Document:

ex41.htm

    Exhibit
4.1

     

     

    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 AIRTRAX, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.

    

    Principal Amount
$__________                                                                                                                     Issue
Date: May __, 2008

    

    

    SECURED CONVERTIBLE
NOTE

    

    FOR VALUE RECEIVED, AIRTRAX, INC., a
New Jersey corporation (hereinafter called “Borrower”), hereby promises to pay
to ___________________ (the “Holder”) ____________ ($________), on October __,
2008 at the offices of Grushko & Mittman, P.C. 551 Fifth avenue, Suite 1601
New York, NY 10176 (the “Maturity Date”), if not retired sooner.

    

    ARTICLE
I

    GENERAL
PROVISIONS

    

    1.1           Payment Grace
Period.  The Borrower shall have a three(3) 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
Rights.  The Conversion Rights set forth in Article II shall
remain in full force and effect from the date hereof and until the Note is paid
in full or otherwise satisfied 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.

    

    1.3           Interest
Rate.   Simple interest payable on this Note shall accrue
at the annual rate of eight percent (8%) and be payable monthly commencing June
30, 2008, and on the Maturity Date, accelerated or otherwise, when the principal
and remaining accrued but unpaid interest shall be due and payable, or sooner as
described below.

     

    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, $0.001 par value per
(“Common Stock”) as set forth below.

    

    2.1.           Conversion into the
Borrower's Common Stock.

     

    
      
        
        

      

      
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    (a)           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 subject to the availability of
adequate shares of the Company’s common stock being available for issue
(“Adequate Authorized Shares”), 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 fifth 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.  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 $0.05 subject to adjustment as described herein.

    

    (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..

     

    D.           Share
Issuance.   So long as this Note is outstanding, if the
Borrower shall issue or agree to issue any shares of Common Stock 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.

     

    
      
        
        

      

      
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    (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.

    

    2.2.           Method of
Conversion.  This Note may be converted by the Holder in whole
or in part as described in Section 2.1(a) hereof.  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.

    

    2.5.           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 2.5 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”) after
the date hereof 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 three (3) business
days after the due date.

    

    3.2         Breach of
Covenant.  The Borrower breaches any material covenant or other
term or condition of this Note in any material respect.

     

    
      
        
        

      

      
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    3.3         Breach of Representations
and Warranties.  Any material representation or warranty 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 the date hereof.

    

    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.   Other
than as set forth on Schedule 3.6, 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;

    

    3.5         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.

    

    3.6         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.

    

    3.7         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.

    

    3.8         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, and, if requested by Borrower, a replacement Note.

    

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

     

    
      
        
        

      

      
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    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.

    

    5.2           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: Airtrax
Inc., 870b Central Avenue Hammonton NJ 08037, with a copy by telecopier only to:
Sichenzia Ross Friedman Ference, Attn: Richard A. Friedman, Esq., telecopier:
(212) 930-9725, 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.

     

    
      
        
        

      

      
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    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 and county 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.

    

    IN WITNESS WHEREOF, Borrower
has caused this Note to be signed in its name by an authorized officer as of the
___ day of May, 2008.

     

     

    
      
        	 	AIRTRAX
      INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ 	 
	 	 	Name 	 
	 	 	Title 	 
	 	 	 	 

      

    

     

    Holder:

     

    
      
        
        

      

      
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    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 Airtrax Inc. on May __, 2008 into
Shares of Common Stock of Airtrax 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:_____________________________________________________________________________

    

       ____________________________________________________________________________

     

     

    7ex101.htm

     

    Exhibit 10.1

     

     

    SUBSCRIPTION
AGREEMENT

     

     

    THIS SUBSCRIPTION AGREEMENT
(this “Agreement”), is
dated as of May 16, 2008, among Airtrax Inc., a New Jersey 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”); and

     

    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 $100,000.00  (the “Aggregate Principal Amount”)
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”) for an
aggregate purchase price of up to $100,000.00 (the “Aggregate Purchase
Price”).  The Notes and the shares of Common Stock issuable
upon conversion of the Notes (the “Note Conversion Shares”), are
collectively referred to herein as the “Securities”; and

     

    WHEREAS, the aggregate
proceeds of the sale of the Notes 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 B (the “Escrow
Agreement”).

     

    WHEREAS, the monetary
obligations arising under the Notes will be secured pursuant to a Security
Agreement dated February 20, 2007 (the “Security Agreement”) among the
Company and the other signatories thereto (the “Secured Lenders”), of which
the Subscriber herein are a subset.

     

    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.           Closing
Date.   The “Closing Date” shall be the
date that the purchase price (the “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 shall take
place at the offices of Grushko & Mittman, P.C., 551 Fifth Avenue, Suite
1601, New York, New York 10176, upon the satisfaction or waiver of all
conditions to closing set forth in this Agreement.   Upon the
terms and subject to the satisfaction or waiver of the conditions set forth
herein, on the Closing Date the Company agrees to sell and each Subscriber
agrees to purchase a Note with a principal amount equal to the amount set forth
below such Subscriber’s name on the signature pages hereof

    

    2.           Amendment to the February
20, 2007 Documents.  The Company and the Subscribers agree to
that the limit upon conversion set forth in Section 4(c) of the notes issued on
February 20, 2007 is hereby increased so that the Subscribers may convert
amounts that will result in them being the beneficial owner of upto 9.99% of the
outstanding shares of the Company.

     

    
      
         

      

      
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    3.           Security
Interest.   The Subscribers have been previously granted a
security interest in the assets of the Company and its subsidiaries pursuant to
Security Agreement and Subsidiary Guaranty entered into on or about February 20,
2007 (the “2007 Security Documents”).  The Company for itself and it
subsidiaries acknowledge that the obligation created under this Agreement shall
be included in the definition of “Obligations” under 2007 Security
Documents.

    

                                  
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 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 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 Securities 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, via the EDGAR Website of the Commission, to the Company's Form
10-KSB filed on February 16, 2007 for the fiscal year ended December 31, 2006,
and the financial statements included therein for the year ended December 31,
2006, together with all subsequent amendments and filings made with the
Commission available at the EDGAR website (hereinafter referred to collectively
as the "Reports").  In
addition, the Subscriber may have received in writing from the Company such
other information concerning its operations, financial condition and other
matters as the Subscriber has requested in writing, identified thereon as OTHER
WRITTEN INFORMATION (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.

     

    
      
         

      

      
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    (e)           Information on
Subscriber.  The Subscriber is, and will be at the time of the
conversion of the Notes, 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 has the authority
and is duly and legally qualified to purchase and own the
Securities.  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.  On the Closing Date, the Subscriber will purchase the
Notes 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.

    

    (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.  The Subscribers will comply with all
applicable rules and regulations in connection with the sales of the securities
including laws relating to short sales.

    

    (h)           Shares
Legend.  The Note Conversion 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 OR ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO [THE COMPANY]
THAT SUCH REGISTRATION IS NOT REQUIRED.”

    

    (i)           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 OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO [THE COMPANY] THAT SUCH REGISTRATION IS NOT
REQUIRED.”

     

    (j)           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.

     

    
      
         

      

      
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    (k)           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 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.

    

    (l)           Restricted
Securities.   Subscriber understands that the Securities
have not been registered under the 1933 Act and such Subscriber will not sell,
offer to sell, assign, pledge, hypothecate or otherwise transfer any of the
Securities unless pursuant to an effective registration statement under the 1933
Act, or unless an exemption from registration is
available.  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 includes each subsidiary 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.

    

    (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 for a
period of three years.

     

    5.           Company Representations and
Warranties.  The Company represents and warrants to and agrees
with each Subscriber that:

     

    (a)           Due
Incorporation.  The Company is a corporation 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 properties and to carry on its business as
presently conducted.  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 purposes 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 and its
Subsidiaries taken 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 30% 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.  The Company’s Subsidiaries as of the Closing Date are set
forth on Schedule
5(a).

     

    
      
         

      

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

     

    (c)           Authority;
Enforceability.  This Agreement, the Note, the Security
Agreements, 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 are valid and
binding agreements of the Company 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 has full corporate power and authority necessary to enter into and
deliver the Transaction Documents and to perform its obligations
thereunder.

     

    (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 Subsidiaries or other equity interest in the Company except as
described in the Reports or on Schedule 5(d).  The
Common Stock of the Company on a fully diluted basis outstanding as of the last
Business Day preceding the Closing Date is set forth on Schedule 5(d).

     

    (e)           Consents.  No
consent, approval, authorization or order of any court, governmental agency,
body or arbitrator having jurisdiction over the Company, or any of its
Affiliates, the OTC Bulletin Board (the “Bulletin Board”) 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 except that the Company needs the consent of
its shareholders to amend it certificate of incorporation to increase its
authorized shares to be able to issue the Shares into which the Notes are
convertible.  The Transaction Documents and the Company’s performance
of its obligations thereunder has been unanimously approved by the Company’s
Board of Directors.

     

    (f)           No Violation or
Conflict.  Assuming the representations and warranties of the
Subscribers in Section 4 are true and correct, 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) under (A) the articles or certificate of
incorporation, charter or bylaws of the Company, (B) to the Company's knowledge,
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

     

    
      
         

      

      
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    (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 described herein; or

     

    (iii)           except
as described in Schedule
5(d), 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)           will
result in the triggering of any piggy-back registration rights of any person or
entity holding securities of the Company or having the right to receive
securities of the Company.

     

    (g)           The
Securities.  Except that the Company needs the consent of its
shareholders to amend it certificate of incorporation to increase its authorized
shares to be able to issue the Shares into which the Notes are convertible, 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
Note Conversion Shares upon conversion of the Notes and the Note Conversion
Shares will be duly and validly issued, fully paid and non-assessable and if
registered pursuant to the 1933 Act and resold pursuant to an effective
registration statement will be free trading and unrestricted;

     

    (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; and

     

                    (v)           assuming
the representations warranties of the Subscribers as set forth in Section 4
hereof are true and correct, will not result in a violation of Section 5 under
the 1933 Act.

     

    (h)           Litigation.  To
the best knowledge of the Company, 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.  Except as
disclosed in the Reports, there is no pending or, to the best knowledge of the
Company, basis for 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 which litigation if adversely
determined would have a Material Adverse Effect.

     

    (i)           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.

     

    
      
         

      

      
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    (j)           Information Concerning
Company.  The Reports and Other Written Information contain all
material information relating to the Company and its operations and financial
condition as of their respective dates which information is required to be
disclosed therein.   Since the date of the financial statements
included in the Reports, and except as modified in the Other Written Information
or in the Schedules hereto, there has been no Material Adverse Event relating to
the Company's business, financial condition or affairs not disclosed in the
Reports. The Reports and Other Written Information do not contain any untrue
statement of a material fact or omit or fail to state a material fact required
to be stated therein or necessary to make the statements therein, taken as a
whole, not misleading in light of the circumstances when made.

     

    (k)           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.

     

    (l)           Defaults.   The
Company is not in violation of its articles of incorporation or
bylaws.  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,
except as identified on Schedule 5(l).

     

    (m)           No 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 Bulletin Board which would impair the exemptions relied upon in this
Offering, as defined below, or the Company’s ability to timely comply with its
obligations hereunder.  Nor will the Company nor 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.

     

    (n)           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.

     

    (o)           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 businesses since December 31, 2006 and which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect, except as disclosed in the Reports or on Schedule 5(o).

     

    (p)           No Undisclosed Events or
Circumstances.  Since December 31, 2006,, 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 except the Company has not yet disclosed
that Robert Watson is no longer the CEO and William Hungerville is the new
CEO.

     

    
      
         

      

      
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    (q) Capitalization.  The
authorized and outstanding capital stock of the Company and Subsidiaries as of
the date of this Agreement and the Closing Date (not including the Securities)
are set forth in the Reports or 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 or any of its Subsidiaries.

     

    (r)           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 Note Conversion Shares upon conversion of the Notes 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.

     

    (s) No Disagreements with
Accountants and Lawyers.  There are no material disagreements
of any kind presently existing, or reasonably anticipated by the Company to
arise between the Company and the accountants and lawyers 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.

    

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

     

    (u)           Foreign Corrupt
Practices.  Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is  in violation of law, or (iv)
violated in any material respect any provision of the Foreign Corrupt Practices
Act of 1977, as amended.

    

    (v)           Reporting
Company.  The Company is a publicly-held company subject to
reporting obligations pursuant to Section 13 of the Securities Exchange Act of
1934, as amended (the "1934
Act") and has a class of Common Stock 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 twelve months.

    

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

     

    
      
         

      

      
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    (x)           DTC
Status.   The Company’s transfer agent is a not a
participant in and the Common Stock is not 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(x)
hereto.

    

    (y)           [left intentionally
blank]

    

    (z)           Company Predecessor and
Subsidiaries.   The Company makes each of the
representations contained in Sections 5(a), (b), (c), (d), (e), (f), (h), (j),
(l), (o), (p), (q), (s), (t), and (u) of this Agreement, as same relate to the
Subsidiary of the Company.  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.

    

    (aa)           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 the Closing Date, shall be true and correct in all material respects as
of the Closing Date.

     

    (bb)           Survival.  The
foregoing representations and warranties shall survive the Closing Date for a
period of three years.

     

               6.           Regulation D Offering/Legal
Opinion.  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 C.  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 pursuant to an effective
registration statement, Rule 144 under the 1933 Act or an exemption from
registration.

    

                          7.1.           Conversion of
Note.

    

    (a)           Upon
the conversion of a Note 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 Note Conversion Shares,
assuming (i) the Registration Statement (as defined below) is effective and the
prospectus, as supplemented or amended, contained therein is current and (ii)
the Subscriber or its agent confirms in writing to the transfer agent that the
Subscriber has complied with the prospectus delivery requirements, the Company
will reissue the Note Conversion Shares without restrictive legend and the Note
Conversion Shares will be free-trading, and freely transferable.  In
the event that the Note Conversion 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(b)(1)(i)).

     

    
      
         

      

      
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    (b)           Subscriber
will give notice of its decision to exercise its right to convert the Note,
interest, or part thereof by telecopying, or otherwise delivering a 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 by 6 PM (or if received by
the Company after 6 PM then the next business day) 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 Note
Conversion 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").  In the event the Note Conversion Shares are
electronically transferable, then delivery of the Note Conversion Shares shall
be made by electronic transfer provided request for such electronic transfer has
been made by the Subscriber.   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 of a Note, 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.

    

    (c)           The
Company understands that a delay in the delivery of the Note Conversion Shares
in the form required pursuant to Section 7.1 hereof, or the Mandatory Redemption
Amount described in Section 7.2 hereof, respectively later than 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 Note Conversion 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 (and proportionately for other amounts) being converted
of the corresponding Note Conversion 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
within seven (7) business days after the Delivery Date or make payment within
seven (7) business days after the Mandatory Redemption Payment Date (as defined
in Section 7.2 below), the Subscriber will be entitled to 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)           The
Company agrees and acknowledges that despite the pendency of a not yet effective
Registration Statement which includes for registration the Registrable
Securities (as defined in Section 11.1(iv)), the Subscriber is permitted to, and
the Company will issue to the Subscriber Note Conversion Shares upon conversion
of the Note.  Such Note Conversion Shares will, if required by law,
bear the legends described in Section 4 above and if the requirements of Rule
144 under the 1933 Act are satisfied, be resalable thereunder.

     

    
      
         

      

      
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    7.2.           Mandatory Redemption at
Subscriber’s Election.  In the event (i) the Company is
prohibited from issuing Note Conversion Shares, (ii) upon the occurrence of any
other Event of Default (as defined in the Note or in this Agreement), that
continues for more than twenty (20) business days, (iii) a Change in Control (as
defined below), or (iv) of the liquidation, dissolution or winding up of the
Company, then at the Subscriber's election, the Company must pay to the
Subscriber ten (10) business days after request by the Subscriber (“Calculation Period”), a sum of
money determined by multiplying up to the outstanding principal amount of the
Note designated by the Subscriber by 120% (“Mandatory Redemption
Payment”). The Mandatory Redemption Payment must be received by the
Subscriber on the same date as the Note Conversion 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 ten (10) day
period prior to the actual receipt of the Mandatory Redemption Payment by the
Subscriber shall be credited against the Mandatory Redemption
Payment.  For purposes of this Section 7.2, “Change in Control” shall mean
(i) the Company no longer having a class of shares publicly traded or listed on
a Principal Market, (ii) the Company becoming a Subsidiary of another entity
(other than a corporation formed by the Company for purposes of reincorporation
in another U.S. jurisdiction), (iii) a majority of the board of directors of the
Company as of the Closing Date no longer serving as directors of the Company
(iv) the sale, lease or transfer of substantially all the assets of the Company
or Subsidiaries, or (v) if the holders of the Company’s Common Stock as of the
Closing Date beneficially own at any time after the Closing Date less than 40%
of the Common Stock owned by them on the Closing Date.

    

               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.  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 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 increase the
permitted beneficial ownership amount up to 9.99% upon and effective after 61
days’ prior written notice to the Company.  Such Subscriber may
allocate which of the equity of the Company deemed beneficially owned by the
Subscriber shall be included in the 4.99% amount described above and which shall
be allocated to the excess above 4.99%.

    

    7.4.           Injunction Posting of
Bond.  In the event a Subscriber shall elect to convert a Note
or part thereof, the Company may not refuse conversion or exercise 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 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 Note Conversion 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 such shares issuable upon conversion of a Note by
the Delivery Date and if after seven (7) business days after the Delivery 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 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, the Company shall be required to pay the
Subscriber $1,000 plus interest. The Subscriber shall provide the Company
written notice and evidence indicating the amounts payable to the Subscriber in
respect of the Buy-In.

     

    
      
         

      

      
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    7.6           Adjustments.   The
Conversion Price and amount of Note Conversion Shares issuable upon conversion
of the Notes shall be equitably adjusted and as otherwise described in this
Agreement and the Notes.

     

    7.7.           Redemption.    The
Notes shall not be redeemable or callable by the Company except as described in
the Notes and Subscription Agreement.

    

    8.           Commissions/Due
Diligence/Legal Fees.

     

    (a)           Commissions.   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 or in connection with any investment in the Company at any
time, whether or not such investment was consummated 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
this Agreement..

     

    (b)           Subscriber’s Legal
Fees.   The Company shall pay to Grushko & Mittman,
P.C., a fee of $7,500 (“Subscriber’s Legal Fees”) as reimbursement
for services rendered to the Subscribers in connection with this Agreement and
the purchase and sale of the Notes (the “Offering”)
..   The Subscriber’s Legal Fees and expenses will be payable out
of funds held pursuant to the Escrow Agreement.  Grushko &
Mittman, P.C. will be reimbursed at Closing for all lien searches, filing fees,
and printing and shipping costs for the closing statements to be delivered to
Subscribers.

     

    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 one
(1) business days after it 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/Quotation.  The
Company shall promptly secure the quotation or listing of the Note Conversion
Shares upon each national securities exchange, or automated quotation system
upon which they are or become eligible for quotation or listing (subject to
official notice of issuance) and shall maintain same so long as any Note
Conversion Shares are outstanding.  The Company will maintain the
quotation or listing of its Common Stock on the American Stock Exchange, Nasdaq
Capital Market, Nasdaq Global Market, Nasdaq Global Select Market, 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 and the
Closing Date, the Bulletin Board is and will be the Principal
Market.

     

    
      
         

      

      
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    (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
last to occur of (i) two (2) years after the Closing Date, (ii) until all the
Note Conversion Shares have been resold or transferred by all the Subscribers
pursuant to any registration statement or pursuant to Rule 144, or (iii) the
Notes are no longer outstanding (the date of occurrence of the last such event
being the “End Date”),
the Company will (A) cause its Common Stock 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 best 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 the End Date.  Until the
End Date, the Company will 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.  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.

     

    (e)           Use of
Proceeds.  The proceeds of the Offering will be employed by the
Company 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 nor non-trade obligations outstanding on a Closing Date.  For
so long as any Notes are outstanding, the Company will not prepay any financing
related debt obligations nor redeem any equity instruments of the
Company.

     

    (f)           Reservation.   As
soon as the Company amends its article of incorporation to increases it
authorized shares, but in no event later than five months from the date of this
Agreement, the Company shall have reserved, pro rata, on behalf of
each holder of a Note, from its authorized but unissued Common Stock, a number
of common shares equal to 150% 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.

     

    (g)           Taxes.  From
the date of this Agreement and until the End Date, 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 End Date, the Company shall 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.

     

    
      
         

      

      
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    (i)           Books and
Records.  From the date of this Agreement and until the End
Date, 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 End Date, the Company will 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 End
Date, the Company will  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 End Date, 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.

     

    (m)           Confidentiality/Public
Announcement.  From the date of this Agreement and until the
End Date, the Company agrees that except in connection with a Form 8-K and a
registration statement or statements regarding the Subscribers’ securities or in
correspondence with the SEC regarding same, it will not disclose publicly or
privately the identity of the Subscribers unless expressly agreed to in writing
by a Subscriber or 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 undertakes to file a Form 8-K or make a public
announcement describing the Offering no later than four (4) business days after
the Closing Date.  Prior to filing or announcement, such Form 8-K or
public announcement will be provided to Subscribers for their review and
approval.  In the Form 8-K or public announcement, the Company will
specifically disclose the amount of Common Stock outstanding immediately after
the Closing.  Upon  delivery by the Company to Subscriber
after the Closing Date of any notice or information, in writing, electronically
or otherwise, and while a Note or Note Conversion Shares are held by Subscriber,
unless the  Company has in good faith determined that the matters
relating to such notice do not constitute material, nonpublic
information relating to the Company or
Subsidiaries, the Company  shall within one business day after
any such delivery publicly disclose such  material,  nonpublic 
information on a Report on Form 8-K or otherwise. 
In the event that
the Company believes that a notice or communication to
Subscriber contains material, nonpublic information, relating to the Company or
Subsidiaries, the Company shall so indicate to the Subscriber contemporaneously
with delivery of such notice or information.  In the absence of any
such indication, the Subscriber shall be allowed to presume that all
matters relating to such notice and information do not constitute material,
nonpublic information relating to the Company or
Subsidiaries.

     

               (n)           Non-Public
Information.  The Company covenants and agrees that except for
the Reports, Other Written Information and schedules and exhibits to this
Agreement, neither it nor any other person acting on its behalf will at any time
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 keep such information in
confidence.  The Company understands and confirms that each Subscriber
shall be relying on the foregoing representations in effecting transactions in
securities of the Company.

     

    
      
         

      

      
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    (o)           Negative
Covenants.   So long as a Note is outstanding, without the
consent of the Subscriber, 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:  (A) the
Excepted Issuances (as defined in Section 12 hereof), (B) (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; and (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”), (C)
indebtedness for borrowed money which is not senior or pari passu in right of
payment to the payment of the Notes or distribution of the Company’s assets and
(D) indebtedness which shall be used to repay the Notes;

    

                                                                    (ii)           amend
its certificate of incorporation, bylaws or its charter documents so as to
materially and 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)           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 $100,000
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; or

    

    (v)           prepay
or redeem any financing related debt or past due obligations outstanding as of
the Closing Date.

     

    
      
         

      

      
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    (p)           Further Registration
Statements.   The Company will not, without the consent of
the Subscribers, file with the Commission or with state regulatory authorities
any registration statements or amend any already filed registration statement to
increase the amount of Common Stock registered therein, or reduce the price of
which such Common Stock is registered therein, (including but not limited to
Forms S-8), until the expiration of the “Exclusion Period,” which shall
be defined as the sooner of (i) for a period of one hundred and eighty (180)
days after the first anniversary of the date of this Subscription Agreement, or
(ii) until all the Note Conversion Shares have been resold or transferred by the
Subscribers pursuant to a registration statement or Rule 144.  The
Exclusion Period will be tolled or reinstated, as the case may be, during the
pendency of an Event of Default as defined in the Note.

     

    (r)           Blackout.    The
Company undertakes and covenants that, until the end of the Exclusion Period,
the Company will not enter into any acquisition, merger, exchange or sale or
other transaction or fail to take any action that could have the effect of
delaying the effectiveness of any pending Registration Statement or causing an
already effective Registration Statement to no longer be effective or current
for a period of forty or more days in the aggregate during any three hundred and
sixty-five day period.

     

    (r)           Offering
Restrictions.   Until the expiration of the Exclusion
Period and/or during the pendency of an Event of Default, except for the
Excepted Issuances, the Company will not enter into an agreement to issue 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 the Subscriber,
which consent may be withheld for any reason.   For so long as
the Notes are outstanding, 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 (collectively, the “Variable Rate
Restrictions”).   For purposes hereof, “Equity Line of Credit” shall
include any transaction involving a written agreement between the Company and an
investor or underwriter whereby the Company has the right to “put” its
securities to the investor or underwriter over an agreed period of time and at
an agreed price or price formula, and “Variable Priced Equity Linked
Instruments” shall include: (A) any debt or equity securities which are
convertible into, exercisable or exchangeable for, or carry the right to receive
additional shares of Common Stock either (1) at any conversion, exercise or
exchange rate or other price that is based upon and/or varies with the trading
prices of or quotations for Common Stock at any time after the initial issuance
of such debt or equity security, or (2) with a fixed conversion, exercise or
exchange price that is subject to being reset at some future date at any time
after the initial issuance of such debt or equity security due to a change in
the market price of the Company’s Common Stock since date of initial issuance,
and (B) any amortizing convertible security which amortizes prior to its
maturity date, where the Company is required or has the option to (or the
investor in such transaction has the option to require the Company to) make such
amortization payments in shares of Common Stock which are valued at a price that
is based upon and/or varies with the trading prices of or quotations for Common
Stock at any time after the initial issuance of such debt or equity security
(whether or not such payments in stock are subject to certain equity
conditions).  The only officer, director, employee and consultant
stock option or stock incentive plan currently in effect or contemplated by the
Company is described on Schedule 5(d).

     

    (s)           Seniority.   Except
for Permitted Liens and as otherwise provided for herein, until the Notes are
fully satisfied or converted, the Company shall not grant nor allow any security
interest to be taken in the assets of the Company or any Subsidiary; nor issue
any debt, equity or other instrument which would give the holder thereof
directly or indirectly, a right in any assets of the Company or any Subsidiary,
equal or superior to any right of the holder of a Note in or to such
assets.

     

    (t)           Notices.   For
so long as the Subscribers hold any Securities, the Company will maintain as
United States address and United States fax number for notices purposes under
the Transaction Documents.

     

    (u)           The
Company undertakes that all expenditures of any funds will be countersigned or
approved by Isaac Onn.

     

    
      
         

      

      
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    10.           Covenants of the Company
Regarding Indemnification. The Company agrees to indemnify, hold
harmless, reimburse and defend the Subscribers, the Subscribers' officers,
directors, agents, Affiliates, members, managers, 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 breach of any
representation or 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 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.

     

    11.1.           Delivery of Unlegended
Shares.

     

    (a)           Within
seven business days (such seventh business day being the “Unlegended Shares Delivery
Date”) after the business day on which the Company has received (i) a
notice that Note Conversion Shares or any other Common Stock held by a
Subscriber have been sold pursuant to a registration statement, if any, or Rule
144, (ii) a representation that the prospectus delivery requirements, or the
requirements of Rule 144, as applicable and if required, have been satisfied,
(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 a 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 (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 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.  In the event that the
Note Conversion Shares are sold in a manner that complies with an exemption from
registration, the Company will promptly instruct its counsel to issue to the
Company’s transfer agent an opinion permitting removal of the legend
indefinitely if pursuant to Rule 144(b)(1)(i).

    

    (b)           The
Company understands that a delay in the delivery of the Unlegended Shares
pursuant to Section 11 hereof later than 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 $25 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 11.1 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 Note Conversion Shares subject to such default at a price per
share equal to the greater of (i) 120% of the purchase price of such Note
Conversion Shares, or (ii) a fraction in which the numerator is the highest
closing price of the Common Stock during the aforedescribed 30 day period and
the denominator of which is the purchase price of the Note Conversion Shares,
during such 30 day period, multiplied by the purchase price of the Note
Conversion Shares (“Unlegended
Redemption Amount”).  The Company shall pay any payments
incurred under this Section in immediately available funds upon
demand.

     

    
      
         

      

      
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    (c)           
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 three 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.

    

    (d)           In
the event a Subscriber shall request delivery of Unlegended Shares as described
in Section 11.1 and the Company is required to deliver such Unlegended Shares
pursuant to Section 11.1, 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 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 Note Conversion Shares which are subject to
the injunction or temporary restraining order, which bond shall remain in effect
until the final unappealable disposition of the 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.

    

    11.2.           In
the event commencing one hundred and eighty-one (181) days after the Closing
Date and ending five years thereafter, the Subscriber is not permitted to resell
any of the Note Conversion Shares without any restrictive legend or further
restrictions on resale as a result of the unavailability to Subscriber of Rule
Rule 144(b)(1)(i) without the requirements of 144(c)(1) under the 1933 Act or
any successor rule (a “144
Default”), for any reason except for Subscriber’s status as an Affiliate
or “control person” of the Company, then the Company shall pay such Subscriber
as liquidated damages (“Liquidated Damages”) and not
as a penalty an amount equal to one percent (1%) for the first day of such
occurrence and one percent (1%) for each thirty (30) days (or such lesser
pro-rata amount for any period less than thirty (30) days) thereafter of the
purchase price of the Note Conversion Shares owned by the Subscriber during the
pendency of the 144 Default.

    

    12.           (a)           Right of First
Refusal.  Until eighteen months after the date of this
Subscription Agreement, the Subscribers shall be given not less than ten
business days prior written notice of any proposed sale by the Company of its
Common Stock or other securities or equity linked debt obligations, 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 to
employees, directors, and consultants, as described on Schedule 5(d), (iv) attorney’s
fees which may be paid with Common Stock and included for registration on Form
S-8, and (v) as a result of conversion of Notes which are granted or issued
pursuant to this Agreement on the terms described in the Transaction Documents
as of the Closing Date (collectively the foregoing are “Excepted
Issuances”).  The Subscribers who exercise their rights
pursuant to this Section 12(a) shall have the right during the ten business days
following receipt of the notice to purchase in cash or by using the outstanding
balance including principle, interest, liquidated damages and any other amount
then owing to such Subscriber by the Company, in the aggregate up to all of such
offered Common Stock, debt 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 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 ten
business days following the notice of modification to exercise such
right.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

         (b)                                Favored Nations
Provision.   Other than in connection with the Excepted
Issuances, if at any time the Notes or Note Conversion Shares are outstanding,
the Company shall offer, issue or agree to issue (the “Lower Price Issuance”) 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 Note Conversion Shares
without the consent of each Subscriber, then the Company shall issue, for each
such occasion, issue additional shares of Common Stock to each Subscriber
respecting those Notes, and Note Conversion Shares that remain outstanding at
the time of the Lower Price Issuance so that the average per share purchase
price of the shares of Common Stock issued to the Subscriber (of only the Common
Stock still owned by the Subscriber) is equal to such other lower price per
share and the Conversion Price shall automatically be reduced to such other
lower price.  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.  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 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 or to
which the Subscriber and Company are parties.  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 Sections 12(a) and 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.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    13.           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: Airtrax Inc., 870b
Central Avenue Hammonton NJ 08037, Attn: ____________, telecopier: (___)
___–____, with a copy by telecopier only to: Sichenzia Ross Friedman Ference
LLP, Attn: Richard A. Friedman, Esq., telecopier: (212) 930–9725, (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: (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
principles of conflicts of laws.  Any action brought by either party
against the other concerning the transactions contemplated by this Agreement
shall be brought only in the state and Federal courts located in the State and
county of New York.  The parties to this Agreement hereby irrevocably
waive any objection to jurisdiction and venue of any action instituted hereunder
and shall not assert any defense based on lack of jurisdiction or venue or based
upon forum non
conveniens.  The parties executing this Agreement
and other agreements referred to herein or delivered in connection herewith on
behalf of the Company agree to submit to the in personam jurisdiction of such
courts and hereby irrevocably 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.

     

    (e)           Specific Enforcement,
Consent to Jurisdiction.  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 seek an injunction or 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 13(d) hereof, the Company hereby
irrevocably 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.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

    (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 Transactions, 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 75% of the total of the Note Conversion
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.

     

    (j)           Maximum
Payments.   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.

     

    (k)           Calendar Days/Time
Periods.   All references to “days” in the Transaction
Documents shall mean calendar days unless otherwise stated.  The terms
“business days” and “trading days” shall mean days that the New York Stock
Exchange is open for trading for three or more hours.  Time periods
shall be determined as if the relevant action, calculation or time period were
occurring in New York City.

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     

    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.

     

     

    
      
        	 	AIRTRAX
      INC. a New Jersey corporation	 
	 	 	 	 
	
                Date

              	
                By:
      

              	/s/ 	 
	 	 	Name 	 
	 	 	Title 	 
	 	 	 	 

      

    

    
      	
              SUBSCRIBER

            	
              PURCHASE
      PRICE AND NOTE PRINCIPAL

            
	
              Name
      of Subscriber:

               

              Platinum Partners Long Term Growth
      V_______________________________

               

              Address:
      152 West 57th Street, ____________________________________

               

              New York, NY
      10019_________________________________________

               

              Fax
      No.: __________________________________________________

               

              Taxpayer
      ID# (if applicable): __________________________________

               

               

               

              _________________________________________________________

              (Signature)

              By:

               

            	
              $23,411.76

            
	 
      	 
      

    

    

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

     

    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.

     

     

    
       

      
        
          	 	AIRTRAX
      INC. a New Jersey corporation	 
	 	 	 	 
	
                  Date

                	
                  By:
      

                	/s/ 	 
	 	 	Name 	 
	 	 	Title 	 
	 	 	 	 

        

    

    

    

    
      	
              SUBSCRIBER

            	
              PURCHASE
      PRICE AND NOTE PRINCIPAL

            
	
              Name
      of Subscriber:

               

              Rachel Mendelowitz _______________________________

               

              Address:
      490 Argyle Road _________________

               

              Brooklyn
      NY 11218________________________

               

              Fax
      No.: (866) 651–8475______________________________________

               

              Taxpayer
      ID# (if applicable): __________________________________

               

               

               

              _________________________________________________________

              (Signature)

              By:

               

            	
              $11,760.00

            
	 
      	 
      

    

    

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

     

     

    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.

     

     

    
       

      
        
          	 	AIRTRAX
      INC. a New Jersey corporation	 
	 	 	 	 
	
                  Date

                	
                  By:
      

                	/s/ 	 
	 	 	Name 	 
	 	 	Title 	 
	 	 	 	 

        

    

    

    
      	
              SUBSCRIBER

            	
              PURCHASE
      PRICE AND NOTE PRINCIPAL

            
	
              Name
      of Subscriber:

               

              Ellis International Ltd.___________________________________________

               

              Address:
      53rd Street Urbanizacion Obarrio, Swiss Tower,
      16th Floor ___

               

              Panama, Republic of Panama
      ___________________________________

               

              Fax
      No.: (516)
      887–8990______________________________________

               

              Taxpayer
      ID# (if applicable): __________________________________

               

               

               

              _________________________________________________________

              (Signature)

              By:

               

            	
              $20,705.88

            
	 
      	 
      

    

     

    
 

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

     

    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.

     

     

     

    
      
        
          	 	AIRTRAX
      INC. a New Jersey corporation	 
	 	 	 	 
	
                  Date

                	
                  By:
      

                	/s/ 	 
	 	 	Name 	 
	 	 	Title 	 
	 	 	 	 

        

    

    

    
      	
              SUBSCRIBER

            	
              PURCHASE
      PRICE AND NOTE PRINCIPAL

            
	
              Name
      of Subscriber:

               

              Whalehaven Capital Fund Limited _______________________________

               

              Address:
      c/o FWS Capital Ltd. 3rd Floor, 14
      Par-Laville Road ________

               

              Hamilton, Bermuda
      HM08____________________________________

               

              Fax
      No.: (441)
      295–5262______________________________________

               

              Taxpayer
      ID# (if applicable): __________________________________

               

               

               

              _________________________________________________________

              (Signature)

              By:

               

            	
              $20,705.88

            
	 
      	 
      

    

    

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

     

    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.

     

     

    
       

      
        
          	 	AIRTRAX
      INC. a New Jersey corporation	 
	 	 	 	 
	
                  Date

                	
                  By:
      

                	/s/ 	 
	 	 	Name 	 
	 	 	Title 	 
	 	 	 	 

        

    

    

    
      	
              SUBSCRIBER

            	
              PURCHASE
      PRICE AND NOTE PRINCIPAL

            
	
              Name
      of Subscriber:

               

              Alpha Capital Anstalt
      _____________________________________________

               

              Address:
      Pradafant 7, 9490
      Furstentums _____________________________

               

              Vaduz, Lichtenstein __________________________________________

               

              Fax
      No.: 011-42-32323196
      __________________________________

               

              Taxpayer
      ID# (if applicable): __________________________________

               

               

               

              _________________________________________________________

              (Signature)

              By:

               

            	
              $23,411.76

            
	 
      	 
      

    

     

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

     

    LIST OF EXHIBITS AND
SCHEDULES

     

    
    

     

    
      	Exhibit A	Form of
    Note
	 	 
	Exhibit
      B 	Form of Escrow
      Agreement
	 	 
	Exhibit
      C  	Form of Legal
      Opinion
	 	 
	Schedule
      5(a)  	Subsidiaries
	 	 
	Schedule
      5(d) 	Additional Issuances
      / Capitalization / Reset Rights
	 	 
	Schedule
      5(o) 	Undisclosed
      Liabilities
	 	 
	Schedule
    5(x)	Transfer
    Agent
	 	 
	Schedule
      9(e)  	Use of
      Proceeds

    

     

     

     

    27

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