Document:

Unassociated Document

    Exhibit
      10.1

     

    SUBSCRIPTION
      AGREEMENT

     

    THIS
      SUBSCRIPTION AGREEMENT
      (this
“Agreement”),
      dated
      as of February 16, 2007, by and among VoIP, Inc., a Texas corporation (the
      “Company”),
      and
      the subscribers identified on the signature page hereto (each a “Subscriber”
and
      collectively “Subscribers”).

     

    WHEREAS,
      the
      Company and the Subscribers are executing and delivering this Agreement in
      reliance upon an exemption from securities registration afforded by the
      provisions of Section 4(2), Section 4(6) and/or Regulation D (“Regulation
      D”)
      as
      promulgated by the United States Securities and Exchange Commission (the
“Commission”)
      under
      the Securities Act of 1933, as amended (the “1933
      Act”).

     

    WHEREAS,
      the
      parties desire that, upon the terms and subject to the conditions contained
      herein, the Company shall issue and sell to the Subscribers, as provided herein,
      and the Subscribers, in the aggregate, shall purchase up to $3,462,719 (the
      “Aggregate
      Principal Amount”)
      of
      principal amount of promissory notes of the Company (“Note”
or
      “Notes”),
      a
      form of which is annexed hereto as Exhibit
      A,
      convertible into shares of the Company’s Class A common stock, $0.001 par value
      (the “Common
      Stock”),
      at a
      per share conversion price set forth in the Note (“Conversion
      Price”);
      and
      share purchase warrants (the “Warrants”),
      in
      the form annexed hereto as Exhibit
      B,
      to
      purchase shares of Common Stock (the “Warrant
      Shares”).
      The
      Notes, shares of Common Stock issuable upon conversion of the Notes (the
“Shares”),
      Settlement Shares, the Warrants and the Warrant Shares are collectively referred
      to herein as the “Securities”;
      and

     

    WHEREAS,
      the
      aggregate proceeds of the sale of the Notes and the Warrants contemplated hereby
      shall be held in escrow pending the closing of the transactions contemplated
      by
      this Agreement pursuant to the terms of a Funds Escrow Agreement to be executed
      by the parties substantially in the form attached hereto as Exhibit
      C
      (the
“Escrow
      Agreement”).

     

    NOW,
      THEREFORE,
      in
      consideration of the mutual covenants and other agreements contained in this
      Agreement the Company and the Subscribers hereby agree as follows:

     

    1.    Aggregate
      Purchase Price.
      The
      aggregate purchase price for the Notes (the “Aggregate
      Purchase Price”)
      shall
      equal the result of (x) divided by (y), where (x) equals the Aggregate Principal
      Amount and (y) equals 1.25. Each date upon which a Closing occurs is a
“Closing
      Date”.

     

    2.    Closing.
      Subject
      to the satisfaction or waiver of the terms and conditions of this Agreement,
      on
      the Closing Date, each Subscriber shall purchase and the Company shall sell
      to
      each Subscriber a Note in the principal amount designated on the signature
      page
      hereto and Warrants as described in Section 2 of this Agreement. The Aggregate
      Purchase Amount of the Notes to be purchased by the Subscribers on the Initial
      Closing Date shall be $3,462,719 in exchange for $2,770,175 of Aggregate
      Purchase Price. The Aggregate Purchase Price will be paid with a combination
      of
      cash, surrender of certain outstanding promissory notes of the Company held
      by
      Subscribers and waiver or deemed payment of interest, default interest and
      liquidated damages in connection with such surrendered promissory notes as
      more
      fully described on the signature pages hereto. The “Closing
      Date”
shall
      be the date that the Aggregate Purchase Price is transmitted by wire transfer
      or
      otherwise credited to or for the benefit of the Company. The consummation of
      the
      transactions contemplated herein for all closings shall take place at the
      offices of Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York,
      New York 10176, upon the satisfaction of all conditions to Closing set forth
      in
      this Agreement.

    

    3.    Warrants.
      On the
      Closing Date, the Company will issue and deliver Warrants to the Subscribers.
      One Class D Warrant will be issued for each Share which would be issued on
      each
      Closing Date assuming the conversion of all of the Notes issued on the Closing
      Date at the Conversion Price in effect on the Closing Date. The per Warrant
      Share exercise price to acquire a Warrant Share upon exercise of a Class D
      Warrant shall be equal to the greater of $.30, or (ii) 110% of the closing
      price
      of the Common Stock as reported by Bloomberg L.P. for the trading day preceding
      the Closing Date. The Class D Warrants shall be exercisable until five years
      after the Closing Date.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4.    Subscriber's
      Representations and Warranties.
      Each
      Subscriber hereby represents and warrants to and agrees with the Company only
      as
      to such Subscriber that:

     

    (a)    Organization
      and Standing of the Subscribers. If the Subscriber is an entity, such Subscriber
      is a corporation, partnership or other entity duly incorporated or organized,
      validly existing and in good standing under the laws of the jurisdiction of
      its
      incorporation or organization and has the requisite corporate power to own
      its
      assets and to carry on its business.

    

    (b)    Authorization
      and Power. Each Subscriber has the requisite power and authority to enter into
      and perform this Agreement and to purchase the Notes and Warrants being sold
      to
      it hereunder. The execution, delivery and performance of this Agreement by
      such
      Subscriber and the consummation by it of the transactions contemplated hereby
      and thereby have been duly authorized by all necessary corporate or partnership
      action, and no further consent or authorization of such Subscriber or its Board
      of Directors, stockholders, partners, members, as the case may be, is required.
      This Agreement has been duly authorized, executed and delivered by such
      Subscriber and constitutes, or shall constitute when executed and delivered,
      a
      valid and binding obligation of the Subscriber enforceable against the
      Subscriber in accordance with the terms thereof.

     

    (c)    No
      Conflicts. The execution, delivery and performance of this Agreement and the
      consummation by such Subscriber of the transactions contemplated hereby or
      relating hereto do not and will not (i) result in a violation of such
      Subscriber’s charter documents or bylaws or other organizational documents or
      (ii) conflict with, or constitute a default (or an event which with notice
      or
      lapse of time or both would become a default) under, or give to others any
      rights of termination, amendment, acceleration or cancellation of any agreement,
      indenture or instrument or obligation to which such Subscriber is a party or
      by
      which its properties or assets are bound, or result in a violation of any law,
      rule, or regulation, or any order, judgment or decree of any court or
      governmental agency applicable to such Subscriber or its properties (except
      for
      such conflicts, defaults and violations as would not, individually or in the
      aggregate, have a material adverse effect on such Subscriber). Such Subscriber
      is not required to obtain any consent, authorization or order of, or make any
      filing or registration with, any court or governmental agency in order for
      it to
      execute, deliver or perform any of its obligations under this Agreement or
      to
      purchase the Notes or acquire the Warrants in accordance with the terms hereof,
      provided that for purposes of the representation made in this sentence, such
      Subscriber is assuming and relying upon the accuracy of the relevant
      representations and agreements of the Company herein.

    

    (d)    Information
      on Company.
      The
      Subscriber has been furnished with or has had access at the EDGAR Website of
      the
      Commission to the Company's Form 10-KSB for the year ended December 31, 2005
      and
      all periodic reports filed with the Commission thereafter, but not later than
      five business days before the Closing Date (hereinafter referred to as the
      "Reports").
      In
      addition, the Subscriber has received in writing from the Company such other
      information concerning its operations, financial condition and other matters
      as
      the Subscriber has requested in writing (such other information is collectively,
      the "Other
      Written Information"),
      and
      considered all factors the Subscriber deems material in deciding on the
      advisability of investing in the Securities. 

     

    (e)    Information
      on Subscriber.
      The
      Subscriber is, and will be at the time of the conversion of the Notes and
      exercise of the Warrants, an "accredited investor", as such term is defined
      in
      Regulation D promulgated by the Commission under the 1933 Act, is experienced
      in
      investments and business matters, has made investments of a speculative nature
      and has purchased securities of United States publicly-owned companies in
      private placements in the past and, with its representatives, has such knowledge
      and experience in financial, tax and other business matters as to enable the
      Subscriber to utilize the information made available by the Company to evaluate
      the merits and risks of and to make an informed investment decision with respect
      to the proposed purchase, which represents a speculative investment. The
      Subscriber is able to bear the risk of such investment for an indefinite period
      and to afford a complete loss thereof. The information set forth on the
      signature page hereto regarding the Subscriber is accurate.

     

    (f)    Purchase
      of Notes and Warrants.
      On the
      Closing Date, the Subscriber will purchase the Notes and Warrants as principal
      for its own account for investment only and not with a view toward, or for
      resale in connection with, the public sale or any distribution thereof, but
      Subscriber does not agree to hold the Notes and Warrants for any minimum amount
      of time.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (g)    Compliance
      with Securities Act.
      The
      Subscriber understands and agrees that the Securities have not been registered
      under the 1933 Act or any applicable state securities laws, by reason of their
      issuance in a transaction that does not require registration under the 1933
      Act
      (based in part on the accuracy of the representations and warranties of
      Subscriber contained herein), and that such Securities must be held indefinitely
      unless a subsequent disposition is registered under the 1933 Act or any
      applicable state securities laws or is exempt from such registration. For so
      long as Subscriber holds Notes, the Subscriber will not maintain a net short
      position in the Common Stock contrary to applicable rules and regulations.
      Notwithstanding anything to the contrary contained in this Agreement, such
      Subscriber may transfer (without restriction and without the need for an opinion
      of counsel) the Securities to its Affiliates (as defined below) provided that
      each such Affiliate is an “accredited investor” under Regulation D and such
      Affiliate agrees to be bound by the terms and conditions of this Agreement.
      For
      the purposes of this Agreement, an “Affiliate”
of
      any
      person or entity means any other person or entity directly or indirectly
      controlling, controlled by or under direct or indirect common control with
      such
      person or entity. Affiliate when employed in connection with the Company
      includes each Subsidiary [as defined in Section 5(a)] of the Company. For
      purposes of this definition, “control”
means
      the power to direct the management and policies of such person or firm, directly
      or indirectly, whether through the ownership of voting securities, by contract
      or otherwise.

     

    (h)    Shares
      Legend.
      The
      Shares and the Warrant Shares shall bear the following or similar
      legend:

     

    "THE
      SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
      SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT UNDER SUCH SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAW
      OR
      AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO VOIP, INC. THAT SUCH
      REGISTRATION IS NOT REQUIRED."

     

    (i)    Warrants
      Legend.
      The
      Warrants shall bear the following or
      similar
      legend:

     

    "THIS
      WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
      BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
      AND
      THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
      OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
      REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE
      STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO VOIP,
      INC. THAT SUCH REGISTRATION IS NOT REQUIRED."

    

    (j)    Note
      Legend.
      The
      Note shall bear the following legend:

     

    "THIS
      NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
      COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
      FOR
      SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
      LAW
      OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO VOIP, INC. THAT SUCH
      REGISTRATION IS NOT REQUIRED."

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (k)    Communication
      of Offer.
      The
      offer to sell the Securities was directly communicated to the Subscriber by
      the
      Company. At no time was the Subscriber presented with or solicited by any
      leaflet, newspaper or magazine article, radio or television advertisement,
      or
      any other form of general advertising or solicited or invited to attend a
      promotional meeting otherwise than in connection and concurrently with such
      communicated offer.

     

    (l)    Authority;
      Enforceability.
      This
      Agreement and other agreements delivered together with this Agreement or in
      connection herewith have been duly authorized, executed and delivered by the
      Subscriber and are valid and binding agreements enforceable in accordance with
      their terms, subject to bankruptcy, insolvency, fraudulent transfer,
      reorganization, moratorium and similar laws of general applicability relating
      to
      or affecting creditors’ rights generally and to general principles of equity;
      and Subscriber has full corporate power and authority necessary to enter into
      this Agreement and such other agreements and to perform its obligations
      hereunder and under all other agreements entered into by the Subscriber relating
      hereto.

    

    (m)    No
      Governmental Review.
      Each
      Subscriber understands that no United States federal or state agency or any
      other governmental or state agency has passed on or made recommendations or
      endorsement of the Securities or the suitability of the investment in the
      Securities nor have such authorities passed upon or endorsed the merits of
      the
      offering of the Securities.

    

    (n)    Correctness
      of Representations.
      Each
      Subscriber represents as to such Subscriber that the foregoing representations
      and warranties are true and correct as of the date hereof and, unless a
      Subscriber otherwise notifies the Company prior to the Closing Date, shall
      be
      true and correct as of the Closing Date.

    

    (o)    Survival.
      The
      foregoing representations and warranties shall survive the Closing Date until
      three years after the Closing Date.

     

    5.    Company
      Representations and Warranties.
      The
      Company represents and warrants to and agrees with each Subscriber that except
      as set forth in the Reports and as otherwise qualified in the Transaction
      Documents:

     

    (a)    Due
      Incorporation.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its incorporation and has the requisite
      corporate power to own its properties and to carry on its business is disclosed
      in the Reports.
      The
      Company is duly qualified as a foreign corporation to do business and is in
      good
      standing in each jurisdiction where the nature of the business conducted or
      property owned by it makes such qualification necessary, other than those
      jurisdictions in which the failure to so qualify would not have a Material
      Adverse Effect. For purpose of this Agreement, a “Material
      Adverse Effect”
shall
      mean a material adverse effect on the financial condition, results of
      operations, properties or business of the Company taken individually, or in
      the
      aggregate, as a whole. For purposes of this Agreement, “Subsidiary”
means,
      with respect to any entity at any date, any corporation, limited or general
      partnership, limited liability company, trust, estate, association, joint
      venture or other business entity) of which more than 50% of (i) the
      outstanding capital stock having (in the absence of contingencies) ordinary
      voting power to elect a majority of the board of directors or other managing
      body of such entity, (ii) in the case of a partnership or limited liability
      company, the interest in the capital or profits of such partnership or limited
      liability company or (iii) in the case of a trust, estate, association,
      joint venture or other entity, the beneficial interest in such trust, estate,
      association or other entity business is, at the time of determination, owned
      or
      controlled directly or indirectly through one or more intermediaries, by such
      entity. All the Company’s Subsidiaries as of the Closing Date are set forth on
Schedule
      5(a)
      hereto.

     

    (b)    Outstanding
      Stock.
      All
      issued and outstanding shares of capital stock of the Company have been duly
      authorized and validly issued and are fully paid and nonassessable.

     

    (c)    Authority;
      Enforceability.
      This
      Agreement, the Notes, the Warrants, the Escrow Agreement, and any other
      agreements delivered together with this Agreement or in connection herewith
      (collectively “Transaction
      Documents”)
      have
      been duly authorized, executed and delivered by the Company and Subsidiaries
      (as
      the case may be) and are valid and binding agreements enforceable in accordance
      with their terms, subject to bankruptcy, insolvency, fraudulent transfer,
      reorganization, moratorium and similar laws of general applicability relating
      to
      or affecting creditors’ rights generally and to general principles of equity.
      The Company and Subsidiaries have full corporate power and authority necessary
      to enter into and deliver the Transaction Documents and to perform their
      obligations thereunder.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (d)    Additional
      Issuances.
      There
      are no outstanding agreements or preemptive or similar rights affecting the
      Company's common stock or equity and no outstanding rights, warrants or options
      to acquire, or instruments convertible into or exchangeable for, or agreements
      or understandings with respect to the sale or issuance of any shares of common
      stock or equity of the Company or other equity interest in any of the
      Subsidiaries of the Company except as described on Schedule
      5(d) or as described in the Reports.
      The
      Common Stock of the Company on a fully diluted basis outstanding as of
      immediately preceding and following the Closing is set forth on Schedule
      5(d).

     

    (e)    Consents.
      Except
      as described in Section 9(f), no consent, approval, authorization or order
      of
      any court, governmental agency or body or arbitrator having jurisdiction over
      the Company, or any of its Affiliates, any Principal Market (as defined in
      Section 9(b) of this Agreement), nor the Company’s shareholders is required for
      the execution by the Company of the Transaction Documents and compliance and
      performance by the Company of its obligations under the Transaction Documents,
      including, without limitation, the issuance and sale of the Securities, and
      all
      such consents will have been obtained by the Company prior to
      Closing. 

     

    (f)    No
      Violation or Conflict.
      Assuming the representations and warranties of the Subscribers in Section 4
      are
      true and correct, and except as disclosed on Schedule
      5(f),
      neither
      the issuance and sale of the Securities nor the performance of the Company’s
      obligations under this Agreement and all other agreements entered into by the
      Company relating thereto by the Company will:

     

    (i)    
violate,
      conflict with, result in a breach of, or constitute a default (or an event
      which
      with the giving of notice or the lapse of time or both would be reasonably
      likely to constitute a default in any material respect) of a material nature
      under (A) the articles or certificate of incorporation, charter or bylaws of
      the
      Company, (B) any decree, judgment, order, law, treaty, rule, regulation or
      determination applicable to the Company of any court, governmental agency or
      body, or arbitrator having jurisdiction over the Company or over the properties
      or assets of the Company or any of its Affiliates, (C) the terms of any bond,
      debenture, note or any other evidence of indebtedness, or any agreement, stock
      option or other similar plan, indenture, lease, mortgage, deed of trust or
      other
      instrument to which the Company or any of its Affiliates is a party, by which
      the Company or any of its Affiliates is bound, or to which any of the properties
      of the Company or any of its Affiliates is subject, or (D) the terms of any
      “lock-up” or similar provision of any underwriting or similar agreement to which
      the Company, or any of its Affiliates is a party except the violation, conflict,
      breach, or default of which would not have a Material Adverse Effect;
      or

     

    (ii)    
result
      in
      the creation or imposition of any lien, charge or encumbrance upon the
      Securities or any of the assets of the Company or any of its Affiliates, except
      as contemplated herein; or

     

    (iii)    result
      in
      the activation of any anti-dilution rights or a reset or repricing of any debt
      or security instrument of any other creditor or equity holder of the Company,
      nor result in the acceleration of the due date of any obligation of the Company;
      or

     

    (iv)    result
      in
      the activation of any piggy-back registration rights of any person or entity
      holding securities or debt of the Company or having the right to receive
      securities of the Company.

     

    (g)    The
      Securities.
      The
      Securities upon issuance:

     

    (i)     
      are,
      or
      will be, free and clear of any security interests, liens, claims or other
      encumbrances, subject to restrictions upon transfer under the 1933 Act and
      any
      applicable state securities laws;

    

    (ii)    
have
      been, or will be, duly and validly authorized and on the date of issuance of
      the
      Shares and upon exercise of the Warrants, the Shares and Warrant Shares will
      be
      duly and validly issued, fully paid and nonassessable or if registered pursuant
      to the 1933 Act, and resold pursuant to an effective registration statement
      will
      be free trading and unrestricted;

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (iii)    will
      not
      have been issued or sold in violation of any preemptive or other similar rights
      of the holders of any securities of the Company;

     

    (iv)    will
      not
      subject the holders thereof to personal liability by reason of being such
      holders, provided Subscriber’s representations herein are true and accurate and
      Subscribers take no actions or fail to take any actions required for their
      purchase of the Securities to be in compliance with all applicable laws and
      regulations; and

     

    (v)    provided
      Subscriber’s representations herein are true and accurate, will have been issued
      in reliance upon an exemption from the registration requirements of and will
      not
      result in a violation of Section 5 under the 1933 Act.

     

    (h)    Litigation.
      Except
      as disclosed on Schedule
      5(h),
      or in
      the Reports, there is no pending or threatened action, suit, proceeding or
      investigation before any court, governmental agency or body, or arbitrator
      having jurisdiction over the Company, or any of its Affiliates that would affect
      the execution by the Company or the performance by the Company of its
      obligations under the Transaction Documents. There is no pending, or, to the
      knowledge of the Company, basis for any, action, suit, proceeding or
      investigation before any court, governmental agency or body, or arbitrator
      having jurisdiction over the Company, or any of its Affiliates which litigation
      if adversely determined would have a Material Adverse Effect.

     

    (i)    Reporting
      Company.
      The
      Company is a publicly-held company subject to reporting obligations pursuant
      to
      Section 13 of the Securities Exchange Act of 1934 (the “1934
      Act”)
      and
      has a
      class of common shares registered pursuant to Section 12(g) of the 1934 Act.
      Pursuant to the provisions of the 1934 Act, the Company has filed all reports
      and other materials required to be filed thereunder with the Commission during
      the preceding thirty-six months.

     

    (j)    No
      Market Manipulation.
      The
      Company and its Affiliates have not taken, and will not take, directly or
      indirectly, any action designed to, or that might reasonably be expected to,
      cause or result in stabilization or manipulation of the price of the Common
      Stock to
      facilitate the sale or resale of the Securities or affect the price at which
      the
      Securities may be issued or resold, provided, however, that this provision
      shall
      not prevent the Company from engaging in investor relations/public relations
      activities consistent with past practices.

     

    (k)    Information
      Concerning Company.
      The
      Reports contain all material information relating to the Company and its
      operations and financial condition which is required to be disclosed by
      applicable securities laws, rules or regulations, as of their respective dates
      and all the information required to be disclosed therein. Since the last day
      of
      the fiscal year of the most recent audited financial statements included in
      the
      Reports (“Latest
      Financial Date”),
      and
      except as modified in the Other Written Information or in the Schedules hereto,
      there has been no Material Adverse Effect relating to the Company’s business,
      financial condition or affairs not disclosed in the Reports. The Reports do
      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 not
      misleading in light of the circumstances when made.

     

    (l)    Stop
      Transfer.
      The
      Company will not issue any stop transfer order or other order impeding the
      sale,
      resale or delivery of any of the Securities, except as may be required by any
      applicable federal or state securities laws and unless contemporaneous notice
      of
      such instruction is given to the Subscriber.

     

    (m)    Defaults.
      The
      Company is not in violation of its articles of incorporation or bylaws. Except
      as described on Schedule
      5(m),
      the
      Company is (i) not in default under or in violation of any other material
      agreement or instrument to which it is a party or by which it or any of its
      properties are bound or affected, which default or violation would have a
      Material Adverse Effect,
      (ii)
      not in default with respect to any order of any court, arbitrator or
      governmental body or subject to or party to any order of any court or
      governmental authority arising out of any action, suit or proceeding under
      any
      statute or other law respecting antitrust, monopoly, restraint of trade, unfair
      competition or similar matters, or (iii) to the Company’s knowledge not in
      violation of any statute, rule or regulation of any governmental authority
      which
      violation would have a Material Adverse Effect.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (n)    Not
      an
      Integrated Offering.
      Neither
      the Company, nor any of its Affiliates, nor any person acting on its or their
      behalf, has directly or indirectly made any offers or sales of any security
      or
      solicited any offers to buy any security under circumstances that would cause
      the offer of the Securities pursuant to this Agreement to be integrated with
      prior offerings by the Company for purposes of the 1933 Act or any applicable
      stockholder approval provisions, including, without limitation, under the rules
      and regulations of the OTC Bulletin Board (“Bulletin
      Board”)
      or any
      Principal Market which would impair the exemptions relied upon in this Offering
      or the Company’s ability to timely comply with its obligations hereunder. Nor
      will the Company or any of its Affiliates take any action or steps that would
      cause the offer or issuance of the Securities to be integrated with other
      offerings which would impair the exemptions relied upon in this Offering or
      the
      Company’s ability to timely comply with its obligations hereunder. The Company
      will not conduct any offering other than the transactions contemplated hereby
      that will be integrated with the offer or issuance of the Securities which
      would
      impair the exemptions relied upon in this Offering or the Company’s ability to
      timely comply with its obligations hereunder.

     

    (o)    No
      General Solicitation.
      Neither
      the Company, nor any of its Affiliates, nor to its knowledge, any person acting
      on its or their behalf, has engaged in any form of general solicitation or
      general advertising (within the meaning of Regulation D under the 1933 Act)
      in
      connection with the offer or sale of the Securities.

     

    (p)    Listing.
      The
      Common Stock is quoted on the Bulletin Board under the symbol: VOII.OB. The
      Company has not received any oral or written notice that the Common Stock is
      not
      eligible nor will become ineligible for quotation on the Bulletin Board nor
      that
      the Common Stock does not meet all requirements for the continuation of such
      quotation.

     

    (q)    No
      Undisclosed Liabilities.
      The
      Company has no liabilities or obligations which are material, individually
      or in
      the aggregate, which are not disclosed in the Reports and Other Written
      Information, other than those incurred in the ordinary course of the Company’s
      businesses since the Latest Financial Date and which, individually or in the
      aggregate, would reasonably be expected to have a Material Adverse
      Effect,
      except
      as disclosed on Schedule
      5(q).

     

    (r)    No
      Undisclosed Events or Circumstances.
      Since
      the Latest Financial Date, no event or circumstance has occurred or exists
      with
      respect to the Company or its businesses, properties, operations or financial
      condition, that, under applicable law, rule or regulation, requires public
      disclosure or announcement prior to the date hereof by the Company but which
      has
      not been so publicly announced or disclosed in the Reports.

     

    (s)    Capitalization.
      The
      authorized and outstanding capital stock of the Company as of the date of this
      Agreement and the Closing Date (not including the Securities) are set forth
      on
Schedule
      5(d).
      Except
      as set forth on Schedule
      5(d),
      there
      are no options, warrants, or rights to subscribe to, securities, rights or
      obligations convertible into or exchangeable for or giving any right to
      subscribe for any shares of capital stock of the Company. All of the outstanding
      shares of Common Stock of the Company have been duly and validly authorized
      and
      issued and are fully paid and nonassessable, except for 9,958 shares of Class
      B
      Common Stock which are assessable.

     

    (t)    Dilution.
      The
      Company’s executive officers and directors understand the nature of the
      Securities being sold hereby and recognize that the issuance of the Securities
      will have a potential dilutive effect on the equity holdings of other holders
      of
      the Company’s equity or rights to receive equity of the Company. The board of
      directors of the Company has concluded, in its good faith business judgment
      that
      the issuance of the Securities is in the best interests of the Company. The
      Company specifically acknowledges that its obligation to issue the Shares upon
      conversion of the Notes, and the Warrant Shares upon exercise of the Warrants
      is
      binding upon the Company and enforceable regardless of the dilution such
      issuance may have on the ownership interests of other shareholders of the
      Company or parties entitled to receive equity of the Company.

     

    (u)    No
      Disagreements with Accountants and Lawyers.
      Except
      as disclosed on Schedule
      5(u),
      there
      are no disagreements of any kind presently existing, or reasonably anticipated
      by the Company to arise, between the Company and the accountants and lawyers
      formerly or presently employed by the Company, including but not limited to
      disputes or conflicts over payment owed to such accountants and lawyers, nor
      have there been any such disagreements during the two years prior to the Closing
      Date. 

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (v)    DTC
      Status.
      The
      Company’s transfer agent is a participant in and the Common Stock is eligible
      for transfer pursuant to the Depository Trust Company Automated Securities
      Transfer Program. The name, address, telephone number, fax number, contact
      person and email address of the Company transfer agent is set forth on
Schedule
      5(v)
      hereto.

    

    (w)    Investment
      Company.
      Neither
      the Company nor any Affiliate is an “investment company” within the meaning of
      the Investment Company Act of 1940, as amended.

    

    (x)    Subsidiary
      Representations.
      The
      Company makes each of the representations contained in Sections 5(a), (b),
      (d),
      (e), (f), (h), (k), (m), (q), (r), (u) and (w) of this Agreement, as same relate
      to each Subsidiary of the Company, except as set forth on Schedule
      5(a).

    

    (y)    Company
      Predecessor.
      All
      representations made by or relating to the Company of a historical or
      prospective nature and all undertakings described in Sections 9(g) through
      9(l)
      shall relate, apply and refer to the Company and its predecessors.

    

    (z)    Correctness
      of Representations.
      The
      Company represents that the foregoing representations and warranties are true
      and correct as of the date hereof in all material respects, and, unless the
      Company otherwise notifies the Subscribers prior to Closing Date, shall be
      true
      and correct in all material respects as of Closing Date.

     

    (AA)      
      Survival.
      The
      foregoing representations and warranties shall survive until three years after
      the Second Closing Date.

     

    6.    Regulation
      D Offering.
      The
      offer and issuance of the Securities to the Subscribers is being made pursuant
      to the exemption from the registration provisions of the 1933 Act afforded
      by
      Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation
      D
      promulgated thereunder. On the Closing Date, the Company will provide an opinion
      reasonably acceptable to Subscriber from the Company’s legal counsel opining on
      the availability of an exemption from registration under the 1933 Act as it
      relates to the offer and issuance of the Securities and other matters reasonably
      requested by Subscribers. A form of the legal opinion is annexed hereto as
      Exhibit
      D.
      The
      Company will provide, at the Company’s expense, such other legal opinions in the
      future as are reasonably necessary for the issuance and resale of the Common
      Stock issuable upon conversion of the Notes and exercise of the Warrants
      pursuant to an effective registration statement under the 1933 Act, Rule 144
      under the 1933 Act (“Rule
      144”),
      or an
      exemption from registration.

    

    7.1.    Conversion
      of Note.

    

    (a)    Upon
      the
      conversion of a Note, interest, any sum due to the Subscriber under the
      Transaction Documents including Liquidated Damages, or part thereof, the Company
      shall, at its own cost and expense, take all necessary action, including
      obtaining and delivering, an opinion of counsel to assure that the Company's
      transfer agent shall issue stock certificates in the name of Subscriber (or
      its
      permitted nominee) or such other persons as designated by Subscriber and in
      such
      denominations to be specified at conversion representing the number of shares
      of
      Common Stock issuable upon such conversion. The Company warrants that no
      instructions other than these instructions have been or will be given to the
      transfer agent of the Company's Common Stock and that the certificates
      representing such shares shall contain no legend other than the usual 1933
      Act
      restriction from transfer legend. If and when the Subscriber sells the Shares
      and Warrant Shares, assuming (i) a registration statement registering such
      shares under the 1933 Act is effective and the prospectus, as supplemented
      or
      amended, contained therein is current and (ii) the Subscriber confirms in
      writing to the transfer agent that the Subscriber has complied with the
      prospectus delivery requirements, the restrictive legend will be removed and
      the
      Shares will be free-trading, and freely transferable. In the event that the
      Shares are sold in a manner that complies with an exemption from registration,
      the Company will promptly instruct its counsel to issue to the transfer agent
      an
      opinion permitting removal of the legend (indefinitely, if pursuant to Rule
      144(k) of the 1933 Act, or for 90 days if pursuant to the other provisions
      of
      Rule 144 of the 1933 Act). 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (b)    Subscriber
      will give notice of its decision to exercise its right to convert the Note,
      interest, any sum due to the Subscriber under the Transaction Documents
      including Liquidated Damages, or part thereof by telecopying an executed and
      completed Notice
      of Conversion
      (a form
      of which is annexed as Exhibit
      A
      to the
      Note) to the Company via confirmed telecopier transmission or otherwise pursuant
      to Section 13(a) of this Agreement. The Subscriber will not be
      required to surrender the Note
      until
      the Note has been fully converted or satisfied. Each date on which a Notice
      of
      Conversion is telecopied to the Company in accordance with the provisions hereof
      shall be deemed a Conversion
      Date.
      The
      Company will itself or cause the Company’s transfer agent to transmit the
      Company’s Common Stock certificates representing the Shares issuable upon
      conversion of the Note to the Subscriber via express courier for receipt by
      such
      Subscriber within three (3) business days after receipt by the Company of the
      Notice of Conversion (such third day being the “Delivery
      Date”).
      A
      Note representing the balance of the Note not so converted will be provided
      by
      the Company to the Subscriber if requested by Subscriber, provided the
      Subscriber delivers the
      original Note to the Company. In the event that a Subscriber elects not to
      surrender a Note for reissuance upon partial payment or conversion, the
      Subscriber hereby indemnifies the Company against any and all loss or damage
      attributable to a third-party claim in an amount in excess of the actual amount
      then due under the Note. “Business
      day”
and
      “trading
      day”
as
      employed in the Transaction Documents is a day that the New York Stock Exchange
      is open for trading for three or more hours.

     

      (c)    The
      Company understands that a delay in the delivery of the Shares in the form
      required pursuant to Section 7.1 hereof, or the Mandatory Redemption Amount
      described in Section 7.2 hereof, respectively after the Delivery Date or the
      Mandatory Redemption Payment Date (as hereinafter defined) could result in
      economic loss to the Subscriber. As compensation to the Subscriber for such
      loss, the Company agrees to pay (as liquidated damages and not as a penalty)
      to
      the Subscriber for late issuance of Shares in the form required pursuant to
      Section 7.1 hereof upon Conversion of the Note in the amount of $100 per
      business day after the Delivery Date for each $10,000 of Note principal amount
      being converted of the corresponding Shares which are not timely delivered.
      The
      Company shall pay any payments incurred under this Section in immediately
      available funds upon demand. Furthermore, in addition to any other remedies
      which may be available to the Subscriber, in the event that the Company fails
      for any reason to effect delivery of the Shares by the Delivery Date or make
      payment by the Mandatory Redemption Payment Date, the Subscriber may revoke
      all
      or part of the relevant Notice of Conversion or rescind all or part of the
      notice of Mandatory Redemption by delivery of a notice to such effect to the
      Company whereupon the Company and the Subscriber shall each be restored to
      their
      respective positions immediately prior to the delivery of such notice, except
      that the liquidated damages described above shall be payable through the date
      notice of revocation or rescission is given to the Company.

    

    (d)    Within
      three (3) business days (such third business day being the “Unlegended Shares
      Delivery Date”) after the business day on which the Company has received (i) a
      notice that Shares or Warrant Shares or any other Common Stock held by a
      Subscriber have been sold pursuant to Rule 144 under the 1933 Act, (ii) a
      representation that the requirements of Rule 144, as applicable and if required,
      have been satisfied, and (iii) the original share certificates representing
      the
      shares of Common Stock that have been sold, and (iv) customary representation
      letters of the Subscriber and/or Subscriber’s broker regarding compliance with
      the requirements of Rule 144, the Company at its expense, (y) shall deliver,
      and
      shall cause legal counsel selected by the Company to deliver to its transfer
      agent (with copies to Subscriber) an appropriate instruction and opinion of
      such
      counsel, directing the delivery of shares of Common Stock without any legends
      including the legend set forth in Section 4(i) above, or pursuant to Rule 144
      (the “Unlegended Shares”); and (z) cause the transmission of the certificates
      representing the Unlegended Shares together with a legended certificate
      representing the balance of the submitted Shares certificate, if any, to the
      Subscriber at the address specified in the notice of sale, via express courier,
      by electronic transfer or otherwise on or before the Unlegended Shares Delivery
      Date. 

    

    (e)    The
      Company understands that a delay in the delivery of the Unlegended Shares
      pursuant to Section 7.1(e) hereof later than two business days after the
      Unlegended Shares Delivery Date could result in economic loss to a Subscriber.
      As compensation to a Subscriber for such loss, the Company agrees to pay late
      payment fees (as liquidated damages and not as a penalty) to the Subscriber
      for
      late delivery of Unlegended Shares in the amount of $100 per business day after
      the Delivery Date for each $10,000 of purchase price of the Unlegended Shares
      subject to the delivery default. If during any 360 day period, the Company
      fails
      to deliver Unlegended Shares as required by this Agreement for an aggregate
      of
      thirty (30) days, then each Subscriber or assignee holding Securities subject
      to
      such default may, at its option, require the Company to redeem all or any
      portion of the Shares and Warrant Shares subject to such default at a price
      per
      share equal to the greater of (i) 120%, or (ii) a fraction in which the
      numerator is the highest closing price during the aforedescribed thirty day
      period and the denominator of which is the lowest conversion
      price during such thirty day period, multiplied by the Purchase Price of such
      Common Stock and Warrant Shares (“Unlegended
      Redemption Amount”).
      The
      amount of the aforedescribed liquidated damages that have accrued or been paid
      for the ten day period prior to the receipt by the Subscriber of the Unlegended
      Redemption Amount shall be credited against the Unlegended Redemption Amount.
      Damages calculated pursuant to Section 7.1(c) and Section 7.1(e) for the same
      Shares and Unlegended Shares shall be calculated only under one such section
      at
      the Subscriber’s election.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    
 

    (f)    In
      lieu
      of delivering physical certificates representing the Shares or Unlegended
      Shares, if the Company’s transfer agent is participating in the Depository Trust
      Company (“DTC”) Fast Automated Securities Transfer program, upon request of a
      Subscriber, so long as the certificates therefor do not bear a legend and the
      Subscriber is not obligated to return such certificate for the placement of
      a
      legend thereon, the Company must cause its transfer agent to electronically
      transmit the Shares or Unlegended Shares by crediting the account of
      Subscriber’s prime Broker with DTC through its Deposit Withdrawal Agent
      Commission system. Such delivery must be made on or before the Delivery Date
      or
      Unlegended Shares Delivery Date, as the case may be.

    

    (g)   Nothing
      contained herein or in any document referred to herein or delivered in
      connection herewith shall be deemed to establish or require the payment of
      a
      rate of interest or other charges in excess of the maximum permitted by
      applicable law. In the event that the rate of interest or dividends required
      to
      be paid or other charges hereunder exceed the maximum permitted by such law,
      any
      payments in excess of such maximum shall be credited against amounts owed by
      the
      Company to the Subscriber and thus refunded to the Company.

    

    (h)    The
      Company shall pay all damages payable pursuant to Section 7 hereof and all
      other
      liquidated damages and payments in immediately available funds upon
      demand.

    

    7.2.    Mandatory
      Redemption at Subscriber’s Election.
      In the
      event the Company is prohibited from issuing Shares, or fails to timely deliver
      Shares on a Delivery Date, or upon the occurrence of any other Event of Default
      (as defined in the Note or in this Agreement) that is not cured during any
      applicable cure period and an additional ten days thereafter, then at the
      Subscriber's election, the Company must pay to the Subscriber ten (10) business
      days after request by the Subscriber, at the Subscriber’s election, a sum of
      money determined by (i) multiplying up to the outstanding principal amount
      of
      the Note designated by the Subscriber by 115%, or (ii) multiplying the number
      of
      Shares otherwise deliverable upon conversion of an amount of Note principal
      and/or interest designated by the Subscriber (with the date of giving of such
      designation being a “Deemed
      Conversion Date”)
      at the
      then Conversion Price that would be in effect on the Deemed Conversion Date
      by
      the highest closing price of the Common Stock on the Principal Market for the
      period commencing on the Deemed Conversion Date until the day prior to the
      receipt of the Mandatory Redemption Payment, whichever is greater, together
      with
      accrued but unpaid interest thereon and any other sums arising and outstanding
      under the Transaction Documents ("Mandatory
      Redemption Payment").
      The
      Mandatory Redemption Payment must be received by the Subscriber on the same
      date
      as the Company Shares otherwise deliverable or within ten (10) business days
      after request, whichever is sooner ("Mandatory
      Redemption Payment Date").
      Upon
      receipt of the Mandatory Redemption Payment, the corresponding Note principal
      and interest will be deemed paid and no longer outstanding. Liquidated damages
      calculated pursuant to Section 7.1(c) hereof, that have been paid or accrued
      for
      the twenty day period prior to the actual receipt of the Mandatory Redemption
      Payment by the Subscriber shall be credited against the Mandatory Redemption
      Payment calculated pursuant to subsections (i) and (ii) above of this Section
      7.2. In the event of a “Change
      in Control”
(as
      defined below), the Subscriber may demand, and the Company shall pay, a
      Mandatory Redemption Payment equal to 115% of the outstanding principal amount
      of the Note designated by the Subscriber together with accrued but unpaid
      interest thereon and any other sums arising and outstanding under the
      Transaction Documents. For purposes of this Section 7.2, “Change
      in Control”
shall
      mean (i) the Company no longer having a class of shares publicly tradable and
      listed on a Principal Market, (ii) the Company becoming a Subsidiary of another
      entity or merging into or with another entity, (iii) a majority of the board
      of
      directors of the Company as of the Closing Date no longer serving as directors
      of the Company except for the addition or replacement of up to six directors,
      other than due to natural causes, (iv) if the holders of the Company’s Common
      Stock as of the Closing Date beneficially owning at any time after the Closing
      Date less than thirty-five percent of the Common stock owned by them on the
      Closing Date, or (v) the sale, lease, license or transfer of substantially
      all
      the assets of the Company or Subsidiaries.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    7.3.    Maximum
      Conversion.
      The
      Subscriber shall not be entitled to convert on a Conversion Date that amount
      of
      the Note in connection with that number of shares of Common Stock which would
      be
      in excess of the sum of (i) the number of shares of common stock beneficially
      owned by the Subscriber and its Affiliates on a Conversion Date, and (ii) the
      number of shares of Common Stock issuable upon the conversion of the Note with
      respect to which the determination of this provision is being made on a
      Conversion Date, which would result in beneficial ownership by the Subscriber
      and its Affiliates of more than 4.99% of the outstanding shares of common stock
      of the Company on such Conversion Date. Beneficial ownership shall be determined
      in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
      amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the
      Subscriber shall not be limited to aggregate conversions of only 4.99% and
      aggregate conversions by the Subscriber may exceed 4.99%. The Subscriber may
      waive the conversion limitation described in this Section 7.3, in whole or
      in
      part, upon and effective after 61 days prior written notice to the Company
      to
      increase such percentage to up to 9.99%. The Subscriber may decide whether
      to
      convert a Note or exercise Warrants to achieve an actual 4.99% or up to 9.99%
      ownership position as described above.

    

    7.4.    Injunction
      Posting of Bond.
      In the
      event a Subscriber shall elect to convert a Note or part thereof or exercise
      the
      Warrant in whole or in part or request the delivery of Unlegended Shares
      pursuant to the terms of this Agreement, the Company may not refuse conversion,
      exercise or delivery based on any claim that such Subscriber or any one
      associated or affiliated with such Subscriber has been engaged in any violation
      of law, or for any other reason, unless, an injunction from a court, on notice,
      restraining and or enjoining conversion of all or part of such Note or exercise
      of all or part of such Warrant, or delivery of Unlegended Shares shall have
      been
      sought and obtained by the Company
      or at
      the Company’s request or with the Company’s assistance, and
      the
      Company has posted a surety bond for the benefit of such Subscriber in the
      amount of 120% of the outstanding principal and interest of the Note, or
      aggregate purchase price of the Shares, Warrant Shares and Unlegended Shares
      which are sought to be subject to the injunction, which bond shall remain in
      effect until the completion of arbitration/litigation of the dispute and the
      proceeds of which shall be payable to such Subscriber to the extent Subscriber
      obtains judgment in Subscriber’s favor.

    

    7.5.    Buy-In.
      In
      addition to any other rights available to the Subscriber, if the Company fails
      to deliver to the Subscriber Shares issuable upon conversion of a Note or
      exercise of a Warrant by the Delivery Date (as defined herein and in the
      Warrant) or fails to deliver Unlegended Shares by the Unlegended Shares Delivery
      Date and if after seven (7) business days after such date the Subscriber or
      a
      broker on the Subscriber’s behalf, purchases (in an open market transaction or
      otherwise) shares of Common Stock to deliver in satisfaction of a sale by such
      Subscriber of the Common Stock which the Subscriber was entitled to receive
      upon
      such conversion (a "Buy-In"),
      then
      the Company shall pay in cash to the Subscriber (in addition to any remedies
      available to or elected by the Subscriber) the amount by which (A) the
      Subscriber's total purchase price (including brokerage commissions, if any)
      for
      the shares of Common Stock so purchased exceeds (B) the aggregate principal
      and/or interest amount of the Note for which such conversion, exercise or
      required delivery was not timely honored,
      together with interest thereon at a rate of 15% per annum, accruing until such
      amount and any accrued interest thereon is paid in full (which amount shall
      be
      paid as liquidated damages and not as a penalty). For
      example, if the Subscriber purchases shares of Common Stock having a total
      purchase price of $11,000 to cover a Buy-In with respect to an attempted
      conversion of $10,000 of note principal and/or interest or exercise of Warants
      having an aggregate purchase price of $10,000, or Unlegended Shares having
      an
      aggregate purchase price of $10,000, then the Company shall be required to
      pay
      the Subscriber $1,000,
      plus interest. The
      Subscriber shall provide the Company written notice indicating the amounts
      payable to the Subscriber in respect of the Buy-In.

    

    7.6.    Adjustments.
      The
      Conversion Price, Warrant exercise price and amount of Shares issuable upon
      conversion of the Notes and exercise of the Warrants shall be adjusted as
      described in this Agreement, the Notes and Warrants.

     

    7.7.    Redemption.
      The
      Note and Warrants shall not be redeemable or mandatorily convertible except
      as
      described in the Note and Warrants. 

    

    8.     
      Finder/Legal
      Fees.

     

    (a)    Finder’s
      Fee.
      The
      Company on the one hand, and each Subscriber (for himself only) on the other
      hand, agree to indemnify the other against and hold the other harmless from
      any
      and all liabilities to any persons claiming brokerage commissions or finder’s
      fees on account of services purported to have been rendered on behalf of the
      indemnifying party in connection with this Agreement or the transactions
      contemplated hereby and arising out of such party’s actions. The Company
      represents that there are no parties entitled to receive fees, commissions,
      or
      similar payments in connection with the Offering except as described in Section
      8(b) below.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (b)    Due
      Diligence Fee.
      The
      Company will pay a due diligence fee (“Due
      Diligence Fee”).
      The
      aggregate Due Diligence Fee shall be equal to ten percent (10%) of the Aggregate
      Purchase Price as more fully described on Schedule
      8
      hereto.
      The Due Diligence Fee shall be paid in the form of a Note with terms
      substantially similar to the Notes to be issued to Subscribers in this
      Offering.

    

    (c)    Legal
      Fees.
      The
      Company shall pay to Grushko & Mittman, P.C., a fee of $30,000
      (“Legal
      Fees”)
      as
      reimbursement for services rendered to the Subscribers in connection with this
      Agreement and the purchase and sale of the Notes, and Warrants (the
“Offering”)
      and
      acting as Escrow Agent for the Offering. The Legal Fees will be payable on
      the
      Closing Date out of funds held pursuant to the Escrow Agreement. Grushko &
Mittman, P.C. will be reimbursed on the Closing Date for all UCC search and
      filing fees, if any.

     

    9.    Covenants
      of the Company.
      The
      Company covenants and agrees with the Subscribers as follows:

     

    (a)    Stop
      Orders.
      The
      Company will advise the Subscribers, within two hours after the Company receives
      notice of issuance by the Commission, any state securities commission or any
      other regulatory authority of any stop order or of any order preventing or
      suspending any offering of any securities of the Company, or of the suspension
      of the qualification of the Common Stock of the Company for offering or sale
      in
      any jurisdiction, or the initiation of any proceeding for any such
      purpose.

     

    (b)    Listing.
      The
      Company shall promptly secure the listing of the Shares and the Warrant Shares
      upon each national securities exchange, or electronic or automated quotation
      system upon which they are or become listed and shall use commercially
      reasonable efforts to maintain such listing so long as any Notes or Warrants
      are
      outstanding. The Company will maintain the listing of its Common Stock on the
      American Stock Exchange, Nasdaq Capital Market, Nasdaq National Market System,
      Bulletin Board, or New York Stock Exchange (whichever of the foregoing is at
      the
      time the principal trading exchange or market for the Common Stock (the
“Principal
      Market”)),
      and
      will comply in all respects with the Company’s reporting, filing and other
      obligations under the bylaws or rules of the Principal Market, as applicable.
      The Company will provide the Subscribers copies of all notices it receives
      notifying the Company of the threatened and actual delisting of the Common
      Stock
      from any Principal Market. As of the date of this Agreement, the Bulletin Board
      is the Principal Market.

     

    (c)    Market
      Regulations.
      The
      Company shall notify the Commission, the Principal Market and applicable state
      authorities, in accordance with their requirements, of the transactions
      contemplated by this Agreement, and shall take all other necessary action and
      proceedings as may be required and permitted by applicable law, rule and
      regulation, for the legal and valid issuance of the Securities to the
      Subscribers and promptly provide copies thereof to Subscriber.

     

    (d)    Filing
      Requirements.
      From
      the date of this Agreement and until the later of (i) two (2) years after the
      Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations, the Company will
      (A)
      cause its Common Stock to continue to be registered under Section 12(b) or
      12(g)
      of the 1934 Act, (B) comply in all respects with its reporting and filing
      obligations under the 1934 Act, (C) voluntarily comply with all reporting
      requirements that are applicable to an issuer with a class of shares registered
      pursuant to Section 12(g) of the 1934 Act, if Company is not subject to such
      reporting requirements, and (D) comply with all requirements related to any
      registration statement filed pursuant to this Agreement. The Company will use
      its commercially reasonable efforts not to take any action or file any document
      (whether or not permitted by the 1933 Act or the 1934 Act or the rules
      thereunder) to terminate or suspend such registration or to terminate or suspend
      its reporting and filing obligations under said acts until two (2) years after
      the Closing Date. Until the earlier of the resale of the Common Stock and the
      Warrant Shares by each Subscriber or two (2) years after the Warrants have
      been
      exercised, the Company will use its commercially reasonable efforts to continue
      the listing or quotation of the Common Stock on a Principal Market and will
      comply in all respects with the Company’s reporting, filing and other
      obligations under the bylaws or rules of the Principal Market; provided that
      the
      Company shall not be required to consummate a reverse stock split in order
      to
      comply with the foregoing covenant. The Company agrees to timely file a Form
      D
      with respect to the Securities if required under Regulation D and to provide
      a
      copy thereof to each Subscriber promptly after such filing.

     

    
      
        
        

      

      
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    (e)    Use
      of
      Proceeds.
      The
      proceeds of the Offering will be employed by the Company for the purposes set
      forth on Schedule
      9(e)
      hereto.
      Except as set forth on Schedule
      9(e),
      the
      Purchase Price may not and will not be used for accrued and unpaid officer
      and
      director salaries, payment of financing related debt, redemption of outstanding
      notes or equity instruments of the Company, litigation related expenses or
      settlements, brokerage fees, nor non-trade obligations outstanding on a Closing
      Date.

     

    (f)    Reservation.
      After
      the
      Reservation Approval (as described in Section 9(q) of this Agreement), the
      Company will reserve pro-rata on behalf of the Subscribers from its authorized
      but unissued Common Stock a number of common shares equal to 200% of the amount
      of Common Stock necessary to allow each holder of a Note to be able to convert
      all such outstanding Notes and interest and reserve the amount of Warrant Shares
      issuable upon exercise of the Warrants. Failure to have sufficient shares
      reserved pursuant to this Section 9(f) for three (3) consecutive business days
      or ten (10) days in the aggregate shall be a material default of the Company’s
      obligations under this Agreement and an Event of Default under the Note. The
      Subscribers acknowledge that until the Reservation Approval is obtained, shares
      of Common Stock will not be reserved on their behalf and the Notes will not
      be
      convertible nor the Warrants exercisable.

     

    (g)    Taxes.
      From
      the date of this Agreement and until the conversion or satisfaction of the
      Note,
      in its entirety, the Company will promptly pay and discharge, or cause to be
      paid and discharged, when due and payable, all lawful taxes, assessments and
      governmental charges or levies imposed upon the income, profits, property or
      business of the Company; provided, however, that any such tax, assessment,
      charge or levy need not be paid if the validity thereof shall currently be
      contested in good faith by appropriate proceedings and if the Company shall
      have
      set aside on its books adequate reserves with respect thereto, and provided,
      further, that the Company will pay all such taxes, assessments, charges or
      levies forthwith upon the commencement of proceedings to foreclose any lien
      which may have attached as security therefore.

     

    (h)    Insurance.
      From
      the date of this Agreement and until the conversion or satisfaction of the
      Note,
      in its entirety, the Company will keep its assets which are of an insurable
      character insured by financially sound and reputable insurers against loss
      or
      damage by fire, explosion and other risks customarily insured against by
      companies in the Company’s line of business, in amounts sufficient to prevent
      the Company from becoming a co-insurer and not in any event less than one
      hundred percent (100%) of the insurable value of the property insured less
      reasonable deductible amounts; and the Company will maintain, with financially
      sound and reputable insurers, insurance against other hazards and risks and
      liability to persons and property to the extent and in the manner customary
      for
      companies in similar businesses similarly situated and to the extent available
      on commercially reasonable terms.

     

    (i)    Books
      and Records.
      From the
      date of this Agreement and until the conversion or satisfaction of the Note,
      in
      its entirety, the Company will keep true records and books of account in which
      full, true and correct entries will be made of all dealings or transactions
      in
      relation to its business and affairs in accordance with generally accepted
      accounting principles applied on a consistent basis.

     

    (j)    Governmental
      Authorities.
      From the
      date of this Agreement and until the conversion or satisfaction of the Note,
      in
      its entirety, the Company shall duly observe and conform in all material
      respects to all valid requirements of governmental authorities relating to
      the
      conduct of its business or to its properties or assets.

     

    (k)    Intellectual
      Property.
      From
      the date of this Agreement and until the conversion or satisfaction of the
      Note,
      in its entirety, the Company shall maintain in full force and effect its
      corporate existence, rights and franchises and all licenses and other rights
      to
      use intellectual property owned or possessed by it and reasonably deemed to
      be
      necessary to the conduct of its business, unless it is sold for
      value.

     

    (l)    Properties.
      From the
      date of this Agreement and until the conversion or satisfaction of the Note,
      in
      its entirety, the Company will keep its properties in good repair, working
      order
      and condition, reasonable wear and tear excepted, and from time to time make
      all
      necessary and proper repairs, renewals, replacements, additions and improvements
      thereto; and the Company will at all times comply with each provision of all
      leases to which it is a party or under which it occupies property if the breach
      of such provision could reasonably be expected to have a Material Adverse
      Effect.

     

    
      
        
        

      

      
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    (m)    Confidentiality/Public
      Announcement.
      From the
      date of this Agreement and until the sooner of (i) two (2) years after the
      Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations, the Company agrees
      that except in connection with a Form 8-K or the Registration Statement or
      as
      otherwise required in any other Commission filing, it will not disclose publicly
      or privately the identity of the Subscribers unless expressly agreed to in
      writing by a Subscriber, only to the extent required by law and then only upon
      five days prior notice to Subscriber. In any event and subject to the foregoing,
      the Company shall file
      a
      Form 8-K or make a public announcement describing the Offering not later than
      the second business day after the Closing Date. In the Form 8-K or public
      announcement, the Company will specifically disclose the amount of common stock
      outstanding immediately after the Closing. A form of the proposed Form 8-K
      or
      public announcement to be employed in connection with the Closing is annexed
      hereto as Exhibit
      E.

     

    (n)    Non-Public
      Information.
      The
      Company covenants and agrees that neither it nor any other person acting on
      its
      behalf will provide any Subscriber or its agents or counsel with any information
      that the Company believes constitutes material non-public information, unless
      prior thereto such Subscriber shall have agreed in writing to receive such
      information. The Company understands and confirms that each Subscriber shall
      be
      relying on the foregoing representations in effecting transactions in securities
      of the Company.

    

    (o)    Offering
      Restrictions.
      Until
      the expiration of the “Exclusion
      Period”,
      which
      shall be defined as the sooner of (i) the Registration Statement having been
      current and available for use in connection with the resale of all of the
      Registrable Securities (as defined in Section 11.1(i) for a period of 365 days,
      or (ii) until all the Shares and Warrant Shares have been resold or transferred
      by the Subscribers pursuant to the Registration Statement or Rule 144, without
      regard to volume limitations, or at any time during the pendency of an Event
      of
      Default, except for the Excepted Issuances, the Company will not enter into
      an
      agreement to nor issue any equity, convertible debt or other securities
      convertible into common stock or equity of the Company nor modify any of the
      foregoing which may be outstanding at anytime, without the prior written consent
      of a majority of the Subscriber, which consent may be withheld for any reason.
      For so long as the Notes are outstanding, except for the Excepted Issuances,
      the
      Company will not enter into any equity line of credit or similar agreement,
      nor
      issue nor agree to issue any floating or variable priced equity linked
      instruments nor any of the foregoing or equity with price reset rights.
The
      only
      officer, director, employee and consultant stock option or stock incentive
      plan
      currently in effect or contemplated by the Company has been submitted to the
      Subscribers. No other plan will be adopted nor may any options or equity not
      included in such plan be issued for so long as any sum is outstanding under
      the
      Note.

    

    (p)    Additional
      Negative Covenants.
      So long
      as at least twenty-five percent (25%) of the principal amount of Notes issued
      by
      the Company pursuant to Subscription Agreements entered into by the Company
      on
      or about the date of this Agreement are outstanding or at any time during the
      pendency of an Event of Default (as defined in the Note), except as described
      on
Schedule
      9(p),
      without
      the consent of the Subscribers, the Company will not and will not permit any
      of
      its Subsidiaries to directly or indirectly:

    

    (i)    create,
      incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
      arrangement, lien, charge, claim, security interest, security title, mortgage,
      security deed or deed of trust, easement or encumbrance, or preference, priority
      or other security agreement or preferential arrangement of any kind or nature
      whatsoever (including any lease or title retention agreement, any financing
      lease having substantially the same economic effect as any of the foregoing,
      and
      the filing of, or agreement to give, any financing statement perfecting a
      security interest under the Uniform Commercial Code or comparable law of any
      jurisdiction) (each, a “Lien”)
      upon
      any of its property, whether now owned or hereafter acquired except for (i)
      the
      Excepted Issuances (as defined in Section 12(a) hereof), (ii) (a) Liens imposed
      by law for taxes that are not yet due or are being contested in good faith
      and
      for which adequate reserves have been established in accordance with generally
      accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’,
      material men’s, repairmen’s and other like Liens imposed by law, arising in the
      ordinary course of business and securing obligations that are not overdue by
      more than 30 days or that are being contested in good faith and by appropriate
      proceedings; (c) pledges and deposits made in the ordinary course of business
      in
      compliance with workers’ compensation, unemployment insurance and other social
      security laws or regulations; (d) deposits to secure the performance of bids,
      trade contracts, leases, statutory obligations, surety and appeal bonds,
      performance bonds and other obligations of a like nature, in each case in the
      ordinary course of business; (e) Liens created with respect to the financing
      of
      the purchase of new property in the ordinary course of the Company’s business up
      to the amount of the purchase price of such property, or (f) easements, zoning
      restrictions, rights-of-way and similar encumbrances on real property imposed
      by
      law or arising in the ordinary course of business that do not secure any
      monetary obligations and do not materially detract from the value of the
      affected property (each of (a) through (f), a “Permitted
      Lien”)
      and
      (iii) indebtedness for borrowed money which is not senior or pari passu in
      right
      of payment to the payment of the Notes;

     

    
      
        
        

      

      
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    (ii)    amend
      its
      certificate of incorporation, bylaws or its charter documents so as to adversely
      affect any rights of the Subscriber;

    

    (iii)    repay,
      repurchase or offer to repay, repurchase or otherwise acquire or make any
      dividend or distribution in respect of any of its Common Stock, preferred stock,
      or other equity securities other than to the extent permitted or required under
      the Transaction Documents;

    

    (iv)    prepay
      any financing related debt obligations; or

    

    (v)    engage
      in
      any transactions with any officer, director, employee or any Affiliate of the
      Company, including any contract, agreement or other arrangement providing for
      the furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any officer,
      director or such employee or, to the knowledge of the Company, any entity in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner, in each case in excess of $20,000
      other than (i) for payment of salary or consulting fees for services rendered,
      (ii) reimbursement for expenses incurred on behalf of the Company and (iii)
      for
      other employee benefits, including stock option agreements under any stock
      option plan of the Company.

    

    (q)    Shareholder
      Approval.
      The
      Company and Subscribers agree that until the Company obtains shareholder
      approval of an increase in the authorized Common Stock of the Company and files
      an amendment to the Company’s Articles of Incorporation and reserves the amount
      of shares of Common Stock necessary to allow the conversion of Note principal
      and interest that may accrue thereon and Common Stock issuable upon exercise
      of
      the Warrants issued in connection with this Agreement (in the aggregate such
      shares of Common Stock being the “Reserve
      Amount”),
      each
      Subscriber may not convert the Note nor exercise Warrants in excess of the
      available Reserve Amount. The Company covenants to obtain the authorization
      and
      reservation of Common Stock on behalf of the Subscribers of not less than 200%
      of the amount of shares of Common Stock issuable upon conversion of the Note
      principal and 100% of shares of Common Stock issuable upon exercise of the
      Warrants (such approval being the “Shareholder
      Approval”
and
      such reservation being the “Reservation”).
      Failure to obtain the Shareholder Approval and Reservation on or before April
      15, 2007 (a “Reservation
      Default”)
      is an
      Event of Default under the Note and for which liquidated damages will accrue
      at
      the rate of two percent (2%) for each thirty (30) days, or pro rata portion
      thereof during the pendency of such Reservation Default. 

     

    10.    Covenants
      of the Company and Subscriber Regarding Indemnification.

     

    (a)    The
      Company agrees to indemnify, hold harmless, reimburse and defend the
      Subscribers, the Subscribers’ officers, directors, agents, Affiliates, control
      persons, and principal shareholders, against any claim, cost, expense,
      liability, obligation, loss or damage (including reasonable legal fees) of
      any
      nature, incurred by or imposed upon the Subscriber or any such person which
      results, arises out of or is based upon (i) any material misrepresentation
      by
      Company or material breach of any warranty by Company in this Agreement or
      in
      any Exhibits or Schedules attached hereto, or other agreement delivered pursuant
      hereto; or (ii) after any applicable notice and/or cure periods, any material
      breach or default in performance by the Company of any covenant or undertaking
      to be performed by the Company hereunder, or any other agreement entered into
      by
      the Company and Subscriber relating hereto.

     

    (b)    Each
      Subscriber agrees to indemnify, hold harmless, reimburse and defend the Company
      and each of the Company’s officers, directors, agents, Affiliates, control
      persons and principal shareholders against any claim, cost, expense, liability,
      obligation, loss or damage (including reasonable legal fees) of any nature,
      incurred by or imposed upon the Company or any such person which results, arises
      out of or is based upon (i) any material misrepresentation by such Subscriber
      in
      this Agreement or in any Exhibits or Schedules attached hereto, or other
      agreement delivered pursuant hereto; or (ii) after any applicable notice and/or
      cure periods, any material breach or default in performance by such Subscriber
      of any covenant or undertaking to be performed by such Subscriber hereunder,
      or
      any other agreement entered into by the Company and Subscribers, relating
      hereto.

     

    
      
        
        

      

      
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    (c)    In
      no
      event shall the liability of any Subscriber or permitted successor hereunder
      or
      under any Transaction Document or other agreement delivered in connection
      herewith be greater in amount than the dollar amount of the net proceeds
      actually received by such Subscriber upon the sale of the Shares.

     

    (d)    The
      procedures set forth in Section 11.6 shall apply to the indemnification set
      forth in Sections 10(a) and 10(b) above.

     

    11.1.    Registration
      Rights.
      The
      Company hereby grants the following registration rights to holders of the
      Securities. If the Company at any time proposes to register any of its
      securities under the 1933 Act for sale to the public, whether for its own
      account or for the account of other security holders or both, except with
      respect to registration statements in connection with registrable securities
      as
      defined in Subscription Agreements entered into by the Company and Subscribers
      and others on or about October 17, 2006 (“October
      Subscription Agreements”)
      and on
      Forms S-4, S-8 or another form not available for registering the “Registrable
      Securities”,
      which
      shall mean 130% of the Shares issuable upon conversion of the Notes issuable
      to
      Subscribers, Settlement Shares, and 100% of the Warrant Shares issuable pursuant
      to this Agreement upon exercise of the Warrants, for sale to the public,
      provided the Registrable Securities are not otherwise registered for resale
      by
      the Subscribers or Holder pursuant to an effective registration statement,
      each
      such time it will give at least fifteen (15) days' prior written notice to
      the
      record holder of the Registrable Securities of its intention so to do. Upon
      the
      written request of the holder, received by the Company within fifteen (15)
      days
      after the giving of any such notice by the Company, to register any of the
      Registrable Securities not previously registered, the Company will cause such
      Registrable Securities as to which registration shall have been so requested
      to
      be included with the securities to be covered by the registration statement
      proposed to be filed by the Company, all to the extent required to permit the
      sale or other disposition of the Registrable Securities so registered by the
      holder of such Registrable Securities (the “Seller”
or
      “Sellers”).
      In
      the event that any registration pursuant to this Section 11.1(ii) shall be,
      in
      whole or in part, an underwritten public offering of common stock of the
      Company, the number of shares of Registrable Securities to be included in such
      an underwriting may be reduced by the managing underwriter if and to the extent
      that the Company and the underwriter shall reasonably be of the opinion that
      such inclusion would adversely affect the marketing of the securities to be
      sold
      by the Company therein; provided, however, that the Company shall notify the
      Seller in writing of any such reduction. Notwithstanding the foregoing
      provisions, or Section 11.4 hereof, the Company may withdraw or delay or suffer
      a delay of any registration statement referred to in this Section 11.1 without
      thereby incurring any liability to the Seller.

     

    11.2.    Registration
      Procedures.
      If and
      whenever the Company is required by the provisions of Section 11.1 to effect
      the
      registration of any Registrable Securities under the 1933 Act, the Company
      will,
      as expeditiously as possible: 

     

    (a)    subject
      to the timelines provided in this Agreement, prepare and file with the
      Commission a registration statement required by Section 11, with respect to
      such
      securities and use its best efforts to cause such registration statement to
      become and remain effective for the period of the distribution contemplated
      thereby (determined as herein provided), promptly provide to the holders of
      the
      Registrable Securities copies of all filings and Commission letters of comment
      and notify Subscribers (by telecopier and by e-mail addresses provided by
      Subscribers) and Grushko & Mittman, P.C. (by telecopier and by email to
Counslers@aol.com)
      on or
      before the first business day thereafter that the Company receives notice that
      (i) the Commission has no comments or no further comments on the Registration
      Statement, and (ii) the registration statement has been declared effective
      (failure to timely provide notice as required by this Section 11.2(a) shall
      be a
      material breach of the Company’s obligation and an Event of Default as defined
      in the Notes
      and
      a Non-Registration Event as defined in Section 11.4 of this Agreement);

     

    (b)    prepare
      and file with the Commission such amendments and supplements to such
      registration statement and the prospectus used in connection therewith as may
      be
      necessary to keep such registration statement effective until such registration
      statement has been effective for a period of two (2) years, and comply with
      the
      provisions of the 1933 Act with respect to the disposition of all of the
      Registrable Securities covered by such registration statement in accordance
      with
      the Sellers’ intended method of disposition set forth in such registration
      statement for such period; 

     

    (c)    furnish
      to the Sellers, at the Company’s expense, such number of copies of the
      registration statement and the prospectus included therein (including each
      preliminary prospectus) as such persons reasonably may request in order to
      facilitate the public sale or their disposition of the securities covered by
      such registration statement or make them electronically available; 

     

    
      
        
        

      

      
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    (d)    use
      its
commercially
      reasonable best efforts to register or qualify the Registrable Securities
      covered by such registration statement under the securities or “blue sky” laws
      of New York and such jurisdictions as the Sellers shall request in writing,
      provided, however, that the Company shall not for any such purpose be required
      to qualify generally to transact business as a foreign corporation in any
      jurisdiction where it is not so qualified or to consent to general service
      of
      process in any such jurisdiction; 

     

    (e)    if
      applicable, list the Registrable Securities covered by such registration
      statement with any securities exchange on which the Common Stock of the Company
      is then listed; 

     

    (f)    notify
      the Subscribers within two hours of the Company’s becoming aware that a
      prospectus relating thereto is required to be delivered under the 1933 Act,
      of
      the happening of any event of which the Company has knowledge as a result of
      which the prospectus contained in such registration statement, as then in
      effect, includes an untrue statement of a material fact or omits to state a
      material fact required to be stated therein or necessary to make the statements
      therein not misleading in light of the circumstances then existing or which
      becomes subject to a Commission, state or other governmental order suspending
      the effectiveness of the registration statement covering any of the Registrable
      Securities;

     

    (g)    provided
      same would not be in violation of the provision of Regulation FD under the
      1934
      Act, make available for inspection by the Sellers, and any attorney, accountant
      or other agent retained by the Seller or underwriter, all publicly available,
      non-confidential financial and other records, pertinent corporate documents
      and
      properties of the Company, and cause the Company's officers, directors and
      employees to supply all publicly available, non-confidential information
      reasonably requested by the seller, attorney, accountant or agent in connection
      with such registration statement; and 

     

    (h)    provide
      to the Sellers copies of the Registration Statement and amendments thereto
      five
      business days prior to the filing thereof with the Commission.

     

    11.3.    Provision
      of Documents.
      In
      connection with each registration described in this Section 11, each Seller
      will
      furnish to the Company in writing such information and representation letters
      with respect to itself and the proposed distribution by it as reasonably shall
      be necessary in order to assure compliance with federal and applicable state
      securities laws. 

     

    11.4.    Non-Registration
      Events.
      The
      Company and the Subscribers agree that the Sellers will suffer damages if any
      Registration Statement is not filed by the Filing Date and not declared
      effective by the Commission by the Effective Date, and any registration
      statement required under Section 11.1 is not filed within 60 days after written
      request and declared effective by the Commission within 120 days after such
      request, and maintained in the manner and within the time periods contemplated
      by Section 11 hereof, and it would not be feasible to ascertain the extent
      of
      such damages with precision. Accordingly, if (A) any Registration Statement
      is
      not filed on or before the Filing Date, (B) is not declared effective on or
      before the Effective Date, (C) due to the action or inaction of the Company
      the
      Registration Statement is not declared effective within three (3) business
      days
      after receipt by the Company or its attorneys of a written or oral communication
      from the Commission that any Registration Statement will not be reviewed or
      that
      the Commission has no further comments, (D) if the registration statement
      described in Sections 11.1 is not filed within 60 days after such written
      request, or is not declared effective within 120 days after such written
      request, or (E) any registration statement described in Sections 11 is filed
      and
      declared effective but shall thereafter cease to be effective without being
      succeeded within fifteen (15) business days by an effective replacement or
      amended Registration Statement or for a period of time which shall exceed thirty
      (30) days in the aggregate per year (defined as every rolling period of 365
      consecutive days commencing on the Actual Effective Date (each such event
      referred to in clauses A through E of this Section 11.4 is referred to herein
      as
      a "Non-Registration
      Event"),
      then
      the Company shall deliver to the holder of Registrable Securities, as
Liquidated
      Damages,
      an
      amount equal to two percent (2%) for each thirty (30) days (or such lesser
      pro-rata amount for any period of less than thirty (30) days) of the Principal
      Amount of the outstanding Notes and purchase price of Shares issued upon
      conversion of the Notes owned of record by such holder which are subject to
      such
      Non-Registration Event. The Company may pay the Liquidated Damages in cash.
      The
      maximum amount of Liquidated Damages payable in connection with Non-Registration
      Event may not exceed twenty-four percent (24%). The Liquidated Damages must
      be
      paid within ten (10) days after the end of each thirty (30) day period or
      shorter part thereof for which Liquidated Damages are payable. In the event
      a
      Registration Statement is filed by the Filing Date but is withdrawn prior to
      being declared effective by the Commission, then such Registration Statement
      will be deemed to have not been filed and Liquidated Damages will be calculated
      accordingly. All
      oral
      or written comments received from the Commission relating to the Registration
      Statement must be satisfactorily responded to within
      fifteen (15) business days after receipt of comments from the Commission.
      Failure
      to
      timely respond to Commission comments is a Non-Registration Event for which
      Liquidated Damages shall accrue and be payable by the Company to the holders
      of
      Registrable Securities at the same rate set forth above. Notwithstanding the
      foregoing, the Company shall not be liable to the Subscriber under this Section
      11.4 for any events or delays occurring as a consequence of the acts or
      omissions of the Subscribers contrary to the obligations undertaken by
      Subscribers in this Agreement. Liquidated Damages will not accrue nor be payable
      pursuant to this Section 11.4 nor will a Non-Registration Event be deemed to
      have occurred for times during which Registrable Securities are transferable
      by
      the holder of Registrable Securities pursuant to Rule 144(k) under the 1933
      Act.

     

    
      
        
        

      

      
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    11.5.    Expenses.
      All
      expenses incurred by the Company in complying with Section 11, including,
      without limitation, all registration and filing fees, printing expenses (if
      required), fees and disbursements of counsel and independent public accountants
      for the Company, fees and expenses (including reasonable counsel fees) incurred
      in connection with complying with state securities or “blue sky” laws, fees of
      the National Association of Securities Dealers, Inc., transfer taxes, and fees
      of transfer agents and registrars, are called “Registration
      Expenses.”
All
      underwriting discounts and selling commissions applicable to the sale of
      Registrable Securities are called "Selling
      Expenses."
      The
      Company will pay all Registration Expenses in connection with the registration
      statement under Section 11. Selling Expenses in connection with each
      registration statement under Section 11 shall be borne by the Seller and may
      be
      apportioned among the Sellers in proportion to the number of shares sold by
      the
      Seller relative to the number of shares sold under such registration statement
      or as all Sellers thereunder may agree.

     

    11.6.    Indemnification
      and Contribution.

     

    (a)    In
      the
      event of a registration of any Registrable Securities under the 1933 Act
      pursuant to Section 11, the Company will, to the extent permitted by law,
      indemnify and hold harmless the Seller, each officer of the Seller, each
      director of the Seller, each underwriter of such Registrable Securities
      thereunder and each other person, if any, who controls such Seller or
      underwriter within the meaning of the 1933 Act, against any losses, claims,
      damages or liabilities, joint or several, to which the Seller, or such
      underwriter or controlling person may become subject under the 1933 Act or
      otherwise, insofar as such losses, claims, damages or liabilities (or actions
      in
      respect thereof) arise out of or are based upon any untrue statement or alleged
      untrue statement of any material fact contained in any registration statement
      under which such Registrable Securities was registered under the 1933 Act
      pursuant to Section 11, any preliminary prospectus or final prospectus contained
      therein, or any amendment or supplement thereof, or arise out of or are based
      upon the omission or alleged omission to state therein a material fact required
      to be stated therein or necessary to make the statements therein not misleading
      in light of the circumstances when made, and will subject to the provisions
      of
      Section 11.6(c) reimburse the Seller, each such underwriter and each such
      controlling person for any legal or other expenses reasonably incurred by them
      in connection with investigating or defending any such loss, claim, damage,
      liability or action; provided, however, that the Company shall not be liable
      to
      the Seller to the extent that any such damages arise out of or are based upon
      an
      untrue statement or omission made in any preliminary prospectus if (i) the
      Seller failed to send or deliver a copy of the final prospectus delivered by
      the
      Company to the Seller with or prior to the delivery of written confirmation
      of
      the sale by the Seller to the person asserting the claim from which such damages
      arise, (ii) the final prospectus would have corrected such untrue statement
      or
      alleged untrue statement or such omission or alleged omission, or (iii) to
      the
      extent that any such loss, claim, damage or liability arises out of or is based
      upon an untrue statement or alleged untrue statement or omission or alleged
      omission so made in conformity with information furnished by any such Seller,
      or
      any such controlling person in writing specifically for use in such registration
      statement or prospectus. 

     

    
      
        
        

      

      
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    (b)    In
      the
      event of a registration of any of the Registrable Securities under the 1933
      Act
      pursuant to Section 11, each Seller severally but not jointly will, to the
      extent permitted by law, indemnify and hold harmless the Company, and each
      person, if any, who controls the Company within the meaning of the 1933 Act,
      each officer of the Company who signs the registration statement, each director
      of the Company, each underwriter and each person who controls any underwriter
      within the meaning of the 1933 Act, against all losses, claims, damages or
      liabilities, joint or several, to which the Company or such officer, director,
      underwriter or controlling person may become subject under the 1933 Act or
      otherwise, insofar as such losses, claims, damages or liabilities (or actions
      in
      respect thereof) arise out of or are based upon any untrue statement or alleged
      untrue statement of any material fact contained in the registration statement
      under which such Registrable Securities were registered under the 1933 Act
      pursuant to Section 11, any preliminary prospectus or final prospectus contained
      therein, or any amendment or supplement thereof, or arise out of or are based
      upon the omission or alleged omission to state therein a material fact required
      to be stated therein or necessary to make the statements therein not misleading,
      and will reimburse the Company and each such officer, director, underwriter
      and
      controlling person for any legal or other expenses reasonably incurred by them
      in connection with investigating or defending any such loss, claim, damage,
      liability or action, provided, however, that the Seller will be liable hereunder
      in any such case if and only to the extent that any such loss, claim, damage
      or
      liability arises out of or is based upon an untrue statement or alleged untrue
      statement or omission or alleged omission made in reliance upon and in
      conformity with information pertaining to such Seller, as such, furnished in
      writing to the Company by such Seller specifically for use in such registration
      statement or prospectus, and provided, further, however, that the liability
      of
      the Seller hereunder shall be limited to the net proceeds actually received
      by
      the Seller from the sale of Registrable Securities covered by such registration
      statement.

     

    (c)    Promptly
      after receipt by an indemnified party hereunder of notice of the commencement
      of
      any action, such indemnified party shall, if a claim in respect thereof is
      to be
      made against the indemnifying party hereunder, notify the indemnifying party
      in
      writing thereof, but the omission so to notify the indemnifying party shall
      not
      relieve it from any liability which it may have to such indemnified party other
      than under this Section 11.6(c) and shall only relieve it from any liability
      which it may have to such indemnified party under this Section 11.6(c), except
      and only if and to the extent the indemnifying party is prejudiced by such
      omission. In case any such action shall be brought against any indemnified
      party
      and it shall notify the indemnifying party of the commencement thereof, the
      indemnifying party shall be entitled to participate in and, to the extent it
      shall wish, to assume and undertake the defense thereof with counsel
      satisfactory to such indemnified party, and, after notice from the indemnifying
      party to such indemnified party of its election so to assume and undertake
      the
      defense thereof, the indemnifying party shall not be liable to such indemnified
      party under this Section 11.6(c) for any legal expenses subsequently incurred
      by
      such indemnified party in connection with the defense thereof other than
      reasonable costs of investigation and of liaison with counsel so selected,
      provided, however, that, if the defendants in any such action include both
      the
      indemnified party and the indemnifying party and the indemnified party shall
      have reasonably concluded that there may be reasonable defenses available to
      it
      which are different from or additional to those available to the indemnifying
      party or if the interests of the indemnified party reasonably may be deemed
      to
      conflict with the interests of the indemnifying party, the indemnified parties,
      as a group, shall have the right to select one separate counsel and to assume
      such legal defenses and otherwise to participate in the defense of such action,
      with the reasonable expenses and fees of such separate counsel and other
      expenses related to such participation to be reimbursed by the indemnifying
      party as incurred.

     

    (d)    In
      order
      to provide for just and equitable contribution in the event of joint liability
      under the 1933 Act in any case in which either (i) a Seller, or any controlling
      person of a Seller, makes a claim for indemnification pursuant to this Section
      11.6 but it is judicially determined (by the entry of a final judgment or decree
      by a court of competent jurisdiction and the expiration of time to appeal or
      the
      denial of the last right of appeal) that such indemnification may not be
      enforced in such case notwithstanding the fact that this Section 11.6 provides
      for indemnification in such case, or (ii) contribution under the 1933 Act may
      be
      required on the part of the Seller or controlling person of the Seller in
      circumstances for which indemnification is not provided under this Section
      11.6;
      then, and in each such case, the Company and the Seller will contribute to
      the
      aggregate losses, claims, damages or liabilities to which they may be subject
      (after contribution from others) in such proportion so that the Seller is
      responsible only for the portion represented by the percentage that the public
      offering price of its securities offered by the registration statement bears
      to
      the public offering price of all securities offered by such registration
      statement, provided, however, that, in any such case, (y) the Seller will not
      be
      required to contribute any amount in excess of the public offering price of
      all
      such securities sold by it pursuant to such registration statement; and (z)
      no
      person or entity guilty of fraudulent misrepresentation (within the meaning
      of
      Section 11(f) of the 1933 Act) will be entitled to contribution from any person
      or entity who was not guilty of such fraudulent misrepresentation.

     

    
      
        
        

      

      
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    11.7.    Delivery
      of Unlegended Shares.

     

    (a)    Within
      three (3) business days (such third business day being the “Unlegended
      Shares Delivery Date”)
      after
      the business day on which the Company has received (i) a notice that Shares
      or
      Warrant Shares or any other Common Stock held by a Subscriber have been sold
      pursuant to the Registration Statement or Rule 144 under the 1933 Act, (ii)
      a
      representation that the prospectus delivery requirements, or the requirements
      of
      Rule 144, as applicable and if required, have been satisfied, and (iii) the
      original share certificates representing the shares of Common Stock that have
      been sold, and (iv) in the case of sales under Rule 144, customary
      representation letters of the Subscriber and/or Subscriber’s broker regarding
      compliance with the requirements of Rule 144, the Company at its expense, (y)
      shall deliver, and shall cause legal counsel selected by the Company to deliver
      to its transfer agent (with copies to Subscriber) an appropriate instruction
      and
      opinion of such counsel, directing the delivery of shares of Common Stock
      without any legends including the legend set forth in Section 4(i)
      above,
      reissuable pursuant to any effective and current Registration Statement
      described in Section 11 of this Agreement or pursuant to Rule 144 under the
      1933
      Act (the “Unlegended
      Shares”);
      and
      (z) cause the transmission of the certificates representing the Unlegended
      Shares together with a legended certificate representing the balance of the
      submitted Shares certificate, if any, to the Subscriber at the address specified
      in the notice of sale, via express courier, by electronic transfer or otherwise
      on or before the Unlegended Shares Delivery Date. 

     

    (b)    In
      lieu
      of delivering physical certificates representing the Unlegended Shares, if
      the
      Company’s transfer agent is participating in the Depository Trust Company
      (“DTC”)
      Fast
      Automated Securities Transfer program, upon request of a Subscriber, so long
      as
      the certificates therefor do not bear a legend and the Subscriber is not
      obligated to return such certificate for the placement of a legend thereon,
      the
      Company shall cause its transfer agent to electronically transmit the Unlegended
      Shares by crediting the account of Subscriber’s prime Broker with DTC through
      its Deposit Withdrawal Agent Commission system. Such delivery must be made
      on or
      before the Unlegended Shares Delivery Date.

    

    (c)    The
      Company understands that a delay in the delivery of the Unlegended Shares
      pursuant to Section 11 hereof later than two business days after the Unlegended
      Shares Delivery Date could result in economic loss to a Subscriber. As
      compensation to a Subscriber for such loss, the Company agrees to pay late
      payment fees (as liquidated damages and not as a penalty) to the Subscriber
      for
      late delivery of Unlegended Shares in the amount of $100 per business day after
      the Delivery Date for each $10,000 of purchase price of the Unlegended Shares
      subject to the delivery default. If during any 360 day period, the Company
      fails
      to deliver Unlegended Shares as required by this Section 11.7 for an aggregate
      of thirty (30) days, then each Subscriber or assignee holding Securities subject
      to such default may, at its option, require the Company to redeem all or any
      portion of the Shares and Warrant Shares subject to such default at a price
      per
      share equal to the greater of (i) 120%, or (ii) a fraction in which the
      numerator is the highest closing price during the aforedescribed thirty day
      period and the denominator of which is the lowest conversion price during such
      thirty day period, multiplied by the Purchase Price of such Common Stock and
      Warrant Shares (“Unlegended
      Redemption Amount”).
      The
      amount of the aforedescribed liquidated damages that have accrued or been paid
      for the ten day period prior to the receipt by the Subscriber of the Unlegended
      Redemption Amount shall be credited against the Unlegended Redemption Amount.
      The Company shall pay any payments incurred under this Section in immediately
      available funds upon demand.

    

    (d)    In
      addition to any other rights available to a Subscriber, if the Company fails
      to
      deliver to a Subscriber Unlegended Shares as required pursuant to this
      Agreement, within seven (7) business days after the Unlegended Shares Delivery
      Date and the Subscriber or a broker on the Subscriber’s behalf, purchases (in an
      open market transaction or otherwise) shares of common stock to deliver in
      satisfaction of a sale by such Subscriber of the shares of Common Stock which
      the Subscriber was entitled to receive from the Company (a "Buy-In"),
      then
      the Company shall pay in cash to the Subscriber (in addition to any remedies
      available to or elected by the Subscriber) the amount by which (A) the
      Subscriber's total purchase price (including brokerage commissions, if any)
      for
      the shares of common stock so purchased exceeds (B) the aggregate purchase
      price
      of the shares of Common Stock delivered to the Company for reissuance as
      Unlegended Shares  together
      with interest thereon at a rate of 15% per annum, accruing until such amount
      and
      any accrued interest thereon is paid in full (which amount shall be paid as
      liquidated damages and not as a penalty). For
      example, if a Subscriber purchases shares of Common Stock having a total
      purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
      price of shares of Common Stock delivered to the Company for reissuance as
      Unlegended Shares, the Company shall be required to pay the Subscriber
      $1,000,
      plus interest. The
      Subscriber shall provide the Company written notice indicating the amounts
      payable to the Subscriber in respect of the Buy-In.

     

    
      
        
        

      

      
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    (e)    In
      the
      event a Subscriber shall request delivery of Unlegended Shares as described
      in
      Section 11.7 and the Company is required to deliver such Unlegended Shares
      pursuant to Section 11.7, the Company may not refuse to deliver Unlegended
      Shares based on any claim that such Subscriber or any one associated or
      affiliated with such Subscriber has been engaged in any violation of law, or
      for
      any other reason, unless, an injunction or temporary restraining order from
      a
      court, on notice, restraining and or enjoining delivery of such Unlegended
      Shares or exercise of all or part of said Warrant shall have been sought and
      obtained by the Company or at the Company’s request or with the Company’s
      assistance,
      and the
      Company has posted a surety bond for the benefit of such Subscriber in the
      amount of 120% of the amount of the aggregate purchase price of the Common
      Stock
      and Warrant Shares which are subject to the injunction or temporary restraining
      order, which bond shall remain in effect until the completion of
      arbitration/litigation of the dispute and the proceeds of which shall be payable
      to such Subscriber to the extent Subscriber obtains judgment in Subscriber’s
      favor.

    

    12.    Additional
      Agreements.

    

    (a)    Right
      of First Refusal.
      Subject
      and subordinate to similar rights granted by the Company prior to the Closing
      Date, until the later of one year after the actual effective date of the
      Registration Statement or the Notes are no longer outstanding, the Subscribers
      shall be given not less than seven (7) business days prior written notice of
      any
      proposed sale by the Company of its Common Stock or other securities or debt
      obligations, or instruments convertible into or exchangeable for Common Stock
      except in connection with (i) full or partial consideration in connection with
      a
      strategic merger, acquisition, consolidation or purchase of substantially all
      of
      the securities or assets of corporation
      or other entity which holders of such securities or debt are not at any time
      granted registration rights, (ii)
      the
      Company’s issuance of securities in connection with strategic license agreements
      and other partnering arrangements so long as such issuances are not for the
      purpose of raising capital and which
      holders of such securities or debt are not at any time granted registration
      rights,
      (iii)
      the Company’s issuance of Common Stock or the issuances or grants of options to
      purchase Common Stock pursuant to stock option plans and employee stock purchase
      plans described on Schedule
      5(d)
      hereto
      at prices equal to or higher than the closing price of the Common Stock on
      the
      issue date of any of the foregoing, (iv) as a result of the exercise of Warrants
      or conversion of Notes which are granted or issued pursuant to this Agreement
      or
      that have been issued prior to the Closing Date, the issuance of which has
      been
      disclosed in a Report filed not less than five (5) days prior to the Closing
      Date, (v) the payment of any interest on the Notes and liquidated damages or
      other damages pursuant to the Transaction Documents or other securities
      instruments that have been issued prior to the Closing Date, the issuance of
      which has been disclosed in a Report filed not less than five days prior to
      the
      Closing Date, (vi) the Additional Subscriber Investments, and (vii) the
      issuances listed on Schedule
      12(a) (collectively
      the foregoing are “Excepted
      Issuances”).
      The
      aggregate amount of Common Stock that may be issued as Excepted Issuances under
      items
      12(a)(i), (ii) and (iii) may not exceed 1,000,000 shares of Common Stock. The
      Excepted Issuances may be modified as to all Subscribers with the consent of
      the
      Subscribers. The Subscribers who exercise their rights pursuant to this Section
      12(a) shall have the right during the seven (7) business days following receipt
      of the notice to purchase in the aggregate such offered convertible debt
      instruments or other securities in accordance with the terms and conditions
      set
      forth in the notice of sale in the same proportion to each other as their
      purchase of Notes in the Offering. In the case of Common stock or equity of
      the
      Company convertible, exercisable or exchangeable for Common Stock, the
      Subscriber may purchase an amount equal to the aggregate purchase prices of
      all
      of the debt or equity of the Company ever purchased by such Subscriber pursuant
      to a Subscription Agreement or exercise of a Warrant. In the event such terms
      and conditions are modified during the notice period, the Subscribers shall
      be
      given prompt notice of such modification and shall have the right during the
      seven (7) business days following the notice of modification to exercise such
      right. 

     

    
      
        
        

      

      
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    (b)    Favored
      Nations Provision.
      Other
      than in connection with the Excepted Issuances, if at any time Notes are
      outstanding and in the case of the Warrants, for as long as both Notes and
      Warrants are outstanding, the Company shall offer, issue or agree to issue
      any
      common stock or securities convertible into or exercisable for shares of common
      stock (or modify any of the foregoing which may be outstanding) to any person
      or
      entity at a price per share or conversion or exercise price per share which
      shall be less than the Conversion Price in respect of the Shares, or if less
      than the Warrant exercise price in respect of the Warrant Shares, without the
      consent of each Subscriber holding Notes, Shares, Warrants, or Warrant Shares,
      then the Company shall issue, for each such occasion, additional shares of
      Common Stock to each Subscriber so that the average per share purchase price
      of
      the shares of Common Stock issued to the Subscriber (of only the Common Stock
      or
      Warrant Shares still owned by the Subscriber) is equal to such other lower
      price
      per share and the Conversion Price and Warrant exercise price shall
      automatically be reduced to such lower price. The average Purchase Price of
      the
      Shares and average exercise price in relation to the Warrant Shares shall be
      calculated separately for the Shares and Warrant Shares. The foregoing
      calculation and issuance shall be made separately for Shares received upon
      conversion and separately for Warrant Shares. The delivery to the Subscriber
      of
      the additional shares of Common Stock shall be not later than the closing date
      of the transaction giving rise to the requirement to issue additional shares
      of
      Common Stock. The Subscriber is granted the registration rights described in
      Section 11 hereof in relation to such additional shares of Common Stock except
      that the Filing Date and Effective Date vis-à-vis such additional common shares
      shall be, respectively, the thirtieth (30th)
      and
      sixtieth (60th)
      date
      after the closing date giving rise to the requirement to issue the additional
      shares of Common Stock. For purposes of the issuance and adjustment described
      in
      this paragraph, the issuance of any security of the Company carrying the right
      to convert such security into shares of Common Stock or of any warrant, right
      or
      option to purchase Common Stock shall result in the issuance of the additional
      shares of Common Stock upon the sooner of the agreement to or actual issuance
      of
      such convertible security, warrant, right or option and again at any time upon
      any subsequent issuances of shares of Common Stock upon exercise of such
      conversion or purchase rights if such issuance is at a price lower than the
      Conversion Price or Warrant exercise price in effect upon such issuance. The
      rights of the Subscriber set forth in this Section 12 are in addition to any
      other rights the Subscriber has pursuant to this Agreement, the Note, any
      Transaction Document, and any other agreement referred to or entered into in
      connection herewith. The Subscriber is also given the right to elect to
      substitute any term or terms of any other offering in connection with which
      the
      Subscriber has rights as described in Section 12(a), for any term or terms
      of
      the Offering in connection with Securities owned by Subscriber as of the date
      the notice described in Section 12(a) is required to be given to
      Subscriber.

     

    (c)    Maximum
      Exercise of Rights.
      In the
      event the exercise of the rights described in Section 12(a) or
      12(b)
      would or could result in the issuance of an amount of common stock of the
      Company that would exceed the maximum amount that may be issued to a Subscriber
      calculated in the manner described in Section 7.3 of this Agreement, then the
      issuance of such additional shares of common stock of the Company to such
      Subscriber will be deferred in whole or in part until such time as such
      Subscriber is able to beneficially own such common stock without exceeding
      the
      applicable maximum amount set forth calculated in the manner described in
      Section 7.3 of this Agreement. The determination of when such common stock
      may
      be issued shall be made by each Subscriber as to only such
      Subscriber.

     

    13.    Security
      Interest.
      On or
      about July 5, 2005, January 6, 2006, February 2, 2006 and the October
      Subscription Agreements, the Subscribers were granted a security interest in
      assets of the Company and Subsidiaries (as defined in Section 5(a) of this
      Agreement), including ownership of the Subsidiaries. The security interest
      was
      memorialized in Security Agreements. Each Subsidiary executed and delivered
      to
      the Subscribers a form of Guaranty. The Company and Subsidiaries will execute
      such other agreements, documents and financing statements reasonably requested
      by Subscribers to affirm such security agreement, which will be filed at the
      Company’s expense with such jurisdictions, states and counties designated by the
      Subscribers. The
      Company and Subsidiaries will also execute all such documents reasonably
      necessary in the opinion of Subscribers to memorialize and further protect
      the
      security interest described herein. The Subscribers appointed a Collateral
      Agent
      to represent them collectively in connection with the security interest. The
      appointment was pursuant to a Collateral Agent Agreement. The Notes and all
      sums
      due under the Notes and the Transaction Documents (as defined in Section 5(c)
      below) are included in the term “Obligations” as defined in the Security
      Agreements and are secured by the Collateral (as defined in the Security
      Agreements) in the same manner and having the same priority as granted to the
      Subscribers pursuant to the Security Agreements. The Subsidiaries by signing
      this Agreement consent and agree that the Guarantees provided by them on or
      about January 6, 2006, include as guaranteed obligations all sums which may
      become due to the Subscribers under the Transaction Documents (as defined in
      Section 5(c)). The Company and Subscribers agree that Schedule 13 hereto sets
      forth as of the date stated therein, the principal and interest outstanding
      on
      Notes issued by the Company to the Subscribers which are included as
“Obligations” under various “Security Agreements” to which the Company and
      Subscribers are parties. Such “Obligations” include additional amounts as
      described in the documents and other agreements entered into in connection
      with
      such “Obligations”. The Subscribers agree that their interests in all
      Obligations are pari passu in proportion to their specific Obligation amounts
      and of equal priority with each other. The Subscribers, Company, and
      Subsidiaries agree that the Collateral Agent Agreement dated as of February
      2,
      2006 is the Collateral Agent Agreement which shall govern the rights and
      obligations of the Subscribers in connection with the Obligations and shall
      remain in full force and effect except as modified in this Agreement. The
      Subscribers agree that for so long as any Obligations relating to the
      Obligations as set forth on Schedule 13 hereto and other sums which may become
      Obligations which derive from such stated Obligations (“Schedule 13
      Obligations”), remain outstanding, “Majority In Interest” as employed in the
      Collateral Agent Agreement shall relate only to holders of such described
      Obligations. After such Schedule 13 Obligations are no longer outstanding,
      Majority In Interest shall be determined among the holders of all other
      Obligations. As employed in this Agreement, “Subscribers” includes assignees of
      a Subscriber who by their signature on the signature pages hereto are deemed
      to
      be and become parties to the Security Agreements and Collateral Agent Agreement
      and become beneficiaries of all the rights and benefits of the other Subscribers
      and assume the corresponding obligations, and assignors who hold any portion
      of
      the Obligations.

     

    
      
        
        

      

      
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    14.    Modification
      of Prior Fundings.

    

    (a)    Bridge
      Funding.
      On
      November 27, 2006, December 15, 2006 and January 4, 2007, respectively, the
      Company issued to several of the Subscribers an aggregate $866,667.00 in
      promissory notes (“Initial
      Funding”).
      On
      January 18, 2007 and January 26, 2007, respectively, the Company issued to
      several of the Subscribers an aggregate $800,000.00 in promissory notes
      (“Second
      Funding”).
      Collectively, the Initial Funding and Second Funding are referred to as the
      “Bridge
      Fundings”.
      Upon
      the Closing of this Offering and the rollover of the Bridge Funding Notes into
      the Notes being issued herein, all of the Bridge Fundings Notes shall be deemed
      cancelled. In consideration of entering into this Agreement, and other good
      and
      valuable mutual consideration, receipt of which is acknowledged, the Company
      and
      Subscribers agree to the following modifications of the terms of the Bridge
      Fundings.

    

    (b)    Outstanding
      Amounts.
      The
      Company acknowledges and agrees that the amount of principal, interest and
      default interest in connection with the Bridge Fundings is set forth on
Schedule
      14(b)
      hereto.

    

    (c)    Settlement
      Shares.
      The
      Company shall issue and deliver to each Subscriber who participated in the
      Initial Funding its proportionate amount of an aggregate of 4,000,000 shares
      of
      Common Stock set forth on Schedule
      14(c)
      hereto
      (“Settlement
      Shares”)
      in
      lieu of and in payment for the accrued damages within 10 days of the Company
      obtaining Shareholder Approval and Reservation but in no event later than April
      25, 2007.

    

    (d)    October
      17, 2006 Modifications.
      The
      following modifications as acknowledged by the Company and Subscribers, are
      made
      to the October 17, 2006 Transaction Documents as follows:

    

    (i)    Section
      9(s) of the Subscription Agreement - Shareholder
      Approval,
      is
      deleted and replaced with the following:

    

    
      	 	 	 	 	
              “Shareholder
                Approval.
                The Company and Subscribers agree that until the Company obtains
                shareholder approval of an increase in the authorized Common Stock
                of the
                Company and files an amendment to the Company’s Articles of Incorporation
                and reserves the amount of shares of Common Stock necessary to allow
                the
                conversion of Note principal and interest that may accrue thereon
                and
                Common Stock issuable upon exercise of the Warrants issued in connection
                with this Agreement (in the aggregate such shares of Common Stock
                being
                the “Reserve
                Amount”),
                each Subscriber may not convert the Note nor exercise Warrants in
                excess
                of the available Reserve Amount. The Company covenants to obtain
                the
                authorization and reservation of Common Stock on behalf of the Subscribers
                of not less than 200% of the amount of shares of Common Stock issuable
                upon conversion of the Note principal and 100% of shares of Common
                Stock
                issuable upon exercise of the Warrants (such approval being the
                “Shareholder
                Approval”
                and such reservation being the “Reservation”).
                Failure to obtain the Shareholder Approval and Reservation on or
                before
                April 15, 2007 (a “Reservation
                Default”)
                is an Event of Default under the Note and for which liquidated damages
                will accrue at the rate of two percent (2%) for each thirty (30)
                days, or
                pro rata portion thereof during the pendency of such Reservation
                Default.”

            

    

    

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    
 

    (ii)    Section
      1.2 of the Convertible Note - Conversion Privileges, is deleted and replaced
      with the following:

    

    “1.2        
      Conversion
      Privileges.
      Subject
      to Sections 9(f) and 9(s) of the Subscription Agreement, the Conversion
      Privileges set forth in Article II shall remain in full force and effect
      immediately from the date hereof and until the Note is paid in full regardless
      of the occurrence of an Event of Default. The Note shall be payable in full
      on
      the Maturity Date, unless previously converted into Common Stock in accordance
      with Article II hereof; provided, that if an Event of Default has occurred,
      the
      Holder may extend the Maturity Date up to an amount of time equal to the
      pendency of the Event of Default. Such extension must be on notice in
      writing.”

    

    (iii)   Section
      2.2 of the Convertible Note - Optional Redemption of Principal Amount, is
      deleted and replaced with the following:

    

    “2.2         
      Optional
      Redemption of Principal Amount.
      Provided an Event of Default or an event which with the passage of time or
      the
      giving of notice could become an Event of Default has not occurred, whether
      or
      not such Event of Default has been cured, the Borrower will have the option
      of
      prepaying the outstanding Principal amount of this Note ("Optional Redemption"),
      in whole or in part, by paying to the Holder a sum of money equal to the number
      of Shares of Common Stock issuable upon an assumed conversion of the outstanding
      principal and interest of this Note multiplied by $1.50 (subject to adjustment
      for stock splits, stock dividends and similar events), and any and all other
      sums due, accrued or payable to the Holder arising under this Note or any
      Transaction Document through and as of the Redemption Payment Date as defined
      below (the "Redemption Amount"). Borrower’s election to exercise its right to
      prepay must be by notice in writing (“Notice of Redemption”). The Notice of
      Redemption shall specify the date for such Optional Redemption (the "Redemption
      Payment Date"), which date shall be thirty (30) business days after the date
      of
      the Notice of Redemption (the "Redemption Period"). A Notice of Redemption
      shall
      not be effective with respect to any portion of the Principal Amount for which
      the Holder has a pending election to convert, or for conversions initiated
      or
      made by the Holder during the Redemption Period. On the Redemption Payment
      Date,
      the Redemption Amount, less any portion of the Redemption Amount against which
      the Holder has exercised its conversion rights, shall be paid in good funds
      to
      the Holder. In the event the Borrower fails to pay the Redemption Amount on
      the
      Redemption Payment Date as set forth herein, then (i) such Notice of Redemption
      will be null and void, (ii) Borrower will have no right to deliver another
      Notice of Redemption, and (iii) Borrower’s failure may be deemed by Holder to be
      a non-curable Event of Default. A Redemption Notice may be given only at a
      time
      a registration statement covering all of the shares issuable upon conversion
      of
      all amounts convertible under this Note (“Registration Statement”) is effective.
      A Notice of Redemption may not be given nor may the Borrower effectuate a
      Redemption without the consent of the Holder, if at any time during the
      Redemption Period an Event of Default or an Event which with the passage of
      time
      or giving of notice could become an Event of Default (whether or not such Event
      of Default has been cured), has occurred or the Registration Statement is not
      effective each day during the Redemption Period.”

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    15.    Miscellaneous.

     

    (a)    Notices.
      All
      notices, demands, requests, consents, approvals, and other communications
      required or permitted hereunder shall be in writing and, unless otherwise
      specified herein, shall be (i) personally served, (ii) deposited in the mail,
      registered or certified, return receipt requested, postage prepaid, (iii)
      delivered by reputable air courier service with charges prepaid, or (iv)
      transmitted by hand delivery, telegram, or facsimile, addressed as set forth
      below or to such other address as such party shall have specified most recently
      by written notice. Any notice or other communication required or permitted
      to be
      given hereunder shall be deemed effective (a) upon hand delivery or delivery
      by
      facsimile, with accurate confirmation generated by the transmitting facsimile
      machine, at the address or number designated below (if delivered on a business
      day during normal business hours where such notice is to be received), or the
      first business day following such delivery (if delivered other than on a
      business day during normal business hours where such notice is to be received)
      or (b) on the second business day following the date of mailing by express
      courier service, fully prepaid, addressed to such address, or upon actual
      receipt of such mailing, whichever shall first occur. The addresses for such
      communications shall be: (i) if to the Company, to: VoIP,
      Inc., 151 So. Wymore Road, Suite 3000, Altamonte Springs, FL 32714, Attn:
      Anthony Cataldo, CEO, telecopier: (407) 389-3233, with a copy by telecopier
      only
      to: Baratta, Baratta & Aidala LLP, 597 Fifth Avenue, New York, NY 10017,
      Attn: Joseph A. Baratta, Esq., telecopier: (212) 750-8297, and (ii) if to the
      Subscriber, to: the one or more addresses and telecopier numbers indicated
      on
      the signature pages hereto, with an additional copy by telecopier only to:
      Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York
      10176, telecopier number: (212) 697-3575.

     

    (b)    Entire
      Agreement; Assignment.
      This
      Agreement and other documents delivered in connection herewith represent the
      entire agreement between the parties hereto with respect to the subject matter
      hereof and may be amended only by a writing executed by both parties. Neither
      the Company nor the Subscribers have relied on any representations not contained
      or referred to in this Agreement and the documents delivered herewith. No right
      or obligation of the Company shall be assigned without prior notice to and
      the
      written consent of the Subscribers. 

     

    (c)    Counterparts/Execution.
      This
      Agreement may be executed in any number of counterparts and by the different
      signatories hereto on separate counterparts, each of which, when so executed,
      shall be deemed an original, but all such counterparts shall constitute but
      one
      and the same instrument. This Agreement may be executed by facsimile signature
      and delivered by facsimile transmission.

     

    (d)    Law
      Governing this Agreement.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York without regard to conflicts
      of laws
      principles that would result in the application of the substantive laws of
      another jurisdiction. Any action brought by either party against the other
      concerning the transactions contemplated by this Agreement shall be brought
      only
      in the civil or state courts of New York or in the federal courts located in
      New
      York County. The
      parties and the individuals executing this Agreement and other agreements
      referred to herein or delivered in connection herewith on behalf of the Company
      agree to submit to the jurisdiction of such courts and waive trial by
      jury.
      The
      prevailing party shall be entitled to recover from the other party its
      reasonable attorney’s fees and costs. In the event that any provision of this
      Agreement or any other agreement delivered in connection herewith is invalid
      or
      unenforceable under any applicable statute or rule of law, then such provision
      shall be deemed inoperative to the extent that it may conflict therewith and
      shall be deemed modified to conform with such statute or rule of law. Any such
      provision which may prove invalid or unenforceable under any law shall not
      affect the validity or enforceability of any other provision of any
      agreement.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    (e)    Specific
      Enforcement, Consent to Jurisdiction.
      To the
      extent permitted by law, the Company and Subscriber acknowledge and agree that
      irreparable damage would occur in the event that any of the provisions of this
      Agreement were not performed in accordance with their specific terms or were
      otherwise breached. It is accordingly agreed that the parties shall be entitled
      to one or more preliminary and final injunctions to prevent or cure breaches
      of
      the provisions of this Agreement and to enforce specifically the terms and
      provisions hereof, this being in addition to any other remedy to which any
      of
      them may be entitled by law or equity. Subject to Section 12(d) hereof, each
      of
      the Company, Subscriber and any signator hereto in his personal capacity hereby
      waives, and agrees not to assert in any such suit, action or proceeding, any
      claim that it is not personally subject to the jurisdiction in New York of
      such
      court, that the suit, action or proceeding is brought in an inconvenient forum
      or that the venue of the suit, action or proceeding is improper. Nothing in
      this
      Section shall affect or limit any right to serve process in any other manner
      permitted by law.

     

    (f)    Independent
      Nature of Subscribers.  
        The
      Company acknowledges that the obligations of each Subscriber under the
      Transaction Documents are several and not joint with the obligations of any
      other Subscriber, and no Subscriber shall be responsible in any way for the
      performance of the obligations of any other Subscriber under the Transaction
      Documents. The
      Company acknowledges that each Subscriber has represented that the decision
      of
      each Subscriber to purchase Securities has been made by such Subscriber
      independently of any other Subscriber and independently of any information,
      materials, statements or opinions as to the business, affairs, operations,
      assets, properties, liabilities, results of operations, condition (financial
      or
      otherwise) or prospects of the Company which may have been made or given by
      any
      other Subscriber or by any agent or employee of any other Subscriber, and no
      Subscriber or any of its agents or employees shall have any liability to any
      Subscriber (or any other person) relating to or arising from any such
      information, materials, statements or opinions.  The
      Company acknowledges that nothing contained in any Transaction Document, and
      no
      action taken by any Subscriber pursuant hereto or thereto (including, but not
      limited to, the (i) inclusion of a Subscriber in the Registration Statement
      and
      (ii) review by, and consent to, such Registration Statement by a Subscriber)
      shall be deemed to constitute the Subscribers as a partnership, an association,
      a joint venture or any other kind of entity, or create a presumption that the
      Subscribers are in any way acting in concert or as a group with respect to
      such
      obligations or the transactions contemplated by the Transaction Documents. 
The Company acknowledges that each Subscriber shall be entitled to independently
      protect and enforce its rights, including without limitation, the rights arising
      out of the Transaction Documents, and it shall not be necessary for
      any other Subscriber to be joined as an additional party in any proceeding
      for
      such purpose.  The Company acknowledges that it has elected to provide all
      Subscribers with the same terms and Transaction Documents for the convenience
      of
      the Company and not because Company was required or requested to do so by the
      Subscribers.  The Company acknowledges that such procedure with respect to
      the Transaction Documents in no way creates a presumption that the Subscribers
      are in any way acting in concert or as a group with respect to the Transaction
      Documents or the transactions contemplated thereby.

     

    (g)    Damages.
      In the
      event the Subscriber is entitled to receive any liquidated damages pursuant
      to
      the Transaction Documents, the Subscriber may elect to receive the greater
      of
      actual damages or such liquidated damages.

     

    (h)    Consent.
      As used
      in the Agreement, “consent of the Subscribers” or similar language means the
      consent of holders of not less than 65% of the total of the Shares issued and
      issuable upon conversion of outstanding Notes owned by Subscribers on the date
      consent is requested.

     

    (i)    Equal
      Treatment.
      No
      consideration shall be offered or paid to any person to amend or consent to
      a
      waiver or modification of any provision of the Transaction Documents unless
      the
      same consideration is also offered and paid to all the Subscribers and their
      permitted successors and assigns.

     

    

     

    [THIS
      SPACE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (A)

     

    

    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

     

     

    
      	 	 	 
	 	
              VOIP,
                INC.

              a
                Texas corporation

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name: Robert
                Staats

              Title:
                 Chief
                Accounting Officer

              

              Dated:
                February 16, 2007

            
	 	 

    

    
 

    

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE *

            	
              AGGREGATE
                PRINCIPAL AMOUNT

            	
              SETTLEMENT
                SHARES

            
	
              ALPHA
                CAPITAL ANSTALT

              Pradafant
                7

              9490
                Furstentums

              Vaduz,
                Lichtenstein

              Fax:
                011-42-32323196

               

               

               

               

               

              _________________________________

              (Signature)

              By:
                

            	
              $449,940.00

            	
              $562,425.00

            	
              624,000

            

    

    

    *
      The
      Aggregate Purchase Price will be paid by a cash payment and the deemed surrender
      and cancellation of Notes deemed issued by the Company to Alpha Capital Anstalt
      on November 27, 2006, December 15, 2006, January 4, 2007 and January 18, 2007
      and additional amounts in connection therewith. 

    

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (B)

     

    

    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

     

     

    
      	 	 	 
	 	
              VOIP,
                INC.

              a
                Texas corporation

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name: Robert
                Staats

              Title:
                 Chief
                Accounting Officer

              

              Dated:
                February 16, 2007

            
	 	 

    

    

    

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE *

            	
              AGGREGATE
                PRINCIPAL AMOUNT

            	
              SETTLEMENT
                SHARES

            
	
              WHALEHAVEN
                CAPITAL FUND LIMITED

              3rd
                Floor, 14 Par-Laville Road

              Hamilton,
                Bermuda HM08

              Fax:
                (441) 292-1373

               

               

               

               

               

              _________________________________

              (Signature)

              By:
                

            	
              $407,640.00

            	
              $509,550.00

            	
              576,000

            

    

    

    *
      The
      Aggregate Purchase Price will be paid by a cash payment and the deemed surrender
      and cancellation of Notes deemed issued by the Company to Whalehaven Capital
      Fund Limited on November 27, 2006, December 15, 2006, January 4, 2007 and
      January 18, 2007 and additional amounts in connection therewith. 

    

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (C)

     

    

    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

     

    
       

      
        	 	 	 
	 	
                VOIP,
                  INC.

                a
                  Texas corporation

              
	 
 	 
 	 
 
	 	By:  	 
	 	
                

                Name: Robert
                  Staats

                Title:
                   Chief
                  Accounting Officer

                

                Dated:
                  February 16, 2007

              
	 	 

      

      

    

    

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE *

            	
              AGGREGATE
                PRINCIPAL AMOUNT

            	
              SETTLEMENT
                SHARES

            
	
              ELLIS
                INTERNATIONAL LTD.

              53rd
                Street
                Urbanizacion Obarrio

              Swiss
                Tower, 16th
                Floor, Panama

              Republic
                of Panama

              Fax
                (516) 887-8990

               

               

               

               

              _________________________________

              (Signature)

              By:
                

            	
              $407,595.00

            	
              $509,493.91

            	
              560,000

            

    

    

    *
      The
      Aggregate Purchase Price will be paid by a cash payment and the deemed surrender
      and cancellation of Notes deemed issued by the Company to Ellis International
      Ltd. on November 27, 2006, December 15, 2006, January 4, 2007 and January 18,
      2007 and additional amounts in connection therewith.

    

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (D)

     

    

    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

     

     

    
       

      
        	 	 	 
	 	
                VOIP,
                  INC.

                a
                  Texas corporation

              
	 
 	 
 	 
 
	 	By:  	 
	 	
                

                Name: Robert
                  Staats

                Title:
                   Chief
                  Accounting Officer

                

                Dated:
                  February 16, 2007

              
	 	 

      

      

    

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE *

            	
              AGGREGATE
                PRINCIPAL AMOUNT

            	
              SETTLEMENT
                SHARES

            
	
              BRISTOL
                INVESTMENT FUND, LTD.

               

               

              By:_______________________________

                    
                Name:  Paul Kessler

                    
                Title:    Director

               

              REGISTERED
                OFFICE:

              Caledonian
                Fund Services (Cayman) Limited

              69
                Dr. Roy’s Drive

              George
                Town, Grand Cayman, Cayman Islands

               

              NOTICE
                TO:

              c/o
                Bristol Capital Advisors, LLC

              10990
                Wilshire Boulevard, Suite 1410

              Los
                Angeles, California 90024

              Attention:
                Amy Wang, Esq.

              Fax:
                (310) 696-0334

            	
              $518,166.00

            	
              $647,707.50

            	
              720,000

            

    

    

    *
      The
      Aggregate Purchase Price will be paid by a cash payment and the deemed surrender
      and cancellation of Notes deemed issued by the Company to Bristol Investment
      Fund, Ltd. on November 27, 2006, December 15, 2006, January 4, 2007, January
      18,
      2007, January 26, 2007 and additional amounts in connection therewith.

    

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (E)

     

    

    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

     

     

    
       

      
        	 	 	 
	 	
                VOIP,
                  INC.

                a
                  Texas corporation

              
	 
 	 
 	 
 
	 	By:  	 
	 	
                

                Name: Robert
                  Staats

                Title:
                   Chief
                  Accounting Officer

                

                Dated:
                  February 16, 2007

              
	 	 

      

      

    

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE *

            	
              AGGREGATE
                PRINCIPAL AMOUNT

            	
              SETTLEMENT
                SHARES

            
	
              CHESTNUT
                RIDGE PARTNERS LP

              50
                Tice Boulevard

              Woodcliff
                Lake, NJ 07677

              Fax:
                (201) 802-9450

               

               

               

               

               

              _________________________________

              (Signature)

              By:
                

            	
              $184,800.00

            	
              $231,000.00

            	
              288,000

            

    

    

    *
      The
      Aggregate Purchase Price will be paid by a cash payment and the deemed surrender
      and cancellation of Notes deemed issued by the Company to Chestnut Ridge
      Partners LP on November 27, 2006, December 15, 2006, January 4, 2007 and January
      18, 2007 and additional amounts in connection therewith. 

    

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (F)

     

    

    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

     

    
       

      
        	 	 	 
	 	
                VOIP,
                  INC.

                a
                  Texas corporation

              
	 
 	 
 	 
 
	 	By:  	 
	 	
                

                Name: Robert
                  Staats

                Title:
                   Chief
                  Accounting Officer

                

                Dated:
                  February 16, 2007

              
	 	 

      

      

    

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE *

            	
              AGGREGATE
                PRINCIPAL AMOUNT

            	
              SETTLEMENT
                SHARES

            
	
              CENTURION
                MICROCAP, L.P.

              3014
                Avenue L

              Brooklyn,
                NY 11210

              Fax:
                (718) 228-9570

               

               

               

               

               

              _________________________________

              (Signature)

              By:
                

            	
              $319,500.00

            	
              $399,375.00

            	
              480,000

            

    

    

    *
      The
      Aggregate Purchase Price will be paid by a cash payment and the deemed surrender
      and cancellation of Notes deemed issued by the Company to Centurion Microcap,
      L.P. on November 27, 2006, December 15, 2006, January 4, 2007 and January 18,
      2007 and additional amounts in connection therewith. 

    

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (G)

     

    

    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

     

     

    
       

      
        	 	 	 
	 	
                VOIP,
                  INC.

                a
                  Texas corporation

              
	 
 	 
 	 
 
	 	By:  	 
	 	
                

                Name: Robert
                  Staats

                Title:
                   Chief
                  Accounting Officer

                

                Dated:
                  February 16, 2007

              
	 	 

      

      
         

      

    

    

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE *

            	
              AGGREGATE
                PRINCIPAL AMOUNT

            	
              SETTLEMENT
                SHARES

            
	
              PLATINUM
                LONG TERM GROWTH II INC.

              152
                West 57th
                Street

              New
                York, New York 10019

              Attn:
                Mark Nordlicht

              Fax:
                (212)

               

               

               

               

               

              _________________________________

              (Signature)

              By:
                

            	
              $154,000.00

            	
              $192,500.00

            	
              240,000

            

    

    

    *
      The
      Aggregate Purchase Price will be paid by a cash payment and the deemed surrender
      and cancellation of Notes deemed issued by the Company to Platinum Long Term
      Growth II Inc. on November 27, 2006, December 15, 2006, January 4, 2007 and
      January 18, 2007 and additional amounts in connection therewith. 

    

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (H)

     

    

    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

     

     

    
       

      
        	 	 	 
	 	
                VOIP,
                  INC.

                a
                  Texas corporation

              
	 
 	 
 	 
 
	 	By:  	 
	 	
                

                Name: Robert
                  Staats

                Title:
                   Chief
                  Accounting Officer

                

                Dated:
                  February 16, 2007

              
	 	 

      

      
      

    

    

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE *

            	
              AGGREGATE
                PRINCIPAL AMOUNT

            	
              SETTLEMENT
                SHARES

            
	
              DOUBLE
                U MASTER FUND L.P.

              P.
                O. Box 972

              Harbour
                House

              Roadtown,
                Tortola, BVI

              Fax:
                (284) 494-4770

               

               

               

               

               

              _________________________________

              (Signature)

              By:
                

            	
              $184,800.00

            	
              $231,000.00

            	
              288,000

            

    

    

    *
      The
      Aggregate Purchase Price will be paid by a cash payment and the deemed surrender
      and cancellation of Notes deemed issued by the Company to Double U Master Fund
      L.P. on November 27, 2006, December 15, 2006, January 4, 2007 and January 18,
      2007 and additional amounts in connection therewith. 

    

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (I)

    

    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

     

    
       

      
        	 	 	 
	 	
                VOIP,
                  INC.

                a
                  Texas corporation

              
	 
 	 
 	 
 
	 	By:  	 
	 	
                

                Name: Robert
                  Staats

                Title:
                   Chief
                  Accounting Officer

                

                Dated:
                  February 16, 2007

              
	 	 

      

      

    

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE *

            	
              AGGREGATE
                PRINCIPAL AMOUNT

            	
              SETTLEMENT
                SHARES

            
	
              DKR
                SOUNDSHORE OASIS HOLDING FUND LTD.

              C/o
                DKR Capital Partners, L.P.

              1281
                East Main Street

              Stamford,
                CT 06902

              Fax:
                (203) 674-4737

               

               

               

               

              _________________________________

              (Signature)

              By:
                

            	
              $71,867.00

            	
              $89,833.59

            	
              112,000

            

    

    

    *
      The
      Aggregate Purchase Price will be paid by a cash payment and the deemed surrender
      and cancellation of Notes deemed issued by the Company to DKR Soundshore Oasis
      Holding Fund Ltd. on November 27, 2006, December 15, 2006, January 4, 2007
      and
      January 18, 2007 and additional amounts in connection therewith. 

    

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (J)

     

    

    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

     

    
       

      
        	 	 	 
	 	
                VOIP,
                  INC.

                a
                  Texas corporation

              
	 
 	 
 	 
 
	 	By:  	 
	 	
                

                Name: Robert
                  Staats

                Title:
                   Chief
                  Accounting Officer

                

                Dated:
                  February 16, 2007

              
	 	 

      

      

    

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE *

            	
              AGGREGATE
                PRINCIPAL AMOUNT

            	
              SETTLEMENT
                SHARES

            
	
              CMS
                CAPITAL

              9612
                Van Nuys Blvd., Suite 108

              Panorama
                City, CA 91402

              Fax:
                (818) 907-3372

               

               

               

               

              _________________________________

              (Signature)

              By:
                

            	
              $71,867.00

            	
              $89,833.59

            	
              112,000

            

    

    

    *
      The
      Aggregate Purchase Price will be paid by a cash payment and the deemed surrender
      and cancellation of Notes deemed issued by the Company to CMS Capital on
      November 27, 2006, December 15, 2006, January 4, 2007 and January 18, 2007
      and
      additional amounts in connection therewith.

    

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    LIST
      OF EXHIBITS AND SCHEDULES

    

      
        	
                 

                Exhibit
                  A

              	
                 

                Form
                  of Note

              
	
                 

                Exhibit
                  B

              	
                 

                Form
                  of Class D Warrant

              
	
                 

                Exhibit
                  C

              	
                 

                Escrow
                  Agreement

              
	
                 

                Exhibit
                  D

              	
                 

                Form
                  of Legal Opinion

              
	
                 

                Exhibit
                  E

              	
                 

                Form
                  of Form 8-K or Public Announcement

              
	
                 

                Schedule
                  5(a)

              	
                 

                Subsidiaries

              
	
                 

                Schedule
                  5(d)

              	
                 

                Additional
                  Issuances / Capitalization

              
	
                 

                Schedule
                  5(f)

              	
                 

                Conflicts

              
	
                 

                Schedule
                  5(h)

              	
                 

                Litigation

              
	
                 

                Schedule
                  5(m)

              	
                 

                Defaults

              
	
                 

                Schedule
                  5(q)

              	
                 

                Undisclosed
                  Liabilities

              
	
                 

                Schedule
                  5(u)

              	
                 

                Disagreements

              
	
                 

                Schedule
                  5(v)

              	
                 

                Transfer
                  Agent

              
	
                 

                Schedule
                  8

              	
                 

                Due
                  Diligence Fee

              
	
                 

                Schedule
                  9(e)

              	
                 

                Use
                  of Proceeds

              
	
                 

                Schedule
                  9(p)

              	
                 

                Additional
                  Negative Covenants

              
	
                 

                Schedule
                  12(a)

              	
                 

                Excepted
                  Issuances

              
	
                 

                Schedule
                  13

              	
                 

                Obligations

              
	
                 

                Schedule
                  14(b)

              	
                 

                Outstanding
                  Amounts

              

      

    

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      8

     

    DUE
      DILIGENCE FEE

    

    
      	
              DUE
                DILIGENCE FEE RECIPIENT

            	
              DUE
                DILIGENCE FEE

            
	
              ELLIS
                CAPITAL LTD.

               

               

               

            	
              $259,703.92

            
	
              BRISTOL
                CAPITAL ADVISORS LLC

              10990
                Wilshire Boulevard, Suite 1410

              Los
                Angeles, CA 90024

              Fax:
                (310) 696-0334

            	
              $86,567.98

            
	
              TOTAL

            	
              $346,271.90

            

    

    

    
      
        
        

      

      
        38Unassociated Document

    Exhibit
      10.2

    CONVERTIBLE
      NOTE

    

    

    THIS
      NOTE
      AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
      COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
      FOR
      SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
      SATISFACTORY TO VOIP INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

     

    
      	Principal
              Amount $___________     
              Purchase
                Price $___________

            	
              Issue
                Date: February 16,
                2007

            

    

    
    

    

    FOR
      VALUE
      RECEIVED, VOIP INC., a Texas corporation (hereinafter called "Borrower"), hereby
      promises to pay to [Payee Name], [Payee Address and Fax No.] (the "Holder")
      or
      order, without demand, the sum of
      ___________________________________________________ Dollars ($__________),
      on
      February 16, 2008 (the "Maturity Date"), if not retired sooner.

    

    This
      Note
      has been entered into pursuant to the terms of a subscription agreement between
      the Borrower and the Holder, dated of even date herewith (the “Subscription
      Agreement”), and shall be governed by the terms of such Subscription Agreement.
      Unless otherwise separately defined herein, all capitalized terms used in this
      Note shall have the same meaning as is set forth in the Subscription Agreement.
      The following terms shall apply to this Note:

    

    ARTICLE
      I

    

    GENERAL
      PROVISIONS

    

    1.1    Payment
      Grace Period.
      The
      Borrower shall have a ten (10) day grace period to pay any monetary amounts
      due
      under this Note, after which grace period and during the pendency of any other
      Event of Default (as defined below) a default interest rate of fifteen percent
      (15%) per annum shall apply to the amounts owed hereunder.

    

    1.2    Conversion
      Privileges.
      Subject
      to Sections 9(f) and 9(q) of the Subscription Agreement, the Conversion
      Privileges set forth in Article II shall remain in full force and effect
      immediately from the date hereof and until the Note is paid in full regardless
      of the occurrence of an Event of Default. The Note shall be payable in full
      on
      the Maturity Date, unless previously converted into Common Stock in accordance
      with Article II hereof; provided, that if an Event of Default has occurred,
      the
      Holder may extend the Maturity Date up to an amount of time equal to the
      pendency of the Event of Default. Such extension must be on notice in
      writing.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
      II

    

    CONVERSION
      RIGHTS

    

    The
      Holder shall have the right to convert the principal and any interest due under
      this Note into Shares of the Borrower's Common Stock, $.001 par value per share
      (“Common Stock”) as set forth below.

    

    2.1.    Conversion
      into the Borrower's Common Stock.

    

    (a)    Subject
      to Sections 9(f) and 9(p) of the Subscription Agreement, the Holder shall have
      the right from and after the date of the issuance of this Note and then at
      any
      time until this Note is fully paid, to convert any outstanding and unpaid
      principal portion of this Note, at the election of the Holder (the date of
      giving of such notice of conversion being a "Conversion Date") into fully paid
      and nonassessable shares of Common Stock as such stock exists on the date of
      issuance of this Note, or any shares of capital stock of Borrower into which
      such Common Stock shall hereafter be changed or reclassified, at the conversion
      price as defined in Section 2.1(b) hereof (the "Conversion Price"), determined
      as provided herein. Upon delivery to the Borrower of a completed Notice of
      Conversion, a form of which is annexed hereto, Borrower shall issue and deliver
      to the Holder within three (3) business days after the Conversion Date (such
      third day being the “Delivery Date”) that number of shares of Common Stock for
      the portion of the Note converted in accordance with the foregoing. At the
      election of the Holder, the Borrower will deliver accrued but unpaid interest
      on
      the Note, if any, through the Conversion Date directly to the Holder on or
      before the Delivery Date (as defined in the Subscription Agreement). The number
      of shares of Common Stock to be issued upon each conversion of this Note shall
      be determined by dividing that portion of the principal of the Note to be
      converted by the Conversion Price.

    

    (b)    Subject
      to adjustment as provided in Section 2.1(c) hereof, the Conversion Price per
      share shall be $0.18, subject to adjustment as described herein and in the
      Subscription Agreement.

    

    (c)    The
      Conversion Price and number and kind of shares or other securities to be issued
      upon conversion determined pursuant to Section 2.1(a), shall be subject to
      adjustment from time to time upon the happening of certain events while this
      conversion right remains outstanding, as follows:

    

    A.    Merger,
      Sale of Assets, etc. If the Borrower at any time shall consolidate with or
      merge
      into or sell or convey all or substantially all its assets to any other
      corporation, this Note, as to the unpaid principal portion thereof and accrued
      interest thereon, shall thereafter be deemed to evidence the right to purchase
      such number and kind of shares or other securities and property as would have
      been issuable or distributable on account of such consolidation, merger, sale
      or
      conveyance, upon or with respect to the securities subject to the conversion
      or
      purchase right immediately prior to such consolidation, merger, sale or
      conveyance. The foregoing provision shall similarly apply to successive
      transactions of a similar nature by any such successor or purchaser. Without
      limiting the generality of the foregoing, the anti-dilution provisions of this
      Section shall apply to such securities of such successor or purchaser after
      any
      such consolidation, merger, sale or conveyance.

    

    B.    Reclassification,
      etc. If the Borrower at any time shall, by reclassification or otherwise, change
      the Common Stock into the same or a different number of securities of any class
      or classes that may be issued or outstanding, this Note, as to the unpaid
      principal portion thereof and accrued interest thereon, shall thereafter be
      deemed to evidence the right to purchase an adjusted number of such securities
      and kind of securities as would have been issuable as the result of such change
      with respect to the Common Stock immediately prior to such reclassification
      or
      other change.

    

    C.    Stock
      Splits, Combinations and Dividends. If the shares of Common Stock are subdivided
      or combined into a greater or smaller number of shares of Common Stock, or
      if a
      dividend is paid on the Common Stock in shares of Common Stock, the Conversion
      Price shall be proportionately reduced in case of subdivision of shares or
      stock
      dividend or proportionately increased in the case of combination of shares,
      in
      each such case by the ratio which the total number of shares of Common Stock
      outstanding immediately after such event bears to the total number of shares
      of
      Common Stock outstanding immediately prior to such event..

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    D.    Share
      Issuance. So long as this Note is outstanding, if the Borrower shall issue
      or
      agree to issue any shares of Common Stock except for the Excepted Issuances
      (as
      defined in the Subscription Agreement) for a consideration less than the
      Conversion Price in effect at the time of such issue, then, and thereafter
      successively upon each such issue, the Conversion Price shall be reduced to
      such
      other lower issue price. For purposes of this adjustment, the issuance of any
      security carrying the right to convert such security into shares of Common
      Stock
      or of any warrant, right or option to purchase Common Stock shall result in
      an
      adjustment to the Conversion Price upon the issuance of the above-described
      security and again upon the issuance of shares of Common Stock upon exercise
      of
      such conversion or purchase rights if such issuance is at a price lower than
      the
      then applicable Conversion Price. The reduction of the Conversion Price
      described in this paragraph is in addition to other rights of the Holder
      described in this Note and the Subscription Agreement.

    

    (d)    Whenever
      the Conversion Price is adjusted pursuant to Section 2.1(c) above, the Borrower
      shall promptly mail to the Holder a notice setting forth the Conversion Price
      after such adjustment and setting forth a statement of the facts requiring
      such
      adjustment.

    

    (e)    During
      the period the conversion right exists, Borrower will reserve from its
      authorized and unissued Common Stock a sufficient number of shares to provide
      for the issuance of Common Stock issuable upon the full conversion of this
      Note
      and as described in the Subscription Agreement. Borrower represents that upon
      issuance, such shares will be duly and validly issued, fully paid and
      non-assessable. Borrower agrees that its issuance of this Note shall constitute
      full authority to its officers, agents, and transfer agents who are charged
      with
      the duty of executing and issuing stock certificates to execute and issue the
      necessary certificates for shares of Common Stock upon the conversion of this
      Note.

    

    2.2.    Optional
      Redemption of Principal Amount.
      Provided an Event of Default or an event which with the passage of time or
      the
      giving of notice could become an Event of Default has not occurred, whether
      or
      not such Event of Default has been cured, the Borrower will have the option
      of
      prepaying the outstanding Principal amount of this Note ("Optional Redemption"),
      in whole or in part, by paying to the Holder a sum of money equal to the number
      of Shares of Common Stock issuable upon an assumed conversion of the outstanding
      principal and interest of this Note multiplied by $1.50 (subject to adjustment
      for stock splits, stock dividends and similar events), and any and all other
      sums due, accrued or payable to the Holder arising under this Note or any
      Transaction Document through and as of the Redemption Payment Date as defined
      below (the "Redemption Amount"). Borrower’s election to exercise its right to
      prepay must be by notice in writing (“Notice of Redemption”). The Notice of
      Redemption shall specify the date for such Optional Redemption (the "Redemption
      Payment Date"), which date shall be thirty (30) business days after the date
      of
      the Notice of Redemption (the "Redemption Period"). A Notice of Redemption
      shall
      not be effective with respect to any portion of the Principal Amount for which
      the Holder has a pending election to convert, or for conversions initiated
      or
      made by the Holder during the Redemption Period. On the Redemption Payment
      Date,
      the Redemption Amount, less any portion of the Redemption Amount against which
      the Holder has exercised its conversion rights, shall be paid in good funds
      to
      the Holder. In the event the Borrower fails to pay the Redemption Amount on
      the
      Redemption Payment Date as set forth herein, then (i) such Notice of Redemption
      will be null and void, (ii) Borrower will have no right to deliver another
      Notice of Redemption, and (iii) Borrower’s failure may be deemed by Holder to be
      a non-curable Event of Default. A Redemption Notice may be given only at a
      time
      a registration statement covering all of the shares issuable upon conversion
      of
      all amounts convertible under this Note (“Registration Statement”) is effective.
      A Notice of Redemption may not be given nor may the Borrower effectuate a
      Redemption without the consent of the Holder, if at any time during the
      Redemption Period an Event of Default or an Event which with the passage of
      time
      or giving of notice could become an Event of Default (whether or not such Event
      of Default has been cured), has occurred or the Registration Statement is not
      effective each day during the Redemption Period.

    

    2.3.    Method
      of Conversion.
      This
      Note may be converted by the Holder in whole or in part as described in Section
      2.1(a) hereof and the Subscription Agreement. Upon partial conversion of this
      Note, a new Note containing the same date and provisions of this Note shall,
      at
      the request of the Holder, be issued by the Borrower to the Holder for the
      principal balance of this Note and interest which shall not have been converted
      or paid.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    2.4.    Maximum
      Conversion.
      The
      Holder shall not be entitled to convert on a Conversion Date that amount of
      the
      Note in connection with that number of shares of Common Stock which would be
      in
      excess of the sum of (i) the number of shares of Common Stock beneficially
      owned
      by the Holder and its affiliates on a Conversion Date, (ii) any Common Stock
      issuable in connection with the unconverted portion of the Note, and (iii)
      the
      number of shares of Common Stock issuable upon the conversion of the Note with
      respect to which the determination of this provision is being made on a
      Conversion Date, which would result in beneficial ownership by the Holder and
      its affiliates of more than 4.99% of the outstanding shares of Common Stock
      of
      the Borrower on such Conversion Date. For the purposes of the provision to
      the
      immediately preceding sentence, beneficial ownership shall be determined in
      accordance with Section 13(d) of the Securities Exchange Act of 1934, as
      amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder
      shall not be limited to aggregate conversions of only 4.99% and aggregate
      conversion by the Holder may exceed 4.99%. The Holder shall have the authority
      and obligation to determine whether the restriction contained in this Section
      2.3 will limit any conversion hereunder and to the extent that the Holder
      determines that the limitation contained in this Section applies, the
      determination of which portion of the Notes are convertible shall be the
      responsibility and obligation of the Holder. The Holder may waive the conversion
      limitation described in this Section 2.3, in whole or in part, upon and
      effective after 61 days prior written notice to the Borrower to increase such
      percentage to up to 9.99%. The Holder may allocate which of the equity of the
      Borrower deemed beneficially owned by the Holder shall be included in the 4.99%
      amount or up to 9.99% amount as described above.

    

    ARTICLE
      III

    

    EVENT
      OF DEFAULT

    

    The
      occurrence of any of the following events of default ("Event of Default") shall,
      at the option of the Holder hereof, make all sums of principal and interest
      then
      remaining unpaid hereon and all other amounts payable hereunder immediately
      due
      and payable, upon demand, without presentment, or grace period, all of which
      hereby are expressly waived, except as set forth below:

    

    3.1   Failure
      to Pay Principal or Interest.
      The
      Borrower fails to pay any installment of Principal Amount, interest or other
      sum
      due under this Note or any Transaction Document when due and such failure
      continues for a period of ten (10) business days after the due
      date.

    

    3.2   Breach
      of Covenant.
      The
      Borrower breaches any material covenant or other term or condition of the
      Subscription Agreement, this Note or Transaction Document in any material
      respect and such breach, if subject to cure, continues for a period of ten
      (10)
      business days after written notice to the Borrower from the Holder.

    

    3.3   Breach
      of Representations and Warranties.
      Any
      material representation or warranty of the Borrower made herein, in the
      Subscription Agreement, Transaction Document or in any agreement, statement
      or
      certificate given in writing pursuant hereto or in connection herewith or
      therewith shall be false or misleading in any material respect as of the date
      made and as of each Closing Date.

    

    3.4   Receiver
      or Trustee.
      The
      Borrower or any Subsidiary of Borrower shall make an assignment for the benefit
      of creditors, or apply for or consent to the appointment of a receiver or
      trustee for them or for a substantial part of their property or business; or
      such a receiver or trustee shall otherwise be appointed.

    

    3.5   Judgments.
      Any
      money judgment, writ or similar final process shall be entered or filed against
      Borrower or any Subsidiary of Borrower or any of their property or other assets
      for more than One Hundred Thousand Dollars ($100,000),
      and
      shall remain unvacated, unbonded or unstayed for a period of forty-five (45)
      days.

    

    3.6   Non-Payment.
      The
      Borrower shall have received a notice of default, which remains uncured for
      a
      period of more than twenty (20) days, on the payment of any one or more debts
      or
      obligations aggregating in excess of One Hundred Thousand Dollars (US
      $100,000.00) beyond any applicable grace period;

    

    3.7   Bankruptcy.
      Bankruptcy, insolvency, reorganization or liquidation proceedings or other
      proceedings or relief under any bankruptcy law or any law, or the issuance
      of
      any notice in relation to such event, for the relief of debtors shall be
      instituted by or against the Borrower or any Subsidiary of Borrower and if
      instituted against them are not dismissed within forty-five (45) days of
      initiation.

    

    3.8   Delisting.
      Delisting of the Common Stock from any Principal Market; failure to comply
      with
      the requirements for continued listing on a Principal Market for a period of
      seven consecutive trading days; or notification from a Principal Market that
      the
      Borrower is not in compliance with the conditions for such continued listing
      on
      such Principal Market.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    3.9    
Stop
      Trade.
      An SEC
      or judicial stop trade order or Principal Market trading suspension with respect
      to Borrower’s Common Stock that lasts for five or more consecutive trading
      days.

    

    3.10   Failure
      to Deliver Common Stock or Replacement Note.
      Borrower's failure to timely deliver Common Stock to the Holder pursuant to
      and
      in the form required by this Note or the Subscription Agreement, and, if
      requested by Borrower, a replacement Note.

    

    3.11   Reverse
      Splits.
      The
      Borrower effectuates a reverse split of its Common Stock without twenty days
      prior written notice to the Holder.

    

    3.12   Cross
      Default.
      A
      default by the Borrower of a material term, covenant, warranty or undertaking
      of
      any Transaction Document or other agreement to which the Borrower and Holder
      are
      parties, or the occurrence of a material event of default under any such other
      agreement which is not cured after any required notice and/or cure
      period.

    

    3.13   Reservation
      Default.
      The
      occurrence of Reservation Default as described in Section 9(p) of the
      Subscription Agreement.

    

    ARTICLE
      IV

    

    SECURITY
      INTEREST

    

    4.   Security
      Interest/Waiver of Automatic Stay.
      This
      Note is secured by a security interest granted to the Collateral Agent for
      the
      benefit of the Holder pursuant to a Security Agreement, as delivered by Borrower
      to Holder. The Borrower acknowledges and agrees that should a proceeding under
      any bankruptcy or insolvency law be commenced by or against the Borrower, or
      if
      any of the Collateral (as defined in the Security Agreement) should become
      the
      subject of any bankruptcy or insolvency proceeding, then the Holder should
      be
      entitled to, among other relief to which the Holder may be entitled under the
      Transaction Documents and any other agreement to which the Borrower and Holder
      are parties (collectively, "Loan Documents") and/or applicable law, an order
      from the court granting immediate relief from the automatic stay pursuant to
      11
      U.S.C. Section 362 to permit the Holder to exercise all of its rights and
      remedies pursuant to the Loan Documents and/or applicable law. TO THE EXTENT
      PERMITTED BY LAW, THE BORROWER EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC
      STAY IMPOSED BY 11 U.S.C. SECTION 362. FURTHERMORE, THE BORROWER EXPRESSLY
      ACKNOWLEDGES AND AGREES THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION
      OF THE BANKRUPTCY CODE OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION,
      11 U.S.C. SECTION 105) SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT
      IN
      ANY WAY THE ABILITY OF THE HOLDER TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES
      UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW. The Borrower hereby consents
      to
      any motion for relief from stay that may be filed by the Holder in any
      bankruptcy or insolvency proceeding initiated by or against the Borrower and,
      further, agrees not to file any opposition to any motion for relief from stay
      filed by the Holder. The Borrower represents, acknowledges and agrees that
      this
      provision is a specific and material aspect of the Loan Documents, and that
      the
      Holder would not agree to the terms of the Loan Documents if this waiver were
      not a part of this Note. The Borrower further represents, acknowledges and
      agrees that this waiver is knowingly, intelligently and voluntarily made, that
      neither the Holder nor any person acting on behalf of the Holder has made any
      representations to induce this waiver, that the Borrower has been represented
      (or has had the opportunity to he represented) in the signing of this Note
      and
      the Loan Documents and in the making of this waiver by independent legal counsel
      selected by the Borrower and that the Borrower has discussed this waiver with
      counsel.

    

    ARTICLE
      V

    

    MISCELLANEOUS

    

    5.1   Failure
      or Indulgence Not Waiver.
      No
      failure or delay on the part of Holder hereof in the exercise of any power,
      right or privilege hereunder shall operate as a waiver thereof, nor shall any
      single or partial exercise of any such power, right or privilege preclude other
      or further exercise thereof or of any other right, power or privilege. All
      rights and remedies existing hereunder are cumulative to, and not exclusive
      of,
      any rights or remedies otherwise available.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    5.2   Notices.
      All
      notices, demands, requests, consents, approvals, and other communications
      required or permitted hereunder shall be in writing and, unless otherwise
      specified herein, shall be (i) personally served, (ii) deposited in the mail,
      registered or certified, return receipt requested, postage prepaid, (iii)
      delivered by reputable air courier service with charges prepaid, or (iv)
      transmitted by hand delivery, telegram, or facsimile, addressed as set forth
      below or to such other address as such party shall have specified most recently
      by written notice. Any notice or other communication required or permitted
      to be
      given hereunder shall be deemed effective (a) upon hand delivery or delivery
      by
      facsimile, with accurate confirmation generated by the transmitting facsimile
      machine, at the address or number designated below (if delivered on a business
      day during normal business hours where such notice is to be received), or the
      first business day following such delivery (if delivered other than on a
      business day during normal business hours where such notice is to be received)
      or (b) on the second business day following the date of mailing by express
      courier service, fully prepaid, addressed to such address, or upon actual
      receipt of such mailing, whichever shall first occur. The addresses for such
      communications shall be: (i) if to the Borrower to: VoIP, Inc., 151 So. Wymore
      Road, Suite 3000, Altamonte Springs, FL 32714, Attn: Anthony Cataldo, CEO,
      telecopier: (407) 389-3233, with a copy by telecopier only to: Baratta, Baratta
      & Aidala LLP, 597 Fifth Avenue, New York, NY 10017, Attn: Joseph A. Baratta,
      Esq., telecopier: (212) 750-8297, and (ii) if to the Holder, to the name,
      address and telecopy number set forth on the front page of this Note, with
      a
      copy by telecopier only to Grushko & Mittman, P.C., 551 Fifth Avenue, Suite
      1601, New York, New York 10176, telecopier number: (212) 697-3575.

    

    5.3   Amendment
      Provision.
      The
      term "Note" and all reference thereto, as used throughout this instrument,
      shall
      mean this instrument as originally executed, or if later amended or
      supplemented, then as so amended or supplemented.

    

    5.4   Assignability.
      This
      Note shall be binding upon the Borrower and its successors and assigns, and
      shall inure to the benefit of the Holder and its successors and assigns. The
      Borrower may not assign any of its obligations under this Note without the
      consent of the Holder.

    

    5.5   Cost
      of Collection.
      If
      default is made in the payment of this Note, Borrower shall pay the Holder
      hereof reasonable costs of collection, including reasonable attorneys'
      fees.

    

    5.6   Governing
      Law.
      This
      Note shall be governed by and construed in accordance with the laws of the
      State
      of New York. Any action brought by either party against the other concerning
      the
      transactions contemplated by this Agreement shall be brought only in the state
      courts of New York or in the federal courts located in the state of New York.
      Both parties and the individual signing this Agreement on behalf of the Borrower
      agree to submit to the jurisdiction of such courts. The prevailing party shall
      be entitled to recover from the other party its reasonable attorney's fees
      and
      costs.

    

    5.7   Maximum
      Payments.
      Nothing
      contained herein shall be deemed to establish or require the payment of a rate
      of interest or other charges in excess of the maximum permitted by applicable
      law. In the event that the rate of interest required to be paid or other charges
      hereunder exceed the maximum permitted by such law, any payments in excess
      of
      such maximum shall be credited against amounts owed by the Borrower to the
      Holder and thus refunded to the Borrower.

    

    5.8   Shareholder
      Status.
      The
      Holder shall not have rights as a shareholder of the Borrower with respect
      to
      unconverted portions of this Note. However, the Holder will have all the rights
      of a shareholder of the Borrower with respect to the shares of Common Stock
      to
      be received by Holder after delivery by the Holder of a Conversion Notice to
      the
      Borrower.

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      Borrower has caused this Note to be signed in its name by an authorized officer
      as of the 16th day of February, 2007.

     

    
      	 	 	 
	 	VOIP
              INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name: Robert
                Staats

              Title:
                 Chief
                Accounting Officer

            
	 	
               

            

    WITNESS:

    

    

    

    ______________________________________

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    
 

    NOTICE
      OF CONVERSION

    

    (To
      be
      executed by the Registered Holder in order to convert the Note)

    

    

    The
      undersigned hereby elects to convert $_________ of the principal and $_________
      of the interest due on the Note issued by VoIP Inc. on February ___, 2007 into
      Shares of Common Stock of VoIP Inc. (the "Borrower") according to the conditions
      set forth in such Note, as of the date written below.

    

    

    

    Date
      of
      Conversion:____________________________________________________________________

    

    

    Conversion
      Price:______________________________________________________________________

    

    

    Shares
      To
      Be
      Delivered:_________________________________________________________________

    

    

    Signature:____________________________________________________________________________

    

    

    Print
      Name:__________________________________________________________________________

    

    

    Address:_____________________________________________________________________________

    

    ____________________________________________________________________________

    

    
      
        
        

      

      
        8

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