Document:

REGISTRATION
      RIGHTS AGREEMENT

     

    This
      Registration Rights Agreement (this "Agreement") is made and entered into as
      of
      July 19, 2006, by and between FRIENDLYWAY CORPORATION, a Nevada corporation
      (the
      "Company"), SLOAN SECURITIES CORP. (“Placement Agent”) and certain accredited
      investors purchasing the securities offered in private placement by the Company.
      Such investors are each referred to herein as a “Purchaser” and collectively as
      the "Purchasers".

     

    WHEREAS,
      this Agreement is made pursuant to the Securities Purchase Agreement, dated
      as
      of the date hereof, by and between the Purchasers and the Company (as amended,
      modified or supplemented from time to time, the "Securities Purchase
      Agreement"), and pursuant to the Notes and the Warrants referred to
      therein.

     

    WHEREAS,
      to induce the Purchasers to execute and deliver the Securities Purchase
      Agreement, the Company has agreed to provide certain registration rights with
      respect to the shares of Common Stock issuable upon conversion of the Notes
      and
      exercise of the Warrants and the Company has also agreed to provide certain
      registration rights with respect to the shares of Common Stock issuable upon
      exercise of the warrants (“Placement Agent Warrants”), issued to the Placement
      Agent and its permitted transferees (the “Placement Agent Warrant Shares”), both
      on the terms and conditions provided herein. 

     

    NOW,
      THEREFORE, for good and valuable consideration, the parties hereby agree as
      follows:

     

    1.
       Definitions.
      Capitalized terms used and not otherwise defined herein that are defined in
      the
      Securities Purchase Agreement shall have the meanings given such terms in the
      Securities Purchase Agreement. As used in this Agreement, the following terms
      shall have the following meanings:

     

    "Commission"
      means the Securities and Exchange Commission.

     

    "Common
      Stock" means shares of the Company's common stock, par value $0.001 per
      share.

     

    "Effectiveness
      Date" means (i) with respect to the initial Registration Statement required
      to
      be filed hereunder, a date no later than one-hundred-eighty (180) days following
      the last closing held pursuant to the Securities Purchase Agreement and (ii)
      with respect to each additional Registration Statement required to be filed
      hereunder, a date no later than forty (40) days following the applicable Filing
      Date.

     

    "Effectiveness
      Period" shall have the meaning set forth in Section 2(a).

     

    "Exchange
      Act" means the Securities Exchange Act of 1934, as amended, and any successor
      statute.

     

    
      
        
        

      

      
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    "Filing
      Date" means, (i) with respect to the initial Registration Statement required
      to
      be filed hereunder, a date no later than sixty (60) days following the date
      of
      the last closing held pursuant to the Securities Purchase Agreement, and (ii)
      with respect to shares of Common Stock issuable to the Holders as a result
      of
      adjustments to the Fixed Conversion Price set forth in any Notes or the Warrant
      Price set forth in any Warrants, thirty (30) days after the occurrence of such
      event or the date of the adjustment of the Conversion Price.

     

    "Holder"
      or "Holders" means a Purchaser or the Purchasers, as the case may be or any
      of
      their affiliates or transferees to the extent any of them hold Registrable
      Securities.

     

    "Indemnified
      Party" shall have the meaning set forth in Section 5(c).

     

    "Indemnifying
      Party" shall have the meaning set forth in Section 5(c).

     

    "Proceeding"
      means an action, claim, suit, investigation or proceeding (including, without
      limitation, an investigation or partial proceeding, such as a deposition),
      whether commenced or threatened.

     

    "Prospectus"
      means the prospectus included in the Registration Statement (including, without
      limitation, a prospectus that includes any information previously omitted from
      a
      prospectus filed as part of an effective registration statement in reliance
      upon
      Rule 430A promulgated under the Securities Act), as amended or supplemented
      by
      any prospectus supplement, with respect to the terms of the offering of any
      portion of the Registrable Securities covered by the Registration Statement,
      and
      all other amendments and supplements to the Prospectus, including post-effective
      amendments, and all material incorporated by reference or deemed to be
      incorporated by reference in such Prospectus.

     

    "Registrable
      Securities" means the shares of Common Stock issued upon (i) the conversion
      of
      the Notes or payable thereunder in lieu of a cash payment of principal or
      accrued interest,
      (ii) the
      exercise of the Warrants, (iii) the exercise of the Placement Agent Warrants
      and
      (iv) the issuance of Penalty Shares under the Securities Purchase Agreement,
      if
      any.

     

    "Registration
      Statement" means each registration statement required to be filed hereunder,
      including the Prospectus, amendments and supplements to such registration
      statement or Prospectus, including pre- and post-effective amendments, all
      exhibits thereto, and all material incorporated by reference or deemed to be
      incorporated by reference in such registration statement.

     

    "Rule
      144" means Rule 144 promulgated by the Commission pursuant to the Securities
      Act, as such Rule may be amended from time to time, or any similar rule or
      regulation hereafter adopted by the Commission having substantially the same
      effect as such Rule.

     

    "Rule
      415" means Rule 415 promulgated by the Commission pursuant to the Securities
      Act, as such Rule may be amended from time to time, or any similar rule or
      regulation hereafter adopted by the Commission having substantially the same
      effect as such Rule.

     

    
      
        
        

      

      
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    "Rule
      424" means Rule 424 promulgated by the Commission pursuant to the Securities
      Act, as such Rule may be amended from time to time, or any similar rule or
      regulation hereafter adopted by the Commission having substantially the same
      effect as such Rule.

     

    "Securities
      Act" means the Securities Act of 1933, as amended, and any successor
      statute.

     

    "Securities
      Purchase Agreement" shall have the meaning provided above.

     

    "Trading
      Market" means any of the OTCBB, NASDAQ SmallCap Market, the Nasdaq National
      Market, the American Stock Exchange or the New York Stock Exchange.

     

    "Warrants"
      means, collectively, the Common Stock purchase warrants issued pursuant to
      the
      Securities Purchase Agreement.

     

    2.
       Registration.

     

    (a)
       On
      or
      prior to the applicable Filing Date the Company shall prepare and file with
      the
      Commission a Registration Statement covering the Registrable Securities for
      an
      offering to be made on a continuous basis pursuant to Rule 415. The Registration
      Statement shall be on Form SB-2 (except if the Company is not then eligible
      to
      register for resale the Registrable Securities on Form SB-2, in which case
      such
      registration shall be on another appropriate form in accordance herewith).
      The
      Company shall cause the Registration Statement to become effective and remain
      effective as provided herein. The Company shall use its reasonable commercial
      efforts to cause the Registration Statement to be declared effective under
      the
      Securities Act as promptly as possible after the filing thereof, but in any
      event no later than the Effectiveness Date. The Company shall use its reasonable
      commercial efforts to keep the Registration Statement continuously effective
      under the Securities Act until the date which is the earlier date of when (i)
      all Registrable Securities have been sold or (ii) all Registrable Securities
      may
      be sold immediately without registration under the Securities Act and without
      volume restrictions pursuant to Rule 144(k), as determined by the counsel to
      the
      Company pursuant to a written opinion letter to such effect, addressed and
      acceptable to the Company's transfer agent and the affected Holders (the
      "Effectiveness Period").

     

    (b) 
      If: (i)
      the Registration Statement is not filed on or prior to the Filing Date; (ii)
      the
      Company fails to respond in writing to comments received from the Commission
      in
      connection with the Registration Statement within 15 business days of receipt
      thereof, (iii) the Registration Statement is not declared effective by the
      Commission by the Effectiveness Date; (iv) after the Registration Statement
      is
      filed with and declared effective by the Commission, the Registration Statement
      ceases to be effective (by suspension or otherwise) as to any Registrable
      Securities to which it is required to relate at any time prior to the expiration
      of the Effectiveness Period (without being succeeded immediately by an
      additional registration statement filed and declared effective) for a period
      of
      time which shall exceed 30 days in the aggregate per year or more than 20
      consecutive calendar days (defined as a period of 365 days commencing on the
      date the Registration Statement is declared effective); or (v) the Common Stock
      is not listed or quoted, or is suspended from trading on any Trading Market
      for
      a period of three (3) consecutive Trading Days (provided the Company shall
      not
      have been able to cure such trading suspension within 30 days of the notice
      thereof or list the Common Stock on another Trading Market); (any such failure
      or breach being referred to as an "Event," and for purposes of clause (i) or
      (ii) the date on which such Event occurs, or for purposes of clause (iv) the
      date on which such 30 day or 20 consecutive day period (as the case may be)
      is
      exceeded, or for purposes of clause (v) the date on which such three (3) Trading
      Day period is exceeded, being referred to as "Event Date"), then until the
      applicable Event is cured, the Company shall pay to each Holder an amount in
      cash, as liquidated damages and not as a penalty, equal to 2.0% for each thirty
      (30) day period (prorated for partial periods) on a daily basis of the sum
      of
      the original principal amount of the Note held by such Holder. While such Event
      continues, such liquidated damages shall be paid not less often than each thirty
      (30) days. Any unpaid liquidated damages as of the date when an Event has been
      cured by the Company shall be paid within three (3) days following the date
      on
      which such Event has been cured by the Company.

     

    
      
        
        

      

      
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    (c)
       Within
      three business days of the Effectiveness Date, the Company shall cause its
      counsel to issue a blanket opinion in the form attached hereto as Exhibit A,
      to
      the transfer agent stating that the shares are subject to an effective
      registration statement and can be reissued free of restrictive legend upon
      notice of a sale by any of the Purchasers and confirmation by such Purchaser
      that it has complied with the prospectus delivery requirements, provided that
      the Company has not advised the transfer agent orally or in writing that the
      opinion has been withdrawn. Copies of the blanket opinion required by this
      Section 2(c) shall be delivered to the Purchasers within the time frame set
      forth above.

     

    3.
       Registration
      Procedures.
      If and
      whenever the Company is required by the provisions hereof to effect the
      registration of any Registrable Securities under the Securities Act, the Company
      will, as expeditiously as possible:

     

    (a)
       prepare
      and file with the Commission the Registration Statement with respect to such
      Registrable Securities, respond as promptly as possible to any comments received
      from the Commission, and use its best efforts to cause the Registration
      Statement to become and remain effective for the Effectiveness Period with
      respect thereto, and promptly provide to the Purchasers copies of all filings
      and Commission letters of comment relating thereto;

     

    (b)
       prepare
      and file with the Commission such amendments and supplements to the Registration
      Statement and the Prospectus used in connection therewith as may be necessary
      to
      comply with the provisions of the Securities Act with respect to the disposition
      of all Registrable Securities covered by the Registration Statement and to
      keep
      such Registration Statement effective until the expiration of the Effectiveness
      Period;

     

    
      
        
        

      

      
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    (c) 
      furnish
      to the Purchasers such number of copies of the Registration Statement and the
      Prospectus included therein (including each preliminary Prospectus) as the
      Purchasers reasonably may request to facilitate the public sale or disposition
      of the Registrable Securities covered by the Registration
      Statement;

     

    (d)
       use
      its
      commercially reasonable efforts to register or qualify the Purchasers'
      Registrable Securities covered by the Registration Statement under the
      securities or "blue sky" laws of such jurisdictions within the United States
      as
      the Purchasers may reasonably request, 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)
       list
      the
      Registrable Securities covered by the Registration Statement with any securities
      exchange on which the Common Stock of the Company is then listed;

     

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

     

    (g)
       make
      available for inspection by the Purchasers and any attorney, accountant or
      other
      agent retained by the Purchasers, 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
      attorney, accountant or agent of the Purchasers.

     

    (h) promptly
      notify each seller of Registrable Securities of the issuance by the Commission
      of any stop order suspending the effectiveness of the Registration Statement
      or
      the initiation of any proceedings for that purpose and make every reasonable
      effort to prevent the issuance of any stop order and, if any stop order is
      issued, to obtain the lifting thereof at the earliest possible time;

     

    (i) if
      the
      offering is an underwritten offering, enter into a written agreement with the
      managing underwriter selected in the manner herein provided in such form and
      containing such provisions as are usual and customary in the securities business
      for such an arrangement between such underwriter and companies of the Company’s
      size and investment stature, including, without limitation, customary
      indemnification and contribution provisions; 

     

    (j) if
      the
      offering is an underwritten offering, at the request of any seller of
      Registrable Securities, use its best efforts to furnish to such seller on the
      date that Registrable Securities are delivered to the underwriters for sale
      pursuant to such registration: (i) a copy of an opinion dated such date of
      counsel representing the Company for the purposes of such registration,
      addressed to the underwriters, stating that such Registration Statement has
      become effective under the Securities Act and that (A) to the best knowledge
      of
      such counsel, no stop order suspending the effectiveness thereof has been issued
      and no proceedings for that purpose have been instituted or are pending or
      contemplated under the Securities Act, (B) the Registration Statement, the
      related prospectus and each amendment or supplement thereof comply as to form
      in
      all material respects with the requirements of the Securities Act (except that
      such counsel need not express any opinion as to financial statements or other
      financial or statistical information contained therein) and (C) to such other
      effects as reasonably may be requested by counsel for the underwriters; and
      (ii)
      a copy of a letter dated such date from the independent public accountants
      retained by the Company, addressed to the underwriters, stating that they are
      independent public accountants within the meaning of the Securities Act and
      that, in the opinion of such accountants, the financial statements of the
      Company included in the Registration Statement or the prospectus, or any
      amendment or supplement thereof, comply as to form in all material respects
      with
      the applicable accounting requirements of the Securities Act, and such letter
      shall additionally cover such other financial matters (including information
      as
      to the period ending no more than five business days prior to the date of such
      letter) with respect to such registration as such underwriters reasonably may
      request; 

     

    
      
        
        

      

      
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    (k) take
      all
      actions reasonably necessary to facilitate the timely preparation and delivery
      of certificates (not bearing any legend restricting the sale or transfer of
      such
      securities) representing the Registrable Securities to be sold pursuant to
      the
      Registration Statement and to enable such certificates to be in such
      denominations and registered in such names as the Investors or any underwriters
      may reasonably request; and 

     

    (l) take
      all
      other reasonable actions necessary to expedite and facilitate the registration
      of the Registrable Securities pursuant to the Registration
      Statement.

     

    4.
       Registration
      Expenses.
      All
      expenses relating to the Company's compliance with Sections 2 and 3 hereof,
      including, without limitation, all registration and filing fees, printing
      expenses, fees and disbursements of counsel and independent public accountants
      for the Company, fees and expenses (including counsel fees) incurred in
      connection with complying with state securities or "blue sky" laws, fees of
      the
      NASD, transfer taxes, fees of transfer agents and registrars, fees of, and
      disbursements incurred by, one counsel for the Holders, are called "Registration
      Expenses". All selling commissions applicable to the sale of Registrable
      Securities, including any fees and disbursements of any special counsel to
      the
      Holders beyond those included in Registration Expenses, are called "Selling
      Expenses." The Company shall only be responsible for all Registration
      Expenses.

     

    5.
       Indemnification.

     

    (a)
       In
      the
      event of a registration of any Registrable Securities under the Securities
      Act
      pursuant to this Agreement, the Company will indemnify and hold harmless each
      of
      the Purchasers, and their respective officers, directors and each other person,
      if any, who controls any of the Purchasers within the meaning of the Securities
      Act, against any losses, claims, damages or liabilities, joint or several,
      to
      which any of the Purchasers, or such persons may become subject under the
      Securities 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 were
      registered under the Securities Act pursuant to this Agreement, 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 Purchasers, and
      each such person for any reasonable legal or other expenses incurred by them
      in
      connection with investigating or defending any such loss, claim, damage,
      liability or action; provided, however, that the Company will not be liable
      in
      any such case if and 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 or on behalf of any of the Purchasers or any such person in writing
      specifically for use in any such document.

     

    
      
        
        

      

      
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    (b)
       In
      the
      event of a registration of the Registrable Securities under the Securities
      Act
      pursuant to this Agreement, each of the Purchasers will indemnify and hold
      harmless the Company, and its officers, directors and each other person, if
      any,
      who controls the Company within the meaning of the Securities Act, against
      all
      losses, claims, damages or liabilities, joint or several, to which the Company
      or such persons may become subject under the Securities 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 which was furnished in writing by such Purchaser
      to the Company expressly for use in (and such information is contained in)
      the
      Registration Statement under which such Registrable Securities were registered
      under the Securities Act pursuant to this Agreement, 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
      person for any reasonable legal or other expenses incurred by them in connection
      with investigating or defending any such loss, claim, damage, liability or
      action, provided, however, that such Purchaser will be liable 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 so made in conformity with information furnished
      in
      writing to the Company by or on behalf of such Purchaser specifically for use
      in
      any such document. Notwithstanding the provisions of this paragraph, no
      Purchaser shall be required to indemnify any person or entity in excess of
      the
      amount of the aggregate net proceeds received by such Purchaser in respect
      of
      Registrable Securities in connection with any such registration under the
      Securities Act.

     

    (c)
       Promptly
      after receipt by a party entitled to claim indemnification hereunder (an
      "Indemnified Party") of notice of the commencement of any action, such
      Indemnified Party shall, if a claim for indemnification in respect thereof
      is to
      be made against a party hereto obligated to indemnify such Indemnified Party
      (an
      "Indemnifying Party"), 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 5(c) and shall only relieve it from any liability which it may have
      to
      such Indemnified Party under this Section 5(c) 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 5(c) for any legal expenses
      subsequently incurred by such Indemnified Party in connection with the defense
      thereof; if the Indemnified Party retains its own counsel, then the Indemnified
      Party shall pay all fees, costs and expenses of such counsel, provided, however,
      that, if the defendants in any such action include both the Indemnified Party
      and the Indemnifying Party and the Indemnified Party shall have reasonably
      concluded that there may be reasonable defenses available to it which are
      different from or additional to those available to the Indemnifying Party or
      if
      the interests of the Indemnified Party reasonably may be deemed to conflict
      with
      the interests of the Indemnifying Party, the Indemnified Party shall have the
      right to select one separate counsel and to assume such legal defenses and
      otherwise to participate in the defense of such action, with the reasonable
      expenses and fees of such separate counsel and other expenses related to such
      participation to be reimbursed by the Indemnifying Party as
      incurred.

     

    
      
        
        

      

      
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    (d)
       In
      order
      to provide for just and equitable contribution in the event of joint liability
      under the Securities Act in any case in which either (i) the Purchasers, or
      any
      officer, director or controlling person of the Purchasers, makes a claim for
      indemnification pursuant to this Section 5 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 5 provides for indemnification in such case, or (ii)
      contribution under the Securities Act may be required on the part of the
      Purchasers or such officer, director or controlling person of the Purchasers
      in
      circumstances for which indemnification is provided under this Section 5; then,
      and in each such case, the Company and the Purchasers 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 each Purchaser
      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, (A) no Purchaser will
      be
      required to contribute any amount in excess of the public offering price of
      all
      such securities offered by it pursuant to such Registration Statement; and
      (B)
      no person or entity guilty of fraudulent misrepresentation (within the meaning
      of Section 10(f) of the Act) will be entitled to contribution from any person
      or
      entity who was not guilty of such fraudulent misrepresentation.

    

    
      
        
        

      

      
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    6. Changes
      in Capital Stock.  If,
      and
      as often as, there is any change in the capital stock of the Company by way
      of a
      stock split, stock dividend, combination or reclassification, or through a
      merger, consolidation, reorganization or recapitalization, or by any other
      means, appropriate adjustment shall be made in the provisions hereof so that
      the
      rights and privileges granted hereby shall continue as so changed.

    

    7.
       Representations
      and Warranties. The
      Company represents and warrants to the Purchasers as follows: 

    

    (a) The
      execution, delivery and performance of this Agreement by the Company have been
      duly authorized by all requisite corporate action and will not violate any
      provision of law, any order of any court or other agency of government, the
      Charter or By-laws of the Company or any provision of any indenture, agreement
      or other instrument to which it or any or its properties or assets is bound,
      conflict with, result in a breach of or constitute (with due notice or lapse
      of
      time or both) a default under any such indenture, agreement or other instrument
      or result in the creation or imposition of any lien, charge or encumbrance
      of
      any nature whatsoever upon any of the properties or assets of the Company or
      its
      subsidiaries. 

     

    (b) This
      Agreement has been duly executed and delivered by the Company and constitutes
      the legal, valid and binding obligation of the Company, enforceable in
      accordance with its terms, subject to any applicable bankruptcy, insolvency
      or
      other laws affecting the rights of creditors generally and to general equitable
      principles and the availability of specific performance. 

     

    (c)
       The
      Common Stock of the Company is registered pursuant to Section 12(b) or 12(g)
      of
      the Exchange Act and, except with respect to certain matters which the Company
      has disclosed to the Purchasers on Schedule 4.21 to the Securities Purchase
      Agreement, the Company has timely filed all proxy statements, reports,
      schedules, forms, statements and other documents required to be filed by it
      under the Exchange Act. The Company has filed (i) its Annual Report on Form
      10-KSB for its fiscal year ended October 31, 2005, (ii) its Quarterly Report
      on
      Form 10-QSB for the fiscal quarter ended January 31, 2006 and a Current Report
      on Form 8-K, filed with the Commission on May 3, 2006 (collectively, the "SEC
      Reports"). Each SEC Report was, at the time of its filing, in substantial
      compliance with the requirements of its respective form and none of the SEC
      Reports, nor the financial statements (and the notes thereto) included in the
      SEC Reports, as of their respective filing dates, contained any untrue statement
      of a material fact or omitted to state a material fact required to be stated
      therein or necessary to make the statements therein, in light of the
      circumstances under which they were made, not misleading. The financial
      statements of the Company included in the SEC Reports comply as to form in
      all
      material respects with applicable accounting requirements and the published
      rules and regulations of the Commission or other applicable rules and
      regulations with respect thereto. Such financial statements have been prepared
      in accordance with generally accepted accounting principles ("GAAP") applied
      on
      a consistent basis during the periods involved (except (i) as may be otherwise
      indicated in such financial statements or the notes thereto or (ii) in the
      case
      of unaudited interim statements, to the extent they may not include footnotes
      or
      may be condensed) and fairly present in all material respects the financial
      condition, the results of operations and the cash flows of the Company and
      its
      subsidiaries, on a consolidated basis, as of, and for, the periods presented
      in
      each such SEC Report.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    (d)
       The
      Common Stock is listed for trading on the OTCBB and satisfies all requirements
      for the continuation of such listing. The Company has not received any notice
      that its Common Stock will be delisted from the OTCBB (except for prior notices
      which have been fully remedied) or that the Common Stock does not meet all
      requirements for the continuation of such listing.

     

    (e)
       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 offering of the Securities pursuant to the Securities Purchase Agreement
      to
      be integrated with prior offerings by the Company for purposes of the Securities
      Act which would prevent the Company from selling the Common Stock pursuant
      to
      Rule 506 under the Securities Act, or any applicable exchange-related
      stockholder approval provisions, nor will the Company or any of its affiliates
      or subsidiaries take any action or steps that would cause the offering of such
      Securities to be integrated with other offerings.

     

    (f)
       The
      Warrants, the Notes and the shares of Common Stock which the Purchasers may
      acquire pursuant to the Warrants and the Notes are all restricted securities
      under the Securities Act as of the date of this Agreement. The Company will
      not
      issue any stop transfer order or other order impeding the sale and delivery
      of
      any of the Registrable Securities at such time as such Registrable Securities
      are registered for public sale or an exemption from registration is available,
      except as required by federal or state securities laws.

     

    (g)
       The
      Company understands the nature of the Registrable Securities issuable upon
      the
      conversion of the Notes and the exercise of the Warrants and recognizes that
      the
      issuance of such Registrable Securities may have a potential dilutive effect.
      The Company specifically acknowledges that its obligation to issue the
      Registrable Securities is binding upon the Company and enforceable regardless
      of
      the dilution such issuance may have on the ownership interests of other
      shareholders of the Company.

     

    (h)
       Except
      for agreements made in the ordinary course of business, there is no agreement
      that has not been filed with the Commission as an exhibit to a registration
      statement or to a form required to be filed by the Company under the Exchange
      Act, the breach of which could reasonably be expected to have a material and
      adverse effect on the Company and its subsidiaries, or would prohibit or
      otherwise interfere with the ability of the Company to enter into and perform
      any of its obligations under this Agreement in any material
      respect.

     

    (i)
       The
      Company will at all times have authorized and reserved a sufficient number
      of
      shares of Common Stock for the full conversion of the Notes and the exercise
      of
      the Warrants.

     

    8.
       Miscellaneous.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

       

    

    (a)
       Remedies.
      In the
      event of a breach by the Company or by a Holder, of any of their respective
      obligations under this Agreement, each Holder or the Company, as the case may
      be, in addition to being entitled to exercise all rights granted by law and
      under this Agreement, including recovery of damages, will be entitled to
      specific performance of its rights under this Agreement.

     

    (b)
       No
      Piggyback on Registrations.
      Neither
      the Company nor any of its security holders (other than the Holders in such
      capacity pursuant hereto) may include securities of the Company in any
      Registration Statement other than the Registrable Securities, and the Company
      shall not after the date hereof enter into any agreement providing any such
      right for inclusion of shares in the Registration Statement to any of its
      security holders. The Company has not previously entered into any agreement
      granting any registration rights with respect to any of its securities to any
      Person that have not been fully satisfied.

     

    (c)
       Compliance.
      Each
      Holder covenants and agrees that it will comply with the prospectus delivery
      requirements of the Securities Act as applicable to it in connection with sales
      of Registrable Securities pursuant to the Registration Statement.

     

    (d)
       Discontinued
      Disposition.
      Each
      Holder agrees by its acquisition of such Registrable Securities that, upon
      receipt of a notice from the Company of the occurrence of a Discontinuation
      Event (as defined below), such Holder will forthwith discontinue disposition
      of
      such Registrable Securities under the applicable Registration Statement until
      such Holder's receipt of the copies of the supplemented Prospectus and/or
      amended Registration Statement or until it is advised in writing (the "Advice")
      by the Company that the use of the applicable Prospectus may be resumed, and,
      in
      either case, has received copies of any additional or supplemental filings
      that
      are incorporated or deemed to be incorporated by reference in such Prospectus
      or
      Registration Statement. The Company may provide appropriate stop orders to
      enforce the provisions of this paragraph. For purposes of this Section 8(d),
      a
      "Discontinuation Event" shall mean (i) when the Commission notifies the Company
      whether there will be a "review" of such Registration Statement and whenever
      the
      Commission comments in writing on such Registration Statement (the Company
      shall
      provide true and complete copies thereof and all written responses thereto
      to
      each of the Holders); (ii) any request by the Commission or any other Federal
      or
      state governmental authority for amendments or supplements to such Registration
      Statement or Prospectus or for additional information; (iii) the issuance by
      the
      Commission of any stop order suspending the effectiveness of such Registration
      Statement covering any or all of the Registrable Securities or the initiation
      of
      any Proceedings for that purpose; (iv) the receipt by the Company of any
      notification with respect to the suspension of the qualification or exemption
      from qualification of any of the Registrable Securities for sale in any
      jurisdiction, or the initiation or threatening of any Proceeding for such
      purpose; and/or (v) the occurrence of any event or passage of time that makes
      the financial statements included in such Registration Statement ineligible
      for
      inclusion therein or any statement made in such Registration Statement or
      Prospectus or any document incorporated or deemed to be incorporated therein
      by
      reference untrue in any material respect or that requires any revisions to
      such
      Registration Statement, Prospectus or other documents so that, in the case
      of
      such Registration Statement or Prospectus, as the case may be, it will not
      contain any untrue statement of a material fact or omit to state any material
      fact required to be stated therein or necessary to make the statements therein,
      in light of the circumstances under which they were made, not
      misleading.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

    

    (e)
       Piggy-Back
      Registrations.
      If at
      any time during the Effectiveness Period there is not an effective Registration
      Statement covering all of the Registrable Securities and the Company shall
      determine to prepare and file with the Commission a registration statement
      relating to an offering for its own account or the account of others under
      the
      Securities Act of any of its equity securities, other than on Form S-4 or Form
      S-8 (each as promulgated under the Securities Act) or their then equivalents
      relating to equity securities to be issued solely in connection with any
      acquisition of any entity or business or equity securities issuable in
      connection with stock option or other employee benefit plans, then the Company
      shall send to each Holder written notice of such determination and, if within
      fifteen days after receipt of such notice, any such Holder shall so request
      in
      writing, the Company shall include in such registration statement all or any
      part of such Registrable Securities such holder requests to be registered to
      the
      extent the Company may do so without violating registration rights of others
      which exist as of the date of this Agreement, subject to customary underwriter
      cutbacks applicable to all holders of registration rights and subject to
      obtaining any required consent of any selling stockholder(s) to such inclusion
      under such registration statement.

     

    (f)
       Amendments
      and Waivers.
      The
      provisions of this Agreement, including the provisions of this sentence, may
      not
      be amended, modified or supplemented, and waivers or consents to departures
      from
      the provisions hereof may not be given, unless the same shall be in writing
      and
      signed by the Company and the Holders of the then outstanding Registrable
      Securities. Notwithstanding the foregoing, a waiver or consent to depart from
      the provisions hereof with respect to a matter that relates exclusively to
      the
      rights of certain Holders and that does not directly or indirectly affect the
      rights of other Holders may be given by Holders of at least a majority of the
      Registrable Securities to which such waiver or consent relates; provided,
      however, that the provisions of this sentence may not be amended, modified,
      or
      supplemented except in accordance with the provisions of the immediately
      preceding sentence.

     

    (g)
       Notices.
      Any
      notice or request hereunder may be given to the Company or the Purchasers at
      the
      respective addresses set forth below or as may hereafter be specified in a
      notice designated as a change of address under this Section 8(g). Any notice
      or
      request hereunder shall be given by registered or certified mail, return receipt
      requested, hand delivery, overnight mail, Federal Express or other national
      overnight next day carrier (collectively, "Courier") or telecopy (confirmed
      by
      mail). Notices and requests shall be, in the case of those by hand delivery,
      deemed to have been given when delivered to any party to whom it is addressed,
      in the case of those by mail or overnight mail, deemed to have been given three
      (3) business days after the date when deposited in the mail or with the
      overnight mail carrier, in the case of a Courier, the next business day
      following timely delivery of the package with the Courier, and, in the case
      of a
      telecopy, when confirmed. The address for such notices and communications shall
      be as follows:

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    If
      to the
      Company:

    

    Friendlyway
      Corporation

    1255
      Battery Street, Suite 200

    San
      Francisco, CA 94111

    Attention:
      Ken
      Upcraft, Chief
      Executive Officer and President

    Fax:
      631-254-2136

    

    With
      a
      copy to:

    

    Christopher
      K. Brenner, P.C. 

    130
      E.
      Kiowa Street, Suite 600

    Colorado
      Springs, CO  80903

    Attention:
      Christopher K. Brenner, Esq.

    Fax
      No.:
      (719)
      785-7170 

     

    If
      to the
      Holders, at their respective addresses as set forth on the Financing Signature
      Page to the Securities Purchase Agreement.

    

    If
      to
      Sloan:

    

    Sloan
      Securities Corp.

    444
      Madison Avenue

    New
      York,
      New York 10022

    Attention:
      James
      C. Ackerman, President
      & Chief Executive Officer

    Fax:
      (212) 202-4022

    

    With
      a
      copy to:

    

    Littman
      Krooks LLP

    655
      Third
      Avenue, 20th
      Floor

    New
      York,
      NY 10017

    Attention:
      Steven
      Uslaner, Esq.

    Fax:
      (212) 490-2990

    

    or
      such
      other address as may be designated in writing hereafter in accordance with
      this
      Section 8(g) by such Person.

     

    (h)
       Successors
      and Assigns.
      This
      Agreement shall inure to the benefit of and be binding upon the successors
      and
      permitted assigns of each of the parties and shall inure to the benefit of
      each
      Holder. The Company may not assign its rights or obligations hereunder without
      the prior written consent of each Holder. Each Holder may assign their
      respective rights hereunder in the manner and to the Persons as permitted under
      the Securities Purchase Agreement and each Term Note.

     

    (i)
       Execution
      and Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed shall be deemed to be an original and all of which taken together
      shall
      constitute one and the same Agreement. In the event that any signature is
      delivered by facsimile transmission, such signature shall create a valid binding
      obligation of the party executing (or on whose behalf such signature is
      executed) the same with the same force and effect as if such facsimile signature
      were the original thereof.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

       

    

    (j)
       Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by and construed and enforced in accordance
      with the internal laws of the State of New York, without regard to the
      principles of conflicts of law thereof. Each party agrees that all Proceedings
      concerning the interpretation, enforcement and defense of the transactions
      contemplated by this Agreement shall be commenced exclusively in the state
      and
      federal courts sitting in the City of New York, Borough of Manhattan. Each
      party
      hereto hereby irrevocably submits to the exclusive jurisdiction of the state
      and
      federal courts sitting in the City of New York, Borough of Manhattan for the
      adjudication of any dispute hereunder or in connection herewith or with any
      transaction contemplated hereby or discussed herein, and hereby irrevocably
      waives, and agrees not to assert in any Proceeding, any claim that it is not
      personally subject to the jurisdiction of any such court or that such Proceeding
      is improper. Each party hereto hereby irrevocably waives personal service of
      process and consents to process being served in any such Proceeding 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 manner permitted
      by law. Each party hereto hereby irrevocably waives, to the fullest extent
      permitted by applicable law, any and all right to trial by jury in any legal
      proceeding arising out of or relating to this Agreement or the transactions
      contemplated hereby. If either party shall commence a Proceeding to enforce
      any
      provisions of this Agreement, the Securities Purchase Agreement, or any Related
      Agreement, then the prevailing party in such Proceeding shall be reimbursed
      by
      the other party for its reasonable attorney’s fees and other costs and expenses
      incurred with the investigation, preparation and prosecution of such
      Proceeding.

     

    (k)
       Cumulative
      Remedies.
      The
      remedies provided herein are cumulative and not exclusive of any remedies
      provided by law.

     

    (l)
       Severability.
      If any
      term, provision, covenant or restriction of this Agreement is held by a court
      of
      competent jurisdiction to be invalid, illegal, void or unenforceable, the
      remainder of the terms, provisions, covenants and restrictions set forth herein
      shall remain in full force and effect and shall in no way be affected, impaired
      or invalidated, and the parties hereto shall use their reasonable efforts to
      find and employ an alternative means to achieve the same or substantially the
      same result as that contemplated by such term, provision, covenant or
      restriction. It is hereby stipulated and declared to be the intention of the
      parties that they would have executed the remaining terms, provisions, covenants
      and restrictions without including any of such that may be hereafter declared
      invalid, illegal, void or unenforceable.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

       

    

    (m)
       Headings.
      The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

     

    [BALANCE
      OF PAGE INTENTIONALLY LEFT BLANK;

    SIGNATURE
      PAGE FOLLOWS]

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
      as
      of the date first written above.

    
      	 	 	 
	 	FRIENDLYWAY
              CORPORATION
	 
 	 
 	 
 
	 	By:  	/S/
              KEN
              UPCRAFT 
	 	
              

              Kenneth
                J. Upcraft

              President
                and Chief Executive Officer

            
	 	 

    

    
      	 	 	 
	 	SLOAN
              SECURITIES CORP., 
	 
 	 
 	 
 
	 	By:  	/S/
              JAMES C. ACKERMAN
	 	
              
James
              C. Ackerman
              President
                and Chief Executive Officer

            

    

     

    
      	 	 	 
	 	
              PURCHASER

               

               

              
                [to
                  sign Omnibus Signature Page 

                annexed
                  to Securities Purchase Agreement]

              

            
	 
 	 
 	 
 

    

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    [Month
      __, 2006]

     

    [Transfer
      Agent]

     

    Re:
      friendlyway Corporation Registration Statement on Form ____

     

    Ladies
      and Gentlemen:

     

    As
      counsel to friendlyway Corporation, a Nevada corporation (the "Company"), we
      have been requested to render our opinion to you in connection with the resale
      by the individuals or entitles listed on Schedule A attached hereto (the
      "Selling Stockholders"), of an aggregate of [amount] shares (the "Shares")
      of
      the Company's Common Stock.

     

    A
      Registration Statement on Form _____ under the Securities Act of 1933, as
      amended (the "Act"), with respect to the resale of the Shares was declared
      effective by the Securities and Exchange Commission on [date]. Enclosed is
      the
      Prospectus dated [date]. We understand that the Shares are to be offered and
      sold in the manner described in the Prospectus.

     

    Based
      upon the foregoing, upon request by the Selling Stockholders at any time while
      such registration statement remains effective, it is our opinion that the Shares
      have been registered for resale under the Act and new certificates evidencing
      the Shares upon their transfer or re-registration by the Selling Stockholders
      may be issued without restrictive legend. We will advise you if such
      registration statement is not available or effective at any point in the
      future.

     

    Very
      truly yours,

     

    [Company
      counsel]

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    Schedule
      A to Opinion to Transfer Agent

     

    Selling
      Stockholder Shares Being Offered

    

    
      
        
        

      

      
        18THIS
      WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
      BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
      STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
      OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
      IN
      THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR THE
      UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES
      LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO FRIENDLYWAY CORPORATION
      THAT SUCH REGISTRATION IS NOT REQUIRED.

    

    
      	
              Warrant
                No. _______

            	
              _____________,
                2006

            

    

    

    FRIENDLYWAY
      CORPORATION

    FORM
      OF WARRANT TO PURCHASE COMMON STOCK

    

    Void
      after _________ __, 2011

    

    THIS
      CERTIFICATE certifies that ____________________, having an address at
      ______________________________________, or permitted assignees is the registered
      holder (the “Holder”)
      of
      this Warrant to Purchase Common Stock (the “Warrant”)
      to
      purchase shares of the common stock, $.001 par value per share (the
“Common
      Stock”),
      of
      friendlyway Corporation, a corporation duly organized and validly existing
      under
      the laws of the State of Nevada (the “Company”).
      This
      Warrant has been issued to the Holder in connection with the private placement
      of securities offered pursuant to the Company’s Securities Purchase Agreement
      dated as of ____________, 2006 (together with all documents and filings attached
      thereto, the “Securities
      Purchase Agreement”).

    

    FOR
      VALUE
      RECEIVED, the Company hereby certifies that the Holder is entitled to purchase
      from the Company [one
      share for every three shares that the Notes are convertible into]
duly
      authorized, validly issued, fully paid and nonassessable shares of Common Stock
      (the “Warrant
      Shares”)
      at a
      purchase price per share equal to $0.19 (the “Warrant
      Price”),
      and
      subject to the terms, conditions and adjustments set forth below in this Warrant
      and in the Securities Purchase Agreement. The person or entity in whose name
      this Warrant is registered on the records of the Company regarding registration
      and transfers of this Warrant (the “Warrant
      Register”)
      is the
      owner and holder thereof for all purposes, except as described in Section 6
      hereof.

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    1. Vesting
      of Warrant.
      This
      Warrant shall vest and become exercisable immediately following the Closing
      (as
      defined in the Securities Purchase Agreement).

    

    2.
      Expiration
      of Warrant.
      This
      Warrant shall expire at 5:00 p.m., New York local time, on _________, 2011,
      which is the fifth anniversary date of the Closing (the "Expiration
      Date").

    

    3.
      Exercise
      of Warrant.
      This
      Warrant shall be exercisable pursuant to the terms of Section 1 and this Section
      3 hereof.

    

    3.1 Manner
      of
      Exercise. This Warrant may only be exercised by the Holder hereof, in accordance
      with the terms and conditions hereof, in whole or in part with respect to any
      portion of this Warrant, into shares of Common Stock, during normal business
      hours on any day other than a Saturday or a Sunday or a day on which commercial
      banking institutions in New York, New York are authorized by law to be closed
      (a
“Business
      Day”)
      on or
      prior to the Expiration Date with respect to such portion of this Warrant,
      by
      surrender of this Warrant to the Company at its office maintained pursuant
      to
      Section 8.2(a) hereof, accompanied by an exercise notice in substantially the
      form attached to this Warrant as Exhibit
      A,
      duly
      executed by or on behalf of the Holder together with (a) or (b)
      below:

    

    (a) the
      payment of the Warrant Price in cash; or

    

    (b) (i)
      The
      Holder may, at its option, elect to exercise this Warrant, in whole or in part
      and at any time or from time to time, on a cashless basis, by surrendering
      this
      Warrant, with the purchase form attached to this Warrant as Exhibit
      A
      duly
      executed by or on behalf of the Holder, at the principal office of the Company,
      or at such other office or agency as the Company may designate, by canceling
      a
      portion of this Warrant in payment of the Warrant Price payable in respect
      of
      the number of Warrant Shares purchased upon such exercise. In the event of
      an
      exercise pursuant to this subsection 3.1(b), the number of Warrant Shares issued
      to the Holder shall be determined according to the following formula:

     

    X
      =
Y(A-B)

                             
      A

    Where:  
      X =  the
      number of Warrant Shares that shall be issued to the Holder; 

    Y
      = the
      number of Warrant Shares for which this Warrant is being exercised (which shall
      include both the number of Warrant Shares issued to the Holder and the number
      of
      Warrant Shares subject to the portion of the Warrant being cancelled in payment
      of the Warrant Price); 

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    A
      = the
      Fair
      Market Value (as defined below) of one share of Common Stock; and

    B
      = the
      Warrant Price then in effect.

     

    (ii)
      The
      Fair Market Value per share of Common Stock shall be determined as
      follows:

     

    (1) If
      the
      Common Stock is listed on a national securities exchange, the Nasdaq National
      Market, the OTC Bulletin Board or another nationally recognized trading system
      as of the Exercise Date, as defined below, the Fair Market Value per share
      of
      Common Stock shall be deemed to be the average of the high and low reported
      sale
      prices per share of Common Stock thereon on the trading day immediately
      preceding the Exercise Date, as defined below, (provided
      that if
      the Common Stock is not so listed on such day, the Fair Market Value per share
      of Common Stock shall be determined pursuant to clause (2) below).

     

    (2)
      If
      the Common Stock is not listed on a national securities exchange, the Nasdaq
      National Market, the OTC Bulletin Board or another nationally recognized trading
      system as of the Exercise Date, as defined below, the Fair Market Value per
      share of Common Stock shall be deemed to be the amount most recently determined
      by the Board of Directors of the Company or an authorized committee of the
      Board
      of Directors of the Company (the “Board”)
      to
      represent the fair market value per share of the Common Stock (including without
      limitation a determination for purposes of granting Common Stock options or
      issuing Common Stock under any plan, agreement or arrangement with employees
      of
      the Company); and, upon request of the Holder, the Board (or a representative
      thereof) shall, as promptly as reasonably practicable but in any event not
      later
      than 15 days after such request, notify the Holder of the Fair Market Value
      per
      share of Common Stock. Notwithstanding the foregoing, if the Board has not
      made
      such a determination within the three-month period prior to the Exercise Date,
      as defined below, then (A) the Board shall make, and shall provide or cause
      to be provided to the Holder notice of, a determination of the Fair Market
      Value
      per share of the Common Stock within 15 days of a request by the Holder that
      it
      do so, and (B) the exercise of this Warrant pursuant to this subsection
      3.1(b) shall be delayed until such determination is made and notice thereof
      is
      provided to the Holder.

     

    3.2 When
      Exercise Effective. Each exercise of this Warrant shall be deemed to have been
      effected immediately prior to the close of business on the Business Day on
      which
      this Warrant shall have been surrendered to the Company as provided in Section
      3.1 hereof (“Exercise
      Date”),
      and,
      at such time, the corporation, association, partnership, organization, business,
      individual, government or political subdivision thereof or a governmental agency
      (a “Person”
or
      the
“Persons”)
      in
      whose name or names any certificate or certificates for shares of Common Stock
      shall be issuable upon exercise as provided herein shall be deemed to have
      become the holder or holders of record thereof. 

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    3.3 Delivery
      of Stock Certificates. As soon as practicable after each exercise of this
      Warrant, in whole or in part, and in any event within five (5) Business Days
      thereafter, the Company at its expense (including the payment by it of any
      applicable issue taxes) will cause to be issued in the name of and delivered
      to
      the Holder hereof or, subject to Section 6 hereof, as the Holder (upon payment
      by the Holder of any applicable transfer taxes) may direct:

    

    (a)
      a
      certificate or certificates (with appropriate restrictive legends, as
      applicable) for the number of duly authorized, validly issued, fully paid and
      nonassessable shares of Common Stock to which the Holder shall be entitled
      upon
      exercise plus, in lieu of any fractional share to which the Holder would
      otherwise be entitled, all issuances of Common Stock shall be rounded up to
      the
      nearest whole share.

    

    (b)
      in
      case exercise is in part only, a new Warrant of like tenor, dated the date
      hereof and calling in the aggregate on the face thereof for the number of shares
      of Common Stock equal to the number of shares called for on the face of this
      Warrant minus the number of shares designated by the Holder upon exercise as
      provided in Section 3.1 hereof (without giving effect to any adjustment
      thereof).

    

    3.4 Company
      to Reaffirm Obligations. The Company will, at the time of each exercise of
      this
      Warrant, upon the written request of the Holder hereof, acknowledge in writing
      its continuing obligation to afford to the Holder all rights (including without
      limitation any rights to registration of the shares of Common Stock issued
      upon
      exercise) to which the Holder shall continue to be entitled after exercise
      in
      accordance with the terms of this Warrant; provided,
      however,
      that if
      the Holder shall fail to make a request, the failure shall not affect the
      continuing obligation of the Company to afford the rights to such
      Holder.

    

    4.
      Anti-dilution
      Adjustment.
      

    

    4.1
      Stock
      Dividends, Stock Splits, Etc. If the Company declares or pays a dividend on
      its
      Common Stock payable in Common Stock or other securities, or subdivides the
      outstanding Common Stock into a greater amount of Common Stock, then upon
      exercise of this Warrant, for each Warrant Share acquired, Holder shall receive,
      without cost to Holder, the total number and kind of securities to which Holder
      would have been entitled had Holder owned the Warrant Shares of record as of
      the
      date the dividend or subdivision occurred. 

    

       4.2 Reclassifications,
      Exchange or Substitution. Upon any reclassification, exchange, substitution,
      or
      other event that results in a change of the number and/or class of the
      securities issuable upon exercise of this Warrant, Holder shall be entitled
      to
      receive, upon exercise of this Warrant, the number and kind of securities and
      property that Holder would have received for the Warrant Shares if this Warrant
      had been exercised immediately before such reclassification, exchange,
      substitution, or other event. The Company or its successor shall promptly issue
      to Holder a new Warrant for such new securities or other property. The new
      Warrant shall provide for adjustments which shall be as nearly equivalent as
      may
      be practicable to the adjustments provided for in this Section 4.2, including,
      without limitation, adjustments to the Warrant Price and to the number of
      securities or property issuable upon exercise of the new Warrant. The provisions
      of this Section 4.2 shall similarly apply to successive reclassifications,
      exchanges, substitutions, or other events. 

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

    4.3
      Adjustments for Combinations, Etc. If the outstanding shares of Common Stock
      are
      combined or consolidated, by reclassification or otherwise, into a lesser number
      of shares, the Warrant Price shall be proportionately increased.

    

    4.4
      Merger or Consolidation. In case of any consolidation of the Company with,
      or
      merger of the Company into any other corporation, or in the case of any sale
      or
      conveyance of all or substantially all of the assets of the Company other than
      in connection with a plan of complete liquidation of the Company, then as a
      condition of such consolidation, merger or sale or conveyance, adequate
      provision will be made whereby the registered holder of the Warrant will have
      the right to acquire and receive upon exercise of this Warrant in lieu of the
      shares of Common Stock immediately theretofore subject to acquisition upon
      the
      exercise of this Warrant, such shares of stock, securities or assets as may
      be
      issued or payable with respect to or in exchange for the number of shares of
      Common Stock immediately theretofore subject to acquisition and receivable
      upon
      exercise of this Warrant had such consolidation, merger or sale or conveyance
      not taken place. In any such case, the Company will make appropriate provision
      to insure that the provisions of this Section 4 hereof will thereafter be
      applicable as nearly as may be in relation to any shares of stock or securities
      thereafter deliverable upon the exercise of this Warrant.

    

    4.5 Adjustment
      of Warrant Price. Except as otherwise hereinafter provided in Section 4.6,
      in
      the event that the Company shall sell any shares of Common Stock for a
      consideration per share less than the Warrant Price, or issue any options,
      rights or warrants to purchase Common Stock or issue any securities convertible
      into or exchangeable for Common Stock at an exercise or conversion price below
      the Warrant Price (such lower per share Common Stock sale price and/or
      derivative security exercise or conversion price below the Warrant Price being
      referred to as the “Lowered
      Warrant Price”),
      then
      the Warrant Price for the exercise of all Warrant Shares hereunder shall
      immediately be changed to the Lowered Warrant Price. 

    

    4.6
      Exceptions. No adjustment to the Warrant Price shall be made pursuant to Section
      4.5 with respect to (i) pursuant to Subsections 4.1 through 4.4 above;
(ii)
      pursuant to options, warrants or other obligations to issue shares outstanding
      on the date hereof as disclosed to the Holder in writing or in the Borrower's
      Exchange Act filings (iii) pursuant to any options, warrants or shares of Common
      Stock that may be sold and issued to Ram Capital Resources and its affiliates
      on
      or before July 30, 2006; and (iv) pursuant to options that are issuable as
      of
      the date hereof under any employee incentive stock option plan adopted by the
      Borrower, or such other similar compensatory options, issuances, arrangements
      or
      plans approved by the Company’s Board of Directors.   

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    4.7 Notice
      of
      Adjustments. Upon any adjustment of the terms of this Warrant pursuant to this
      Section 4, then and in each such case the Company shall promptly deliver a
      notice to the registered Holder of this Warrant, which notice shall state the
      Warrant Price resulting from such adjustment and the changes, if any, in the
      number of Warrant Shares or kind of securities or other property purchasable
      at
      such price upon the exercise hereof, setting forth in reasonable detail the
      method of calculation and the facts upon which such calculation is
      based.

    

    4.8 Adjustment
      in Number of Securities. Upon each adjustment of the Warrant Price pursuant
      to
      the provisions of this Section 4, the number of securities issuable upon the
      exercise of each Warrant shall be adjusted to the nearest full amount by
      multiplying a number equal to the Warrant Price in effect immediately prior
      to
      such adjustment by the number of Warrant Shares issuable upon exercise of the
      Warrants immediately prior to such adjustment and dividing the product so
      obtained by the adjusted Warrant Price.

    

    4.9 No
      Fractional Shares. No fractional shares shall be issuable upon exercise of
      this
      Warrant and the number of Warrant Shares to be issued shall be rounded down
      to
      the nearest whole share. 

    

    5. Reservation
      of Shares.
      The
      Company shall at all times reserve and keep available out of its authorized
      but
      unissued shares of Common Stock, free from all taxes, liens and charges with
      respect to the issue thereof and not be subject to preemptive rights or other
      similar rights of stockholders of the Company, solely for the purpose of issuing
      the shares of Common Stock underlying this Warrant, such number of its shares
      of
      Common Stock as shall from time to time be sufficient to effect the issuance
      or
      exercise thereof, and if at any time the number of authorized but unissued
      shares of Common Stock shall not be sufficient to issue the Common Stock and
      effect the exercise of this Warrant, in addition to such other remedies as
      shall
      be available to Holder, the Company shall take such corporate action as may,
      in
      the opinion of its counsel, be necessary to increase the number of authorized
      but unissued shares of Common Stock to such number of shares as shall be
      sufficient for such purposes, including without limitation, using its best
      efforts to obtain the requisite stockholder approval necessary to increase
      the
      number of authorized shares of the Company’s Common Stock. All shares of Common
      Stock issuable upon exercise of this Warrant shall be duly authorized and,
      when
      issued upon exercise, shall be validly issued and, in the case of shares, fully
      paid and nonassessable and free from preemptive rights and free from taxes,
      liens and charges with respect thereto.

    

    6. No
      Impairment.
      The
      Company will not, by amendment of its charter or through reorganization,
      consolidation, merger, dissolution, sale of assets or any other voluntary
      action, avoid or seek to avoid the observance or performance of any of the
      terms
      of this Warrant but will at all times carry out all such terms and take all
      such
      action as may be reasonably necessary or appropriate in order to protect the
      rights of the holder of this Warrant against impairment.

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    7. Restrictions
      on Transfer.

    

    7.1 Restrictive
      Legends. This Warrant and each Warrant issued upon transfer or in substitution
      for this Warrant pursuant to Section 7, each certificate for Common Stock issued
      upon the exercise of any Warrant and each certificate issued upon the transfer
      of any such Common Stock shall be transferable only upon satisfaction of the
      conditions specified in this Section 7 and Section 8.4. Each of the foregoing
      securities shall be stamped or otherwise imprinted with a legend reflecting
      the
      restrictions on transfer set forth in Section 7 and Section 8.4 hereof and
      any
      restrictions required under the Securities Act of 1933, as amended (the
“Act”).

    

    7.2 Notice
      of
      Proposed Transfer; Opinion of Counsel. Prior to any transfer of any securities
      which are not registered under an effective registration statement under the
      Act
      (“Restricted
      Securities”),
      the
      Holder will give written notice to the Company of the Holder's intention to
      affect a transfer and to comply in all other respects with this Section 7.2.
      Each notice (i) shall describe the manner and circumstances of the proposed
      transfer, and (ii) shall designate counsel for the Holder giving the notice.
      The
      Holder giving notice will submit a copy thereof to the counsel designated in
      the
      notice. The following provisions shall then apply:

    

    (a)
      If in
      the opinion of counsel for the Holder reasonably satisfactory to the Company
      the
      proposed transfer may be effected without registration of Restricted Securities
      under the Act (which opinion shall state the basis of the legal conclusions
      reached therein), the Holder shall thereupon be entitled to transfer the
      Restricted Securities in accordance with the terms of the notice delivered
      by
      the Holder to the Company. Each certificate representing the Restricted
      Securities issued upon or in connection with any transfer shall bear the
      restrictive legends required by Section 7.1 hereof.

    

    (b)
      If
      the opinion called for in (a) above is not delivered, the Holder shall not
      be
      entitled to transfer the Restricted Securities until either (x) receipt by
      the
      Company of a further notice from such Holder pursuant to the foregoing
      provisions of this Section 7.2 and fulfillment of the provisions of clause
      (a)
      above, or (y) such Restricted Securities have been effectively registered under
      the Act.

    

       7.3 Termination
      of Restrictions. The restrictions imposed by this Section 7 upon the
      transferability of Restricted Securities shall cease and terminate as to any
      particular Restricted Securities: (a) which Restricted Securities shall have
      been effectively registered under the Act, or (b) when, in the opinions of
      both
      counsel for the Holder thereof and counsel for the Company, such restrictions
      are no longer required in order to insure compliance with the Act or Section
      8
      hereof. Whenever such restrictions shall cease and terminate as to any
      Restricted Securities, the Holder thereof shall be entitled to receive from
      the
      Company, without expense (other than applicable transfer taxes, if any), new
      securities of like tenor not bearing the applicable legends required by Section
      7.1 hereof.

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    

    8.
      Ownership,
      Transfer and Substitution of Warrant.

    

       8.1
      Ownership
      of Warrant. The Company may treat the person in whose name this Warrant is
      registered in the Warrant Register maintained pursuant to Section 8.2(b) hereof
      as the owner and holder thereof for all purposes, notwithstanding any notice
      to
      the contrary, except that, if and when any Warrant is properly assigned in
      blank, the Company may (but shall not be obligated to) treat the bearer thereof
      as the owner of such Warrant for all purposes, notwithstanding any notice to
      the
      contrary. Subject to Section 7 hereof, this Warrant, if properly assigned,
      may
      be exercised by a new holder without a new Warrant first having been
      issued.

    

    8.2
      Office;
      Transfer and Exchange of Warrant.

    

    (a)
      The
      Company will maintain as principal offices at 7222
      Commerce Center, Suite 240, Colorado Springs, CO 80919 as
      the
      office where notices, presentations and demands in respect of this Warrant
      may
      be made upon it until the Company notifies the holder of this Warrant of any
      change of location of the office.

    

    (b)
       The
      Company shall cause to be kept at its office maintained pursuant to Section
      8.2(a) hereof a Warrant Register for the registration and transfer of this
      Warrant. The names and addresses of holders of this Warrant, the transfers
      thereof and the names and addresses of transferees of this Warrant shall be
      registered in such Warrant Register. The Person in whose name any Warrant shall
      be so registered shall be deemed and treated as the owner and holder thereof
      for
      all purposes of this Warrant, and the Company shall not be affected by any
      notice or knowledge to the contrary.

    

    (c)
       Upon
      the
      surrender of this Warrant, properly endorsed, for registration of transfer
      or
      for exchange at the office of the Company maintained pursuant to Section 8.2(a)
      hereof, the Company at its expense will (subject to compliance with Section
      7
      hereof, if applicable) execute and deliver to or upon the order of the Holder
      thereof a new Warrant of like tenor, in the name of such holder or as such
      holder (upon payment by such holder of any applicable transfer taxes) may
      direct, calling in the aggregate on the face thereof for the number of shares
      of
      Common Stock called for on the face of this Warrant so surrendered.

    

    8.3 Replacement
      of Warrant. Upon 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, upon delivery of indemnity
      reasonably satisfactory to the Company in form and amount or, in the case of
      any
      mutilation, upon surrender of this Warrant for cancellation at the office of
      the
      Company maintained pursuant to Section 8.2(a) hereof, the Company at its expense
      will execute and deliver, in lieu thereof, a new Warrant of like tenor and
      dated
      the date hereof.

    

    9. Registration
      Rights.
      The
      Company hereby agrees that the Holder shall be entitled, with respect to all
      Warrant Shares issued upon the exercise of this Warrant, to the registration
      rights set forth in the Registration Rights Agreement, dated as of ______,
      2006,
      by and among the Company, the Holder and the other investors in the Company’s
      private offering of senior subordinated secured convertible notes and Warrants,
      as may be amended or supplemented from time to time, the terms of which are
      hereby incorporated by this reference, with the same force and effect as if
      specifically set forth herein.

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    

    10.
      No
      Rights or Liabilities as Stockholder.
      No
      Holder
      shall be entitled to vote or receive dividends or be deemed the holder of any
      shares of Common Stock or any other securities of the Company which may at
      any
      time be issuable on the exercise hereof for any purpose, nor shall anything
      contained herein be construed to confer upon the Holder, as such, any of the
      rights of a stockholder of the Company or any right to vote for the election
      of
      directors or upon any matter submitted to stockholders at any meeting thereof,
      or to give or withhold consent to any corporate action (whether upon any
      recapitalization, issuance of stock, reclassification of stock, change of par
      value, consolidation, merger, conveyance, or otherwise) or to receive notice
      of
      meetings, or to receive dividends or subscription rights or otherwise until
      this
      Warrant shall have been exercised and the shares of Common Stock purchasable
      upon the exercise hereof shall have become deliverable, as provided herein.
      The
      Holder will not be entitled to share in the assets of the Company in the event
      of a liquidation, dissolution or the winding up of the Company.

    

    11.
      Notices
      of Record Date, Etc.
      In case
      the Company shall take a record of the holders of its Common Stock (or other
      stock or securities at the time deliverable upon the exercise of this Warrant)
      for the purpose of entitling or enabling them to receive any dividend or other
      distribution, or to receive any right to subscribe for or purchase any shares
      of
      stock of any class or any other securities, or to receive any other right;
      or of
      any capital reorganization of the Company, any reclassification of the capital
      stock of the Company, any consolidation or merger of the Company with or into
      another corporation (other than a consolidation or merger in which the Company
      is the surviving entity), or any transfer of all or substantially all of the
      assets of the Company; or of the voluntary or involuntary dissolution,
      liquidation or winding-up of the Company, then, and in each such case, the
      Company will mail or cause to be mailed to the registered holder of this Warrant
      a notice specifying, as the case may be: (i) the date on which a record is
      to be
      taken for the purpose of such dividend, distribution or right, and stating
      the
      amount and character of such dividend, distribution or right, or (ii) the
      effective date on which such reorganization, reclassification, consolidation,
      merger, transfer, dissolution, liquidation or winding-up is to take place,
      and
      the time, if any is to be fixed, as of which the holders of record of Common
      Stock (or such other stock or securities at the time deliverable upon the
      exercise of this Warrant) shall be entitled to exchange their shares of Common
      Stock (or such other stock or securities) for securities or other property
      deliverable upon such reorganization, reclassification, consolidation, merger,
      transfer, dissolution, liquidation or winding-up. Such notice shall be mailed
      at
      least ten (10) days prior to the record date or effective date for the event
      specified in such notice unless such prior notice is waived by the registered
      holder of this Warrant. 

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    

    12.
      Notices.
      Any
      notice or other communication in connection with this Warrant shall be deemed
      to
      be given if in writing (or in the form of a facsimile) addressed as hereinafter
      provided and actually delivered at said address: (a) if to any Holder, at the
      registered address of such holder as set forth in the Warrant Register kept
      at
      the office of the Company maintained pursuant to Section 8.2(a) hereof, or
      (b)
      if to the Company, to the attention of its Chief Financial Officer at its office
      maintained pursuant to Section 8.2(a) hereof; provided,
      however,
      that
      the exercise of any Warrant shall be effective in the manner provided in Section
      3 hereof.

    

    13. Payment
      of Taxes.
      The
      Company will pay all documentary stamp taxes attributable to the issuance of
      shares of Common Stock underlying this Warrant upon exercise of this Warrant;
      provided,
      however,
      that
      the Company shall not be required to pay any tax which may be payable in respect
      of any transfer involved in the registration of any certificate for shares
      of
      Common Stock underlying this Warrant in a name other that of the Holder. The
      Holder is responsible for all other tax liability that may arise as a result
      of
      holding or transferring this Warrant or receiving shares of Common Stock
      underlying this Warrant upon exercise hereof.

    

    14. Warrant
      Agent.
      The
      Company shall serve as warrant agent under this Warrant. Upon thirty (30) days
      notice to the Holder, the Company may appoint a new warrant agent. Any
      corporation into which the Company or any new warrant agent may be merged or
      any
      corporation resulting from any consolidation to which the Company or any new
      warrant agent shall be a party or any corporation to which the Company or any
      new warrant agent transfers substantially all of its corporate trust or
      stockholders services business shall be successor warrant agent under this
      Warrant without any further act. Any such successor warrant agent shall promptly
      cause notice of its succession as warrant agent to be mailed (by first class
      mail, postage prepaid) to the Holder at the Holder’s last address as shown on
      the Warrant Register.

    

    15.
      Miscellaneous.
      This
      Warrant and any term hereof may be changed, waived, discharged or terminated
      only by an instrument in writing signed by the party against which enforcement
      of the change, waiver, discharge or termination is sought. This Warrant shall
      be
      construed and enforced in accordance with and governed by the laws of the State
      of New York. The section headings in this Warrant are for purposes of
      convenience only and shall not constitute a part hereof.

    

    [THE
      REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock
      to
      be duly executed as of the date first above written.

    

    
      	 	 	 
	 	FRIENDLYWAY
              CORPORATION
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:

	 	Title 

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

    

    PURCHASE
      FORM

     

    
      	
              To:
                friendlyway Corporation

            	
              Dated:____________

            

    

     

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

     

    _________
      shares of the Common Stock of friendlyway Corporation 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
      subsection 3.1(b).

     

    The
      undersigned herewith makes payment of the full Warrant Price for such shares
      at
      the price per share provided for in such Warrant. 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 _____ Warrant Shares (using a Fair Market Value of $_____ per share
      for
      purposes of this calculation) ; and/or

    

    _____
      the
      cancellation of such number of Warrant Shares as is necessary, in accordance
      with the formula set forth in subsection 3.1(b), to exercise this Warrant
      with respect to the maximum number of Warrant Shares purchasable pursuant to
      the
      cashless exercise procedure set forth in subsection 3.1(b).

     

    
      	 	 	 	 
	 	 	 	 
	
            	 	 	Print or Type Name
	 	 	 	 
	 	 	 	   
              
	 	 	 	(Signature must conform in all respects
              to
              name of holder as specified on the face of Warrant) 
	 	 	 	 
	 	 	 	      
	 	 	 	(Street
              Address) 
	 	 	 	 
	 	 	 	       
	 	 	 	(City)         (State)        
(Zip
              Code) 

    
      
        
        

      

      
        12

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