Document:

Exhibit
      10.4

    CONVERTIBLE
      PROMISSORY NOTE

     

    
      	
              $75,000

            	
              June
                19, 2007

            
	 	 

    

    FOR
      VALUE
      RECEIVED, the undersigned, VoIP, INC., a Texas corporation (the "Company"),
      promises to pay to the order of BRISTOL INVESTMENT FUND, LTD., or its successors
      or assigns ("Holder"), on June 25, 2007, or on demand ("Maturity Date") at
      Caledonian Fund Services (Cayman) Limited, 69 Dr. Roy’s Drive, George Town,
      Grand Cayman, Cayman Islands, or at such other place as the Holder may designate
      in writing to the Company, in lawful money of the United States of America,
      the
      principal sum of Seventy-Five Thousand Dollars ($75,000.00), plus a premium
      of
      Twenty-Five Thousand Dollars ($25,000.00). Other terms and conditions
      follow.

     

    
      
        	
                1.

              	
                Standard
                  Conversion. The Holder shall have the right from and after the date of
                  the issuance of this Convertible Promissory Note (this “Note”) and then at
                  any time until this Note is fully paid, to convert any outstanding
                  and
                  unpaid principal portion of this Note, exclusive of the $25,000
                  fee, into
                  shares of the Company’s common stock, par value $0.001 per share (the
                  “Conversion Shares”), at the conversion rate of $0.12 per share (the
                  “Conversion Price”). If this Note is converted into Conversion Shares
                  which are issued free of restrictive legend or registered for resale
                  in an
                  effective registration statement, Holder agrees to waive the above
                  $25,000
                  premium.

              
	 	 
	
                2.

              	
                Default
                  Conversion. In the event of Company's default hereunder, the Note,
                  exclusive of the $25,000 fee, shall become immediately convertible
                  in
                  whole or in part, at Holder’s option into Conversion Shares, at the
                  conversion rate of $0.08 per share (the “Default Conversion Price”). If so
                  converted, Holder agrees to waive the above $25,000 premium. A
                  default for
                  this purpose shall be defined as any of the following: (a) not
                  repaying
                  the Note when due or demanded; (b) not converting the Note by the
                  Delivery
                  Date as defined in Section 3; (b) failing to register the Conversion
                  Shares as provided in Section 4; (c) failing to adjust the Conversion
                  Price as provided in Section 5; or (d) otherwise failing to comply
                  with
                  the provisions of this Note.

              
	 	 
	
                3.

              	
                Conversion
                  Notice. Upon formal notice of conversion, the Company shall issue
                  and
                  deliver to the Holder within three (3) business days after such
                  formal
                  notice (the date that such notice is submitted being the “Conversion Date”
                  and the third business day following the Conversion Date being
                  the
                  “Delivery Date”) that number of Conversion Shares specified in the
                  Holder’s notice.

              
	 	 
	
                4.

              	
                Piggyback
                  Registration. Whenever the Company proposes to register any of its
                  securities under the Securities Act (other than pursuant to a registration
                  on Form S-4 or S-8 or any successor or similar forms), and the
                  registration form to be used may be used for the registration of
                  the
                  Company’s common shares converted hereunder, the Company will include in
                  such registration all the Conversion Shares, subject only to earlier
                  existing registration commitments unless waivers are
                  obtained.

              
	 	 
	
                5.

              	
                Favored
                  Nations. So long as this Note is outstanding, if the Company shall
                  issue or agree to issue any shares of its common stock for a consideration
                  less than the Conversion Price in effect at the time of such issue,
                  then,
                  and thereafter successively upon each such issue, the Conversion
                  Price
                  shall be reduced to such other lower issue price. For purposes
                  of this
                  adjustment, the issuance of any security carrying the right to
                  convert
                  such security into shares of the Company’s common stock or of any warrant,
                  right or option to purchase the Company’s common stock shall result in an
                  adjustment to the Conversion Price upon the issuance of the
                  above-described security and again upon the issuance of shares
                  of the
                  Company’s common stock upon exercise of such conversion or purchase rights
                  if such issuance is at a price lower than the then applicable conversion
                  price. It is further acknowledged that the Holder’s other financial
                  instruments convertible into the Company’s common stock, and which contain
                  similar “favored nations” pricing provisions, as a result of this Note and
                  also the convertible notes executed by the Company on June 14,
                  2007 with
                  substantially similar terms of this Note, such financial instruments’
                  conversion rates and exercise prices have been reduced to $0.12
                  per common
                  share.

              

      

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      
        	
                6.

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

              
	 	 
	
                7.

              	
                The
                  delay or failure to exercise any right hereunder shall not waive
                  such
                  right. The undersigned hereby waives demand, presentment, protest,
                  notice
                  of dishonor or nonpayment, notice of protest, any and all delays
                  or lack
                  of diligence in collection hereof and assents to each and every
                  extension
                  or postponement of the time of payment or other
                  indulgence.

              
	 	 
	
                8.

              	
                In
                  the event of default hereunder such that this Note is placed in
                  the hands
                  of an attorney for collection (whether or not suit is filed), or
                  if this
                  Note is collected by suit or legal proceedings or through bankruptcy
                  proceedings, the Company agrees to pay reasonable attorney's fees
                  and
                  expenses of collection.

              
	 	 
	
                9.

              	
                The
                  Company has been informed by the Holder that Holder is an "accredited
                  investor," as such term is defined in Regulation D promulgated
                  by the
                  Commission under the 1933 Act, is experienced in investments and
                  business
                  matters, has made investments of a speculative nature and has purchased
                  securities of United States publicly-owned companies in private
                  placements
                  in the past and, with its representatives, has such knowledge and
                  experience in financial, tax and other business matters as to enable
                  the
                  Holder to utilize the information made available by the Company
                  to
                  evaluate the merits and risks of and to make an informed investment
                  decision with respect to the proposed purchase, which represents
                  a
                  speculative investment. Further, that the Holder is able to bear
                  the risk
                  of such investment for an indefinite period and to afford a complete
                  loss
                  thereof.

              
	 	 
	
                10.

              	
                This
                  Note shall be governed by, and construed and interpreted in accordance
                  with, the laws of the State of New York. Exclusive jurisdiction
                  relating
                  to this Note shall vest in courts located in New York
                  State.

              

      

    

     

    IN
      WITNESS WHEREOF, the undersigned has duly executed and delivered this Note
      the
      date and year first above written.

     

    

    
      	 	
              VoIP,
                Inc.

            

    

     

    
      	 	 	 
	 	
              By:

            	
                   
                /s/Robert Staats

            
	 	 	
              Name:  
                Robert Staats

            
	 	 	
              Title:    
                Chief Accounting Officer

            

    

    

    
      
        
        

      

      
        2Exhibit
        10.5

       

      SUBSCRIPTION
        AGREEMENT

       

      THIS
        SUBSCRIPTION AGREEMENT
        (this
“Agreement”),
        dated
        as of July 27, 2007 (the “Closing
        Date”),
        by and
        among VoIP, Inc., a Texas corporation (the “Company”),
        and
        the subscribers identified on the signature page hereto (each a “Subscriber”
and
        collectively “Subscribers”).

       

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

       

      WHEREAS,
        the
        parties desire that, upon the terms and subject to the conditions contained
        herein, the Company shall issue and sell to the Subscribers, as provided
        herein,
        and the Subscribers, in the aggregate, shall purchase up to $250,000 (the
        “Aggregate
        Principal Amount”)
        of
        principal amount of promissory notes of the Company (“Note”
or
        “Notes”),
        a
        form of which is annexed hereto as Exhibit
        A,
        convertible into shares of the Company’s Class A common stock, $0.001 par value
        (the “Common
        Stock”),
        at a
        per share conversion price set forth in the Note (“Conversion
        Price”);
        and
        share purchase warrants (the “Warrants”),
        in
        the form annexed hereto as Exhibit
        B,
        to
        purchase shares of Common Stock (the “Warrant
        Shares”).
        The
        Notes, shares of Common Stock issuable upon conversion of the Notes (the
        “Shares”),
        Settlement Shares, the Warrants and the Warrant Shares are collectively referred
        to herein as the “Securities”;
        and

       

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

       

      1. Aggregate
        Purchase Price.
        The
        aggregate purchase price for the Notes (the “Aggregate
        Purchase Price”)
        shall
        equal the result of (x) divided by (y), where (x) equals the Aggregate Principal
        Amount and (y) equals 1.25.

       

      2. Closing.
        Subject
        to the satisfaction or waiver of the terms and conditions of this Agreement,
        on
        the Closing Date, each Subscriber shall purchase and the Company shall sell
        to
        each Subscriber a Note in the principal amount designated on the signature
        page
        hereto and Warrants as described in Section 3 of this Agreement. The Aggregate
        Principal Amount of the Notes to be purchased by the Subscribers on the Initial
        Closing Date shall be $250,000 in exchange for $200,000 cash, representing
        the
        Aggregate Purchase Price. The Company acknowledges receipt of the Aggregate
        Purchase Price ($200,000 cash) on April 17, 2007. The consummation of the
        transactions contemplated herein for all closings shall take place at the
        offices of Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York,
        New York 10176, upon the satisfaction of all conditions to Closing set forth
        in
        this Agreement.

      

      3. Warrants.
        On the
        Closing Date, the Company will issue and deliver Warrants to the Subscribers.
        One Class D Warrant will be issued for each Share which would be issued on
        each
        Closing Date assuming the conversion of all of the Notes issued on the Closing
        Date at the Conversion Price. The per Warrant Share exercise price to acquire
        a
        Warrant Share upon exercise of a Class D Warrant shall be equal to $0.08.
        The
        Class D Warrants shall be exercisable until five years after the Closing
        Date.

      

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

       

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

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

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

       

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

      

      (d) Information
        on Company.
        The
        Subscriber has been furnished with or has had access at the EDGAR Website
        of the
        Commission to the Company's Form 10-K for the year ended December 31, 2006
        and
        all periodic reports filed with the Commission thereafter, but not later
        than
        five business days before the Closing Date (hereinafter referred to as the
        "Reports").
        In
        addition, the Subscriber has received in writing from the Company such other
        information concerning its operations, financial condition and other matters
        as
        the Subscriber has requested in writing (such other information is collectively,
        the "Other
        Written Information"),
        and
        considered all factors the Subscriber deems material in deciding on the
        advisability of investing in the Securities. 

       

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

       

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

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

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

       

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

       

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

       

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

       

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

      

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

       

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

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

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

       

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

      

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

      

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

      

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

       

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

       

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

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

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

       

      (g) The
        Securities.
        The
        Securities upon issuance:

       

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

      

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

      

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

      

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

      

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

      

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

      

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

       

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

       

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

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      7.1. Conversion
        of Note.

      

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

      

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

       

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

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

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

      

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

      

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

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

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

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

      

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

      

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

      
        
          
          

        

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

      

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

      

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

       

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

       

      8. Finder’s
        Fee / Loan Fees.

       

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

       

      (b) Loan
        Fees.
        The
        Company will pay a loan fee to the Subscribers as more fully described on
        Schedule
        8
        hereto.

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

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

       

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

       

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

       

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

       

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

       

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

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

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

       

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

       

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

       

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

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

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

       

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

      

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

      

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

      

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

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

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

      

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

      

      (iv) prepay
        any financing related debt obligations; or

      

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

      

      (q) Shareholder
        Approval.
        The
        Company and Subscribers agree that until the Company obtains shareholder
        approval of an increase in the effective authorized Common Stock of the Company
        and files an amendment to the Company’s Articles of Incorporation and reserves
        the amount of shares of Common Stock necessary to allow the conversion of
        Note
        principal and interest that may accrue thereon and Common Stock issuable
        upon
        exercise of the Warrants issued in connection with this Agreement (in the
        aggregate such shares of Common Stock being the “Reserve
        Amount”),
        each
        Subscriber may not convert the Note nor exercise Warrants in excess of the
        available Reserve Amount. The Company covenants to obtain the authorization
        and
        reservation of Common Stock on behalf of the Subscribers of not less than
        200%
        of the amount of shares of Common Stock issuable upon conversion of the Note
        principal and 100% of shares of Common Stock issuable upon exercise of the
        Warrants (such approval being the “Shareholder
        Approval”
and
        such reservation being the “Reservation”).
        Failure to obtain the Shareholder Approval and Reservation on or before August
        13, 2007 (a “Reservation
        Default”)
        is an
        Event of Default under the Note and for which liquidated damages will accrue
        at
        the rate of two percent (2%) for each thirty (30) days, or pro rata portion
        thereof during the pendency of such Reservation Default.

       

      10. Covenants
        of the Company and Subscriber Regarding Indemnification.

       

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

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

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

       

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

       

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

      
        
          
          

        

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

      
        
          
          

        

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

       

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

       

      11.6. Indemnification
        and Contribution.

       

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

      
        
          
          

        

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

       

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

       

      
        
          
          

        

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

       

      11.7. Delivery
        of Unlegended Shares.

       

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

       

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

      

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

      
        
          
          

        

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

      

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

      

      12. Additional
        Agreements.

      

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

      
        
          
          

        

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

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

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

      13. Security
        Interest.
        On or
        about July 5, 2005, January 6, 2006, February 2, 2006, the October Subscription
        Agreements, February 16, 2007, and April 6, 2007, the Subscribers were granted
        a
        security interest in assets of the Company and Subsidiaries (as defined in
        Section 5(a) of this Agreement), including ownership of the Subsidiaries.
        The
        security interest was memorialized in Security Agreements. Each Subsidiary
        executed and delivered to the Subscribers a form of Guaranty. The Company
        and
        Subsidiaries will execute such other agreements, documents and financing
        statements reasonably requested by Subscribers to affirm such security
        agreement, which will be filed at the Company’s expense with such jurisdictions,
        states and counties designated by the Subscribers. The
        Company and Subsidiaries will also execute all such documents reasonably
        necessary in the opinion of Subscribers to memorialize and further protect
        the
        security interest described herein. The Subscribers appointed a Collateral
        Agent
        to represent them collectively in connection with the security interest.
        The
        appointment was pursuant to a Collateral Agent Agreement. The Notes and all
        sums
        due under the Notes and the Transaction Documents (as defined in Section
        5(c)
        below) are included in the term “Obligations” as defined in the Security
        Agreements and are secured by the Collateral (as defined in the Security
        Agreements) in the same manner and having the same priority as granted to
        the
        Subscribers pursuant to the Security Agreements. The Subsidiaries by signing
        this Agreement consent and agree that the Guarantees provided by them on
        or
        about January 6, 2006, include as guaranteed obligations all sums which may
        become due to the Subscribers under the Transaction Documents (as defined
        in
        Section 5(c)). The Company and Subscribers agree that Schedule 13 hereto
        sets
        forth as of the date stated therein, the principal and interest outstanding
        on
        Notes issued by the Company to the Subscribers which are included as
“Obligations” under various “Security Agreements” to which the Company and
        Subscribers are parties. Such “Obligations” include additional amounts as
        described in the documents and other agreements entered into in connection
        with
        such “Obligations.” The Subscribers agree that their interests in all
        Obligations are pari
        passu
        in
        proportion to their specific Obligation amounts and of equal priority with
        each
        other. The Subscribers, Company, and Subsidiaries agree that the Collateral
        Agent Agreement dated as of February 2, 2006 is the Collateral Agent Agreement
        which shall govern the rights and obligations of the Subscribers in connection
        with the Obligations and shall remain in full force and effect except as
        modified in this Agreement. The Subscribers agree that for so long as any
        Obligations relating to the Obligations as set forth on Schedule 13 hereto
        and
        other sums which may become Obligations which derive from such stated
        Obligations (“Schedule 13 Obligations”), remain outstanding, “Majority In
        Interest” as employed in the Collateral Agent Agreement shall relate only to
        holders of such described Obligations. After such Schedule 13 Obligations
        are no
        longer outstanding, Majority In Interest shall be determined among the holders
        of all other Obligations. As employed in this Agreement, “Subscribers” includes
        assignees of a Subscriber who by their signature on the signature pages hereto
        are deemed to be and become parties to the Security Agreements and Collateral
        Agent Agreement and become beneficiaries of all the rights and benefits of
        the
        other Subscribers and assume the corresponding obligations, and assignors
        who
        hold any portion of the Obligations.

      

      14. Miscellaneous.

       

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

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

      (e) Specific
        Enforcement, Consent to Jurisdiction.
        To the
        extent permitted by law, the Company and Subscriber acknowledge and agree
        that
        irreparable damage would occur in the event that any of the provisions of
        this
        Agreement were not performed in accordance with their specific terms or were
        otherwise breached. It is accordingly agreed that the parties shall be entitled
        to one or more preliminary and final injunctions to prevent or cure breaches
        of
        the provisions of this Agreement and to enforce specifically the terms and
        provisions hereof, this being in addition to any other remedy to which any
        of
        them may be entitled by law or equity. Subject to Section 14(d) hereof, each
        of
        the Company, Subscriber and any signator hereto in his personal capacity
        hereby
        waives, and agrees not to assert in any such suit, action or proceeding,
        any
        claim that it is not personally subject to the jurisdiction in New York of
        such
        court, that the suit, action or proceeding is brought in an inconvenient
        forum
        or that the venue of the suit, action or proceeding is improper. Nothing
        in this
        Section shall affect or limit any right to serve process in any other manner
        permitted by law.

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

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

       

      SIGNATURE
        PAGE TO SUBSCRIPTION AGREEMENT (A)

       

      

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

      

      
        	
                VOIP,
                  INC.

              
	
                a
                  Texas corporation

              
	 	 
	 	 
	
                By:

              	
                 

              
	 	
                Name:
                  Robert Staats

              
	 	
                Title:
                  Chief Accounting Officer

              
	 	 
	 	
                Dated:
                  July 27, 2007

              

      

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

      
        	
                SUBSCRIBER

              	 	
                AGGREGATE
                  

                PURCHASE PRICE

              	 	
                AGGREGATE
                  

                PRINCIPAL
                  

                AMOUNT

              	 
	
                ALPHA
                  CAPITAL ANSTALT

                Pradafant
                  7

                9490
                  Furstentums

                Vaduz,
                  Lichtenstein

                Fax:
                  011-42-32323196

              	 	
                $

              	
                100,000.00

              	 	
                $

              	
                125,000.00

              	 

      

      

      
        _________________________________

        (Signature)

        By:
          Konrad Ackermann

        
          
            
              
              

            

            
              27

              
                

              

            

            
              
              

            

          

        

         

      

      SIGNATURE
        PAGE TO SUBSCRIPTION AGREEMENT (B)

      

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

      

      
        	
                VOIP,
                  INC.

              
	
                a
                  Texas corporation

              
	 	 
	 	 
	
                By:
                  

              	
                 
                  

              
	 	
                   
                  Name: Robert Staats

              
	 	
                   
                  Title: Chief Accounting Officer

              
	 	 
	 	   
                Dated: July 27, 2007

      

       

      
        	
                SUBSCRIBER

              	 	
                AGGREGATE
                  

                PURCHASE PRICE

              	 	
                AGGREGATE
                  

                PRINCIPAL
                  

                AMOUNT

              	 
	
                BRISTOL
                  INVESTMENT FUND, LTD.

                c/o
                  Caledonian Fund Services Limited

                69
                  Dr. Roy’s Drive

                George
                  Town, Grand Cayman

                Cayman
                  Islands

                Fax:
                  (310) 696-0334

              	 	
                $

              	
                100,000.00

              	 	
                $

              	
                125,000.00

              	 

      

       

      
        
          
            	 
                    
	
                    (Signature)

                     By:
                      Paul Kessler

                  

          

        

        
 

        
          
            
              
              

            

            
              28

              
                

              

            

            
              
              

            

          

        

         

      

      LIST
        OF EXHIBITS AND SCHEDULES

       

      
        	 	
                Exhibit
                  A

              	
                Form
                  of Note

              
	 	 	 
	 	
                Exhibit
                  B

              	
                Form
                  of Class D Warrant

              
	 	 	 
	 	
                Exhibit
                  C

              	
                Form
                  of Legal Opinion

              
	 	 	 
	 	
                Exhibit
                  D

              	
                Form
                  of Form 8-K or Public Announcement

              
	 	 	 
	 	
                Schedule
                  5(a)

              	
                Subsidiaries

              
	 	 	 
	 	
                Schedule
                  5(d)

              	
                Additional
                  Issuances / Capitalization

              
	 	 	 
	 	
                Schedule
                  5(f)

              	
                Conflicts

              
	 	 	 
	 	
                Schedule
                  5(h)

              	
                Litigation

              
	 	 	 
	 	
                Schedule
                  5(m)

              	
                Defaults

              
	 	 	 
	 	
                Schedule
                  5(q)

              	
                Undisclosed
                  Liabilities

              
	 	 	 
	 	
                Schedule
                  5(u)

              	
                Disagreements

              
	 	 	 
	 	
                Schedule
                  5(v)

              	
                Transfer
                  Agent

              
	 	 	 
	 	
                Schedule
                  8

              	
                Due
                  Diligence Fee

              
	 	 	 
	 	
                Schedule
                  9(e)

              	
                Use
                  of Proceeds

              
	 	 	 
	 	
                Schedule
                  9(p)

              	
                Additional
                  Negative Covenants

              
	 	 	 
	 	
                Schedule
                  12(a)

              	
                Excepted
                  Issuances

              
	 	 	 
	 	
                Schedule
                  13

              	
                Obligations

              

      

       

      
        
          
          

        

        
          29

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