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Unassociated Document

    THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
      ACT
      OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE.
      THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
      AND
      MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
      APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
      THEREFROM.  THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF
      COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
      ANY
      PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
      STATE SECURITIES LAWS.

     

    WATERBANK
      OF AMERICA (USA) INC.

     

    WARRANT
      FOR THE PURCHASE OF SHARES OF COMMON STOCK

     

    
      	
              No.

            	
              
                **W-001**

              

            	
               

            	
              
                **500,000**  
                  

              

            	
              Shares

            

    

     

    FOR
      VALUE
      RECEIVED, WATERBANK OF AMERICA (USA) INC., a Utah corporation (the “Company”),
      with its principal office at 1000
      rue
      de la Gauchetiere Ouest, Suite 2400, Montreal, Quebec, Canada,
      hereby
      certifies that QUANTUM MERCHANT BANKERS, LLC (“Holder”), or its assigns, is
      entitled, subject to the provisions of this Warrant, to purchase from the
      Company, at any time before 5:00 p.m. (Eastern Daylight Time) on the expiration
      date of October 17, 2011 (the “Expiration Date”), the number of fully paid and
      nonassessable shares of Common Stock of the Company set forth above, subject
      to
      adjustment as hereinafter provided.

     

    Holder
      may purchase such number of shares of Common Stock at a purchase price per
      share
      (as appropriately adjusted pursuant to Section 6 hereof) of 50/100 Dollar
      ($0.50) (the “Exercise Price”). The term “Common Stock” shall mean the
      aforementioned Common Stock of the Company, together with any other equity
      securities that may be issued by the Company in addition thereto or in
      substitution therefor as provided herein.

     

    Section
      1. Exercise of Warrant.

     

    (a)          
      Subject
      to there being an effective registration statement on file with the Securities
      and Exchange Commission, this Warrant may be exercised in whole or in part
      on
      any business day, commencing six months and one day following the final closing
      of the Offering of the Company’s Series A Convertible Preferred Stock pursuant
      to that certain Private Placement Memorandum dated June 14, 2006, as
      supplemented from time to time (collectively, the “Private Placement
      Memorandum”), and ending prior to the Expiration Date (collectively, the
“Exercise Period”), unless there is an earlier effective registration statement
      on file with the Securities and Exchange Commission, by presentation and
      surrender hereof to the Company at its principal office at the address set
      forth
      in the initial paragraph hereof (or at such other address as the Company may
      hereafter notify Holder in writing) with the Purchase Form annexed hereto duly
      executed and accompanied by proper payment of the Exercise Price in lawful
      money
      of the United States of America in the form of cash, by wire transfer or by
      check, subject to collection, for the number of Warrant Shares specified in
      the
      Purchase Form. If this Warrant should be exercised in part only, the
      Company shall, upon surrender of this Warrant, execute and deliver a new Warrant
      evidencing the rights of Holder thereof to purchase the balance of the Warrant
      Shares purchasable hereunder. Upon receipt by the Company of this Warrant
      and such Purchase Form, together with proper payment of the Exercise Price,
      at
      such office, Holder shall be deemed to be the holder of record of the Warrant
      Shares, notwithstanding that the stock transfer books of the Company shall
      then
      be closed or that certificates representing such Warrant Shares shall not then
      be actually delivered to Holder. The Company shall pay any and all
      documentary stamp or similar issue or transfer taxes payable in respect of
      the
      issue or delivery of the Warrant Shares.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b)          
      In
      lieu
      of exercising this Warrant by paying the purchase price of the shares to be
      purchased in cash, by wire transfer or by check pursuant to in Section 1(a)
      above, the Holder of this Warrant may elect to receive shares of Common Stock
      equal to the value of this Warrant (or the portion thereof being exercised)
      by
      surrender of this Warrant and the attached Notice of Exercise, duly completed
      and executed on behalf of the Holder, at the principal office of the Company
      (or
      such other office or agency of the Company as it may designate by notice in
      writing to the Holder at the address of the Holder appearing on the books of
      the
      Company), in which event the Company shall issue to the Holder hereof a number
      of shares of Common Stock computed using the following formula:

     

    
      	
               

            	
               

            	
              Y
                (A-B)

            
	
              X
                =

            	
               

            	
              A

            

    

     

    
      	
              Where:

            	
              X

            	
              =

            	
              The
                number of shares of Common Stock to be issued to the Holder of this
                Warrant pursuant to this Section 1(b)

            
	
               

            	
               

            	
               

            	
               

            
	
               

            	
              Y

            	
              =

            	
              The
                number of shares of Common Stock purchasable under this Warrant or,
                if
                only a portion of this Warrant is being exercised, the portion of
                this
                Warrant being exercised.

            
	
               

            	
               

            	
               

            	
               

            
	
               

            	
              A

            	
              =

            	
              The
                Fair Market Value of one share of Common Stock; and

            
	
               

            	
               

            	
               

            	
               

            
	
               

            	
              B

            	
              =

            	
              The
                Exercise Price per share (as adjusted to the date of such
                calculations).

            

    

     

    For
      purposes of this Section 1(b), the “Fair Market Value” of a share of Common
      Stock as of a particular date shall mean:

     

    (i)           
      If
      the
      Common Stock is traded on a securities exchange or The Nasdaq National Market,
      the Fair Market Value shall be deemed to be the average of the closing prices
      of
      the Common Stock of the Company on such exchange or market over the five (5)
      business days ending immediately prior to the applicable date of
      valuation;

     

    (ii)          
      If
      the
      Common Stock is traded over-the-counter, but not on The Nasdaq National Market,
      the Fair Market Value shall be deemed to be the average of the closing bid
      prices over the 30-day period ending immediately prior to the applicable date
      of
      valuation; and

     

    (iii)        
      If
      there
      is no active public market for the Common Stock, the Fair Market Value shall
      be
      the value thereof, as determined in good faith by the Board of Directors of
      the
      Company, upon due consideration of the proposed determination thereof of the
      Holder.

     

    Section
      2. Reservation of Shares. The
      Company hereby agrees that at all times there shall be reserved for issuance
      and
      delivery upon exercise of this Warrant all shares of its Common Stock or other
      shares of capital stock of the Company from time to time issuable upon exercise
      of this Warrant.  All such shares shall be duly authorized and, when issued
      upon such exercise in accordance with the terms of this Warrant, shall be
      validly issued, fully paid and nonassessable, free and clear of all liens,
      security interests, charges and other encumbrances or restrictions on sale
      (other than as provided in the Company’s certificate of incorporation and any
      restrictions on sale set forth herein or pursuant to applicable federal and
      state securities laws) and free and clear of all preemptive rights.

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    Section
      3. Fractional Interest. 
      The Company will not issue a fractional share of Common Stock upon exercise
      of a
      Warrant. Instead, the Company will deliver its check for the current market
      value of the fractional share. The current market value of a fraction of a
      share is determined as follows: multiply the current market price of a full
      share by the fraction of a share and round the result to the nearest
      cent.

     

    The
      current market price of a share of Common Stock for purposes of this Section
      is
      the last reported sales price of the Common Stock as reported by the Nasdaq
      National Market, or the primary national securities exchange on which the Common
      Stock is then quoted, on the last trading day prior to the exercise date;
provided,
      however,
      that if
      the Common Stock is neither traded on the Nasdaq National Market nor on a
      national securities exchange, the price referred to above shall be the price
      reflected in the over-the counter market as reported by the National Quotation
      Bureau, Inc. or any organization performing a similar function.

     

    Section
      4. Assignment of Loss of Warrant.

     

    (a)          
      Except
      as
      provided in Section 9, Holder shall be entitled, without obtaining the consent
      of the Company, to assign its interest in this Warrant in whole or in part
      to
      any person or persons. Subject to the provisions of Section 9, upon
      surrender of this Warrant to the Company or at the office of its stock transfer
      agent or warrant agent, with the Assignment Form annexed hereto duly executed
      and funds sufficient to pay any transfer tax, the Company shall, without charge,
      execute and deliver a new Warrant or Warrants in the name of the assignee or
      assignees named in such instrument of assignment (any such assignee will then
      be
      a “Holder” for purposes of this Warrant) and, if Holder’s entire interest is not
      being assigned, in the name of Holder, and this Warrant shall promptly be
      canceled.

     

    (b)          
      Upon
      receipt of evidence satisfactory to the Company of the loss, theft, destruction
      or mutilation of this Warrant, and (in the case of loss, theft or destruction)
      of indemnification satisfactory to the Company, and upon surrender and
      cancellation of this Warrant, if mutilated, the Company shall execute and
      deliver a new Warrant of like tenor and date.

     

    Section
      5. Rights of Holder. Holder
      shall not, by virtue hereof, be entitled to any rights of a stockholder in
      the
      Company, either at law or equity, and the rights of Holder are limited to those
      expressed in this Warrant. Nothing contained in this Warrant shall be
      construed as conferring upon Holder hereof the right to vote or to consent
      or to
      receive notice as a stockholder of the Company on any matters or with respect
      to
      any rights whatsoever as a stockholder of the Company. No dividends or
      interest shall be payable or accrued in respect of this Warrant or the interest
      represented hereby or the Warrant Shares purchasable hereunder until, and only
      to the extent that, this Warrant shall have been exercised in accordance with
      its terms.

     

    Section
      6. Adjustment of Exercise Price and Number of Shares. The
      number and kind of securities purchasable upon the exercise of this Warrant
      and
      the Exercise Price shall be subject to adjustment from time to time upon the
      beginning of certain events, as follows:

     

    (a)          
      Adjustment
      for Change in Capital Stock. 
If
      at any time after the date hereof the Company:

     

    (A)       
      pays a dividend or makes a distribution on its Common Stock in shares of its
      Common Stock;

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    (B)       
      subdivides its outstanding shares of Common Stock into a greater number of
      shares;

     

    (C)       
      combines its outstanding shares of Common Stock into a smaller number of
      shares;

     

    (D)       
      makes a distribution on its Common Stock in shares of its capital stock other
      than Common Stock; or

     

    (E)       
      issues by reclassification of its Common Stock any shares of its capital
      stock;

     

    then
      the
      number and kind of securities purchasable upon the exercise of this Warrant
      and
      the Exercise Price in effect immediately prior to such action shall be adjusted
      so that Holder may receive upon exercise of this Warrant and payment of the
      same
      aggregate consideration the number of shares of capital stock of the Company
      which Holder would have owned immediately following such action if Holder had
      exercised this Warrant immediately prior to such action.

    

    The
      adjustment shall become effective immediately after the record date in the
      case
      of a dividend or distribution and immediately after the effective date in the
      case of a subdivision, combination or reclassification.

    

    (b)          
      Minimum
      Adjustment. No
      adjustment in the Exercise Price of this Section 6 shall be required unless
      such
      adjustment would require an increase or decrease of at least one cent
      ($.01) in such Exercise Price; provided,
      however,
      that
      any adjustments which by reason of this subsection are not required to be made,
      shall be carried forward and taken into account in any subsequent
      adjustment. All calculations under this Section 6 shall be made to the
      nearest cent or to the nearest share, as the case may be.

     

    (c)          
      Deferral
      of Issuance or Payment. In
      any case in which an event covered by this Section 6 shall require that an
      adjustment in the Exercise Price be made effective as of a record date, the
      Company may elect to defer until the occurrence of such event (i) issuing to
      Holder, if this Warrant is exercised after such record date, the shares of
      Common Stock and other capital stock of the Company, if any, issuable upon
      such
      exercise over and above the shares of Common Stock or other capital stock of
      the
      Company, if any, issuable upon such exercise on the basis of the Exercise Price
      in effect prior to such adjustment, and (ii) paying to Holder by check any
      amount in lieu of the issuance of fractional shares pursuant to Section
      3.

     

    (d)          
      When
      No Adjustment Required. No
      adjustment need be made for a change in the par value of the Common
      Stock. To the extent this Warrant becomes exercisable into cash, no
      adjustment need be made thereafter as to the cash, and interest will not accrue
      on the cash.

     

    (e)          
      Notice
      of Certain Actions.
      In the
      event that:

     

    (A)      
      the Company shall authorize the issuance to all holders of its Common Stock
      of
      rights, warrants, options or convertible securities to subscribe for or purchase
      shares of its Common Stock or of any other subscription rights, warrants,
      options or convertible securities; or

     

    (B)      
      the Company shall authorize the distribution to all holders of its Common Stock
      of evidences of its indebtedness or assets (other than dividends paid in or
      distributions of the Company’s capital stock for which the Exercise Price shall
      have been adjusted pursuant to subsection (a) of this Section 6 or cash
      dividends or cash distributions payable out of consolidated current or
      retained earnings as shown on the books of the Company and paid in the ordinary
      course of business); or

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (C)      
      the Company shall authorize any capital reorganization or reclassification
      of
      the Common Stock (other than a subdivision or combination of the outstanding
      Common Stock and other than a change in par value of the Common Stock) or of
      any
      consolidation or merger to which the Company is a party and for which approval
      of any stockholders of the Company is required (other than a consolidation
      or
      merger in which the Company is the continuing corporation and that does not
      result in any reclassification or change of the Common Stock outstanding),
      or of
      the conveyance or transfer of the properties and assets of the Company as an
      entirety or substantially as an entirety; or

     

    (D)      
      the Company is the subject of a voluntary or involuntary dissolution,
      liquidation or winding-up procedure; or

     

    (E)      
      the Company proposes to take any action that would require an adjustment of
      the
      Exercise Price pursuant to this Section 6;

     

    then
      the
      Company shall cause to be mailed by first-class mail to Holder, at least twenty
      (20) days prior to the applicable record or effective date hereinafter
      specified, a notice stating (x) the date as of which the holders of Common
      Stock
      of record to be entitled to receive any such rights, warrants or distributions
      are to be determined, or (y) the date on which any such consolidation, merger,
      conveyance, transfer, dissolution, liquidation or winding-up is expected to
      become effective, and the date as of which it is expected that holders of Common
      Stock of record shall be entitled to exchange their shares of Common Stock
      for
      securities or other property, if any, deliverable upon such reorganization,
      reclassification, consolidation, merger, conveyance, transfer, dissolution,
      liquidation or winding-up.

     

    Section
      7. Officers’ Certificate. Whenever
      the Exercise Price shall be adjusted as required by the provisions of Section
      6,
      the Company shall forthwith file in the custody of its Secretary or an Assistant
      Secretary at its principal office an officers’ certificate showing the adjusted
      Exercise Price determined as herein provided, setting forth in reasonable detail
      the facts requiring such adjustment and the manner of computing such adjustment.
      Each such officers’ certificate shall be signed by the chairperson, president or
      chief financial officer of the Company and by the secretary or any assistant
      secretary of the Company. Each such officers’ certificate shall be made
      available at all reasonable times for inspection by Holder.

     

    Section
      8. Reclassification, Reorganization, Consolidation or
      Merger.
      Other
      than the contemplated reorganization transaction with Autostrada Motors, Inc.,
      a
      Utah corporation, described in the Private Placement Memorandum, in which event
      the terms and conditions of this Section 8 shall not apply, in the event of
      any
      reclassification, capital reorganization or other change of outstanding shares
      of Common Stock of the Company (other than a subdivision or combination of
      the
      outstanding Common Stock and other than a change in the par value of the Common
      Stock) or in the event of any consolidation or merger of the Company with or
      into another corporation (other than a merger (excluding a reverse triangular
      merger or similar transaction) in which the Company is the continuing
      corporation and that does not result in any reclassification, capital
      reorganization or other change of outstanding shares of Common Stock of the
      class issuable upon exercise of this Warrant) or in the event of any sale,
      lease, transfer or conveyance to another corporation of the property and assets
      of the Company as an entirety or substantially as an entirety, the Company
      shall, as a condition precedent to such transaction, cause effective provisions
      to be made so that Holder shall have the right thereafter, by exercising this
      Warrant at any time prior to the Expiration Date, to purchase the kind and
      amount of shares of stock and other securities and property (including cash)
      receivable upon such reclassification, capital reorganization and other change,
      consolidation, merger, sale or conveyance by a holder of the number of shares
      of
      Common Stock that might have been received upon exercise of this Warrant
      immediately prior to such reclassification, capital reorganization, change,
      consolidation, merger, sale or conveyance. Any such provision shall include
      provisions for adjustments in respect of such shares of stock and other
      securities and property that shall be as nearly equivalent as may be practicable
      to the adjustments provided for in this Warrant. The foregoing provisions
      of this Section 8 shall similarly apply to successive reclassifications, capital
      reorganizations and changes of shares of Common Stock and to successive
      consolidations, mergers, sales or conveyances. The issuer of any shares of
      stock or other securities or property thereafter deliverable on the exercise
      of
      this Warrant shall be responsible for all of the agreements and obligations
      of
      the Company hereunder.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    Section
      9. Transfer to Comply with the Securities Act of 1933. This
      Warrant may not be exercised and neither this Warrant nor any of the Warrant
      Shares, nor any interest in either, may be offered, sold, assigned, pledged,
      hypothecated, encumbered or in any other manner transferred or disposed of,
      in
      whole or in part, except in compliance with applicable United States federal
      and
      state securities or Blue Sky laws and the terms and conditions hereof. Each
      Warrant shall bear a legend in substantially the same form as the legend set
      forth on the first page of this Warrant. Each certificate for Warrant
      Shares issued upon exercise of this Warrant, unless at the time of exercise
      such
      Warrant Shares are acquired pursuant to a registration statement that has been
      declared effective under the Act or are eligible for transfer pursuant to Rule
      144(k) under the Securities Act of 1933, as amended (the “Securities Act”), and
      applicable blue sky laws shall bear a legend substantially in the following
      form:

     

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

     

    Any
      certificate for any Warrant Shares issued at any time in exchange or
      substitution for any certificate for any Warrant Shares bearing such legend
      (except a new certificate for any Warrant Shares (i) issued after the
      acquisition of such Warrant Shares pursuant to a registration statement that
      has
      been declared effective under the Act or in a transaction in compliance with
      Rule 144 under the Securities Act, or (ii) that are then eligible for transfer
      pursuant to Rule 144(k) under the Securities Act) shall also bear such legend
      unless, in the opinion of counsel for the Company, the Warrant Shares
      represented thereby need no longer be subject to the restriction contained
      herein. The provisions of this Section 9 shall be binding upon all
      subsequent holders of certificates for Warrant Shares bearing the above legend
      and all subsequent holders of this Warrant, if any. Nothing in this Section
      9 or elsewhere in this Warrant shall be deemed to restrict the ability of the
      holder hereof to transfer Warrant Shares to an affiliate, partner or former
      partner of such holder in compliance with the Securities Act, nor shall any
      legal opinion be required in respect thereof.

     

    Section
      10. Registration
      Rights.

    

    (a) Piggyback
      Registration.
      Pursuant to the terms of the offering
      of the Company’s Series A Convertible Preferred Stock set forth in the Private
      Placement Memorandum, the Company is required to file a registration statement
      with the Securities and Exchange Commission six months and one day following
      the
      closing of that offering. In connection with that registration statement, or,
      if
      earlier, the
      Company at any time proposes to file a registration statement under the
      Securities Act respecting any securities of the Company on a form appropriate
      for registration of a sale of Warrant Shares (excluding registrations of shares
      of Common Stock to be offered in connection with the Company's employee benefit
      plans and registrations of securities to be offered by the Company in connection
      with acquisitions, mergers or similar transactions), it will at such time give
      written notice to Holder of its intention to do so. Upon the written request
      of
      Holder given within 15 days after receipt of any such notice (which request
      shall specify the Warrant Shares intended to be sold or disposed of by Holder
      and describe the nature of any proposed sale or other disposition thereof),
      the
      Company shall use its best efforts, but shall not be obligated, to cause all
      such Warrant Shares specified in such request to be so registered. In the event
      that any such registration shall be underwritten, if the underwriters notify
      the
      Company in writing that the inclusion in such underwriting of such Warrant
      Shares would materially and adversely affect the underwriting, the Company
      shall
      have the right not to include such Warrant Shares.

    

    
      
        
        

      

      
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    (b) Other
      Registrations.
      If, in
      connection with a registration under the Securities Act, any Warrant Shares
      require registration or qualification with or approval of any United States
      or
      state governmental official or authority other than registration under the
      Securities Act before the Warrant Shares may be sold, the Company shall use
      its
      best efforts to cause any such Warrant Shares to be duly registered or approved
      as may be required; provided,
      however,
      that
      the Company shall not be required to give a general consent to service of
      process or to qualify as a foreign corporation or subject itself to taxation
      as
      doing business in any such state.

    

    (c) Registration
      Obligations.
      The
      Company shall deliver to Holder after effectiveness of any registration under
      this Warrant such reasonable number of copies of a definitive prospectus
      included in such registration statement and of any revised or supplemental
      prospectus filed as Holder may from time to time request. The Company shall
      file
      post-effective amendments or supplements to such registration statement for
      a
      period of up to 90 days after the commencement of the offering and so long
      as a
      prospectus is required to be delivered under the Act in order that the
      registration statement may be effective at all times during such period and
      at
      all times comply with the various applicable federal and state securities laws
      (after which period the Company may withdraw such Warrant Shares from
      registration), and shall deliver copies of the prospectus contained therein
      as
      hereinabove provided. Holder shall notify the Company when his sales are
      completed.

    

    Prior
      to
      filing a registration statement which includes Warrant Shares, the Company
      shall
      (i) provide copies of such registration statement at a reasonable time before
      it
      is filed for the review of Holder and the underwriters of Holder; and (ii)
      make
      available to such Holders or underwriters the appropriate employees and records
      for purposes of performing the requisite "due diligence".

    

    (d) Expenses.
      In any
      registration pursuant to Section 10 of this Warrant, Holder shall pay the
      Company for the incremental portion of the federal and state registration and
      filing fees attributable to the Warrant Shares and shall pay all underwriting
      commissions, discounts, underwriting expenses and taxes attributable to the
      Warrant Shares.

    

    (e) Indemnity.
      The
      Company shall indemnify Holder and each underwriter of Warrant Shares (and
      any
      person who controls such underwriter within the meaning of Section 15 of the
      Securities Act) against all claims, losses, damages, liabilities and expenses
      resulting from any untrue statement or alleged untrue statement of a material
      fact contained in a prospectus or in any related registration statement,
      notification or the like or from any omission or alleged omission to state
      therein a material fact required to be stated therein or necessary to make
      the
      statements therein not misleading, except insofar as the same may have been
      based upon information furnished in writing to the Company by Holder or such
      underwriter expressly for use therein and used in accordance with such
      writing.

    

    Holder
      shall furnish to the Company such information concerning Holder as may be
      requested by the Company which is necessary in connection with any registration
      or qualification of Warrant Shares pursuant to Section 10(a) hereof, and to
      indemnify the Company, its officers and directors and each underwriter of the
      Company's securities (and any person who controls the Company or any such
      underwriter within the meaning of Section 15 of the Securities Act), against
      all
      claims, losses, damages, liabilities and expenses resulting from any untrue
      statement or alleged untrue statement of material fact contained in a prospectus
      or any related registration statement, notification or the like, or omission
      or
      alleged omission to state therein a material fact required to be stated therein
      or necessary to make the statements therein not misleading, to the extent the
      same was derived from information furnished in writing to the Company by Holder
      expressly for use therein and used in accordance with such writing.

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    If
      any
      action is brought or any claim is made against any persons indemnified pursuant
      to this Section in respect of which indemnity may be sought against the
      indemnitor pursuant to this Section, such person shall promptly notify the
      indemnitor in writing of the institution of such action or the making of such
      claim and the indemnitor shall promptly notify the indemnitor in writing of
      the
      institution of such action or the making of such claim and the indemnitor shall
      assume the defense of such action or claim, including the employment of counsel
      and payment of expenses. Such person shall have the right to employ his own
      counsel in any such case, but the fees and expenses of such counsel shall be
      at
      the expense of such person unless the employment of such counsel shall have
      been
      authorized in writing by the indemnitor in connection with the defense of such
      action or claim or the indemnitor shall not have employed counsel to have charge
      of the defense of such action or claim or such indemnified party or parties
      shall have reasonably concluded that there may be defenses available to him
      which are different from or additional to those available to the indemnitor
      (in
      which the case the indemnitor shall have the right to direct any different
      or
      additional defense of such action or claim on behalf of the indemnified party
      or
      parties), in any of which events such fees and expenses of not more than one
      additional counsel for the indemnified person shall be borne by the indemnitor.
      Except as expressly provided above, in the event that the indemnitor shall
      not
      previously have assumed the defense of any such action or claim, at such time
      as
      the indemnitor does not assume the defense of such action or claim, the
      indemnitor shall thereafter be liable to any person indemnified pursuant to
      this
      Section for any legal or other expenses subsequently incurred by such person
      in
      investigating, preparing or defending against such action or claim. Anything
      in
      this Section to the contrary notwithstanding, the indemnitor shall not be liable
      for any settlement of any such claim or action effected without its written
      consent.

     

    Section
      11. Company
      Call Right. In
      the
      event that (i) the average closing bid prices per share of Common Stock, as
      quoted on the Over-The-Counter-Bulletin Board (or such other exchange or stock
      market on which the Common Stock may then be listed or quoted) over a period
      of
      twenty (20) consecutive trading days ending on or after six months and one
      day
      following the date hereof, equals or exceeds 300% of the Exercise Price
      (appropriate adjusted for any stock split, reverse stock split, stock dividend
      or other reclassification or combination of the Common Stock occurring after
      the
      date hereof), and (ii) the average daily trading volume over that period is
      at
      least fifty thousand (50,000) shares of Common Stock, then thereafter, provided
      there is then an effective registration statement on file with the Securities
      and Exchange Commission relating to the issuance and resale of all shares of
      Common Stock issuable on exercise of these Warrants, the Company, upon
fifteen
      (15) calendar days prior written notice (the “Notice Period”) given to the
      Holder with ten (10) business days of the end of such twenty (20) consecutive
      trading day period, may call the Warrants, in whole or in part, at a redemption
      price equal to $.01 per share of Common Stock then purchasable pursuant to
      the
      Warrants called for redemption. The Holder shall have the right to exercise
      the
      Warrants prior to the end of the Notice Period. As of the last day of the Notice
      Period, any Warrants timely and validly called for redemption by the Company
      shall terminate and permanently cease to be exercisable.

     

     

    Section
      12. Modification and Waiver. Neither
      this Warrant nor any term hereof may be changed, waived, discharged or
      terminated other than by an instrument in writing signed by the Company and
      by
      Holder.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    Section
      13. No Dilution or Impairment. Without
      the consent of the holders of at least 51% of the then outstanding Warrants
      issued in connection with the Company’s Series A Convertible Preferred Stock,
      the Company shall not participate in any reorganization, transfer of assets,
      consolidation, merger, dissolution, issue or sale of securities, or take any
      other voluntary action, for the purpose of avoiding or seeking to avoid the
      observance or performance of any of the terms to be observed or performed
      hereunder by the Company, but shall at all times in good faith assist in
      carrying out all such action as may be reasonably necessary or appropriate
      in
      order to protect the exercise rights of the holder of this Warrant against
      dilution or other impairment.

     

    Section
      14.    Notices. Any
      notice, request or other document required or permitted to be given or delivered
      to Holder or the Company shall be delivered or shall be sent by certified mail,
      postage prepaid, to Holder at its address as shown on the books of the Company
      or to the Company at the address indicated therefor in the first paragraph
      of
      this Warrant.

     

    Section
      15.    Payment of Taxes. The
      Company will pay all taxes (other than taxes based upon income) and other
      governmental charges that may be imposed with respect to the issue or delivery
      of Warrant Shares upon exercise of this Warrant, excluding any tax or other
      charge imposed in connection with any transfer involved in the issue and
      delivery of Warrant Shares in a name other than that in which the Warrant so
      exercised was registered.

     

    Section
      16.    Descriptive Headings and Governing
      Law. The
      description headings of the several sections and paragraphs of this Warrant
      are
      inserted for convenience only and do not constitute a part of this
      Warrant. This Warrant shall be construed and enforced in accordance with,
      and the rights of the parties shall be governed by, the laws of the State of
      Utah, without regard to its conflicts of laws principles.

     

    [remainder
      of page intentionally left blank; signature on following page]

     

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      the
      Company has duly caused this Warrant to be signed by its duly authorized officer
      and to be dated as of October 18, 2006.

     

     

     

    
      	 	 	 	 
	 	 	 	 
	 	WATERBANK
              OF AMERICA (USA) INC.
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	
               

            	
              By:

            	
               

            	
              /s/
                Jean-Jean Pelletier

            
	
               

            	
               

            	
               

            	
              Name:
                Jean-Jean Pelletier

            
	
               

            	
               

            	
               

            	
              Title:
                Senior Vice President

            

    

     

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    PURCHASE
      FORM

     

     

    Dated
      ___________, 200____

     

     

    The
      undersigned hereby elects:

     

    o   
      to purchase ________ shares of Common Stock pursuant to the terms of the
      attached Warrant, and tenders herewith payment of the exercise price in full,
      together with all applicable transfer taxes, if any;

     

    o   
      to purchase the number of shares of Common Stock pursuant to the terms of the
      net exercise provisions set forth in Section 1(b) of the attached Warrant
      as shall be issuable upon net exercise of the portion of the attached Warrant
      relating to ________ shares, and shall tender payment of all applicable transfer
      taxes, if any;

     

    The
      undersigned represents and warrants to Waterbank of America (USA) Inc. as of
      the
      date hereof the same statements with respect to the shares being acquired upon
      exercise of this warrant as are set forth in the Subscription Document dated
      _____________, 2006, pursuant to which the above-referenced warrant was sold,
      regarding the securities purchased thereby.

     

     

    
      	 	Holder	 
	 	 	 
	 	
              By:

            	
               

            
	 	
               

            	
               

            
	 	
              Print
                Name:

            	
               

            
	 	
               

            	
               

            
	 	
              Title:

            	
               

            

    

     

     

     

    

 

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    ASSIGNMENT
      FORM

     

    Dated
      _________, 200____

     

    FOR
      VALUE
      RECEIVED, _______________________________________ hereby sells, assigns and
      transfers unto  

    _______________________________________
      (the “Assignee”)

    (please
      type or print in block letters)

     

    ______________________________________________________________________________________

    (insert
      address)

     

    its
      right
      to purchase up to _______ shares of Common Stock represented by this Warrant
      No.
      _________ and does hereby irrevocably constitute and appoint
      ____________________________  attorney, to transfer the same on the books
      of the Company, with full power of substitution in the premises.

    
       

      
        	 	Holder	 
	 	 	 
	 	
                By:

              	
                 

              
	 	
                 

              	
                 

              
	 	
                Print
                  Name:

              	
                 

              
	 	
                 

              	
                 

              
	 	
                Title:

              	
                 

              

      

       

       

       

      
        
          
          

        

        
          1EXHIBIT
      NO. 4.1

     

    SUBSCRIPTION
      AGREEMENT

     

    COMMON
      STOCK PURCHASE AGREEMENT (this
      “Agreement”)
      made
      as of this 19th
      day of
      October 2006 between MSGI Security Solutions, Inc., a corporation organized
      under the laws of the State of Nevada (the “Company”),
      and
      Hyundai Syscomm Corp, a California corporation (“HYUNDAI”).

     

    WHEREAS,
      the Company and HYUNDAI have entered into a certain license agreement, dated
      September 11, 2006, pursuant to which, among other things, the Company is
      licensing certain intellectual property to HYUNDAI (the “License
      Agreement”);

     

    WHEREAS,
      the Company and HYUNDAI are entering into a certain sub-contracting agreement,
      dated as of the date hereof, pursuant to which, among other things, HYUNDAI
      is
      retaining the Company as a sub-contractor and for the exploitation of the
      Company’s services (the “Sub-Contracting
      Agreement”);

     

    WHEREAS,
      in connection with the License Agreement and the Sub-Contracting Agreement
      the
      Company desires to issue to Purchaser, as an “accredited investor” (the
“Issuance”)
      900,000 shares of the Company's Common Stock, par value $0.01 (the "Common
      Stock")
      on the
      terms and conditions set forth herein, and HYUNDAI desires to acquire the
      900,000 shares of Common Stock; and

     

    WHEREAS,
      the Company and HYUNDAI are entering into a certain registration rights
      agreement, dated as of the date hereof, pursuant to which, among other things,
      the Company has granted HYUNDAI certain registration rights (the “Registration
      Rights Agreement”).

     

    NOW,
      THEREFORE, for and in consideration of the premises and the mutual covenants
      hereinafter set forth, the parties hereto do hereby agree as
      follows:

     

    I.         
      SUBSCRIPTION
      FOR COMMON STOCK AND REPRESENTATIONS BY AND COVENANTS OF
      PURCHASER

     

    1.1.  Subscription
      for Common Stock.
      Subject
      to the terms and conditions hereinafter set forth, HYUNDAI hereby subscribes
      for
      and agrees to purchase from the Company 900,000 shares of Common Stock in
      exchange for the consideration set forth in 1.3 hereof.

     

    1.2.  19.99%
      Limitation.
      HYUNDAI
      hereby agrees that the Company shall not be required to issue, or reserve for
      issuance at any time in accordance with Nasdaq rule 4350(i), in the aggregate,
      Common Stock equal to more than 19.99% of the Company's Common Stock outstanding
      (on a pre-transaction basis). Therefore the Company can issue 865,000 shares
      of
      Common Stock at the initial Closing, and the remaining 35,000 shares of Common
      Stock shall be issued when and if: (a) the holders of a majority of the shares
      of Common Stock outstanding vote in favor of HYUNDAI owning more than 19.99%
      of
      the Company’s Common Stock outstanding; or
      (b)
      additional issuances of Common Stock by the Company permit such issuance in
      accordance with Nasdaq rule 4350(i). 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.3.  Purchase
      Price.
      The
      Common Stock shall be issued in exchange for (i) the receipt of $500,000
      received in connection with the License Agreement, and (ii) the Sub-Contracting
      Agreement. 

     

    1.4.  Reliance
      on Exemptions.
      HYUNDAI
      acknowledges that the Issuance has not been reviewed by the United States
      Securities and Exchange Commission (the “SEC”)
      or any
      state agency because of the Company’s representations that this is intended to
      be a nonpublic offering exempt from the registration requirements of the
      Securities Act of 1933, as amended (the “1933
      Act”)
      and
      state securities laws. HYUNDAI understands that the Company is relying in part
      upon the truth and accuracy of, and HYUNDAI’s compliance with, the
      representations, warranties, agreements, acknowledgments and understandings
      of
      HYUNDAI set forth herein in order to determine the availability of such
      exemptions and the eligibility of HYUNDAI to acquire the Common
      Stock.

     

    1.5.  Investment
      Purpose.
      HYUNDAI
      represents that the Common Stock is being purchased for its own account, for
      investment purposes only and not for distribution or resale to others in
      contravention of the registration requirements of the 1933 Act. HYUNDAI agrees
      that it will not sell or otherwise transfer the Common Stock (except to an
      affiliate which agrees to comply with all provisions of this Agreement), unless
      they are registered under the 1933 Act or unless an exemption from such
      registration is available.

     

    1.6.  Accredited
      Investor.
      HYUNDAI
      represents and warrants that it is an “accredited investor” as such term is
      defined in Rule 501 of Regulation D promulgated under the 1933 Act and that
      it
      is able to bear the economic risk of an investment in the Common Stock.

     

    1.7.  Risk
      of Investment.
      HYUNDAI
      recognizes that the purchase of the Common Stock involves a high degree of
      risk
      in that: (i) an investment in the Company is highly speculative and only
      investors who can afford the loss of their entire investment should consider
      investing in the Company and the Common Stock; (ii) transferability of the
      Common Stock is limited; and (iii) the Company may require substantial
      additional funds to operate its business and there can be no assurance that
      adequate funds will be available to the Company, in addition to all of the
      other
      risks set forth in the SEC Documents (as defined in Section 1.8 hereof). HYUNDAI
      acknowledges the disclosure relating to the risks affecting the Company set
      forth in the SEC Documents. 

     

    1.8.  Information.
      HYUNDAI
      acknowledges that the Company has made available for its review: (a) the
      Company’s Annual Report on Form 10-K for the year ended June 30, 2005, (b) the
      Company’s Quarterly Reports, on Form 10-Q for the fiscal quarters ended December
      31, 2004, March 31, 2005, September 30, 2005, and March 31, 2006 (c) the
      Company’s Proxy Statements, Definitive Information Statements, Current Reports
      on Form 8-k, as filed with the SEC between December 31, 2004 and the date of
      this Subscription Agreement (collectively the “SEC
      Documents”)
      and
      hereby represents that: (i) HYUNDAI has been furnished by the Company during
      the
      course of this transaction with all information regarding the Company which
      it
      has requested; and (ii) that HYUNDAI has been afforded the opportunity to ask
      questions of and receive answers from duly authorized officers of the Company
      concerning the terms and conditions of the Placement, and any additional
      information which it has requested, if any. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.9.  No
      Representations.
      HYUNDAI
      hereby represents that, except as expressly set forth in (a) this Subscription
      Agreement, (b) the Common Stock, (c) the License Agreement, (d) the
      Sub-Contracting Agreement, (e) the Registration Rights Agreement and (g) all
      exhibits, schedules and appendices which are part of the aforementioned
      documents, (collectively, the “Offering
      Documents”),
      no
      representations or warranties have been made to HYUNDAI by the Company or any
      agent, employee or affiliate of the Company, and in entering into this
      transaction HYUNDAI is not relying on any information other than that contained
      in the Offering Documents, the SEC Documents and the results of independent
      investigation by HYUNDAI. 

     

    1.10.  Tax
      Consequences.
      HYUNDAI
      acknowledges that the Issuance may involve tax consequences and that the
      contents of the Offering Documents do not contain tax advice or information.
      HYUNDAI acknowledges that it must retain its own professional advisors to
      evaluate the tax and other consequences of an investment in the Common
      Stock.

     

    1.11.  Transfer
      or Resale.
      HYUNDAI
      understands that Rule 144 (the “Rule”)
      promulgated under the 1933 Act requires, among other conditions, a one-year
      holding period prior to the resale (in limited amounts) of securities acquired
      in a non-public offering without having to satisfy the registration requirements
      under the 1933 Act. HYUNDAI understands and hereby acknowledges that the Company
      is under no obligation to register the securities comprising the Common Stock
      under the 1933 Act, with the exception of certain registration rights covering
      the resale of the Common Stock set forth in the Registration Rights Agreement.
      

     

    1.12.  Legends.
      HYUNDAI
      understands that the certificates or other instrument representing the Common
      Stock, until such time as they have been registered under the 1933 Act or,
      if
      earlier, until paragraph (k) of the Rule shall become applicable, shall bear
      a
      restrictive legend in substantially the following form (and a stop-transfer
      order may be placed against transfer of such certificates or other
      instruments):

     

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
      SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN
      THE
      ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
      THE
      SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR
      (B)
      AN OPINION OF COUNSEL, IN A REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS
      NOT
      REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS, OR (II) UNLESS
      SOLD
      PURSUANT TO RULE 144 UNDER SAID ACT.

    

    The
      legend set forth above shall be removed and the Company shall promptly issue
      a
      certificate or other instrument without such legend to the holder of the Common
      Stock upon which it is stamped, if (a) such Common Stock is being sold by the
      holder pursuant to an effective registration statement under the 1933 Act,
      or
      (b) such holder delivers to the Company an opinion of counsel, in a reasonably
      satisfactory and acceptable form to the Company and its counsel directed to
      the
      Company or expressly providing that the Company may rely thereon, that a
      disposition of the Common Stock is being made pursuant to an exemption from
      such
      registration.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.13.  No
      General Solicitation.
      HYUNDAI
      represents that HYUNDAI was not induced to invest by any of the following:
      (i)
      any advertisement, article, notice or other communication published in any
      newspaper, magazine or similar media or broadcast over the news or radio; and
      (ii) any seminar or meeting whose attendees were invited by any general
      solicitation or advertising.

     

    1.14.     
      Validity; Enforcement. If HYUNDAI is a corporation,
      partnership, trust or other entity, HYUNDAI represents and warrants that: (a)
      it
      is authorized and otherwise duly qualified to purchase and hold the Common
      Stock; and (b) that this Subscription Agreement has been duly and validly
      authorized, executed and delivered and constitutes the legal, binding and
      enforceable obligation of HYUNDAI.

     

    1.15.      
      Address.
      HYUNDAI
      hereby represents that the address of Purchaser furnished by HYUNDAI at the
      end
      of this Subscription Agreement is HYUNDAI’s principal business address.

     

    1.16.      
      No Hedging Transactions.
      HYUNDAI
      hereby agrees not to engage in any Hedging Transaction until such time as the
      Common Stock have been registered for resale under the 1933 Act or may otherwise
      be sold in the public market without an effective registration statement under
      the 1933 Act. “Hedging
      Transaction”
means
      any short sale (whether or not against the box) or any purchase, sale or grant
      of any right (including, without limitation, any put or call option) with
      respect to any security (other than a broad-based market basket or index) that
      includes, relates to or derives any significant part of its value from the
      Company’s Common Stock or any rights, warrants, options or other securities that
      are convertible into, or exercisable or exchangeable for, Common
      Stock.

     

    1.17.  Foreign
      Purchaser.
      HYUNDAI
      is a United States person and is not a foreign purchaser.

     

    1.18.  NASD
      Member.
      HYUNDAI
      acknowledges that if it not a Registered Representative of a NASD member firm.
      

     

    II.        
      REPRESENTATIONS
      BY THE COMPANY

     

    The
      Company represents and warrants to HYUNDAI, except as set forth in the SEC
      Documents or the disclosure schedules, if any, attached hereto:

     

    2.1.  Securities
      Law Compliance.
      The
      offer, offer for sale, and sale of the Common Stock have not been registered
      under the 1933 Act. The Common Stock is to be offered, offered for sale and
      sold
      in reliance upon the exemptions from the registration requirements of Section
      4
      of the 1933 Act. The Company will use its commercially reasonable efforts to
      conduct the Issuance in compliance with the requirements of Regulation D of
      the
      General Rules and Regulations under the 1933 Act and applicable state “blue sky”
laws, and the Company will file all appropriate notices of offering with the
      SEC. The Company has prepared the Offering Documents. The Offering Documents
      will not contain any untrue statement of a material fact or omit to state any
      material fact necessary in order to make the statements therein, in light of
      the
      circumstances in which they were made, not misleading. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    2.2.  Organization
      and Qualification.
      The
      Company is duly organized and validly existing in good standing under the laws
      of the State of Nevada, and has the requisite power and authorization to own
      its
      properties and to carry on its business as now being conducted. The Company
      is
      duly qualified as a foreign corporation to do business and is in good standing
      in the State of New York and in every other jurisdiction in which its ownership
      of property or 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.
      As
      used in this Subscription Agreement, “Material
      Adverse Effect”
means
      any material adverse effect on the business, properties, assets, operations,
      results of operations, financial condition or prospects of the Company, or
      on
      the transactions contemplated hereby, or by the other Offering Documents or
      the
      agreements and instruments to be entered into in connection herewith or
      therewith, or on the authority or ability of the Company to perform its
      obligations under the Offering Documents. 

     

    2.3.  SEC
      Documents; Financial Statements.
      The SEC
      Documents represent all reports, schedules, forms, statements and other
      documents required to be filed by it since March 31, 2005 with the SEC pursuant
      to the reporting requirements of the Securities Exchange Act of 1934 (the
“Exchange
      Act”).
      The
      Company has made available to HYUNDAI or its representatives copies of the
      SEC
      Documents. As of their respective dates, the SEC Documents complied in all
      material respects with the requirements of the Exchange Act and the rules and
      regulations of the SEC promulgated thereunder applicable to the SEC Documents,
      and none of the SEC Documents, at the time they were filed with the SEC,
      contained any untrue statement of a material fact or omitted to state a material
      fact required to be stated therein or necessary in order to make the statements
      therein, in light of the circumstances under which they were made, not
      misleading. As of their respective dates, the financial statements of the
      Company included in the SEC Documents 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 (a) as may be
      otherwise indicated in such financial statements or the notes thereto, or (b)
      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 that would not be material). The Company has no reason to believe
      its independent auditors will withhold their consent to the inclusion of their
      audit opinion concerning the Company’s financial statements which are to be
      included in any Registration Statement.

     

    2.4.  Absence
      of Changes.
      Since
      March 31, 2006, other than as set forth in the SEC Documents and Schedule
      2.4
      to this
      Subscription Agreement, the Company has not (i) incurred any debts, obligations
      or liabilities, absolute, accrued, contingent or otherwise, whether due or
      to
      become due, except current liabilities incurred in the usual and ordinary course
      of business and consistent with past practices, having individually or in the
      aggregate a Material Adverse Effect, (ii) made or suffered any changes in its
      contingent obligations by way of guaranty, endorsement (other than the
      endorsement of checks for deposit in the usual and ordinary course of business),
      indemnity, warranty or otherwise, (iii) discharged or satisfied any liens or
      paid any obligation or liability other than current liabilities shown on the
      balance sheet dated as of March 31, 2006, and current liabilities incurred
      since
      the date of the balance sheet dated as of March 31, 2006, in each case in the
      usual and ordinary course of business and consistent with past practices, (iv)
      mortgaged, pledged or subjected to lien any of its assets, tangible or
      intangible, (v) sold, transferred or leased any of its assets except in the
      usual and ordinary course of business and consistent with past practices, (vi)
      cancelled or compromised any debt or claim, or waived or released any right,
      of
      material value, (vii) suffered any physical damage, destruction or loss (whether
      or not covered by insurance) adversely affecting the properties, business or
      prospects of the Company, (viii) entered into any transaction other than in
      the
      usual and ordinary course of business except for this Subscription Agreement
      and
      the other Offering Documents and the related agreements referred to herein
      and
      therein, (ix) declared or paid any dividends on or made any other distributions
      with respect to, or purchased or redeemed, any of its outstanding equity
      securities, (x) suffered or experienced any change in, or condition affecting,
      its condition (financial or otherwise), properties, assets, liabilities,
      business operations, results of operations or prospects other than changes,
      events or conditions in the usual and ordinary course of its business and
      consistent with past practices, having (either by itself or in conjunction
      with
      all such other changes, events and conditions) a Material Adverse Effect or
      (xi)
      made any change in the accounting principles, methods or practices followed
      by
      it or depreciation or amortization policies or rates theretofore adopted.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    2.5.  Title.
      The
      Company has good and marketable title to all properties and assets owned by
      it,
      free and clear of all liens, charges, encumbrances or restrictions, except
      such
      as are not significant or important in relation to the Company’s business; all
      of the material leases and subleases under which the Company is the lessor
      or
      sublessor of properties or assets or under which the Company holds properties
      or
      assets as lessee or sublessee are in full force and effect, and the Company
      is
      not in default in any material respect with respect to any of the terms or
      provisions of any of such leases or subleases, and no material claim has been
      asserted by anyone adverse to rights of the Company as lessor, sublessor, lessee
      or sublessee under any of the leases or subleases mentioned above, or affecting
      or questioning the right of the Company to continued possession of the leased
      or
      subleased premises or assets under any such lease or sublease. The Company
      owns
      or leases all such properties as are necessary to its operations as described
      in
      the Offering Documents. 

     

    2.6.  Proprietary
      Rights.
      The
      Company owns, or is duly licensed to use or possess, or possesses exclusive
      and
      enforceable rights to use all patents, patent applications, trademarks, service
      marks, copyrights, trade secrets, processes, formulations, technology or
      know-how used in the conduct of its business (the “Proprietary
      Rights”).
      The
      Company has not received any notice of any claims, nor does it have any
      knowledge of any threatened claims, and knows of no facts which would form
      the
      basis of any claim, asserted by any person to the effect that the sale or use
      of
      any product or process now used or offered by the Company or proposed to be
      used
      or offered by the Company infringes on any patents or infringes upon the use
      of
      any such Proprietary Rights of another person and, to the best of the Company’s
      knowledge, no others have infringed the Company’s Proprietary
      Rights.

     

    2.7.  Litigation.
      There
      is no material action, suit, investigation, customer complaint, claim or
      proceeding at law or in equity by or before any arbitrator, court, governmental
      instrumentality or agency, self-regulatory organization or body or public board
      now pending or, to the knowledge of the Company, threatened against the Company
      of any of the Company’s officers or directors in their capacities as such (or
      basis 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    2.8.  Non-Defaults;
      Non-Contravention.
      Other
      than as set forth in Schedule
      2.8
      to this
      Subscription Agreement, the Company is not in violation of or default under,
      nor
      will the execution and delivery of this Subscription Agreement or any of the
      other Offering Documents or consummation of the transactions contemplated herein
      or therein result in a violation of or constitute a default in the performance
      or observance of any obligation under: (i) its Certificate of Incorporation,
      or
      its By-laws; or (ii) any indenture, mortgage, contract, material purchase order
      or other agreement or instrument to which the Company is a party or by which
      it
      or its property is bound; or (iii) any material order, writ, injunction or
      decree of any court of any Federal, state, municipal or other governmental
      department, commission, board, bureau, agency or instrumentality, domestic
      or
      foreign (including, to the Company’s knowledge, federal and state securities
      laws and regulations). 

     

    2.9.  Taxes.
      The
      Company has filed all tax returns that are required to be filed by it or
      otherwise met its disclosure obligations to the relevant agencies and all such
      returns are true and correct. The Company has paid or adequately provided for
      all tax liabilities of the Company as reflected on such returns or pursuant
      to
      any assessments received by it or that it is obligated to withhold from amounts
      owing to any employee, creditor or third party. The Company has properly accrued
      all taxes required to be accrued by GAAP consistently applied. The income tax
      returns of the Company have not been audited by any government or regulatory
      authorities with- in the last five years. The Company has not waived any statute
      of limitations with respect to taxes or agreed to any extension of time with
      respect to any tax assessment or deficiency.

     

    2.10.  Compliance
      With Laws; Licenses, Etc.
      The
      Company has not received notice of any violation of or noncompliance with any
      laws, ordinances, regulations and orders applicable to its business that would
      have a Material Adverse Effect and that has not been cured. The Company has
      all
      material licenses and permits and other governmental certificates,
      authorizations and permits and approvals (collectively, “Licenses”)
      required by every government or regulatory body for the operation of its
      business as currently conducted and the use of its properties. The Licenses
      are
      in full force and effect and to the Company’s knowledge no violations currently
      exist in respect of any License and no proceeding is pending or threatened
      to
      revoke or limit any thereof. 

     

    2.11.  Authorization;
      Enforcement; Validity.
      The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under this Subscription Agreement and the other Offering
      Documents, to file and perform its obligations under the Offering Documents,
      and
      to issue the Common Stock in accordance with the terms of the Offering
      Documents. The execution and delivery of the Offering Documents by the Company
      and the consummation by the Company of the transactions contemplated by the
      Offering Documents, including without limitation the issuance of the Common
      Stock hereunder, have been duly authorized by the Company’s board of directors.
      This Subscription Agreement constitutes the legal, binding and enforceable
      obligation of the Company.

     

    2.12.  Authorization
      of Securities.
      The
      issuance, sale and delivery of the Common Stock has been duly authorized by
      all
      requisite corporate action of the Company. When so issued, sold and delivered
      in
      accordance with the Offering Documents for the consideration set forth therein,
      the Common Stock will be duly executed, issued and delivered and will constitute
      valid and legal obligations of the Company enforceable in accordance with their
      respective terms and, in each case, will not be subject to preemptive or any
      other similar rights of the stockholders of the Company or others which rights
      shall not have been waived prior to the Closing. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    2.13.  Exemption
      from Registration.
      Assuming the accuracy of the information provided by HYUNDAI in this
      Subscription Agreement, the offer and sale of the Common Stock pursuant to
      the
      terms of this Subscription Agreement are exempt from the registration
      requirements of the 1933 Act and the rules and regulations promulgated
      thereunder. 

     

    2.14.  Brokers.
      Neither
      the Company nor any of its officers, directors, employees or stockholders has
      employed any broker or finder in connection with the transactions contemplated
      by the Offering Documents. 

     

    2.15.  Title
      to Securities.
      When
      the Common Stock has been duly delivered to HYUNDAI and full payment shall
      have
      been made therefore pursuant to Section 1.3 hereof and the terms of the Offering
      Documents, HYUNDAI shall receive from the Company good and marketable title
      to
      such Common Stock free and clear of all liens, encumbrances and claims
      whatsoever (with the exception of claims arising through the acts or omissions
      of HYUNDAI and except as arising from applicable federal and state securities
      laws), and the Company shall have paid all taxes, if any, in respect of the
      original issuance thereof.

     

    2.16.  Consents.
      Except
      as contemplated by this Subscription Agreement, to the Company’s knowledge, 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 or any
      regulatory or self-regulatory agency in order for it to execute, deliver or
      perform any of its obligations under or contemplated by the Offering Documents.
      Except as otherwise provided in the Offering Documents, all consents,
      authorizations, orders, filings and registrations that 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 is unaware of any facts or
      circumstances that might prevent the Company from obtaining or effecting any
      of
      the foregoing. 

     

    2.17.  No
      General Solicitation.
      None of
      the Company, any of its affiliates, and, to the Company’s knowledge, any person
      acting on its behalf, has engaged in any form of general solicitation or general
      advertising (within the meaning of Regulation D under the 1933 Act) in
      connection with the offer or sale of the Common Stock.

     

           
      III.  TERMS
      OF PURCHASE

     

    3.1.  Closing
      Date.
      Provided
      that all conditions to closing have been satisfied or waived, the closing (the
      “Closing”)
      shall
      take place at the offices of counsel to the Company, Greenberg Traurig LLP,
      200
      Park Avenue, New York, New York 10166, or such other location as mutually agreed
      to by the Company and HYUNDAI. 

     

    3.2.  Certificates.
      HYUNDAI
      hereby authorizes and directs the Company to deliver the Common Stock to be
      issued to HYUNDAI pursuant to this Subscription Agreement in the name and
      address of HYUNDAI’s nominee, Alluser, Inc., 3760 Convoy Street, Suite 210, San
      Diego, California 92111, Att: Jason Kim. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IV. MISCELLANEOUS

     

    4.1   Notice.
      Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Subscription Agreement must be in writing and
      will
      be deemed to have been delivered: (a) upon receipt, when delivered personally,
      (b) upon receipt, when sent by facsimile (provided confirmation of transmission
      is mechanically or electronically generated and kept on file by the sending
      party), or (c) one (1) business day after deposit with an overnight courier
      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:

     

    MSGI
      Security Solutions, Inc.

    575
      Madison Avenue

    New
      York,
      New York 10022

    Telephone:
      (917) 339-7150

    Facsimile:
      (917) 339-7166

    Attention.:
      Jeremy Barbera

     

    With
      a
      copy to:

    

    Greenberg
      Traurig, LLP

    MetLife
      Building

    200
      Park
      Avenue

    New
      York,
      New York 10166

    Telephone:
      (212) 801-9323

    Facsimile:
      (212) 801-6400

    Attention:
      Alan I. Annex, Esq.

    

    If
      to
      HYUNDAI:

    

    Hyundai
      Syscomm Corp.

    228
      Hamilton Avenue

    Palo
      Alto, California 94301

    Telephone:
      (510) 790-4500

    Facsimile:
      (415) 358-4551

    Attn.:
      Benjamin Byun

    

    With
      a
      copy to:

    

    Hirshfield
      Law

    1035
      Park
      Avenue

    Suite
      7B

    New
      York,
      New York 10028-0912

    Telephone:
      (646) 827-9362

    Facsimile:
      (646) 349-1665

    Attention:
      Peter B. Hirshfield, Esq.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    4.2    
      Entire
      Agreement; Amendment.
      This
      Subscription Agreement supersedes all other prior oral or written agreements
      between HYUNDAI, the Company, their affiliates and persons acting on their
      behalf with respect t-o the matters discussed herein, and this Subscription
      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
      HYUNDAI makes any representation, warranty, covenant or undertaking with respect
      to such matters. No provision of this Subscription Agreement may be amended
      or
      waived other than by an instrument in writing signed by the Company and
      HYUNDAI.

     

    4.3   
      Severability.
      If any
      provision of this Subscription Agreement shall be invalid or unenforceable
      in
      any jurisdiction, such invalidity or unenforceability shall not affect the
      validity or enforceability of the remainder of this Subscription Agreement
      in
      that jurisdiction or the validity or enforceability of any provision of this
      Subscription Agreement in any other jurisdiction.

     

    4.4   
      Governing Law; Jurisdiction; Jury Trial.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Subscription Agreement shall be governed by the internal laws of the
      State of Nevada, without giving effect to any choice of law or conflict of
      law
      provision or rule (whether of the State of Nevada or any other jurisdictions)
      that would cause the application of the laws of any jurisdictions other than
      the
      State of Nevada. Each party hereby irrevocably submits to the exclusive
      jurisdiction of the federal courts sitting in the State of Nevada, for the
      adjudication of any dispute hereunder or in connection herewith or with any
      transaction contemplated hereby or discussed herein, and hereby irrevocably
      waives, and agrees not to assert in any suit, action or proceeding, any claim
      that it is not personally subject to the jurisdiction of any such court, that
      such suit, action or proceeding is brought in an inconvenient forum or that
      the
      venue of such suit, action or proceeding is improper. Each party hereby
      irrevocably waives personal service of process and consents to process being
      served in any such suit, action or proceeding by sending a copy thereof to
      such
      party by overnight courier service at the address for such notices to it under
      this Agreement and agrees that such service shall constitute good and sufficient
      service of process and notice thereof. Nothing contained herein shall be deemed
      to limit in any way any right to serve process in any manner permitted by law.
      Each party hereby irrevocably waives any right it may have, and agrees not
      to
      request, a jury trial for the adjudication of any dispute hereunder or in
      connection with or arising out of this Subscription Agreement or any transaction
      contemplated hereby. 

     

    4.5   
      Headings.
      The
      headings of this Subscription Agreement are for convenience of reference and
      shall not form part of, or affect the interpretation of, this Subscription
      Agreement.

     

    4.6    
      Successors And Assigns.
      This
      Subscription Agreement shall be binding upon and inure to the benefit of the
      parties and their respective successors and assigns, including any purchasers
      of
      the Common Stock. The Company shall not assign this Subscription Agreement
      or
      any rights or obligations hereunder without the prior written consent of the
      holders of at least a majority the Securities then outstanding, except by merger
      or consolidation. HYUNDAI may assign some or all of its rights hereunder without
      the consent of the Company, provided, however, that any such assignment shall
      not release HYUNDAI from its obligations hereunder unless such obligations
      are
      assumed by such assignee and the Company has consented to such assignment and
      assumption, which consent shall not be unreasonably withheld.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4.7    
      Survival.
      The
      representations and warranties of the Company and HYUNDAI contained in Articles
      I and II shall survive the Closing for a period of one year.

     

    4.8    
      Further
      Assurances.
      Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as the other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Subscription Agreement and the consummation of the transactions contemplated
      hereby.

     

    4.9    
      No
      Strict Construction.
      The
      language used in this Subscription Agreement will be deemed to be the language
      chosen by the parties to express their mutual intent, and no rules of strict
      construction will be applied against any party, notwithstanding anything herein
      to the contrary. 

     

    4.10    
      Legal Representation.
      Each
      party acknowledges that:
      (a) it
      has read this Subscription Agreement and the exhibits hereto; (b) it understands
      that such party has been represented in the preparation, negotiation, and
      execution of this Subscription Agreement by its own counsel; and that such
      counsel has not represented and is not representing the other party; (c) it
      has
      been represented in the preparation, negotiation, and execution of this
      Subscription Agreement by legal counsel of its own choice; and (d) it
      understands the terms and consequences of this Subscription Agreement and is
      fully aware of its legal and binding effect. 

     

    4.11    
      Confidentiality.
      Each
      party agrees that it shall keep confidential and not divulge, furnish or make
      accessible to anyone, the confidential information concerning or relating to
      the
      business or financial affairs of the other party, if any, contained in the
      Offering Documents to which it becomes privy until such information has been
      publicly disclosed by such other party, until such information is no longer
      confidential, or unless it is required to be disclosed under applicable law
      or
      regulation. 

     

    4.12    
      Counterparts.
      This
      Subscription 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; provided that a facsimile signature shall be considered due
      execution and shall be binding upon the signatory thereto with the same force
      and effect as if the signature were an original, not a facsimile
      signature.

     

    4.13    
      Legal
      Fees.
      In the
      event that any dispute among the parties to this Agreement should result in
      litigation, the prevailing party in such dispute shall be entitled to recover
      from the losing party all fees, costs and expenses of enforcing any right of
      such prevailing party under or with respect to this Agreement, including without
      limitation such reasonable fees and expenses of attorneys and accountants,
      which
      shall include, without, limitation, all fees, costs and expense of
      appeals.

     

    IN
      WITNESS WHEREOF, the parties have executed this Subscription Agreement as of
      the
      day and year first written above.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
              HYUNDAI:

               

              Hyundai
                Syscomm Corp.

               

              By:
                __________________________

                Name:

                Title:

            	 
	
               

              __________________________

              Taxpayer
                Identification Number of Purchaser

               

            	 
	
              Number
                of Shares of Common Stock Subscribed For (subject to limitations
                set
                forth

               in
                this Subscription Agreement):     
                900,000

            	
              Subscription
                Accepted by MSGI Security Solutions, Inc.:

               

              By:
                ___________________________

                    
                Name: Jeremy Barbera

                    
                Title: Chairman and CEO

               

            
	 	
              Number
                of shares of Common Stock Sub-scription Accepted (subject to limitations
                set forth in the Subscription Agreement):
                900,000

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