Document:

Exhibit 10.2

    
      

      

    

    

    EXHIBIT
      A

     

    REGISTRATION
      RIGHTS AGREEMENT

     

    This
      Registration Rights Agreement (this "Agreement")
      is made
      and entered into as of September __, 2006, by and among Welund Fund, Inc.,
      a
      Nevada corporation (the "Company"),
      and
      the investors signatory hereto (each a "Investor"
      and
      collectively, the "Investors").

     

    This
      Agreement is made pursuant to the Securities Purchase Agreement, dated as of
      the
      date hereof among the Company and the Investors (the "Purchase
      Agreement").

     

    The
      Company and the Investors hereby agree as follows: 

     

    1.    Definitions.
      Capitalized terms used and not otherwise defined herein that are defined in
      the
      Purchase Agreement will have the meanings given such terms in the Purchase
      Agreement. As used in this Agreement, the following terms have the respective
      meanings set forth in this Section 1:

     

    “Advice”
      has
      the
      meaning set forth in Section 6(d).

     

    “Audit
      Completion Date”
      means
      the date on which the Company and its Subsidiaries have completed its audit
      and
      have audited and unaudited financial statements as are necessary for the Company
      to meet its reporting obligations under rules and regulations promulgated by
      the
      Commission, including periodic reports, current reports and the proposed
      registration statement contemplated to be filed under Form SB-2.

     

    "Effective
      Date"
      means,
      as to a Registration Statement, the date on which such Registration Statement
      is
      first declared effective by the Commission.

     

    “Effectiveness
      Date”
      means
      (a) with respect to the Registration Statement required to be filed under
      Section 2(a), the earliest of: (a)(i) the 120th
      day
      following the Audit Completion Date, (ii) the 120th
      day
      following the Outside Registration Date, and (iii) the fifth Trading Day
      following the date on which the Company is notified by the Commission that
      such
      Registration Statement will not be reviewed or is no longer subject to further
      review and comments; and (b) with respect to a Registration Statement required
      to be filed under Section 2(b), the earlier of: (b)(i) the 90th
      day
      following the date on which the Company becomes eligible to utilize Form S-3
      to
      register the resale of Common Stock, and (ii) the fifth Trading Day following
      the date on which the Company is notified by the Commission that such
      Registration Statement will not be reviewed or is no longer subject to further
      review and comments.

     

    "Effectiveness
      Period"
      has the
      meaning set forth in Section 2(a).

     

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

    "Exchange
      Act"
      means
      the Securities Exchange Act of 1934, as amended.

     

    "Filing
      Date"
      means
      (a) with respect to the Registration Statement required to be filed under
      Section 2(a), the earlier of (a)(i) the 15th
      day
      following the Audit Completion Date and (ii) the Outside Registration Date;
      and
      (b) with respect to a Registration Statement required to be filed under Section
      2(b), the 30th
      day
      following the date on which the Company becomes eligible to utilize Form S-3
      to
      register the resale of Common Stock.

     

    "Holder"
      or
"Holders"
      means
      the holder or holders, as the case may be, from time to time of Registrable
      Securities.

     

    “Indemnified
      Party”
      has the
      meaning set forth in Section 5(c).

     

    “Indemnifying
      Party”
      has the
      meaning set forth in Section 5(c).

     

    “Losses”
      has the
      meaning set forth in Section 5(a).

     

    “New
      York Courts”
      means
      the state and federal courts sitting in the City of New York, Borough of
      Manhattan.

     

    “Outside
      Registration Date”
      means
      the six month anniversary of the Closing Date.

     

    "Proceeding"
      means an
      action, claim, suit, investigation or proceeding (including, without limitation,
      an investigation or partial proceeding, such as a deposition), whether commenced
      or threatened.

     

    “Prospectus”
      means
      the prospectus included in a Registration Statement (including, without
      limitation, a prospectus that includes any information previously omitted from
      a
      prospectus filed as part of an effective registration statement in reliance
      upon
      Rule 430A promulgated under the Securities Act), as amended or supplemented
      by
      any prospectus supplement, with respect to the terms of the offering of any
      portion of the Registrable Securities covered by a Registration Statement,
      and
      all other amendments and supplements to the Prospectus, including post-effective
      amendments, and all material incorporated by reference or deemed to be
      incorporated by reference in such Prospectus.

     

    “Registrable
      Securities”
      means:
      (i) the Shares, (ii) any shares of Common Stock issuable upon the exercise
      of
      warrants issued to any placement agent (the “Placement
      Agent Warrants”)
      as
      compensation in connection with the financing that is the subject of the
      Purchase Agreement, (iii) 4,000,000 (pre-reverse stock split) shares of Common
      Stock with piggy back registration rights held by the following: Liberty
      Associates, LLC for 2,240,000 shares; TATS, LLC 237,457 shares; Pamplona, Inc.
      100,000 shares; Howard S. Landa 237,457 shares; Steve Strasser 468,643 shares;
      Byron Roth 247,800 shares; and Steve Kay 468,643 shares, including transferees
      of any such shares, and (iv) any securities issued or issuable upon any stock
      split, dividend or other distribution, recapitalization or similar event, or
      any
      price adjustment as a result of such stock splits, reverse stock splits or
      similar events with respect to any of the securities referenced in (i) - (iii)
      above.

     

    

    
      
        
          
          

        

        
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    "Registration
      Statement"
      means
      the registration statement required to be filed in accordance with Section
      2(a)
      and any additional registration statement(s) required to be filed under Section
      2(b), including (in each case) the Prospectus, amendments and supplements to
      such registration statements or Prospectus, including pre- and post-effective
      amendments, all exhibits thereto, and all material incorporated by reference
      or
      deemed to be incorporated by reference therein.

     

    "Rule
      144"
      means
      Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

     

    "Rule
      415"
      means
      Rule 415 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

     

    "Rule
      424"
      means
      Rule 424 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

     

    "Securities
      Act"
      means
      the Securities Act of 1933, as amended.

     

    "Shares"
      means
      the shares of Common Stock issued or issuable to the Investors pursuant to
      the
      Purchase Agreement.

     

    2.    Registration.

     

    (a)    On
      or
      prior to the Filing Date, the Company shall prepare and file with the Commission
      a Registration Statement covering the resale of all Registrable Securities
      not
      already covered by an existing and effective Registration Statement for an
      offering to be made on a continuous basis pursuant to Rule 415, on Form SB-2
      (or
      on such other form appropriate for such purpose). Such Registration Statement
      shall contain (except if otherwise required pursuant to written comments
      received from the Commission upon a review of such Registration Statement)
      the
      "Plan of Distribution" attached hereto as Annex
      A.
      The
      Company shall cause such Registration Statement to be declared effective under
      the Securities Act as soon as possible but, in any event, no later than its
      Effectiveness Date, and shall use its reasonable best efforts to keep the
      Registration Statement continuously effective under the Securities Act until
      the
      date which is the earliest of (i) five years after its Effective Date, (ii)
      such time as all of the Registrable Securities covered by such Registration
      Statement have been publicly sold by the Holders, or (iii) such time as all
      of
      the Registrable Securities covered by such Registration Statement may be sold
      by
      the Holders pursuant to Rule 144(k) as determined by the counsel to the Company
      pursuant to a written opinion letter to such effect, addressed and acceptable
      to
      the Company's transfer agent and the affected Holders (the "Effectiveness
      Period").
      By
      9:00 a.m. (New York City time) on the Business Day following the Effective
      Date,
      the Company shall file with the Commission in accordance with Rule 424 under
      the
      Securities Act the final prospectus to be used in connection with sales pursuant
      to such Registration Statement (whether or not such filing is technically
      required under such Rule).

     

    

    
      
        
          
          

        

        
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    (b)    Promptly
      following any date on which the Company becomes eligible to use a registration
      statement on Form S-3 to register the Registrable Securities for resale, the
      Company shall file a Registration Statement on Form S-3 covering the Registrable
      Securities (or a post-effective amendment on Form S-3 to the then effective
      Registration Statement) and shall cause such Registration Statement to be
      filed by the Filing Date for such Registration Statement and declared effective
      as soon as possible thereafter, but in any event prior to the Effectiveness
      Date
      therefor. Such Registration Statement shall contain (except if otherwise
      required pursuant to written comments received from the Commission upon a review
      of such Registration Statement) the "Plan of Distribution" attached hereto
      as
Annex
      A.
      The
      Company shall cause such Registration Statement to be declared effective under
      the Securities Act as soon as possible but, in any event, by its Effectiveness
      Date, and shall use its reasonable best efforts to keep such Registration
      Statement continuously effective under the Securities Act during the entire
      Effectiveness Period. By 9:00 a.m. (New York City time) on the Business Day
      following the Effective Date of such Registration Statement, the Company shall
      file with the Commission in accordance with Rule 424 under the Securities Act
      the final prospectus to be used in connection with sales pursuant to such
      Registration Statement (whether or not such filing is technically required
      under
      such Rule).

     

    (c)    If:
      (i) a
      Registration Statement is not filed on or prior to its Filing Date (if the
      Company files a Registration Statement without affording the Holders the
      opportunity to review and comment on the same as required by Section 3(a)
      hereof, the Company shall not be deemed to have satisfied this clause (i)),
      or
      (ii) a Registration Statement is not declared effective by the Commission on
      or
      prior to its required Effectiveness Date or if by the Business Day immediately
      following the Effective Date the Company shall not have filed a “final”
prospectus for the Registration Statement with the Commission under Rule 424(b)
      (whether or not such a prospectus is actually required by such Rule), or (iii)
      after its Effective Date, without regard for the reason thereunder or efforts
      therefore, such Registration Statement ceases for any reason to be effective
      and
      available to the Holders as to all Registrable Securities to which it is
      required to cover at any time prior to the expiration of its Effectiveness
      Period for more than an aggregate of 30 Trading Days (which need not be
      consecutive) (any such failure or breach being referred to as an "Event,"
      and for
      purposes of clauses (i) or (ii) the date on which such Event occurs, or for
      purposes of clause (iii) the date which such 30 Trading Day-period is exceeded,
      being referred to as "Event
      Date"),
      then
      in addition to any other rights the Holders may have hereunder or under
      applicable law: on each such Event Date, and on each monthly anniversary of
      each
      such Event Date (if the applicable Event shall not have been cured by such
      date)
      until the applicable Event is cured, the Company shall pay to each Holder an
      amount in cash, as partial liquidated damages and not as a penalty, equal to
      1.0% of the aggregate Investment Amount paid by such Holder for Shares pursuant
      to the Purchase Agreement; provided,
      however, that the total amount of partial liquidated damages payable by the
      Company pursuant to all Events under this Section shall be capped at an
      aggregate of 10% of the aggregate Investment Amount paid by the Investors under
      the Purchase Agreement. The partial liquidated damages pursuant to the terms
      hereof shall apply on a daily pro-rata basis for any portion of a month prior
      to
      the cure of an Event, except in the case of the first Event Date. In no event
      will the Company be liable for liquidated damages under this Agreement in excess
      of 1.0% of the aggregate Investment Amount of the Investors in any 30-day
      period. The Company will not be liable for liquidated damages under this
      Agreement with respect to any Placement Agent Warrants or any shares of Common
      Stock issuable upon exercise of the Placement Agent Warrants.

     

    

    
      
        
          
          

        

        
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    (d)    Each
      Holder agrees to furnish to the Company a completed Questionnaire in the form
      attached to this Agreement as Annex
      B
      (a
“Selling
      Holder Questionnaire”).
      The
      Company shall not be required to include the Registrable Securities of a Holder
      in a Registration Statement and shall not be required to pay any liquidated
      or
      other damages under Section 2(c) to any Holder who fails to furnish to the
      Company a fully completed Selling Holder Questionnaire at least two Trading
      Days
      prior to the Filing Date (subject to the requirements set forth in Section
      3(a)).

     

    3.    Registration
      Procedures.

     

    In
      connection with the Company's registration obligations hereunder, the Company
      shall:

     

    (a)    Not
      less
      than four Trading Days prior to the filing of a Registration Statement or any
      related Prospectus or any amendment or supplement thereto, the Company shall
      use
      its best efforts to furnish to each Holder copies of the “Selling Stockholders”
section of such document, the “Plan of Distribution” and any risk factor
      contained in such document that addresses specifically this transaction or
      the
      Selling Stockholders, as proposed to be filed. The Company shall not file a
      Registration Statement, any Prospectus or any amendments or supplements thereto
      in which the “Selling Stockholder” section thereof differs from the disclosure
      received from a Holder in its Selling Holder Questionnaire (as amended or
      supplemented).

     

    (b)    (i)
      Use
      its best efforts to prepare and file with the Commission such amendments,
      including post-effective amendments, to each Registration Statement and the
      Prospectus used in connection therewith as may be necessary to keep such
      Registration Statement continuously effective as to the applicable Registrable
      Securities for its Effectiveness Period and prepare and file with the Commission
      such additional Registration Statements in order to register for resale under
      the Securities Act all of the Registrable Securities; (ii) use its best efforts
      to cause the related Prospectus to be amended or supplemented by any required
      Prospectus supplement, and as so supplemented or amended to be filed pursuant
      to
      Rule 424; (iii) respond as promptly as reasonably possible to any comments
      received from the Commission with respect to each Registration Statement or
      any
      amendment thereto and, as promptly as reasonably possible provide the Holders
      true and complete copies of all correspondence from and to the Commission
      relating to such Registration Statement that would not result in the disclosure
      to the Holders of material and non-public information concerning the Company;
      and (iv) comply in all material respects with the provisions of the Securities
      Act and the Exchange Act with respect to the Registration Statements and the
      disposition of all Registrable Securities covered by each Registration
      Statement.

     

    

    
      
        
          
          

        

        
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    (c)    Use
      its
      best efforts to notify the Holders as promptly as reasonably possible (and,
      in
      the case of (i)(A) below, not less than three Trading Days prior to such filing
      and, in the case of (v) below, not less than three Trading Days prior to the
      financial statements in any Registration Statement becoming ineligible for
      inclusion therein) and (if requested by any such Person) confirm such notice
      in
      writing no later than one Trading Day following the day (i)(A) when a Prospectus
      or any Prospectus supplement or post-effective amendment to a Registration
      Statement is proposed to be filed; (B) when the Commission notifies the Company
      whether there will be a "review" of such Registration Statement and whenever
      the
      Commission comments in writing on such Registration Statement (the Company
      shall
      provide true and complete copies thereof and all written responses thereto
      to
      each of the Holders that pertain to the Holders as a Selling Stockholder or
      to
      the Plan of Distribution, but not information which the Company believes would
      constitute material and non-public information); and (C) with respect to each
      Registration Statement or any post-effective amendment, when the same has become
      effective; (ii) of any request by the Commission or any other Federal or state
      governmental authority for amendments or supplements to a Registration Statement
      or Prospectus or for additional information; (iii) of the issuance by the
      Commission of any stop order suspending the effectiveness of a Registration
      Statement covering any or all of the Registrable Securities or the initiation
      of
      any Proceedings for that purpose; (iv) of the receipt by the Company of any
      notification with respect to the suspension of the qualification or exemption
      from qualification of any of the Registrable Securities for sale in any
      jurisdiction, or the initiation or threatening of any Proceeding for such
      purpose; and (v) of the occurrence of any event or passage of time that makes
      the financial statements included in a Registration Statement ineligible for
      inclusion therein or any statement made in such Registration Statement or
      Prospectus or any document incorporated or deemed to be incorporated therein
      by
      reference untrue in any material respect or that requires any revisions to
      such
      Registration Statement, Prospectus or other documents so that, in the case
      of
      such Registration Statement or the Prospectus, as the case may be, 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 light of the circumstances under which they were made, not misleading;
      provided, however, prior to any sale by a Holder under a Registration Statement
      covering any or all of the Registrable Securities, the Holder shall confirm
      with
      the Company that such Registration Statement remains effective.

     

    (d)    Use
      its
      reasonable best efforts to avoid the issuance of, or, if issued, obtain the
      withdrawal of (i) any order suspending the effectiveness of a Registration
      Statement, or (ii) any suspension of the qualification (or exemption from
      qualification) of any of the Registrable Securities for sale in any
      jurisdiction, at the earliest practicable moment.

     

    (e)    Furnish
      to each Holder, without charge, at least one conformed copy of each Registration
      Statement and each amendment thereto and all exhibits to the extent requested
      by
      such Person (including those previously furnished) promptly after the filing
      of
      such documents with the Commission.

     

    (f)
    Promptly
      deliver to each Holder, without charge, as many copies of each Prospectus or
      Prospectuses (including each form of prospectus) and each amendment or
      supplement thereto as such Persons may reasonably request. The Company hereby
      consents to the use of such Prospectus and each amendment or supplement thereto
      by each of the selling Holders in connection with the offering and sale of
      the
      Registrable Securities covered by such Prospectus and any amendment or
      supplement thereto.

     

    (g)    Prior
      to
      any public offering of Registrable Securities, use its best efforts to register
      or qualify such Registrable Securities for offer and sale under the securities
      or Blue Sky laws of all jurisdictions within the United States, to keep each
      such registration or qualification (or exemption therefrom) effective during
      the
      Effectiveness Period and to do any and all other acts or things necessary or
      advisable to enable the disposition in such jurisdictions of the Registrable
      Securities covered by the Registration Statements.

     

    

    
      
        
          
          

        

        
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    (h)    Cooperate
      with the Holders to facilitate the timely preparation and delivery of
      certificates representing Registrable Securities to be delivered to a transferee
      pursuant to the Registration Statements, which certificates shall be free,
      to
      the extent permitted by the Purchase Agreement, of all restrictive legends,
      and
      to enable such Registrable Securities to be in such denominations and registered
      in such names as any such Holders may request.

     

    (i)
    Upon
      the
      occurrence of any event contemplated by Section 3(c)(v), as promptly as
      reasonably possible, prepare a supplement or amendment, including a
      post-effective amendment, to the affected Registration Statements or a
      supplement to the related Prospectus or any document incorporated or deemed
      to
      be incorporated therein by reference, and file any other required document
      so
      that, as thereafter delivered, no Registration Statement nor any Prospectus
      will
      contain an 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 under which they were made, not
      misleading.

     

    4.    Registration
      Expenses.
      All
      fees and expenses incident to the performance of or compliance with this
      Agreement by the Company shall be borne by the Company whether or not any
      Registrable Securities are sold pursuant to a Registration Statement. The fees
      and expenses referred to in the foregoing sentence shall include, without
      limitation, (i) all registration and filing fees (including, without limitation,
      fees and expenses (A) with respect to filings required to be made with any
      Trading Market on which the Common Stock is then listed for trading, and (B)
      in
      compliance with applicable state securities or Blue Sky laws), (ii) printing
      expenses (including, without limitation, expenses of printing certificates
      for
      Registrable Securities and of printing prospectuses if the printing of
      prospectuses is reasonably requested by the holders of a majority of the
      Registrable Securities included in the Registration Statement), (iii) messenger,
      telephone and delivery expenses, (iv) fees and disbursements of counsel for
      the
      Company, (v) Securities Act liability insurance, if the Company so desires
      such
      insurance, and (vi) fees and expenses of all other Persons retained by the
      Company in connection with the consummation of the transactions contemplated
      by
      this Agreement. In addition, the Company shall be responsible for all of its
      internal expenses incurred in connection with the consummation of the
      transactions contemplated by this Agreement (including, without limitation,
      all
      salaries and expenses of its officers and employees performing legal or
      accounting duties), the expense of any annual audit and the fees and expenses
      incurred in connection with the listing of the Registrable Securities on any
      securities exchange as required hereunder.

     

    5.    Indemnification.

     

    

    
      
        
          
          

        

        
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    (a)    Indemnification
      by the Company.
      The
      Company shall, notwithstanding any termination of this Agreement, indemnify
      and
      hold harmless each Holder, the officers, directors, agents, investment advisors,
      partners, members and employees of each of them, each Person who controls any
      such Holder (within the meaning of Section 15 of the Securities Act or Section
      20 of the Exchange Act) and the officers, directors, agents and employees of
      each such controlling Person, to the fullest extent permitted by applicable
      law,
      from and against any and all losses, claims, damages, liabilities, costs
      (including, without limitation, reasonable costs of preparation and reasonable
      attorneys' fees) and expenses (collectively, "Losses"),
      as
      incurred, arising out of or relating to any untrue or alleged untrue statement
      of a material fact contained in any Registration Statement, any Prospectus
      or
      any form of prospectus or in any amendment or supplement thereto or in any
      preliminary prospectus, or arising out of or relating to any omission or alleged
      omission of a material fact required to be stated therein or necessary to make
      the statements therein (in the case of any Prospectus or form of prospectus
      or
      supplement thereto, in light of the circumstances under which they were made)
      not misleading, except to the extent, but only to the extent, that (1) such
      untrue statements or omissions are based solely upon information regarding
      such
      Holder furnished in writing to the Company by such Holder expressly for use
      therein, or to the extent that such information relates to such Holder or such
      Holder's proposed method of distribution of Registrable Securities and was
      reviewed and expressly approved in writing by such Holder expressly for use
      in
      the Registration Statement, such Prospectus or such form of Prospectus or in
      any
      amendment or supplement thereto (it being understood that the Holder has
      approved Annex A hereto for this purpose) or (2) in the case of an occurrence
      of
      an event of the type specified in Section 3(c)(ii)-(v), the use by such Holder
      of an outdated or defective Prospectus after the Company has notified such
      Holder in writing that the Prospectus is outdated or defective and prior to
      the
      receipt by such Holder of an Advice or an amended or supplemented Prospectus,
      but only if and to the extent that following the receipt of the Advice or the
      amended or supplemented Prospectus the misstatement or omission giving rise
      to
      such Loss would have been corrected. The Company shall notify the Holders
      promptly of the institution, threat or assertion of any Proceeding of which
      the
      Company is aware in connection with the transactions contemplated by this
      Agreement.

     

    (b)    Indemnification
      by Holders.
      Each
      Holder shall, severally and not jointly, indemnify and hold harmless the
      Company, its directors, officers, agents and employees, each Person who controls
      the Company (within the meaning of Section 15 of the Securities Act and Section
      20 of the Exchange Act), and the directors, officers, agents or employees of
      such controlling Persons, to the fullest extent permitted by applicable law,
      from and against all Losses, as incurred, arising solely out of or based solely
      upon: (x) such Holder's failure to comply with the prospectus delivery
      requirements of the Securities Act or (y) any untrue statement of a material
      fact contained in any Registration Statement, any Prospectus, or any form of
      prospectus, or in any amendment or supplement thereto, or arising solely out
      of
      or based solely upon any omission of a material fact required to be stated
      therein or necessary to make the statements therein not misleading to the
      extent, but only to the extent that, (1) such untrue statements or omissions
      are
      based solely upon information regarding such Holder furnished in writing to
      the
      Company by such Holder expressly for use therein, or to the extent that such
      information relates to such Holder or such Holder's proposed method of
      distribution of Registrable Securities and was reviewed and expressly approved
      in writing by such Holder expressly for use in the Registration Statement (it
      being understood that the Holder has approved Annex A hereto for this purpose),
      such Prospectus or such form of Prospectus or in any amendment or supplement
      thereto or (2) in the case of an occurrence of an event of the type specified
      in
      Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective
      Prospectus after the Company has notified such Holder in writing that the
      Prospectus is outdated or defective and prior to the receipt by such Holder
      of
      an Advice or an amended or supplemented Prospectus, but only if and to the
      extent that following the receipt of the Advice or the amended or supplemented
      Prospectus the misstatement or omission giving rise to such Loss would have
      been
      corrected. In no event shall the liability of any selling Holder hereunder
      be
      greater in amount than the dollar amount of the net proceeds received by such
      Holder upon the sale of the Registrable Securities giving rise to such
      indemnification obligation.

     

    

    
      
        
          
          

        

        
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    (c)    Conduct
      of Indemnification Proceedings.
      If any
      Proceeding shall be brought or asserted against any Person entitled to indemnity
      hereunder (an "Indemnified
      Party"),
      such
      Indemnified Party shall promptly notify the Person from whom indemnity is sought
      (the "Indemnifying
      Party")
      in
      writing, and the Indemnifying Party shall assume the defense thereof, including
      the employment of counsel reasonably satisfactory to the Indemnified Party
      and
      the payment of all fees and expenses incurred in connection with defense
      thereof; provided, that the failure of any Indemnified Party to give such notice
      shall not relieve the Indemnifying Party of its obligations or liabilities
      pursuant to this Agreement, except (and only) to the extent that it shall be
      finally determined by a court of competent jurisdiction (which determination
      is
      not subject to appeal or further review) that such failure shall have
      proximately and materially adversely prejudiced the Indemnifying
      Party.

     

    An
      Indemnified Party shall have the right to employ separate counsel in any such
      Proceeding and to participate in the defense thereof, but the fees and expenses
      of such counsel shall be at the expense of such Indemnified Party or Parties
      unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
      expenses; (2) the Indemnifying Party shall have failed promptly to assume the
      defense of such Proceeding and to employ counsel reasonably satisfactory to
      such
      Indemnified Party in any such Proceeding; or (3) the named parties to any such
      Proceeding (including any impleaded parties) include both such Indemnified
      Party
      and the Indemnifying Party, and such Indemnified Party shall have been advised
      by counsel that a conflict of interest is likely to exist if the same counsel
      were to represent such Indemnified Party and the Indemnifying Party (in which
      case, if such Indemnified Party notifies the Indemnifying Party in writing
      that
      it elects to employ separate counsel at the expense of the Indemnifying Party,
      the Indemnifying Party shall not have the right to assume the defense thereof
      and such counsel shall be at the expense of the Indemnifying Party). The
      Indemnifying Party shall not be liable for any settlement of any such Proceeding
      effected without its written consent, which consent shall not be unreasonably
      withheld. No Indemnifying Party shall, without the prior written consent of
      the
      Indemnified Party, effect any settlement of any pending Proceeding in respect
      of
      which any Indemnified Party is a party, unless such settlement includes an
      unconditional release of such Indemnified Party from all liability on claims
      that are the subject matter of such Proceeding.

     

    All
      fees
      and expenses of the Indemnified Party (including reasonable fees and expenses
      to
      the extent incurred in connection with investigating or preparing to defend
      such
      Proceeding in a manner not inconsistent with this Section) shall be paid to
      the
      Indemnified Party, as incurred, within ten Trading Days of written notice
      thereof to the Indemnifying Party (regardless of whether it is ultimately
      determined that an Indemnified Party is not entitled to indemnification
      hereunder; provided, that the Indemnifying Party may require such Indemnified
      Party to undertake to reimburse all such fees and expenses to the extent it
      is
      finally judicially determined that such Indemnified Party is not entitled to
      indemnification hereunder).

     

    

    
      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

    

    

     

    (d)    Contribution.
      If a
      claim for indemnification under Section 5(a) or 5(b) is unavailable to an
      Indemnified Party (by reason of public policy or otherwise), then each
      Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
      contribute to the amount paid or payable by such Indemnified Party as a result
      of such Losses, in such proportion as is appropriate to reflect the relative
      fault of the Indemnifying Party and Indemnified Party in connection with the
      actions, statements or omissions that resulted in such Losses as well as any
      other relevant equitable considerations. The relative fault of such Indemnifying
      Party and Indemnified Party shall be determined by reference to, among other
      things, whether any action in question, including any untrue or alleged untrue
      statement of a material fact or omission or alleged omission of a material
      fact,
      has been taken or made by, or relates to information supplied by, such
      Indemnifying Party or Indemnified Party, and the parties' relative intent,
      knowledge, access to information and opportunity to correct or prevent such
      action, statement or omission. The amount paid or payable by a party as a result
      of any Losses shall be deemed to include, subject to the limitations set forth
      in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses
      incurred by such party in connection with any Proceeding to the extent such
      party would have been indemnified for such fees or expenses if the
      indemnification provided for in this Section was available to such party in
      accordance with its terms.

     

    The
      parties hereto agree that it would not be just and equitable if contribution
      pursuant to this Section 5(d) were determined by pro rata allocation or by
      any
      other method of allocation that does not take into account the equitable
      considerations referred to in the immediately preceding paragraph.
      Notwithstanding the provisions of this Section 5(d), no Holder shall be required
      to contribute, in the aggregate, any amount in excess of the amount by which
      the
      proceeds actually received by such Holder from the sale of the Registrable
      Securities subject to the Proceeding exceeds the amount of any damages that
      such
      Holder has otherwise been required to pay by reason of such untrue or alleged
      untrue statement or omission or alleged omission.

     

    The
      indemnity and contribution agreements contained in this Section are in addition
      to any liability that the Indemnifying Parties may have to the Indemnified
      Parties.

     

    6.    Miscellaneous.

     

    (a)    Remedies.
      In the
      event of a breach by the Company or by a Holder, of any of their obligations
      under this Agreement, each Holder or the Company, as the case may be, in
      addition to being entitled to exercise all rights granted by law and under
      this
      Agreement, including recovery of damages, will be entitled to specific
      performance of its rights under this Agreement. The Company and each Holder
      agree that monetary damages would not provide adequate compensation for any
      losses incurred by reason of a breach by it of any of the provisions of this
      Agreement and hereby further agrees that, in the event of any action for
      specific performance in respect of such breach, it shall waive the defense
      that
      a remedy at law would be adequate.

     

    (b)    No
      Piggyback on Registrations.
      Except
      as and to the extent specified in Schedule
      3.1(v)
      to the
      Purchase Agreement, neither the Company nor any of its security holders (other
      than the Holders in such capacity pursuant hereto) may include securities of
      the
      Company in a Registration Statement other than the Registrable Securities,
      and
      the Company shall not during the Effectiveness Period enter into any agreement
      providing any such right to any of its security holders.

     

    

    
      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

    

    

     

    (c)    Compliance.
      Each
      Holder covenants and agrees that it will comply with the prospectus delivery
      requirements of the Securities Act as applicable to it in connection with sales
      of Registrable Securities pursuant to the Registration Statement.

     

    (d)    Discontinued
      Disposition.
      Each
      Holder agrees by its acquisition of such Registrable Securities that, upon
      receipt of a notice from the Company of the occurrence of any event of the
      kind
      described in Section 3(c), such Holder will forthwith discontinue disposition
      of
      such Registrable Securities under the Registration Statement until such Holder's
      receipt of the copies of the supplemented Prospectus and/or amended Registration
      Statement or until it is advised in writing (the "Advice")
      by the
      Company that the use of the applicable Prospectus may be resumed, and, in either
      case, has received copies of any additional or supplemental filings that are
      incorporated or deemed to be incorporated by reference in such Prospectus or
      Registration Statement. The Company may provide appropriate stop orders to
      enforce the provisions of this paragraph.

     

    (e)    Piggy-Back
      Registrations.
      If at
      any time during the Effectiveness Period there is not an effective Registration
      Statement covering all of the Registrable Securities and the Company shall
      determine to prepare and file with the Commission a registration statement
      relating to an offering for its own account or the account of others under
      the
      Securities Act of any of its equity securities, other than on Form S-4 or Form
      S-8 (each as promulgated under the Securities Act) or their then equivalents
      relating to equity securities to be issued solely in connection with any
      acquisition of any entity or business or equity securities issuable in
      connection with stock option or other employee benefit plans, then the Company
      shall send to each Holder written notice of such determination and, if within
      fifteen days after receipt of such notice, any such Holder shall so request
      in
      writing, the Company shall include in such registration statement all or any
      part of such Registrable Securities such holder requests to be registered,
      subject to customary underwriter cutbacks applicable to all holders of
      registration rights.

     

    (f) 
         Amendments
      and Waivers.
      The
      provisions of this Agreement, including the provisions of this Section 6(f),
      may
      not be amended, modified or supplemented, and waivers or consents to departures
      from the provisions hereof may not be given, unless the same shall be in writing
      and signed by the Company and the Holders of no less than a majority in interest
      of the then outstanding Registrable Securities. Notwithstanding the foregoing,
      a
      waiver or consent to depart from the provisions hereof with respect to a matter
      that relates exclusively to the rights of certain Holders and that does not
      directly or indirectly affect the rights of other Holders may be given by
      Holders of at least a majority of the Registrable Securities to which such
      waiver or consent relates.

     

    (g)    Notices.
      Any and
      all notices or other communications or deliveries required or permitted to
      be
      provided hereunder shall be in writing and shall be deemed given and effective
      on the earliest of (a) the date of transmission, if such notice or communication
      is delivered via facsimile (provided the sender receives a machine-generated
      confirmation of successful transmission) at the facsimile number specified
      in
      this Section or via electronic mail, prior to 6:30 p.m. (New York City time)
      on
      a Trading Day, (b) the next Trading Day after the date of transmission of the
      facsimile or electronic mail, if such notice or communication is delivered
      via
      facsimile at the facsimile number specified in this Section on a day that is
      not
      a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day,
      (c) the Trading Day following the date of mailing, if sent by U.S. nationally
      recognized overnight courier service, or (d) upon actual receipt by the party
      to
      whom such notice is required to be given. The address for such notices and
      communications shall be as follows:

     

    

    
      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

    

    

    

    
      	
              If
                to the Company:

            	
              Welund
                Fund, Inc.

            
	 	
              1940
                Zinfandel Drive, Suite R

            
	 	
              Rancho
                Cordova, California 95670

            
	 	
              Facsimile:
                (916) 791-0289

            
	 	
              Attn.:
                Steven Strasser, President

            
	 	 
	
              With
                a copy to:

            	
              Bullivant
                Houser Bailey PC

            
	 	
              1415
                L Street, Suite 1000

            
	 	
              Sacramento,
                CA 95814

            
	 	
              Facsimile:
                (916) 930-2501

            
	 	
              Attn.:
                David C. Adams, Esq.

               

            
	
              If
                to a Investor: 

               

            	
              To
                the address set forth under such Investor's name on the signature
                pages
                hereto.

               

            
	
              If
                to any other Person who is then the registered Holder:

               

            
	 	
              To
                the address of such Holder as it appears in the stock transfer books
                of
                the Company

               

            

    

    or
      such
      other address as may be designated in writing hereafter, in the same manner,
      by
      such Person.

     

    (h)    Successors
      and Assigns.
      This
      Agreement shall inure to the benefit of and be binding upon the successors
      and
      permitted assigns of each of the parties and shall inure to the benefit of
      each
      Holder. The Company may not assign its rights or obligations hereunder without
      the prior written consent of each Holder. Each Holder may assign their
      respective rights hereunder in the manner and to the Persons as permitted under
      the Purchase Agreement.

     

    (i)
    Execution
      and Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed shall be deemed to be an original and, all of which taken together
      shall constitute one and the same Agreement. In the event that any signature
      is
      delivered by facsimile transmission, such signature shall create a valid binding
      obligation of the party executing (or on whose behalf such signature is
      executed) the same with the same force and effect as if such facsimile signature
      were the original thereof.

     

    

    
      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

    

    

    

    (j)
    Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by and construed and enforced in accordance
      with the internal laws of the State of New York, without regard to the
      principles of conflicts of law thereof. Each party agrees that all Proceedings
      concerning the interpretations, enforcement and defense of the transactions
      contemplated by this Agreement (whether brought against a party hereto or its
      respective Affiliates, employees or agents) will be commenced in the New York
      Courts. Each party hereto hereby irrevocably submits to the exclusive
      jurisdiction of the New York Courts 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 Proceeding, any claim that it is not personally subject to the jurisdiction
      of any New York Court, or that such Proceeding has been commenced in an improper
      or inconvenient forum. Each party hereto hereby irrevocably waives personal
      service of process and consents to process being served in any such Proceeding
      by mailing a copy thereof via registered or certified mail or overnight delivery
      (with evidence of delivery) to such party at the address in effect for notices
      to it under this Agreement and agrees that such service shall constitute good
      and sufficient service of process and notice thereof. Nothing contained herein
      shall be deemed to limit in any way any right to serve process in any manner
      permitted by law. Each party hereto hereby irrevocably waives, to the fullest
      extent permitted by applicable law, any and all right to trial by jury in any
      Proceeding arising out of or relating to this Agreement or the transactions
      contemplated hereby. If either party shall commence a Proceeding to enforce
      any
      provisions of this Agreement, then the prevailing party in such Proceeding
      shall
      be reimbursed by the other party for its attorney’s fees and other costs and
      expenses incurred with the investigation, preparation and prosecution of such
      Proceeding.

     

    (k)    Cumulative
      Remedies.
      The
      remedies provided herein are cumulative and not exclusive of any remedies
      provided by law.

     

    (l)
    Severability.
      If any
      term, provision, covenant or restriction of this Agreement is held by a court
      of
      competent jurisdiction to be invalid, illegal, void or unenforceable, the
      remainder of the terms, provisions, covenants and restrictions set forth herein
      shall remain in full force and effect and shall in no way be affected, impaired
      or invalidated, and the parties hereto shall use their reasonable efforts to
      find and employ an alternative means to achieve the same or substantially the
      same result as that contemplated by such term, provision, covenant or
      restriction. It is hereby stipulated and declared to be the intention of the
      parties that they would have executed the remaining terms, provisions, covenants
      and restrictions without including any of such that may be hereafter declared
      invalid, illegal, void or unenforceable.

     

    (m)   Headings.
      The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

     

    (n)    Independent
      Nature of Investors' Obligations and Rights.
      The
      obligations of each Investor under this Agreement are several and not joint
      with
      the obligations of each other Investor, and no Investor shall be responsible
      in
      any way for the performance of the obligations of any other Investor under
      this
      Agreement. Nothing contained herein or in any Transaction Document, and no
      action taken by any Investor pursuant thereto, shall be deemed to constitute
      the
      Investors as a partnership, an association, a joint venture or any other kind
      of
      entity, or create a presumption that the Investors are in any way acting in
      concert or as a group with respect to such obligations or the transactions
      contemplated by this Agreement or any other Transaction Document. Each Investor
      acknowledges that no other Investor will be acting as agent of such Investor
      in
      enforcing its rights under this Agreement. Each Investor shall be entitled
      to
      independently protect and enforce its rights, including without limitation
      the
      rights arising out of this Agreement, and it shall not be necessary for any
      other Investor to be joined as an additional party in any Proceeding for such
      purpose. The Company acknowledges that each of the Investors has been provided
      with the same Registration Rights Agreement for the purpose of closing a
      transaction with multiple Investors and not because it was required or requested
      to do so by any Investor.

     

     

     

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          13

          
            

          

        

        
          
          

        

      

    

    

    

     

    IN
      WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
      as
      of the date first written above.

     

    
      	 	
              WELUND
                FUND, INC.

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/
                Steve
                Strasser                                     
                

            
	 	 	
              Name:
                Steve
                Strasser

            
	 	 	
              Title:
                President

            

    

     

     

     

     

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          14

          
            

          

        

        
          
          

        

      

    

    

     

    IN
      WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
      as
      of the date first written above.

     

    

    
      	 	
              NAME
                OF INVESTING ENTITY

               

            
	 	_________________________________________________ 
	 	
            
	 	
              By:

            	___________________________________________
	 	 	
              Name

            
	 	 	
              Title:

            
	 	 	 

    

    

    
      	 	
              ADDRESS
                FOR NOTICE

            
	 	 
	 	
              c/o:
                ______________________________________________

            
	 	 
	 	
              Street:
                ____________________________________________

            
	 	 
	 	
              City/State/Zip:
                ______________________________________

            
	 	 
	 	
              Attention:
                 _________________________________________

            
	 	 
	 	
              Tel:
                ______________________________________________

            
	 	 
	 	
              Fax:
                 _____________________________________________

            
	 	 
	 	
              Email:
                ____________________________________________

            

    

    

    

     

    

     

    

     

    

     

    

    
      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

    

     

     

    Annex
      A

     

    Plan
      of
      Distribution

     

    The
      Selling Stockholders and any of their pledgees, donees, transferees, assignees
      and successors-in-interest may, from time to time, sell any or all of their
      shares of Common Stock on any stock exchange, market or trading facility on
      which the shares are traded or in private transactions. These sales may be
      at
      fixed or negotiated prices. The Selling Stockholders may use any one or more
      of
      the following methods when selling shares:

     

    
      	
              ·

            	
              ordinary
                brokerage transactions and transactions in which the broker-dealer
                solicits Investors;

            

    

     

    
      	
              ·

            	
              block
                trades in which the broker-dealer will attempt to sell the shares
                as agent
                but may position and resell a portion of the block as principal to
                facilitate the transaction;

            

    

     

    
      	
              ·

            	
              purchases
                by a broker-dealer as principal and resale by the broker-dealer for
                its
                account;

            

    

     

    
      	
              ·

            	
              an
                exchange distribution in accordance with the rules of the applicable
                exchange;

            

    

     

    
      	
              ·

            	
              privately
                negotiated transactions;

            

    

     

    
      	
              ·

            	
              to
                cover short sales made after the date that this Registration Statement
                is
                declared effective by the Commission;

            

    

     

    
      	
              ·

            	
              broker-dealers
                may agree with the Selling Stockholders to sell a specified number
                of such
                shares at a stipulated price per
                share;

            

    

     

    
      	
              ·

            	
              a
                combination of any such methods of sale;
                and

            

    

     

    
      	
              ·

            	
              any
                other method permitted pursuant to applicable
                law.

            

    

     

    The
      Selling Stockholders may also sell shares under Rule 144 under the Securities
      Act, if available, rather than under this prospectus.

     

    Broker-dealers
      engaged by the Selling Stockholders may arrange for other brokers-dealers to
      participate in sales. Broker-dealers may receive commissions or discounts from
      the Selling Stockholders (or, if any broker-dealer acts as agent for the
      purchaser of shares, from the purchaser) in amounts to be negotiated. The
      Selling Stockholders do not expect these commissions and discounts to exceed
      what is customary in the types of transactions involved.

     

    The
      Selling Stockholders may from time to time pledge or grant a security interest
      in some or all of the Shares owned by them and, if they default in the
      performance of their secured obligations, the pledgees or secured parties may
      offer and sell shares of Common Stock from time to time under this prospectus,
      or under an amendment to this prospectus under Rule 424(b)(3) or other
      applicable provision of the Securities Act of 1933 amending the list of selling
      stockholders to include the pledgee, transferee or other successors in interest
      as selling stockholders under this prospectus.

     

    

    
      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

    

    

     

    Upon
      the
      Company being notified in writing by a Selling Stockholder that any material
      arrangement has been entered into with a broker-dealer for the sale of Common
      Stock through a block trade, special offering, exchange distribution or
      secondary distribution or a purchase by a broker or dealer, a supplement to
      this
      prospectus will be filed, if required, pursuant to Rule 424(b) under the
      Securities Act, disclosing (i) the name of each such Selling Stockholder and
      of
      the participating broker-dealer(s), (ii) the number of shares involved, (iii)
      the price at which such the shares of Common Stock were sold, (iv)the
      commissions paid or discounts or concessions allowed to such broker-dealer(s),
      where applicable, (v) that such broker-dealer(s) did not conduct any
      investigation to verify the information set out or incorporated by reference
      in
      this prospectus, and (vi) other facts material to the transaction. In addition,
      upon the Company being notified in writing by a Selling Stockholder that a
      donee
      or pledgee intends to sell more than 500 shares of Common Stock, a supplement
      to
      this prospectus will be filed if then required in accordance with applicable
      securities law.

     

    The
      Selling Stockholders also may transfer the shares of Common Stock in other
      circumstances, in which case the transferees, pledgees or other successors
      in
      interest will be the selling beneficial owners for purposes of this
      prospectus.

     

    The
      Selling Stockholders and any broker-dealers or agents that are involved in
      selling the shares may be deemed to be "underwriters" within the meaning of
      the
      Securities Act in connection with such sales. In such event, any commissions
      received by such broker-dealers or agents and any profit on the resale of the
      shares purchased by them may be deemed to be underwriting commissions or
      discounts under the Securities Act. Discounts, concessions, commissions and
      similar selling expenses, if any, that can be attributed to the sale of the
      securities will be paid by the Selling Stockholder and/or the purchasers. Each
      Selling Stockholder has represented and warranted to the Company that it
      acquired the securities subject to this registration statement in the ordinary
      course of such Selling Stockholder’s business and, at the time of its purchase
      of such securities such Selling Stockholder had no agreements or understandings,
      directly or indirectly, with any person to distribute any such securities.
      

     

    The
      Company has advised each Selling Stockholder that it may not use shares
      registered on this Registration Statement to cover short sales of Common Stock
      made prior to the date on which this Registration Statement shall have been
      declared effective by the Commission. If a Selling Stockholder uses this
      prospectus for any sale of the Common Stock, it will be subject to the
      prospectus delivery requirements of the Securities Act. The Selling Stockholders
      will be responsible to comply with the applicable provisions of the Securities
      Act and Exchange Act, and the rules and regulations thereunder promulgated,
      including, without limitation, Regulation M, as applicable to such Selling
      Stockholders in connection with resales of their respective shares under this
      Registration Statement.

     

    The
      Company is required to pay all fees and expenses incident to the registration
      of
      the shares, but the Company will not receive any proceeds from the sale of
      the
      Common Stock. The Company has agreed to indemnify the Selling Stockholders
      against certain losses, claims, damages and liabilities, including liabilities
      under the Securities Act. 

     

    

    
      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

    

     

    

    Annex
      B

     

    WELUND
      FUND, INC.

     

    Selling
      Securityholder Notice and Questionnaire

     

    The
      undersigned beneficial owner of common stock (the “Common
      Stock”),
      of
      Welund Fund, Inc., a Nevada corporation (the “Company”)
      understands that the Company has filed or intends to file with the Securities
      and Exchange Commission (the “Commission”)
      a
      Registration Statement for the registration and resale of the Registrable
      Securities, in accordance with the terms of the Registration Rights Agreement,
      dated as of September __, 2006 (the “Registration
      Rights Agreement”),
      among
      the Company and the Investors named therein. A copy of the Registration Rights
      Agreement is available from the Company upon request at the address set forth
      below. All capitalized terms used and not otherwise defined herein shall have
      the meanings ascribed thereto in the Registration Rights Agreement.

     

    The
      undersigned hereby provides the following information to the Company and
      represents and warrants that such information is accurate:

     

    QUESTIONNAIRE

     

    
      	
              1.

            	
              Name.

            

    

     

    
      	 	
              (a)

            	
              Full
                Legal Name of Selling Securityholder

            

      	 	 	 

      	 	 	
              
 

    

     

    
      	 	
              (b)

            	
              Full
                Legal Name of Registered Holder (if not the same as (a) above) through
                which Registrable Securities Listed in Item 3 below are
                held:

            

      	 	 	 

      	 	 	
              
 

    

     

     

    
      	 	
              (c)

            	
              Full
                Legal Name of Natural Control Person (which means a natural person
                who
                directly or indirectly alone or with others has power to vote or
                dispose
                of the securities covered by the
                questionnaire):

            

      	 	 	
            

      	 	 	
              
 

    

     

    2.
      Address for Notices to Selling Securityholder:

     

    
      

    

     

    
      

    

     

    
      

    

    
      	
              Telephone:

            	
               

              
                

              

            

    

    
      	
              Fax:

            	
               

              
                

              

            

    

    
      	
              Contact
                Person:

            	
               

              
                
 

            

    

    

    

    
      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

    

    

    

    3.
      Beneficial Ownership of Registrable Securities:

     

    
      	
            	 	
              Type
                and Principal Amount of Registrable Securities beneficially
                owned:

            

      	 	 	
               

            

      	 	 	
              
 

      	 	 	
              
 

      	 	 	
              
 

    

     

     

    4.
      Broker-Dealer Status:

     

    
      	 	
              (a)

            	
              Are
                you a broker-dealer?

            

    

     

    Yes  
      o 
No 
      o

     

    
      	 	
              Note:

            	
              If
                yes, the Commission’s staff has indicated that you should be identified as
                an underwriter in the Registration
                Statement.

            

    

     

    
      	 	
              (b)

            	
              Are
                you an affiliate of a
                broker-dealer?

            

    

    
       

      Yes  
        o 
No 
        o

       

    

    
      	 	
              (c)

            	
              If
                you are an affiliate of a broker-dealer, do you certify that you
                bought
                the Registrable Securities in the ordinary course of business, and
                at the
                time of the purchase of the Registrable Securities to be resold,
                you had
                no agreements or understandings, directly or indirectly, with any
                person
                to distribute the Registrable
                Securities?

            

    

    
       

      Yes  
        o 
No 
        o

       

    

    
      	 	
              Note:

            	
              If
                no, the Commission’s staff has indicated that you should be identified as
                an underwriter in the Registration
                Statement.

            

    

     

    5.
      Beneficial Ownership of Other Securities of the Company Owned by the Selling
      Securityholder.

     

    Except
      as set forth below in this Item 5, the undersigned is not the beneficial or
      registered owner of any securities of the Company other than the Registrable
      Securities listed above in Item 3.

     

    Type
      and
      Amount of Other Securities beneficially owned by the Selling
      Securityholder:

     

    
      	 	 	
              
 

      	 	 	
              
 

      	 	 	
              
 

    

    

    

    
      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

    

    

    

    6.
      Relationships with the Company:

     

    Except
      as set forth below, neither the undersigned nor any of its affiliates, officers,
      directors or principal equity holders (owners of 5% of more of the equity
      securities of the undersigned) has held any position or office or has had any
      other material relationship with the Company (or its predecessors or affiliates)
      during the past three years.

     

    State
      any
      exceptions here:

     

    
      	 	 	
              
 

      	 	 	
              
 

    

     

     

    The
      undersigned agrees to promptly notify the Company of any inaccuracies or changes
      in the information provided herein that may occur subsequent to the date hereof
      and prior to the Effective Date for the Registration Statement.

     

    By
      signing below, the undersigned consents to the disclosure of the information
      contained herein in its answers to Items 1 through 6 and the inclusion of such
      information in the Registration Statement and the related prospectus. The
      undersigned understands that such information will be relied upon by the Company
      in connection with the preparation or amendment of the Registration Statement
      and the related prospectus.

     

    IN
      WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice
      and Questionnaire to be executed and delivered either in person or by its duly
      authorized agent.

     

    
      	
              Dated:
                

            	
               

              
                
 

            	 	
              Beneficial
                Owner: 

            	
               

              
                

              

               

            
	 	 	 	 	 

    

    

    
      	 	
              By:

            	
               

              
                

              

              Name:

            
	 	 	
              Title:

            

    

    

    PLEASE
      FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN
      THE ORIGINAL BY OVERNIGHT MAIL, TO:

    

    
      	 	
              Bullivant
                Houser Bailey PC

            
	 	
              1415
                L Street, Suite 1000

            
	 	
              Sacramento,
                CA 95814

            
	 	
              Facsimile:
                (916) 930-2501

            
	 	
              Attn.:
                David C. Adams, Esq.

            

    

    

     

    

     

     

     

    20Exhibit 10.3

    
      

      

    

    

    

      August
        29, 2006

      

      

      Mr.
        Steven Strasser

      President

      Welund
        Fund, Inc.

      1940
        Zinfandel Drive, Suite R

      Rancho
        Cordova, CA 95670

      

      Re:    Engagement
        Letter

      

      Dear
        Mr.
        Strasser:

      

      Roth
        Capital Partners, LLC (“we” or “RCP”) is pleased to act as the exclusive
        financial advisor and placement agent for Welund Fund, Inc. (“you” or the
“Company”) in connection with your proposed private placement. The terms of our
        engagement are set forth below. As discussed, a condition to our engagement
        is
        that Stephen Kircher be appointed Chairman of the Board of Directors of Welund
        Fund prior to the commencement of the Roadshow. We look forward to working
        with
        you.

      

      1.
        The
        Offering.

      

      (a)
        We
        currently anticipate raising approximately $10.0 million through a “PIPE”
transaction involving the sale of securities to institutional investors.
        The
        actual terms of the offering will depend on market conditions, and will be
        subject to negotiation between the Company and RCP and prospective investors.
        

      

      (b)
        Although we cannot guarantee you that we will be able to raise new capital,
        we
        will conduct the offering on a best efforts basis.

      

      (c)
        In
        turn, during the term of our engagement, you agree not to use any other
        investment banking firm to raise capital (including debt) for you.

      

      2.  Fees
        and Expenses.

      

      (a)
        Concurrently with the consummation of the offering, the Company will pay
        us in
        cash a fee equal to 6% of the gross proceeds received from the sale of
        securities.

       

      (b)
        In
        addition, the Company agrees to reimburse RCP upon request for its out-of-pocket
        expenses, including the fees and disbursements of RCP’s legal counsel, up to
        $25,000.

      

      (c)
        Upon
        the closing of the Offering, the Company will issue to RCP warrants for the
        purchase of an amount equal to 5% of the securities issued in the Offering.
        The
        Warrants will be exercisable into the same class of common stock as issued
        as
        part of the Offering, have a strike price equal to 115% of the Company’s common
        stock on the closing date of the Offering and have a term of five years.
        The
        Warrants will provide for cashless or “net” exercise. In the event Investor
        Warrants are issued as part of the Offering, the terms and conditions of
        the
        Warrants shall be the same as Investor Warrants. The shares issuable upon
        exercise of the RCP warrants will be entitled to the same registration rights
        as
        those granted to the Investors in connection with the Offering. To that end,
        you
        agree that RCP will be afforded the indemnification protections granted to
        the
        Investors as part of the agreement governing the registration of the Investor
        securities sold in the Offering, as a third party beneficiary to such
        provisions.

       

      

      24
        CORPORATE PLAZA, NEWPORT BEACH, CA 926600 800.678.9147
www.rothcp.com

      Member
        SIPC/NASD

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      Welund
        Fund, Inc.

      August
        29, 2006

      Page
        2

       

      3.
        Term
        of Engagement.

      

      (a)
        The
        term of our engagement will be three months; however, either party may terminate
        our engagement at any time upon 10 days written notice to the other party.
        Upon
        termination, we will be entitled to collect all fees earned and expenses
        incurred through the date of termination.

      

      (b)
        If
        the offering is not consummated during the term, for reasons other than
        termination of this engagement by us, and during the twelve months following
        termination of this Agreement, either (i) the Company completes an offering
        of
        its securities, or (ii) any person which we introduced to the Company or
        with
        which we have discussions or negotiations during the term on behalf of the
        Company, purchases securities from the Company (other than through a
        underwritten public offering), you agree to pay us upon the closing a cash
        fee
        in the amount that would otherwise have been payable to RCP had such transaction
        occurred during the term. 

      

      4.
        Offering
        Memorandum; Representations and Warranties.

      

      (a)
        You
        hereby authorize RCP to transmit to the prospective purchasers of the securities
        a private placement memorandum prepared by the Company with such exhibits
        and
        supplements as may from time to time be required or appropriate or,
        alternatively, copies of the Company’s most recent filings with the Securities
        and Exchange Commission, together with summary materials prepared by the
        Company, if we deem them appropriate (as the case may be, the “Memorandum”). The
        Company represents and warrants that the Memorandum (i) will be prepared
        by the
        management of the Company and reviewed and approved by its Board of Directors;
        and (ii) will 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 or previously made, in light of the circumstances under
        which
        they were made, not misleading. The Company will advise RCP immediately of
        the
        occurrence of any event or any other change known to the Company which results
        in the Memorandum containing an untrue statement of a material fact or omitting
        to state a material fact required to be stated therein or necessary to make
        the
        statements therein or previously made, in light of the circumstances under
        which
        they were made, not misleading.

      

      (b)
        You
        agree that you will enter into subscription, registration rights and other
        customary agreements, and that your counsel will supply an opinion letter
        on the
        transaction, all of which will be in form and substance reasonably acceptable
        to, and addressed to, us and the investors.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      Welund
        Fund, Inc.

      August
        29, 2006

      Page
        3

       

      (c)
        You
        further agree that we may rely upon, and are a third party beneficiary of,
        the
        representations and warranties, and applicable covenants, set forth in any
        agreements with investors in the offering.

      

      (d)
        In
        conjunction with the filing of the resale registration statement for investors
        pursuant to the Registration Rights Agreement, if the Company does not meet
        the requirements for S-3 eligibility that existed in October 1992
        (essentially, that it have a non-affiliate float of $150 million, or
        a non-affiliate float of $100 million and $3 million share annual
        trading volume, within 60 days of filing, and that it have been subject to
        the
        reporting requirements of the Securities Exchange Act of 1934 for 3 years,
        and
        current in that reporting for one year), the Company will file with the NASD,
        via the COBRA desk filing system, for approval of underwriting compensation
        under Section 2710 of the rules and regulations of the NASD, obtain from
        the NASD a standard clearance letter, and coordinate with the placement
        agent on filings it will be required to make upon sales under the registration
        statement.

      

      5.
        Indemnification, Contribution, and Confidentiality. The
        Company agrees to indemnify RCP and its controlling persons, representatives
        and
        agents in accordance with the indemnification provisions set forth in Appendix
        I, and the parties agree to the confidentiality provisions of Appendix II,
        all
        of which are incorporated herein by this reference. These provisions will
        apply
        regardless of whether the proposed offering is consummated.

      

      6.
        Governing
        Law. This
        Agreement shall be governed by and construed in accordance with the laws
        of the
        state of California applicable to contracts executed and to be wholly performed
        therein without giving effect to its conflicts of laws principles or rules.
        The
        Company and RCP agree that any dispute concerning this Agreement this Agreement
        shall be resolved through binding arbitration before the NASD pursuant to
        its
        arbitration rules. Arbitration will be venued in Los Angeles
        County.

      

      7.
        Announcement of Offering. If
        the
        Offering is consummated, RCP may, at its expense, place an announcement in
        such
        newspapers and periodicals as RCP may desire.

      

      8.
        Advice
        to the Board.
        The
        Company acknowledges that any advice given by us to you is solely for benefit
        and use of the Board of Directors of the Company and may not be used,
        reproduced, disseminated, quoted or referred to, without our prior written
        consent.

      

      9.
        Entire
        Agreement. This
        Agreement constitutes the entire Agreement between the parties and supersedes
        and cancels any and all prior or contemporaneous arrangements, understandings
        and agreements, written or oral, between them relating to the subject matter
        hereof. 

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      Welund
        Fund, Inc.

      August
        29, 2006

      Page
        4

       

      We
        look
        forward to working with you toward the successful conclusion of this engagement,
        and developing a long-term relationship with the Company.

      

      Very
        truly yours,

      

      ROTH
        CAPITAL PARTNERS, LLC

      

      

      
        	
                By:

              	
                /s/
                  Byron
                  Roth                                      
                  

              

      

      Byron
        Roth

      Chairman
        and CEO

      

      Confirmed
        and accepted as of

      this
        31st
        day of August, 2006:

      

      WELUND
        FUND, INC.

      

      

      
        	
                By:

              	
                /s/
                  Steve
                  Strasser                                  
                  

              

      

      Steven
        Strasser 

      President

      

      

      

      

      

      

      

      

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      Welund
        Fund, Inc.

      August
        29, 2006

      Page
        5

      
 

      APPENDIX
        I

      

      

      INDEMNIFICATION
        AND CONTRIBUTION

      

      The
        Company agrees to indemnify and hold harmless RCP and its affiliates (as
        defined
        in Rule 405 under the Securities Act of 1933, as amended) and their respective
        directors, officers, employees, agents and controlling persons (RCP and each
        such person being an “Indemnified Party”) from and against all losses, claims,
        damages and liabilities (or actions, including shareholder actions, in respect
        thereof), joint or several, to which such Indemnified Party may become subject
        under any applicable federal or state law, or otherwise, which are related
        to or
        result from the performance by RCP of the services contemplated by or the
        engagement of RCP pursuant to, this Agreement and will promptly reimburse
        any
        Indemnified Party for all reasonable expenses (including reasonable counsel
        fees
        and expenses) as they are incurred in connection with the investigation of,
        preparation for or defense arising from any threatened or pending claim,
        whether
        or not such Indemnified Party is a party and whether or not such claim, action
        or proceeding is initiated or brought by the Company. The Company will not
        be
        liable to any Indemnified Party under the foregoing indemnification and
        reimbursement provisions, (i) for any settlement by an Indemnified Party
        effected without its prior written consent (not to be unreasonably withheld);
        or
        (ii) to the extent that any loss, claim, damage or liability is found in
        a
        final, non-appealable judgment by a court of competent jurisdiction to have
        resulted primarily from RCP’s willful misconduct or gross negligence. The
        Company also agrees that no Indemnified Party shall have any liability (whether
        direct or indirect, in contract or tort or otherwise) to the Company or its
        security holders or creditors related to or arising out of the engagement
        of RCP
        pursuant to, or the performance by RCP of the services contemplated by, this
        Agreement except to the extent that any loss, claim, damage or liability
        is
        found in a final, non-appealable judgment by a court of competent jurisdiction
        to have resulted primarily from RCP’s willful misconduct or gross
        negligence.

      

      Promptly
        after receipt by an Indemnified Party of notice of any intention or threat
        to
        commence an action, suit or proceeding or notice of the commencement of any
        action, suit or proceeding, such Indemnified Party will, if a claim in respect
        thereof is to be made against the Company pursuant hereto, promptly notify
        the
        Company in writing of the same. In case any such action is brought against
        any
        Indemnified Party and such Indemnified Party notifies the Company of the
        commencement thereof, the Company may elect to assume the defense thereof,
        with
        counsel reasonably satisfactory to such Indemnified Party, and an Indemnified
        Party may employ counsel to participate in the defense of any such action
        provided, that the employment of such counsel shall be at the Indemnified
        Party’s own expense, unless (i) the employment of such counsel has been
        authorized in writing by the Company, (ii) the Indemnified Party has reasonably
        concluded (based upon advice of counsel to the Indemnified Party) that there
        may
        be legal defenses available to it or other Indemnified Parties that are
        different from or in addition to those available to the Company, or that
        a
        conflict or potential conflict exists (based upon advice of counsel to the
        Indemnified Party) between the Indemnified Party and the Company that makes
        it
        impossible or inadvisable for counsel to the Indemnifying Party to conduct
        the
        defense of both the Company and the Indemnified Party (in which case the
        Company
        will not have the right to direct the defense of such action on behalf of
        the
        Indemnified Party), or (iii) the Company has not in fact employed counsel
        reasonably satisfactory to the Indemnified Party to assume the defense of
        such
        action within a reasonable time after receiving notice of the action, suit
        or
        proceeding, in each of which cases the reasonable fees, disbursements and
        other
        charges of such counsel will be at the expense of the Company; provided,
        further, that in no event shall the Company be required to pay fees and expenses
        for more than one firm of attorneys representing Indemnified Parties unless
        the
        defense of one Indemnified Party is unique or separate from that of another
        Indemnified Party subject to the same claim or action. Any failure or delay
        by
        an Indemnified Party to give the notice referred to in this paragraph shall
        not
        affect such Indemnified Party’s right to be indemnified hereunder, except to the
        extent that such failure or delay causes actual harm to the Company, or
        prejudices its ability to defend such action, suit or proceeding on behalf
        of
        such Indemnified Party.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      Welund
        Fund, Inc.

      August
        29, 2006

      Page
        6

      

      If
        the
        indemnification provided for in this Agreement is for any reason held
        unenforceable by an Indemnified Party, the Company agrees to contribute to
        the
        losses, claims, damages and liabilities for which such indemnification is
        held
        unenforceable (i) in such proportion as is appropriate to reflect the relative
        benefits to the Company, on the one hand, and RCP on the other hand, of the
        Offering as contemplated whether or not the Offering is consummated or, (ii)
        if
        (but only if) the allocation provided for in clause (i) is for any reason
        unenforceable, in such proportion as is appropriate to reflect not only the
        relative benefits referred to in clause (i) but also the relative fault of
        the
        Company, on the one hand and RCP, on the other hand, as well as any other
        relevant equitable considerations. The Company agrees that for the purposes
        of
        this paragraph the relative benefits to the Company and RCP of the Offering
        as
        contemplated shall be deemed to be in the same proportion that the total
        value
        received or contemplated to be received by the Company or its shareholders,
        as
        the case may be, as a result of or in connection with the Offering bear to
        the
        fees paid or to be paid to RCP under this Agreement. Notwithstanding the
        foregoing, the Company expressly agrees that RCP shall not be required to
        contribute any amount in excess of the amount by which fees paid RCP hereunder
        (excluding reimbursable expenses), exceeds the amount of any damages which
        RCP
        has otherwise been required to pay.

      

      The
        Company agrees that without RCP’s prior written consent, which shall not be
        unreasonably withheld, it will not settle, compromise or consent to the entry
        of
        any judgment in any pending or threatened claim, action or proceeding in
        respect
        of which indemnification could be sought under the indemnification provisions
        of
        this Agreement (in which RCP or any other Indemnified Party is an actual
        or
        potential party to such claim, action or proceeding), unless such settlement,
        compromise or consent includes an unconditional release of each Indemnified
        Party from all liability arising out of such claim, action or
        proceeding.

      

      In
        the
        event that an Indemnified Party is requested or required to appear as a witness
        in any action brought by or on behalf of or against the Company in which
        such
        Indemnified Party is not named as a defendant, the Company agrees to promptly
        reimburse RCP on a monthly basis for all expenses incurred by it in connection
        with such Indemnified Party’s appearing and preparing to appear as such a
        witness, including, without limitation, the reasonable fees and disbursements
        of
        its legal counsel.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      Welund
        Fund, Inc.

      August
        29, 2006

      Page
        7

      

      If
        multiple claims are brought with respect to at least one of which
        indemnification is permitted under applicable law and provided for under
        this
        Agreement, The Company agrees that any judgment or arbitrate award shall
        be
        conclusively deemed to be based on claims as to which indemnification is
        permitted and provided for, except to the extent the judgment or arbitrate
        award
        expressly states that it, or any portion thereof, is based solely on a claim
        as
        to which indemnification is not available.

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      Welund
        Fund, Inc.

      August
        29, 2006

      Page
        8

      

      APPENDIX
        II

      

      

      INFORMATION
        TO BE SUPPLIED; CONFIDENTIALITY.

      

      In
        connection with RCP’s activities on behalf of the Company, the Company will
        furnish RCP with all financial and other information regarding the Company
        that
        RCP reasonably believes appropriate to its assignment (all such information
        so
        furnished by the Company, whether furnished before or after the date of this
        Agreement, being referred to herein as the “Information”). The Company will
        provide RCP with access to the officers, directors, employees, independent
        accountants, legal counsel and other advisors and consultants of the Company.
        The Company recognizes and agrees that RCP (i) will use and rely primarily
        on
        the Information and information available from generally recognized public
        sources in performing the services contemplated by this Agreement without
        independently verifying the Information or such other information, (ii) does
        not
        assume responsibility for the accuracy of the Information or such other
        information, and (iii) will not make an appraisal of any assets or liabilities
        owned or controlled by the Company or its market competitors.

      

      RCP
        will
        maintain the confidentiality of the Information and, unless and until such
        information shall have been made publicly available by the Company or by
        others
        without breach of a confidentiality agreement, shall disclose the Information
        only as authorized by the Company or as required by law or by order of a
        governmental authority or court of competent jurisdiction. In the event that
        RCP
        is legally required to make disclosure of any of the Information, RCP will
        give
        notice to the Company prior to such disclosure, to the extent that RCP can
        practically do so.

      

      The
        foregoing paragraph shall not apply to information that:

      

      
        	 	
                (i)

              	
                at
                  the time of disclosure by the Company is, or thereafter becomes,
                  generally
                  available to the public or within the industries in which the Company
                  or
                  RCP or its affiliates conduct business, other than as a direct
                  result of a
                  breach by RCP of its obligations under this
                  Agreement;

              

      

      

      
        	 	
                (ii)

              	
                prior
                  to or at the time of disclosure by the Company, was already in
                  the
                  possession of, or conceived by, RCP or any of its affiliates, or
                  could
                  have been developed by them from information then in their possession,
                  by
                  the application of other information or techniques in their possession,
                  generally available to the public, or available to RCP or its affiliates
                  other than from the Company;

              

      

      

      
        	 	
                (iii)

              	
                at
                  the time of disclosure by the Company or thereafter, is obtained
                  by RCP or
                  any of its affiliates from a third party who RCP reasonably believes
                  to be
                  in possession of the information not in violation of any contractual,
                  legal or fiduciary obligation to the Company with respect to that
                  information; or

              

      

      

      
        	 	
                (iv)

              	
                is
                  independently developed by RCP or its
                  affiliates.

              

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      Welund
        Fund, Inc.

      August
        29, 2006

      Page
        9

      

      Nothing
        in this Agreement shall be construed to limit the ability of RCP or its
        affiliates to pursue, investigate, analyze, invest in, or engage in investment
        banking, financial advisory or any other business relationship with entities
        other than the Company, notwithstanding that such entities may be engaged
        in a
        business which is similar to or competitive with the business of the Company,
        and notwithstanding that such entities may have actual or potential operations,
        products, services, plans, ideas, customers or supplies similar or identical
        to
        the Company’s, or may have been identified by the Company as potential merger or
        acquisition targets or potential candidates for some other business combination,
        cooperation or relationship. The Company expressly acknowledges and agrees
        that
        it does not claim any proprietary interest in the identity of any other entity
        in its industry or otherwise, and that the identity of any such entity is
        not
        confidential information.

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