Filed by Automated Filing Services Inc. (604) 609-0244 - EYI Industries, Inc. - Exhibit 10.26





 STANDBY EQUITY DISTRIBUTION AGREEMENT

                THIS
  AGREEMENT dated as of the 22nd day of June 2004 (the "Agreement")
  between CORNELL CAPITAL PARTNERS, LP, a Delaware limited partnership
  (the "Investor"), and EYI INDUSTRIES, INC., a corporation organized
  and existing under the laws of the State of Nevada (the "Company"). 

                WHEREAS,
  the parties desire that, upon the terms and subject to the conditions contained
  herein, the Company shall issue and sell to the Investor, from time to time
  as provided herein, and the Investor shall purchase from the Company up to Ten
  Million U.S. Dollars ($10,000,000) of the Company's common stock, par value
  $0.001 per share (the "Common Stock"); and 

                WHEREAS,
  such investments will be made in reliance upon the provisions of Regulation
  D ("Regulation D") of the Securities Act of 1933, as amended, and the
  regulations promulgated thereunder (the "Securities Act"), and or upon
  such other exemption from the registration requirements of the Securities Act
  as may be available with respect to any or all of the investments to be made
  hereunder. 

                WHEREAS,
  the Company has engaged Newbridge Securities Corporation (the "Placement
  Agent"), to act as the Company's exclusive placement agent in connection
  with the sale of the Company's Common Stock to the Investor hereunder pursuant
  to the Placement Agent Agreement dated the date hereof by and among the Company,
  the Placement Agent and the Investor (the "Placement Agent Agreement").


                NOW,
  THEREFORE, the parties hereto agree as follows: 

      ARTICLE I. 

  Certain Definitions 

                Section
  1.1.               
  "Advance" shall mean the portion of the Commitment Amount requested by
  the Company in the Advance Notice. 

                Section
  1.2.               
  "Advance Date" shall mean the date Butler Gonzalez LLP Escrow Account
  is in receipt of the funds from the Investor and Butler Gonzalez LLP, as the
  Investor's Counsel, is in possession of free trading shares from the Company
  and therefore an Advance by the Investor to the Company can be made and Butler
  Gonzalez LLP can release the free trading shares to the Investor. The Advance
  Date shall be the first (1st) Trading Day after expiration of the
  applicable Pricing Period for each Advance. 

                Section
  1.3.               
  "Advance Notice" shall mean a written notice to the Investor setting
  forth the Advance amount that the Company requests from the Investor and the
  Advance Date. 

                Section
  1.4.               
  "Advance Notice Date" shall mean each date the Company delivers to the
  Investor an Advance Notice requiring the Investor to advance funds to the Company,
  subject to 








 the terms of this Agreement. No Advance Notice Date shall
  be less than six (6) Trading Days after the prior Advance Notice Date. 

                Section
  1.5.               
  "Bid Price" shall mean, on any date, the closing bid price (as reported
  by Bloomberg L.P.) of the Common Stock on the Principal Market or if the Common
  Stock is not traded on a Principal Market, the highest reported bid price for
  the Common Stock, as furnished by the National Association of Securities Dealers,
  Inc. 

                Section
  1.6.               
  "Closing" shall mean one of the closings of a purchase and sale of Common
  Stock pursuant to Section 2.3. 

                Section
  1.7.                "Commitment
  Amount" shall mean the aggregate amount of up to Ten Million U.S. Dollars
  ($10,000,000) which the Investor has agreed to provide to the Company in order
  to purchase the Company's Common Stock pursuant to the terms and conditions
  of this Agreement. 

                Section
  1.8.               
  "Commitment Period" shall mean the period commencing on the earlier to
  occur of (i) the Effective Date, or (ii) such earlier date as the Company and
  the Investor may mutually agree in writing, and expiring on the earliest to
  occur of (x) the date on which the Investor shall have made payment of Advances
  pursuant to this Agreement in the aggregate amount of Ten Million U.S. Dollars
  ($10,000,000) , (y) the date this Agreement is terminated pursuant to Section
  2.5, or (z) the date occurring twenty-four (24) months after the Effective Date.


                Section
  1.9.               
  "Common Stock" shall mean the Company's common stock, par value $0.001
  per share. 

                Section
  1.10.               
  "Condition Satisfaction Date" shall have the meaning set forth in Section
  7.2. 

                Section
  1.11.               
  "Damages" shall mean any loss, claim, damage, liability, costs and expenses
  (including, without limitation, reasonable attorney's fees and disbursements
  and costs and expenses of expert witnesses and investigation). 

                Section
  1.12.               
  "Effective Date" shall mean the date on which the SEC first declares
  effective a Registration Statement registering the resale of the Registrable
  Securities as set forth in Section 7.2(a) .

                Section
  1.13.               .
  "Escrow Agreement" shall mean the escrow agreement among the Company,
  the Investor, and Butler Gonzalez LLP, dated the date hereof. 

                Section
  1.14.               
  "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
  and the rules and regulations promulgated thereunder. 

                Section
  1.15.               
  "Material Adverse Effect" shall mean any condition, circumstance, or
  situation that would prohibit or otherwise materially interfere with the ability
  of the Company to enter into and perform any of its obligations under this Agreement
  or the Registration Rights Agreement in any material respect. 

 2 





                Section
  1.16.               
  "Market Price" shall mean the lowest VWAP of the Common Stock during
  the Pricing Period. 

                Section
  1.17.               
  "Maximum Advance Amount" shall be Two Hundred Fifty Thousand U.S. Dollars
  (US$250,000) per Advance Notice.

                Section
  1.18               .
  "NASD" shall mean the National Association of Securities Dealers, Inc.


                Section
  1.19.               
  "Person" shall mean an individual, a corporation, a partnership, an association,
  a trust or other entity or organization, including a government or political
  subdivision or an agency or instrumentality thereof. 

                Section
  1.20.               
  "Placement Agent" shall mean Newbridge Securities Corporation, a registered
  broker-dealer. 

                Section
  1.21.               
  "Pricing Period" shall mean the five (5) consecutive Trading Days after
  the Advance Notice Date. 

                Section
  1.22.                "Principal
  Market" shall mean the Nasdaq National Market, the Nasdaq SmallCap Market,
  the American Stock Exchange, the OTC Bulletin Board or the New York Stock Exchange,
  whichever is at the time the principal trading exchange or market for the Common
  Stock. 

                Section
  1.23.               
  "Purchase Price" shall be set at ninety eight percent (98%) of the Market
  Price during the Pricing Period. 

                Section
  1.24.               
  "Registrable Securities" shall mean the shares of Common Stock to be
  issued hereunder (i) in respect of which the Registration Statement has
  not been declared effective by the SEC, (ii) which have not been sold under
  circumstances meeting all of the applicable conditions of Rule 144 (or any similar
  provision then in force) under the Securities Act ("Rule 144") or (iii)
  which have not been otherwise transferred to a holder who may trade such shares
  without restriction under the Securities Act, and the Company has delivered
  a new certificate or other evidence of ownership for such securities not bearing
  a restrictive legend. 

                Section
  1.25.               
  "Registration Rights Agreement" shall mean the Registration Rights Agreement
  dated the date hereof, regarding the filing of the Registration Statement for
  the resale of the Registrable Securities, entered into between the Company and
  the Investor. 

                Section
  1.26.               
  "Registration Statement" shall mean a registration statement on Form
  S-1 or SB-2 (if use of such form is then available to the Company pursuant to
  the rules of the SEC and, if not, on such other form promulgated by the SEC
  for which the Company then qualifies and which counsel for the Company shall
  deem appropriate, and which form shall be available for the resale of the Registrable
  Securities to be registered thereunder in accordance with the provisions of
  this Agreement and the Registration Rights Agreement, and in accordance with
  the intended method of distribution of such securities), for the registration
  of the resale by the Investor of the Registrable Securities under the Securities
  Act. 

 3 





                Section
  1.27.               
  "Regulation D" shall have the meaning set forth in the recitals of this
  Agreement. 

                Section
  1.28.               
  "SEC" shall mean the Securities and Exchange Commission. 

                Section
  1.29.               
  "Securities Act" shall have the meaning set forth in the recitals of
  this Agreement. 

                Section
  1.30.               
  "SEC Documents" shall mean Annual Reports on Form 10-KSB, Quarterly Reports
  on Form 10-QSB, Current Reports on Form 8-K and Proxy Statements of the Company
  as supplemented to the date hereof, filed by the Company for a period of at
  least twelve (12) months immediately preceding the date hereof or the Advance
  Date, as the case may be, until such time as the Company no longer has an obligation
  to maintain the effectiveness of a Registration Statement as set forth in the
  Registration Rights Agreement. 

                Section
  1.31.               
  "Trading Day" shall mean any day during which the New York Stock Exchange
  shall be open for business. 

                Section
  1.32.               
  "VWAP" shall mean the volume weighted average price of the Company's
  Common Stock as quoted by Bloomberg, LP. 

 ARTICLE II. 

  Advances 

                Section
  2.1.               
  Investments. 

                               (a)               
  Advances. Upon the terms and conditions set forth herein (including,
  without limitation, the provisions of Article VII hereof), on any Advance Notice
  Date the Company may request an Advance by the Investor by the delivery of an
  Advance Notice. The number of shares of Common Stock that the Investor shall
  receive for each Advance shall be determined by dividing the amount of the Advance
  by the Purchase Price. No fractional shares shall be issued. Fractional shares
  shall be rounded to the next higher whole number of shares. The aggregate maximum
  amount of all Advances that the Investor shall be obligated to make under this
  Agreement shall not exceed the Commitment Amount. 

                Section
  2.2.               
  Mechanics. 

                               (a)                
  Advance Notice. At any time during the Commitment Period, the Company
  may deliver an Advance Notice to the Investor, subject to the conditions set
  forth in Section 7.2; provided, however, the amount for each Advance as designated
  by the Company in the applicable Advance Notice, shall not be more than the
  Maximum Advance Amount. The aggregate amount of the Advances pursuant to this
  Agreement shall not exceed the Commitment Amount. The Company acknowledges that
  the Investor may sell shares of the Company's Common Stock corresponding with
  a particular Advance Notice on the day the Advance Notice is received by the
  Investor. There shall be a minimum of six (6) Trading Days between each Advance
  Notice Date. 

 4 





                               (b)                
  Date of Delivery of Advance Notice. An Advance Notice shall be deemed
  delivered on (i) the Trading Day it is received by facsimile or otherwise by
  the Investor if such notice is received prior to 12:00 noon Eastern Time, or
  (ii) the immediately succeeding Trading Day if it is received by facsimile or
  otherwise after 12:00 noon Eastern Time on a Trading Day or at any time on a
  day which is not a Trading Day. No Advance Notice may be deemed delivered on
  a day that is not a Trading Day. 

                                (c)                
  Pre-Closing Share Credit. Within two (2) business days after the Advance
  Notice Date, the Company shall credit shares of the Company's Common Stock to
  the Investor's counsel's balance account with The Depository Trust Company through
  its Deposit Withdrawal At Custodian system, in an amount equal to the amount
  of the requested Advance divided by the closing Bid Price of the Company's Common
  Stock as of the Advance Notice Date multiplied by one point one (1.1) . Any
  adjustments to the number of shares to be delivered to the Investor at the Closing
  as a result of fluctuations in the closing Bid Price of the Company's Common
  Stock shall be made as of the date of the Closing. Any excess shares shall be
  credited to the next Advance. In no event shall the number of shares issuable
  to the Investor pursuant to an Advance cause the Investor to own in excess of
  nine and 9/10 percent (9.9%) of the then outstanding Common Stock of the Company.


                               (d)                
  Hardship. In the event the Investor sells the Company's Common Stock
  pursuant to subsection (c) above and the Company fails to perform its obligations
  as mandated in Section 2.5 and 2.2 (c), and specifically fails to provide the
  Investor with the shares of Common Stock for the applicable Advance, the Company
  acknowledges that the Investor shall suffer financial hardship and therefore
  shall be liable for any and all losses, commissions, fees, or financial hardship
  caused to the Investor.

                Section
  2.3.                
  Closings. On each Advance Date, which shall be the first (1st)
  Trading Day after expiration of the applicable Pricing Period for each Advance,
  (i) the Company shall deliver to the Investor's Counsel, as defined pursuant
  to the Escrow Agreement, shares of the Company's Common Stock, representing
  the amount of the Advance by the Investor pursuant to Section 2.1 herein, registered
  in the name of the Investor which shall be delivered to the Investor, or otherwise
  in accordance with the Escrow Agreement and (ii) the Investor shall deliver
  to Butler Gonzalez LLP (the "Escrow Agent") the amount of the Advance
  specified in the Advance Notice by wire transfer of immediately available funds
  which shall be delivered to the Company, or otherwise in accordance with the
  Escrow Agreement. In addition, on or prior to the Advance Date, each of the
  Company and the Investor shall deliver to the other through the Investor's Counsel,
  all documents, instruments and writings required to be delivered by either of
  them pursuant to this Agreement in order to implement and effect the transactions
  contemplated herein. Payment of funds to the Company and delivery of the Company's
  Common Stock to the Investor shall occur in accordance with the conditions set
  forth above and those contained in the Escrow Agreement; provided, however,
  that to the extent the Company has not paid the fees, expenses, and disbursements
  of the Investor, the Investor's counsel, or Kirkpatrick & Lockhart, LLP
  in accordance with Section 12.4, the amount of such fees, expenses, and disbursements
  may be deducted by the Investor (and shall be paid to the relevant party) from
  the amount of the Advance with no reduction in the amount of shares of the Company's
  Common Stock to be delivered on such Advance Date. 

 5 





                Section
  2.4.               
  Termination of Investment. The obligation of the Investor to make an
  Advance to the Company pursuant to this Agreement shall terminate permanently
  (including with respect to an Advance Date that has not yet occurred) in the
  event that (i) there shall occur any stop order or suspension of the effectiveness
  of the Registration Statement for an aggregate of fifty (50) Trading Days, other
  than due to the acts of the Investor, during the Commitment Period, and (ii)
  the Company shall at any time fail materially to comply with the requirements
  of Article VI and such failure is not cured within thirty (30) days after receipt
  of written notice from the Investor, provided, however, that this
  termination provision shall not apply to any period commencing upon the filing
  of a post-effective amendment to such Registration Statement and ending upon
  the date on which such post effective amendment is declared effective by the
  SEC. 

                Section
  2.5.               
  Agreement to Advance Funds. 

                               (a)
                  The
  Investor agrees to advance the amount specified in the Advance Notice to the
  Company after the completion of each of the following conditions and the other
  conditions set forth in this Agreement: 

                                                      (i)               
  the execution and delivery by the Company, and the Investor, of this Agreement
  and the Exhibits hereto; 

                                                      (ii)               
  Investor's Counsel shall have received the shares of Common Stock applicable
  to the Advance in accordance with Section 2.2(c) hereof; 

                                                     (iii)              
  the Company's Registration Statement with respect to the resale of the Registrable
  Securities in accordance with the terms of the Registration Rights Agreement
  shall have been declared effective by the SEC; 

                                                     (iv)               
  the Company shall have obtained all material permits and qualifications required
  by any applicable state for the offer and sale of the Registrable Securities,
  or shall have the availability of exemptions therefrom. The sale and issuance
  of the Registrable Securities shall be legally permitted by all laws and regulations
  to which the Company is subject;

                                                     (v)               
  the Company shall have filed with the Commission in a timely manner all reports,
  notices and other documents required of a "reporting company" under the Exchange
  Act and applicable Commission regulations; 

                                                     (vi)               
  the fees as set forth in Section 12.4 below shall have been paid or can be withheld
  as provided in Section 2.3; and 

                                                     (vii)              
  the conditions set forth in Section 7.2 shall have been satisfied. 

                                                      (viii)             
  the Company shall have provided to the Investor an acknowledgement, from Williams
  & Webster as to its ability to provide all consents required in order to
  file a registration statement in connection with this transaction; 

                                                     (ix)
                 The
  Company's transfer agent shall be DWAC eligible. 

 6 





                Section
  2.6.               
  Lock Up Period. 

                                                     (i)
                 During
  the Commitment Period, the Company shall not issue or sell (i) any Common Stock
  or Preferred Stock without consideration or for a consideration per share less
  than the Bid Price on the date of issuance or (ii) issue or sell any warrant,
  option, right, contract, call, or other security or instrument granting the
  holder thereof the right to acquire Common Stock without consideration or for
  a consideration per share less than the Bid Price on the date of issuance. 

                                                     (ii)
                 On
  the date hereof, the Company shall obtain from each officer and director a lock-up
  agreement, as defined below, in the form annexed hereto as Schedule 2.6 agreeing
  to only sell in compliance with the volume limitation of Rule 144. 

 ARTICLE III. 

  Representations and Warranties of Investor 

                Investor
  hereby represents and warrants to, and agrees with, the Company that the following
  are true and as of the date hereof and as of each Advance Date: 

                Section
  3.1.               
  Organization and Authorization. The Investor is duly incorporated or
  organized and validly existing in the jurisdiction of its incorporation or organization
  and has all requisite power and authority to purchase and hold the securities
  issuable hereunder. The decision to invest and the execution and delivery of
  this Agreement by such Investor, the performance by such Investor of its obligations
  hereunder and the consummation by such Investor of the transactions contemplated
  hereby have been duly authorized and requires no other proceedings on the part
  of the Investor. The undersigned has the right, power and authority to execute
  and deliver this Agreement and all other instruments (including, without limitations,
  the Registration Rights Agreement), on behalf of the Investor. This Agreement
  has been duly executed and delivered by the Investor and, assuming the execution
  and delivery hereof and acceptance thereof by the Company, will constitute the
  legal, valid and binding obligations of the Investor, enforceable against the
  Investor in accordance with its terms. 

                Section
  3.2.               
  Evaluation of Risks. The Investor has such knowledge and experience in
  financial tax and business matters as to be capable of evaluating the merits
  and risks of, and bearing the economic risks entailed by, an investment in the
  Company and of protecting its interests in connection with this transaction.
  It recognizes that its investment in the Company involves a high degree of risk.


                Section
  3.3.               
  No Legal Advice From the Company. The Investor acknowledges that it had
  the opportunity to review this Agreement and the transactions contemplated by
  this Agreement with his or its own legal counsel and investment and tax advisors.
  The Investor is relying solely on such counsel and advisors and not on any statements
  or representations of the Company or any of its representatives or agents for
  legal, tax or investment advice with respect to this investment, the transactions
  contemplated by this Agreement or the securities laws of any jurisdiction. 

 7 





                Section
  3.4.               
  Investment Purpose. The securities are being purchased by the Investor
  for its own account, for investment and without any view to the distribution,
  assignment or resale to others or fractionalization in whole or in part. The
  Investor agrees not to assign or in any way transfer the Investor's rights to
  the securities or any interest therein and acknowledges that the Company will
  not recognize any purported assignment or transfer except in accordance with
  applicable Federal and state securities laws. No other person has or will have
  a direct or indirect beneficial interest in the securities. The Investor agrees
  not to sell, hypothecate or otherwise transfer the Investor's securities unless
  the securities are registered under Federal and applicable state securities
  laws or unless, in the opinion of counsel satisfactory to the Company, an exemption
  from such laws is available. 

                Section
  3.5.               
  Accredited Investor. The Investor is an "Accredited Investor"
  as that term is defined in Rule 501(a)(3) of Regulation D of the Securities
  Act. 

                Section
  3.6.               
  Information. The Investor and its advisors (and its counsel), if any,
  have been furnished with all materials relating to the business, finances and
  operations of the Company and information it deemed material to making an informed
  investment decision. The Investor and its advisors, if any, have been afforded
  the opportunity to ask questions of the Company and its management. Neither
  such inquiries nor any other due diligence investigations conducted by such
  Investor or its advisors, if any, or its representatives shall modify, amend
  or affect the Investor's right to rely on the Company's representations and
  warranties contained in this Agreement. The Investor understands that its investment
  involves a high degree of risk. The Investor is in a position regarding the
  Company, which, based upon employment, family relationship or economic bargaining
  power, enabled and enables such Investor to obtain information from the Company
  in order to evaluate the merits and risks of this investment. The Investor has
  sought such accounting, legal and tax advice, as it has considered necessary
  to make an informed investment decision with respect to this transaction. 

                Section
  3.7.               
  Receipt of Documents. The Investor and its counsel have received and
  read in their entirety: (i) this Agreement and the Exhibits annexed hereto;
  (ii) all due diligence and other information necessary to verify the accuracy
  and completeness of such representations, warranties and covenants; (iii) the
  Company's Form 10-KSB for the year ended year ended December 31, 2002 and Form
  10-QSB for the period ended March 31, 2004; and (iv) answers to all questions
  the Investor submitted to the Company regarding an investment in the Company;
  and the Investor has relied on the information contained therein and has not
  been furnished any other documents, literature, memorandum or prospectus.

                Section
  3.8.               
  Registration Rights Agreement and Escrow Agreement. The parties have
  entered into the Registration Rights Agreement and the Escrow Agreement, each
  dated the date hereof. 

                Section
  3.9.               
  No General Solicitation. Neither the Company, nor any of its affiliates,
  nor any person acting on its or their behalf, has engaged in any form of general
  solicitation or general advertising (within the meaning of Regulation D under
  the Securities Act) in connection with the offer or sale of the shares of Common
  Stock offered hereby. 

 8 





                Section
  3.10.               
  Not an Affiliate. The Investor is not an officer, director or a person
  that directly, or indirectly through one or more intermediaries, controls or
  is controlled by, or is under common control with the Company or any "Affiliate"
  of the Company (as that term is defined in Rule 405 of the Securities Act).
  Neither the Investor nor its Affiliates has an open short position in the Common
  Stock of the Company, and the Investor agrees that it will not, and that it
  will cause its Affiliates not to, engage in any short sales of or hedging transactions
  with respect to the Common Stock, provided that the Company acknowledges
  and agrees that upon receipt of an Advance Notice the Investor will sell the
  Shares to be issued to the Investor pursuant to the Advance Notice, even if
  the Shares have not been delivered to the Investor. 

                Section
  3.11.               
  Trading Activities. The Investor's trading activities with respect to
  the Company's Common Stock shall be in compliance with all applicable federal
  and state securities laws, rules and regulations and the rules and regulations
  of the Principal Market on which the Company's Common Stock is listed or traded.
  Neither the Investor nor its affiliates has an open short position in the Common
  Stock of the Company and, except as set forth below, the Investor shall not
  and will cause its affiliates not to engage in any short sale as defined in
  any applicable SEC or National Association of Securities Dealers rules on any
  hedging transactions with respect to the Common Stock. The Investor shall be
  entitled to sell Common Stock during the applicable Pricing Period. 

 ARTICLE IV. 

  Representations and Warranties of the Company 

                Except
  as stated below, on the disclosure schedules attached hereto or in the SEC Documents
  (as defined herein), the Company hereby represents and warrants to, and covenants
  with, the Investor that the following are true and correct as of the date hereof:


                Section
  4.1.               
  Organization and Qualification. The Company is duly incorporated or organized
  and validly existing in the jurisdiction of its incorporation or organization
  and has all requisite power and authority corporate power to own its properties
  and to carry on its business as now being conducted. Each of the Company and
  its subsidiaries is duly qualified as a foreign corporation to do business and
  is in good standing in every jurisdiction in which the nature of the business
  conducted by it makes such qualification necessary, except to the extent that
  the failure to be so qualified or be in good standing would not have a Material
  Adverse Effect on the Company and its subsidiaries taken as a whole. 

                Section
  4.2.               
  Authorization, Enforcement, Compliance with Other Instruments. (i) The
  Company has the requisite corporate power and authority to enter into and perform
  this Agreement, the Registration Rights Agreement, the Escrow Agreement, the
  Placement Agent Agreement and any related agreements, in accordance with the
  terms hereof and thereof, (ii) the execution and delivery of this Agreement,
  the Registration Rights Agreement, the Escrow Agreement, the Placement Agent
  Agreement and any related agreements by the Company and the consummation by
  it of the transactions contemplated hereby and thereby, have been duly authorized
  by the Company's Board of Directors and no further consent or authorization
  is required by the Company, its Board of Directors or its stockholders, (iii)
  this Agreement, the Registration Rights Agreement, the Escrow Agreement, the
  Placement Agent Agreement and 

 9 








 any related agreements have been duly executed and delivered
  by the Company, (iv) this Agreement, the Registration Rights Agreement, the
  Escrow Agreement, the Placement Agent Agreement and assuming the execution and
  delivery thereof and acceptance by the Investor and any related agreements constitute
  the valid and binding obligations of the Company enforceable against the Company
  in accordance with their terms, except as such enforceability may be limited
  by general principles of equity or applicable bankruptcy, insolvency, reorganization,
  moratorium, liquidation or similar laws relating to, or affecting generally,
  the enforcement of creditors' rights and remedies. 

                Section
  4.3.               
  Capitalization. As of the date hereof, the authorized capital stock of
  the Company consists of 300,000,000 shares of Common Stock, par value $0.001
  per share and 10,000,000 shares of Preferred Stock of which 153,814,044 shares
  of Common Stock and no shares of Preferred Stock were issued and outstanding.
  All of such outstanding shares have been validly issued and are fully paid and
  nonassessable. Except as disclosed in the SEC Documents, no shares of Common
  Stock are subject to preemptive rights or any other similar rights or any liens
  or encumbrances suffered or permitted by the Company. Except as disclosed in
  the SEC Documents, as of the date hereof, (i) there are no outstanding options,
  warrants, scrip, rights to subscribe to, calls or commitments of any character
  whatsoever relating to, or securities or rights convertible into, any shares
  of capital stock of the Company or any of its subsidiaries, or contracts, commitments,
  understandings or arrangements by which the Company or any of its subsidiaries
  is or may become bound to issue additional shares of capital stock of the Company
  or any of its subsidiaries or options, warrants, scrip, rights to subscribe
  to, calls or commitments of any character whatsoever relating to, or securities
  or rights convertible into, any shares of capital stock of the Company or any
  of its subsidiaries, (ii) there are no outstanding debt securities (iii)
  there are no outstanding registration statements other than on Form S-8 and
  (iv) there are no agreements or arrangements under which the Company or any
  of its subsidiaries is obligated to register the sale of any of their securities
  under the Securities Act (except pursuant to the Registration Rights Agreement).
  There are no securities or instruments containing anti-dilution or similar provisions
  that will be triggered by this Agreement or any related agreement or the consummation
  of the transactions described herein or therein. The Company has furnished to
  the Investor true and correct copies of the Company's Articles of Incorporation,
  as amended and as in effect on the date hereof (the "Articles of Incorporation"),
  and the Company's By-laws, as in effect on the date hereof (the "By-laws"),
  and the terms of all securities convertible into or exercisable for Common Stock
  and the material rights of the holders thereof in respect thereto. 

                Section
  4.4.               
  No Conflict. The execution, delivery and performance of this Agreement
  by the Company and the consummation by the Company of the transactions contemplated
  hereby will not (i) result in a violation of the Certificate of Incorporation,
  any certificate of designations of any outstanding series of preferred stock
  of the Company or By-laws or (ii) conflict with or constitute a default (or
  an event which with notice or lapse of time or both would become a default)
  under, or give to others any rights of termination, amendment, acceleration
  or cancellation of, any agreement, indenture or instrument to which the Company
  or any of its subsidiaries is a party, or result in a violation of any law,
  rule, regulation, order, judgment or decree (including federal and state securities
  laws and regulations and the rules and regulations of the Principal Market on
  which the Common Stock is quoted) applicable to the Company or any of its subsidiaries
  or by which any material property or asset of the Company or any of its 

 10 








 subsidiaries is bound or affected and which would cause a
  Material Adverse Effect. Except as disclosed in the SEC Documents, neither the
  Company nor its subsidiaries is in violation of any term of or in default under
  its Articles of Incorporation or By-laws or their organizational charter or
  by-laws, respectively, or any material contract, agreement, mortgage, indebtedness,
  indenture, instrument, judgment, decree or order or any statute, rule or regulation
  applicable to the Company or its subsidiaries. The business of the Company and
  its subsidiaries is not being conducted in violation of any material law, ordinance,
  regulation of any governmental entity. Except as specifically contemplated by
  this Agreement and as required under the Securities Act and any applicable state
  securities laws, the Company is not required to obtain any consent, authorization
  or order of, or make any filing or registration with, any court or governmental
  agency in order for it to execute, deliver or perform any of its obligations
  under or contemplated by this Agreement or the Registration Rights Agreement
  in accordance with the terms hereof or thereof. All consents, authorizations,
  orders, filings and registrations which the Company is required to obtain pursuant
  to the preceding sentence have been obtained or effected on or prior to the
  date hereof. The Company and its subsidiaries are unaware of any fact or circumstance
  which might give rise to any of the foregoing. 

                Section
  4.5.               
  SEC Documents; Financial Statements. Since January 1, 2003, the Company
  has filed all reports, schedules, forms, statements and other documents required
  to be filed by it with the SEC under of the Exchange Act. The Company has delivered
  to the Investor or its representatives, or made available through the SEC's
  website at http://www.sec.gov, true and complete copies of the SEC Documents.
  As of their respective dates, the financial statements of the Company disclosed
  in the SEC Documents (the "Financial Statements") complied as to form
  in all material respects with applicable accounting requirements and the published
  rules and regulations of the SEC with respect thereto. Such financial statements
  have been prepared in accordance with generally accepted accounting principles,
  consistently applied, during the periods involved (except (i) as may be otherwise
  indicated in such financial statements or the notes thereto, or (ii) in the
  case of unaudited interim statements, to the extent they may exclude footnotes
  or may be condensed or summary statements) and, fairly present in all material
  respects the financial position of the Company as of the dates thereof and the
  results of its operations and cash flows for the periods then ended (subject,
  in the case of unaudited statements, to normal year-end audit adjustments).
  No other information provided by or on behalf of the Company to the Investor
  which is not included in the SEC Documents contains any untrue statement of
  a material fact or omits to state any material fact necessary in order to make
  the statements therein, in the light of the circumstances under which they were
  made, not misleading. 

                Section
  4.6.               
  10b-5. The SEC Documents do not include any untrue statements of material
  fact, nor do they omit to state any material fact required to be stated therein
  necessary to make the statements made, in light of the circumstances under which
  they were made, not misleading. 

                Section
  4.7.               
  No Default. Except as disclosed in the SEC Documents, the Company is
  not in default in the performance or observance of any material obligation,
  agreement, covenant or condition contained in any indenture, mortgage, deed
  of trust or other material instrument or agreement to which it is a party or
  by which it is or its property is bound and neither the execution, nor the delivery
  by the Company, nor the performance by the Company of its 

 11 








 obligations under this Agreement or any of the exhibits or
  attachments hereto will conflict with or result in the breach or violation of
  any of the terms or provisions of, or constitute a default or result in the
  creation or imposition of any lien or charge on any assets or properties of
  the Company under its Certificate of Incorporation, By-Laws, any material indenture,
  mortgage, deed of trust or other material agreement applicable to the Company
  or instrument to which the Company is a party or by which it is bound, or any
  statute, or any decree, judgment, order, rules or regulation of any court or
  governmental agency or body having jurisdiction over the Company or its properties,
  in each case which default, lien or charge is likely to cause a Material Adverse
  Effect on the Company's business or financial condition. 

                Section
  4.8.               
  Absence of Events of Default. Except for matters described in the SEC
  Documents and/or this Agreement, no Event of Default, as defined in the respective
  agreement to which the Company is a party, and no event which, with the giving
  of notice or the passage of time or both, would become an Event of Default (as
  so defined), has occurred and is continuing, which would have a Material Adverse
  Effect on the Company's business, properties, prospects, financial condition
  or results of operations. 

                Section
  4.9.               
  Intellectual Property Rights. The Company and its subsidiaries own or
  possess adequate rights or licenses to use all material trademarks, trade names,
  service marks, service mark registrations, service names, patents, patent rights,
  copyrights, inventions, licenses, approvals, governmental authorizations, trade
  secrets and rights necessary to conduct their respective businesses as now conducted.
  The Company and its subsidiaries do not have any knowledge of any infringement
  by the Company or its subsidiaries of trademark, trade name rights, patents,
  patent rights, copyrights, inventions, licenses, service names, service marks,
  service mark registrations, trade secret or other similar rights of others,
  and, to the knowledge of the Company, there is no claim, action or proceeding
  being made or brought against, or to the Company's knowledge, being threatened
  against, the Company or its subsidiaries regarding trademark, trade name, patents,
  patent rights, invention, copyright, license, service names, service marks,
  service mark registrations, trade secret or other infringement; and the Company
  and its subsidiaries are unaware of any facts or circumstances which might give
  rise to any of the foregoing.

                Section
  4.10.               
  Employee Relations. Neither the Company nor any of its subsidiaries is
  involved in any labor dispute nor, to the knowledge of the Company or any of
  its subsidiaries, is any such dispute threatened. None of the Company's or its
  subsidiaries' employees is a member of a union and the Company and its subsidiaries
  believe that their relations with their employees are good. 

                Section
  4.11.               
  Environmental Laws. The Company and its subsidiaries are (i) in compliance
  with any and all applicable material foreign, federal, state and local laws
  and regulations relating to the protection of human health and safety, the environment
  or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental
  Laws"), (ii) have received all permits, licenses or other approvals required
  of them under applicable Environmental Laws to conduct their respective businesses
  and (iii) are in compliance with all terms and conditions of any such permit,
  license or approval. 

 12 





                Section
  4.12.               
  Title. Except as set forth in the SEC Documents, the Company has good
  and marketable title to its properties and material assets owned by it, free
  and clear of any pledge, lien, security interest, encumbrance, claim or equitable
  interest other than such as are not material to the business of the Company.
  Any real property and facilities held under lease by the Company and its subsidiaries
  are held by them under valid, subsisting and enforceable leases with such exceptions
  as are not material and do not interfere with the use made and proposed to be
  made of such property and buildings by the Company and its subsidiaries. 

                Section
  4.13.               
  Insurance. The Company and each of its subsidiaries are insured by insurers
  of recognized financial responsibility against such losses and risks and in
  such amounts as management of the Company believes to be prudent and customary
  in the businesses in which the Company and its subsidiaries are engaged. Neither
  the Company nor any such subsidiary has been refused any insurance coverage
  sought or applied for and neither the Company nor any such subsidiary has any
  reason to believe that it will not be able to renew its existing insurance coverage
  as and when such coverage expires or to obtain similar coverage from similar
  insurers as may be necessary to continue its business at a cost that would not
  materially and adversely affect the condition, financial or otherwise, or the
  earnings, business or operations of the Company and its subsidiaries, taken
  as a whole. 

                Section
  4.14.               
  Regulatory Permits. The Company and its subsidiaries possess all material
  certificates, authorizations and permits issued by the appropriate federal,
  state or foreign regulatory authorities necessary to conduct their respective
  businesses, and neither the Company nor any such subsidiary has received any
  notice of proceedings relating to the revocation or modification of any such
  certificate, authorization or permit. 

                Section
  4.15.               
  Internal Accounting Controls. The Company and each of its subsidiaries
  maintain a system of internal accounting controls sufficient to provide reasonable
  assurance that (i) transactions are executed in accordance with management's
  general or specific authorizations, (ii) transactions are recorded as necessary
  to permit preparation of financial statements in conformity with generally accepted
  accounting principles and to maintain asset accountability, (iii) access to
  assets is permitted only in accordance with management's general or specific
  authorization and (iv) the recorded accountability for assets is compared with
  the existing assets at reasonable intervals and appropriate action is taken
  with respect to any differences. 

                Section
  4.16.               
  No Material Adverse Breaches, etc. Except as set forth in the SEC Documents,
  neither the Company nor any of its subsidiaries is subject to any charter, corporate
  or other legal restriction, or any judgment, decree, order, rule or regulation
  which in the judgment of the Company's officers has or is expected in the future
  to have a Material Adverse Effect on the business, properties, operations, financial
  condition, results of operations or prospects of the Company or its subsidiaries.
  Except as set forth in the SEC Documents, neither the Company nor any of its
  subsidiaries is in breach of any contract or agreement which breach, in the
  judgment of the Company's officers, has or is expected to have a Material Adverse
  Effect on the business, properties, operations, financial condition, results
  of operations or prospects of the Company or its subsidiaries. 

 13 





                Section
  4.17.               
  Absence of Litigation. Except as set forth in the SEC Documents, there
  is no action, suit, proceeding, inquiry or investigation before or by any court,
  public board, government agency, self-regulatory organization or body pending
  against or affecting the Company, the Common Stock or any of the Company's subsidiaries,
  wherein an unfavorable decision, ruling or finding would (i) have a Material
  Adverse Effect on the transactions contemplated hereby (ii) adversely affect
  the validity or enforceability of, or the authority or ability of the Company
  to perform its obligations under, this Agreement or any of the documents contemplated
  herein, or (iii) except as expressly disclosed in the SEC Documents, have a
  Material Adverse Effect on the business, operations, properties, financial condition
  or results of operation of the Company and its subsidiaries taken as a whole.


                Section
  4.18.               
  Subsidiaries. Except as disclosed in the SEC Documents, the Company does
  not presently own or control, directly or indirectly, any interest in any other
  corporation, partnership, association or other business entity. 

                Section
  4.19.               
  Tax Status. Except as disclosed in the SEC Documents, the Company and
  each of its subsidiaries has made or filed all federal and state income and
  all other tax returns, reports and declarations required by any jurisdiction
  to which it is subject and (unless and only to the extent that the Company and
  each of its subsidiaries has set aside on its books provisions reasonably adequate
  for the payment of all unpaid and unreported taxes) has paid all taxes and other
  governmental assessments and charges that are material in amount, shown or determined
  to be due on such returns, reports and declarations, except those being contested
  in good faith and has set aside on its books provision reasonably adequate for
  the payment of all taxes for periods subsequent to the periods to which such
  returns, reports or declarations apply. There are no unpaid taxes in any material
  amount claimed to be due by the taxing authority of any jurisdiction, and the
  officers of the Company know of no basis for any such claim. 

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

                Section
  4.21.               
  Fees and Rights of First Refusal. The Company is not obligated to offer
  the securities offered hereunder on a right of first refusal basis or otherwise
  to any third parties including, but not limited to, current or former shareholders
  of the Company, underwriters, brokers, agents or other third parties. 

                Section
  4.22.               
  Use of Proceeds. The Company represents that the net proceeds from this
  offering will be used for general corporate purposes. However, in no event shall
  the net proceeds from this offering be used by the Company for the payment (or
  loaned to any such person for the payment) of any judgment, or other liability,
  incurred by any executive officer, officer, director or employee of the Company,
  except for any liability owed to such person for services rendered, 

 14 








 or if any judgment or other liability is incurred by such
  person originating from services rendered to the Company, or the Company has
  indemnified such person from liability. 

                Section
  4.23.               
  Further Representation and Warranties of the Company. For so long as
  any securities issuable hereunder held by the Investor remain outstanding, the
  Company acknowledges, represents, warrants and agrees that it will maintain
  the listing of its Common Stock on the Principal Market. 

                Section
  4.24.               
  Opinion of Counsel. Investor shall receive an opinion letter on the date
  hereof. 

                Section
  4.25.               
  Opinion of Counsel. The Company will obtain for the Investor, at the
  Company's expense, any and all opinions of counsel which may be reasonably required
  in order to sell the securities issuable hereunder without restriction. 

                Section
  4.26.               
  Dilution. The Company is aware and acknowledges that issuance of shares
  of the Company's Common Stock could cause dilution to existing shareholders
  and could significantly increase the outstanding number of shares of Common
  Stock.

 ARTICLE V. 

  Indemnification 

                The
  Investor and the Company represent to the other the following with respect to
  itself: 

                Section
  5.1.               
  Indemnification. 

                               (a)
                 In
  consideration of the Investor's execution and delivery of this Agreement, and
  in addition to all of the Company's other obligations under this Agreement,
  the Company shall defend, protect, indemnify and hold harmless the Investor,
  and all of its officers, directors, partners, employees and agents (including,
  without limitation, those retained in connection with the transactions contemplated
  by this Agreement) (collectively, the "Investor Indemnitees")
  from and against any and all actions, causes of action, suits, claims, losses,
  costs, penalties, fees, liabilities and damages, and expenses in connection
  therewith (irrespective of whether any such Investor Indemnitee is a party to
  the action for which indemnification hereunder is sought), and including reasonable
  attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred
  by the Investor Indemnitees or any of them as a result of, or arising out of,
  or relating to (a) any misrepresentation or breach of any representation or
  warranty made by the Company in this Agreement or the Registration Rights Agreement
  or any other certificate, instrument or document contemplated hereby or thereby,
  (b) any breach of any covenant, agreement or obligation of the Company contained
  in this Agreement or the Registration Rights Agreement or any other certificate,
  instrument or document contemplated hereby or thereby, or (c) any cause of action,
  suit or claim brought or made against such Investor Indemnitee not arising out
  of any action or inaction of an Investor Indemnitee, and arising out of or resulting
  from the execution, delivery, performance or enforcement of this Agreement or
  any other instrument, document or agreement executed pursuant hereto by any
  of the Investor Indemnitees. To the extent that the foregoing undertaking by
  the Company may be unenforceable for any reason, the Company shall make the
  maximum contribution to the 

 15 








 payment and satisfaction of each of the Indemnified Liabilities,
  which is permissible under applicable law. 

                               (b)               
  In consideration of the Company's execution and delivery of this Agreement,
  and in addition to all of the Investor's other obligations under this Agreement,
  the Investor shall defend, protect, indemnify and hold harmless the Company
  and all of its officers, directors, shareholders, employees and agents (including,
  without limitation, those retained in connection with the transactions contemplated
  by this Agreement) (collectively, the "Company Indemnitees") from
  and against any and all Indemnified Liabilities incurred by the Company Indemnitees
  or any of them as a result of, or arising out of, or relating to (a) any misrepresentation
  or breach of any representation or warranty made by the Investor in this Agreement,
  the Registration Rights Agreement, or any instrument or document contemplated
  hereby or thereby executed by the Investor, (b) any breach of any covenant,
  agreement or obligation of the Investor(s) contained in this Agreement, the
  Registration Rights Agreement or any other certificate, instrument or document
  contemplated hereby or thereby executed by the Investor, or (c) any cause of
  action, suit or claim brought or made against such Company Indemnitee based
  on misrepresentations or due to a breach by the Investor and arising out of
  or resulting from the execution, delivery, performance or enforcement of this
  Agreement or any other instrument, document or agreement executed pursuant hereto
  by any of the Company Indemnitees. To the extent that the foregoing undertaking
  by the Investor may be unenforceable for any reason, the Investor shall make
  the maximum contribution to the payment and satisfaction of each of the Indemnified
  Liabilities, which is permissible under applicable law. 

                (c)               
  The obligations of the parties to indemnify or make contribution under this
  Section 5.1 shall survive termination. 

 ARTICLE VI. 

  Covenants of the Company 

                Section
  6.1.               
  Registration Rights. The Company shall cause the Registration Rights
  Agreement to remain in full force and effect and the Company shall comply in
  all material respects with the terms thereof. 

                Section
  6.2.               
  Listing of Common Stock. The Company shall maintain the Common Stock's
  authorization for quotation on the National Association of Securities Dealers
  Inc.'s Over the Counter Bulletin Board.

                Section
  6.3.               
  Exchange Act Registration. The Company will cause its Common Stock to
  continue to be registered under Section 12(g) of the Exchange Act, will file
  in a timely manner all reports and other documents required of it as a reporting
  company under the Exchange Act and will not take any action or file any document
  (whether or not permitted by Exchange Act or the rules thereunder) to terminate
  or suspend such registration or to terminate or suspend its reporting and filing
  obligations under said Exchange Act. 

                Section
  6.4.               
  Transfer Agent Instructions. Not later than two (2) business days after
  each Advance Notice Date and prior to each Closing and the effectiveness of
  the Registration 

 16 








 Statement and resale of the Common Stock by the Investor,
  the Company will deliver instructions to its transfer agent to issue shares
  of Common Stock free of restrictive legends. 

                Section
  6.5.               
  Corporate Existence. The Company will take all steps necessary to preserve
  and continue the corporate existence of the Company. 

                Section
  6.6.               
  Notice of Certain Events Affecting Registration; Suspension of Right to
  Make an Advance. The Company will immediately notify the Investor upon
  its becoming aware of the occurrence of any of the following events in respect
  of a registration statement or related prospectus relating to an offering of
  Registrable Securities: (i) receipt of any request for additional information
  by the SEC or any other Federal or state governmental authority during the period
  of effectiveness of the Registration Statement for amendments or supplements
  to the registration statement or related prospectus; (ii) the issuance by the
  SEC or any other Federal or state governmental authority of any stop order suspending
  the effectiveness of the Registration Statement or the initiation of any proceedings
  for that purpose; (iii) receipt of any notification with respect to the suspension
  of the qualification or exemption from qualification of any of the Registrable
  Securities for sale in any jurisdiction or the initiation or threatening of
  any proceeding for such purpose; (iv) the happening of any event that makes
  any statement made in the Registration Statement or related prospectus of any
  document incorporated or deemed to be incorporated therein by reference untrue
  in any material respect or that requires the making of any changes in the Registration
  Statement, related prospectus or documents so that, in the case of the Registration
  Statement, it will not contain any untrue statement of a material fact or omit
  to state any material fact required to be stated therein or necessary to make
  the statements therein not misleading, and that in the case of the related prospectus,
  it will not contain any untrue statement of a material fact or omit to state
  any material fact required to be stated therein or necessary to make the statements
  therein, in the light of the circumstances under which they were made, not misleading;
  and (v) the Company's reasonable determination that a post-effective amendment
  to the Registration Statement would be appropriate; and the Company will promptly
  make available to the Investor any such supplement or amendment to the related
  prospectus. The Company shall not deliver to the Investor any Advance Notice
  during the continuation of any of the foregoing events. 

                Section
  6.7.               
  Expectations Regarding Advance Notices. Within ten (10) days after the
  commencement of each calendar quarter occurring subsequent to the commencement
  of the Commitment Period, the Company must notify the Investor, in writing,
  as to its reasonable expectations as to the dollar amount it intends to raise
  during such calendar quarter, if any, through the issuance of Advance Notices.
  Such notification shall constitute only the Company's good faith estimate and
  shall in no way obligate the Company to raise such amount, or any amount, or
  otherwise limit its ability to deliver Advance Notices. The failure by the Company
  to comply with this provision can be cured by the Company's notifying the Investor,
  in writing, at any time as to its reasonable expectations with respect to the
  current calendar quarter. 

                Section
  6.8.               
  Restriction on Sale of Capital Stock. During the Commitment Period, the
  Company shall not issue or sell (i) any Common Stock or Preferred Stock without
  consideration or for a consideration per share less than the bid price of the
  Common Stock determined immediately prior to its issuance, (ii) issue or sell
  any Preferred Stock warrant, option, right, contract, call, or other
  security or instrument granting the holder thereof the right to acquire 

 17 








 Common Stock without consideration or for a consideration
  per share less than such Common Stock's Bid Price determined immediately prior
  to its issuance, or (iii) file any registration statement on Form S-8. 

                Section
  6.9.               
  Consolidation; Merger. The Company shall not, at any time after the date
  hereof, effect any merger or consolidation of the Company with or into, or a
  transfer of all or substantially all the assets of the Company to another entity
  (a "Consolidation Event") unless the resulting successor or acquiring
  entity (if not the Company) assumes by written instrument the obligation to
  deliver to the Investor such shares of stock and/or securities as the Investor
  is entitled to receive pursuant to this Agreement. 

                Section
  6.10.               
  Issuance of the Company's Common Stock. The sale of the shares of Common
  Stock shall be made in accordance with the provisions and requirements of Regulation
  D and any applicable state securities law. 

 ARTICLE VII. 

  Conditions for Advance and Conditions to Closing 

                Section
  7.1.               
  Conditions Precedent to the Obligations of the Company. The obligation
  hereunder of the Company to issue and sell the shares of Common Stock to the
  Investor incident to each Closing is subject to the satisfaction, or waiver
  by the Company, at or before each such Closing, of each of the conditions set
  forth below. 

                               (a)               
  Accuracy of the Investor's Representations and Warranties. The representations
  and warranties of the Investor shall be true and correct in all material respects.


                               (b)               
  Performance by the Investor. The Investor shall have performed, satisfied
  and complied in all respects with all covenants, agreements and conditions required
  by this Agreement and the Registration Rights Agreement to be performed, satisfied
  or complied with by the Investor at or prior to such Closing. 

                Section
  7.2.               
  Conditions Precedent to the Right of the Company to Deliver an Advance
  Notice and the Obligation of the Investor to Purchase Shares of Common Stock.
  The right of the Company to deliver an Advance Notice and the obligation of
  the Investor hereunder to acquire and pay for shares of the Company's Common
  Stock incident to a Closing is subject to the fulfillment by the Company, on
  (i) the date of delivery of such Advance Notice and (ii) the applicable Advance
  Date (each a "Condition Satisfaction Date"), of each of the following
  conditions: 

                               (a)               
  Registration of the Common Stock with the SEC. The Company shall have
  filed with the SEC a Registration Statement with respect to the resale of the
  Registrable Securities in accordance with the terms of the Registration Rights
  Agreement. As set forth in the Registration Rights Agreement, the Registration
  Statement shall have previously become effective and shall remain effective
  on each Condition Satisfaction Date and (i) neither the Company nor the Investor
  shall have received notice that the SEC has issued or intends to issue a stop
  order with respect to the Registration Statement or that the SEC otherwise has
  suspended or withdrawn the effectiveness of the Registration Statement, either
  temporarily or permanently, or 

 18 








 intends or has threatened to do so (unless the SEC's concerns
  have been addressed and the Investor is reasonably satisfied that the SEC no
  longer is considering or intends to take such action), and (ii) no other suspension
  of the use or withdrawal of the effectiveness of the Registration Statement
  or related prospectus shall exist. The Registration Statement must have been
  declared effective by the SEC prior to the first Advance Notice Date. 

                               (b)               
  Authority. The Company shall have obtained all permits and qualifications
  required by any applicable state in accordance with the Registration Rights
  Agreement for the offer and sale of the shares of Common Stock, or shall have
  the availability of exemptions therefrom. The sale and issuance of the shares
  of Common Stock shall be legally permitted by all laws and regulations to which
  the Company is subject. 

                               (c)               
  Fundamental Changes. There shall not exist any fundamental changes to
  the information set forth in the Registration Statement which would require
  the Company to file a post-effective amendment to the Registration Statement.

                               (d)               
  Performance by the Company. The Company shall have performed, satisfied
  and complied in all material respects with all covenants, agreements and conditions
  required by this Agreement (including, without limitation, the conditions specified
  in Section 2.5 hereof) and the Registration Rights Agreement to be performed,
  satisfied or complied with by the Company at or prior to each Condition Satisfaction
  Date. 

                                (e)               
  No Injunction. No statute, rule, regulation, executive order, decree,
  ruling or injunction shall have been enacted, entered, promulgated or endorsed
  by any court or governmental authority of competent jurisdiction that prohibits
  or directly and adversely affects any of the transactions contemplated by this
  Agreement, and no proceeding shall have been commenced that may have the effect
  of prohibiting or adversely affecting any of the transactions contemplated by
  this Agreement. 

                                (f)               
  No Suspension of Trading in or Delisting of Common Stock. The trading
  of the Common Stock is not suspended by the SEC or the Principal Market (if
  the Common Stock is traded on a Principal Market). The issuance of shares of
  Common Stock with respect to the applicable Closing, if any, shall not violate
  the shareholder approval requirements of the Principal Market (if the Common
  Stock is traded on a Principal Market). The Company shall not have received
  any notice threatening the continued listing of the Common Stock on the Principal
  Market (if the Common Stock is traded on a Principal Market). 

                               (g)               
  Maximum Advance Amount. The amount of an Advance requested by the Company
  shall not exceed the Maximum Advance Amount. In addition, in no event shall
  the number of shares issuable to the Investor pursuant to an Advance cause the
  Investor to own in excess of nine and 9/10 percent (9.9%) of the then outstanding
  Common Stock of the Company. 

                               (h)               
  No Knowledge. The Company has no knowledge of any event which would be
  more likely than not to have the effect of causing such Registration Statement
  to be suspended or otherwise ineffective. 

 19 





 ARTICLE VIII. 

  Due Diligence Review; Non-Disclosure of Non-Public Information 

                Section
  8.1.               
  Due Diligence Review. Prior to the filing of the Registration Statement
  the Company shall make available for inspection and review by the Investor,
  its advisors and representatives, and any underwriter participating in any disposition
  of the Registrable Securities on behalf of the Investor pursuant to the Registration
  Statement, any such registration statement or amendment or supplement thereto
  or any blue sky, NASD or other filing, all financial and other records, all
  SEC Documents and other filings with the SEC, and all other corporate documents
  and properties of the Company as may be reasonably necessary for the purpose
  of such review, and cause the Company's officers, directors and employees to
  supply all such information reasonably requested by the Investor or any such
  representative, advisor or underwriter in connection with such Registration
  Statement (including, without limitation, in response to all questions and other
  inquiries reasonably made or submitted by any of them), prior to and from time
  to time after the filing and effectiveness of the Registration Statement for
  the sole purpose of enabling the Investor and such representatives, advisors
  and underwriters and their respective accountants and attorneys to conduct initial
  and ongoing due diligence with respect to the Company and the accuracy of the
  Registration Statement. 

                Section
  8.2.               
  Non-Disclosure of Non-Public Information. 

                               (a)
                 The
  Company shall not disclose non-public information to the Investor, its advisors,
  or its representatives, unless prior to disclosure of such information the Company
  identifies such information as being non-public information and provides the
  Investor, such advisors and representatives with the opportunity to accept or
  refuse to accept such non-public information for review. The Company may, as
  a condition to disclosing any non-public information hereunder, require the
  Investor's advisors and representatives to enter into a confidentiality agreement
  in form reasonably satisfactory to the Company and the Investor. 

                               (b)               
  Nothing herein shall require the Company to disclose non-public information
  to the Investor or its advisors or representatives, and the Company represents
  that it does not disseminate non-public information to any investors who purchase
  stock in the Company in a public offering, to money managers or to securities
  analysts, provided, however, that notwithstanding anything herein to the contrary,
  the Company will, as hereinabove provided, immediately notify the advisors and
  representatives of the Investor and, if any, underwriters, of any event or the
  existence of any circumstance (without any obligation to disclose the specific
  event or circumstance) of which it becomes aware, constituting non-public information
  (whether or not requested of the Company specifically or generally during the
  course of due diligence by such persons or entities), which, if not disclosed
  in the prospectus included in the Registration Statement would cause such prospectus
  to include a material misstatement or to omit a material fact required to be
  stated therein in order to make the statements, therein, in light of the circumstances
  in which they were made, not misleading. Nothing contained in this Section 8.2
  shall be construed to mean that such persons or entities other than the Investor
  (without the written consent of the Investor prior to disclosure of such information)
  may not obtain non-public information in the course of conducting due diligence
  in accordance with the terms of this Agreement and nothing herein shall prevent
  any such persons or entities from notifying the Company of their opinion that
  based on such due diligence by such persons or entities, that the 

 20 








 Registration Statement contains an untrue statement of material
  fact or omits a material fact required to be stated in the Registration Statement
  or necessary to make the statements contained therein, in light of the circumstances
  in which they were made, not misleading. 

 ARTICLE IX. 

  Choice of Law/Jurisdiction 

                Section
  9.1.               
  Governing Law. This Agreement shall be governed by and interpreted in
  accordance with the laws of the State of Nevada without regard to the principles
  of conflict of laws. The parties further agree that any action between them
  shall be heard in Hudson County, New Jersey, and expressly consent to the jurisdiction
  and venue of the Superior Court of New Jersey, sitting in Hudson County, New
  Jersey and the United States District Court of New Jersey, sitting in Newark,
  New Jersey, for the adjudication of any civil action asserted pursuant to this
  paragraph. 

 ARTICLE X. 

  Assignment; Termination 

                Section
  10.1.               
  Assignment. Neither this Agreement nor any rights of the Company hereunder
  may be assigned to any other Person.

                Section
  10.2.               
  Termination. The obligations of the Investor to make Advances under Article
  II hereof shall terminate twenty-four (24) months after the Effective Date.


 ARTICLE XI. 

  Notices 

                Section
  11.1.               
  Notices. Any notices, consents, waivers, or other communications required
  or permitted to be given under the terms of this Agreement must be in writing
  and will be deemed to have been delivered (i) upon receipt, when delivered personally;
  (ii) upon receipt, when sent by facsimile, provided a copy is mailed by U.S.
  certified mail, return receipt requested; (iii) three (3) days after being sent
  by U.S. certified mail, return receipt requested, or (iv) one (1) day after
  deposit with a nationally recognized overnight delivery service, in each case
  properly addressed to the party to receive the same. The addresses and facsimile
  numbers for such communications shall be: 

	 If to the Company, to :  	 EYI Industries, Inc.  
	  	 3960 Howard Hughes Parkway - Suite 500  
	  	 Las Vegas, Nevada 89109  
	  	 Attention:  	 Jay Sargeant, President  
	  	 Telephone:  	 (702) 296-8034  
	  	 Facsimile:  	 (604) 502-5144  





21 




 

	 With a copy to:  	 Kirkpatrick & Lockhart LLP  
	  	 201 South Biscayne Boulevard – Suite 2000 
    
	  	 Miami, FL  33131-2399  
	  	 Attention:  	 Clayton E. Parker, Esq.  
	  	 Telephone:  	 (305) 539-3300  
	  	 Facsimile:  	 (305) 358-7095  
	  	 	 
	 If to the Investor(s):  	 Cornell Capital Partners, LP  
	  	 101 Hudson Street –Suite 3700  
	  	 Jersey City, NJ 07302  
	  	 Attention:  	 Mark Angelo  
	  	  	 Portfolio Manager  
	  	 Telephone:  	 (201) 985-8300  
	  	 Facsimile:  	 (201) 985-8266  
	  	 	 
	 With a Copy to:  	 Butler Gonzalez LLP  
	  	 1416 Morris Avenue - Suite 207  
	  	 Union, NJ 07083  
	  	 Attention:  	 David Gonzalez, Esq.  
	  	 Telephone:  	 (908) 810-8588  
	  	 Facsimile:  	 (908) 810-0973  


 Each party shall provide five (5) days' prior written notice
  to the other party of any change in address or facsimile number. 

 ARTICLE XII. 

  Miscellaneous 

                Section
  12.1.               
  Counterparts. This Agreement may be executed in two or more identical
  counterparts, all of which shall be considered one and the same agreement and
  shall become effective when counterparts have been signed by each party and
  delivered to the other party. In the event any signature page is delivered by
  facsimile transmission, the party using such means of delivery shall cause four
  (4) additional original executed signature pages to be physically delivered
  to the other party within five (5) days of the execution and delivery hereof,
  though failure to deliver such copies shall not affect the validity of this
  Agreement. 

                Section
  12.2.               
  Entire Agreement; Amendments. This Agreement supersedes all other prior
  oral or written agreements between the Investor, the Company, their affiliates
  and persons acting on their behalf with respect to the matters discussed herein,
  and this Agreement and the instruments referenced herein contain the entire
  understanding of the parties with respect to the matters covered herein and
  therein and, except as specifically set forth herein or therein, neither the
  Company nor the Investor makes any representation, warranty, covenant or undertaking
  with respect to such matters. No provision of this Agreement may be waived or
  amended other than by an instrument in writing signed by the party to be charged
  with enforcement. 

 22 





                Section
  12.3.               
  Reporting Entity for the Common Stock. The reporting entity relied upon
  for the determination of the trading price or trading volume of the Common Stock
  on any given Trading Day for the purposes of this Agreement shall be Bloomberg,
  L.P. or any successor thereto. The written mutual consent of the Investor and
  the Company shall be required to employ any other reporting entity. 

                Section
  12.4.               
  Fees and Expenses. The Company hereby agrees to pay the following fees:


                                 (a)               
  Legal Fees. Each of the parties shall pay its own fees and expenses (including
  the fees of any attorneys, accountants, appraisers or others engaged by such
  party) in connection with this Agreement and the transactions contemplated hereby,
  except that the Company will pay Five Thousand Dollars ($5,000) to Butler Gonzalez
  LLP for legal, administrative, and escrow fees shall be paid directly from the
  gross proceeds of the First Closing of the Convertible Debenture transaction
  pursuant to the Securities Purchase Agreement dated the date hereof. Subsequently
  on each advance date, the Company will pay Butler Gonzalez LLP, the sum of Five
  Hundred Dollars ($500) for legal, administrative and escrow fees and any outstanding
  fees of Kirkpatrick & Lockhart, LLP directly out the proceeds of any Advances
  hereunder. 

                                 (b)               
  Commitment Fees. 

      (i)                On
  each Advance Date the Company shall pay to the Investor, directly from the gross
  proceeds held in escrow, an amount equal to five percent (5%) of the amount
  of each Advance. The Company hereby agrees that if such payment, as is described
  above, is not made by the Company on the Advance Date, such payment will be
  made at the direction of the Investor as outlined and mandated by Section 2.3
  of this Agreement.

      (ii)                Upon
  the execution of this Agreement the Company shall issue to the Investor One
  Million Two Hundred Sixty-Six Thousand Five Hundred and Eighty-Nine (1,266,589)
  shares of the Company's Common Stock (the "Investor's Shares"). 

      (iii)              Fully
  Earned. The Investor's Shares shall be deemed fully earned as of the date
  hereof.

      (iv)               Registration
  Rights. The Investor's Shares will have "piggy-back" registration rights.


                Section
  12.5.               
  Brokerage. Each of the parties hereto represents that it has had no dealings
  in connection with this transaction with any finder or broker who will demand
  payment of any fee or commission from the other party. The Company on the one
  hand, and the Investor, on the other hand, agree to indemnify the other against
  and hold the other harmless from any and all liabilities to any person claiming
  brokerage commissions or finder's fees on account of services purported to have
  been rendered on behalf of the indemnifying party in connection with this Agreement
  or the transactions contemplated hereby. 

 23 





                Section
  12.6.               
  Confidentiality. If for any reason the transactions contemplated by this
  Agreement are not consummated, each of the parties hereto shall keep confidential
  any information obtained from any other party (except information publicly available
  or in such party's domain prior to the date hereof, and except as required by
  court order) and shall promptly return to the other parties all schedules, documents,
  instruments, work papers or other written information without retaining copies
  thereof, previously furnished by it as a result of this Agreement or in connection
  herein. 

 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 

 24 





                IN
  WITNESS WHEREOF, the parties hereto have caused this Standby Equity Distribution
  Agreement to be executed by the undersigned, thereunto duly authorized, as of
  the date first set forth above.

	 	 COMPANY:  
	 	 EYI INDUSTRIES, INC.  
	  	 	 
	 	 By:  	 "Jay Sargeant"  
	 	 Name:  	 Jay Sargeant
	 	 Title:  	 President  
	 	  	 
	 	  	 
	 	 INVESTOR:  
	 	 CORNELL CAPITAL PARTNERS, LP  
	 	  	 
	 	 By:  	 Yorkville Advisors, LLC  
	 	 Its:  	 General Partner  
	 	  	 
	 	 By:  	 "Mark Angelo"  
	 	 Name: 	Mark Angelo  
	 	 Title:  	 Portfolio Manager  



25 








 EXHIBIT A

 ADVANCE NOTICE/COMPLIANCE CERTIFICATE

 EYI INDUSTRIES, INC.

                The
  undersigned, _______________________ hereby certifies, with respect to the sale
  of shares of Common Stock of EYI Industries, Inc., (the "Company"), issuable
  in connection with this Advance Notice and Compliance Certificate dated ___________________
  (the "Notice"), delivered pursuant to the Standby Equity Distribution
  Agreement (the "Agreement"), as follows:

                1.               
  The undersigned is the duly elected President of the Company. 

                2.
                 There
  are no fundamental changes to the information set forth in the Registration
  Statement which would require the Company to file a post effective amendment
  to the Registration Statement.

                3.
                 The
  Company has performed in all material respects all covenants and agreements
  to be performed by the Company on or prior to the Advance Date related to the
  Notice and has complied in all material respects with all obligations and conditions
  contained in the Agreement. 

                4.
                 The
  Advance requested is _____________________ . 

                The
  undersigned has executed this Certificate this ____ day of _________________
  . 


	  	EYI INDUSTRIES, INC.  
	  	 	 
	  	 	 
	 	 By:  	 
	 	 Name:  	 Jay Sargeant  
	 	 Title:  	 President  













 SCHEDULE 2.6

 EYI INDUSTRIES, INC.

                The
  undersigned hereby agrees that for a period commencing on the date hereof and
  expiring on the termination of the Agreement dated June __, 2004 between EYI
  Industries, Inc., (the "Company"), and Cornell Capital Partners, LP,
  (the "Investor") (the "Lock-up Period"), he, she or it will not,
  directly or indirectly, without the prior written consent of the Investor, issue,
  offer, agree or offer to sell, sell, grant an option for the purchase or sale
  of, transfer, pledge, assign, hypothecate, distribute or otherwise encumber
  or dispose of except pursuant to Rule 144 of the General Rules and Regulations
  under the Securities Act of 1933, any securities of the Company, including common
  stock or options, rights, warrants or other securities underlying, convertible
  into, exchangeable or exercisable for or evidencing any right to purchase or
  subscribe for any common stock (whether or not beneficially owned by the undersigned),
  or any beneficial interest therein (collectively, the "Securities").


                In
  order to enable the aforesaid covenants to be enforced, the undersigned hereby
  consents to the placing of legends and/or stop-transfer orders with the transfer
  agent of the Company's securities with respect to any of the Securities registered
  in the name of the undersigned or beneficially owned by the undersigned, and
  the undersigned hereby confirms the undersigned's investment in the Company.


 Dated: _______________ , 2004 


	 	 Signature  
	 	  
	 	  
	 	  
	 	_______________________________________________________________________
    
	 	 Address:  _______________________________________________________________
	 	 City, State, Zip Code:  ______________________________________________________
	 	  
	 	  
	 	  
	 	_______________________________________________________________________
    
	 	 Print Social Security Number  
	 	 or Taxpayer I.D. Number