Document:

Unassociated Document

    INVESTMENT
      AGREEMENT

    

    INVESTMENT
      AGREEMENT (this “AGREEMENT”), dated as of September
      12, 2006 by and between Homeland
      Security Network Inc,
      Inc., a
      Nevada corporation (the “Company”),
      and
      EFUND SMALL CAP FUND II, LP., a Nevada limited liability company (the
“Purchaser”).

    

    Whereas,
      the
      parties desire that, upon the terms and subject to the conditions contained
      herein, the Purchaser shall invest up to $5,000,000 to purchase the Company’s
      Common Stock, $0.001 par value per share (the “Common
      Stock”);
      

    

    Whereas,
      such
      investments will be made in reliance upon the provisions of Section 4(2) under
      the Securities Act of 1933, as amended (the “1933
      Act”),
      Rule
      506 of Regulation D, and the rules and regulations promulgated thereunder,
      and/or upon such other exemption from the registration requirements of the
      1933
      Act as may be available with respect to any or all of the investments in Common
      Stock to be made hereunder; and

    

    Whereas,
      contemporaneously with the execution and delivery of this Agreement, the parties
      hereto are executing and delivering a Registration Rights Agreement
      substantially in the form attached hereto as Exhibit
      A
      (as
      amended from time to time, the “Registration
      Rights Agreement”)
      pursuant to which the Company has agreed to provide certain registration rights
      under the 1933 Act, and the rules and regulations promulgated thereunder, and
      applicable state securities laws.

    

    NOW
      THEREFORE, in consideration of the foregoing recitals, which shall be considered
      an integral part of this Agreement, the covenants and agreements set forth
      hereafter, and other good and valuable consideration, the receipt and
      sufficiency of which is hereby acknowledged, the Company and the Purchaser
      hereby agree as follows:

    

    Section
      1.
      DEFINITIONS.
      

    

    As
      used
      in this Agreement, the following terms shall have the following meanings
      specified or indicated, and such meanings shall be equally applicable to the
      singular and plural forms of the defined terms.

    

    “1933
      Act”
shall
      have the meaning set forth in the preamble, above.

    

    “1934
      Act”
shall
      mean the Securities Exchange Act of 1934, as it may be amended.

    

    “Affiliate”
shall
      have the meaning specified in Section 5(h), below.

    

    “Agreed
      Upon Procedures Report”
shall
      have the meaning specified in Section 2(o), below.

    

    “Agreement”
shall
      mean this Investment Agreement.

    

    “Best
      Bid”
      shall
      mean the highest posted bid price of the Common Stock.

    

    “Bring
      Down Cold Comfort Letter”
shall
      have the meaning specified in Section 2(n), below.

    

    “Buy
      In”
shall
      have the meaning specified in Section 6, below.

    

    “Buy
      In
      Adjustment Amount”
shall
      have the meaning specified in Section 6.

    

    “Closing”
shall
      have the meaning specified in Section 2(h).

    

    “Closing
      Date”
shall
      mean five (5) Trading Days following the Put Notice Date.

    

    “Common
      Stock”
shall
      have the meaning set forth in the preamble to this Agreement.

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    “Control”
or
      “Controls”
shall
      have the meaning specified in Section 5(h).

    

    “Covering
      Shares”
shall
      have the meaning specified in Section 6.

    

    “Effective
      Date”
shall
      mean the date the SEC declares effective under the 1933 Act the Registration
      Statement covering the Securities.

    

    “Environmental
      Laws”
shall
      have the meaning specified in Section 4(m), below.

    

    “Execution
      Date”
shall
      mean the date first indicated above.

    

    “Indemnitiees”
shall
      have the meaning specified in Section 10, below.

    

    “Indemnified
      Liabilities”
shall
      have the meaning specified in Section 10, below.

     

    “Ineffective
      Period”
shall
      mean any period of time that the Registration Statement or any Supplemental
      Registration Statement (as defined in the Registration Rights Agreement) becomes
      ineffective or unavailable for use for the sale or resale, as applicable, of
      any
      or all of the Registrable Securities (as defined in the Registration Rights
      Agreement) for any reason (or in the event the prospectus under either of the
      above is not current and deliverable) during any time period required under
      the
      Registration Rights Agreement.

    

    “Purchaser”
shall
      have the meaning indicated above. 

    

    “Major
      Transaction”
shall
      have the meaning specified in Section 2(g), above.

    

    “Material
      Adverse Effect”
shall
      have the meaning specified in Section 4(a).

    

    “Material
      Facts”
shall
      have the meaning specified in Section 2(m).

    

    “Maximum
      Common Stock Issuance”
shall
      have the meaning specified in Section 2(j).

    

    “Minimum
      Acceptable Price”
with
      respect to any Put Notice Date shall mean 75% of the average of the closing
      bid
      prices for the fifteen Trading Day period immediately preceding such Put Notice
      Date.

    

    “Open
      Period”
shall
      mean the period beginning on and including the Trading Day immediately following
      the Effective Date and ending on the earlier to occur of (i)
      the date
      which is 36 months from the Effective Date; and (ii)
      termination of the Agreement in accordance with Section 9, below.

    

    “Payment
      Amount”
shall
      have the meaning specified in Section 2(p), below.

    

    “Partial
      Release Form”
shall
      have the meaning specified in Section 2(i), below.

     

    “Pricing
      Period”
shall
      mean the period beginning on the Put Notice Date and ending on and including
      the
      date that is five Trading Days after such Put Notice Date.

    

    “Principal
      Market”
shall
      mean the American Stock Exchange, Inc., the National Association of Securities
      Dealers, Inc. Over-the-Counter Bulletin Board, the Nasdaq National Market System
      or the Nasdaq SmallCap Market, whichever is the principal market on which the
      Common Stock is listed.

    

    “Prospectus”
shall
      mean the prospectus, preliminary prospectus and supplemental prospectus used
      in
      connection with the Registration Statement.

    

    “Purchase
      Amount”
shall
      mean the total amount being paid by the Purchaser on a particular Closing Date
      to purchase the Securities.

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    “Purchase
      Price”
shall
      mean 91% of the average of the four lowest closing Best Bid price of the Common
      Stock during the Pricing Period. 

    

    “Put
      Amount”
shall
      have the meaning set forth in Section 2(b) hereof. 

    

    “Put
      Notice”
shall
      mean a written notice sent to the Purchaser by the Company stating the Put
      Amount of Shares the Company intends to sell to the Purchaser pursuant to the
      terms of the Agreement and stating the current number of Shares issued and
      outstanding on such date.

     

    “Put
      Notice Date”
shall
      mean the Trading Day immediately following the day on which the Purchaser
      receives a Put Notice, however a Put Notice shall be deemed delivered
      on
      (x)
      the
      Trading Day it is received by facsimile or otherwise by the Purchaser if such
      notice is received prior to 9:00 am Eastern Time, or (y)
      the
      immediately succeeding Trading Day if it is received by facsimile or otherwise
      after 9:00 am Eastern Time on a Trading Day. No Put Notice may be deemed
      delivered on a day that is not a Trading Day. 

    

    “Put
      Restriction”
shall
      mean the days between the end of the Pricing Period and the date on which the
      Purchaser deems the Put closed. During this time, the Company shall not be
      entitled to deliver another Put Notice.

    

    “Registration
      Period”
shall
      have the meaning specified in Section 5(c), below.

    

    “Registration
      Rights Agreement”
shall
      have the meaning set forth in the recitals, above.

    

    “Registration
      Statement”
means
      the registration statement of the Company filed under the 1933 Act covering
      the
      Common Stock issuable hereunder.

    

    “Related
      Party”
shall
      have the meaning specified in Section 5(h).

    

    “Repurchase
      Event”
shall
      have the meaning specified in Section 2(p).

    

    “Resolution”
shall
      have the meaning specified in Section 8(f).

    

    “SEC”
shall
      mean the U.S. Securities & Exchange Commission.

    

    “SEC
      Documents”
shall
      have the meaning specified in Section 4(f).

    

    “Securities”
shall
      mean the shares of Common Stock issued pursuant to the terms of the
      Agreement.

    

    “Shares”
shall
      mean the shares of the Company’s Common Stock.

    

    “Sold
      Shares”
shall
      have the meaning specified in Section 6.

    

    “Subsidiaries”
shall
      have the meaning specified in Section 4(a).

    

    “Trading
      Day”
shall
      mean any day on which the Principal Market for the Common Stock is open for
      trading, from the hours of 9:30 am until 4:00 pm.

    

    “Transaction
      Documents”
shall
      mean this Agreement, the Registration Rights Agreement, and each of the other
      agreements entered into by the parties hereto in connection with this
      Agreement.

     

    “Valuation
      Event”
shall
      have the meaning specified in Section 2(k).

    

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    Section
      2. PURCHASE
      AND SALE OF COMMON STOCK.

     

    (a) Purchase
      and Sale of Common Stock.
      Subject
      to the terms and conditions set forth herein, the Company shall issue and sell
      to the Purchaser, and the Purchaser shall purchase from the Company, up to
      that
      number of Shares having an aggregate Purchase Price of $5,000,000. 

    

    (b)
      Delivery of Put Notices. 

    

    (i)
      Subject
      to the terms and conditions of the Transaction Documents, and from time to
      time
      during the Open Period, the Company may, in its sole discretion, deliver a
      Put
      Notice to the Purchaser which states the Put Amount (designated in shares of
      Common Stock) which the Company intends to sell to the Purchaser on a Closing
      Date. The Put Notice shall be in the form attached hereto as Exhibit
      F
      and
      incorporated herein by reference. The amount that the Company shall be entitled
      to Put to the Purchaser (the “Put
      Amount”)
      shall
      be equal to, at the Company’s election, either: (a)
      200% of
      the average daily volume (U.S. market only) of the Common Stock for the 10
      Trading Days prior to the applicable Put Notice Date, multiplied by the average
      of the four daily closing Best Bid prices immediately preceding the Put Date,
      or
(b)
      a
      minimum of $10,000; provided
      that in
      no event will the Put Amount be more than $100,000 with respect to any single
      Put. During the Open Period, the Company shall not be entitled to submit a
      Put
      Notice until after the previous Closing has been completed. The Purchase Price
      for the Common Stock identified in the Put Notice shall be equal to 91% of
      the
      average of the four lowest closing Best Bid price of the Common Stock during
      the
      Pricing Period.

    

    (ii)
      If any
      closing bid price during the applicable Pricing Period with respect to that
      Put
      Notice is less than 75% of the any closing Best Bid prices of the Common Stock
      for the fifteen Trading Days prior to the Put Notice Date (the “Minimum
      Acceptable Price”),
      the
      Put Notice will terminate at the Company’s request sent in accordance with
      Section 9 of this Agreement. In the event that the closing bid price for the
      applicable Pricing Period is less than the Minimum Acceptable Price, the Company
      may elect, by sending written notice to the Purchaser to cancel the Put Notice.
      

    

    (iii)
      Within
      seven calendar days after the commencement of each calendar quarter occurring
      subsequent to the commencement of the Open Period, the Company undertakes to
      notify Purchaser as to its reasonable expectations as to the Put Amount it
      intends to raise during such calendar quarter, if any, through the issuance
      of
      Put Notices. Such notification shall constitute only the Company’s good faith
      estimate with respect to such calendar quarter and shall in no way obligate
      the
      Company to raise such amount during such calendar quarter or otherwise limit
      its
      ability to deliver Put Notices during such calendar quarter. The failure by
      the
      Company to comply with this provision may be cured by the Company’s notification
      Purchaser at any time as to its reasonable expectations with respect to the
      current calendar quarter.

    

    (c)
      Interest.
      It is
      the intention of the parties that any interest that may be deemed to be payable
      under this Agreement shall not exceed the maximum amount permitted under
      applicable law. If any applicable law sets the maximum interest amount, and
      any
      payment required under this Agreement exceeds such limit, then: (i)
      any such
      interest shall be reduced by the amount necessary to reduce the interest to
      the
      legally permitted limit; and (ii)
      any sums
      already collected (if any) from a party which exceed the legally permitted
      limits will be refunded to such party. 

    

    (d)
      Purchaser’s Obligation to Purchase Shares.
      Subject
      to the conditions set forth in this Agreement, following the Purchaser's receipt
      of a validly delivered Put Notice, the Purchaser shall be required to purchase
      from the Company during the related Pricing Period that number of Shares having
      an aggregate Purchase Price equal to the lesser of (i) the Put Amount set forth
      in the Put Notice, and (ii) 200% of the aggregate trading volume of the Common
      Stock during the applicable Pricing Period times (x) 91% of the lowest closing
      bid price of the Company's Common Stock during the specified Pricing Period,
      but
      only if said Shares bear no restrictive legend, are not subject to stop transfer
      instructions and are being held in escrow, pursuant to Section 2(h), prior
      to
      the applicable Closing Date. 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (e) Limitation
      on Purchaser’s Obligation to Purchase Shares.
      In no
      event shall the Purchaser purchase Shares (whether from the Company or in public
      or private secondary transactions) other than pursuant to this Agreement until
      such date as this Agreement is terminated. 

    

    (f) Conditions
      to Purchaser’s Obligation to Purchase Shares.
      Notwithstanding anything to the contrary in this Agreement, the Company shall
      not be entitled to deliver a Put Notice and the Purchaser shall not be obligated
      to purchase any Shares at a Closing (as defined in Section 2(h)) unless each
      of
      the following conditions are satisfied: 

    

    (i)
      a
      Registration Statement shall have been declared effective and shall remain
      effective and available for the resale of all the Registrable Securities (as
      defined in the Registration Rights Agreement) at all times until the Closing
      with respect to the subject Put Notice;

    

    (ii)
      at all
      times during the period beginning on the related Put Notice Date and ending
      on
      and including the related Closing Date, the Common Stock shall have been listed
      on the Principal Market and shall not have been suspended from trading thereon
      for a period of five consecutive Trading Days during the Open Period and the
      Company shall not have been notified of any pending or threatened proceeding
      or
      other action to delist or suspend the Common Stock;

    

    (iii)
      the
      Company has complied with its obligations and is otherwise not in breach of
      a
      material provision of, or in default under, this Agreement, the Registration
      Rights Agreement or any other agreement executed in connection herewith which
      has not been corrected prior to delivery of the Put Notice Date; 

    

    (iv)
      no
      injunction shall have been issued and remain in force, or action commenced
      by a
      governmental authority which has not been stayed or abandoned, prohibiting
      the
      purchase or the issuance of the Securities; and 

    

    (v)
      the
      issuance of the Securities will not violate any share Purchaser approval
      requirements of the Principal Market. 

    

    If
      any of
      the events described in clauses (i) through (v) above occurs during a Pricing
      Period, then the Purchaser shall have no obligation to purchase the Put Amount
      of Common Stock set forth in the applicable Put Notice. 

    

    (g) Major
      Transaction.
      For
      purposes of this Agreement, a “Major
      Transaction”
shall
      be deemed to have occurred upon the closing of any of the following events:
      (i)
      the
      consolidation, merger or other business combination of the Company with or
      into
      another person (other than pursuant to a migratory merger effected solely for
      the purposes of changing the jurisdiction of incorporation of the Company or
      other than a transaction in which the Company is the surviving corporation);
      (ii)
      the sale
      or transfer of all or substantially all of the Company’s assets; or (iii)
      the
      consummation of a purchase, tender or exchange offer made to, and accepted
      by,
      the Purchasers of more than 50% of the economic interest in, or the combined
      voting power of all classes of voting stock of, the Company.

    

    (h) Mechanics
      of Purchase of Shares by Purchaser.
      Subject
      to the satisfaction of the conditions set forth in Sections 2(f), 7 and 8,
      the
      closing of the purchase by the Purchaser of Shares or the Purchaser deeming
      a
      Put closed (a “Closing”)
      shall
      occur on the date which is no later than seven Trading Days following the
      applicable Put Notice Date or when the Purchaser deems a Put closed (each a
      “Closing
      Date”).
      Prior
      to each Closing Date, (i)
      the
      Company shall deliver to the Purchaser pursuant to the this Agreement,
      certificates representing the Shares to be issued to the Purchaser on such
      date
      and registered in the name of the Purchaser; and (ii)
      the
      Purchaser shall deliver to the Company the Purchase Price to be paid for such
      Shares, determined as set forth in Sections 2(b) and 2(d). In lieu of delivering
      physical certificates representing the Securities and provided that the
      Company’s transfer agent then is participating in The Depository Trust Company
      (“DTC”)
      Fast
      Automated Securities Transfer (“FAST”)
      program, upon request of the Purchaser, the Company shall use its commercially
      reasonable efforts to cause its transfer agent to electronically transmit the
      Securities by crediting the account of the Purchaser’s prime broker (which shall
      be specified by the Purchaser a reasonably sufficient time in advance) with
      DTC
      through its Deposit Withdrawal Agent Commission (“DWAC”)
      system.  

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    The
      Company understands that a delay in the issuance of Securities beyond the
      Closing Date could result in economic loss to the Purchaser. After the Effective
      Date, as compensation to the Purchaser for such loss, the Company agrees to
      pay
      late payments to the Purchaser for late issuance of Securities (delivery of
      Securities after the applicable Closing Date) in accordance with the following
      schedule (where “No.
      of
      Days Late”
is
      defined as the number of days beyond the Closing Date): 

    

    
      	
              Late
                Payment For Each

            	 
	
              No.
                of Days Late

            	
              $10,000
                of Common Stock

            
	 	 
	
              1

            	
              $100

            
	
              2

            	
              $200

            
	
              3

            	
              $300

            
	
              4

            	
              $400

            
	
              5

            	
              $500

            
	
              6

            	
              $600

            
	
              7

            	
              $700

            
	
              8

            	
              $800

            
	
              9

            	
              $900

            
	
              10

            	
              $1,000

            
	
              Over
                10

            	
              $1,000
                + $200 for each

            
	 	
              Business
                Day late beyond 10 days

            

    

    

    The
      Company shall pay any payments incurred under this Section in immediately
      available funds upon demand. Nothing herein shall limit the Purchaser’s right to
      pursue actual damages for the Company’s failure to issue and deliver the
      Securities to the Purchaser, except to the extent that such late payments shall
      constitute payment for and offset any such actual damages alleged by the
      Purchaser, and any Buy In Adjustment Amount.

    

    (i) reserved.

    

    (j) Overall
      Limit on Common Stock Issuable.
      Notwithstanding anything contained herein to the contrary, if during the Open
      Period the Company becomes listed on an exchange that limits the number of
      shares of Common Stock that may be issued without share Purchaser approval,
      then
      the number of Shares issuable by the Company and purchasable by the Purchaser,
      including the shares of Common Stock issuable to the Purchasers pursuant to
      Section 11(b), shall not exceed that number of the shares of Common Stock that
      may be issuable without share Purchaser approval, subject to appropriate
      adjustment for stock splits, stock dividends, combinations or other similar
      recapitalization affecting the Common Stock (the “Maximum
      Common Stock Issuance”),
      unless the issuance of Shares, including any Common Stock to be issued to the
      Purchasers pursuant to Section 11(b), in excess of the Maximum Common Stock
      Issuance shall first be approved by the Company’s share Purchasers in accordance
      with applicable law and the By-laws and Amended and Restated Certificate of
      Incorporation of the Company, if such issuance of shares of Common Stock could
      cause a delisting on the Principal Market. The parties understand and agree
      that
      the Company’s failure to seek or obtain such share Purchaser approval shall in
      no way adversely affect the validity and due authorization of the issuance
      and
      sale of Securities or the Purchaser’s obligation in accordance with the terms
      and conditions hereof to purchase a number of Shares in the aggregate up to
      the
      Maximum Common Stock Issuance limitation, and that such approval pertains only
      to the applicability of the Maximum Common Stock Issuance limitation provided
      in
      this Section 2(j).

    

    (k)
      For the
      purpose of this Agreement, the term “Valuation
      Event”
means
      the Company taking any of the following actions at any time during a Pricing
      Period:

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    (i)
      the
      subdivision or combinations of the Company’s Common Stock;

    

    (ii)
      the
      payment of a dividend or any other distribution with respect to shares of the
      Company’s Common Stock;

    

    (iii)
      the
      issuance of any options or other rights to subscribe for or purchase Common
      Stock (“Options”)
      or any
      securities convertible into or exchangeable for Common Stock (“Convertible
      Securities”),
      except for Incentive Stock Option Plans, the price per share for which Common
      Stock is shall be less than the bid price in effect immediately prior to such
      issuance of such Options or Convertible Securities;

    

    (iv)
      the
      issuance of shares of Common Stock other than as provided in the foregoing
      subsections (i) through (iii), at a price per share less, or for other
      consideration lower, than the bid price in effect immediately prior to such
      issuance, or without consideration, except for Incentive Stock Option Plans;
      or

    

    (v)
      the
      distribution of its assets or evidences of indebtedness to the Purchasers of
      Common Stock as a dividend in liquidation or by way of return of capital or
      other than as a dividend payable out of earnings or surplus legally available
      for dividends under applicable law or any distribution to such Purchasers made
      in respect of the sale of all or substantially all of the Company’s assets
      (other than under the circumstances provided for in the foregoing subsections
      (i) through (iv)).

     

    (l)
      The
      Company agrees that it shall not take any action that would result in a
      Valuation Event occurring during a Pricing Period. 

    

    (m) reserved.

    

    (n) Audit.

    

    (i)
      Whenever
      reasonably requested by Purchaser, the Company shall engage its independent
      auditors to prepare in accordance with the provisions of Statement on Auditing
      Standards No. 71, as amended, such written report (the “Bring
      Down Cold Comfort Letters”)
      with
      respect to the financial information contained in the Registration Statement
      and
      shall have delivered to the Purchaser such a report addressed to the Purchaser,
      on or prior to each Registration Opinion Deadline;

    

    (ii)
      in the
      event that the Purchaser shall have requested delivery of an Agreed Upon
      Procedures Report pursuant to Section 2(o), the Company shall engage its
      independent auditors to perform certain agreed upon procedures and report
      thereon as shall have been reasonably requested by the Purchaser with respect
      to
      certain financial information of the Company and the Company shall deliver
      to
      the Purchaser a copy of such report addressed to the Purchaser. In the event
      that the report required by this Section 2(n) cannot be delivered by the
      Company’s independent auditors, the Company shall, if necessary, promptly revise
      the Registration Statement and the Company shall not deliver a Put Notice to
      Purchaser until such report is delivered. 

    

    (o)
      Procedure if Material Facts are Reasonably Believed to be Untrue or are
      Omitted.
      In the
      event after such consultation the Purchaser or the Purchaser’s counsel
      reasonably believes that the Registration Statement contains an untrue statement
      or a 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, (i)
      the
      Company shall file with the SEC an amendment to the Registration Statement
      responsive to such alleged untrue statement or omission and provide the
      Purchaser, as promptly as practicable, with copies of the Registration Statement
      and related Prospectus, as so amended, or (ii)
      if the
      Company disputes the existence of any such material misstatement or omission,
      and in the event the dispute relates to the adequacy of financial disclosure
      and
      the Purchaser shall reasonably request, the Company’s independent auditors shall
      provide to the Company a letter (“Agreed
      Upon Procedures Report”)
      outlining the performance of such “agreed upon procedures,” which shall not
      require any more than the SAS 71 review described above as shall be reasonably
      requested by the Purchaser and the Company shall provide the Purchaser with
      a
      copy of such letter. 

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (p)
      Delisting; Suspension.
      If at
      any time during the Open Period or within 30 calendar days after the end of
      the
      Open Period; (i)
      the
      Registration Statement, after it has been declared effective, shall not remain
      effective and available for sale of all the Registrable Securities for a period
      exceeding 10 calendar days; (ii)
      the
      Common Stock shall not be listed on the Principal Market or shall have been
      suspended from trading thereon (excluding suspensions of not more than one
      trading day resulting from business announcements by the Company) or the Company
      shall have been notified of any pending or threatened proceeding or other action
      to delist or suspend the Common Stock; (iii)
      there
      shall have occurred a Major Transaction (as defined in Section 2(g)) or the
      public announcement of a pending Major Transaction which has not been abandoned
      or terminated; or (iv)
      the
      Registration Statement is no longer effective or stale for a period of more
      than
      five Trading Days as a result of the Company’s failure to timely file its
      financial statements or for any other reason, the Company shall repurchase,
      within 30 calendar days of the occurrence of one of the events listed in clauses
      (i), (ii), (iii) or (iv) above (each a “Repurchase
      Event”)
      and
      subject to the limitations imposed by applicable federal and state law, all
      or
      any part of the Securities issued to the Purchaser within the 60 Trading Days
      preceding the occurrence of the Repurchase Event and then held by the Purchaser
      at a price per Share equal to the highest closing bid price during the period
      beginning on the date of the Repurchase Event and ending on and including the
      date on which the Purchaser is paid by the Company for the repurchase of the
      Shares (the “Payment
      Amount”).
      If
      the Company fails to pay to the Purchaser the full aggregate Payment Amount
      within ten calendar days of the occurrence of a Repurchase Event, the Company
      shall pay to the Purchaser, on the first Trading Day following such tenth
      calendar day, in addition to and not in lieu of the Payment Amount payable
      by
      the Company to the Purchaser, an amount equal to 2% of the aggregate Payment
      Amount then due and payable to the Purchaser, in cash by wire transfer, plus
      compounded annual interest of 18% on such Payment Amount during the period,
      beginning on the day following such tenth calendar day, during which such
      Payment Amount, or any portion thereof, is outstanding.

    

    Section
      3. PURCHASER’S
      REPRESENTATIONS, WARRANTIES AND COVENANTS.

    

    The
      Purchaser represents and warrants to the Company, and covenants,
      that:

    

    (a) Sophisticated
      Purchaser.
      The
      Purchaser has, by reason of its business and financial experience, such
      knowledge, sophistication and experience in financial and business matters
      and
      in making investment decisions of this type that it is capable of (i)
      evaluating the merits and risks of an investment in the Securities and making
      an
      informed investment decision; (ii)
      protecting its own interest; and (iii)
      bearing
      the economic risk of such investment for an indefinite period of time.

    

    (b)
      Authorization; Enforcement.
      This
      Agreement has been duly and validly authorized, executed and delivered on behalf
      of the Purchaser and is a valid and binding agreement of the Purchaser
      enforceable against the Purchaser in accordance with its terms, subject as
      to
      enforceability to general principles of equity and to applicable bankruptcy,
      insolvency, reorganization, moratorium, liquidation and other similar laws
      relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies.

    

    (c) Section
      9 of the 1934 Act.
      During
      the term of this Agreement, the Purchaser will comply with the provisions of
      Section 9 of the 1934 Act, and the rules promulgated thereunder, with respect
      to
      transactions involving the Common Stock. The Purchaser agrees not to short,
      either directly or indirectly through its affiliates, principals or advisors,
      the Company’s common stock during the term of this Agreement.

    

    (d) Accredited
      Purchaser.
      Purchaser is an “Accredited Purchaser” as that term is defined in Rule 501(a)(3)
      of Regulation D of the 1933 Act.

    

    
      
        
        

      

      
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    (e)
      No Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the
      Purchaser and the consummation by the Purchaser of the transactions contemplated
      hereby and thereby will not result in a violation of Partnership Agreement
      or
      other organizational documents of the Purchaser.

    

    (f) Opportunity
      to Discuss.
      The
      Purchaser has had an opportunity to discuss the business, management and
      financial affairs of the Company with the Company’s management.

    

    (g) Investment
      Purposes.
      The
      Purchaser is purchasing the Securities for its own account for investment
      purposes and not with a view towards distribution and agrees to resell or
      otherwise dispose of the Securities solely in accordance with the registration
      provisions of the 1933 Act (or pursuant to an exemption from such registration
      provisions).

    

    (h) No
      Registration as a Dealer.
      The
      Purchaser is not and will not be required to be registered as a “dealer” under
      the 1934 Act, either as a result of its execution and performance of its
      obligations under this Agreement or otherwise. 

    

    (i)
      The Purchaser is a Limited Liability Company,
      duly
      organized, validly existing and in good standing in the State of
      Nevada.

    

    
      
        (j)
          The
          Purchaser understands that it is liable for its own tax
          liabilities.

      

    

    

    (k)
      The Purchaser will comply with Regulation M under the 1934 Act, if
      applicable

    

    Section
      4. REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.

    

    Except
      as
      set forth in the Schedules attached hereto, or as disclosed in the Company’s
      materials, the Company represents and warrants to the Purchaser
      that:

    

    (a)
      Organization and Qualification.
      The
      Company is a corporation duly organized and validly existing in good standing
      under the laws of the State of Nevada, and has the requisite corporate power
      and
      authorization 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 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 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 and
      its
      Subsidiaries, if any, taken as a whole, or on the transactions contemplated
      hereby or by the agreements and instruments to be entered into in connection
      herewith, or on the authority or ability of the Company to perform its
      obligations under the Transaction Documents (as defined in Section 1 and 4(b),
      below). 

    

    (b) 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, and each of the
      other
      agreements entered into by the parties hereto in connection with the
      transactions contemplated by this Agreement (collectively, the “Transaction
      Documents”),
      and
      to issue the Securities in accordance with the terms hereof and thereof.

    

    (ii)
      The
      execution and delivery of the Transaction Documents by the Company and the
      consummation by it of the transactions contemplated hereby and thereby,
      including without limitation the reservation for issuance and the issuance
      of
      the Securities pursuant to this Agreement, have been duly and validly 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 share
      Purchasers.

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (iii)
      The
      Transaction Documents have been duly and validly executed and delivered by
      the
      Company.

    

    (iv)
      The
      Transaction Documents 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.

    

    (c) Capitalization.
      As of
      the date hereof, the authorized capital stock of the Company consists of
      (i) 400,000,000 shares
      of
      Common Stock, .001 par value per share, of which as of the date
      hereof, 175,336,430
      shares
      are issued and outstanding; shares of reserved for issuance pursuant to options,
      warrants and other convertible securities. All of such outstanding shares have
      been, or upon issuance will be, validly issued and are fully paid and
      nonassessable. Except as disclosed in the Company’s publicly available filings
      with Periodic Filings, (i)
      no
      shares of the Company’s capital stock are subject to preemptive rights or any
      other similar rights or any liens or encumbrances suffered or permitted by
      the
      Company; (ii)
      there
      are no outstanding debt securities; (iii)
      there
      are
      no outstanding shares of capital stock, 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; (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 1933 Act (except the Registration Rights Agreement); (v)
      there
      are no outstanding securities of the Company or any of its Subsidiaries which
      contain any redemption or similar provisions, and there are no contracts,
      commitments, understandings or arrangements by which the Company or any of
      its
      Subsidiaries is or may become bound to redeem a security of the Company or
      any
      of its Subsidiaries; (vi)
      there
      are no securities or instruments containing anti-dilution or similar provisions
      that will be triggered by the issuance of the Securities as described in this
      Agreement; (vii)
      the
      Company does not have any stock appreciation rights or “phantom stock” plans or
      agreements or any similar plan or agreement; and (viii)
      there is
      no dispute as to the classification of any shares of the Company’s capital
      stock. The Company has furnished to the Purchaser, or the Purchaser has had
      access through EDGAR to, true and correct copies of the Company’s Amended and
      Restated Certificate of Incorporation, as in effect on the date hereof (the
      “Certificate
      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 Purchasers thereof in respect thereto.

    

    (d) Issuance
      of Shares.
      The
      Company will reserve such number of shares for issuance pursuant to this
      Agreement once this agreement has been duly authorized and reserved for issuance
      (subject to adjustment pursuant to the Company’s covenant set forth in Section
      5(f) below) pursuant to this Agreement. Upon issuance in accordance with this
      Agreement, the Securities will be validly issued, fully paid and non-assessable
      and free from all taxes, liens and charges with respect to the issue thereof.
      In
      the event the Company cannot register a sufficient number of Shares for issuance
      pursuant to this Agreement, the Company will use its best efforts to authorize
      and reserve for issuance the number of Shares required for the Company to
      perform its obligations hereunder as soon as reasonably
      practicable.

    

    (e) No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company of the transactions contemplated hereby
      and
      thereby will not (i)
      result
      in a violation of the Certificate of Incorporation, any Certificate of
      Designations, Preferences and Rights of any outstanding series of preferred
      stock of the Company or the By-laws; or (ii)
      conflict
      with, or constitute a material default (or an event which with notice or lapse
      of time or both would become a material default) under, or give to others any
      rights of termination, amendment, acceleration or cancellation of, any material
      agreement, contract, indenture mortgage, indebtedness or instrument to which
      the

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    Company
      or any of its Subsidiaries is a party, or result in a violation of any law,
      rule, regulation, order, judgment or decree (including United States federal
      and
      state securities laws and regulations and the rules and regulations of the
      Principal Market or principal securities exchange or trading market on which
      the
      Common Stock is traded or listed) applicable to the Company or any of its
      Subsidiaries or by which any property or asset of the Company or any of its
      Subsidiaries is bound or affected. Except as disclosed in Schedule 4(e), neither
      the Company nor its Subsidiaries is in violation of any term of, or in default
      under, the Certificate of Incorporation, any Certificate of Designations,
      Preferences and Rights of any outstanding series of preferred stock of the
      Company or the By-laws or their organizational charter or by-laws, respectively,
      or any contract, agreement, mortgage, indebtedness, indenture, instrument,
      judgment, decree or order or any statute, rule or regulation applicable to
      the
      Company or its Subsidiaries, except for possible conflicts, defaults,
      terminations, amendments, accelerations, cancellations and violations that
      would
      not individually or in the aggregate have a Material Adverse Effect. The
      business of the Company and its Subsidiaries is not being conducted, and shall
      not be conducted, in violation of any law, statute, ordinance, rule, order
      or
      regulation of any governmental authority or agency, regulatory or
      self-regulatory agency, or court, except for possible violations the sanctions
      for which either individually or in the aggregate would not have a Material
      Adverse Effect. Except as specifically contemplated by this Agreement and as
      required under the 1933 Act, the Company is not required to obtain any consent,
      authorization, permit or order of, or make any filing or registration (except
      the filing of a registration statement) with, any court, governmental authority
      or agency, regulatory or self-regulatory agency or other third party in order
      for it to execute, deliver or perform any of its obligations under, or
      contemplated by, the Transaction Documents in accordance with the terms hereof
      or thereof. All consents, authorizations, permits, 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 and
      are
      in full force and effect as of the date hereof. Except as disclosed in Schedule
      4(e), the Company and its Subsidiaries are unaware of any facts or circumstances
      which might give rise to any of the foregoing. The Company is not, and will
      not
      be, in violation of the listing requirements of the Principal Market as in
      effect on the date hereof and on each of the Closing Dates and is not aware
      of
      any facts which would reasonably lead to delisting of the Common Stock by the
      Principal Market in the foreseeable future.

    

    (f) SEC
      Documents; Financial Statements.
      The
      Company has delivered to the Purchaser or its representatives, or they have
      had
      access through EDGAR to, true and complete copies of the SEC Documents. As
      of
      their respective dates, the SEC Documents complied in all material respects
      with
      the requirements of the 1934 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 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 (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 written information provided by or on behalf of the Company to the
      Purchaser which is not included in the SEC Documents, including, without
      limitation, information referred to in Section 4(d) of this Agreement, contains
      any untrue statement of a material fact or omits to state any material fact
      necessary to make the statements therein, in the light of the circumstance
      under
      which they are or were made, not misleading. Neither the Company nor any of
      its
      Subsidiaries or any of their officers, directors, employees or agents have
      provided the Purchaser with any material, nonpublic information which was not
      publicly disclosed prior to the date hereof and any material, nonpublic
      information provided to the Purchaser by the Company or its Subsidiaries or
      any
      of their officers, directors, employees or agents prior to any Closing Date
      shall be publicly disclosed by the Company prior to such Closing
      Date.

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (g) Absence
      of Certain Changes.
      Except
      as set forth in the SEC Documents, the Company does not intend to change the
      business operations of the Company. The Company has not taken any steps, and
      does not currently expect to take any steps, to seek protection pursuant to
      any
      bankruptcy law nor does the Company or its Subsidiaries have any knowledge
      or
      reason to believe that its creditors intend to initiate involuntary bankruptcy
      proceedings.

    

    (h) Absence
      of Litigation.
      Except
      as set forth in Schedule 4(h) and 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 or, to the
      knowledge of the executive officers of Company or any of its Subsidiaries,
      threatened against or affecting the Company, the Common Stock or any of the
      Company’s Subsidiaries or any of the Company’s or the Company’s Subsidiaries’
officers or directors in their capacities as such, in which an adverse decision
      could have a Material Adverse Effect.

    

    (i) Acknowledgment
      Regarding Purchaser’s Purchase of Shares.
      The
      Company acknowledges and agrees that the Purchaser is acting solely in the
      capacity of arm’s length purchaser with respect to the Transaction Documents and
      the transactions contemplated hereby and thereby. The Company further
      acknowledges that the Purchaser is not acting as a financial advisor or
      fiduciary of the Company (or in any similar capacity) with respect to the
      Transaction Documents and the transactions contemplated hereby and thereby
      and
      any advice given by the Purchaser or any of its respective representatives
      or
      agents in connection with the Transaction Documents and the transactions
      contemplated hereby and thereby is merely incidental to the Purchaser’s purchase
      of the Securities. The Company further represents to the Purchaser that the
      Company’s decision to enter into the Transaction Documents has been based solely
      on the independent evaluation by the Company and its
      representatives.

    

    (j) No
      Undisclosed Events, Liabilities, Developments or
      Circumstances.
      Except
      as set forth in the SEC Documents, since December 31, 2005, no event, liability,
      development or circumstance has occurred or exists, or to the Company’s
      knowledge is contemplated to occur, with respect to the Company or its
      Subsidiaries or their respective business, properties, assets, prospects,
      operations or financial condition, that would be required to be disclosed by
      the
      Company under applicable securities laws on a registration statement filed
      with
      the SEC relating to an issuance and sale by the Company of its Common Stock
      and
      which has not been publicly announced.

    

    (k) Employee
      Relations.
      Neither
      the Company nor any of its Subsidiaries is involved in any union labor dispute
      nor, to the knowledge of the Company or any of its Subsidiaries, is any such
      dispute threatened. Neither the Company nor any of its Subsidiaries is a party
      to a collective bargaining agreement, and the Company and its Subsidiaries
      believe that relations with their employees are good. No executive officer
      (as
      defined in Rule 501(f) of the 1933 Act) has notified the Company that such
      officer intends to leave the Company’s employ or otherwise terminate such
      officer’s employment with the Company.

    

    (l) Intellectual
      Property Rights.
      Except
      as set forth in Schedule 4(l) the Company and its Subsidiaries own or possess
      adequate rights or licenses to use all 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. Except
      as set forth the SEC Documents, none of the Company’s trademarks, trade names,
      service marks, service mark registrations, service names, patents, patent
      rights, copyrights, inventions, licenses, approvals, government authorizations,
      trade secrets or other intellectual property rights necessary to conduct its
      business as now or as proposed to be conducted have expired or terminated,
      or
      are expected to expire or terminate within two years from the date of this
      Agreement. 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, or of any such development of similar or identical trade secrets or
      technical information by others and, except as set forth on the SEC Documents,
      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. The
      Company and its Subsidiaries have taken commercially reasonable security
      measures to protect the secrecy, confidentiality and value of all of their
      intellectual properties.

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    (m) Environmental
      Laws.
      The
      Company and its Subsidiaries (i)
      are, to
      the knowledge of management of the Company, in compliance with any and all
      applicable 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, to
      the knowledge of management of the Company, received all permits, licenses
      or
      other approvals required of them under applicable Environmental Laws to conduct
      their respective businesses; and (iii)
      are
      in
      compliance, to the knowledge of the Company, with all terms and conditions
      of
      any such permit, license or approval where, in each of the three foregoing
      cases, the failure to so comply would have, individually or in the aggregate,
      a
      Material Adverse Effect.

    

    (n) Title.
      The
      Company and its Subsidiaries have good and marketable title in fee simple to
      all
      real property and good and marketable title to all personal property owned
      by
      them which is material to the business of the Company and its Subsidiaries,
      in
      each case free and clear of all liens, encumbrances and defects except such
      as
      are described in the SEC Documents or such as do not materially affect the
      value
      of such property and do not interfere with the use made and proposed to be
      made
      of such property by the Company or any of its Subsidiaries. Any real property
      and facilities held under lease by the Company or any of 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.

    

    (o)
      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 reasonably 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 have
      a
      Material Adverse Effect.

    

    (p) Regulatory
      Permits.
      The
      Company and its Subsidiaries have in full force and effect all certificates,
      approvals, authorizations and permits from the appropriate federal, state,
      local
      or foreign regulatory authorities and comparable foreign regulatory agencies,
      necessary to own, lease or operate their respective properties and assets and
      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, approval, authorization or permit, except
      for such certificates, approvals, authorizations or permits which if not
      obtained, or such revocations or modifications which, would not have a Material
      Adverse Effect.

    

    (q)
      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.

    

    (r) No
      Materially Adverse Contracts, Etc.
      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. Neither the Company nor any of its
      Subsidiaries is a party to any contract or agreement which in the judgment
      of
      the Company’s officers has or is expected to have a Material Adverse
      Effect.

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    (s)
      Tax Status. Except
      as
      Disclosed on Schedule 4(s) the Company and each of its Subsidiaries has made
      or
      filed all United States federal and state income and all other tax returns,
      reports and declarations required by any jurisdiction to which it is subject
      (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) and 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.

    

    (t) Certain
      Transactions.
      Except
      as set forth in the SEC Documents filed at least ten days prior to the date
      hereof and except for arm’s length transactions pursuant to which the Company
      makes payments in the ordinary course of business upon terms no less favorable
      than the Company could obtain from third parties and other than the grant of
      stock options disclosed in the SEC Documents, none of the officers, directors,
      or employees of the Company is presently a party to any transaction with the
      Company or any of its Subsidiaries (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.

    

    (u) Dilutive
      Effect.
      The
      Company understands and acknowledges that the number of shares of Common Stock
      issuable upon purchases pursuant to this Agreement will increase in certain
      circumstances including, but not necessarily limited to, the circumstance
      wherein the trading price of the Common Stock declines during the period between
      the Effective Date and the end of the Open Period. The Company’s executive
      officers and directors have studied and fully understand the nature of the
      transactions contemplated by this Agreement and recognize that they have a
      potential dilutive effect. The Board of Directors of the Company has concluded,
      in its good faith business judgment, that such issuance is in the best interests
      of the Company. The Company specifically acknowledges that, subject to such
      limitations as are expressly set forth in the Transaction Documents, its
      obligation to issue shares of Common Stock upon purchases pursuant to this
      Agreement is absolute and unconditional regardless of the dilutive effect that
      such issuance may have on the ownership interests of other share Purchasers
      of
      the Company.

    

    (v) Right
      of First Refusal.
      The
      Company shall not, directly or indirectly, without the prior written consent
      of
      Purchaser offer, sell, grant any option to purchase, or otherwise dispose of
      (or
      announce any offer, sale, grant or any option to purchase or other disposition)
      any of its Common Stock or securities convertible into Common Stock at a price
      that is less than the market price of the Common Stock at the time of issuance
      of such security or investment (a “Subsequent
      Financing”)
      for a
      period of one year after the Effective Date, except (i)
      the
      granting of options or warrants to employees, officers, directors and
      consultants including shares issued to such people under Form S-8, and the
      issuance of shares upon exercise of options granted, under any stock option
      plan
      heretofore or hereafter duly adopted by the Company or for services rendered
      or
      to be rendered; (ii)
      shares
      issued upon exercise of any currently outstanding warrants or options and upon
      conversion of any currently outstanding convertible debenture or convertible
      preferred stock, in each case disclosed pursuant to Section 4(c); (iii)
      securities issued in connection with the capitalization or creation of a joint
      venture with a strategic partner; (iv)
      shares
      issued to pay part or all of the purchase price for the acquisition by the
      Company of another entity (which, for purposes of this clause (iv), shall not
      include an individual or group of individuals); and (v)
      shares
      issued in a bona
      fide
      public
      offering by the Company of its securities, unless (A)
      the
      Company delivers to Purchaser a written notice (the “Subsequent
      Financing Notice”)
      of its
      intention to effect such Subsequent Financing, which Subsequent Financing Notice
      shall describe in reasonable detail the proposed terms of such Subsequent
      Financing, the amount of proceeds intended to be raised thereunder, the person
      with whom such Subsequent Financing shall be effected, and attached to which
      shall be a term sheet or similar document relating thereto; and (B)
      Purchaser shall not have notified the Company by 5:00 p.m. (New York time)
      on
      the fifth Trading Day after its receipt of the Subsequent Financing Notice
      of
      its willingness to provide, subject to completion of mutually acceptable
      documentation, financing to the Company on substantially the terms set forth
      in
      the Subsequent Financing Notice. If Purchaser shall fail to notify the Company
      of its intention to enter into such negotiations within such time period, then
      the Company may effect the Subsequent Financing substantially upon the terms
      set
      forth in the Subsequent Financing Notice; provided
      that
      the
      Company shall provide Purchaser with a second Subsequent Financing Notice,
      and
      Purchaser shall again have the right of first refusal set forth above in this
      Section, if the Subsequent Financing subject to the initial Subsequent Financing
      Notice shall not have been consummated for any reason on the terms set forth
      in
      such Subsequent Financing Notice within thirty Trading Days after the date
      of
      the initial Subsequent Financing Notice. The rights granted to Purchaser in
      this
      Section are not subject to any prior right of first refusal given to any other
      person disclosed on Schedule 4(c).

    

    
      
        
        

      

      
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    (w) Lock-up.
      The
      Company shall cause its officers, insiders, directors, affiliates or other
      related parties to refrain from selling Common Stock during each Pricing Period,
      except for shares issued under S-8 or otherwised agreed to by the parties
      pursuant to a Lock-up and Leak-out Agreement. 

    

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

    

    (y)
      No brokers, finders or financial advisory fees or
      commissions
      will be
      payable by the Company with respect to the transaction contemplated by this
      Agreement.

    

    Section
      5. COVENANTS
      OF THE COMPANY

    

    (a) Best
      Efforts.
      The
      Company shall use commercially reasonable efforts timely to satisfy each of
      the
      conditions to be satisfied by it as provided in Section 7 of this
      Agreement.

     

    (b) Blue
      Sky.
      The
      Company shall, at its sole cost and expense, on or before each of the Closing
      Dates, take such action as the Company shall reasonably determine is necessary
      to qualify the Securities for, or obtain exemption for the Securities for,
      sale
      to the Purchaser at each of the Closings pursuant to this Agreement under
      applicable securities or “Blue Sky” laws of such states of the United States, as
      reasonably specified by Purchaser, and shall provide evidence of any such action
      so taken to the Purchaser on or prior to the Closing Date. 

     

    (c) Reporting
      Status.
      Until
      the earlier to occur of (i)
      the
      first
      date which is after the date this Agreement is terminated pursuant to Section
      9
      and on which the Purchasers (as that term is defined in the Registration Rights
      Agreement) may sell all of the Securities without restriction pursuant to Rule
      144(k) promulgated under the 1933 Act (or successor thereto); and (ii)
      the date
      on which (A)
      the
      Purchasers shall have sold all the Securities; and (B)
      this
      Agreement has been terminated pursuant to Section 9 (the “Registration
      Period”),
      the
      Company shall file all reports required to be filed with the SEC pursuant to
      the
      1934 Act, and the Company shall not terminate its status as a reporting company
      under the 1934 Act.

    

    (d) Use
      of Proceeds.
      The
      Company will use the proceeds from the sale of the Shares (excluding amounts
      paid by the Company for fees as set forth in the Transaction Documents) for
      general corporate and working capital purposes

    

    (e)
      Financial Information.
      The
      Company agrees to make available to the Purchaser via
      EDGAR or
      other electronic means the following to the Purchaser during the Registration
      Period: (i)
      within
      five Trading Days after the filing thereof with the SEC, a copy of its Annual
      Reports on Form 10-KSB, its Quarterly Reports on Form 10-QSB, any Current
      Reports on Form 8-K and any Registration Statements or amendments filed pursuant
      to the 1933 Act; (ii)
      on the
      same day as the release thereof, facsimile copies of all press releases issued
      by the Company or any of its Subsidiaries; (iii)
      copies
      of any notices and other information made available or given to the share
      Purchasers of the Company generally, contemporaneously with the making available
      or giving thereof to the share Purchasers; and (iv)
      within
      two calendar days of filing or delivery thereof, copies of all documents filed
      with, and all correspondence sent to, the Principal Market, any securities
      exchange or market, or the National Association of Securities Dealers, Inc.,
      unless such information is material nonpublic information.

    

    
      
        
        

      

      
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    (f) Reservation
      of Shares.
      Subject
      to the following sentence, the Company shall take all action necessary to at
      all
      times have authorized, and reserved for the purpose of issuance, a sufficient
      number of shares of Common Stock to provide for the issuance of the Securities
      hereunder. In the event that the Company determines that it does not have a
      sufficient number of authorized shares of Common Stock to reserve and keep
      available for issuance as described in this Section 5(f), the Company shall
      use
      its best efforts to increase the number of authorized shares of Common Stock
      by
      seeking share Purchaser approval for the authorization of such additional
      shares.

    

    (g) Listing.
      The
      Company shall promptly secure and maintain the listing of all of the Registrable
      Securities (as defined in the Registration Rights Agreement) upon the Principal
      Market and each other national securities exchange and automated quotation
      system, if any, upon which shares of Common Stock are then listed (subject
      to
      official notice of issuance) and shall maintain, such listing of all Registrable
      Securities from time to time issuable under the terms of the Transaction
      Documents. The Company shall maintain the Common Stock’s authorization for
      quotation on the Principal Market. Neither the Company nor any of its
      Subsidiaries shall take any action which would be reasonably expected to result
      in the delisting or suspension of the Common Stock on the Principal Market
      (excluding suspensions of not more than one trading day resulting from business
      announcements by the Company). The Company shall promptly provide to the
      Purchaser copies of any notices it receives from the Principal Market regarding
      the continued eligibility of the Common Stock for listing on such automated
      quotation system or securities exchange. The Company shall pay all fees and
      expenses in connection with satisfying its obligations under this Section
      5(g).

    

    (h) Transactions
      With Affiliates.
      The
      Company shall not, and shall cause each of its Subsidiaries not to, enter into,
      amend, modify or supplement, or permit any Subsidiary to enter into, amend,
      modify or supplement, any agreement, transaction, commitment or arrangement
      with
      any of its or any Subsidiary’s officers, directors, persons who were officers or
      directors at any time during the previous two years, share Purchasers who
      beneficially own 5% or more of the Common Stock, or affiliates or with any
      individual related by blood, marriage or adoption to any such individual or
      with
      any entity in which any such entity or individual owns a 5% or more beneficial
      interest (each a “Related
      Party”),
      except for (i)
      customary employment arrangements and benefit programs on reasonable terms,
      (ii)
      any
      agreement, transaction, commitment or arrangement on an arms-length basis on
      terms no less favorable than terms which would have been obtainable from a
      person other than such Related Party, or (iii)
      any
      agreement, transaction, commitment or arrangement which is approved by a
      majority of the disinterested directors of the Company. For purposes hereof,
      any
      director who is also an officer of the Company or any Subsidiary of the Company
      shall not be a disinterested director with respect to any such agreement,
      transaction, commitment or arrangement. “Affiliate”
for
      purposes hereof means, with respect to any person or entity, another person
      or
      entity that, directly or indirectly, (i)
      has
      a 5%
      or more equity interest in that person or entity, (ii)
      has 5%
      or more common ownership with that person or entity, (iii)
      controls
      that person or entity, or (iv)
      is
      under
      common control with that person or entity. “Control”
or
      “Controls”
for
      purposes hereof means that a person or entity has the power, direct or indirect,
      to conduct or govern the policies of another person or entity.

    

    (i) Filing
      of Form 8-K.
      On or
      before the date which is three Trading Days after the Execution Date, the
      Company shall file a Current Report on Form 8-K with the SEC describing the
      terms of the transaction contemplated by the Transaction Documents in the form
      required by the 1934 Act, if such filing is required. 

    

    (j) Corporate
      Existence.
      The
      Company shall use its best efforts to preserve and continue the corporate
      existence of the Company.

    

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    (k) Notice
      of Certain Events Affecting Registration; Suspension of Right to Make a
      Put.
      The
      Company shall promptly notify Purchaser upon the occurrence of any of the
      following events in respect of a Registration Statement or related prospectus
      in
      respect of an offering of the 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 any 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 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 such Registration
      Statement or related prospectus or 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 a 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 shall promptly
      make
      available to Purchaser any such supplement or amendment to the related
      prospectus. The Company shall not deliver to Purchaser any Put Notice during
      the
      continuation of any of the foregoing events.

    

    (l) Reserved

    

    Section
      6.
      COVER.
      If the
      number of Shares represented by any Put Notices become restricted or are no
      longer freely trading for any reason, and after the applicable Closing Date,
      the
      Purchaser purchases, in an open market transaction or otherwise, the Company’s
      Common Stock (the “Covering
      Shares”)
      in
      order to make delivery in satisfaction of a sale of Common Stock by the
      Purchaser (the “Sold
      Shares”),
      which
      delivery such Purchaser anticipated to make using the Shares represented by
      the
      Put Notice (a “Buy-In”),
      the
      Company shall pay to the Purchaser the Buy-In Adjustment Amount (as defined
      below). The “Buy-In
      Adjustment Amount”
is
      the
      amount equal to the excess, if any, of (a)
      the
      Purchaser’s total purchase price (including brokerage commissions, if any) for
      the Covering Shares over (b)
      the net
      proceeds (after brokerage commissions, if any) received by the Purchaser from
      the sale of the Sold Shares. The Company shall pay the Buy-In Adjustment Amount
      to the Purchaser in immediately available funds immediately upon demand by
      the
      Purchaser. By way of illustration and not in limitation of the foregoing, if
      the
      Purchaser purchases Common Stock having a total purchase price (including
      brokerage commissions) of $11,000 to cover a Buy-In with respect to the Common
      Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount which
      the Company will be required to pay to the Purchaser will be $1,000.

    

    

    Section 7.
      CONDITIONS
      OF THE COMPANY’S OBLIGATION TO SELL.

     

    The
      obligation hereunder of the Company to issue and sell the Securities to the
      Purchaser is further subject to the satisfaction, at or before each Closing
      Date, of each of the following conditions set forth below. These conditions
      are
      for the Company’s sole benefit and may be waived by the Company at any time in
      its sole discretion.

    

    (a)
      The
      Purchaser shall have executed each of this Agreement and the Registration Rights
      Agreement and delivered the same to the Company.

    

    (b)
      The
      Purchaser shall have delivered to the Company the Purchase Price for the
      Securities being purchased by the Purchaser at the Closing (after receipt of
      confirmation of delivery of such Securities) by wire transfer of immediately
      available funds pursuant to the wire instructions provided by the
      Company.

    

    (c)
      The
      representations and warranties of the Purchaser shall be true and correct as
      of
      the date when made and as of the applicable Closing Date as though made at
      that
      time (except for representations and warranties that speak as of a specific
      date), and the Purchaser shall have performed, satisfied and complied with
      the
      covenants, agreements and conditions required by the Transaction Documents
      to be
      performed, satisfied or complied with by the Purchaser at or prior to such
      Closing Date.

    

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    (d)
      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 which prohibits the consummation of any
      of
      the transactions contemplated by this Agreement.

    

    (e)
      No
      Valuation Event shall have occurred since the applicable Put Notice
      Date.

    

    Section 8.
      FURTHER
      CONDITIONS OF THE PURCHASER’S OBLIGATION TO PURCHASE.

     

    The
      obligation of the Purchaser hereunder to purchase Shares is subject to the
      satisfaction, on or before each Closing Date, of each of the following
      conditions set forth below. 

    

    (a)
      The
      Company shall have executed each of the Transaction Documents and delivered
      the
      same to the Purchaser.

    

    (b)
      The
      Common Stock shall be authorized for quotation on the Principal Market and
      trading in the Common Stock shall not have been suspended by the Principal
      Market or the SEC, at any time beginning on the date hereof and through and
      including the respective Closing Date (excluding suspensions of not more than
      one Trading Day resulting from business announcements by the Company, provided
      that such suspensions occur prior to the Company’s delivery of the Put Notice
      related to such Closing).

    

    (c)
      The
      representations and warranties of the Company shall be true and correct as
      of
      the date when made and as of the applicable Closing Date as though made at
      that
      time (except for (i)
      representations and warranties that speak as of a specific date and (ii)
      with
      respect to the representations made in Sections 4(g), (h) and (j) and the third
      sentence of Section 4(k) hereof, events which occur on or after the date of
      this
      Agreement and are disclosed in SEC filings made by the Company at least ten
      Trading Days prior to the applicable Put Notice Date) and the Company shall
      have
      performed, satisfied and complied with the covenants, agreements and conditions
      required by the Transaction Documents to be performed, satisfied or complied
      with by the Company on or before such Closing Date. The Purchaser may request
      an
      update as of such Closing Date regarding the representation contained in Section
      4(c) above.

    

    (d) reserved 

    

    (e)
      The
      Company shall have executed and delivered to the Purchaser the certificates
      representing, or have executed electronic book-entry transfer of, the Securities
      (in such denominations as such Purchaser shall request) being purchased by
      the
      Purchaser at such Closing.

    

    (f)
      The
      Board of Directors of the Company shall have adopted resolutions consistent
      with
      Section 4(b)(ii) above (the “Resolutions”)
      and
      such Resolutions shall not have been amended or rescinded prior to such Closing
      Date.

    

    (g)
      reserved.

    

    (h)
      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 which prohibits the consummation of any
      of
      the transactions contemplated by this Agreement.

    

    (i)
      The
      Registration Statement shall be effective on each Closing Date and no stop
      order
      suspending the effectiveness of the Registration statement shall be in effect
      or
      shall be pending or threatened. Furthermore, on each Closing Date (i)
      neither
      the Company nor Purchaser shall have received notice that the SEC has issued
      or
      intends to issue a stop order with respect to such Registration Statement or
      that the SEC otherwise has suspended or withdrawn the effectiveness of such
      Registration Statement, either temporarily or permanently, or intends or has
      threatened to do so (unless the SEC’s concerns have been addressed and Purchaser
      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 such Registration
      Statement or related prospectus shall exist.

    

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    (j)
      At the
      time of each Closing, the Registration Statement (including information or
      documents incorporated by reference therein) and any amendments or supplements
      thereto shall 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 or which would require public disclosure
      or an
      update supplement to the prospectus.

    

    (k)
      There
      shall have been no filing of a petition in bankruptcy, either voluntarily or
      involuntarily, with respect to the Company and there shall not have been
      commenced any proceedings under any bankruptcy or insolvency laws, or any laws
      relating to the relief of debtors, readjustment of indebtedness or
      reorganization of debtors, and there shall have been no calling of a meeting
      of
      creditors of the Company or appointment of a committee of creditors or
      liquidating agents or offering of a composition or extension to creditors by,
      for, with or without the consent or acquiescence of the Company.

    

    (l)
      If
      applicable, the share Purchasers of the Company shall have approved the issuance
      of any Shares in excess of the Maximum Common Stock Issuance in accordance
      with
      Section 2(j).

    

    (m)
      The
      conditions to such Closing set forth in Section 2(f) shall have been satisfied
      on or before such Closing Date.

    

    (n)
      The
      Company shall have certified to the Purchaser the number of shares of Common
      Stock outstanding as of a date within ten Trading Days prior to such Closing
      Date.

     

    Section
      9. TERMINATION.
      This
      Agreement shall terminate upon any of the following events: 

    

    (i)
      when the
      Purchaser has purchased an aggregate of $5,000,000 in the Common Stock of the
      Company pursuant to this Agreement; provided
      that the
      Company’s representations, warranties and covenants contained in this Agreement
      insofar as applicable to the transactions consummated hereunder prior to such
      termination, shall survive the termination of this Agreement for the period
      of
      any applicable statute of limitations;

    

    (ii)
      on the
      date which is 36 months after the Effective Date;

    

    (iii)
      if the
      Company shall file or consent by answer or otherwise to the entry of an order
      for relief or approving a petition for relief, reorganization or arrangement
      or
      any other petition in bankruptcy for liquidation or to take advantage of any
      bankruptcy or insolvency law of any jurisdiction, or shall make an assignment
      for the benefit of its creditors, or shall consent to the appointment of a
      custodian, receiver, trustee or other officer with similar powers of itself
      or
      of any substantial part of its property, or shall be adjudicated a bankrupt
      or
      insolvent, or shall take corporate action for the purpose of any of the
      foregoing, or if a court or governmental authority of competent jurisdiction
      shall enter an order appointing a custodian, receiver, trustee or other officer
      with similar powers with respect to the Company or any substantial part of
      its
      property or an order for relief or approving a petition for relief or
      reorganization or any other petition in bankruptcy or for liquidation or to
      take
      advantage of any bankruptcy or insolvency law, or an order for the dissolution,
      winding up or liquidation of the Company, or if any such petition shall be
      filed
      against the Company;

    

    (iv)
      if the
      Company shall issue or sell any equity securities or securities convertible
      into, or exchangeable for, equity securities or enter into any other equity
      financing facility during the Open Period, other than in compliance with Section
      4(v);

    

    (v)
      the
      trading of the Common Stock is suspended by the SEC, the Principal Market or
      the
      NASD for a period of five consecutive Trading Days during the Open
      Period;

    

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    (vi)  the
      Company shall not have filed with the SEC the initial Registration Statement
      with respect to the resale of the Registrable Securities in accordance with
      the
      terms of the initial Registration Rights Agreement within one calendar year
      of
      the date hereof or the Registration Statement has not been declared effective
      within one year and six months of the date hereof; or

    

    (vii)
      The
      Common Stock ceases to be registered under the 1934 Act or listed or traded
      on
      the Principal Market. Upon the occurrence of one of the above-described events,
      the Company shall send written notice of such event to the
      Purchaser.

    

    

    Section
      10. INDEMNIFICATION.
      In
      consideration of the parties mutual obligations set forth in the Transaction
      Documents, each of the parties (in such capacity, an “Indemnitor”)
      shall
      defend, protect, indemnify and hold harmless the other and all of the other
      party’s share Purchasers, officers, directors, employees, counsel, and direct or
      indirect Purchasers and any of the foregoing person’s agents or other
      representatives (including, without limitation, those retained in connection
      with the transactions contemplated by this Agreement) (collectively, the
“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 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 any Indemnitee as a result of, or arising out of, or relating to
      (i)
      any
      misrepresentation or breach of any representation or warranty made by the
      Indemnitor or any other certificate, instrument or document contemplated hereby
      or thereby; (ii)
      any
      breach of any covenant, agreement or obligation of the Indemnitor contained
      in
      the Transaction Documents or any other certificate, instrument or document
      contemplated hereby or thereby; or (iii)
      any
      cause of action, suit or claim brought or made against such Indemnitee by a
      third party and arising out of or resulting from the execution, delivery,
      performance or enforcement of the Transaction Documents or any other
      certificate, instrument or document contemplated hereby or thereby, except
      insofar as any such misrepresentation, breach or any untrue statement, alleged
      untrue statement, omission or alleged omission is made in reliance upon and
      in
      conformity with written information furnished to Indemnitor which is
      specifically intended for use in the preparation of any such Registration
      Statement, preliminary prospectus, prospectus or amendments to the prospectus.
      To the extent that the foregoing undertaking by the Indenitor may be
      unenforceable for any reason, the Indemnitor shall make the maximum contribution
      to the payment and satisfaction of each of the Indemnified Liabilities which
      is
      permissible under applicable law. The indemnity provisions contained herein
      shall be in addition to any cause of action or similar rights Indemnitor may
      have, and any liabilities the Indemnitor or the Indemnitees may be subject
      to.

    

    Section
      11. GOVERNING
      LAW; MISCELLANEOUS.

    

    (a) Governing
      Law.
      This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the State of California without regard to the principles of conflict of laws.
      Each party hereby irrevocably submits to the exclusive jurisdiction of the
      state
      and federal courts sitting in the County of Los Angeles, 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 mailing a copy thereof to such party 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. If any provision of this 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 Agreement in that jurisdiction or the validity or
      enforceability of any provision of this Agreement in any other
      jurisdiction.

    

    
      
        
        

      

      
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    (b) Legal
      Fees; and Miscellaneous Fees.
      Except
      as otherwise set forth in the Transaction Documents, each party shall pay the
      fees and expenses of its advisers, counsel, the accountants and other experts,
      if any, and all other expenses incurred by such party incident to the
      negotiation, preparation, execution, delivery and performance of this Agreement.
      Any attorneys’ fees and expenses incurred by either the Company or by the
      Purchaser in connection with the preparation, negotiation, execution and
      delivery of any amendments to this Agreement or relating to the enforcement
      of
      the rights of any party, after the occurrence of any breach of the terms of
      this
      Agreement by another party or any default by another party in respect of the
      transactions contemplated hereunder, shall be paid on demand by the party which
      breached the Agreement and/or defaulted, as the case may be. The Company shall
      pay all stamp and other taxes and duties levied in connection with the issuance
      of any Securities.

    

    (c) 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;
      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.

    

    (d) Headings;
      Singular/Plural.
      The
      headings of this Agreement are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Agreement. Whenever required
      by
      the context of this Agreement, the singular shall include the plural and
      masculine shall include the feminine. 

    

    (e) Severability.
      If any
      provision of this 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 Agreement in that jurisdiction or
      the
      validity or enforceability of any provision of this Agreement in any other
      jurisdiction.

    

    (f) Entire
      Agreement;
      Amendments.
      This
      Agreement supersedes all other prior oral or written agreements between the
      Purchaser, 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 (including the other Transaction Documents) 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 Purchaser makes any representation, warranty, covenant or
      undertaking with respect to such matters. No provision of this Agreement may
      be
      amended other than by an instrument in writing signed by the Company and the
      Purchaser, and no provision hereof may be waived other than by an instrument
      in
      writing signed by the party against whom enforcement is sought.

    

    (g) Notices.
      Any
      notices 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 confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii)
      one 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:

    

    HOMELAND
      SECURITY NETWORK, Inc.

    300
      North
      Coit Rd.

    Suite
      1200

    Richardson,
      TX 75080 

    Facsimile:
      214-618-6428

    

    With
      Copy
      to:

    Jeffrey
      Conrad, Esq.

    1719
      Huntington Ln.

    Redondo
      Beach, CA 90278

     

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    

    If
      to the
      Purchaser:

    EFUND
      SMALL CAP FUND II, LP

    301
      E.
      Ocean Blvd. Ste. 640

    Long
      Beach, CA 90802

    Facsimile: 562-983-0662

     

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

    

    (h) No
      Assignment.
      This
      Agreement may not be assigned. 

    

    (i) No
      Third Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and is not for
      the
      benefit of, nor may any provision hereof be enforced by, any other
      person.

    

    (j) Survival.
      The
      representations and warranties of the Company and the Purchaser contained in
      Sections 2 and 3, the agreements and covenants set forth in Sections 4 and
      5,
      and the indemnification provisions set forth in Section 10, shall survive each
      of the Closings and the termination of this Agreement. 

    

    (k) Publicity.
      The
      Company and Purchaser shall consult with each other in issuing any press
      releases or otherwise making public statements with respect to the transactions
      contemplated hereby and no party shall issue any such press release or otherwise
      make any such public statement without the prior written consent of the other
      parties, which consent shall not be unreasonably withheld or delayed, except
      that no prior consent shall be required if such disclosure is required by law,
      in which such case the disclosing party shall provide the other parties with
      prior notice of such public statement. Notwithstanding the foregoing, the
      Company shall not publicly disclose the name of Purchaser without the prior
      written consent of such Purchaser, except to the extent required by law.
      Purchaser acknowledges that this Agreement and all or part of the Transaction
      Documents may be deemed to be “material contracts” as that term is defined by
      Item 601(b)(10) of Regulation S-B, and that the Company may therefore be
      required to file such documents as exhibits to reports or registration
      statements filed under the 1933 Act or the 1934 Act. Purchaser further agrees
      that the status of such documents and materials as material contracts shall
      be
      determined solely by the Company, in consultation with its counsel.

    

    (l) 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
      Agreement and the consummation of the transactions contemplated
      hereby.

    

    (m)
       Placement
      Agent.
      There
      were no brokers involved in this Agreement.

    

    (n)
      No Strict Construction.
      The
      language used in this 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.

    

    (o)
      Remedies.
      The
      Purchaser and each Purchaser of the Shares shall have all rights and remedies
      set forth in this Agreement and the Registration Rights Agreement and all rights
      and remedies which such Purchasers have been granted at any time under any
      other
      agreement or contract and all of the rights which such Purchasers have under
      any
      law. Any person having any rights under any provision of this Agreement shall
      be
      entitled to enforce such rights specifically (without posting a bond or other
      security), to recover damages by reason of any default or breach of any
      provision of this Agreement, including the recovery of reasonable attorneys
      fees
      and costs, and to exercise all other rights granted by law.

    

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    (p)
      Payment Set Aside.
      To the
      extent that the Company makes a payment or payments to the Purchaser hereunder
      or the Registration Rights Agreement or the Purchaser enforces or exercises
      its
      rights hereunder or thereunder, and such payment or payments or the proceeds
      of
      such enforcement or exercise or any part thereof are subsequently invalidated,
      declared to be fraudulent or preferential, set aside, recovered from, disgorged
      by or are required to be refunded, repaid or otherwise restored to the Company,
      a trustee, receiver or any other person under any law (including, without
      limitation, any bankruptcy law, state or federal law, common law or equitable
      cause of action), then to the extent of any such restoration the obligation
      or
      part thereof originally intended to be satisfied shall be revived and continued
      in full force and effect as if such payment had not been made or such
      enforcement or setoff had not occurred.

    

    (q)
      Pricing of Common Stock.
      For
      purposes of this Agreement, the bid price of the Common Stock in this Agreement
      shall be as reported on Bloomberg.com.

    

    

    

    *
      * *

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    

    SIGNATURE
      PAGE OF INVESTMENT AGREEMENT

     

    Your
      signature on this Signature Page evidences your agreement to be bound by the
      terms and conditions of the Investment Agreement and the Registration Rights
      Agreement as of the date first written above.

    

    The
      undersigned signatory hereby certifies that he has read and understands the
      Investment Agreement, and the representations made by the undersigned in this
      Investment Agreement are true and accurate, and agrees to be bound by its
      terms.

    

    

    

    EFUND
      SMALL CAP FUND II, LP 

    

    

    

    By:
      /s/
      Barrett Evans

    Barrett
      Evans, Managing Member

    

    

    

    HOMELAND
      SECURITY NETWORK, INC.

    

    

    

    By:
      /s/
      Peter Ubaldi

          
      Peter Ubaldi, President

    

    

    

    
      
        
        

      

      
        24REGISTRATION
      RIGHTS AGREEMENT

    

    Registration
      Rights Agreement (the “Agreement”),
      dated
      as of September
      12, 2006,
      by and
      between Homeland Security Network, Inc., a corporation organized under the
      laws
      of State of Nevada, with its principal executive office at 300 North Coit Road,
      Suite 1200, Richardson, TX 75080 (the “Company”),
      and
      eFund Capital Partners LLC., a Delaware limited company with its principal
      office at 301 E. Ocean Blvd., Suite 640, Long Beach, CA 90802 (the “Holder”).

    

    Whereas, in
      connection with the Investment Agreement by and between the Company and the
      Holder of even date herewith (the “Investment
      Agreement”),
      the
      Company has agreed to issue and sell to the Holder an indeterminate number
      of
      shares of the Company’s Common Stock, .001 par value per share (the
“Common
      Stock”),
      to be
      purchased pursuant to the terms and subject to the conditions set forth in
      the
      Investment Agreement; and 

    

    Whereas, to
      induce
      the Holder to execute and deliver the Investment Agreement, the Company has
      agreed to provide certain registration rights under the Securities Act of 1933,
      as amended, and the rules and regulations thereunder, or any similar successor
      statute (collectively, the “1933
      Act”),
      and
      applicable state securities laws, with respect to the shares of Common Stock
      issuable pursuant to the Investment Agreement.

    

    Now
      therefore, in consideration of the foregoing premises and the mutual covenants
      contained hereinafter and other good and valuable consideration, the receipt
      and
      sufficiency of which are hereby acknowledged, the Company and the Holder hereby
      agree as follows: 

     

    Section
      1. DEFINITIONS.

    

    As
      used
      in this Agreement, the following terms shall have the following
      meanings:

    

    “Execution
      Date”
means
      the date first written above.

    

    “Person”
means
      a
      corporation, a limited liability company, an association, a partnership, an
      organization, a business, an individual, a governmental or political subdivision
      thereof or a governmental agency. 

    “Holder”
means
      EFund Small Cap Fund, a Nevada limited partnership.

    

    “Potential
      Material Event”
means
      any of the following: (i)
      the
      possession by the Company of material information not ripe for disclosure in
      a
      Registration Statement, which shall be evidenced by determinations in good
      faith
      by the Board of Directors of the Company that disclosure of such information
      in
      the Registration Statement would be detrimental to the business and affairs
      of
      the Company, or (ii)
      any
      material engagement or activity by the Company which would, in the good faith
      determination of the Board of Directors of the Company, be adversely affected
      by
      disclosure in a Registration Statement at such time, which determination shall
      be accompanied by a good faith determination by the Board of Directors of the
      Company that the Registration Statement would be materially misleading absent
      the inclusion of such information.

    

    “Principal
      Market”
shall
      mean The American Stock Exchange, National Association of Securities Dealer’s,
      Inc. Over-the-Counter electronic bulletin board, the Nasdaq National Market
      or
      The Nasdaq SmallCap Market whichever is the principal market on which the Common
      Stock is listed. 

     

    “Register,”
      “Registered,”
and
      “Registration”
refer
      to a registration effected by preparing and filing one or more Registration
      Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
      1933 Act or any successor rule providing for offering securities on a continuous
      basis (“Rule
      415”),
      and
      the declaration or ordering of effectiveness of such Registration Statement(s)
      by the United States Securities and Exchange Commission (the
“SEC”).

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Registrable
      Securities”
means
      (i)
      the
      shares of Common Stock issued or issuable pursuant to the Investment Agreement,
      and (ii)
      any
      shares of capital stock issued or issuable with respect to such shares of Common
      Stock, if any, as a result of any stock split, stock dividend, recapitalization,
      exchange or similar event or otherwise, which have not been (x)
      included
      in a Registration Statement that has been declared effective by the SEC or
      (y)
      sold
      under circumstances meeting all of the applicable conditions of Rule 144 (or
      any
      similar provision then in force) under the 1933 Act.

    

    “Registration
      Statement”
means
      a
      registration statement of the Company filed under the 1933 Act covering the
      Registrable Securities.

    

    All
      capitalized terms used in this Agreement and not otherwise defined herein shall
      have the same meaning ascribed to them as in the Investment Agreement.

    

    Section
      2. REGISTRATION.

    

    (a)
      The
      Company shall have provided a draft of the Registration Statement covering
      the
      Registrable Securities to the Holder. The Company shall, as soon as is
      practicable, but not later than three hundred sixty five calendar days following
      the Execution Date, file with the SEC a Registration Statement or Registration
      Statements (as is necessary) on Form SB-2 (or, if such form is unavailable
      for
      such a registration, on such other form as is available for such a
      registration), covering the resale of all of the Registrable Securities, which
      Registration Statement(s) shall state that, in accordance with Rule 416
      promulgated under the 1933 Act, such Registration Statement also covers such
      indeterminate number of additional shares of Common Stock as may become issuable
      upon stock splits, stock dividends or similar transactions. The Company shall
      initially register for resale five hundred million shares
      of
      Common Stock which would be issuable on the date preceding the filing of the
      Registration Statement based on the closing bid price of the Company’s Common
      Stock on such date and the amount reasonably calculated that represents Common
      Stock issuable to other parties as set forth in the Investment Agreement except
      to the extent that the SEC requires the share amount to be reduced as a
      condition of effectiveness..

    

    (b)
      The
      Company shall use commercially reasonable efforts to have the Registration
      Statement(s) declared effective by the SEC within 90 calendar days following
      the
      filing of the Registration Statement on Form SB-2.. 

     

    (c)
      The
      Company agrees not to include any other securities in the Registration Statement
      covering the Registrable Securities without Holder’s prior written consent which
      Holder may withhold in its sole discretion, except for shares issued to
      employees or consultants whose agreements require such registration.
      Furthermore, the Company agrees that it will not file any other Registration
      Statement for other securities except for S-8 Registration Statements, until
      thirty calendar days after the Registration Statement for the Registrable
      Securities is declared effective by the SEC.

    

    Section
      3. RELATED
      OBLIGATIONS.

    

    At
      such
      time as the Company is obligated to prepare and file a Registration Statement
      with the SEC pursuant to Section 2(a), the Company will effect the registration
      of the Registrable Securities in accordance with the intended method of
      disposition thereof and, with respect thereto, the Company shall have the
      following obligations:

    

    

    (a)
      The
      Company shall use commercially reasonable efforts to cause such Registration
      Statement relating to the Registrable Securities to become effective within
      90
      calendar days following the filing of the Registration Statement on Form SB-2
      and shall keep such Registration Statement effective until the earlier to occur
      of (i)
      the date
      as of which the Holder may sell all of the Registrable Securities without
      restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
      thereto); or (ii)
      the date
      on which (A)
      the
      Holder shall have sold all the Registrable Securities; and (B)
      the
      Holder has no right to acquire any additional shares of Common Stock under
      the
      Investment Agreement (the “Registration
      Period”).
      The
      Registration Statement (including any amendments or supplements thereto and
      prospectuses contained therein) shall not contain any untrue statement of a
      material fact or omit to state a material fact required to be stated therein,
      or
      necessary to make the statements therein, in light of the circumstances in
      which
      they were made, not misleading. The Company shall use its best efforts to
      respond to all SEC comments within seven business days from receipt of such
      comments by the Company. The Company shall use its best efforts to cause the
      Registration Statement relating to the Registrable Securities to become
      effective no later than three business days after notice from the SEC that
      the
      Registration Statement may be declared effective. The Holder agrees to provide
      all information which it is required by law to provide to the Company, including
      the intended method of disposition of the Registrable Securities, and the
      Company’s obligations set forth above shall be conditioned on the receipt of
      such information.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b)
      The
      Company shall prepare and file with the SEC such amendments (including
      post-effective amendments) and supplements to a Registration Statement and
      the
      prospectus used in connection with such Registration Statement, which prospectus
      is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may
      be
      necessary to keep such Registration Statement effective during the Registration
      Period, and, during such period, comply with the provisions of the 1933 Act
      with
      respect to the disposition of all Registrable Securities of the Company covered
      by such Registration Statement until such time as all of such Registrable
      Securities shall have been disposed of in accordance with the intended methods
      of disposition by the Holder thereof as set forth in such Registration
      Statement. In the event the number of shares of Common Stock covered by a
      Registration Statement filed pursuant to this Agreement is at any time
      insufficient to cover all of the Registrable Securities, the Company shall
      amend
      such Registration Statement, or file a new Registration Statement (on the short
      form available therefor, if applicable), or both, so as to cover all of the
      Registrable Securities, in each case, as soon as practicable, but in any event
      within 30 calendar days after the necessity therefor arises (based on the then
      Purchase Price of the Common Stock and other relevant factors on which the
      Company reasonably elects to rely), assuming the Company has sufficient
      authorized shares at that time, and if it does not, within 30 calendar days
      after such shares are authorized. The Company shall use commercially reasonable
      efforts to cause such amendment and/or new Registration Statement to become
      effective as soon as practicable following the filing thereof. 

    

    (c)
      The
      Company shall make available to the Holder whose Registrable Securities are
      included in any Registration Statement and its legal counsel without charge
      (i)
      promptly
      after the same is prepared and filed with the SEC at least one copy of such
      Registration Statement and any amendment(s) thereto, including financial
      statements and schedules, all documents incorporated therein by reference and
      all exhibits, the prospectus included in such Registration Statement (including
      each preliminary prospectus) and, with regards to such Registration
      Statement(s), any correspondence by or on behalf of the Company to the SEC
      or
      the staff of the SEC and any correspondence from the SEC or the staff of the
      SEC
      to the Company or its representatives; (ii)
      upon the
      effectiveness of any Registration Statement, the Company shall make available
      copies of the prospectus included in such Registration Statement and all
      amendments and supplements thereto; and (iii)
      such
      other documents, including copies of any preliminary or final prospectus, as
      the
      Holder may reasonably request from time to time in order to facilitate the
      disposition of the Registrable Securities.

     

    (d)
      The
      Company shall use commercially reasonable efforts to (i)
      register
      and qualify the Registrable Securities covered by a Registration Statement
      under
      such other securities or “blue sky” laws of such states in the United States as
      any Holder reasonably requests; (ii)
      prepare
      and file in those jurisdictions, such amendments (including post-effective
      amendments) and supplements to such registrations and qualifications as may
      be
      necessary to maintain the effectiveness thereof during the Registration Period;
      (iii)
      take
      such other actions as may be necessary to maintain such registrations and
      qualifications in effect at all times during the Registration Period, and
(iv)
      take all
      other actions reasonably necessary or advisable to qualify the Registrable
      Securities for sale in such jurisdictions; provided,
      however,
      that
      the Company shall not be required in connection therewith or as a condition
      thereto to (x)
      qualify
      to do business in any jurisdiction where it would not otherwise be required
      to
      qualify but for this Section 3(d), or (y)
      subject
      itself to general taxation in any such jurisdiction. The Company shall promptly
      notify each Holder who holds Registrable Securities of the receipt by the
      Company of any notification with respect to the suspension of the registration
      or qualification of any of the Registrable Securities for sale under the
      securities or “blue sky” laws of any jurisdiction in the United States or its
      receipt of actual notice of the initiation or threatening of any proceeding
      for
      such purpose.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (e)
      As
      promptly as practicable after becoming aware of such event, the Company shall
      notify each Holder in writing of the happening of any event as a result of
      which
      the prospectus included in a Registration Statement, as then in effect, includes
      an untrue statement of a material fact or omission to state a material fact
      required to be stated therein or necessary to make the statements therein,
      in
      light of the circumstances under which they were made, not misleading
      (“Registration
      Default”)
      and
      use all diligent efforts to promptly prepare a supplement or amendment to such
      Registration Statement and take any other necessary steps to cure the
      Registration Default, (which, if such Registration Statement is on Form S-3,
      may
      consist of a document to be filed by the Company with the SEC pursuant to
      Section 13(a), 13(c), 14 or 15(d) of the 1934 Act (as defined below) and to
      be
      incorporated by reference in the prospectus) to correct such untrue statement
      or
      omission, and make available copies of such supplement or amendment to each
      Holder. The Company shall also promptly notify each Holder (i)
      when a
      prospectus or any prospectus supplement or post-effective amendment has been
      filed, and when a Registration Statement or any post-effective amendment has
      become effective (the Company will prepare notification of such effectiveness
      which shall be delivered to the Holder on the same day of such effectiveness
      and
      by overnight mail), additionally, the Company will promptly provide to the
      Holder a copy of the effectiveness order prepared by the SEC once it is received
      by the Company; (ii)
      of any
      request by the SEC for amendments or supplements to a Registration Statement
      or
      related prospectus or related information, (iii)
      of
      the
      Company’s reasonable determination that a post-effective amendment to a
      Registration Statement would be appropriate, (iv)
      in the
      event the Registration Statement is no longer effective, or
      (v) if
      Registration Statement is stale as a result of the Company’s failure to timely
      file its financials or otherwise. The Company acknowledges that its failure
      to
      cure the Registration Default within ten business days will cause the Holder
      to
      suffer damages in an amount that will be difficult to ascertain. Accordingly,
      the parties agree that it is appropriate to include a provision for liquidated
      damages. The parties acknowledge and agree that the liquidated damages provision
      set forth in this section represents the parties’ good faith effort to quantify
      such damages and, as such, agree that the form and amount of such liquidated
      damages are reasonable and will not constitute a penalty. It is the intention
      of
      the parties that interest payable under any of the terms of this Agreement
      shall
      not exceed the maximum amount permitted under any applicable law. If a law,
      which applies to this Agreement which sets the maximum interest amount, is
      finally interpreted so that the interest in connection with this Agreement
      exceeds the permitted limits, then: (1)
      any such
      interest shall be reduced by the amount necessary to reduce the interest to
      the
      permitted limit; and (2)
      any sums
      already collected (if any) from the Company which exceed the permitted limits
      will be refunded to the Company. The Holder may choose to make this refund
      by
      reducing the amount that the Company owes under this Agreement or by making
      a
      direct payment to the Company. If a refund reduces the amount that the Company
      owes the Holder, the reduction will be treated as a partial payment. In case
      any
      provision of this Agreement is held by a court of competent jurisdiction to
      be
      excessive in scope or otherwise invalid or unenforceable, such provision shall
      be adjusted rather than voided, if possible, so that it is enforceable to the
      maximum extent possible, and the validity and enforceability of the remaining
      provisions of this Agreement will not in any way be affected or impaired
      thereby.

    

    (f)
      The
      Company shall use commercially reasonable efforts to prevent the issuance of
      any
      stop order or other suspension of effectiveness of a Registration Statement,
      or
      the suspension of the qualification of any of the Registrable Securities for
      sale in any jurisdiction and, if such an order or suspension is issued, to
      obtain the withdrawal of such order or suspension at the earliest possible
      moment and to notify the Holder who holds Registrable Securities being sold
      of
      the issuance of such order and the resolution thereof or its receipt of actual
      notice of the initiation or threat of any proceeding for such
      purpose.

    

    (g)
      The
      Company shall permit the Holder and one legal counsel, designated by the Holder,
      to review and comment upon a Registration Statement and all amendments and
      supplements thereto at least seven business days prior to their filing with
      the
      SEC, and not file any document in a form to which such counsel reasonably
      objects. The Company may request to shorten the Holder’s review period and the
      Holder will, if possible, attempt to comply with the accelerated review period.
      The Company shall not submit to the SEC a request for acceleration of the
      effectiveness of a Registration Statement or file with the SEC a Registration
      Statement or any amendment or supplement thereto without the prior approval
      of
      such counsel, which approval shall not be unreasonably withheld.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (h)
      At the
      request of the Holder, the Company shall cause to be furnished to such Holder,
      on the date of the effectiveness of a Registration Statement, a legal opinion,
      in form and substance reasonably acceptable to Holder’s counsel, dated as of
      such date, of counsel representing the Company for purposes of such Registration
      Statement. 

    

    (i)
      The
      Company shall make available for inspection by (i)
      the
      Holder and (ii)
      one
      legal counsel and one firm of accountants or other agents retained by the Holder
      (collectively, the “Inspectors”),
      at
      the Holder's expense, all pertinent financial and other records, and pertinent
      corporate documents and properties of the Company (collectively, the
“Records”),
      as
      shall be reasonably deemed necessary by each Inspector, and cause the Company’s
      officers, directors and employees to supply all information which any Inspector
      may reasonably request; provided,
      however, that each Inspector shall hold in strict confidence and shall not
      make
      any disclosure (except to a Holder) or use of any Record or other information
      which the Company determines in good faith to be confidential, and of which
      determination the Inspectors are so notified, unless (a)
      the
      disclosure of such Records is necessary to avoid or correct a misstatement
      or
      omission in any Registration Statement or is otherwise required under the 1933
      Act, (b)
      the
      release of such Records is ordered pursuant to a final, non-appealable subpoena
      or order from a court or government body of competent jurisdiction, or
(c)
      the
      information in such Records has been made generally available to the public
      other than by disclosure in violation of this or any other agreement of which
      the Inspector has knowledge. Each Holder agrees that it shall, upon learning
      that disclosure of such Records is sought in or by a court or governmental
      body
      of competent jurisdiction or through other means, give prompt notice to the
      Company and allow the Company, at its expense, to undertake appropriate action
      to prevent disclosure of, or to obtain a protective order for, the Records
      deemed confidential.

    

    (j)
      The
      Company shall hold in confidence and not make any disclosure of information
      concerning a Holder provided to the Company unless (i)
      disclosure
      of such information is necessary to comply with federal or state securities
      laws, (ii)
      the
      disclosure of such information is necessary to avoid or correct a misstatement
      or omission in any Registration Statement, (iii)
      the
      release of such information is ordered pursuant to a subpoena or other final,
      non-appealable order from a court or governmental body of competent
      jurisdiction, or (iv)
      such
      information has been made generally available to the public other than by
      disclosure in violation of this Agreement or any other agreement. The Company
      agrees that it shall, upon learning that disclosure of such information
      concerning a Holder is sought in or by a court or governmental body of competent
      jurisdiction or through other means, give prompt written notice to such Holder
      and allow such Holder, at the Holder’s expense, to undertake appropriate action
      to prevent disclosure of, or to obtain a protective order for, such
      information.

    

    (k)
      The
      Company shall use commercially reasonable efforts to maintain designation and
      quotation of all the Registrable Securities covered by any Registration
      Statement on the Principal Market. If, despite the Company’s best efforts, the
      Company is unsuccessful in satisfying the preceding sentence, it shall use
      commercially reasonable efforts to cause all the Registrable Securities covered
      by any Registration Statement to be listed on each other national securities
      exchange and automated quotation system, if any, on which securities of the
      same
      class or series issued by the Company are then listed, if any, if the listing
      of
      such Registrable Securities is then permitted under the rules of such exchange
      or system. The Company shall pay all fees and expenses in connection with
      satisfying its obligation under this Section 3(k).

    

    (l)
      The
      Company shall cooperate with the Holder to facilitate the prompt preparation
      and
      delivery of certificates (not bearing any restrictive legend) representing
      the
      Registrable Securities to be offered pursuant to a Registration Statement and
      enable such certificates to be in such denominations or amounts, as the case
      may
      be, as the Holder may reasonably request.

    

    (m)
      The
      Company shall provide a transfer agent for all the Registrable Securities not
      later than the effective date of the first Registration Statement filed pursuant
      hereto.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (n)
      If
      requested by the Holder, the Company shall (i)
      as soon
      as reasonably practical incorporate in a prospectus supplement or post-effective
      amendment such information as such Holder reasonably determine should be
      included therein relating to the sale and distribution of Registrable
      Securities, including, without limitation, information with respect to the
      offering of the Registrable Securities to be sold in such offering; (ii)
      make all
      required filings of such prospectus supplement or post-effective amendment
      as
      soon as reasonably possible after being notified of the matters to be
      incorporated in such prospectus supplement or post-effective amendment; and
      (iii)
      supplement or make amendments to any Registration Statement if reasonably
      requested by such Holder.

    

    (o)
      The
      Company shall use commercially reasonable efforts to cause the Registrable
      Securities covered by the applicable Registration Statement to be registered
      with or approved by such other governmental agencies or authorities as may
      be
      necessary to consummate the disposition of such Registrable
      Securities.

     

    (p)
      The
      Company shall otherwise use commercially reasonable efforts to comply with
      all
      applicable rules and regulations of the SEC in connection with any registration
      hereunder.

    

    (q)
      Within
      one business day after the Registration Statement which includes Registrable
      Securities is declared effective by the SEC, the Company shall deliver to the
      transfer agent for such Registrable Securities, with copies to the Holder,
      confirmation that such Registration Statement has been declared effective by
      the
      SEC.

    

    (r)
      At or
      prior to the date of the first Put Notice (as that term is defined in the
      Investment Agreement) and at such other times as the Holder may reasonably
      request, the Company shall cause to be delivered, letters from the Company’s
      independent certified public accountants (i)
      addressed to the Holder that such accountants are independent public accountants
      within the meaning of the 1933 Act and the applicable published rules and
      regulations thereunder, and (ii)
      in
      customary form and covering such financial and accounting matters as are
      customarily covered by letters of independent certified public accountants
      delivered to underwriters in connection with public offerings.

    

    (s)
      The
      Company shall take all other reasonable actions necessary to expedite and
      facilitate disposition by the Holder of Registrable Securities pursuant to
      a
      Registration Statement.

    

    Section
      4. OBLIGATIONS
      OF THE HOLDER.

     

    (a)
      At least
      five calendar days prior to the first anticipated filing date of a Registration
      Statement the Company shall notify the Holder in writing of the information
      the
      Company requires from each such Holder if such Holder elects to have any of
      such
      Holder’s Registrable Securities included in such Registration Statement. It
      shall be a condition precedent to the obligations of the Company to complete
      the
      registration pursuant to this Agreement with respect to the Registrable
      Securities of a particular Holder that such Holder shall furnish in writing
      to
      the Company such information regarding itself, the Registrable Securities held
      by it and the intended method of disposition of the Registrable Securities
      held
      by it as shall reasonably be required to effect the registration of such
      Registrable Securities and shall execute such documents in connection with
      such
      registration as the Company may reasonably request. Each Holder covenants and
      agrees that, in connection with any sale of Registrable Securities by it
      pursuant to a Registration Statement, it shall comply with the “Plan of
      Distribution” section of the current prospectus relating to such Registration
      Statement.

    

    (b)
      The
      Holder, by such Holder’s acceptance of the Registrable Securities, agrees to
      cooperate with the Company as reasonably requested by the Company in connection
      with the preparation and filing of any Registration Statement hereunder, unless
      such Holder has notified the Company in writing of such Holder’s election to
      exclude all of such Holder’s Registrable Securities from such Registration
      Statement. 

    

    (c)
      The
      Holder agrees that, upon receipt of written notice from the Company of the
      happening of any event of the kind described in Section 3(f) or the first
      sentence of 3(e), such Holder will immediately discontinue disposition of
      Registrable Securities pursuant to any Registration Statement(s) covering such
      Registrable Securities until such Holder’s receipt of the copies of the
      supplemented or amended prospectus contemplated by Section 3(f) or the first
      sentence of 3(e).

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    Section
      5. EXPENSES
      OF REGISTRATION.

    

    All
      expenses, other than underwriting discounts and commissions and other than
      as
      set forth in the Investment Agreement, incurred in connection with
      registrations, filings or qualifications pursuant to Sections 2 and 3,
      including, without limitation, all registration, listing and qualifications
      fees, printing and accounting fees, and fees and disbursements of counsel for
      the Company shall be paid by the Company; provided, however, that nothing in
      this Section 5 shall obligate the Company to pay the expenses or fees of
      Inspectors or counsel to the Holder.

    

    Section
      6. INDEMNIFICATION.

    

    In
      the
      event any Registrable Securities are included in a Registration Statement under
      this Agreement:

    

    (a)
      To the
      fullest extent permitted by law, the Company will, and hereby does, indemnify,
      hold harmless and defend each Holder who holds such Registrable Securities,
      the
      directors, officers, partners, employees, counsel, agents, representatives
      of,
      and each Person, if any, who controls, any Holder within the meaning of the
      1933
      Act or the Securities Exchange Act of 1934, as amended (the “1934
      Act”)
      (each,
      an “Indemnified
      Person”),
      against any losses, claims, damages, liabilities, judgments, fines, penalties,
      charges, costs, attorneys’ fees, amounts paid in settlement or expenses, joint
      or several (collectively, “Claims”),
      incurred in investigating, preparing or defending any action, claim, suit,
      inquiry, proceeding, investigation or appeal taken from the foregoing by or
      before any court or governmental, administrative or other regulatory agency,
      body or the SEC, whether pending or threatened, whether or not an indemnified
      party is or may be a party thereto (“Indemnified
      Damages”),
      to
      which any of them may become subject insofar as such Claims (or actions or
      proceedings, whether commenced or threatened, in respect thereof) arise out
      of
      or are based upon: (i)
      any
      untrue statement or alleged untrue statement of a material fact in a
      Registration Statement or any post-effective amendment thereto or in any filing
      made in connection with the qualification of the offering under the securities
      or other “blue sky” laws of any jurisdiction in which the Holder has requested
      in writing that the Company register or qualify the Shares (“Blue
      Sky Filing”),
      or
      the omission or alleged omission to state a material fact required to be stated
      therein or necessary to make the statements therein, in light of the
      circumstances under which the statements therein were made, not misleading,
      (ii)
      any
      untrue statement or alleged untrue statement of a material fact contained in
      the
      final prospectus (as amended or supplemented, if the Company files any amendment
      thereof or supplement thereto with the SEC) or the omission or alleged omission
      to state therein any material fact necessary to make the statements made
      therein, in light of the circumstances under which the statements therein were
      made, not misleading, or (iii)
      any
      violation or alleged violation by the Company of the 1933 Act, the 1934 Act,
      any
      other law, including, without limitation, any state securities law, or any
      rule
      or regulation thereunder relating to the offer or sale of the Registrable
      Securities pursuant to a Registration Statement (the matters in the foregoing
      clauses (i) through (iii) being, collectively, “Violations”).
      Subject to the restrictions set forth in Section 6(c) with respect to the number
      of legal counsel, the Company shall reimburse the Holder and each such
      controlling person, promptly as such expenses are incurred and are due and
      payable, for any reasonable legal fees or other reasonable expenses incurred
      by
      them in connection with investigating or defending any such Claim.
      Notwithstanding anything to the contrary contained herein, the indemnification
      agreement contained in this Section 6(a): (i)
      shall
      not apply to a Claim arising out of or based upon a Violation which is due
      to
      the inclusion in the Registration Statement of the information furnished to
      the
      Company by any Indemnified Person expressly for use in connection with the
      preparation of the Registration Statement or any such amendment thereof or
      supplement thereto; (ii)
      shall
      not be available to the extent such Claim is based on (a)
      a
      failure of the Holder to deliver or to cause to be delivered the prospectus
      made
      available by the Company or (b)
      the
      Indemnified Person’s use of an incorrect prospectus despite being promptly
      advised in advance by the Company in writing not to use such incorrect
      prospectus; (iii)
      any
      claims based on the manner of sale of the Registrable Securities by the Holder
      or of the Holder’s failure to register as a dealer under applicable securities
      laws; (iv)
      any
      omission of the Holder to notify the Company of any material fact that should
      be
      stated in the Registration Statement or prospectus relating to the Holder or
      the
      manner of sale; and (v)
      any
      amounts paid in settlement of any Claim if such settlement is effected without
      the prior written consent of the Company, which consent shall not be
      unreasonably withheld. Such indemnity shall remain in full force and effect
      regardless of any investigation made by or on behalf of the Indemnified Person
      and shall survive the resale of the Registrable Securities by the Holder
      pursuant to the Registration Statement.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b)
      In
      connection with any Registration Statement in which a Holder is participating,
      each such Holder agrees to severally and jointly indemnify, hold harmless and
      defend, to the same extent and in the same manner as is set forth in Section
      6(a), the Company, each of its directors, each of its officers who signs the
      Registration Statement, each Person, if any, who controls the Company within
      the
      meaning of the 1933 Act or the 1934 Act and the Company’s agents (collectively
      and together with an Indemnified Person, an “Indemnified
      Party”),
      against any Claim or Indemnified Damages to which any of them may become
      subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
      or
      Indemnified Damages arise out of or are based upon any Violation, in each case
      to the extent, and only to the extent, that such Violation is due to the
      inclusion in the Registration Statement of the written information furnished
      to
      the Company by such Holder expressly for use in connection with such
      Registration Statement; and, subject to Section 6(c), such Holder will reimburse
      any legal or other expenses reasonably incurred by them in connection with
      investigating or defending any such Claim; provided,
      however,
      that
      the indemnity agreement contained in this Section 6(b) and the agreement with
      respect to contribution contained in Section 7 shall not apply to amounts paid
      in settlement of any Claim if such settlement is effected without the prior
      written consent of such Holder, which consent shall not be unreasonably
      withheld; provided, further, however, that the Holder shall be liable under
      this
      Section 6(b) for only that amount of a Claim or Indemnified Damages as does
      not
      exceed the net proceeds to such Holder as a result of the sale of Registrable
      Securities pursuant to such Registration Statement. Such indemnity shall remain
      in full force and effect regardless of any investigation made by or on behalf
      of
      such Indemnified Party and shall survive the resale of the Registrable
      Securities by the Holder pursuant to the Registration Statement. Notwithstanding
      anything to the contrary contained herein, the indemnification agreement
      contained in this Section 6(b) with respect to any preliminary prospectus shall
      not inure to the benefit of any Indemnified Party if the untrue statement or
      omission of material fact contained in the preliminary prospectus were corrected
      on a timely basis in the prospectus, as then amended or supplemented. This
      indemnification provision shall apply separately to each Holder and liability
      hereunder shall not be joint and several.

    

    (c)
      Promptly
      after receipt by an Indemnified Person or Indemnified Party under this Section
      6
      of notice of the commencement of any action or proceeding (including any
      governmental action or proceeding) involving a Claim, such Indemnified Person
      or
      Indemnified Party shall, if a Claim in respect thereof is to be made against
      any
      indemnifying party under this Section 6, deliver to the indemnifying party
      a
      written notice of the commencement thereof, and the indemnifying party shall
      have the right to participate in, and, to the extent the indemnifying party
      so
      desires, jointly with any other indemnifying party similarly noticed, to assume
      control of the defense thereof with counsel mutually satisfactory to the
      indemnifying party and the Indemnified Person or the Indemnified Party, as
      the
      case may be; provided, however, that an Indemnified Person or Indemnified Party
      shall have the right to retain its own counsel with the fees and expenses to
      be
      paid by the indemnifying party, if, in the reasonable opinion of counsel
      retained by the Indemnified Person or Indemnified Party, the representation
      by
      counsel of the Indemnified Person or Indemnified Party and the indemnifying
      party would be inappropriate due to actual or potential differing interests
      between such Indemnified Person or Indemnified Party and any other party
      represented by such counsel in such proceeding. The indemnifying party shall
      pay
      for only one separate legal counsel for the Indemnified Persons or the
      Indemnified Parties, as applicable, and such counsel shall be selected by the
      Holder, if the Holder are entitled to indemnification hereunder, or the Company,
      if the Company is entitled to indemnification hereunder, as applicable. The
      Indemnified Party or Indemnified Person shall cooperate fully with the
      indemnifying party in connection with any negotiation or defense of any such
      action or Claim by the indemnifying party and shall furnish to the indemnifying
      party all information reasonably available to the Indemnified Party or
      Indemnified Person which relates to such action or Claim. The indemnifying
      party
      shall keep the Indemnified Party or Indemnified Person fully appraised at all
      times as to the status of the defense or any settlement negotiations with
      respect thereto. No indemnifying party shall be liable for any settlement of
      any
      action, claim or proceeding effected without its written consent, provided,
      however, that the indemnifying party shall not unreasonably withhold, delay
      or
      condition its consent. No indemnifying party shall, without the consent of
      the
      Indemnified Party or Indemnified Person, consent to entry of any judgment or
      enter into any settlement or other compromise which does not include as an
      unconditional term thereof the giving by the claimant or plaintiff to such
      Indemnified Party or Indemnified Person of a release from all liability in
      respect to such Claim. Following indemnification as provided for hereunder,
      the
      indemnifying party shall be surrogated to all rights of the Indemnified Party
      or
      Indemnified Person with respect to all third parties, firms or corporations
      relating to the matter for which indemnification has been made. The failure
      to
      deliver written notice to the indemnifying party within a reasonable time of
      the
      commencement of any such action shall not relieve such indemnifying party of
      any
      liability to the Indemnified Person or Indemnified Party under this Section
      6,
      except to the extent that the indemnifying party is prejudiced in its ability
      to
      defend such action.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (d)
      The
      indemnity agreements contained herein shall be in addition to (i)
      any
      cause of action or similar right of the Indemnified Party or Indemnified Person
      against the indemnifying party or others, and (ii)
      any
      liabilities the indemnifying party may be subject to pursuant to the
      law.

    

    Section
      7. CONTRIBUTION.

    

    To
      the
      extent any indemnification by an indemnifying party is prohibited or limited
      by
      law, the indemnifying party agrees to make the maximum contribution with respect
      to any amounts for which it would otherwise be liable under Section 6 to the
      fullest extent permitted by law; provided,
      however,
      that:
(i)
      no
      contribution shall be made under circumstances where the maker would not have
      been liable for indemnification under the fault standards set forth in Section
      6; (ii)
      no
      seller of Registrable Securities guilty of fraudulent misrepresentation (within
      the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
      from any seller of Registrable Securities who was not guilty of fraudulent
      misrepresentation; and (iii)
      contribution
      by any seller of Registrable Securities shall be limited in amount to the net
      amount of proceeds received by such seller from the sale of such Registrable
      Securities.

    

    Section
      8. REPORTS
      UNDER THE 1934 ACT.

    

    With
      a
      view to making available to the Holder the benefits of Rule 144 promulgated
      under the 1933 Act or any other similar rule or regulation of the SEC that
      may
      at any time permit the Holder to sell securities of the Company to the public
      without registration (“Rule
      144”),
      the
      Company agrees to:

    

    (a) make
      and
      keep public information available, as those terms are understood and defined
      in
      Rule 144;

    

    (b) file
      with
      the SEC in a timely manner all reports and other documents required of the
      Company under the 1933 Act and the 1934 Act so long as the Company remains
      subject to such requirements (it being understood that nothing herein shall
      limit the Company’s obligations under Section 5(c) of the Investment Agreement)
      and the filing of such reports and other documents is required for the
      applicable provisions of Rule 144; and

    

    (c) furnish
      to the Holder, promptly upon request, (i)
      a
      written statement by the Company that it has complied with the reporting
      requirements of Rule 144, the 1933 Act and the 1934 Act, (ii)
      a copy
      of the most recent annual or quarterly report of the Company and such other
      reports and documents so filed by the Company, and (iii)
      such
      other information as may be reasonably requested to permit the Holder to sell
      such securities pursuant to Rule 144 without registration.

    

    Section
      9. NO
      ASSIGNMENT OF REGISTRATION RIGHTS.

    

    The
      rights under this Agreement shall not be assignable.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    Section
      10. AMENDMENT
      OF REGISTRATION RIGHTS.

    

    Provisions
      of this Agreement may be amended only with the written consent of the Company
      and Holder. No such amendment shall be effective to the extent that it applies
      to less than all of the Holder of the Registrable Securities. 

    

    Section
      11. MISCELLANEOUS.

    

    (a)
      Any
      notices or other communications required or permitted to be given under the
      terms of this Agreement that must be in writing will be deemed to have been
      delivered (i)
      upon
      receipt, when delivered personally; (ii)
      upon
      receipt, when sent by facsimile (provided a confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii)
      one 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:

    

    Homeland
      Security Network, Inc.

    300
      North
      Coit Rd., Suite 1200

    Richardson,
      TX 75080

    214-618-6428
      fax

    

    With
      Copy
      to:

    Jeffrey
      Conrad, Esq.

    1719
      Huntington Ln.

    Redondo
      Beach, CA 90278

    

     

    If
      to the
      Holder:

    

    EFund
      Capital Partners, LLC 

    301
      E.
      Ocean Blvd., Suite 640 

    Long
      Beach, CA 90802

    562-983-0662
      fax

     

    

    Each
      party shall provide five business days prior notice to the other party of any
      change in address, phone number or facsimile number.

    

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

    

    (c)
      The laws
      of the State of California shall govern all issues arising from or related
      to
      this Agreement without regard to the principles of conflict of laws. Each party
      hereby irrevocably submits to the exclusive jurisdiction of the state and
      federal courts sitting in the, County of Los Angeles, 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 mailing a copy thereof to such party 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. If any provision of this 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 Agreement in that jurisdiction or the validity or
      enforceability of any provision of this Agreement in any other
      jurisdiction.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (d)
      This
      Agreement and the Transaction Documents constitute the entire agreement among
      the parties hereto with respect to the subject matter hereof and thereof. There
      are no restrictions, promises, warranties or undertakings, other than those
      set
      forth or referred to herein and therein.

    

    (e)
      This
      Agreement and the Transaction Documents supersede all prior agreements and
      understandings among the parties hereto with respect to the subject matter
      hereof and thereof.

    

    (f)
      The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof. Whenever required by the context
      of this Agreement, the singular shall include the plural and masculine shall
      include the feminine. This Agreement shall not be construed as if it had been
      prepared by one of the parties, but rather as if all the parties had prepared
      the same.

    

    (g)
      This
      Agreement may be executed in two or more identical counterparts, each of which
      shall be deemed an original but all of which shall constitute one and the same
      agreement. This Agreement, once executed by a party, may be delivered to the
      other party hereto by facsimile transmission of a copy of this Agreement bearing
      the signature of the party so delivering this Agreement.

    

    (h)
      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
      Agreement and the consummation of the transactions contemplated
      hereby.

    

    *
      * *

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    SIGNATURE
      PAGE OF REGISTRATION RIGHTS AGREEMENT

    

    

    Agreed
      as
      of the date first written above.

    

    EFUND
      SMALL CAP FUND, LP 

    

    

    

    By:
      /s/
      Barrett Evans

    Barrett
      Evans, Managing Member

    

    

    

    Homeland
      Security Network, Inc. 

    

    

    By:
      /s/
      Peter Ubaldi 

          
      Peter Ubaldi, President

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