counsel, then the Company shall send suchNon-Responsive Holder and its Counsel a reminder of such informationrequest.  If at least two business days prior to the anticipated filingdate the Company still has not received the Requested Information from suchNon-Responsive Holder or its Counsel, then the Company may file theRegistration Statement without including Registrable Securities of suchNon-Responsive Holder.  However, promptly upon receipt of the RequestedInformation, and at the expense of the Non-Responsive Holder, the Company shallfile such amendment(s) to the Registration Statement as may be necessary toinclude therein the Registrable Securities of the Non-Responsive Holder.

(b)           Each Holder by its acceptance of the Registrable Securities agrees tocooperate with the Company in connection with the preparation and filing of theRegistration Statement hereunder, unless such Holder has notified the Companyin writing of its election to exclude all of its Registrable Securities fromthe Registration Statement; the Company shall, on its part, ensure that Item507 of Regulation S-K of the Securities Act (regarding information on theselling security holders) be complied with in connection with its preparationand filing of the Registration Statement hereunder; 

(c)            As promptly as practicable after becoming aware of such event, notifythe Company of the occurrence of any event, as a result of which the Prospectusincluded in the Registration Statement, as then in effect, includes an untruestatement of a material fact or omits to state a material fact required to bestated therein or necessary to make the statements therein, in light of thecircumstances under which they were made, not misleading; and

(d)           Each Holder agrees that, upon receipt of any notice from the Company ofthe occurrence of any event of the kind described in Section 3(e) or 3(f), itshall immediately discontinue its disposition of Registrable Securitiespursuant to the Registration Statement covering such Registrable Securitiesuntil such Holder's receipt of the copies of the supplemented or amendedProspectus contemplated by Section 3(e) and, if so directed by the Company,such Holder shall deliver to the Company (at the expense of the Company) ordestroy (and deliver to the Company a certificate of destruction) all copies insuch Holder's possession, of the Prospectus covering such Registrable Securitiescurrent at the time of receipt of such notice.

**5.              ****Expenses of Registration**.  All expenses, otherthan underwriting discounts and commissions, incurred in connection withregistrations, filings or qualifications pursuant to Section 3, but including,without limitation, all registration, listing, and qualifications fees,printing and engraving fees, accounting fees, and the fees and disbursements ofcounsel for the Company, and the reasonable fees, not to exceed $5,000.00, ofone firm of counsel to the holders of a majority in interest of the RegistrableSecurities shall be borne by the Company.

**6.              ****Indemnification and Contribution.**

(a)            The Company shall indemnify and hold harmless each Holder and eachunderwriter, if any, which facilitates the disposition of RegistrableSecurities, and each of their respective officers and directors and each personwho controls such Holder or underwriter within the meaning of Section 15 of theSecurities Act or Section 20 of the Exchange Act (a "Company IndemnifiedPerson") from and against any losses, claims, damages or liabilities, joint orseveral, to which such Company Indemnified Person may become subject under theSecurities Act or otherwise, insofar as such losses, claims, damages orliabilities (or actions in respect thereof) arise out of or are based upon anuntrue statement or alleged untrue statement of a material fact contained inany Registration Statement or an omission or alleged omission to state thereina material fact required to be stated therein or necessary to make thestatements therein, not misleading, or arise out of or are based upon an untruestatement or alleged untrue statement of a material fact contained in anyProspectus or an omission or alleged omission to state therein a material factrequired to be stated therein or necessary to make the statements therein, inthe light of the circumstances under which they were made, not misleading; andthe Company hereby agrees to reimburse such Company Indemnified Person for allreasonable legal and other expenses incurred by them in connection withinvestigating or defending any such action or claim as and when such expensesare incurred; provided, however, that the Company shall not be liable to anysuch Company Indemnified Person in any such case to the extent that any suchloss, claim, damage or liability arises out of or is based upon (i) an untruestatement or alleged untrue statement made in, or an omission or allegedomission from, such Registration Statement or Prospectus in reliance upon andin conformity with written information furnished to the Company by such Company

Indemnified Personexpressly for use therein or (ii) in the case of the occurrence of an event ofthe type specified in Section 3(e), the use by the Company Indemnified Personof an outdated or defective Prospectus after the Company has provided to suchCompany Indemnified Person written notice that such Prospectus is outdated ordefective.

(b)           Indemnification by the Holders.  Each Holder agrees, as aconsequence of the inclusion of any of its Registrable Securities in aRegistration Statement, severally and not jointly, to (i) indemnify and holdharmless the Company, its directors (including any person who, with his or herconsent, is named in the Registration Statement as a director nominee of theCompany), its officers and each person, if any, who controls the Company withinthe meaning of either Section 15 of the Securities Act or Section 20 of theExchange Act ("Holder Indemnified Person"), against any losses, claims, damagesor liabilities to which the Holder Indemnified Person may become subject, underthe Securities Act or otherwise, insofar as such losses, claims, damages orliabilities (or actions in respect thereof) arise out of or are based upon anuntrue statement or alleged untrue statement of a material fact contained insuch Registration Statement or Prospectus or arise out of or are based upon theomission or alleged omission to state therein a material fact required to bestated therein or necessary to make the statements therein (in light of thecircumstances under which they were made, in the case of the Prospectus), notmisleading, in each case to the extent, but only to the extent, that suchuntrue statement or alleged untrue statement or omission or alleged omissionwas made by such Holder in reliance upon and in conformity with writteninformation furnished to the Company by such holder expressly for use therein;provided, however, that no Holder shall be liable under this Section 6(b) forany amount in excess of the gross proceeds paid to such Holder in respect ofshares sold by it, and (ii) reimburse the Holder Indemnified Person for anylegal or other expenses incurred in connection with investigating or defendingany such action or claim as such expenses are incurred.

(c)            Indemnification by the Underwriters.  Each underwriter, ifany, which facilitates the disposition of Registrable Securities shall agree,as a consequence of facilitating such disposition of Registrable Securities,severally and not jointly, to (i) indemnify and hold harmless the Company, itsdirectors (including any person who, with his or her consent, is named in theRegistration Statement as a director nominee of the Company), its officers andeach person, if any, who controls the Company within the meaning of eitherSection 15 of the Securities Act or Section 20 of the Exchange Act, against anylosses, claims, damages or liabilities to which the Company or such otherpersons may become subject, under the Securities Act or otherwise, insofar assuch losses, claims, damages or liabilities (or actions in respect thereof)arise out of or are based upon an untrue statement or alleged untrue statementof a material fact contained in such Registration Statement or Prospectus orarise out of or are based upon the omission or alleged omission to statetherein a material fact required to be stated therein or necessary to make thestatements therein (in light of the circumstances under which they were made,in the case of the Prospectus), not misleading, in each case to the extent, butonly to the extent, that such untrue statement or alleged untrue statement oromission or 

alleged omissionwas made in reliance upon and in conformity with written information furnishedto the Company by such holder or underwriter expressly for use therein;provided, however, that no underwriter shall be liable under this Section 6(b)for any amount in excess of the gross proceeds paid to such underwriter inrespect of shares sold by it, and (ii) reimburse the Company for any legal orother expenses incurred by the Company in connection with investigating ordefending any such action or claim as such expenses are incurred.

(d)           Notice of Claims, etc.  Promptly after receipt by a partyseeking indemnification pursuant to this Section 6 (an "Indemnified Party") ofwritten notice of any investigation, claim, proceeding or other action inrespect of which indemnification is being sought (each, a "Claim"), theIndemnified Party promptly shall notify the party against whom indemnificationpursuant to this Section 6 is being sought (the "Indemnifying Party") of thecommencement thereof; but the omission to so notify the Indemnifying Partyshall not relieve it from any liability that it otherwise may have to theIndemnified Party, except to the extent that the Indemnifying Party ismaterially prejudiced and forfeits substantive rights and defenses by reason ofsuch failure.  In connection with any Claim as to which both theIndemnifying Party and the Indemnified Party are parties, the IndemnifyingParty shall be entitled to assume the defense thereof.  Notwithstandingthe assumption of the defense of any Claim by the Indemnifying Party, theIndemnified Party shall have the right to employ separate legal counsel and toparticipate in the defense of such Claim, and the Indemnifying Party shall bearthe reasonable fees, out-of-pocket costs and expenses of such separate legalcounsel to the Indemnified Party if (and only if): (x) the Indemnifying Partyshall have agreed to pay such fees, costs and expenses, (y) the IndemnifiedParty and the Indemnifying Party shall reasonably have concluded thatrepresentation of the Indemnified Party by the Indemnifying Party by the samelegal counsel would not be appropriate due to actual or, as reasonablydetermined by legal counsel to the Indemnified Party, potentially differinginterests between such parties in the conduct of the defense of such Claim, orif there may be legal defenses available to the Indemnified Party that are inaddition to or disparate from those available to the Indemnifying Party, or (z)the Indemnifying Party shall have failed to employ legal counsel reasonablysatisfactory to the Indemnified Party within a reasonable period of time afternotice of the commencement of such Claim.  If the Indemnified Party employsseparate legal counsel in circumstances other than as described in clauses (x),(y) or (z) above, the fees, costs and expenses of such legal counsel shall beborne exclusively by the Indemnified Party.  Except as provided above, theIndemnifying Party shall not, in connection with any Claim in the samejurisdiction, be liable for the fees and expenses of more than one firm ofcounsel for the Indemnified Party (together with appropriate localcounsel).  The Indemnified Party shall not, without the prior writtenconsent of the Indemnifying Party (which consent shall not unreasonably bewithheld), settle or compromise any Claim or consent to the entry of anyjudgment that does not include an unconditional release of the IndemnifyingParty from all liabilities with respect to such Claim or judgment.

(e)            Contribution.  If the indemnification provided for in thisSection 6 is unavailable to or insufficient to hold harmless an IndemnifiedPerson under subsection (a) or (b) above in respect of any losses, claims,damages or liabilities (or actions in respect thereof) referred to therein,then each Indemnifying Party shall contribute to the amount paid or payable bysuch Indemnified Party as a result of such losses, claims, damages orliabilities (or actions in respect thereof) in such proportion as isappropriate to reflect the relative fault of the Indemnifying Party and theIndemnified Party in connection with the statements or omissions which resultedin such losses, claims, damages or liabilities (or actions in respect thereof),as well as any other relevant equitable considerations.  The relativefault of such Indemnifying Party and Indemnified Party shall be determined byreference to, among other things, whether the untrue or alleged untruestatement of a material fact or omission or alleged omission to state amaterial fact relates to information supplied by such Indemnifying Party or bysuch Indemnified Party, and the parties' relative intent, knowledge, access toinformation and opportunity to correct or prevent such statement oromission.  The parties hereto agree that it would not be just andequitable if contribution pursuant to this Section 6(d) were determined by prorata allocation (even if the Holders or any underwriters were treated as oneentity for such purpose) or by any other method of allocation which does nottake account of the equitable considerations referred to in this Section6(d).  The amount paid or payable by an Indemnified Party as a result ofthe losses, claims, damages or liabilities (or actions in respect thereof)referred to above shall be deemed to include any legal or other fees orexpenses reasonably incurred by such Indemnified Party in connection withinvestigating or defending any such action or claim.  No person guilty offraudulent misrepresentation (within the meaning of Section 11(f) of theSecurities Act) shall be entitled to contribution from any person who was notguilty of such fraudulent misrepresentation.  The obligations of theHolders and any underwriters in this Section 6(d) to contribute shall beseveral in proportion to the percentage of Registrable Securities registered orunderwritten, as the case may be, by them and not joint.

(f)            Notwithstanding any other provision of this Section 6, in no event shallany (i) Holder be required to undertake liability to any person under thisSection 6 for any amounts in excess of the dollar amount of the gross proceedsto be received by such Holder from the sale of such Holder's RegistrableSecurities pursuant to any Registration Statement under which such RegistrableSecurities are to be registered under the Securities Act.

(g)           The obligations of the Company under this Section 6 shall be in additionto any liability which the Company may otherwise have to any Indemnified Personand the obligations of any Indemnified Person under this Section 6 shall be inaddition to any liability which such Indemnified Person may otherwise have tothe Company.  The remedies provided in this Section 6 are not exclusiveand shall not limit any rights or remedies which may otherwise be available toan indemnified party at law or in equity.

**7.              ****Rule 144**.  With a view to making available to theHolders the benefits of Rule 144 under the Securities Act or any other similarrule or regulation of the Commission that may at any time permit the Holders tosell securities of the Company to the public without registration ("Rule 144"),the Company agrees to:

(a)            comply with the provisions of paragraph (c) (1) of Rule 144; and

(b)           file with the Commission in a timely manner all reports and otherdocuments required to be filed by the Company pursuant to Section 13 or 15(d)under the Exchange Act; and, if at any time it is not required to file suchreports but in the past had been required to or did file such reports, it will,upon the request of any Holder, make available other information as requiredby, and so long as necessary to permit sales of, its Registrable Securitiespursuant to Rule 144.

**8.              ****Assignment. **The rights to have the Companyregister Registrable Securities pursuant to this Appendix I may beassigned or transferred only with the prior written consent of the Company, andany such assignment or transfer without such consent shall be void and of noeffect, which consent shall not be unreasonably withheld.  Notwithstandingthe foregoing, such consent of the Company shall not be required with respectto any assignment or transfer of Registrable Securities to an affiliate ofSubscriber, including for this purpose if Subscriber is an investment company,any fund or account advised by Subscriber's investment adviser or any affiliatethereof.  In the event of any such permitted assignment or transfer by theHolders to any permitted transferee of all or any portion of such RegistrableSecurities such transfer will be allowed only if: (a) the Holder agrees inwriting with the transferee or assignee to assign such rights, and a copy ofsuch agreement is furnished to the Company within a reasonable time after suchassignment, (b) the Company is, within a reasonable time after such transfer orassignment, furnished with written notice of (i) the name and address of suchtransferee or assignee and (ii) the securities with respect to which suchregistration rights are being transferred or assigned, (c) immediatelyfollowing such transfer or assignment, the securities so transferred orassigned to the transferee or assignee constitute Restricted Securities, and(d) at or before the time the Company received the written notice contemplatedby clause (b) of this sentence the transferee or assignee agrees in writingwith the Company to be bound by all of the provisions contained herein.

**9.              ****Amendment and Waiver.**  Any provision of thisAppendix I may be amended and the observance thereof may be waived (eithergenerally or in a particular instance and either retroactively orprospectively), only with the written consent of the Company and Holders whohold a majority interest of the Registrable Securities.  Any amendment orwaiver effected in accordance with this Section 9 shall be binding upon each Holderand the Company.
****
** **

**10.           ****Miscellaneous.**

(a)            A person or entity shall be deemed to be a holder of RegistrableSecurities whenever such person or entity owns of record such RegistrableSecurities.  If the Company receives conflicting instructions, notices orelections from two or more persons or entities with respect to the sameRegistrable Securities, the Company shall act upon the basis of instructions,notice or election received from the registered owner of such RegistrableSecurities.

(b)           If after the date hereof and prior to the Commission declaring theRegistration Statement to be filed pursuant to Section 2(a) effective under theSecurities Act, the Company grants to any Person any registration rights withrespect to any Company securities which are more favorable to such other Personthan those provided in this Appendix I, then the Company forthwith shall grant(by means of an amendment to this Appendix I or otherwise) identicalregistration rights to all Holders hereunder.

(c)            Except as may be otherwise provided herein, any notice or othercommunication or delivery required or permitted hereunder shall be in writingand shall be delivered personally or sent by certified mail, postage prepaid,or by a nationally recognized overnight courier service as follows, and shallbe deemed given when actually received.

if to the  Company, to:

VillageEDOCS    1401 N. Tustin Avenue, Suite 230  Santa Ana,   CA  92705-8686  Facsimile: (800) 837-0679  Attention: Mason Conner, CEO

if to the Holders, to:

Gemstone Securities, LLC  19321 US Hwy 19 No. C-606  Clearwater, FL 33764  Facsimile: (727) 535-9600  Attn: Dale Twardowski, Managing Principal

The Companyor any Holder may change the foregoing address by notice given pursuant to thisSection 10(c).

(d)           Failure of any party to exercise any right or remedy under this AppendixI or otherwise, or delay by a party in exercising such right or remedy,shall not operate as a waiver thereof.

(e)            This Appendix I shall be governed by and interpreted in accordance withthe laws of the State of Florida.

(f)            The remedies provided in this Appendix I are cumulative and notexclusive of any remedies provided by law.  If any term, provision,covenant or restriction of this Appendix I is held by a court of competentjurisdiction to be invalid, illegal, void or unenforceable, the remainder ofthe terms, provisions, covenants and restrictions set forth herein shall remainin full force and effect and shall in no way be affected, impaired orinvalidated, and the parties hereto shall use their best efforts to find andemploy an alternative means to achieve the same or substantially the sameresult as that contemplated by such term, provision, covenant orrestriction.  It is hereby stipulated and declared to be the intention ofthe parties that they would have executed the remaining terms, provisions,covenants and restrictions without including any of such that may be hereafterdeclared invalid, illegal, void or unenforceable.

(g)           The Company shall not enter into any agreement with respect to itssecurities that is inconsistent with the rights granted to the holders ofRegistrable Securities in this Appendix I or otherwise conflicts withthe provisions hereof.  The Company is not currently a party to anyagreement granting any registration rights with respect to any of its securitiesto any person which conflicts with the Company's obligations hereunder or givesany other party the right to include any securities in any RegistrationStatement filed pursuant hereto, except for such rights and conflicts as havebeen irrevocably waived.  Without limiting the generality of theforegoing, without the written consent of the holders of a 66 2/3% interest ofthe Registrable Securities, the Company shall not grant to any person the rightto request it to register any of its securities under the Securities Act unlessthe rights so granted are pari pasu to the prior rights of the holders ofRegistrable Securities set forth herein, and are not otherwise in conflict orinconsistent with the provisions of this Appendix I.  Therestrictions on the Company's rights to grant registration rights under thisparagraph shall terminate on the date all Registrable Securities have beenregistered pursuant to a Registration Statement that has been declaredeffective by the Commission

(h)           This Appendix I and the Subscription Agreements constitute theentire agreement among the parties hereto with respect to the subject matterhereof.  There are no restrictions, promises, warranties or undertakings,other than those set forth or referred to herein.  This Appendix I and theSubscription Agreements supersede all prior agreements and undertakings amongthe parties hereto with respect to the subject matter hereof.

(i)             Subject to the requirements of Section 8 hereof, this Appendix Ishall inure to the benefit of and be binding upon the successors and assigns ofeach of the parties hereto.

(j)             All pronouns and any variations thereof refer to the masculine, feminineor neuter, singular or plural, as the context may require.

(k)           The headings in this Appendix I are for convenience of reference onlyand shall not limit or otherwise affect the meaning thereof.