Document:

NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
      (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
      (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
      FORM,
      THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT
      TO
      RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
      SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
      OTHER
      LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

    

    
      	 	
              Right
                to Purchase ____________ shares of Common Stock of Pay88, Inc. (subject
                to
                adjustment as provided herein)

            

    

    

    FORM
      OF CLASS A AND CLASS B COMMON STOCK PURCHASE WARRANT

     

     

    
      	
              No. 2007-A/B-001

            	 	
              Issue
                Date: September ___, 2007

            

    

     

    PAY88,
      INC., a corporation organized under the laws of the State of Nevada (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 Common Stock at a per share purchase
      price of $_____ [125%
      of the Fixed Conversion Price for the Class A Warrants, and 175% of the Fixed
      Conversion Price for the Class B Warrants, subject to adjustment on the Second
      Closing Date].
      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 for
      some or all of the Warrants, temporarily or permanently. 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 September ___, 2007, 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 Pay88, Inc. and any corporation which shall succeed or
      assume the obligations of Pay88, Inc. hereunder. 

     

    (b) The
      term
“Common Stock” includes (a) the Company's Common Stock, $0.001 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. 

     

    
      
         

      

      
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    (d) The
      term
“Warrant Shares” shall mean the Common Stock issuable upon exercise of this
      Warrant.

     

    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 delivery within two
      days thereafter of 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. The original Warrant is not
      required to be surrendered to the Company until it has been fully exercised.
      

     

    1.3. Partial
      Exercise.
      This
      Warrant may be exercised in part (but not for a fractional share) by delivery
      of
      a Subscription Form 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
      provided the Holder has surrendered the original Warrant, 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 for the balance of.

     

    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 NASDAQ
      Global Market, Nasdaq Global Select Market, the NASDAQ Capital Market, the
      New
      York Stock Exchange or the American Stock Exchange, LLC, then the average of
      the
      closing or last sale prices, respectively, reported for the ten trading days
      immediately preceding the Determination Date;

     

    (b) If
      the
      Company's Common Stock is not traded on an exchange or on the NASDAQ Global
      Market, Nasdaq Global Select Market, the NASDAQ Capital Market, the New York
      Stock Exchange or the American Stock Exchange, LLC, but is traded in the
      over-the-counter market, then the average of the closing bid and ask prices
      reported for the ten trading days immediately preceding the Determination
      Date;

     

    (c) Except
      as
      provided in clause (d) below and Section 3.1, 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 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.

     

    
      
         

      

      
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    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 delivery of a
      Subscription Form shall have occurred 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 three (3) business
      days
      thereafter (“Warrant Share Delivery Date”), 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 non-assessable 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.
      The Company understands that a delay in the delivery of the Warrant Shares
      after
      the Warrant Share Delivery Date could result in economic loss to the Holder.
      As
      compensation to the Holder for such loss, the Company agrees to pay (as
      liquidated damages and not as a penalty) to the Holder for late issuance of
      Warrant Shares upon exercise of this Warrant the proportionate amount of $100
      per business day after the Warrant Share Delivery Date for each $10,000 of
      Purchase Price of Warrant Shares for which this Warrant is exercised which
      are
      not timely delivered. The Company shall pay any payments incurred under this
      Section in immediately available funds upon demand. Furthermore, in addition
      to
      any other remedies which may be available to the Holder, in the event that
      the
      Company fails for any reason to effect delivery of the Warrant Shares by the
      Warrant Share Delivery Date, the Holder may revoke all or part of the relevant
      Warrant exercise by delivery of a notice to such effect to the Company,
      whereupon the Company and the Holder shall each be restored to their respective
      positions immediately prior to the exercise of the relevant portion of this
      Warrant, except that the liquidated damages described above shall be payable
      through the date notice of revocation or rescission is given to the Company.
      

     

    1.8 Buy-In.
      In
      addition to any other rights available to the Holder, if the Company fails
      to
      deliver to a Holder the Warrant Shares as required pursuant to this Warrant,
      within seven (7) business days after the Warrant Share Delivery Date and the
      Holder or a broker on the Holder’s behalf, purchases (in an open market
      transaction or otherwise) shares of common stock to deliver in satisfaction
      of a
      sale by such Holder of the Warrant Shares which the Holder was entitled to
      receive from the Company (a "Buy-In"),
      then
      the Company shall pay in cash to the Holder (in addition to any remedies
      available to or elected by the Holder) the amount by which (A) the Holder'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
      Warrant Shares
      required
      to have been delivered 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 Holder 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
      Warrant Shares to have been received upon exercise of this Warrant, the Company
      shall be required to pay the Holder $1,000,
      plus interest. The
      Holder shall provide the Company written notice indicating the amounts payable
      to the Holder in respect of the Buy-In.

     

    
      
         

      

      
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    2. Cashless
      Exercise.

     

    (a) If
      a
      registration statement (as described in Section 11 of the Subscription
      Agreement) (“Registration Statement”) is effective and the Holder may sell its
      shares of Common Stock upon exercise hereof pursuant to the registration
      statement, 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 commencing one year after the Issue Date, 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 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 non-assessable shares of Common
      Stock (or Other Securities) determined as provided herein.

     

    (b) Subject
      to the provisions herein to the contrary, 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), 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
                average of the closing sale prices of the Common Stock for the five
                (5)
                Trading Days immediately prior to (but not including) the Exercise
                Date,
                or Fair Market Value, whichever is
                less

            

    

     

    
      	 	
              B=

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

            

    

     

    For
      purposes of Rule 144 promulgated under the 1933 Act, it is intended, understood
      and acknowledged 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. Fundamental Transaction. 
      If, at any time while this Warrant is outstanding, (A) the Company 
effects any merger or  consolidation  of the Company with or into
      another entity, (B) the Company effects any sale of all or
      substantially all of its assets in one or
      a series of related transactions,  (C)
      any tender offer or exchange offer (whether by the
      Company or another entity) is completed pursuant to which holders of Common
      Stock are permitted to tender or exchange their
      shares for other securities, cash or property, (D) the
      Company consummates a stock purchase agreement or other business combination
      (including, without limitation, a reorganization, recapitalization, spin-off
      or
      scheme of arrangement) with one or more persons or entities whereby such other
      persons or entities acquire more than the 50% of the outstanding shares of
      Common Stock (not including any shares of Common Stock held by such other
      persons or entities making or party to, or associated or affiliated with the
      other persons or entities making or party to, such stock purchase agreement
      or
      other business combination), (E) any "person" or "group" (as these terms are
      used for purposes of Sections 13(d) and 14(d) of the 1934 Act) is or shall
      become the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act),
      directly or indirectly, of 50% of the aggregate Common Stock of the
      Company, or (F) the Company effects any reclassification of
      the Common Stock or any compulsory share exchange
      pursuant to
      which the Common Stock is effectively converted into
      or exchanged for other securities, cash or property (in any such
      case, a "Fundamental  Transaction"), then, upon
      any subsequent exercise of this Warrant, the Holder shall have the
      right to receive, for each Warrant Share that would have been issuable upon
      such
      exercise immediately prior to the occurrence of such
      Fundamental Transaction, at the option of the Holder, (a) upon
      exercise of this Warrant, the number of shares of Common Stock of
      the successor or acquiring corporation or of the
      Company, if it is the surviving corporation, and any additional
      consideration (the "Alternate Consideration") receivable upon or as
      a result of such reorganization,
      reclassification, merger, consolidation or disposition of assets
      by a Holder of the number of shares of Common Stock for
      which this Warrant is exercisable immediately prior to such
      event or (b) if the Company is acquired in (1) a transaction
      where the consideration paid to the holders of the Common Stock consists solely
      of cash, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the 1934
      Act, or (3) a transaction involving a person or entity not traded on a national
      securities exchange, the Nasdaq Global Select Market, the Nasdaq Global Market
      or the Nasdaq Capital Market, cash equal to the Black-Scholes
      Value.  For purposes of any such exercise, the
      determination of the Purchase Price shall
      be appropriately adjusted to apply to such Alternate
      Consideration based on the amount of
      Alternate Consideration issuable in respect of one share of Common
      Stock in such Fundamental Transaction, and
      the Company shall apportion the Purchase Price
      among the Alternate Consideration in a
      reasonable manner reflecting the relative value of any different
      components of the Alternate Consideration.  If holders of Common Stock
      are given any choice as to the securities, cash or property to be
      received in a Fundamental Transaction, then the Holder shall be given
      the same choice as to the Alternate Consideration it receives upon any exercise
      of this Warrant following such Fundamental Transaction.  To the extent
      necessary to effectuate the foregoing provisions, any
      successor to the Company or surviving entity in such
      Fundamental Transaction shall issue to the Holder a
      new warrant consistent with
      the foregoing provisions and evidencing the
      Holder's right to exercise such warrant into Alternate
      Consideration.  The terms of any agreement pursuant to which a
      Fundamental Transaction is effected shall include terms requiring any such
      successor or surviving entity to comply with the provisions of
      this Section 3.1 and insuring that this Warrant (or any such
      replacement security) will be
      similarly adjusted upon any subsequent transaction analogous to a
      Fundamental Transaction. “Black-Scholes Value” shall be determined in accordance
      with the Black-Scholes Option Pricing Model obtained from the “OV” function on
      Bloomberg L.P. using (i) a price per share of Common Stock equal to the VWAP
      of
      the Common Stock for the Trading Day immediately preceding the date of
      consummation of the applicable Fundamental Transaction, (ii) a risk-free
      interest rate corresponding to the U.S. Treasury rate for a period equal to
      the
      remaining term of this Warrant as of the date of such request and (iii) an
      expected volatility equal to the 100 day volatility obtained from the HVT
      function on Bloomberg L.P. determined as of the Trading Day immediately
      following the public announcement of the applicable Fundamental
      Transaction.

     

    
      
         

      

      
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    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. Such property shall be delivered only upon payment of the Warrant
      exercise price. 

     

    
      
         

      

      
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    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 Date, 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 price for then outstanding Warrants. 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 if such issuance is at
      a
      price lower than the Purchase Price in effect upon such issuance and again
      at
      any time upon any subsequent issuances of shares of Common Stock upon exercise
      of such conversion or purchase rights if such issuance is at a price lower
      than
      the Purchase Price in effect upon such issuance. The reduction of the Purchase
      Price described in this Section 3.4 is subject to the provisions of, and in
      addition to the other rights of the Holder described in, the Subscription
      Agreement. The
      number of shares of Common Stock that the Holder of this Warrant shall
      thereafter, on the exercise hereof, 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 3.4 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 3.4 be in effect, and
      (b) the denominator is the Purchase Price in effect on the date of such
      exercise.

     

    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 thereafter, on the exercise hereof,
      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.

     

    
      
         

      

      
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    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 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.

     

    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.

     

    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 4.99% 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 1934 Act , and Rule 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 4.99%. The
      restriction described in this paragraph may be waived, in whole or in part,
      upon sixty-one (61) days prior notice from the Holder to the Company to increase
      such percentage to up to 9.99%, but not in excess of 9.99%. The Holder may
      decide whether to convert a Convertible Note or exercise this Warrant to achieve
      an actual 4.99% or up to 9.99% ownership position as described above, but not
      in
      excess of 9.99%.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    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
      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: if to the Company, to: Pay88,
      Inc., 1053 North Barnstead Road, Barnstead, NH 03225, Attn: Guo Fan, CEO and
      President,
      telecopier: (603) 776-6151, with a copy by telecopier only to: David Lubin
&
Associates, 26 East Hawthorne Avenue, Valley Stream, NY 11580, Attn: David
      Lubin, Esq., telecopier: (516) 887-8250, 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. Law
      Governing This Warrant.
      This
      Warrant 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 Warrant shall be brought only in the state courts of New
      York or in the federal courts located in the state and county of New York.
      The
      parties to this Warrant hereby irrevocably waive any objection to jurisdiction
      and venue of any action instituted hereunder and shall not assert any defense
      based on lack of jurisdiction or venue or based upon forum
      non conveniens.
      The
      Company and Holder 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 Warrant 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. Each party hereby irrevocably waives
      personal service of process and consents to process being served in any suit,
      action or proceeding in connection with this Agreement or any other Transaction
      Document by mailing a copy thereof via registered or certified mail or overnight
      delivery (with evidence of delivery) to such party at the address in effect
      for
      notices to it under this Agreement and agrees that such service shall constitute
      good and sufficient service of process and notice thereof. Nothing contained
      herein shall be deemed to limit in any way any right to serve process in any
      other manner permitted by law.

     

    
      
         

      

      
        8

        
          

        

      

       

    

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

     

    
      	 	 	 
	 	
              PAY88,
                INC. 

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:
                

            
	 	
            

    

     

    
      
         

      

      
        9

        
          

        

      

       

    

    Exhibit A

    

    FORM
      OF
      SUBSCRIPTION

    (to
      be
      signed only on exercise of Warrant)

     

    TO:
      PAY88, 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)

            

    

     

    
      
         

      

      
        10

        
          

        

      

       

    

     

    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 PAY88, 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 PAY88, 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)SUBSCRIPTION
      AGREEMENT

     

    THIS
      SUBSCRIPTION AGREEMENT
      (this
“Agreement”),
      is
      dated as of September 12, 2007, by and among Pay88, Inc., a Nevada corporation
      (the
“Company”),
      and
      the subscribers identified on the signature page hereto (each a “Subscriber”
and
      collectively “Subscribers”).

     

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

     

    WHEREAS,
      the
      parties desire that, upon the terms and subject to the conditions contained
      herein, the Company shall issue and sell to the Subscribers, as provided herein,
      and the Subscribers, in the aggregate, shall purchase for up to $1,500,000
      (the
      "Purchase
      Price")
      up to
      $2,310,000 (the “Principal
      Amount”)
      of
      principal amount of promissory notes of the Company (“Note”
or
      “Notes”),
      a
      form of which is annexed hereto as Exhibit
      A,
      convertible into shares of the Company's Common Stock, $0.001 par value (the
      "Common
      Stock")
      at a
      per share conversion price set forth in the Note (“Conversion
      Price”);
      and
      share purchase warrants (the “Warrants”),
      in
      the form annexed hereto as Exhibit
      B,
      to
      purchase up to 4,620,000 shares of Common Stock (the “Warrant
      Shares”).
      The
      Notes, shares of Common Stock issuable upon conversion of the Notes (the
“Shares”),
      the
      Warrants and the Warrant Shares are collectively referred to herein as the
      "Securities";
      and

     

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

     

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

     

    1. (a) Closing
      Dates.
      The
“Initial
      Closing Date”
shall
      be the date that the Initial Closing Principal Amount is transmitted by wire
      transfer or otherwise credited to or for the benefit of the Company. The
      consummation of the transactions contemplated herein shall take place at the
      offices of Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York,
      New York 10176, upon the satisfaction or waiver of all conditions to closing
      set
      forth in this Agreement. Each of the Initial Closing Date and Second Closing
      Date (as defined in Section 1(c) below) is referred to herein as a “Closing
      Date.”

    

       (b) Initial
      Closing.
      Subject
      to the satisfaction or waiver of the terms and conditions of this Agreement,
      on
      the Initial Closing Date, each Subscriber shall purchase and the Company shall
      sell to each Subscriber a Note in the principal amount set forth on the
      signature page hereto (“Initial
      Closing Notes”),
      and
      Warrants as described in Section 2 of this Agreement (“Initial
      Closing Warrants”).
      The
      principal amount of the Notes to be purchased by the Subscribers on the Initial
      Closing Date shall be One Million One Hundred Fifty-Five Thousand Dollars
      ($1,155,000) (the “Initial
      Closing Principal Amount”).
      The
      Purchase Price to be paid by each Subscriber for such Subscriber’s Initial
      Closing Note and Initial Closing Warrants shall be determined by dividing the
      Principal Amount of the Initial Closing Note to be received by such Subscriber
      by 1.54.

    

    (c) Second
      Closing.
      The
“Second
      Closing Date”
shall
      be on or before the fifth business day after the compliance with the Second
      Closing Condition as defined in Section 1(d) of this Agreement (the
“Second
      Closing Date”).
      Subject to the satisfaction or waiver of the conditions to Closing, on the
      Second Closing Date, each Subscriber shall purchase and the Company shall sell
      to each Subscriber a Note in the Principal Amount set forth on the signature
      page hereto (“Second
      Closing Notes”)
      and
      Warrants as described in Section 2 of this Agreement (“Second
      Closing Warrants”).
      The
      Second Closing Notes shall be of the same tenor as the Notes issuable on the
      Initial Closing Date and have the same maturity date as the Initial Closing
      Notes. The principal amount of the Notes to be purchased by the Subscribers
      on
      the Second Closing Date shall be One Million One Hundred Fifty-Five Thousand
      Dollars ($1,155,000) (the “Second
      Closing Principal Amount”).
      The
      Purchase Price to be paid by each Subscriber for such Subscriber’s Second
      Closing Note and Second Closing Warrants shall be determined by dividing the
      Principal Amount of the Second Closing Note to be received by such Subscriber
      by
      1.54.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    (d) Conditions
      to Second Closing.
      The
      occurrence of the Second Closing is expressly contingent on (i) compliance
      with
      the Second Closing Condition, (ii) the truth and accuracy, on the Second Closing
      Date of the representations and warranties of the Company and Subscriber
      contained in this Agreement except for changes that do not constitute a Material
      Adverse Effect (as defined in Section 5(a)), (iii) continued compliance with
      the
      covenants of the Company set forth in this Agreement, and (iv) the
      non-occurrence of any Event of Default (as defined in the Note and this
      Agreement) or an event that with the passage of time or the giving of notice
      could become an Event of Default. “Second
      Closing Condition”
shall
      mean the actual effectiveness of the Registration Statement as defined in
      Section 11.1 hereunder. For purposes only of this Section 1(d), it shall not
      be
      deemed a Non-Registration Event if the Registration Statement is not declared
      effective on or before the Effective Date [as defined in Section 11.1(iv)],
      provided the Actual Effective Date [as defined in Section 11.1(iv)] occurs
      within sixty days after the Effective Date.

     

    (e) Second
      Closing Deliveries.
      On the
      Second Closing Date, the Company will deliver a certificate (“Second
      Closing Certificate”)
      signed
      by its chief executive officer and chief financial officer (i) representing
      the
      truth and accuracy of all the representations and warranties made by the Company
      contained in this Agreement, as of the Initial Closing Date, and the Second
      Closing Date as if such representations and warranties were made and given
      on
      all such dates, except for changes that do not constitute a Material Adverse
      Effect, (ii) certifying that the information contained in the schedules and
      exhibits hereto is substantially accurate as of the Second Closing Date, except
      for changes that do not constitute a Material Adverse Effect, (iii) adopting
      and
      renewing the covenants and representations set forth in Sections 5, 8, 9, 10,
      11, and 12 of this Agreement in relation to the Second Closing Date, Second
      Closing Notes, and Second Closing Warrants, (iv) representing timely compliance
      by the Company with the Second Closing Condition, (v) representing the timely
      compliance by the Company with the Company’s applicable registration
      requirements set forth in Section 11 of this Agreement except as described
      in
      Section 1(c) above, and (vi) certifying that an Event of Default or an event
      that with the passage of time or the giving of notice could become an Event
      of
      Default except as described in Section 1(c) above, has not occurred. A legal
      opinion nearly identical to the legal opinion referred to in Section 6 of this
      Agreement shall be delivered to each Subscriber at the Second Closing in
      relation to the Company, Second Closing Notes and Second Closing Warrants
      (“Second
      Closing Legal Opinion”).

     

    2. Warrants.
      On each
      Closing Date, the Company will issue and deliver Class A Warrants and Class
      B
      Warrants to each Subscriber (collectively, “Warrants”).
      The
      number of Warrant Shares available for purchase in the aggregate under each
      of
      the Class A and Class B Warrants shall equal the quotient of (a) the Principal
      Amount of the Subscriber’s Note, divided by (b) the Conversion Price in effect
      on the relevant Closing Date. The aggregate number of each of the Class A and
      Class B Warrant Shares eligible for purchase by the Subscribers is 4,620,000,
      subject to adjustment as provided for herein and in the Warrant The per Warrant
      Share exercise price to acquire a Warrant Share upon exercise of a Class A
      Warrant shall be 125% of the Fixed Conversion Price (as defined in the Note),
      and 175% of the Fixed Conversion Price in respect of the Class B Warrants,
      in
      effect on the issue date of the Class A Warrants and Class B Warrants,
      respectively. The Warrants shall be exercisable until five (5) years after
      the
      issue date of the Warrants. Each holder of the Warrants is granted the
      registration rights set forth in this Agreement. The Warrant exercise price
      and
      number of Warrant Shares issuable upon exercise of the Warrants shall be
      equitably adjusted to offset the effect of stock splits, stock dividends, and
      similar events, and as otherwise described in this Agreement and the
      Warrant.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    3. Security
      Interest.
      The
      Subscribers will be granted a security interest in the assets of the Company,
      including ownership of the Subsidiaries (as defined in Section 5(a) of this
      Agreement) and in the assets of the Subsidiaries, which security interest will
      be memorialized in a “Security
      Agreement,”
a
      form
      of which is annexed hereto as Exhibit
      D.
      The
      Subsidiaries will guarantee the Company’s obligations under the Transaction
      Documents [as defined in Section 5(c)]. Such guaranties will be memorialized
      in
      a “Subsidiary
      Guaranty”,
      the
      form of which is annexed hereto as Exhibit
      E.
      The
      principal officers of the Company identified on Schedule
      3,
      (“Personal
      Guarantors”)
      will
      guarantee the obligations of the Company under the Transaction Documents. Such
      personal guaranties will be memorialized in a “Personal
      Guaranty”,
      the
      form of which is annexed hereto as Exhibit
      F.
      The
      Company will execute such other agreements, documents and financing statements
      reasonably requested by the Subscribers to memorialize and further protect
      the
      security interest described herein, which will be filed at the Company’s expense
      with the jurisdictions, states and counties designated by the Subscribers.
      The
      Subscribers will appoint a Collateral Agent to represent them collectively
      in
      connection with the security interests to be granted to the Subscribers. The
      appointment of the Collateral Agent in connection with the Security Agreement
      will be pursuant to a “Collateral
      Agent Agreement,”
a
      form
      of which is annexed hereto as Exhibit
      G.

    

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

    

    (a) Organization
      and Standing of the Subscribers.
      If such
      Subscriber is an entity, such Subscriber is a corporation, partnership or other
      entity duly incorporated or organized, validly existing and in good standing
      under the laws of the jurisdiction of its incorporation or
      organization.

    

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

     

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

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    (d) Information
      on Company.
      Such
      Subscriber has been furnished with or has had access at the EDGAR Website of
      the
      Commission to the Company's Form 10-KSB filed on April 2, 2006 for the fiscal
      year ended December 31, 2006, and the financial statements included therein
      for
      the year ended December 31, 2006, together with all subsequent filings made
      with
      the Commission available at the EDGAR website (hereinafter referred to
      collectively as the "Reports").
      In
      addition, such
      Subscriber may have received in writing from the Company such other information
      concerning its operations, financial condition and other matters as such
      Subscriber has requested in writing, identified thereon as OTHER WRITTEN
      INFORMATION (such other information is collectively, the "Other
      Written Information"),
      and
      considered all factors such
      Subscriber deems material in deciding on the advisability of investing in the
      Securities. 

     

    (e) Information
      on Subscriber.
      Such
      Subscriber is, and will be at the time of the conversion of the Notes and
      exercise of the Warrants, an "accredited
      investor",
      as
      such term is defined in Regulation D promulgated by the Commission under the
      1933 Act, is experienced in investments and business matters, has made
      investments of a speculative nature and has purchased securities of United
      States publicly-owned companies in private placements in the past and, with
      its
      representatives, has such knowledge and experience in financial, tax and other
      business matters as to enable such
      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.
      Such
      Subscriber has the authority and is duly and legally qualified to purchase
      and
      own the Securities. Such
      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 such
      Subscriber is accurate.

     

    (f) Purchase
      of Notes and Warrants.
      On each
      Closing Date, such
      Subscriber will purchase the Notes and Warrants as principal for its own account
      for investment only and not with a view toward, or for resale in connection
      with, the public sale or any distribution thereof.

     

    (g) Compliance
      with Securities Act.
      Such
      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
such
      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.
      Such
      Subscriber will comply with all applicable rules and regulations in connection
      with the sales of the Securities including laws relating to short
      sales.

     

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

     

    "THE
      ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT
      BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR APPLICABLE STATE
      SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
      OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
      THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
      OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
      ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
      SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
      FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
      ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
      SECURITIES."

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

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

     

    "NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
      (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
      (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
      FORM,
      THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT
      TO
      RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
      SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
      OTHER
      LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES."

    

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

     

    "NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
      (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
      (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
      FORM,
      THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT
      TO
      RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
      SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
      OTHER
      LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
      "

     

    (k) Communication
      of Offer.
      The
      offer to sell the Securities was directly communicated to such Subscriber by
      the
      Company. At no time was such 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.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (l) Authority;
      Enforceability.
      This
      Agreement and other agreements delivered together with this Agreement or in
      connection herewith have been duly authorized, executed and delivered by such
      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 such Subscriber has full power and authority necessary to enter into this
      Agreement and such other agreements and to perform its obligations hereunder
      and
      under all other agreements entered into by such Subscriber relating
      hereto.

    

    (m) Restricted
      Securities.
      Such
      Subscriber understands that the Securities have not been registered under the
      1933 Act and such Subscriber will not sell, offer to sell, assign, pledge,
      hypothecate or otherwise transfer any of the Securities unless pursuant to
      an
      effective registration statement under the 1933 Act, or unless an exemption
      from
      registration is available. Notwithstanding anything to the contrary contained
      in
      this Agreement, such Subscriber may transfer (without restriction and without
      the need for an opinion of counsel) the Securities to its Affiliates (as defined
      below) provided that each such Affiliate is an “accredited investor” under
      Regulation D and such Affiliate agrees to be bound by the terms and conditions
      of this Agreement. For the purposes of this Agreement, an “Affiliate”
of
      any
      person or entity means any other person or entity directly or indirectly
      controlling, controlled by or under direct or indirect common control with
      such
      person or entity. Affiliate includes each Subsidiary of the Company. For
      purposes of this definition, “control”
means
      the power to direct the management and policies of such person or firm, directly
      or indirectly, whether through the ownership of voting securities, by contract
      or otherwise.

    

    (n) No
      Governmental Review.
      Such
      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.

    

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

    

    (p) Survival.
      The
      foregoing representations and warranties shall survive the Closing
      Date.

     

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

     

    (a) Due
      Incorporation.
      The
      Company is a corporation or other entity duly incorporated or organized, validly
      existing and in good standing under the laws of the jurisdiction of its
      incorporation or organization and has the requisite corporate power to own
      its
      properties and to carry on its business as presently
      conducted. The Company is duly qualified as a foreign corporation to do business
      and is in good standing in each jurisdiction where the nature of the business
      conducted or property owned by it makes such qualification necessary, other
      than
      those jurisdictions in which the failure to so qualify would not have a Material
      Adverse Effect. For purposes of this Agreement, a “Material
      Adverse Effect”
shall
      mean a material adverse effect on the financial condition, results of
      operations, prospects, properties or business of the Company and its
      Subsidiaries taken as a whole. For purposes of this Agreement, “Subsidiary”
means,
      with respect to any entity at any date, any corporation, limited or general
      partnership, limited liability company, trust, estate, association, joint
      venture or other business entity of which more than 30% of (i) the
      outstanding capital stock having (in the absence of contingencies) ordinary
      voting power to elect a majority of the board of directors or other managing
      body of such entity, (ii) in the case of a partnership or limited liability
      company, the interest in the capital or profits of such partnership or limited
      liability company or (iii) in the case of a trust, estate, association,
      joint venture or other entity, the beneficial interest in such trust, estate,
      association or other entity business is, at the time of determination, owned
      or
      controlled directly or indirectly through one or more intermediaries, by such
      entity. The Company’s Subsidiaries as of the Closing Date are set forth on
Schedule
      5(a).

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

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

     

    (c) Authority;
      Enforceability.
      This
      Agreement, the Note, the Warrants, the Security Agreement, Subsidiary Guaranty,
      Personal Guaranty, Escrow Agreement, Lockup 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, Subsidiaries (as
      applicable) and the Personal Guarantors (as applicable) and are valid and
      binding agreements of the Company, Subsidiaries and Personal Guarantors, and
      are
      enforceable in accordance with their terms, subject to bankruptcy, insolvency,
      fraudulent transfer, reorganization, moratorium and similar laws of general
      applicability relating to or affecting creditors' rights generally and to
      general principles of equity. The Company has full corporate power and authority
      necessary to enter into and deliver the Transaction Documents and to perform
      its
      obligations thereunder.

     

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

     

    (e) Consents.
      No
      consent, approval, authorization or order of any court, governmental agency
      or
      body or arbitrator having jurisdiction over the Company, or any of its
      Affiliates, the OTC Bulletin Board (the “Bulletin
      Board”)
      or 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. The Transaction Documents and the Company’s
      performance of its obligations thereunder has been unanimously approved by
      the
      Company’s Board of Directors.

     

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

     

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

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    (g) The
      Securities.
      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, fully paid and non-assessable
      and
      on the date of issuance of the Shares upon conversion of the Notes and the
      Warrant Shares and upon exercise of the Warrants, the Shares and Warrant Shares
      will be duly and validly issued, fully paid and non-assessable and if registered
      pursuant to the 1933 Act and resold pursuant to an effective registration
      statement will be free trading and unrestricted;

     

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

     

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

     

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

     

    (h) Litigation.
      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
      Reports, there is no pending or, to the best knowledge of the Company, basis
      for
      or threatened action, suit, proceeding or investigation before any court,
      governmental agency or body, or arbitrator having jurisdiction over the Company,
      or any of its Affiliates which litigation if adversely determined would have
      a
      Material Adverse Effect.

     

    (i) No
      Market Manipulation.
      The
      Company and its Affiliates have not taken, and will not take, directly or
      indirectly, any action designed to, or that might reasonably be expected to,
      cause or result in stabilization or manipulation of the price of the Common
      Stock to
      facilitate the sale or resale of the Securities or affect the price at which
      the
      Securities may be issued or resold.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    (m) No
      Integrated Offering.
      Neither
      the Company, nor any of its Affiliates, nor any person acting on its or their
      behalf, has directly or indirectly made any offers or sales of any security
      or
      solicited any offers to buy any security under circumstances that would cause
      the offer of the Securities pursuant to this Agreement to be integrated with
      prior offerings by the Company for purposes of the 1933 Act or any applicable
      stockholder approval provisions, including, without limitation, under the rules
      and regulations of the Bulletin Board which would impair the exemptions relied
      upon in this Offering or the Company’s ability to timely comply with its
      obligations hereunder. Neither the Company nor any of its Affiliates will take
      any action or steps that would cause the offer or issuance of the Securities
      to
      be integrated with other offerings or issuances which would impair the
      exemptions relied upon in this Offering or the Company’s ability to timely
      comply with its obligations hereunder. The Company will not conduct any offering
      other than the transactions contemplated hereby that will be integrated with
      the
      offer or issuance of the Securities that would impair the exemptions relied
      upon
      in this Offering or the Company’s ability to timely comply with its obligations
      hereunder.

     

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

     

    (o) No
      Undisclosed Liabilities.
      The
      Company has no liabilities or obligations which are material, individually
      or in
      the aggregate, other than those incurred in the ordinary course of the Company
      businesses since December 31, 2006 and which, individually or in the aggregate,
      would reasonably be expected to have a Material Adverse Effect,
      except
      as disclosed in the Reports or on Schedule
      5(o).

     

    (p) No
      Undisclosed Events or Circumstances.
      Since
      December 31, 2006, no event or circumstance has occurred or exists with respect
      to the Company or its businesses, properties, operations or financial condition,
      that, under applicable law, rule or regulation, requires public disclosure
      or
      announcement prior to the date hereof by the Company but which has not been
      so
      publicly announced or disclosed in the Reports.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (q) Capitalization.
      The
      authorized and outstanding capital stock of the Company and Subsidiaries as
      of
      the date of this Agreement and the Closing Date (not including the Securities)
      are set forth in the Reports or on Schedule
      5(d).
      Except
      as set forth on Schedule
      5(d),
      there
      are no options, warrants, or rights to subscribe to, securities, rights or
      obligations convertible into or exchangeable for or giving any right to
      subscribe for any shares of capital stock of the Company or any of its
      Subsidiaries.

     

    (r) Dilution.
      The
      Company's executive officers and directors understand the nature of the
      Securities being sold hereby and recognize that the issuance of the Securities
      will have a potential dilutive effect on the equity holdings of other holders
      of
      the Company’s equity or rights to receive equity of the Company. The board of
      directors of the Company has concluded, in its good faith business judgment
      that
      the issuance of the Securities is in the best interests of the Company. The
      Company specifically acknowledges that its obligation to issue the Shares upon
      conversion of the Notes, and the Warrant Shares upon exercise of the Warrants,
      is binding upon the Company and enforceable regardless of the dilution such
      issuance may have on the ownership interests of other shareholders of the
      Company or parties entitled to receive equity of the Company.

     

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

    

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

     

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

    

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

    

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

    

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

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (y) Solvency.
      Based
      on the financial condition of the Company as of the Closing Date after giving
      effect to the receipt by the Company of the proceeds from the sale of the Notes
      hereunder, (i) the Company’s fair saleable value of its assets exceeds the
      amount that will be required to be paid on or in respect of the Company’s
      existing debts and other liabilities (including known contingent liabilities)
      as
      they mature; (ii) the Company’s assets do not constitute unreasonably small
      capital to carry on its business for the current fiscal year as now conducted
      and as proposed to be conducted including its capital needs taking into account
      the particular capital requirements of the business conducted by the Company,
      and projected capital requirements and capital availability thereof; and (iii)
      the current cash flow of the Company, together with the proceeds the Company
      would receive, were it to liquidate all of its assets, after taking into account
      all anticipated uses of the cash, would be sufficient to pay all amounts on
      or
      in respect of its debt when such amounts are required to be paid. The Company
      does not intend to incur debts beyond its ability to pay such debts as they
      mature (taking into account the timing and amounts of cash to be payable on
      or
      in respect of its debt).

    

    (z) Company
      Predecessor and Subsidiaries.
      The
      Company makes each of the representations contained in Sections 5(a), (b),
      (c),
      (d), (e), (f), (h), (j), (l), (o), (p), (q), (s), (t), and (u) of this
      Agreement, as same relate to the Subsidiary of the Company. All representations
      made by or relating to the Company of a historical or prospective nature and
      all
      undertakings described in Sections 9(g) through 9(l) shall relate, apply and
      refer to the Company and its predecessors. The Company represents that it owns
      100% of the outstanding equity of the Subsidiaries and rights to receive equity
      of the Subsidiaries free and clear of all liens, encumbrances and claims, except
      as set forth on Schedule 5(d). No person or entity other than the Company has
      the right to receive any equity interest in the Subsidiaries.

    

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

     

    (BB) Survival.
      The
      foregoing representations and warranties shall survive the Closing
      Date.

     

    6. Regulation
      D Offering/Legal Opinion.
      The
      offer and issuance of the Securities to the Subscribers is being made pursuant
      to the exemption from the registration provisions of the 1933 Act afforded
      by
      Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation
      D
      promulgated thereunder. On the Closing Date, the Company will provide an opinion
      reasonably acceptable to the Subscribers 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
      H.
      The
      Company will provide, at the Company's expense, such other legal opinions,
      if
      any, as are reasonably necessary in each Subscriber’s opinion for the issuance
      and resale of the Common Stock issuable upon conversion of the Notes and
      exercise of the Warrants pursuant to an effective registration statement, Rule
      144 under the 1933 Act or an exemption from registration.

    

    7.1. Conversion
      of Note.

    

    (a) Upon
      the
      conversion of a Note or part thereof, the Company shall, at its own cost and
      expense, take all necessary action, including obtaining and delivering, an
      opinion of counsel to assure that the Company's transfer agent shall issue
      stock
      certificates in the name of Subscriber (or its permitted nominee) or such other
      persons as designated by Subscriber and in such denominations to be specified
      at
      conversion representing the number of shares of Common Stock issuable upon
      such
      conversion. The Company warrants that no instructions other than these
      instructions have been or will be given to the transfer agent of the Company's
      Common Stock and that the certificates representing such shares shall contain
      no
      legend other than the usual 1933 Act restriction from transfer legend. If and
      when a Subscriber sells the Shares, assuming (i) the Registration Statement
      (as
      defined below) is effective and the prospectus, as supplemented or amended,
      contained therein is current and (ii) such Subscriber or its agent confirms
      in
      writing to the transfer agent that such Subscriber has complied with the
      prospectus delivery requirements, the Company will reissue the Shares without
      restrictive legend and the Shares will be free-trading, and freely transferable.
      In the event that the Shares are sold in a manner that complies with an
      exemption from registration, the Company will promptly instruct its counsel
      to
      issue to the transfer agent an opinion permitting removal of the legend
      (indefinitely, if pursuant to Rule 144(k) of the 1933 Act, or for 90 days if
      pursuant to the other provisions of Rule 144 of the 1933 Act, provided that
      Subscriber delivers all reasonably requested representations in support of
      such
      opinion).

     

    
      
        
        

      

      
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    (b) A
      Subscriber will give notice of its decision to exercise its right to convert
      the
      Note, interest, or part thereof by telecopying, or otherwise delivering a
      completed Notice of Conversion (a form of which is annexed as Exhibit
      A
      to the
      Note) to the Company via confirmed telecopier transmission or otherwise pursuant
      to Section 13(a) of this Agreement. Such Subscriber will not be
      required to surrender the Note
      until
      the Note has been fully converted or satisfied. Each date on which a Notice
      of
      Conversion is telecopied to the Company in accordance with the provisions hereof
      by 6 PM Eastern Time (“ET”) (or if received by the Company after 6 PM ET then
      the next business day) shall be deemed a “Conversion
      Date.”
The
      Company will itself or cause the Company’s transfer agent to transmit the
      Company's Common Stock certificates representing the Shares issuable upon
      conversion of the Note to such Subscriber via express courier for receipt by
      such Subscriber within three (3) business days after receipt by the Company
      of
      the Notice of Conversion (such third day being the "Delivery
      Date").
      In
      the event the Shares are electronically transferable, then delivery of the
      Shares must
      be made
      by electronic transfer provided request for such electronic transfer has been
      made by the Subscriber.
      A Note representing the balance of the Note not so converted will be provided
      by
      the Company to such Subscriber if requested by Subscriber, provided such
      Subscriber delivers the
      original Note to the Company. In the event that a Subscriber elects not to
      surrender a Note for reissuance upon partial payment or conversion of a Note,
      such Subscriber hereby indemnifies the Company against any and all loss or
      damage attributable to a third-party claim in an amount in excess of the actual
      amount then due under the Note.

    

    (c) The
      Company understands that a delay in the delivery of the Shares in the form
      required pursuant to Section 7.1 hereof, or the Mandatory Redemption Amount
      described in Section 7.2 hereof, respectively later than the Delivery Date
      or
      the Mandatory Redemption Payment Date (as hereinafter defined) could result
      in
      economic loss to the Subscriber. As compensation to a Subscriber for such loss,
      the Company agrees to pay (as liquidated damages and not as a penalty) to such
      Subscriber for late issuance of Shares in the form required pursuant to Section
      7.1 hereof upon Conversion of the Note in the amount of $100 per business day
      after the Delivery Date for each $10,000 of Note principal amount (and
      proportionately for other amounts) being converted of the corresponding Shares
      which are not timely delivered. The Company shall pay any payments incurred
      under this Section in immediately available funds upon demand. Furthermore,
      in
      addition to any other remedies which may be available to the Subscriber, in
      the
      event that the Company fails for any reason to effect delivery of the Shares
      within seven (7) business days after the Delivery Date or make payment within
      seven (7) business days after the Mandatory Redemption Payment Date (as defined
      in Section 7.2 below), such Subscriber will be entitled to revoke all or part
      of
      the relevant Notice of Conversion or rescind all or part of the notice of
      Mandatory Redemption by delivery of a notice to such effect to the Company
      whereupon the Company and such Subscriber shall each be restored to their
      respective positions immediately prior to the delivery of such notice, except
      that the liquidated damages described above shall be payable through the date
      notice of revocation or rescission is given to the Company.

     

    (d) The
      Company agrees and acknowledges that despite the pendency of a not yet effective
      Registration Statement which includes for registration the Registrable
      Securities (as defined in Section 11.1(iv)), a Subscriber is permitted to and
      the Company will issue to such Subscriber Shares upon conversion of the Note
      and
      Warrant Shares upon exercise of the Warrants. Such Shares will, if required
      by
      law, bear the legends described in Section 4 above and if the requirements
      of
      Rule 144 under the 1933 Act are satisfied, be resalable thereunder.

     

    
      
        
        

      

      
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    7.2. Mandatory
      Redemption at Subscriber’s Election.
      In the
      event (i) the Company is prohibited from issuing Shares, (ii) upon the
      occurrence of any other Event of Default (as defined in the Note or in this
      Agreement), that continues for more than twenty (20) business days, (iii) a
      Change in Control (as defined below), or (iv) of the liquidation, dissolution
      or
      winding up of the Company, then at the Subscriber's election, the Company must
      pay to each Subscriber ten (10) business days after request by each Subscriber
      (“Calculation
      Period”),
      a sum
      of money determined by multiplying up to the outstanding principal amount of
      the
      Note designated by each such Subscriber by 120%, plus accrued but unpaid
      interest ("Mandatory
      Redemption Payment").
      The
      Mandatory Redemption Payment must be received by each Subscriber on the same
      date as the Shares otherwise deliverable or within ten (10) business days after
      request, whichever is sooner ("Mandatory
      Redemption Payment Date").
      Upon
      receipt of the Mandatory Redemption Payment, the corresponding Note principal
      and interest will be deemed paid and no longer outstanding. Liquidated damages
      calculated pursuant to Section 7.1(c) hereof, that have been paid or accrued
      for
      the ten day period prior to the actual receipt of the Mandatory Redemption
      Payment by a Subscriber shall be credited against the Mandatory Redemption
      Payment. For purposes of this Section 7.2, “Change
      in Control”
shall
      mean (i) the Company no longer having a class of shares publicly traded or
      listed on a Principal Market, (ii) the Company becoming a Subsidiary of another
      entity (other than a corporation formed by the Company for purposes of
      reincorporation in another U.S. jurisdiction), (iii) a majority of the board
      of
      directors of the Company as of the Closing Date no longer serving as directors
      of the Company except due to natural causes (which shall include, termination
      of
      such directors by the holders of more than 50% of the equity outstanding as
      of
      the Closing Date), and (iv) the sale, lease or transfer of substantially all
      the
      assets of the Company or its Subsidiaries.

    

    7.3. Maximum
      Conversion.
      No
      Subscriber shall be entitled to convert on a Conversion Date that amount of
      the
      Note in connection with that number of shares of Common Stock which would be
      in
      excess of the sum of (i) the number of shares of Common Stock beneficially
      owned
      by such Subscriber and its Affiliates on a Conversion Date, and (ii) the number
      of shares of Common Stock issuable upon the conversion of the Note with respect
      to which the determination of this provision is being made on a Conversion
      Date,
      which would result in beneficial ownership by such Subscriber and its Affiliates
      of more than 4.99% of the outstanding shares of Common Stock of the Company
      on
      such Conversion Date. For the purposes of the provision to the immediately
      preceding sentence, beneficial ownership shall be determined in accordance
      with
      Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule
      13d-3
      thereunder. Subject to the foregoing, the Subscriber shall not be limited to
      aggregate conversions of only 4.99% and aggregate conversions by the Subscriber
      may exceed 4.99%. The Subscriber may increase the permitted beneficial ownership
      amount up to 9.99% upon and effective after 61 days’ prior written notice to the
      Company. Such Subscriber may allocate which of the equity of the Company deemed
      beneficially owned by such Subscriber shall be included in the 4.99% amount
      described above and which shall be allocated to the excess above
      4.99%.

    

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

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

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

    

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

     

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

    

    8. Broker/Due
      Diligence Fee/Legal Fees.

    

    (a)  Broker’s
      Commission.
      The
      Company on the one hand, and each Subscriber (for himself only) on the other
      hand, agrees to indemnify the other against and hold the other harmless from
      any
      and all liabilities to any persons claiming brokerage commissions or similar
      fees except as described on Schedule
      8(a)
      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 in this
      Agreement to the contrary notwithstanding, each Subscriber is providing
      indemnification only for such Subscriber’s own actions and not for any action of
      any other Subscriber. The Company represents that there are no parties entitled
      to receive fees, commissions, or similar payments in connection with the
      offering described in this Agreement except as described on Schedule
      8(a)
      hereto.

     

    (b) Due
      Diligence Fee.
      The
      Company will pay a due diligence fee (“Due
      Diligence Fee”)
      to the
      lead investor or its designees (each a “Due
      Diligence Fee Recipient”)
      as
      described on Schedule
      8(b).
      The
      aggregate Due Diligence Fee shall be equal to five percent (5%) of the Purchase
      Price as more fully described on Schedule
      8(b)
      hereto.
      The Due Diligence Fee will be payable out of funds held pursuant to the Escrow
      Agreement.

     

      (c) Subscriber’s
      Legal Fees.
      The
      Company shall pay to Grushko & Mittman, P.C., a fee of $22,500
      (“Subscribers’
      Legal Fees”)
      (of
      which $5,000 has been paid) as reimbursement for services rendered to the
      Subscribers in connection with this Agreement and the purchase and sale of
      the
      Notes and Warrants (the “Offering”).
      Twelve Thousand Five Hundred Dollars ($12,500) of the balance of the
      Subscribers’ Legal Fees will be paid on the Initial Closing Date and the
      remaining Subscribers’ Legal Fees will be paid on the Second Closing Date. The
      Subscribers’ Legal Fees and expenses will be payable out of funds held pursuant
      to the Escrow Agreement. Grushko & Mittman, P.C. will be reimbursed on each
      Closing Date for all lien searches, filing fees, and printing and shipping
      costs
      for the closing statements to be delivered to Subscribers.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    (b) Listing/Quotation.
      The
      Company shall promptly secure the quotation or listing of the Shares and Warrant
      Shares upon each national securities exchange, or automated quotation system
      upon which they are or become eligible for quotation or listing (subject to
      official notice of issuance) and shall maintain same so long as any Warrants
      are
      outstanding. The Company will maintain the quotation or listing of its Common
      Stock on the American Stock Exchange, Nasdaq Capital Market, Nasdaq Global
      Market, Nasdaq Global Select Market, Bulletin Board, or New York Stock Exchange
      (whichever of the foregoing is at the time the principal trading exchange or
      market for the Common Stock (the “Principal
      Market”),
      and
      will comply in all respects with the Company's reporting, filing and other
      obligations under the bylaws or rules of the Principal Market, as applicable.
      The Company will provide the Subscribers copies of all notices it receives
      notifying the Company of the threatened and actual delisting of the Common
      Stock
      from any Principal Market. As of the date of this Agreement and the Closing
      Date, the Bulletin Board is and will be the Principal Market.

     

    (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 the Subscribers.

     

    (d) Filing
      Requirements.
      From
      the
      date of this Agreement and until the last to occur of (i) two (2) years after
      the second Closing Date, (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 or
      (iii)
      the Notes are no longer outstanding (the date of occurrence of the last such
      event being the “End
      Date”),
      the
      Company will (A) cause its Common Stock to be registered under Section 12(b)
      or
      12(g) of the 1934 Act, (B) comply in all respects with its reporting and filing
      obligations under the 1934 Act, (C) voluntarily comply with all reporting
      requirements that are applicable to an issuer with a class of shares registered
      pursuant to Section 12(g) of the 1934 Act, if Company is not subject to such
      reporting requirements, and (D) comply with all requirements related to any
      registration statement filed pursuant to this Agreement. The Company will use
      its best efforts not to take any action or file any document (whether or not
      permitted by the 1933 Act or the 1934 Act or the rules thereunder) to terminate
      or suspend such registration or to terminate or suspend its reporting and filing
      obligations under said acts until the End Date. Until the End Date, the Company
      will continue the listing or quotation of the Common Stock on a Principal Market
      and will comply in all respects with the Company's reporting, filing and other
      obligations under the bylaws or rules of the Principal Market. The Company
      agrees to timely file a Form D with respect to the Securities if required under
      Regulation D and to provide a copy thereof to each Subscriber promptly after
      such filing.

     

    (e) Use
      of
      Proceeds.
      The
      proceeds of the Offering will be employed by the Company as described on
Schedule
      9(e).
      The
      Purchase Price may not and will not be used for accrued and unpaid officer
      and
      director salaries, payment of financing related debt, redemption of outstanding
      notes or equity instruments of the Company nor non-trade obligations outstanding
      on a Closing Date. For so long as any Notes are outstanding, the Company will
      not prepay any financing related debt obligations nor redeem any equity
      instruments of the Company.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (f) Reservation.
      Prior
      to Initial Closing Date, and at all times thereafter, the Company shall have
      reserved, pro rata,
      on
      behalf of each holder of a Note or Warrant, from its authorized but unissued
      Common Stock, a number of common shares equal to 175%
      of
      the amount of Common Stock necessary to allow each holder of a Note to be able
      to convert all such outstanding Notes and interest (if any) and reserve the
      amount of Warrant Shares issuable upon exercise of the Warrants. 

     

    (g)
       DTC
      Program.
      At all
      times that Notes or Warrants are outstanding, the Company will employ as the
      transfer agent for the Common Stock, Shares and Warrant Shares a participant
      in
      the Depository Trust Company Automated Securities Transfer Program.

     

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

     

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

     

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

     

    (k) Governmental
      Authorities.
      From the
      date of this Agreement and until the End Date, 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.

     

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

     

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

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (n) Confidentiality/Public
      Announcement.
      From the
      date of this Agreement and until the End Date, the Company agrees that except
      in
      connection with a Form 8-K and the registration statement or statements
      regarding the Subscribers’ securities or in correspondence with the SEC
      regarding same, it will not disclose publicly or privately the identity of
      the
      Subscribers unless expressly agreed to in writing by a Subscriber or only to
      the
      extent required by law and then only upon five days prior notice to Subscriber.
      In any event and subject to the foregoing, the Company undertakes to file a
      Form
      8-K or make a public announcement describing the Offering not later than the
      business day after the Closing Date. Prior to filing or announcement, such
      Form
      8-K or public announcement will be provided to Subscribers for their review
      and
      approval. In the Form 8-K or public announcement, the Company will specifically
      disclose the amount of Common Stock outstanding immediately after the Closing.
      Upon  delivery by the Company to the Subscribers after the Closing
      Date of any notice or information, in writing, electronically or otherwise,
      and
      while a Note, Shares, Warrants, or Warrant Shares are held by such Subscribers,
      unless the  Company has in good faith determined that the matters
      relating to such notice do not constitute material, nonpublic
      information relating to the Company or
      Subsidiaries, the Company  shall within one business day after
      any such delivery publicly disclose such  material,  nonpublic 
information on a Report on Form 8-K or otherwise. 
In
      the event that the Company believes that a
      notice or communication to a Subscriber contains material, nonpublic
      information, relating to the Company or Subsidiaries, the Company shall so
      indicate to such Subscriber contemporaneously with delivery of such notice
      or
      information. In the absence of any such indication, such Subscriber shall
      be allowed to presume that all matters relating to such notice and information
      do not constitute material, nonpublic information relating to the Company
      or its Subsidiaries.

     

    (o) Non-Public
      Information.
      The
      Company covenants and agrees that except for the Reports, Other Written
      Information and schedules and exhibits to this Agreement, which information
      the
      Company undertakes to publicly disclose not later than the sooner of the
      required or actual filing date of the Form 8-K described in Section 9(n) above,
      neither it nor any other person acting on its behalf will at any time provide
      any Subscriber or its agents or counsel with any information that the Company
      believes constitutes material non-public information, unless prior thereto
      such
      Subscriber shall have agreed in writing to keep such information in confidence.
      The Company understands and confirms that each Subscriber shall be relying
      on
      the foregoing representations in effecting transactions in securities of the
      Company.

     

    (p) Negative
      Covenants.
      So long
      as a Note is outstanding, without the consent of the Subscribers, the Company
      will not and will not permit any of its Subsidiaries to directly or
      indirectly:

    

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

     

    
      
        
        

      

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

    

    

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

    

    (iv) engage
      in
      any transactions with any officer, director, employee or any Affiliate of the
      Company, including any contract, agreement or other arrangement providing for
      the furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any officer,
      director or such employee or, to the knowledge of the Company, any entity in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner, in each case in excess of $100,000
      other than (i) for payment of salary or consulting fees for services rendered,
      (ii) reimbursement for expenses incurred on behalf of the Company, and (iii)
      for
      other employee benefits, including stock option agreements under any stock
      option plan of the Company; or

     

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

     

    (q) Further
      Registration Statements.
      Except
      for a registration statement filed on behalf of the Subscribers pursuant to
      Section 11 of this Agreement, and as set forth on Schedule
      11.1
      hereto,
      the Company will not, without the consent of the Subscribers, file with the
      Commission or with state regulatory authorities any registration statements
      or
      amend any already filed registration statement to increase the amount of Common
      Stock registered therein, or reduce the price of which such Common Stock is
      registered therein, (including but not limited to Forms S-8), until the
      expiration of the “Exclusion
      Period,”
which
      shall be defined as the sooner of (i) the Registration Statement having been
      current and available for use in connection with the resale of all of the
      Registrable Securities [as defined in Section 11.1(i)] for a period of two
      hundred and ten (210) days, or (ii) until the Notes are no longer outstanding.
      The Exclusion Period will be tolled or reinstated, as the case may be, during
      the pendency of an Event of Default as defined in the Note.

     

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

     

    (s) Offering
      Restrictions.
      Until
      the sooner of (i) the Registration Statement having been current and available
      for use in connection with the resale of all of the Registrable Securities
      [as
      defined in Section 11.1(i)] for a period of three hundred and sixty-five (365)
      days, or (ii) until the Notes are no longer outstanding, and/or during the
      pendency of an Event of Default, except for the Excepted Issuances, the Company
      will not enter into an agreement to issue nor issue any equity, convertible
      debt
      or other securities convertible into Common Stock or equity of the Company
      nor
      modify any of the foregoing which may be outstanding at anytime, without the
      prior written consent of the Subscriber, which consent may be withheld for
      any
      reason. For so long as the Notes are outstanding, the Company will not enter
      into any Equity Line of Credit or similar agreement, nor issue nor agree to
      issue any floating or Variable Priced Equity Linked Instruments nor any of
      the
      foregoing or equity with price reset rights (collectively, the “Variable
      Rate Restrictions”).
      For
      purposes hereof, “Equity
      Line of Credit”
shall
      include any transaction involving a written agreement between the Company and
      an
      investor or underwriter whereby the Company has the right to “put” its
      securities to the investor or underwriter over an agreed period of time and
      at
      an agreed price or price formula, and “Variable
      Priced Equity Linked Instruments”
shall
      include: (A) any debt or equity securities which are convertible into,
      exercisable or exchangeable for, or carry the right to receive additional shares
      of Common Stock either (1) at any conversion, exercise or exchange rate or
      other
      price that is based upon and/or varies with the trading prices of or quotations
      for Common Stock at any time after the initial issuance of such debt or equity
      security, or (2) with a fixed conversion, exercise or exchange price that is
      subject to being reset at some future date at any time after the initial
      issuance of such debt or equity security due to a change in the market price
      of
      the Company’s Common Stock since date of initial issuance, and (B) any
      amortizing convertible security which amortizes prior to its maturity date,
      where the Company is required or has the option to (or any investor in such
      transaction has the option to require the Company to) make such amortization
      payments in shares of Common Stock which are valued at a price that is based
      upon and/or varies with the trading prices of or quotations for Common Stock
      at
      any time after the initial issuance of such debt or equity security (whether
      or
      not such payments in stock are subject to certain equity conditions). The only
      officer, director, employee and consultant stock option or stock incentive
      plan
      currently in effect or contemplated by the Company is described on Schedule
      5(d).

     

    
      
        
        

      

      
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    (t) Limited
      Standstill.
      The
      Company will deliver to the Subscribers on or before the Closing Date and
      enforce the provisions of an irrevocable lockup agreement (“Lockup
      Agreement”)
      in the
      form annexed hereto as Exhibit
      I,
      with
      the persons identified on Schedule
      9(t).

     

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

     

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

     

    (w) Series
      A Preferred Stock.
      Effective as of the Initial Closing Date, the Company will have caused the
      conversion of ________ outstanding shares of the Company’s Series A Preferred
      Stock into _______ shares of Common Stock. The Company represents that after
      such conversion, the amount of outstanding Common Stock held by non-affiliates
      of the Company as such term is employed by the Commission in connection with
      Rule 415 under the 1933 Act shall be ________ shares of Common
      Stock.

     

    (x) Attendance
      by Observer.
       The
      Finder shall have the right to designate an observer, who shall be entitled
      to
      attend and participate (but not vote) at all meetings of the Board of Directors
      of the Company and to receive all notices, reports, information, correspondence
      and communications sent by the Company to members of the Board of Directors.
      All
      reasonable costs and expenses incurred in connection therewith by any such
      designated observer shall be reimbursed by the Company to the extent that the
      Company reimburses such expenses incurred by any directors of the
      Company. It
      is
      provided and agreed that the actions and advice of any person while serving
      pursuant to this section as an observer at meetings of the Board of Directors
      shall be construed to be the actions and advice of that person alone and not
      be
      construed as actions of any Subscriber as to any notice, requirements or rights
      of any Subscriber under the Transaction Documents, nor as the action of any
      Subscriber to approve modifications, consents, amendments or waivers thereof;
      and all such actions or notices shall be deemed actions or notices to the
      Subscribers only when duly provided in writing and given in accordance with
      the
      provisions of the Transaction Documents. 
      The
      relationship between the Company and the Subscribers is, and shall at all times
      remain, solely that of the Company with a purchaser of its securities and
      creditor. The Subscribers neither undertake nor assume any responsibility or
      duty to the Company to review, inspect, supervise, pass judgment upon, or inform
      the Company of any matter in connection with any phase of the Company’s
      business, operations, or condition, financial or otherwise. The Company shall
      rely entirely upon its own judgment with respect to such matters, and any
      review, inspection, supervision, exercise of judgment, or information supplied
      to the Company by the Subscribers, or any representative or agent of the
      Subscribers, in connection with any such matter is for the protection of the
      Subscribers, and neither the Company nor any third party is entitled to rely
      thereon. It shall be deemed a default of a material obligation under the Notes
      if Company does not comply with the requirements of this section.

     

    
      
        
        

      

      
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    10. Covenants
      of the Company Regarding Indemnification.

     

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

     

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

     

    11.1. Registration
      Rights.
      The
      Company hereby grants the following registration rights to holders of the
      Securities.

     

    (i) On
      one
      occasion, for a period commencing ninety-one (91) days after the Initial Closing
      Date, but not later than two years after the Initial Closing Date, upon a
      written request therefor from any record holder or holders of more than 50%
      of
      the Shares issued and issuable upon conversion of the outstanding Notes and
      outstanding Warrant Shares, the Company shall prepare and file with the
      Commission a registration statement under the 1933 Act registering the
      Registrable Securities, as defined in Section 11.1(iv) hereof, which are the
      subject of such request for unrestricted public resale by the holder thereof.
      For purposes of Sections 11.1(i) and 11.1(ii), Registrable Securities shall
      not
      include Securities which are (A) registered for resale in an effective
      registration statement, (B) included for registration in a pending registration
      statement, (C) which have been issued without further transfer restrictions
      after a sale or transfer pursuant to Rule 144 under the 1933 Act or (D) which
      may be resold under Rule 144(k) or Rule 144 without volume limitations. 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 within ten
      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 11.1(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 ten
      (10)
      days' prior written notice to the record holder of the Registrable Securities
      of
      its intention so to do. Upon the written request of the holder, received by
      the
      Company within 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 11.1(ii) shall be,
      in
      whole or in part, an underwritten public offering of common stock of the
      Company, the number of shares of Registrable Securities to be included in such
      an underwriting may be reduced by the managing underwriter if and to the extent
      that the Company and the underwriter shall reasonably be of the opinion that
      such inclusion would adversely affect the marketing of the securities to be
      sold
      by the Company therein; provided, however, that the Company shall notify the
      Seller in writing of any such reduction. Notwithstanding the foregoing
      provisions, or Section 11.4 hereof, the Company may withdraw or delay or suffer
      a delay of any registration statement referred to in this Section 11.1(ii)
      without thereby incurring any liability to the Seller.

     

    
      
        
        

      

      
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    (iii) If,
      at
      the time any written request for registration is received by the Company
      pursuant to Section 11.1(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 11.1(ii) rather than Section 11.1(i), and the rights of
      the
      holders of Registrable Securities covered by such written request shall be
      governed by Section 11.1(ii).

     

    (iv) The
      Company shall file with the Commission 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 within thirty (30)
      calendar days after the Closing Date (the
      “Filing
      Date”),
      and
      cause the Registration Statement to be declared effective not
      later
      than ninety (90) calendar days after the Closing Date (the
      “Effective
      Date”).
      The
      Company will register not less than a number of shares of common stock in the
      aforedescribed registration statement that is equal to 175%
      of
      the Shares issued and issuable upon conversion of the Notes, and 100% of the
      Warrant Shares issuable upon exercise of the Warrants issued and issuable on
      the
      Initial Closing Date and Second Closing Date (collectively the “Registrable
      Securities”).
      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 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. Except with the written consent of the Subscribers, no securities
      of
      the Company other than the Registrable Securities or the securities described
      on
Schedule
      11.1,
      will be
      included in the Registration Statement. It shall be deemed a Non-Registration
      Event if at any time after the date the Registration Statement is declared
      effective by the Commission (“Actual
      Effective Date”)
      the
      Company has registered for unrestricted resale on behalf of the Subscribers
      less
      than all of the Registrable Securities required to be registered as described
      in
      this Agreement (“Shortfall”).
      The
      Company shall cause to be registered a sufficient amount of shares of Common
      stock in order to eliminate the Shortfall within 60 days after the date the
      Shortfall occurs. Failure to eliminate the Shortfall within such 60 day period
      shall be a Non-Registration Event. Except for Common Stock described on
Schedule
      11.1,
      no
      other securities of the Company will be included in the Registration Statement
      other than the Registrable Securities.

     

    (v) The
      amount of Registrable Securities required to be included in the Registration
      Statement as described in Section 11.1(iv) (“Initial
      Registrable Securities”)
      shall
      be limited to not less than 100% of the maximum amount (“Rule
      415 Amount”)
      of
      Common Stock which may be included in a single Registration Statement without
      exceeding registration limitations imposed by the Commission pursuant to Rule
      415 of the 1933 Act but in any event not less than _________ [REQUIRES
      COMPLETION]
      shares
      of Common Stock. In the event that less than all of the Initial Registrable
      Securities are included in the Registration Statement as a result of the
      limitation described in this Section 11.1(v), then the Company will file
      additional Registration Statements each registering the Rule 415 Amount (each
      such Registration Statement a “Subsequent
      Registration Statement”),
      seriatim,
      until
      all of the Initial Registrable Securities have been registered. The Filing
      Date
      and Effective Date of each such additional Registration Statement shall be,
      respectively, fourteen (14) and forty-five (45) days after the first day such
      Subsequent Registration Statement may be filed without objection by the
      Commission based on Rule 415 of the 1933 Act.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    (vi) Unless
      otherwise instructed in writing by a holder of Registrable Securities and only
      if the initial Registration Statement does not include all of the Registrable
      Securities, the Registrable Securities will be registered on behalf of each
      such
      holder in the Registration Statements based in the following order and
      priority:

     

    (A) Shares.

     

    (B) Conversion
      Shares issued and issuable upon conversion of the Notes (based on the multiple
      set forth above).

     

    (C) Warrants
      Shares issued and issuable to the Subscribers with lower exercise priced Warrant
      Shares being registered first and then the higher exercise priced Warrant
      Shares. In the case of Warrants with the same exercise prices but different
      Issue Dates, the Warrants issuable upon later issued Warrants will be registered
      first.

     

    (vii) The
      foregoing notwithstanding, Registrable Securities shall be allocated and
      registered pro rata among the Subscribers based upon their initial investments
      in the Offering.

     

    11.2. Registration
      Procedures.
      If and
      whenever the Company is required by the provisions of Sections 11.1(i), 11.1(ii)
      or 11.1(iv) to effect the registration of any Registrable Securities under
      the
      1933 Act, the Company will, as expeditiously as possible: 

     

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

     

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

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

    (g) provided
      same would not be in violation of the provision of Regulation FD under the
      1934
      Act, make available for inspection by the Sellers during reasonable business
      hours, 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
      at such
      requesting Seller’s expense;
      and

     

    (h) provide
      to the Sellers copies of the Registration Statement and amendments thereto
      five
      business days prior to the filing thereof with the Commission. Any Subscriber’s
      failure to comment on any Registration Statement or other document provided
      to a
      Subscriber or its counsel shall not be construed to constitute approval thereof
      nor the accuracy thereof.

     

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

     

    11.4. Non-Registration
      Events.
      The
      Company agrees 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 any registration statement required under
      Section 11.1(i) or 11.1(ii) is not filed within 60 days after written request
      and declared effective by the Commission within 90 days after such request,
      and
      maintained in the manner and within the time periods contemplated by Section
      11
      hereof, and it would not be feasible to ascertain the extent of such damages
      with precision. Accordingly, if (A) the Registration Statement is not filed
      on
      or before the Filing Date, (B) the Registration Statement is not declared
      effective on or before the required Effective Date, (C) due to the action or
      inaction of the Company the Registration Statement is not declared effective
      within three (3) business days after receipt by the Company or its attorneys
      of
      a written or oral communication from the Commission that the Registration
      Statement will not be reviewed or that the Commission has no further comments,
      (D) if the registration statement described in Sections 11.1(i) or 11.1(ii)
      is
      not filed within 60 days after such written request, or is not declared
      effective within 90 days after such written request, or (E) any registration
      statement described in Sections 11.1(i), 11.1(ii) or 11.1(iv) is filed and
      declared effective but shall thereafter cease to be effective without being
      succeeded within twenty-five (25) business days by an effective replacement
      or
      amended registration statement or for a period of time which shall exceed forty
      (45) days in the aggregate per year (defined as every rolling period of 365
      consecutive days commencing on the Actual Effective Date (each such event
      referred to in clauses (A) through (E) of this Section 11.4 is referred to
      herein as a "Non-Registration
      Event"),
      then
      the Company shall deliver to the holder of Registrable Securities, as
Liquidated
      Damages,
      an
      amount equal to two percent (2%) for each thirty (30) days (or such lesser
      pro-rata amount for any period of less than thirty (30) days) of the principal
      amount of the outstanding Notes and
      purchase price of Shares and Warrant Shares issued upon conversion of Notes
      and
      exercise of Warrants held by Subscriber which are subject to such
      Non-Registration Event.
      The
      Company must pay the Liquidated Damages in cash. The Liquidated Damages must
      be
      paid within ten (10) days after the end of each thirty (30) day period or
      shorter part thereof for which Liquidated Damages are payable. In the event
      a
      Registration Statement is filed by the Filing Date but is withdrawn prior to
      being declared effective by the Commission, then such Registration Statement
      will be deemed to have not been filed and Liquidated Damages will be calculated
      accordingly. All
      oral
      or written comments received from the Commission relating to the Registration
      Statement must be satisfactorily responded to within
      ten (10) business days after receipt of comments from the Commission.
      Failure
      to
      timely respond to Commission comments is a Non-Registration Event for which
      Liquidated Damages shall accrue and be payable by the Company to the holders
      of
      Registrable Securities at the same rate and amounts set forth above calculated
      from the date the response was required to have been made.

     

    
      
        
        

      

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

     

    11.6. Indemnification
      and Contribution.

     

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

     

    
      
        
        

      

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

     

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

     

    
      
        
        

      

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

     

    11.7. Delivery
      of Unlegended Shares.

     

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

     

    (b) In
      lieu
      of delivering physical certificates representing the Unlegended Shares, 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 the Depository Trust Company through its Deposit
      Withdrawal Agent Commission system, if such transfer agent participates in
      such
      DWAC system. Such delivery must be made on or before the Unlegended Shares
      Delivery Date.

    

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

     

    
      
        
        

      

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

     

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

    

    12. (a) Right
      of Participation.
      Until
      the sooner of (i) the Notes are no longer outstanding, or (ii) the Registration
      Statement in connection with all of the Registrable Securities has been
      effective for 365 days, the Subscribers shall be given not less than ten
      business days prior written notice of any proposed sale by the Company of its
      Common Stock or other securities or equity linked debt obligations, except
      in
      connection with (i) full or partial consideration in connection with a strategic
      merger, acquisition, consolidation or purchase of substantially all of the
      securities
      or assets of corporation or other entity which holders of such securities or
      debt are not at any time granted registration rights, (ii)
      the
      Company’s issuance of securities in connection with strategic license agreements
      and other partnering arrangements so long as such issuances are not for the
      purpose of raising capital and which holders of such securities or debt are
      not
      at any time granted registration rights, (iii) the Company’s issuance of Common
      Stock or the issuances or grants of options to purchase Common Stock to
      employees, directors, and consultants, pursuant to plans described on
Schedule
      5(d),
      and (iv)
      as a result of the exercise of Warrants or conversion of Notes which are granted
      or issued pursuant to this Agreement on the terms described in the Transaction
      Documents as of the Closing Date (collectively the foregoing are “Excepted
      Issuances”).
      The
      Subscribers who exercise their rights pursuant to this
      Section
      12(a) shall have the right during the ten business days following receipt of
      the
      notice to purchase in cash or by using the outstanding balance including
      principal, interest, liquidated damages and any other amount then owing to
      such
      Subscriber by the Company, in the aggregate up to all of such offered Common
      Stock, debt or other securities in accordance with the terms and conditions
      set
      forth in the notice of sale in the same proportion to each other as their
      purchase of Notes in the Offering. In the event such terms and conditions are
      modified during the notice period, the Subscribers shall be given prompt notice
      of such modification and shall have the right during the ten business days
      following the notice of modification to exercise such right. The
      Subscribers who exercise their rights pursuant to this
      Section
      12(a) shall have the right during the ten business days following receipt of
      the
      notice to participate in such offered Common Stock, debt or other securities
      in
      accordance with the terms and conditions set forth in the notice of sale by
      using the outstanding balance including principal, interest, liquidated damages
      and any other amount then owing to such Subscriber by the Company, to pay for
      such participation.

     

    
      
        
        

      

      
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    (b) Favored
      Nations Provision.
      Other
      than in connection with the Excepted Issuances, if at any time the Notes or
      Warrants are outstanding, the Company shall agree to or issue (the “Lower
      Price Issuance”)
      any
      Common Stock or securities convertible into or exercisable for shares of Common
      Stock (or modify any of the foregoing which may be outstanding) to any person
      or
      entity at a price per share or conversion or exercise price per share which
      shall be less than the Conversion Price in respect of the Shares, or if less
      than the Warrant exercise price in respect of the Warrant Shares, without the
      consent of each Subscriber, then the Company shall issue, for each such
      occasion, additional shares of Common Stock to each Subscriber respecting those
      Notes, Warrants and Shares that remain outstanding at the time of the Lower
      Price Issuance so that the average per share purchase price of the shares of
      Common Stock issued to each Subscriber (of only the Common Stock or Warrant
      Shares still owned by a Subscriber) is equal to such other lower price per
      share
      and the Conversion Price and Warrant exercise price shall automatically be
      reduced to such other lower price. The average Purchase Price of the Shares
      and
      average exercise price in relation to the Warrant Shares shall be calculated
      separately for the Shares and Warrant Shares. The foregoing calculation and
      issuance shall be made separately for Shares received upon conversion of the
      Notes and separately for Warrant Shares. The delivery to a 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. Each Subscriber is granted the registration rights described
      in
      Section 11 hereof in relation to such additional shares of Common Stock. For
      purposes of the issuance and adjustment described in this paragraph, the
      issuance of any security of the Company carrying the right to convert such
      security into shares of Common Stock or of any warrant, right or option to
      purchase Common Stock shall result in the issuance of the additional shares
      of
      Common Stock upon the sooner of the agreement to or actual issuance of such
      convertible security, warrant, right or option and again at any time upon any
      subsequent issuances of shares of Common Stock upon exercise of such conversion
      or purchase rights if such issuance is at a price lower than the Conversion
      Price or Warrant exercise price in effect upon such issuance. The rights of
      each
      Subscriber set forth in this Section 12 are in addition to any other rights
      the
      Subscriber has pursuant to this Agreement, the Note, any Transaction Document,
      and any other agreement referred to or entered into in connection herewith
      or to
      which such Subscriber and Company are parties. Each Subscriber is also given
      the
      right to elect to substitute any term or terms of any other offering in
      connection with which such Subscriber has rights as described in Section 12(a),
      for any term or terms of the Offering in connection with Securities owned by
      such Subscriber as of the date the notice described in Section 12(a) is required
      to be given to such Subscriber.

     

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

     

    
      
        
        

      

      
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    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: Pay88, Inc., 1053 North
      Barnstead Road, Barnstead, NH 03225, Attn: Guo Fan, CEO and
      President,
      telecopier: (603) 776-6151, with a copy by telecopier only to: David Lubin
&
Associates, 26 East Hawthorne Avenue, Valley Stream, NY 11580, Attn: David
      Lubin, Esq., telecopier: (516) 887-8250, and (ii) if to the Subscriber, to:
      the
      one or more addresses and telecopier numbers indicated on the signature pages
      hereto, with an additional copy by telecopier only to: Grushko & Mittman,
      P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, telecopier: (212)
      697-3575.

     

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

     

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

     

    (d) Law
      Governing this Agreement.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York without regard to principles of conflicts of laws. Any action
      brought by either party against the other concerning the transactions
      contemplated by this Agreement shall be brought only in the state courts of
      New
      York or in the federal courts located in the state and county of New York.
      The
      parties to this Agreement hereby irrevocably waive any objection to jurisdiction
      and venue of any action instituted hereunder and shall not assert any defense
      based on lack of jurisdiction or venue or based upon forum
      non conveniens.
      The
      parties executing this Agreement and other agreements referred to herein or
      delivered in connection herewith on behalf of the Company agree to submit to
      the
      in personam jurisdiction of such courts and hereby irrevocably waive trial
      by
      jury. The
      prevailing party shall be entitled to recover from the other party its
      reasonable attorney's fees and costs. In the event that any provision of this
      Agreement or any other agreement delivered in connection herewith is invalid
      or
      unenforceable under any applicable statute or rule of law, then such provision
      shall be deemed inoperative to the extent that it may conflict therewith and
      shall be deemed modified to conform with such statute or rule of law. Any such
      provision which may prove invalid or unenforceable under any law shall not
      affect the validity or enforceability of any other provision of any agreement.
      Each party hereby irrevocably waives personal service of process and consents
      to
      process being served in any suit, action or proceeding in connection with this
      Agreement or any other Transaction Document by mailing a copy thereof via
      registered or certified mail or overnight delivery (with evidence of delivery)
      to such party at the address in effect for notices to it under this Agreement
      and agrees that such service shall constitute good and sufficient service of
      process and notice thereof. Nothing contained herein shall be deemed to limit
      in
      any way any right to serve process in any other manner permitted by
      law.

     

    
      
        
        

      

      
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    (e) Specific
      Enforcement, Consent to Jurisdiction.
      The
      Company and Subscriber acknowledge and agree that irreparable damage would
      occur
      in the event that any of the provisions of this Agreement were not performed
      in
      accordance with their specific terms or were otherwise breached. It is
      accordingly agreed that the parties shall be entitled to seek an injunction
      or
      injunctions to prevent or cure breaches of the provisions of this Agreement
      and
      to enforce specifically the terms and provisions hereof, this being in addition
      to any other remedy to which any of them may be entitled by law or equity.
      Subject to Section 13(d) hereof, the Company hereby irrevocably waives, and
      agrees not to assert in any such suit, action or proceeding, any claim that
      it
      is not personally subject to the jurisdiction in New York of such court, that
      the suit, action or proceeding is brought in an inconvenient forum or that
      the
      venue of the suit, action or proceeding is improper. Nothing in this Section
      shall affect or limit any right to serve process in any other manner permitted
      by law.

     

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

     

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

     

    
      
        
        

      

      
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    (h) Consent.
      As used
      in the Agreement, “consent of the Subscribers” or similar language means the
      consent of holders of not less than 75% of the total of the Shares issued and
      issuable upon conversion of outstanding Notes owned by Subscribers on the date
      consent is requested.

     

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

     

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

     

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

     

    (l) Calendar
      Days.
      All
      references to “days” in the Transaction Documents shall mean calendar days
      unless otherwise stated. The terms “business days” and “trading days” shall mean
      days that the New York Stock Exchange is open for trading for three or more
      hours. Time periods shall be determined as if the relevant action, calculation
      or time period were occurring in New York City. Any deadline that falls on
      a
      non-business day in any of the Transaction Documents shall be automatically
      extended to the next business day and interest, if any, shall be calculated
      and
      payable through such extended period. 

     

    [THIS
      SPACE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    

       

      SIGNATURE
        PAGE TO SUBSCRIPTION AGREEMENT

       

      

      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.

       

       

      
        	 	 	 
	 	
                PAY88,
                  INC.

                a
                  Nevada corporation

              
	 
 	 
 	 
 
	 	By:  	/s/ Guo
                Fan
	 	
                

                Name:
                  Guo Fan

                Title:
                  CEO & President 

              
	 	 
	 	Dated: September 12,
                2007

      

       

      

      
        	
                SUBSCRIBER

              	
                INITIAL
                  CLOSING PURCHASE PRICE (CASH)

              	
                INITIAL
                  CLOSING PRINCIPAL AMOUNT OF NOTE

              	
                SECOND
                  CLOSING PURCHASE PRICE (CASH)

              	
                SECOND
                  CLOSING PRINCIPAL AMOUNT OF NOTE

              
	
                ALPHA
                  CAPITAL ANSTALT

                Pradafant
                  7

                9490
                  Furstentums

                Vaduz,
                  Lichtenstein

                Fax:
                  011-42-32323196

                 

                 

                 

                 

                 

                /s/
                  Konrad Ackerman

                (Signature)

                By:
                  Konrad Ackerman

              	
                $325,000.00

              	
                $500,500.00

              	
                $325,000.00

              	
                $500,500.00

              

      

      

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

       

      SIGNATURE
        PAGE TO SUBSCRIPTION AGREEMENT

       

      

      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.

       

      
         

        
          	 	 	 
	 	
                  PAY88,
                    INC.

                  a
                    Nevada corporation

                
	 
 	 
 	 
 
	 	By:  	/s/ Guo
                  Fan
	 	
                  

                  Name:
                    Guo Fan

                  Title:
                    CEO & President 

                
	 	 
	 	Dated: September 12,
                  2007

        

         

         

      

      
        	
                SUBSCRIBER

              	
                INITIAL
                  CLOSING PURCHASE PRICE (CASH)

              	
                INITIAL
                  CLOSING PRINCIPAL AMOUNT OF NOTE

              	
                SECOND
                  CLOSING PURCHASE PRICE (CASH)

              	
                SECOND
                  CLOSING PRINCIPAL AMOUNT OF NOTE

              
	
                WHALEHAVEN
                  CAPITAL FUND LIMITED 

                c/o
                  FWS Capital Ltd.

                3rd
                  Floor, 14 Par-Laville Road

                Hamilton,
                  Bermuda HM08

                Fax:
                  (441) 295-5262

                 

                 

                 

                 

                 

                /s/
                  Brian Mazzella

                (Signature)

                By:
                  Brian Mazzella

              	
                $325,000.00

              	
                $500,500.00

              	
                $325,000.00

              	
                $500,500.00

              

      

       

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

       

      SIGNATURE
        PAGE TO SUBSCRIPTION AGREEMENT

       

      

      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.

       

      
        
           

          
            	 	 	 
	 	
                    PAY88,
                      INC.

                    a
                      Nevada corporation

                  
	 
 	 
 	 
 
	 	By:  	/s/ Guo
                    Fan
	 	
                    

                    Name:
                      Guo Fan

                    Title:
                      CEO & President 

                  
	 	 
	 	Dated: September 12,
                    2007

          

          
          

        

      

      

      
        	
                SUBSCRIBER

              	
                INITIAL
                  CLOSING PURCHASE PRICE (CASH)

              	
                INITIAL
                  CLOSING PRINCIPAL AMOUNT OF NOTE

              	
                SECOND
                  CLOSING PURCHASE PRICE (CASH)

              	
                SECOND
                  CLOSING PRINCIPAL AMOUNT OF NOTE

              
	
                OSHER
                  CAPITAL PARTNERS LLC

                5
                  Sansberry Lane

                Spring
                  Valley, NY 10977

                Fax:
                  (212) 586-8244

                 

                 

                 

                 

                 

                /s/
                  Yisroel Kluger

                (Signature)

                By:
                  Yisroel Kluger

              	
                $100,000.00

              	
                $154,000.00

              	
                $100,000.00

              	
                $154,000.00

              

      

       

    

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    LIST
      OF EXHIBITS AND SCHEDULES

    

      
        	
                Exhibit
                  A

              	 	
                Form
                  of Note

              
	 	 	 
	
                Exhibit
                  B

              	 	
                Form
                  of Class A and Class B Warrant

              
	 	 	 
	
                Exhibit
                  C

              	 	
                Escrow
                  Agreement

              
	 	 	 
	
                Exhibit
                  D

              	 	
                Form
                  of Security Agreement

              
	 	 	 
	
                Exhibit
                  E

              	 	
                Form
                  of Subsidiary Guaranty

              
	 	 	 
	
                Exhibit
                  F

              	 	
                Form
                  of Personal Guaranty

              
	 	 	 
	
                Exhibit
                  G

              	 	
                Form
                  of Collateral Agent Agreement

              
	 	 	 
	
                Exhibit
                  H

              	 	
                Form
                  of Legal Opinion

              
	 	 	 
	
                Exhibit
                  I

              	 	
                Form
                  of Lockup Agreement

              
	 	 	 
	
                Schedule
                  3

              	 	
                Personal
                  Guarantors

              
	 	 	 
	
                Schedule
                  5(a)

              	 	
                Subsidiaries

              
	 	 	 
	
                Schedule
                  5(d)

              	 	
                Additional
                  Issuances / Capitalization / Reset Rights

              
	 	 	 
	
                Schedule
                  5(o)

              	 	
                Undisclosed
                  Liabilities

              
	 	 	 
	
                Schedule
                  5(x)

              	 	
                Transfer
                  Agent

              
	 	 	 
	
                Schedule
                  8(a)

              	 	
                Placement
                  Fees

              
	 	 	 
	
                Schedule
                  8(b)

              	 	
                Due
                  Diligence Fee

              
	 	 	 
	
                Schedule
                  9(e)

              	 	
                Use
                  of Proceeds

              
	 	 	 
	
                Schedule
                  9(t)

              	 	
                Lockup
                  Agreement Providers

              
	 	 	 
	
                Schedule
                  11.1

              	 	
                Other
                  Registrable Shares

              

      

    

     

    
      
        
        

      

      
        35

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