SUBSIDIARY GUARANTY
 
To: Atlantic Professional Association, Inc., as Agent for Purchasers
 
New York, New York July 19, 2006
 
FOR VALUE RECEIVED, and in consideration of note purchases from, loans made or
to be made or credit otherwise extended or to be extended by Purchasers, as
defined in the Securities Purchase Agreement described below (each a "Purchaser"
and together the "Purchasers") to or for the account of friendlyway Corporation,
a Nevada corporation ("Debtor"), from time to time and at any time and for other
good and valuable consideration and to induce the Purchasers, in their
discretion, to purchase such notes, make such loans or extensions of credit and
to make or grant such renewals, extensions, releases of collateral or
relinquishments of legal rights as the Purchasers or the Agent, as defined in
the Securities Purchase Agreement, may deem advisable, the undersigned (and each
of them if more than one, the liability under this Guaranty being joint and
several) (jointly and severally referred to as "Guarantors" or "the
undersigned") unconditionally guaranties to the Purchasers, their successors,
endorsees and assigns the prompt payment when due (whether by acceleration or
otherwise) of all present and future obligations and liabilities of any and all
kinds of Debtor to the Purchasers and of all instruments of any nature
evidencing or relating to any such obligations and liabilities upon which Debtor
is or may become liable to the Purchasers, whether incurred by Debtor as maker,
endorser, drawer, acceptor, guarantor, accommodation party or otherwise, and
whether due or to become due, secured or unsecured, absolute or contingent,
joint or several, and however or whenever acquired by the Purchasers, whether
arising under, out of, or in connection with (i) that certain Securities
Purchase Agreement dated as of the date hereof by and between Debtor and the
Purchasers (the "Securities Purchase Agreement") and (ii) each Related Agreement
referred to in the Securities Purchase Agreement, (the Securities Purchase
Agreement and each Related Agreement, as each may be amended, modified, restated
or supplemented from time to time, are collectively referred to herein as the
"Documents"), or any documents, instruments or agreements relating to or
executed in connection with the Documents or any documents, instruments or
agreements referred to therein or otherwise, or any other indebtedness,
obligations or liabilities of Debtor to the Purchasers or the Agent, whether now
existing or hereafter arising, direct or indirect, liquidated or unliquidated,
absolute or contingent, due or not due and whether under, pursuant to or
evidenced by a note, agreement, guaranty, instrument or otherwise (all of which
are herein collectively referred to as the "Obligations"), and irrespective of
the genuineness, validity, regularity or enforceability of such Obligations, or
of any instrument evidencing any of the Obligations or of any collateral
therefor or of the existence or extent of such collateral, and irrespective of
the allowability, allowance or disallowance of any or all of the Obligations in
any case commenced by or against Debtor under Title 11, United States Code,
including, without limitation, obligations or indebtedness of Debtor for
post-petition interest, fees, costs and charges that would have accrued or been
added to the Obligations but for the commencement of such case. Terms not
otherwise defined herein shall have the meaning assigned such terms in the
Securities Purchase Agreement. In furtherance of the foregoing, the undersigned
hereby agrees as follows:

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1. No Impairment. The Agent, on behalf of the Purchasers and if authorized to do
so pursuant to the terms of the Documents, may at any time and from time to
time, either before or after the maturity thereof, without notice to or further
consent of the undersigned, extend the time of payment of, exchange or surrender
any collateral for, renew or extend any of the Obligations or increase or
decrease the interest rate thereon, or enter into any other agreement with
Debtor or with any other party to or person liable on any of the Obligations, or
interested therein, for the extension, renewal, payment, compromise, discharge
or release thereof, in whole or in part, or for any modification of the terms
thereof or of any agreement between the Purchasers, Debtor and/or the Agent or
any such other party or person, or make any election of rights the Purchasers
may deem desirable under the United States Bankruptcy Code, as amended, or any
other federal or state bankruptcy, reorganization, moratorium or insolvency law
relating to or affecting the enforcement of creditors' rights generally (any of
the foregoing, an "Insolvency Law") without in any way impairing or affecting
this Guaranty. This instrument shall be effective regardless of the subsequent
incorporation, merger or consolidation of Debtor, or any change in the
composition, nature, personnel or location of Debtor and shall extend to any
successor entity to Debtor, including a debtor in possession or the like under
any Insolvency Law.
 
2. Guaranty Absolute. Each of the undersigned jointly and severally guarantees
that the Obligations will be paid strictly in accordance with the terms of the
Documents and/or any other document, instrument or agreement creating or
evidencing the Obligations, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of Debtor with respect thereto. Guarantors hereby knowingly accept the
full range of risk encompassed within a contract of "continuing guaranty" which
risk includes the possibility that Debtor will contract additional indebtedness
for which Guarantors may be liable hereunder after Debtor's financial condition
or ability to pay its lawful debts when they fall due has deteriorated, whether
or not Debtor has properly authorized incurring such additional indebtedness.
The undersigned acknowledge that (i) no oral representations, including any
representations to extend credit or provide other financial accommodations to
Debtor, have been made by the Purchasers or Agent to induce the undersigned to
enter into this Guaranty and (ii) any extension of credit to Debtor shall be
governed solely by the provisions of the Documents. The liability of each of the
undersigned under this Guaranty shall be absolute and unconditional, in
accordance with its terms, and shall remain in full force and effect without
regard to, and shall not be released, suspended, discharged, terminated or
otherwise affected by, any circumstance or occurrence whatsoever, including,
without limitation: (a) any waiver, indulgence, renewal, extension, amendment or
modification of or addition, consent or supplement to or deletion from or any
other action or inaction under or in respect of the Documents or any other
instruments or agreements relating to the Obligations or any assignment or
transfer of any thereof, (b) any lack of validity or enforceability of any
Document or other documents, instruments or agreements relating to the
Obligations or any assignment or transfer of any thereof, (c) any furnishing of
any additional security to the Purchasers, the Agent or their assignees or any
acceptance thereof or any release of any security by the Purchasers, the Agent
or their assignees, (d) any limitation on any party's liability or obligation
under the Documents or any other documents, instruments or agreements relating
to the Obligations or any assignment or transfer of any thereof or any
invalidity or unenforceability, in whole or in part, of any such document,
instrument or agreement or any term thereof, (e) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other like
proceeding relating to Debtor, or any action taken with respect to this Guaranty
by any trustee or receiver, or by any court, in any such proceeding, whether or
not the undersigned shall have notice or knowledge of any of the foregoing, (f)
any exchange, release or nonperfection of any collateral, or any release, or
amendment or waiver of or consent to departure from any guaranty or security,
for all or any of the Obligations or (g) any other circumstance which might
otherwise constitute a defense available to, or a discharge of, the undersigned.
Any amounts due from the undersigned to the Purchasers shall bear interest until
such amounts are paid in full at the highest rate then applicable to the
Obligations. Obligations include post-petition interest whether or not allowed
or allowable.

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3. Waivers.
 
(a) This Guaranty is a guaranty of payment and not of collection. The Agent,
acting on behalf of the Purchasers, shall be under no obligation to institute
suit, exercise rights or remedies or take any other action against Debtor or any
other person liable with respect to any of the Obligations or resort to any
collateral security held by them to secure any of the Obligations as a condition
precedent to the undersigned being obligated to perform as agreed herein and
each Guarantor hereby waives any and all rights which it may have by statute or
otherwise which would require the Agent or the Purchasers to do any of the
foregoing. Each Guarantor further consents and agrees that the Agent, acting on
behalf of the Purchasers, shall be under no obligation to marshal any assets in
favor of Guarantors, or against or in payment of any or all of the Obligations.
The undersigned hereby waives all suretyship defenses and any rights to
interpose any defense, counterclaim or offset of any nature and description
which the undersigned may have or which may exist between and among the
Purchasers, the Agent, Debtor and/or the undersigned with respect to the
undersigned's obligations under this Guaranty, or which Debtor may assert on the
underlying debt, including but not limited to failure of consideration, breach
of warranty, fraud, payment (other than cash payment in full of the
Obligations), statute of frauds, bankruptcy, infancy, statute of limitations,
accord and satisfaction, and usury.
 
(b) Each of the undersigned further waives (i) notice of the acceptance of this
Guaranty, of the making of any such loans or extensions of credit, and of all
notices and demands of any kind to which the undersigned may be entitled,
including, without limitation, notice of adverse change in Debtor's financial
condition or of any other fact which might materially increase the risk of the
undersigned and (ii) presentment to or demand of payment from anyone whomsoever
liable upon any of the Obligations, protest, notices of presentment, non-payment
or protest and notice of any sale of collateral security or any default of any
sort.

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(c) Notwithstanding any payment or payments made by the undersigned hereunder,
or any setoff or application of funds of the undersigned by the Purchasers, the
undersigned shall not be entitled to be subrogated to any of the rights of the
Purchasers or the Agent against Debtor or against any collateral or guarantee or
right of offset held by the Purchasers or Agent for the payment of the
Obligations, nor shall the undersigned seek or be entitled to seek any
contribution or reimbursement from Debtor in respect of payments made by the
undersigned hereunder, until all amounts owing to the Purchasers by Debtor on
account of the Obligations are paid in full. If, notwithstanding the foregoing,
any amount shall be paid to the undersigned on account of such subrogation
rights at any time when all of the Obligations shall not have been paid in full,
such amount shall be held by the undersigned in trust for the Purchasers,
segregated from other funds of the undersigned, and shall forthwith upon, and in
any event within two (2) business days of, receipt by the undersigned, be turned
over to the Purchasers or Agent in the exact form received by the undersigned
(duly endorsed by the undersigned to the Purchasers or Agent, if required), to
be applied against the Obligations, whether matured or unmatured, in such order
as the Agent may determine, subject to the provisions of the Documents. Any and
all present and future debts and obligations of Debtor to any of the undersigned
are hereby waived and postponed in favor of, and subordinated to the full
payment and performance of, all present and future debts and Obligations of
Debtor to the Purchasers.
 
4. Security. All sums at any time to the credit of the undersigned and any
property of the undersigned in the Agent’s possession or in the possession of
any bank, financial institution or other entity that directly or indirectly,
through one or more intermediaries, controls or is controlled by, or is under
common control with, the Agent (each such entity, an "Affiliate") shall be
deemed held by Agent on behalf of the Purchasers or such Affiliate, as the case
may be, as security for any and all of the undersigned's obligations to the
Purchasers and to any Affiliate of the Purchasers, no matter how or when arising
and whether under this or any other instrument, agreement or otherwise. In
addition, this Guaranty is secured by that certain Security Agreement as of even
date herewith in favor of the Purchasers.
 
5. Representations and Warranties. Each of the undersigned respectively, hereby
jointly and severally represents and warrants (all of which representations and
warranties shall survive until all Obligations are indefeasibly satisfied in
full and the Documents have been irrevocably terminated), that:
 
(a) Corporate Status. It is a corporation, partnership or limited liability
company, as the case may be, duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization indicated on the
signature page hereof and has full power, authority and legal right to own its
property and assets and to transact the business in which it is engaged.
 
(b) Authority and Execution. It has full power, authority and legal right to
execute and deliver, and to perform its obligations under, this Guaranty and has
taken all necessary corporate, partnership or limited liability company, as the
case may be, action to authorize the execution, delivery and performance of this
Guaranty.

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(c) Legal, Valid and Binding Character. This Guaranty constitutes its legal,
valid and binding obligation enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting the
enforcement of creditor's rights and general principles of equity that restrict
the availability of equitable or legal remedies.
 
(d) Violations. The execution, delivery and performance of this Guaranty will
not violate any requirement of law applicable to it or any contract, agreement
or instrument to which it is a party or by which it or any of its property is
bound or result in the creation or imposition of any mortgage, lien or other
encumbrance other than to the Purchasers on any of its property or assets
pursuant to the provisions of any of the foregoing, which, in any of the
foregoing cases, would reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect.
 
(e) Consents or Approvals. No consent of any other person or entity (including,
without limitation, any creditor of the undersigned) and no consent, license,
permit, approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental authority is required
in connection with the execution, delivery, performance, validity or
enforceability of this Guaranty by it, except to the extent that the failure to
obtain any of the foregoing would not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
 
(f) Litigation. No litigation, arbitration, investigation or administrative
proceeding of or before any court, arbitrator or governmental authority, bureau
or agency is currently pending or, to the best of its knowledge, threatened (i)
with respect to this Guaranty or any of the transactions contemplated by this
Guaranty or (ii) against or affecting it, or any of its property or assets,
which, in each of the foregoing cases, if adversely determined, would reasonably
be expected to have a Material Adverse Effect.
 
(g) Financial Benefit. It has derived or expects to derive a financial or other
advantage from each and every loan, advance or extension of credit made under
the Documents or other Obligation incurred by Debtor to the Purchasers.
 
6. Acceleration.
 
(a) If any breach of any covenant or condition or other event of default shall
occur and be continuing under any agreement made by Debtor or any of the
undersigned to the Purchasers or the Agent, or either Debtor or any of the
undersigned should at any time become insolvent, or make a general assignment,
or if a proceeding in or under any insolvency law shall be filed or commenced
by, or in respect of, any of the undersigned, or if a notice of any lien, levy,
or assessment is filed of record with respect to any assets of any of the
undersigned by the United States of America or any department, agency, or
instrumentality thereof, or if any taxes or debts owing at any time or times
hereafter to any one of them becomes a lien or encumbrance upon any assets of
the undersigned in the Agent’s possession, or otherwise, any and all Obligations
shall for purposes hereof, at the Agent’s option, be deemed due and payable
without notice notwithstanding that any such Obligation is not then due and
payable by Debtor.

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(b) Each of the undersigned will promptly notify the Agent of any default by
such undersigned in its respective performance or observance of any term or
condition of any agreement to which the undersigned is a party if the effect of
such default is to cause, or permit the holder of any obligation under such
agreement to cause, such obligation to become due prior to its stated maturity
and, if such an event occurs, the Agent shall have the right to accelerate such
undersigned's obligations hereunder.
 
7. Payments from Guarantors. The Agent, in its sole and absolute discretion,
with or without notice to the undersigned, may apply on account of the
Obligations any payment from the undersigned or any other Guarantors, or amounts
realized from any security for the Obligations, or may deposit any and all such
amounts realized in a non-interest bearing cash collateral deposit account to be
maintained as security for the Obligations.
 
8. Costs. The undersigned shall pay on demand, all costs, fees and expenses
(including reasonable expenses for legal services of every kind) relating or
incidental to the enforcement or protection of the rights of the Purchasers or
Agent hereunder or under any of the Obligations.
 
9. No Termination. This is a continuing irrevocable guaranty and shall remain in
full force and effect and be binding upon the undersigned, and each of the
undersigned’s successors and assigns, until all of the Obligations have been
paid in full and the Purchasers' obligation to extend credit pursuant to the
Documents has been irrevocably terminated. If any of the present or future
Obligations are guarantied by persons, partnerships or corporations in addition
to the undersigned, the death, release or discharge in whole or in part or the
bankruptcy, merger, consolidation, incorporation, liquidation or dissolution of
one or more of them shall not discharge or affect the liabilities of any
undersigned under this Guaranty.
 
10. Recapture. Anything in this Guaranty to the contrary notwithstanding, if the
Purchasers or Agent receive any payment or payments on account of the
liabilities guaranteed hereby, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver, or any other party under
any Insolvency Law, common law or equitable doctrine, then to the extent of any
sum not finally retained by the Purchasers or Agent, the undersigned's
obligations to the Purchasers shall be reinstated and this Guaranty shall remain
in full force and effect (or be reinstated) until payment shall have been made
to the Purchasers or Agent, which payment shall be due on demand.
 
11. Books and Records. The books and records of the Agent showing the account
between the Purchasers and Debtor shall be admissible in evidence in any action
or proceeding, shall be binding upon the undersigned for the purpose of
establishing the items therein set forth and shall constitute prima facie proof
thereof.
 
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12. No Waiver. No failure on the part of the Purchasers or Agent to exercise,
and no delay in exercising, any right, remedy or power hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise by the Purchasers
or Agent of any right, remedy or power hereunder preclude any other or future
exercise of any other legal right, remedy or power. Each and every right, remedy
and power hereby granted to the Purchasers or allowed them by law or other
agreement shall be cumulative and not exclusive of any other, and may be
exercised by the Purchasers or Agent at any time and from time to time.
 
13. Waiver of Jury Trial. EACH OF THE UNDERSIGNED DOES HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED ON OR WITH RESPECT TO THIS GUARANTY OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR RELATING OR INCIDENTAL HERETO. THE UNDERSIGNED DOES
HEREBY CERTIFY THAT NO REPRESENTATIVE OR AGENT OF THE PURCHASERS HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE PURCHASERS WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
 
14. Governing Law; Jurisdiction; Amendments. THIS INSTRUMENT CANNOT BE CHANGED
OR TERMINATED ORALLY AND SHALL BE GOVERNED, CONSTRUED AND INTERPRETED AS TO
VALIDITY, ENFORCEMENT AND IN ALL OTHER RESPECTS IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT HAVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS.
EACH OF THE UNDERSIGNED EXPRESSLY CONSENTS TO THE JURISDICTION AND VENUE OF THE
SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK, AND OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR ALL PURPOSES IN
CONNECTION HEREWITH. ANY JUDICIAL PROCEEDING BY THE UNDERSIGNED AGAINST THE
PURCHASERS OR AGENT INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER OR CLAIM IN
ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED HEREWITH SHALL BE BROUGHT ONLY
IN THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK OR THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. THE UNDERSIGNED
FURTHER CONSENTS THAT ANY SUMMONS, SUBPOENA OR OTHER PROCESS OR PAPERS
(INCLUDING, WITHOUT LIMITATION, ANY NOTICE OR MOTION OR OTHER APPLICATION TO
EITHER OF THE AFOREMENTIONED COURTS OR A JUDGE THEREOF) OR ANY NOTICE IN
CONNECTION WITH ANY PROCEEDINGS HEREUNDER, MAY BE SERVED INSIDE OR OUTSIDE OF
THE STATE OF NEW YORK OR THE SOUTHERN DISTRICT OF NEW YORK BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY PERSONAL SERVICE PROVIDED A
REASONABLE TIME FOR APPEARANCE IS PERMITTED, OR IN SUCH OTHER MANNER AS MAY BE
PERMISSIBLE UNDER THE RULES OF SAID COURTS. EACH OF THE UNDERSIGNED WAIVES ANY
OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREON AND SHALL
NOT ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE OR BASED UPON
FORUM NON CONVENIENS.
 
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15. Severability. To the extent permitted by applicable law, any provision of
this Guaranty which is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
 
16. Amendments, Waivers. No amendment or waiver of any provision of this
Guaranty nor consent to any departure by the undersigned therefrom shall in any
event be effective unless the same shall be in writing executed by each of the
undersigned directly affected by such amendment and/or waiver and the Agent.
 
17. Notice. All notices, requests and demands to or upon the undersigned, shall
be in writing and shall be deemed to have been duly given or made (a) when
delivered, if by hand, (b) three (3) days after being sent, postage prepaid, if
by registered or certified mail, (c) when confirmed electronically, if by
facsimile, or (d) when delivered, if by a recognized overnight delivery service
in each event, to the numbers and/or address set forth beneath the signature of
the undersigned.
 
18. Becoming a Guarantor. It is understood and agreed that any person or entity
that desires to become a Guarantor hereunder, or is required to execute a
counterpart of this Guaranty after the date hereof pursuant to the requirements
of any Document, shall become a Guarantor hereunder by (x) executing a Joinder
Agreement in form and substance satisfactory to the Agent, (y) delivering
supplements to such exhibits and annexes to such Documents as the Agent shall
reasonably request and (z) taking all actions as specified in this Guaranty as
would have been taken by such Guarantor had it been an original party to this
Guaranty, in each case with all documents required above to be delivered to the
Agent and with all documents and actions required above to be taken to the
reasonable satisfaction of the Agent.
 
19. Release. Nothing except cash payment in full of the Obligations shall
release any of the undersigned from liability under this Guaranty.
 
20. Limitation of Obligations under this Guaranty. Each Guarantor and the
Purchasers (by their acceptance of the benefits of this Guaranty) hereby confirm
that it is their intention that this Guaranty not constitute a fraudulent
transfer or conveyance for purposes of the Bankruptcy Code, the Uniform
Fraudulent Conveyance Act or any similar Federal or state law. To effectuate the
foregoing intention, each Guarantor and the Purchasers (by their acceptance of
the benefits of this Guaranty) hereby irrevocably agree that the Obligations
guaranteed by such Guarantor shall be limited to such amount as will, after
giving effect to such maximum amount and all other (contingent or otherwise)
liabilities of such Guarantor that are relevant under such laws and after giving
effect to any rights to contribution pursuant to any agreement providing for an
equitable contribution among such Guarantor and the other Guarantors (including
this Guaranty), result in the Obligations of such Guarantor under this Guaranty
in respect of such maximum amount not constituting a fraudulent transfer or
conveyance.
 
 
 

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[REMAINDER OF THIS PAGE IS BLANK.
 
SIGNATURE PAGE IMMEDIATELY FOLLOWS.]

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IN WITNESS WHEREOF, this Guaranty has been executed by the undersigned this 19th
day of July, 2006.
 

FRIENDLYWAY TECHNOLOGIES, INC.                      By: /S/ KEN UPCRAFT      

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Kenneth Upcraft, President & CEO                   PANTEL FINANCIAL CENTERS,
INC.                        By:  /S/ KEN UPCRAFT        

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Kenneth Upcraft, President & CEO 
                    PANTEL SYSTEMS, INC.                    By:   /S/ KEN
UPCRAFT        

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Kenneth Upcraft, President & CEO      

 
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