Document:

Exhibit 10.1.1

                             Subscription Agreement

                             SUBSCRIPTION AGREEMENT

     THIS SUBSCRIPTION  AGREEMENT (this  "Agreement"),  dated as of November 11,
2004, by and among VoIP,  Inc., a Texas  corporation  (the  "Company"),  and the
subscribers  identified on the signature  page hereto (each a  "Subscriber"  and
collectively "Subscribers").

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

     WHEREAS,  the  parties  desire  that,  upon the  terms and  subject  to the
conditions   contained  herein,   the  Company  shall  issue  and  sell  to  the
Subscribers,  as provided  herein,  and the Subscribers  shall purchase,  in the
aggregate,  up to $1,550,000  (the  "Purchase  Price") of the  Company's  common
stock,  $.001 par value (the "Common  Stock" or  "Shares"),  and share  purchase
warrants  in  the  form  attached  hereto  as  Exhibit  A  and  Exhibit  B  (the
"Warrants"),  to purchase shares of Common Stock (the "Warrant Shares"). The per
Share Purchase Price shall be $0.80,  subject to adjustment as described in this
Agreement.  The  Purchase  Price  shall be payable to the Company on the Closing
Date.  The Common Stock,  the Warrants and the Warrant  Shares are  collectively
referred to herein as the "Securities"; and

     WHEREAS,  the  aggregate  proceeds of the sale of the Common  Stock and the
Warrants  contemplated  hereby may be held in escrow  pursuant to the terms of a
Funds Escrow Agreement which may be executed by the parties substantially in the
form attached hereto as Exhibit C (the "Escrow Agreement").

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

     1.   Purchase and Sale of Shares and Warrants.

     Subject to the  satisfaction  (or waiver) of the  conditions to Closing set
forth in this Agreement and the Escrow Agreement, each Subscriber shall purchase
the Shares and Warrants for the portion of the Purchase  Price  indicated on the
signature  page hereto,  and the Company  shall sell such Shares and Warrants to
the Subscriber.  The Purchase Price for the Shares and Warrants shall be paid in
cash. The entire Purchase Price shall be allocated to the Shares.

     2.   Escrow  Arrangements;  Form of Payment.

     Upon  execution  hereof by the  parties  and  pursuant  to the terms of the
Escrow Agreement, each Subscriber agrees to make the deliveries required of such
Subscriber as set forth in the Escrow  Agreement and the Company  agrees to make
the deliveries required of the Company as set forth in the Escrow Agreement.

     3.   (a) A Warrants.

     On the Closing Date the Company  will issue A Warrants to the  Subscribers.
Thirty (30) A Warrant will be issued for each one hundred (100) Shares issued on
the Closing  Date.  The per Warrant  Share  exercise  price to acquire a Warrant
Share upon  exercise  of an A Warrant  shall be $1.75.  The A Warrants  shall be
exercisable  until five (5) years after the Closing  Date,  will have a cashless
exercise as described in Exhibit A hereto.

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     (b) B Warrants.  On the Closing  Date the Company  will issue B Warrants to
the Subscribers.  One (1) B Warrant will be issued for each (2) Shares issued on
the Closing  Date.  The per Warrant  Share  exercise  price to acquire a Warrant
Share upon  exercise  of a B Warrant  shall be $1.20.  The B  Warrants  shall be
exercisable from the date an effective registration statement which includes the
Warrant  Shares  issuable upon exercise of the B Warrants is declared  effective
through the thirtieth (30th) day of such effectiveness.

     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)  Information on Company.  The Subscriber has been furnished with or has
had access at the EDGAR Website of the  Commission to the Company's  Form 10-KSB
for the year ended December 31, 2003 as filed with the Commission, together with
all subsequently  filed Forms 10-QSB,  8-K, and filings made with the Commission
available at the EDGAR  website  (hereinafter  referred to  collectively  as the
"Reports"). In addition, the Subscriber has received in writing from the Company
such other information concerning its operations,  financial condition and other
matters as the  Subscriber  has requested in writing (such other  information is
collectively,  the "Other Written Information"),  and considered all factors the
Subscriber  deems material in deciding on the  advisability  of investing in the
Securities.

     (b)  Information on Subscriber.  The Subscriber is, and will be at the time
of the  issuance of the Common  Stock and  exercise of any of the  Warrants,  an
"accredited  investor",  as such term is defined in Regulation D promulgated  by
the Commission  under the 1933 Act, is  experienced in investments  and business
matters,  has  made  investments  of a  speculative  nature  and  has  purchased
securities of United States  publicly-owned  companies in private  placements in
the past and, with its  representatives,  has such  knowledge and  experience in
financial, tax and other business matters as to enable the Subscriber to utilize
the  information  made available by the Company to evaluate the merits and risks
of and to make an informed  investment  decision  with  respect to the  proposed
purchase,  which  represents a speculative  investment.  The  Subscriber 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.

     (c)  Purchase  of Common  Stock and  Warrants.  On the  closing  date,  the
Subscriber  will purchase the Common Stock and Warrants as principal for its own
account and not with a view to any distribution thereof.

     (d) 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.  In any  event,  and  subject  to
compliance with applicable security laws, the Subscriber may not for a period of
nine (9) months commencing from the date hereof enter into hedging transactions,
short positions or other derivative  transactions  relating to the Securities or
interests in the Securities.

<PAGE>

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

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

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

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

     (g)  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.

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

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<PAGE>

     (i) 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 (i) pursuant to an effective  registration  statement under the 1933 Act,
(ii) such Subscriber  provides the Company with an opinion of counsel, in a form
reasonably  acceptable to the Company, to the effect that a sale,  assignment or
transfer of the Securities may be made without  registration under the 1933 Act,
or (iii) Subscriber provides the Company with reasonable assurances (in the form
of seller  and broker  representation  letters)  that the Shares or the  Warrant
Shares,  as the case may be, can be sold  pursuant  to (A) Rule 144  promulgated
under the 1933 Act, or (B) Rule 144(k)  promulgated  under the 1933 Act, in each
case following the applicable holding period set forth therein.  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 specified Subscriber means any
other person or entity  directly or  indirectly  controlling,  controlled  by or
under direct or indirect  common  control with such  specified  Subscriber.  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.

     (j) 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.

     (k) 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 (as  hereinafter  defined),  shall be true and
correct as of the Closing Date.

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

     (m)  Subscriber  has had an  opportunity  to ask  questions  of and receive
satisfactory  answers from the Company,  or any person or persons  acting on the
Company's  behalf,  concerning  the terms and  conditions  of the  Offering  (as
defined in Section 7 (b) of this  Agreement)  and all such  questions  have been
answered to the full satisfaction of the undersigned.

     (n)  Subscriber  acknowledges  that the Company has made  available  to the
Subscriber  or the  Subscriber's  personal  advisors the  opportunity  to obtain
additional  information  to  evaluate  the merits and risks of this  investment,
including,  but not limited to, the income tax  consequences  of the investment.
The  undersigned  represents  that,  by  reason  of  Subscriber's  business  and
financial   experience,   Subscriber   has  acquired  the  capacity  to  protect
Subscriber's own interest in investments  similar to the Offering.  In reach the

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<PAGE>

conclusion that Subscriber desires to acquire the Securities, the Subscriber has
carefully evaluated Subscriber's financial resources and investment position and
the risks associated with the Offering and acknowledges  that Subscriber is able
to bear the economic risks of the Offering.

     (o) If Subscriber is a pension,  profit sharing or other  employee  benefit
plan (a "Plan"),  an investment in the  Securities  will not cause the Company's
assets  to  become  assets of the Plan,  and the  subscription  hereby  will not
violate any duty Subscriber owes to the Plan.

     5.   Company  Representations  and Warranties.

     The Company  represents  and  warrants  to and agrees with each  Subscriber
that:

     (a) Due  Incorporation.  The  Company  and  each of its  subsidiaries  is a
corporation duly organized, validly existing and in good standing under the laws
of the respective  jurisdictions of their  incorporation  and have the requisite
corporate  power to own their  properties  and to carry on their business as now
being conducted. The Company and each of its subsidiaries 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 taken as a whole.

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

     (c)  Authority;  Enforceability.  This  Agreement,  the Common  Stock,  the
Warrants and 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  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 other
equity interest in any of the subsidiaries of the Company except as described in
the Reports.

     (e) Consents.  No consent,  approval,  authorization or order of any court,
governmental  agency or body or arbitrator having jurisdiction over the Company,
or any of its affiliates,  the American Stock Exchange, the National Association
of Securities  Dealers,  Inc.,  Nasdaq SmallCap  Market,  the OTC Bulletin Board
("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.

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<PAGE>

     (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
the Transaction Documents 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 any of its  subsidiaries  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 or  subsidiaries  is a party,  by
          which the Company or any of its affiliates or  subsidiaries  is bound,
          or to  which  any  of the  properties  of  the  Company  or any of its
          affiliates  or  subsidiaries  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  or
          subsidiaries  is a party except the violation,  conflict,  breach,  or
          default  of which  would  not have a  material  adverse  effect on the
          Company; or

     (ii) result  in  the  creation  or  imposition  of  any  lien,   charge  or
          encumbrance  upon the  Securities or any of the assets of the Company,
          its subsidiaries or any of its affiliates; or

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

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

     (v)  result in a violation of Section 5 under the 1933 Act.

     (g)  The Securities. The Securities upon issuance:

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

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

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<PAGE>

     (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;
          and

     (iv) will not subject the holders  thereof to personal  liability by reason
          of being such holders.

     (h) Litigation.  Except as described in Schedule 5 (h), there is no pending
or, to the best knowledge of the Company, 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 Schedule
5(h), 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 on the Company.

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

     (j) No Market  Manipulation.  The Company has 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  of the  Company  to  facilitate  the sale or  resale  of the
Securities or affect the price at which the Securities may be issued or resold.

     (k)  Information  Concerning  Company.  The Reports  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 change in the Company's  business,  financial
condition or affairs not  disclosed  in the Reports.  The Reports do not contain
any  untrue  statement  of a  material  fact or omit to  state a  material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading in light of the circumstances when made.

     (l)  Stop  Transfer.  The  Securities,  when  issued,  will  be  restricted
securities.  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.

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     (m)  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 on the Company,  (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
its  knowledge  not in  violation  of any  statute,  rule or  regulation  of any
governmental  authority which violation would have a material  adverse effect on
the Company.

     (n) 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
if so integrated  would eliminate the exemption for the Offering as described in
the second  paragraph  of this  Agreement.  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 if so  integrated  would
eliminate the exemption for the Offering as described in the second paragraph of
this Agreement.

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

     (p) Listing.  The Company's  common stock is quoted on the Bulletin  Board.
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 and the Company satisfies and as of the Closing Date, the Company
will  satisfy all the  requirements  for the  continued  quotation of its common
stock on the Bulletin Board.

     (q)  No  Undisclosed  Liabilities.   The  Company  has  no  liabilities  or
obligations which are material,  individually or in the aggregate, which are not
disclosed  in the  Reports  and Other  Written  Information,  other  than  those
incurred in the ordinary course of the Company's  businesses since June 30, 2004
and which,  individually  or in the aggregate,  would  reasonably be expected to
have a material adverse effect on the Company's financial condition.

     (r) No Undisclosed  Events or Circumstances.  Since June 30, 2004, 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.

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     (s)  Capitalization.  The authorized and  outstanding  capital stock of the
Company as of the date of this  Agreement  and the Closing  Date is set forth on
Schedule  5(s).  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  except as
set forth in Schedule 5(s). All of the outstanding shares of Common Stock of the
Company have been duly and validly  authorized and issued and are fully paid and
nonassessable.

     (t)  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.

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

     (v) 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 Securities is in the best interests of
the Company. The Company specifically  acknowledges that its obligation to issue
the  Securities  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.

     (w)  No  Disagreements   with   Accountants  and  Lawyers.   There  are  no
disagreements of any kind presently existing,  or reasonably  anticipated by the
Company to arise between the Company and the accountants and lawyers formerly or
presently  employed  by the  Company,  including  but not limited to disputes or
conflicts over payment owed to such accountants and lawyers.

     (x)  Investment  Company.  The Company is not, and is not an Affiliate  (as
defined in Rule 405 under the 1933 Act ) or, an "investment  company" within the
meaning of the  Investment  Company  Act of 1940,  as  amended.6.  Regulation  D
Offering.  The offer and issuance of the Securities to the  Subscribers is being
made pursuant to the exemption from the registration  provisions of the 1933 Act
afforded  by  Section  4(2) or Section  4(6) of the 1933 Act and/or  Rule 506 of
Regulation  D  promulgated  thereunder.  On the Closing  Date,  the Company will
provide an opinion reasonably  acceptable to Subscriber from the Company's legal
counsel opining on the availability of an exemption from registration  under the
1933 Act as it relates to the offer and  issuance  of the  Securities  and other
matters  reasonably  requested by  Subscribers.  A form of the legal  opinion is
annexed hereto as Exhibit C. The Company will provide, at the Company's expense,
such other legal  opinions  in the future as are  reasonably  necessary  for the
resale of the  Common  Stock and  exercise  of the  Warrants  and  resale of the
Warrant Shares.

                                       9
<PAGE>

     7.   Finder/Legal Fees.

     (a) Finder's  Fee. The Company on the one hand,  and each  Subscriber  (for
himself  only) on the other hand,  agree to indemnify the other against and hold
the  other  harmless  from  any  and all  liabilities  to any  persons  claiming
brokerage  commissions  or finder's  fees other than the parties  identified  on
Schedule 7 hereto  (each a "Finder")  on account of services  purported  to have
been  rendered  on  behalf of the  indemnifying  party in  connection  with this
Agreement  or the  transactions  contemplated  hereby  and  arising  out of such
party's  actions.  Anything to the contrary in this  Agreement  notwithstanding,
each  Subscriber is providing  indemnification  only for such  Subscriber's  own
actions  and not for any  action  of any  other  Subscriber.  Each  Subscriber's
liability  hereunder is several and not joint.  The Company  agrees that it will
pay the Finders a fee as identified in Schedule 7 hereto. The Company represents
that there are no other  parties  entitled  to  receive  fees,  commissions,  or
similar payments in connection with the Offering except the Finders.

     (b) Legal Fees. The Company shall pay to Grushko & Mittman,  P.C., a fee of
$20,000  and  Hallett &  Perrin,  P.C.,  a fee of  $2,821.50  ("Legal  Fees") as
reimbursement  for services  rendered to the Subscribers in connection with this
Agreement and the purchase and sale of the Shares and Warrants (the "Offering").
The Legal Fees will be payable on the Closing Date out of funds held pursuant to
the Escrow Agreement.

     8.   Covenants of the Company.

     The Company covenants and agrees with the Subscribers as follows:

     (a) Stop Orders. The Company will advise the Subscribers, promptly 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.  The Company will  maintain the listing of its Common Stock on
the American Stock  Exchange,  Nasdaq  SmallCap  Market,  Nasdaq National Market
System,  Bulletin Board, or New York Stock Exchange  (whichever of the foregoing
is at the time the  principal  trading  exchange or market for the Common  Stock
(the  "Principal  Market")),  and will comply in all respects with the Company's
reporting,  filing  and  other  obligations  under  the  bylaws  or rules of the
Principal Market, as applicable.

     (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) Reporting  Requirements.  From the date of this Agreement and until the
sooner of (i) two (2) years after the Closing Date, or (ii) until all the Shares
and  Warrant  Shares  have been  resold or  transferred  by all the  Subscribers
pursuant to the  Registration  Statement or pursuant to Rule 144, without regard

                                      10
<PAGE>

to volume limitation, the Company will (v) cause its Common Stock to continue to
be  registered  under  Section 12(b) or 12(g) of the 1934 Act, (x) comply in all
respects  with its  reporting  and filing  obligations  under the 1934 Act,  (y)
comply with all reporting  requirements  that are applicable to an issuer with a
class of shares  registered  pursuant to Section 12(b) or 12(g) of the 1934 Act,
as applicable,  and (z) 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 two (2) years after the Closing  Date.  Until
the  earlier of the resale of the Common  Stock and the  Warrant  Shares by each
Subscriber or at least two (2) years after the Warrants have been exercised, the
Company  will use its best  efforts to continue  the listing or quotation of the
Common Stock on the Principal Market or other market with the reasonable consent
of  Subscribers  holding a majority of the Shares and Warrant  Shares,  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 Company  undertakes  to use the  proceeds of the
Subscribers' funds for the purposes set forth on Schedule 8(e) hereto. Except as
set forth on Schedule  8(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 the Closing Date.

     (f)  Reservation.  Prior to the Closing  Date,  the Company  undertakes  to
reserve,  pro rata, on behalf of each  Subscriber and holder of a Warrant,  from
its authorized but unissued common stock, a number of common shares equal to the
amount of Warrant Shares issuable upon exercise of the Warrants. Failure to have
sufficient  shares  reserved  pursuant  to  this  Section  8(g)  for  three  (3)
consecutive  business days or ten (10) days in the aggregate shall be a material
default of the Company's Obligations under this Agreement.

     (g) Taxes.  From the date of this Agreement and until the sooner of (i) two
(2) years  after the  Closing  Date,  or (ii) until all the  Shares and  Warrant
Shares have been resold or  transferred by all the  Subscribers  pursuant to the
Registration  Statement  or  pursuant  to Rule  144,  without  regard  to volume
limitations,  the Company 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.

                                       11
<PAGE>

     (h) Insurance.  From the date of this agreement and until the sooner of (i)
two (2) years after the Second  Closing  Date,  or (ii) until all the Shares and
Warrant Shares have been resold or transferred by all the  Subscribers  pursuant
to the Registration  Statement or pursuant to Rule 144, without regard to volume
limitations,  the  Company  will  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,  and the
Company will maintain, with financially sound and reputable insurers,  insurance
against  other  hazards and risks and  liability  to persona and property to the
extent and in the  manner  customary  for the  companies  in similar  businesses
similarly situated and to the extent available on commercially reasonable terms.

     (i) Books and Records. From the date of this Agreement and until the sooner
of (i) two (2) years  after the Closing  Date,  or (ii) until all the Shares and
Warrant Shares have been resold or transferred by all the  Subscribers  pursuant
to the Registration  Statement or pursuant to Rule 144, without regard to volume
limitations,  the Company  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
sooner of (i) two (2) years after the Closing Date, or (ii) until all the Shares
and  Warrant  Shares  have been  resold or  transferred  by all the  Subscribers
pursuant to the  Registration  Statement or pursuant to Rule 144, without regard
to volume  limitations,  the  Company  shall  duly  observe  and  conform in all
material respects to all valid requirements of governmental authorities relating
to the conduct of its business or to its properties or assets.

     (k)  Intellectual  Property.  From the date of this Agreement and until the
sooner of (i) two (2) years after the Closing Date, or (ii) until all the Shares
and  Warrant  Shares  have been  resold or  transferred  by all the  Subscribers
pursuant to the  Registration  Statement or pursuant to Rule 144, without regard
to volume  limitations,  the Company shall maintain in full force and effect its
corporate existence,  rights and franchises and all licenses and other rights to
use intellectual  property owned or possessed by it and reasonably  deemed to be
necessary to the conduct of its business.

     (l) Properties. From the date of this Agreement and until the sooner of (i)
two (2) years after the Closing  Date,  or (ii) until all the Shares and Warrant
Shares have been resold or  transferred by all the  Subscribers  pursuant to the
Registration  Statement  or  pursuant  to Rule  144,  without  regard  to volume
limitation,  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.

                                       12
<PAGE>

     (m)  Confidentiality/Public  Announcement.  From the date of this Agreement
and until the sooner of (i) two (2) years after the Closing  Date, or (ii) until
all the Shares and Warrant  Shares have been  resold or  transferred  by all the
Subscribers  pursuant  to the  Registration  Statement  or pursuant to Rule 144,
without  regard  to  volume  limitations,  the  Company  agrees  that  except in
connection with a Form 8-K or the Registration  Statement,  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 not later than the first business day after
the Closing  Date.  In the Form 8-K or public  announcement,  the  Company  will
specifically  disclose the amount of common stock outstanding  immediately after
each  Closing.  A form of the  proposed  Form 8-K or public  announcement  to be
employed in connection with the Closing is annexed hereto as Exhibit D.

     (n) Further Registration  Statements.  Except for a registration  statement
filed on behalf of the  Subscribers  pursuant to Section 10 of this Agreement or
in connection with the securities  identified on Schedule 10.1 hereto, which may
include only the  Additional  Offering (as defined in Section 11(a) hereof,  the
Company will not file any registration statements,  including but not limited to
Form  S-8,  with the  Commission  or with  state  regulatory  authorities  until
thirty-one  (31) days after the Closing  Date.  Nor will the  Company  allow any
registration  statement  except for the  Registration  Statement  to be declared
effective  by the  Commission  prior  to the  date  the  Registration  Statement
described in Section 10.1 (iv) is declared effective by the Commission  ("Actual
Effective  Date").  In the event the  Company  is in breach of the terms of this
Section 8(n), each  Subscriber  within thirty (30) days of the discovery of such
breach, at its option, may require the Company to purchase all or any portion of
the Shares and Warrant  Shares held by the Subscriber at a price per share equal
to one hundred ten percent (110%) of the Purchase Price of such Common Stock and
Warrant Shares.  The Company shall pay any payments  incurred under this Section
in immediately available funds upon demand.

     (o) Blackout.  The Company undertakes and covenants that until the first to
occur of (i) the end of the Exclusion Period defined in Section 11(a) hereof, or
(ii) until all the Shares and Warrant  Shares have been resold  pursuant to such
registration statement, the Company will not enter into any acquisition, merger,
exchange or sale or other transaction 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.

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

     (q) Lockup.  The Company will deliver to the  Subscribers  on or before the
Closing  date and  enforce  the  provisions  of  irrevocable  lockup  agreements
("Lockup Agreements") in the forms annexed hereto as Exhibit D, with the parties
identified on Schedule 8 (q) hereto for the period stated therein.

                                       13
<PAGE>

     9.   Covenants of the Company and Subscriber Regarding Indemnification.

     (a) The Company agrees to indemnify,  hold  harmless,  reimburse and defend
the  Subscribers,  the Subscribers'  officers,  directors,  agents,  affiliates,
control persons, and principal  shareholders,  against any claim, cost, expense,
liability,  obligation,  loss or damage (including reasonable legal fees) of any
nature,  incurred by or imposed  upon the  Subscriber  or any such person  which
results,  arises out of or is based upon (i) any material  misrepresentation  by
Company  or  breach  of any  warranty  by  Company  in  any  of the  Transaction
Documents;  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  under  any  Transaction  Documents  other  than  its
obligations under Section 10 of this Agreement.

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

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

     (d)  The   procedures  set  forth  in  Section  10.6  shall  apply  to  the
indemnifications set forth in Sections 9(a) and 9(b) above.

     10.1 Registration Rights.

          (i)  On  one  occasion,  for  a  period  commencing  one  hundred  and
               twenty-one  (121) days after the Closing Date, but not later than
               two (2) years after the Closing  Date  ("Request  Date"),  upon a
               written  request  therefore  from any record holder or holders of
               more than 50% of the Shares  issued and Warrant  Shares  actually
               issued upon exercise of the  Warrants,  the Company shall prepare
               and file with the Commission a registration  statement  under the
               1933 Act registering the Shares and Warrant Shares  (collectively
               "Registrable  Securities")  which are subject of such request for
               unrestricted  public  resale  by  the  holder  thereof.  For  the
               purposes  of  Sections  10.1  (i)  and  10.1  (ii),   Registrable
               Securities shall not include  Securities which are registered for
               resale in an  effective  registration  statement  or included for
               registration in a pending registration  statement,  or which have
               been issued without further transfer restrictions after a sale or

                                       14
<PAGE>

               transfer  pursuant  to Rule  144  under  the 1933  Act.  Upon the
               receipt of such request,  the Company shall promptly give written
               notice to all other record holders of the Registrable  Securities
               that such registration statement is to be filed and shall include
               in such registration  statement Registrable  Securities for which
               it has  received  written  requests  with ten (10) days after the
               Company gives such written notice.  Such other requesting  record
               holders   shall  be  deemed  to  have   exercised   their  demand
               registration right under this Section 10.1 (i).

          (ii) If the  Company  at any  time  proposes  to  register  any of its
               securities under the 1933 Act for sale to the public, whether for
               its own account or for the account of other  security  holders or
               both,  except with respect to  registration  statements  on Forms
               S-4,  S-8 or  another  form not  available  for  registering  the
               Registrable  Securities  for  sale to the  public,  provided  the
               Registrable Securities are not otherwise registered for resale by
               the Subscribers or Holder  pursuant to an effective  registration
               statement,  each  such time it will  give at least  fifteen  (15)
               days'  prior  notice  to the  record  holder  of the  Registrable
               Securities of its intention so to do. Upon the written request of
               the holder,  received  by the Company  within ten (10) days after
               the giving of any such notice by the Company,  to register any of
               the Registrable Securities not previously registered, the Company
               will cause such Registrable  Securities as to which  registration
               shall have been so requested to be included  with the  securities
               to be covered by the registration  statement proposed to be filed
               by the Company,  all to the extent required to permit the sale or
               other disposition of the Registrable  Securities so registered by
               the  holder  of such  Registrable  Securities  (the  "Seller"  or
               "Sellers").  In the event that any registration  pursuant to this
               Section 10.1 (ii) shall be, in whole or in part, an  underwritten
               public  offering of common  stock of the  Company,  the number of
               shares  of  Registrable  Securities  to be  included  in  such an
               underwriting may be reduced by the managing underwriter if and to
               the extent that the Company and the underwriter  shall reasonably
               be of the opinion that such inclusion would adversely  effect the
               marketing of the  securities  to be sold by the Company  therein;
               provided,  however,  that the Company  shall notify the Seller in
               writing  of any such  reduction.  Notwithstanding  the  foregoing
               provisions,  or Section 10.4 hereof,  the Company may withdraw or
               delay or suffer a delay of any registration statement referred to
               in this Section 10.1 (ii) without thereby incurring any liability
               to the Seller.

          (iii)If, at the time any written request for  registration is received
               by the  Company  pursuant  to Section  10.1 (i),  the Company has
               determined to proceed with the actual preparation and filing of a
               registration  statement under the 1933 Act in connection with the
               proposed offer and sale for cash of any of its securities for the
               Company's  own account and the  Company  actually  does file such
               other  registration  statement,  such  written  request  shall be
               deemed to have been given  pursuant  to Section  10.1 (ii) rather
               than  Section  10.1  (i),  and  the  rights  of  the  holders  of
               Registrable  Securities  covered by such written request shall be
               governed by Section 10.1 (11).

          (iv) Registration  Rights.  The Company shall file with the Commission
               not later  than  thirty  (30) days  after the  Closing  Date (the
               "Filing Date"), and use commercially  reasonable efforts to cause
               to be declared effective within one hundred and twenty (120) days
               after  the  Closing  Date   ("Effective   Date"),   a  Form  SB-2
               registration  statement (the  "Registration  Statement") (or such
               other form that it is eligible  to use) in order to register  the
               Registrable Securities for resale and distribution under the 1933
               Act. The Company  will  register not less than a number of shares
               of common stock in the aforedescribed registration statement that
               is  equal  to all of  the  Shares  and  Warrant  Shares  issuable
               pursuant to this Agreement.  The Registrable  Securities shall be
               reserved  and  set  aside  exclusively  for the  benefit  of each
               Subscriber and Warrant holder, pro rata, and not issued, employed

                                       15
<PAGE>

               or  reserved  for  anyone  other  than each such  Subscriber  and
               Warrant holder.  The  Registration  Statement will immediately be
               amended or additional registration statements will be immediately
               filed by the Company as necessary to register  additional  shares
               of Common  Stock to allow the public  resale of all Common  Stock
               included in and issuable by virtue of the Registrable Securities.
               Without the written consent of the  Subscriber,  no securities of
               the  Company  other  than  the  Registrable  Securities  will  be
               included in the  Registration  Statement  except as  described on
               Schedule 10.1. The Company shall use the services of counsel Marc
               J. Ross of Sichenzia Ross Friedman  Ference,  LLP located at 1065
               Avenue  of  the  Americas,   New  York,   New  York  10018,   (T)
               212.398.5541  to  review  the  Registration  Statement  described
               herein.

     10.2.Registration Procedures.

     If and whenever the Company is required by the  provisions  of Section 10.1
to effect the registration of any Registrable Securities under the 1933 Act, the
Company will, as expeditiously as possible:

     (a) subject to the timelines  provided in this Agreement,  prepare and file
with the  Commission  a  registration  statement  required  by Section  10, with
respect to such  securities and use its best efforts to cause such  registration
statement  to become and  remain  effective  for the period of the  distribution
contemplated  thereby (as herein provided),  and promptly provide to the holders
of the Registrable  Securities  copies of all filings and Commission  letters of
comment and notify Subscribers and Grushko & Mittman, P.C. (by telecopier and by
email to Counslers@aol.com)  within two (2) business days of (i) notice that the
Commission has no comments or no further comments on the Registration Statement,
(ii) request by the Company of acceleration of effectiveness of any registration
statement which includes  Registrable  Securities,  and (iii) the declaration of
effectiveness of the registration statement;

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

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

     (d) use its best  efforts to register or qualify the  Sellers'  Registrable
Securities covered by such registration  statement under the securities or "blue
sky"  laws in up to five (5)  jurisdictions  as the  Sellers  shall  request  in
writing,  provided,  however, that the Company shall not for any such purpose be
required to qualify generally to transact  business as a foreign  corporation in
any  jurisdiction  where it is not so qualified or to consent to general service
of process in any such jurisdiction;

                                       16
<PAGE>

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

     (f) immediately  notify the Sellers when a prospectus  relating  thereto is
required to be  delivered  under the 1933 Act, of the  happening of any event of
which the Company has knowledge as a result of which the prospectus contained in
such registration  statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated  therein
or  necessary  to make the  statements  therein not  misleading  in light of the
circumstances then existing; and

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

     10.3.Provision of Documents.

     In  connection  with each  registration  described in this Section 10, each
Subscriber  will  furnish  to  the  Company  in  writing  such  information  and
representation  letters with respect to itself and the proposed  distribution by
it as reasonably  shall be necessary in order to assure  compliance with federal
and applicable state securities laws.

     10.4.Non-Registration Events.

     The Company and the Subscribers  agree that the Sellers will suffer damages
if the  Registration  Statement is not filed by the Filing Date and not declared
effective by the Commission by the Effective  Date, and maintained in the manner
and within the time periods  contemplated by Section 10 hereof, and it would not
be feasible to ascertain the extent of such damages with precision. Accordingly,
if (i) the  Registration  Statement  is not filed on or before the Filing  Date,
(ii) the  Registration  Statement  is not  declared  effective  on or before the
Effective Date, or (iii) the  Registration  Statement is not declared  effective
within five (5) business  days after receipt by the Company of a written or oral
communication  from the Commission that the  Registration  Statement will not be
reviewed  or  that  the  Commission  has  no  further  comments,   or  (iv)  the
Registration  Statement is filed and  declared  effective  but shall  thereafter
cease to be effective  (without being succeeded within ten (10) business days by
an effective replacement or amended registration statement) for a period of time
which shall exceed 30 days in the aggregate per year (defined as a period of 365
days commencing on the date the Registration Statement is declared effective) or
more than 20 consecutive days (each such event referred to in clauses (i), (ii),
(iii) and (iv) of this Section 10.4 is referred to herein as a "Non-Registration
Event"), then for each thirty (30) days of the pendency of such Non-Registration
Event,  the Company shall deliver to the holder of  Registrable  Securities,  as
Liquidated  Damages,  an amount equal to one and one-half  percent (1.5%) of the
Purchase  Price of the Shares and Warrant  Shares owned of record by such holder
as of and during the pendency of such  Non-Registration  Event which are subject
to such Non-Registration  Event. Liquidated Damages payable in connection with a
Filing  Date  Non-Registration  Event will be waived if the Actual  Filing  Date
occurs within forty five (45) days after the Closing Date. The Company must pay

                                       17
<PAGE>

the Liquidated Damages in cash within ten (10) days after the end of each thirty
(30) day  period or  shorter  part  thereof  for which  Liquidated  Damages  are
payable.  In the event a Registration  Statement is filed by the Filing Date but
is withdrawn  prior to being  declared  effective by the  Commission,  then such
Registration  Statement  will be  deemed  to have  not been  filed.  All oral or
written  comments  received  from the  Commission  relating to the  Registration
Statement  must be responded to within  fifteen (15) business  days.  Failure to
timely respond is a  Non-Registration  Event for which  Liquidated  Damages will
accrue and be payable by the Company to the holders of Registrable Securities at
the same rate set forth above.

     10.5.Expenses.

     All  expenses  incurred  by the  Company  in  complying  with  Section  10,
including,  without  limitation,  all  registration  and filing  fees,  printing
expenses,  fees and disbursements of counsel and independent  public accountants
for the Company,  fees and expenses (including reasonable counsel fees) incurred
in connection  with complying with state  securities or "blue sky" laws, fees of
the National  Association of Securities  Dealers,  Inc., transfer taxes, fees of
transfer  agents and  registrars,  costs of insurance  are called  "Registration
Expenses." All underwriting  discounts and selling commissions applicable to the
sale of  Registrable  Securities,  including any fees and  disbursements  of any
additional  counsel to the Seller,  are called  "Selling  Expenses." The Company
will pay all Registration Expenses in connection with the registration statement
under  Section  10.  Selling  Expenses  in  connection  with  each  registration
statement  under Section 10 shall be borne by the Seller and may be  apportioned
among the  Sellers  in  proportion  to the  number of shares  sold by the Seller
relative to the number of shares sold under such  registration  statement  or as
all Sellers thereunder may agree. Additionally, the parties agree that each will
be  responsible  for  their  respective  legal  fees  in  connection  with  this
transaction.

     10.6. Indemnification and Contribution.

     (a) In the event of a registration of any Registrable  Securities under the
1933 Act pursuant to Section 10, the Company  will,  to the extent  permitted by
law,  indemnify and hold harmless the Seller,  each officer of the Seller,  each
director  of  the  Seller,  each  underwriter  of  such  Registrable  Securities
thereunder  and  each  other  person,  if  any,  who  controls  such  Seller  or
underwriter  within the meaning of the 1933 Act,  against  any  losses,  claims,
damages  or  liabilities,  joint  or  several,  to  which  the  Seller,  or such
underwriter  or  controlling  person  may become  subject  under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect  thereof) arise out of or are based upon any untrue statement or alleged
untrue  statement of any material fact contained in any  registration  statement
under  which  such  Registrable  Securities  was  registered  under the 1933 Act
pursuant to Section 10, any preliminary prospectus or final prospectus contained
therein,  or any amendment or supplement  thereof,  or arise out of or are based
upon the omission or alleged  omission to state therein a material fact required
to be stated therein or necessary to make the statements  therein not misleading
in light of the  circumstances  when made, and will subject to the provisions of
Section  10.6(c)  reimburse  the  Seller,  each such  underwriter  and each such
controlling person for any legal or other expenses  reasonably  incurred by them
in connection  with  investigating  or defending any such loss,  claim,  damage,

                                       18
<PAGE>

liability or action; provided,  however, that the Company shall not be liable to
the Seller to the extent that any such damages arise out of or are based upon an
untrue  statement  or omission  made in any  preliminary  prospectus  if (i) the
Seller failed to send or deliver a copy of the final prospectus delivered by the
Company to the Seller with or prior to the delivery of written  confirmation  of
the sale by the Seller to the person asserting the claim from which such damages
arise,  (ii) the final  prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged  omission,  or (iii) to the
extent that any such loss, claim,  damage or liability arises out of or is based
upon an untrue  statement  or alleged  untrue  statement  or omission or alleged
omission so made in conformity with information furnished by any such Seller, or
any such controlling person in writing specifically for use in such registration
statement or prospectus.

     (b) In the event of a  registration  of any of the  Registrable  Securities
under the 1933 Act pursuant to Section 10, each Seller severally but not jointly
will, to the extent  permitted by law,  indemnify and hold harmless the Company,
and each person, if any, who controls the Company within the meaning of the 1933
Act,  each  officer of the Company who signs the  registration  statement,  each
director of the  Company,  each  underwriter  and each person who  controls  any
underwriter  within the meaning of the 1933 Act,  against  all  losses,  claims,
damages or liabilities,  joint or several, to which the Company or such officer,
director,  underwriter or  controlling  person may become subject under the 1933
Act or otherwise,  insofar as such losses,  claims,  damages or liabilities  (or
actions in respect  thereof) arise out of or are based upon any untrue statement
or alleged untrue  statement of any material fact contained in the  registration
statement under which such Registrable Securities were registered under the 1933
Act  pursuant  to Section 10, any  preliminary  prospectus  or final  prospectus
contained therein,  or any amendment or supplement  thereof,  or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated  therein or necessary to make the  statements  therein not
misleading,  and will  reimburse  the Company and each such  officer,  director,
underwriter  and controlling  person for any legal or other expenses  reasonably
incurred by them in connection  with  investigating  or defending any such loss,
claim, damage, liability or action,  provided,  however, that the Seller will be
liable  hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue  statement or omission or alleged  omission made in reliance upon
and in conformity with information pertaining to such Seller, as such, furnished
in  writing  to the  Company  by  such  Seller  specifically  for  use  in  such
registration statement or prospectus,  and provided,  further, however, that the
liability of the Seller hereunder shall be limited to the net proceeds  actually
received by the Seller from the sale of Registrable  Securities  covered by such
registration statement.

     (c) Promptly after receipt by an indemnified  party  hereunder of notice of
the  commencement  of any action,  such  indemnified  party shall, if a claim in
respect thereof is to be made against the indemnifying  party hereunder,  notify
the  indemnifying  party in writing  thereof,  but the omission so to notify the
indemnifying  party shall not relieve it from any liability which it may have to
such  indemnified  party  other than under this  Section  10.6(c) and shall only
relieve it from any liability which it may have to such indemnified  party under
this  Section  10.6(c),  except and only if and to the  extent the  indemnifying
party is prejudiced by such  omission.  In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying  party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and  undertake  the defense  thereof
with counsel  satisfactory to such indemnified party, and, after notice from the
indemnifying  party to such  indemnified  party of its election so to assume and
undertake the defense  thereof,  the  indemnifying  party shall not be liable to
such  indemnified  party  under  this  Section  10.6(c)  for any legal  expenses
subsequently  incurred by such indemnified  party in connection with the defense

                                       19
<PAGE>

thereof other than reasonable costs of investigation and of liaison with counsel
so selected,  provided,  however,  that,  if the  defendants  in any such action
include  both  the  indemnified  party  and  the  indemnifying   party  and  the
indemnified  party shall have reasonably  concluded that there may be reasonable
defenses  available  to it  which  are  different  from or  additional  to those
available to the indemnifying party or if the interests of the indemnified party
reasonably  may be deemed to conflict  with the  interests  of the  indemnifying
party, the indemnified  parties,  as a group, shall have the right to select one
separate  counsel and to assume such legal defenses and otherwise to participate
in the defense of such  action,  with the  reasonable  expenses and fees of such
separate  counsel  and  other  expenses  related  to  such  participation  to be
reimbursed by the indemnifying party as incurred.

     (d) In order to provide for just and equitable contribution in the event of
joint liability under the 1933 Act in any case in which either (i) a Seller,  or
any controlling person of a Seller,  makes a claim for indemnification  pursuant
to this Section 10.6 but it is  judicially  determined  (by the entry of a final
judgment or decree by a court of competent  jurisdiction  and the  expiration of
time  to  appeal  or  the  denial  of  the  last  right  of  appeal)  that  such
indemnification  may not be enforced in such case  notwithstanding the fact that
this  Section  10.6  provides  for   indemnification   in  such  case,  or  (ii)
contribution  under the 1933 Act may be  required  on the part of the  Seller or
controlling  person of the Seller in circumstances for which  indemnification is
not provided  under this Section 10.6;  then, and in each such case, the Company
and the Seller will  contribute  to the  aggregate  losses,  claims,  damages or
liabilities  to which they may be subject  (after  contribution  from others) in
such  proportion  so that  the  Seller  is  responsible  only  for  the  portion
represented by the percentage  that the public  offering price of its securities
offered by the registration  statement bears to the public offering price of all
securities offered by such registration statement,  provided,  however, that, in
any such case,  (y) the Seller will not be required to contribute  any amount in
excess  of the  public  offering  price of all  such  securities  offered  by it
pursuant to such registration  statement;  and (z) no person or entity guilty of
fraudulent  misrepresentation  (within the meaning of Section  11(f) of the 1933
Act) will be  entitled  to  contribution  from any  person or entity who was not
guilty of such fraudulent misrepresentation.

     10.7. Delivery of Unlegended Shares.

     (a) Within seven (7) business days (such seventh  (7th))  business day, the
"Unlegended  Shares  Delivery Date") after the business day on which the Company
has  received  (i) a notice that  Registrable  Securities  have been sold either
pursuant to the  Registration  Statement or Rule 144 under the 1933 Act,  (ii) a
representation that the prospectus delivery requirements, or the requirements of
Rule 144, as  applicable,  have been  satisfied,  and (iii) the  original  share
certificates  representing  the shares of Common Stock that have been sold,  and
(iv) in the case of sales under Rule 144,  customary  representation  letters of
the  Subscriber  and/or  Subscriber's  broker and opinion of counsel  reasonably
acceptable to the Company  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 legends

                                       20
<PAGE>

set forth in Sections  4(e) and 4(f) above,  issuable  pursuant to any effective
and current Registration  Statement described in Section 10 of this Agreement or
pursuant to Rule 144 under the 1933 Act (the "Unlegended Shares"); and (z) cause
the transmission of the certificates representing the Unlegended Shares together
with a legended  certificate  representing  the balance of the unsold  shares of
Common Stock,  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.  Transfer fees shall be the  responsibility
of the Seller.

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

     (c) The Company  understands that a delay in the delivery of the Unlegended
Shares pursuant to Section 10 hereof beyond the Unlegended  Shares Delivery Date
could result in economic loss to a Subscriber.  As  compensation to a Subscriber
for such  loss,  the  Company  agrees to pay late  payment  fees (as  liquidated
damages and not as a penalty) to the  Subscriber for late delivery of Unlegended
Shares in the amount of $100 per business  day after the Delivery  Date for each
$10,000 of  purchase  price of the  Unlegended  Shares  subject to the  delivery
default.  If during any 360 day period,  the Company fails to deliver Unlegended
Shares as required by this  Section  10.7 for an  aggregate of thirty (30) days,
then each Subscriber or assignee holding Securities subject to such default may,
at its option,  require the Company to purchase all or any portion of the Shares
and  Warrant  Shares  subject to such  default at a price per share equal to one
hundred  twenty  percent  (120%) of the Purchase  Price of such Common Stock and
Warrant Shares.  The Company shall pay any payments  incurred under this Section
in immediately available funds upon demand.

     (d) In addition  to any other  rights  available  to a  Subscriber,  if the
Company fails to deliver to a Subscriber  Unlegended Shares as required pursuant
to this  Agreement,  within ten (10) calendar days after the  Unlegended  Shares
Delivery Date and the  Subscriber  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  anticipated
receiving  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.

                                       21
<PAGE>

     (e) In the event a Subscriber shall request  delivery of Unlegended  Shares
as  described  in Section  10.7(e) and the  Company is required to deliver  such
Unlegended  Shares  pursuant to Section  10.7(e),  the Company may not refuse to
deliver  Unlegended  Shares based on any claim that such  Subscriber  or any one
associated or affiliated  with such Subscriber has been engaged in any violation
of law, or for any other reason,  unless, an injunction or temporary restraining
order from a court,  on notice,  restraining  and or enjoining  delivery of such
Unlegended  Shares or  exercise of all or part of said  Warrant  shall have been
sought and  obtained and the Company has posted a surety bond for the benefit of
such Subscriber in the amount of one hundred twenty percent (120%) of the amount
of the aggregate purchase price of the Common Stock and Warrant Shares which are
subject to the  injunction  or  temporary  restraining  order,  which bond shall
remain in effect until the completion of  arbitration/litigation  of the dispute
and the  proceeds  of which  shall be payable to such  Subscriber  to the extent
Subscriber obtains judgment in Subscriber's favor.

     11.  (a) Right of First Refusal.

     Until the Registration  Statement has been effective for one hundred twenty
(120) days ("Exclusion  Period"),  the Subscribers  shall be given not less than
ten (10) business days prior written  notice of any proposed sale by the Company
of its  common  stock  or  other  securities  or  debt  obligations,  except  in
connection  with (i) employee stock options or compensation  plans,  (ii) public
offering  on  behalf  of the  Company  conducted  by a  member  of the  National
Association  of  Securities  Dealers,   Inc.  to  be  conducted  pursuant  to  a
registration  statement  filed with the  Commission,  (iii) up to $500,000.00 of
Common Stock and Warrants on terms not more favorable to the Purchasers than the
terms of the  Offering  which sale may close  after the  Closing  Date but which
shares may not be registered  prior to the Actual  Effective  Date  ("Additional
Offering"),  (iv) as full or partial  consideration  in connection  with merger,
consolidation  or purchase of  substantially  all of the securities or assets of
any corporation or other entity, or (iv) as has been described in the Reports or
Other  Written  Information  filed  with  the  Commission  or  delivered  to the
Subscribers prior to the Closing Date  (collectively the foregoing are "Excepted
Issuances").  The Subscribers who exercise their rights pursuant to this Section
11(a) shall have the right during the five (5) business days  following  receipt
of the notice to purchase 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 Shares 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 five (5) business days  following  the notice of  modification,
whichever is longer, to exercise such right.

     (b) Favored Nations Provision. Other than the Excepted Issuances, if at any
time that a Subscriber is still holding  Shares or Warrant Shares and during the
entire warrant  exercise period,  if the Company shall offer,  issue or agree to
issue any common stock or securities  convertible into or exercisable for shares
of common stock (or modify any of the foregoing  which may be outstanding at any
time prior to the Closing  Date) to any person or entity at a price per share or
conversion  or  exercise  price per share which shall be less than the Per Share
Purchase Price,  without the consent of each Subscriber holding Shares, then the
Company shall issue, for each such occasion,  additional  shares of Common Stock
to each Subscriber so that the average Per Share Purchase Price of the shares of
Common  Stock  issued to the  Subscriber  (of only the  Common  Stock or Warrant
Shares  still  owned by the  Subscriber)  is equal to such other lower price per
share but not less than $.001 per share.  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

                                       22
<PAGE>

Section 10 hereof in relation to such  additional  shares of Common Stock except
that the Filing Date and Effective Date vis-a-vis such additional  common shares
shall be,  respectively,  the  sixtieth  (60th) and one  hundred  and  twentieth
(120th) date after the closing date giving rise to the  requirement to issue the
additional  shares of Common Stock.  For purposes of the issuance and adjustment
described  in this  paragraph,  the  issuance  of any  security  of the  Company
carrying  the right to convert such  security  into shares of Common Stock or of
any  warrant,  right or option to  purchase  Common  Stock  shall  result in the
issuance  of the  additional  shares of Common  Stock upon the  issuance of such
convertible security, warrant, right or option. The rights of the Subscriber set
forth in this Section 11 are in addition to any other rights the  Subscriber has
pursuant to this Agreement and any other  agreement  referred to or entered into
in connection herewith.

     (c) Reset. If during the period  commencing on the Closing Date through the
Actual  Effective Date ("Reset Period") the volume weighted average price of the
Common  stock as reported by the  Bloomberg  LP using the AQR  function  for the
Principal  Market  ("VWAP") is less than $.80 for any five  consecutive  trading
days then for the lowest such average during the Reset Period,  each  Subscriber
shall receive  additional shares of Common Stock ("Reset Shares")  sufficient an
amount  to make  the  average  purchase  price  of the  Shares  received  by the
Subscriber  on the Closing  Date  together  with such Reset  Shares equal to the
average of the  lowest  five (5) day VWAP  during the Reset  Period but not less
than $.001 per share.  The Reset  Shares must be  delivered  to each  Subscriber
together with the calculation  supporting the number of Reset Shares issued, not
later than seven (7) days after the Closing Date.  The  Subscriber is granted in
connection with the Reset Shares the same registration rights,  undertakings and
indemnification  granted and made by the Company in connection  with the Shares,
except that in connection with the Reset Shares the Actual  Effective Date shall
be deemed the  Closing  Date for  purposes  of  calculating  the Filing Date and
Effective Date.

     (d)  Maximum  Exercise of Rights.  In the event the  exercise of the rights
described  in Section  11(a) would 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 10 of the Warrant,
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
maximum amount set forth calculated in the manner described in Section 10 of the
Warrant. The determination of when such common stock may be issued shall be made
by each Subscriber as to only such Subscriber.

     12.  Covenants of the Subscriber.

     The Subscribers to the Offering,  each for itself,  covenant and agree with
the  Company  that  provided  no Event of Default  (as  defined in the Note) has
occurred,  then until 120 days after the Actual  Effective  Date (as  defined in
Section  8(n) of this  Agreement),  each  Subscriber  will  not,  without  prior
approval  of  the  Company  and  each  other  Subscriber  sell  in  open  market
transactions  during  each  of  the  four  (4)  subsequent   thirty-day  periods
commencing on the Actual Effective Date Shares in excess of twenty-five  percent
(25%) of the Shares purchased by such Subscriber. Any Shares not sold during any
thirty-day period may be sold in any subsequent thirty-day period in addition to
the twenty-five percent (25%) of the shares that may otherwise be sold.

                                       23
<PAGE>

     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:  VoIP,  Inc.,  12330 SW53
Street,  Suite 712, Cooper City Florida 33330,  Attn: Steven Ivester,  President
and CEO, telecopier:  (954) 434-2877,  with a copy by telecopier only to: Ronald
L. Brown,  Andrews Kurth LLP, 717 Main Street,  Suite 3700, Dallas, Texas 75201,
telecopier:  (214)  659-4819,  (ii) if to the  Subscribers,  to: the one or more
addresses and telecopier  numbers indicated on the signature pages hereto,  with
an additional  copy by telecopier  only to:  Grushko & Mittman,  P.C., 551 Fifth
Avenue, Suite 1601, New York, New York 10176, telecopier number: (212) 697-3575,
and (iii) if to the Finder, to: the one or more addresses and telecopier numbers
indicated on Schedule 7 hereto.

     (b) Closing. 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  of all  conditions to
Closing set forth in this Agreement.

     (c)  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 either
party shall be assigned by that party  without  prior  notice to and the written
consent of the other party.

     (d) 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.

                                       24
<PAGE>

     (e) 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 courts of New York or in the federal courts located in
the state of New York. The parties and the individuals  executing this Agreement
and other agreements  referred to herein or delivered in connection  herewith on
behalf of the  Company  agree to submit to the  jurisdiction  of such courts and
waive trial by jury. The prevailing  party shall be entitled to recover from the
other  party its  reasonable  attorney's  fees and costs.  In the event that any
provision of this  Agreement  or any other  agreement  delivered  in  connection
herewith is invalid or  unenforceable  under any  applicable  statute or rule of
law, then such provision  shall be deemed  inoperative to the extent that it may
conflict  therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or  unenforceable  under
any law shall not affect the validity or  enforceability  of any other provision
of any agreement.

     (f)  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 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  12(e)  hereof,  each of the  Company,  Subscriber  and any
signator hereto in his personal capacity hereby waives, and agrees not to assert
in any such suit,  action or  proceeding,  any claim  that it is not  personally
subject to the jurisdiction in New York of such court,  that the suit, action or
proceeding  is brought in an  inconvenient  forum or that the venue of the suit,
action or proceeding is improper.  Nothing in this Section shall affect or limit
any right to serve process in any other manner permitted by law.

     (g) 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 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 SB-2  Registration  Statement and

                                       25
<PAGE>

(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.

                  (h) Equitable Adjustment. The Securities and the purchase
prices of Securities shall be equitably adjusted to offset the effect of stock
splits, stock dividends, and distributions of property or equity interests of
the Company to its shareholders.

                      [THIS SPACE INTENTIONALLY LEFT BLANK]

                                       26
<PAGE>
<TABLE>
<CAPTION>

                  SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)
                  --------------------------------------------

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

                                                     VoIP, INC.,
                                                     a Texas corporation

                                                     By:/s/ Steven Ivester
                                                     ---------------------------
                                                     Name:  Steven Ivester
                                                     Title:   President

                         Dated: as of November 11, 2004

----------------------------------------------------------------------------------------------
SUBSCRIBER                                  PURCHASE PRICE   SHARES    A WARRANTS   B WARRANTS
----------------------------------------------------------------------------------------------
<S>                                         <C>              <C>       <C>          <C>
WHALEHAVEN CAPITAL FUND LTD.3RD Floor, 14   $300,000         375,000   112,500      187,500
Par-Laville Road
Hamilton, Bermuda HM08
Fax: (441) 292-1373

/s/ Evan Schemenauer
--------------------
(Signature)
By:  Evan Schemenauer
----------------------------------------------------------------------------------------------
</TABLE>

                                       27
<PAGE>
<TABLE>
<CAPTION>

                  SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B)

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

                                                     VoIP, INC.,
                                                     a Texas corporation

                                                     By:/s/ Steven Ivester
                                                     ---------------------------
                                                     Name:  Steven Ivester
                                                     Title:   President

                         Dated: as of November 11, 2004

---------------------------------------------------------------------------------
SUBSCRIBER                        PURCHASE PRICE  SHARES   A WARRANTS  B WARRANTS
---------------------------------------------------------------------------------
<S>                               <C>             <C>      <C>         <C>
ALPHA CAPITAL AKTIENGESELLSCHAFT  $500,000        625,000  187,500     312,500
Pradafant 7
9490 Furstentums
Vaduz, Lichtenstein
Fax: 011-42-32323196
/s/ Illegible
-------------
(Signature)
By:
---------------------------------------------------------------------------------
</TABLE>

                                       28
<PAGE>
<TABLE>
<CAPTION>

                  SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (C)

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

                                                     VoIP, INC.,
                                                     a Texas corporation

                                                     By:/s/ Steven Ivester
                                                     ---------------------------
                                                     Name:  Steven Ivester
                                                     Title:   President

                         Dated: as of November 11, 2004

--------------------------------------------------------------------------------------------------
SUBSCRIBER                                        PURCHASE PRICE  SHARES    A WARRANTS  B WARRANTS
--------------------------------------------------------------------------------------------------
<S>                                               <C>             <C>       <C>         <C>
CORDILLERA FUND L.P.                              $500,000        625,000   187,500     312,500

/s/ James Andrew
----------------
(Signature)
By: James P. Andrew
Co-CEO of Andrew Carter Capital, Inc. the General
Partner of ACCR GenPar, L.P.
The General Partner of the Cordillera Fund L.P.
--------------------------------------------------------------------------------------------------
</TABLE>

                                       29
<PAGE>

                  SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (D)

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

                                                     VoIP, INC.,
                                                     a Texas corporation

                                                     By:/s/ Steven Ivester
                                                     ---------------------------
                                                     Title:   President

                         Dated: as of November 11, 2004

--------------------------------------------------------------------------------
SUBSCRIBER                  PURCHASE PRICE   SHARES    A WARRANTS   B WARRANTS
--------------------------------------------------------------------------------
STUART KOSH                 $250,000         312,000   93,750       156,250
2514 Poinciana Drive
Weston, Florida 33327
Fax: (954)978-9328

/s/ Stuart Kosh
---------------
(Signature)
By: Stuart Kosh
--------------------------------------------------------------------------------

                                       30
<PAGE>

                         LIST OF EXHIBITS AND SCHEDULES

         Exhibit A                  Form of Warrant

         Exhibit B                  Escrow Agreement

         Exhibit C                  Form of Legal Opinion

         Exhibit D                  Form 8-K or Public Announcement

         Exhibit E                  Form of Modification Agreement

         Schedule 5(h)              Litigation

         Schedule 5(s)              Capitalization

         Schedule 7                 Finder

         Schedule 8(e)              Use of Proceeds

         Schedule 10.1              Other Securities to be Registered

<PAGE>

                                  SCHEDULE 5(h)

                                   LITIGATION

VOIP Corp. v. VoIP,  Inc., Case No.  04-CA-8140-35,  in the Circuit Court of the
Ninth  Judicial  Circuit,  Orange  County,  Florida.  Plaintiff  accuses VOIP of
deceptive  trade  practices and unfair  competition in using a name  deceptively
similar to Plaintiff's and seeks unspecified damages and injunctive relief. VoIP
intends to defend the case and believes it has  meritorious  defenses based upon
(i) VoIP,  Inc.  is  qualified  to do  business  in Florida  under the name VoIP
Holdings;  (ii) VoIP  also  conducts  business  in  Florida  under the name VoIP
Solutions;  (iii)  VoIP is a  generic  and  unprotectible  term - every  federal
trademark using "VOIP"  requires that the applicant  disaffirm any protection of
"VOIP";  (iv) there are 24 other Florida companies using the name "VOIP" as part
of its name; and (v) the original  Florida  corporation  known as "VOIP,  Inc.",
which predates the Plaintiff's name filing, is now owned by VoIP.

                                  SCHEDULE 5(s)

                                 CAPITALIZATION

100,000,000  shares of  common  stock,  par value  $0.001  per  share,  of which
20,859,434 shares are issued and outstanding.  In addition,  there are 5,000,000
shares are reserved for issuance under outstanding options and warrants.

                                       31
<PAGE>

                                   SCHEDULE 7

                                     FINDERS

Michael Magat
MZM Capital Management Inc.,
MANAGEMENT
920 E. Colorado Blvd., Suite 115
Pasadena, CA 91106
(626) 356-3700 Office
(626) 602-3806 Fax
michael@mzmcapital.com
----------------------

Norman Olshanksy
Granite Enterprises
3003-C8 Yamato Road, Suite 1016
Boca Raton, FL 33434
(561) 999-9809 Office
(561) 561-988-7180 Fax
nolshansky@aldephia.net
-----------------------

Harold Sahlen
Granite Enterprises
3003-C8 Yamato Road, Suite 1016
Boca Raton, FL 33434
(561) 309-5228
hsahlen@aol.com
---------------

Reid Drescher
President & CEO
Spencer Clarke LLC
505 Park Ave 4th fl.
New York, NY 10022
212-446-6111  tel
212-446-6199  fax
rdrescher@spencerclarke.com
---------------------------

                                       32
<PAGE>

                                  SCHEDULE 8(e)

                                 USE OF PROCEEDS

(Thousands $)

Use of funds

o    Expand network equipment for customer growth 22% Amount in US dollars $0.65
     million
     The  purpose  of this  program  is to expand  the  network to stay ahead of
     subscriber acquisitions.
o    Purchase of inventory 22%
     Amount in US dollars $0.65 million
     The   objective  of  this  program  is  to  purchase   inventory   for  two
     subsidiaries: VoIP Solutions, Inc., and DTNet Technologies, Inc.
o    Fixed assets 9%
     Amount in US dollars $0.28
     This program is to improve our fixed assets facilities.
o    Sales and marketing 21%
     Amount in US dollars  $0.625  million This program is to expand the on-line
     advertising  and  marketing  campaign.  In addition of the  extensive  mass
     campaign design for eGlobalphone.
o    Reserve 13%
     Amount in US dollars $0.39 million
     Pending specific application of the net proceeds,  we intend to use them to
     purchase short-term marketable securities.
o    Technical and customer support 5%
     Amount in US dollars $0.08 million
     This  program is to expand  our  current  technical  and  customer  service
     support, to provide adequate assistance to our customers.
o    Reduction of current liabilities 8%
     Amount in US dollars $0.25 million
     This  program is mainly to reduce  current  liabilities  of the fully owned
     subsidiary, DTNet Technologies, Inc.

                                       33
<PAGE>

                                  SCHEDULE 10.1

                        OTHER SECURITIES TO BE REGISTERED

            Stuart Kosh                                          50,000
            Harvey Smades                                        10,000
            Peter Proly                                          25,000
            David L. Ebershoff                                   25,000
            William Jones                                        25,000
            John Trescot                                         25,000
            W. W. Gay                                            25,000
            Daniel J. Russell                                    10,000
            Edward Ruiz                                           8,000
            Steve Litton                                          7,500
            Donna Wiegel                                          5,000
            Harold E. Gear                                       25,000
            Jeff Roberts                                          5,000
            Larry Doxtater                                        5,000
            Thomas Reeves                                         5,000
            Wiegel Group                                          5,000
            Chance Litton                                         4,000
            Lacey J. Litton                                       4,000
            Dudley Facey                                          3,500
            Zereisah Hall                                         3,500
            Gordon Roberts                                        2,000
            Leigh Trescot                                         2,000
            Marvin O'Dell                                         2,000
            Tammy Roberts                                         2,000
            C. Ben Bates Jr.                                      1,500
            David L. Ebershoff                                    1,500
            John H. Trescot Jr.                                   1,500
            Nancy J. Trescot                                      1,500
            Shauna Masin                                          1,500
            Connie Krupka                                         1,000
            David H. Arrington                                    1,000
            Eliot Appel                                           1,000
            Raymond B. Bunton                                     1,000
            Ronald E. Clark                                       1,000
            Thomas E. Thornhill                                   1,000
            Van Noy Thornhill                                     1,000
            David S. Trescot                                        500
            Kelley Smith                                            500
                                                                -------

            Total                                               299,000

                                       34Exhibit 10.1.2

                             Form of Class A Warrant

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

                          Right to Purchase  ________  shares of Common Stockof
                          VoIP,  Inc.(subject to adjustment as provided herein)

                         COMMON STOCK PURCHASE A WARRANT

No. 2004-NOV-001                                  Issue Date: November ___, 2004

VoIP,  INC., a corporation  organized  under the laws of the State of Texas (the
"Company"),      hereby      certifies     that,     for     value     received,
____________________________ or its assigns (the "Holder"), is entitled, subject
to the terms set forth below, to purchase from the Company at any time after the
Issue Date until 5:00  p.m.,  E.S.T on the fifth  anniversary  of the Issue Date
(the "Expiration Date"), up to _________ fully paid and nonassessable  shares of
the common stock of the Company (the "Common Stock"),  $.001 par value per share
at an exercise price of $1.75. The  aforedescribed  purchase price per share, as
adjusted  from time to time as herein  provided,  is  referred  to herein as the
"Purchase  Price." The number and  character  of such shares of Common Stock and
the Purchase Price are subject to adjustment as provided herein. The Company may
reduce the Purchase Price without the consent of the Holder.  Capitalized  terms
used and not otherwise  defined herein shall have the meanings set forth in that
certain  Subscription  Agreement  (the  "Subscription  Agreement"),  dated as of
November ___, 2004, entered into by the Company and the Holder.

     As used herein the following terms,  unless the context otherwise requires,
have the following respective meanings:

     (a) The term "Company" shall include VoIP,  Inc. and any corporation  which
shall succeed or assume the obligations of VoIP, Inc. hereunder.

     (b) The term "Common Stock" includes (a) the Company's Common Stock,  $.001
par value per share,  as authorized on the date of the  Subscription  Agreement,
and (b) any other  securities  into  which or for  which  any of the  securities
described  in  (a)  may  be  converted  or  exchanged  pursuant  to  a  plan  of
recapitalization, reorganization, merger, sale of assets or otherwise.

     (c) The term  "Other  Securities"  refers to any stock  (other  than Common
Stock) and other  securities  of the Company or any other person  (corporate  or
otherwise)  which the holder of the  Warrant at any time  shall be  entitled  to
receive,  or shall have received,  on the exercise of the Warrant, in lieu of or
in  addition  to Common  Stock,  or which at any time shall be issuable or shall
have been  issued in exchange  for or in  replacement  of Common  Stock or Other
Securities pursuant to Section 4 or otherwise.

<PAGE>

     1.   Exercise of Warrant.

     1.1. Number of Shares Issuable upon Exercise. From and after the Issue Date
through and including the  Expiration  Date, the Holder hereof shall be entitled
to receive,  upon exercise of this Warrant in whole in accordance with the terms
of subsection  1.2 or upon  exercise of this Warrant in part in accordance  with
subsection  1.3,  shares of Common Stock of the Company,  subject to  adjustment
pursuant to Section 4.

     1.2.  Full  Exercise.  This  Warrant may be exercised in full by the Holder
hereof by delivery of an original or facsimile copy of the form of  subscription
attached as Exhibit A hereto  (the  "Subscription  Form") duly  executed by such
Holder and surrender of the original  Warrant within seven (7) days of exercise,
to the Company at its principal office or at the office of its Warrant Agent (as
provided  hereinafter),  accompanied  by payment,  in cash,  wire transfer or by
certified or official  bank check  payable to the order of the  Company,  in the
amount  obtained by  multiplying  the number of shares of Common Stock for which
this Warrant is then exercisable by the Purchase Price then in effect.

     1.3. Partial Exercise. This Warrant may be exercised in part (but not for a
fractional  share) by  surrender  of this Warrant in the manner and at the place
provided in subsection  1.2 except that the amount payable by the Holder on such
partial  exercise shall be the amount  obtained by multiplying (a) the number of
whole shares of Common Stock designated by the Holder in the  Subscription  Form
by (b) the  Purchase  Price then in effect.  On any such partial  exercise,  the
Company,  at its expense,  will forthwith issue and deliver to or upon the order
of the  Holder  hereof a new  Warrant of like  tenor,  in the name of the Holder
hereof or as such Holder (upon payment by such Holder of any applicable transfer
taxes) may  request,  the whole  number of shares of Common Stock for which such
Warrant may still be exercised.

     1.4. Fair Market Value.  Fair Market Value of a share of Common Stock as of
a particular date (the "Determination Date") shall mean:

     (a) If the Company's  Common Stock is traded on an exchange or is quoted on
the  National  Association  of  Securities  Dealers,  Inc.  Automated  Quotation
("NASDAQ"),  National Market System,  the NASDAQ SmallCap Market or the American
Stock Exchange, LLC, then the closing or last sale price, respectively, reported
for the last business day immediately preceding the Determination Date;

     (b) If the  Company's  Common  Stock is not traded on an exchange or on the
NASDAQ National Market System,  the NASDAQ SmallCap Market or the American Stock
Exchange,  Inc., but is traded in the over-the-counter  market, then the average
of the closing bid and ask prices reported for the last business day immediately
preceding the Determination Date;

     (c) Except as provided in clause (d) below,  if the Company's  Common Stock
is not  publicly  traded,  then as the Holder and the Company  agree,  or in the
absence of such an agreement,  by arbitration in accordance  with the rules then
standing of the American Arbitration Association,  before a single arbitrator to
be chosen from a panel of persons qualified by education and training to pass on
the matter to be decided; or

     (d) If the Determination Date is the date of a liquidation,  dissolution or
winding up, or any event deemed to be a  liquidation,  dissolution or winding up
pursuant to the Company's  charter,  then all amounts to be payable per share to
holders  of the  Common  Stock  pursuant  to the  charter  in the  event of such

<PAGE>

liquidation, dissolution or winding up, plus all other amounts to be payable per
share in respect of the Common Stock in liquidation under the charter,  assuming
for the  purposes of this clause (d) that all of the shares of Common Stock then
issuable  upon  exercise  of  all  of  the  Warrants  are   outstanding  at  the
Determination Date.

     1.5. Company Acknowledgment.  The Company will, at the time of the exercise
of the Warrant, upon the request of the Holder hereof acknowledge in writing its
continuing  obligation  to afford to such Holder any rights to which such Holder
shall  continue  to be  entitled  after such  exercise  in  accordance  with the
provisions of this  Warrant.  If the Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to such Holder any such rights.

     1.6. Trustee for Warrant Holders. In the event that a bank or trust company
shall have been appointed as trustee for the Holder of the Warrants  pursuant to
Subsection  3.2, such bank or trust company shall have all the powers and duties
of a warrant agent (as hereinafter  described) and shall accept, in its own name
for the  account of the  Company  or such  successor  person as may be  entitled
thereto, all amounts otherwise payable to the Company or such successor,  as the
case may be, on exercise of this Warrant pursuant to this Section 1.

     1.7. Delivery of Stock Certificates,  etc. on Exercise.  The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the Holder  hereof as the record  owner of such shares as
of the close of  business  on the date on which  this  Warrant  shall  have been
surrendered  and  payment  made  for  such  shares  as  aforesaid.  As  soon  as
practicable  after the exercise of this  Warrant in full or in part,  and in any
event within five (5) days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder  hereof,  or as such Holder (upon payment by such
Holder  of  any  applicable  transfer  taxes)  may  direct  in  compliance  with
applicable securities laws, a certificate or certificates for the number of duly
and validly  issued,  fully paid and  nonassessable  shares of Common  Stock (or
Other Securities) to which such Holder shall be entitled on such exercise, plus,
in lieu of any  fractional  share  to  which  such  Holder  would  otherwise  be
entitled,  cash equal to such fraction  multiplied by the then Fair Market Value
of one full  share of  Common  Stock,  together  with any  other  stock or other
securities and property  (including cash, where applicable) to which such Holder
is entitled upon such exercise pursuant to Section 1 or otherwise.

     2.   Cashless Exercise.

     (a) If a Registration  Statement as defined in the  Subscription  Agreement
("Registration  Statement")  is effective  and the Holder may sell its shares of
Common Stock upon exercise  hereof,  this Warrant may be exercisable in whole or
in part for cash only as set forth in Section 1 above.  If no such  Registration
Statement is available,  then payment upon exercise may be made at the option of
the Holder  either in (i) cash,  wire  transfer or by certified or official bank
check  payable to the order of the  Company  equal to the  applicable  aggregate
Purchase  Price,  (ii) by delivery of Common Stock issuable upon exercise of the
Warrants in accordance with Section (b) below ("Cashless  Exercise") or (iii) by
a combination  of any of the foregoing  methods,  for the number of Common Stock
specified in such form (as such exercise number shall be adjusted to reflect any
adjustment in the total number of shares of Common Stock  issuable to the holder
per the terms of this  Warrant)  and the holder  shall  thereupon be entitled to
receive  the  number  of  duly  authorized,   validly  issued,  fully  paid  and
nonassessable  shares  of  Common  Stock (or  Other  Securities)  determined  as
provided herein.

<PAGE>

     (b) If the Fair Market  Value of one share of Common  Stock is greater than
the  Purchase  Price  (at the date of  calculation  as set forth  below)  and no
Registration  Statement  relating to the shares of Common Stock  underlying this
Warrant is effective,  in lieu of exercising  this Warrant for cash,  the holder
may elect to receive  shares  equal to the value (as  determined  below) of this
Warrant (or the portion thereof being cancelled) by surrender of this Warrant at
the  principal  office  of the  Company  together  with  the  properly  endorsed
Subscription  Form in which event the Company shall issue to the holder a number
of shares of Common Stock computed using the following formula:

                                            X=Y(A-B)
                                            --------
                                               A

     Where X= the number of shares of Common Stock to be issued to the holder

     Y= the number of shares of Common Stock  purchasable  under the Warrant or,
if only a portion of the Warrant is being exercised,  the portion of the Warrant
being exercised (at the date of such calculation)

     A= the Fair Market Value of one share of the Company's Common Stock (at the
date of such calculation)

     B= Purchase Price (as adjusted to the date of such calculation)

     The Holder may employ the cashless  exercise  feature  described above only
during the  pendency of a  Non-Registration  Event as described in Section 11 of
the Subscription Agreement and only commencing one year after the Closing Date.

     (d) For  purposes  of Rule  144  promulgated  under  the  1933  Act,  it is
intended,   understood  and  acknowledged  that  the  Commission  currently  has
interpreted  Rule 144 to mean  that the  Warrant  Shares  issued  in a  cashless
exercise  transaction  shall be deemed to have been acquired by the Holder,  and
the holding period for the Warrant Shares shall be deemed to have commenced,  on
the date  this  Warrant  was  originally  issued  pursuant  to the  Subscription
Agreement.

     3.   Adjustment for Reorganization, Consolidation, Merger, etc.

     3.1.  Reorganization,  Consolidation,  Merger,  etc. In case at any time or
from  time  to  time,  the  Company  shall  (a)  effect  a  reorganization,  (b)
consolidate  with  or  merge  into  any  other  person  or (c)  transfer  all or
substantially all of its properties or assets to any other person under any plan
or arrangement  contemplating the dissolution of the Company, then, in each such
case,  as a condition  to the  consummation  of such a  transaction,  proper and
adequate  provision  shall be made by the  Company  whereby  the  Holder of this
Warrant,  on the exercise hereof as provided in Section 1, at any time after the
consummation of such  reorganization,  consolidation  or merger or the effective
date of such  dissolution,  as the case may be,  shall  receive,  in lieu of the
Common  Stock (or Other  Securities)  issuable  on such  exercise  prior to such
consummation or such effective date, the stock and other securities and property
(including  cash) to which  such  Holder  would  have  been  entitled  upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant,  immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.

                                       35
<PAGE>

     3.2. Dissolution.  In the event of any dissolution of the Company following
the  transfer  of all or  substantially  all of its  properties  or assets,  the
Company, prior to such dissolution,  shall at its expense deliver or cause to be
delivered the stock and other  securities and property  (including  cash,  where
applicable) receivable by the Holder of the Warrants after the effective date of
such  dissolution  pursuant  to this  Section  3 to a bank or trust  company  (a
"Trustee")  having its  principal  office in New York,  NY, as  trustee  for the
Holder of the Warrants.

     3.3. Continuation of Terms. Upon any reorganization,  consolidation, merger
or transfer (and any  dissolution  following  any transfer)  referred to in this
Section 3, this  Warrant  shall  continue in full force and effect and the terms
hereof shall be applicable to the Other  Securities  and property  receivable on
the  exercise of this Warrant  after the  consummation  of such  reorganization,
consolidation or merger or the effective date of dissolution  following any such
transfer,  as the case may be, and shall be binding upon the issuer of any Other
Securities,  including,  in the case of any such transfer,  the person acquiring
all or substantially all of the properties or assets of the Company,  whether or
not such  person  shall  have  expressly  assumed  the terms of this  Warrant as
provided in Section 4. In the event this Warrant does not continue in full force
and effect after the  consummation of the transaction  described in this Section
3, then only in such event will the Company's securities and property (including
cash, where applicable) receivable by the Holder of the Warrants be delivered to
the Trustee as contemplated by Section 3.2.

     3.4 Share  Issuance.  Until the  expiration  of the  Exclusion  Period  (as
defined in the  Subscription  Agreement),  if the Company shall issue any Common
Stock  except  for  the  Excepted  Issuances  (as  defined  in the  Subscription
Agreement),  prior to the complete  exercise of this Warrant for a consideration
less than the Purchase  Price that would be in effect at the time of such issue,
then, and thereafter successively upon each such issue, the Purchase Price shall
be reduced to such other lower issue price. For purposes of this adjustment, the
issuance of any security or debt instrument of the Company carrying the right to
convert such  security or debt  instrument  into Common Stock or of any warrant,
right or option to purchase  Common Stock shall result in an  adjustment  to the
Purchase  Price  upon  the  issuance  of  the  above-described   security,  debt
instrument,  warrant,  right,  or option.  The  reduction of the Purchase  Price
described  in this  Section 3.4 is in addition to the other rights of the Holder
described in the Subscription Agreement.

     4.  Extraordinary  Events  Regarding  Common  Stock.  In the event that the
Company shall (a) issue  additional  shares of the Common Stock as a dividend or
other  distribution on outstanding  Common Stock,  (b) subdivide its outstanding
shares of Common  Stock,  or (c)  combine its  outstanding  shares of the Common
Stock into a smaller  number of shares of the Common  Stock,  then, in each such
event,  the Purchase  Price  shall,  simultaneously  with the  happening of such
event,  be adjusted by multiplying  the then Purchase  Price by a fraction,  the
numerator  of which  shall be the number of shares of Common  Stock  outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common  Stock  outstanding  immediately  after such event,  and the
product so obtained shall  thereafter be the Purchase Price then in effect.  The
Purchase Price, as so adjusted,  shall be readjusted in the same manner upon the
happening of any successive  event or events described herein in this Section 4.
The  number of shares of Common  Stock  that the  Holder of this  Warrant  shall

<PAGE>

thereafter,  on the  exercise  hereof as  provided  in Section 1, be entitled to
receive shall be adjusted to a number  determined by  multiplying  the number of
shares of Common  Stock that would  otherwise  (but for the  provisions  of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the  Purchase  Price that would  otherwise  (but for the  provisions  of this
Section 4) be in effect, and (b) the denominator is the Purchase Price in effect
on the date of such exercise.

     5.  Certificate  as to  Adjustments.  In  each  case of any  adjustment  or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the  Warrants,  the Company at its expense will  promptly  cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or  readjustment  in  accordance  with the terms of the  Warrant  and  prepare a
certificate  setting forth such adjustment or readjustment and showing in detail
the facts upon which such  adjustment  or  readjustment  is based,  including  a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold,  (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding,  and (c) the Purchase Price
and the number of shares of Common  Stock to be received  upon  exercise of this
Warrant,  in effect  immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant.  The Company will  forthwith
mail a copy of each  such  certificate  to the  Holder  of the  Warrant  and any
Warrant Agent of the Company (appointed pursuant to Section 11 hereof).

     6. Reservation of Stock,  etc.  Issuable on Exercise of Warrant;  Financial
Statements. The Company will at all times reserve and keep available, solely for
issuance  and  delivery on the  exercise of the  Warrants,  all shares of Common
Stock (or Other  Securities)  from time to time  issuable on the exercise of the
Warrant.  This  Warrant  entitles  the Holder  hereof to  receive  copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.

     7. Assignment;  Exchange of Warrant.  Subject to compliance with applicable
securities  laws,  this  Warrant,  and  the  rights  evidenced  hereby,  may  be
transferred by any registered holder hereof (a  "Transferor").  On the surrender
for exchange of this Warrant,  with the Transferor's  endorsement in the form of
Exhibit B attached hereto (the "Transferor  Endorsement Form") and together with
an opinion of counsel  reasonably  satisfactory to the Company that the transfer
of this Warrant will be in  compliance  with  applicable  securities  laws,  the
Company at its expense,  twice,  only, but with payment by the Transferor of any
applicable  transfer  taxes,  will  issue and  deliver to or on the order of the
Transferor  thereof a new Warrant or Warrants of like tenor,  in the name of the
Transferor  and/or the  transferee(s)  specified in such Transferor  Endorsement
Form  (each a  "Transferee"),  calling  in the  aggregate  on the  face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.  No such transfers shall result
in a public distribution of the Warrant.

     8. Replacement of Warrant. On receipt of evidence  reasonably  satisfactory
to the Company of the loss,  theft,  destruction  or  mutilation of this Warrant
and, in the case of any such loss,  theft or  destruction  of this  Warrant,  on
delivery of an indemnity agreement or security  reasonably  satisfactory in form
and amount to the Company or, in the case of any such  mutilation,  on surrender
and cancellation of this Warrant,  the Company at its expense,  twice only, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.

     9. Registration Rights. The Holder of this Warrant has been granted certain
registration  rights by the Company.  These registration rights are set forth in
the  Subscription  Agreement.  The  terms  of  the  Subscription  Agreement  are
incorporated herein by this reference. Upon the occurrence of a Non-Registration

<PAGE>

Event, or in the event the Company is unable to issue Common Stock upon exercise
of this Warrant that has been registered in a Registration  Statement  described
in Section 11 of the Subscription  Agreement,  within the time periods described
in the Subscription  Agreement,  which Registration  Statement must be effective
for the  periods  set forth in the  Subscription  Agreement,  then upon  written
demand made by the Holder,  the Company will pay to the Holder of this  Warrant,
in lieu of  delivering  Common  Stock,  a sum equal to the closing  price of the
Company's Common Stock on the principal market or exchange upon which the Common
Stock is listed for trading on the trading date  immediately  preceding the date
notice is given by the Holder, less the Purchase Price, for each share of Common
Stock designated in such notice from the Holder.

     10.  Maximum  Exercise.  The Holder shall not be entitled to exercise  this
Warrant on an exercise date 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 an exercise date,
and (ii) the number of shares of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this limitation is being made
on an exercise  date,  which would result in beneficial  ownership by the Holder
and its affiliates of more than 9.99% of the outstanding  shares of Common Stock
on such date. For the purposes of 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  exercises  which
would result in the issuance of more than 9.99%.  The  restriction  described in
this  paragraph  may be revoked upon  sixty-one  (61) days prior notice from the
Holder to the  Company.  The  Holder  may  allocate  which of the  equity of the
Company deemed  beneficially  owned by the  Subscriber  shall be included in the
9.99%  amount  described  above and which shall be allocated to the excess above
9.99%.

     11. Warrant Agent.  The Company may, by written notice to the Holder of the
Warrant,  appoint an agent (a "Warrant Agent") for the purpose of issuing Common
Stock (or Other  Securities) on the exercise of this Warrant pursuant to Section
1,  exchanging  this Warrant  pursuant to Section 7, and replacing  this Warrant
pursuant  to  Section  8,  or any of the  foregoing,  and  thereafter  any  such
issuance,  exchange or  replacement,  as the case may be,  shall be made at such
office by such Warrant Agent.

     12. Transfer on the Company's  Books.  Until this Warrant is transferred on
the books of the Company,  the Company may treat the registered holder hereof as
the absolute  owner hereof for all purposes,  notwithstanding  any notice to the
contrary.

     13. 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

<PAGE>

day during normal  business  hours where such notice is to be received),  or the
first  business  day  following  such  delivery  (if  delivered  other than on a
business day during normal  business  hours where such notice is to be received)
or (b) on the  second  business  day  following  the date of  mailing by express
courier  service,  fully  prepaid,  addressed  to such  address,  or upon actual
receipt of such  mailing,  whichever  shall first occur.  The addresses for such
communications shall be: (i) if to the Company to VoIP, Inc., 12330 SW53 Street,
Suite  712,  Cooper  City  Florida  33330,  Attn:  Steven  Ivester,   President,
telecopier:    (954)    434-2877with    a   copy   by   telecopier    only   to:
____________________________________,  telecopier:  ___________,  and (ii) if to
the Holder,  to the address and telecopier  number listed on the first paragraph
of this Warrant, 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.

     14. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged  or terminated  only by an instrument in writing  signed by the party
against which  enforcement of such change,  waiver,  discharge or termination is
sought.  This Warrant  shall be construed  and enforced in  accordance  with and
governed by the laws of New York. Any dispute  relating to this Warrant shall be
adjudicated  in New York County in the State of New York.  The  headings in this
Warrant are for  purposes of  reference  only,  and shall not limit or otherwise
affect  any of the terms  hereof.  The  invalidity  or  unenforceability  of any
provision  hereof shall in no way affect the validity or  enforceability  of any
other provision.

                      [THIS SPACE INTENTIONALLY LEFT BLANK]

<PAGE>

     IN WITNESS  WHEREOF,  the Company has executed  this Warrant as of the date
first written above.

                                          VOIP, INC.

                                              By:
                                                 -------------------------------
                                            Name:
                                           Title:

Witness:

------------------------------

<PAGE>

                                    Exhibit A

                              FORM OF SUBSCRIPTION
                   (to be signed only on exercise of Warrant)
TO:  VOIP, INC.

The  undersigned,  pursuant to the provisions set forth in the attached  Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):

________ shares of the Common Stock covered by such Warrant; or

___ the  maximum  number  of  shares of Common  Stock  covered  by such  Warrant
pursuant to the cashless exercise procedure set forth in Section 2.

The  undersigned  herewith  makes  payment of the full  purchase  price for such
shares  at  the  price  per  share  provided  for  in  such  Warrant,  which  is
$___________. Such payment takes the form of (check applicable box or boxes):

___  $__________  in  lawful  money  of  the  United  States;   and/or  ___  the
cancellation  of such portion of the attached  Warrant as is  exercisable  for a
total of _______  shares of Common  Stock (using a Fair Market Value of $_______
per share for purposes of this calculation); and/or

___ the  cancellation  of such number of shares of Common Stock as is necessary,
in accordance  with the formula set forth in Section 2, to exercise this Warrant
with  respect  to the  maximum  number of shares  of  Common  Stock  purchasable
pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned  requests that the certificates for such shares be issued in the
name of, and delivered to  _____________________________________________________
whose address is
                 --------------------------------------------------------------.

The  undersigned  represents  and  warrants  that all  offers  and  sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933,  as amended  (the  "Securities  Act"),  or pursuant to an  exemption  from
registration under the Securities Act.

Dated:___________________
                                    (Signature must conform to name of holder as
                                    specified on the face of the Warrant)

                                    (Address)

<PAGE>

                                    Exhibit B

                         FORM OF TRANSFEROR ENDORSEMENT
                   (To be signed only on transfer of Warrant)

For value received,  the undersigned hereby sells,  assigns,  and transfers unto
the person(s) named below under the heading  "Transferees" the right represented
by the within  Warrant to purchase the percentage and number of shares of Common
Stock of VOIP,  INC. to which the within  Warrant  relates  specified  under the
headings  "Percentage  Transferred"  and  "Number  Transferred,"   respectively,
opposite the name(s) of such person(s) and appoints each such person Attorney to
transfer  its  respective  right on the books of VOIP,  INC.  with full power of
substitution in the premises.

--------------------------------------------------------------------------------
Transferees                  Percentage Transferred           Number Transferred
-----------                  ----------------------           ------------------
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Dated:
      -----,---------               --------------------------------------------
                                    --------------------------------------------
                                    (Signature must conform to name of holder as
                                     specified on the face of the warrant)

Signed in the presence of:

----------------------------       ---------------------------------------------
        (Name)                     ---------------------------------------------
                                                    (address)

ACCEPTED AND AGREED:               ---------------------------------------------
[TRANSFEREE]                       ---------------------------------------------
                                    (address)

----------------------------
         (Name)

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