Document:

OMNIBUS
      AMENDMENT AND CONSENT 

    

    OMNIBUS
      AMENDMENT AND CONSENT EFFECTIVE AS OF October 20, 2006 (this “Omnibus
      Amendment and Consent”)
      by and
      among Acura Pharmaceuticals, Inc. (the “Company”),
      and
      Acura Pharmaceutical Technologies, Inc. and the following lenders (“Lenders”):
      Galen
      Partners III, L.P. (as agent for the other lenders (“Agent”)
      and as
      a lender itself), Galen Partners International, III, L.P., Galen Employee Fund
      III, L.P., Care Capital Offshore Investments II, LP, Care Capital Investments
      II, LP, Essex Woodlands Health Ventures V, L.P. (the foregoing Lenders, being
      the “VC
      Lenders”),
      Dennis
      Adams, George E. Boudreau, Michael Weisbrot, Susan Weisbrot; and the following
      persons with respect to Sections 5, 6, 7, and 8: John E. Heppe Jr. and Peter
      Steiglitz (“Additional
      Watson Holders”).

    

    Capitalized
      terms used herein and not defined herein have the meanings set forth in the
      Subordination Agreement dated as of January 31, 2006 among the Lenders, the
      Company and others (the “Subordination
      Agreement”).

    

    R
      E C I T A L S

    

    WHEREAS
      the
      Company and one or more Lenders have entered into the June 2005 Loan Agreement,
      the September 2005 Loan Agreement, the November 2005 Loan Agreement and the
      January 2006 Loan Agreement (collectively, the “Loan
      Agreements”)
      and
      such other agreements, notes and instruments executed in connection with such
      loan agreements (collectively, the “Loan
      Documents”);
      and

    

    WHEREAS,
      the
      Company and certain Lenders and the Additional Watson Holders are parties to
      the
      Watson Note (as defined in the Subordination Agreement); and

    

    WHEREAS,
      the
      loans extended pursuant to the Loan Agreements are due to mature on November
      1,
      2006 (the “Original
      Maturity Date”);
      and

    

    WHEREAS,
      the
      Company and the Lenders wish to extend the Original Maturity Date.

    

    NOW,
      THEREFORE,
      in
      consideration of the mutual covenants herein contained, the parties mutually
      agree as follows:

    

    AMENDMENT
      AND CONSENT 

     

    1.
       Amendments:

    

    
      	(a)  	
              Each
                of the June 2005 Loan Agreement, the September 2005 Loan Agreement,
                the
                November 2005 Loan Agreement and the January 2006 Loan Agreement
                is
                amended by replacing “November 1, 2006” in Section 2.1 thereof with
                “December 1, 2006”. 

            

    

    

    
      	(b)  	
              Each
                of the June 2005 Notes, the September 2005 Notes, the November 2005
                Notes
                and the January 2006 Notes (collectively, the “Notes”) (and each of the
                forms of such Notes attached to the June 2005 Loan Agreement, the
                September 2005 Loan Agreement, the November 2005 Loan Agreement and
                the
                January 2006 Loan Agreement) is amended
                by:

            

    

    

    (i)
      replacing the words November 1, 2006, wherever they appear therein with
“December 1, 2006”; and 

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

       

    

    (ii)
      appending the following additional section to such note:

    

    References
      to Loan Agreement.
      References to the Loan Agreement in this Note shall mean references to the
      Loan
      Agreement, as amended, and as the same may be further amended, supplemented
      or
      modified from time to time.

    

    
      	(c)  	
              In
                the event a Replacement Note (as hereinafter defined) is issued pursuant
                to Section 4 hereof, then in such Replacement Note the words “Secured
                Promissory Note” shall be replaced with “Amended and Restated Promissory
                Secured Note” and the following section shall be appended thereto:
                

            

    

    

     Amended
      and Restated Secured Promissory Note.
      This Amended and Restated Secured Promissory Note issued by the Company in
      favor
      of the Payee amends and restates in its entirety, and is issued by the Company
      in replacement of and substitution for a Secured Promissory Note of identical
      principal amount issued to Payee pursuant to the Loan Agreement(the “Original
      Note”). The Company and the Payee acknowledge and agree that upon the execution
      delivery of this Amended and Restated Secured Promissory Note, the Original
      Note
      shall be null and void and of no further legal force or effect.

    

    The
      form
      of such Replacement Note shall be also be attached to the applicable Loan
 Agreement
      as an acceptable form of note to be issued pursuant thereto.

    

    2. References
      to Loan Documents:
      Any
      reference to any Loan Document in any other Loan Document shall mean the Loan
      Document, as amended hereby. 

    

    3.
       Attachment
      to All Notes:
      The
      Lenders covenant to give a copy of this Omnibus Amendment and Consent to any
      purchaser of the June 2005 Notes, the September 2005 Notes, the November 2005
      Notes or the January 2006 Notes prior to the actual purchase and to attach
      a
      copy of this Omnibus Amendment and Consent to any of such notes where the
      undersigned is the named payee or holder.

    

    4. Amended
      and Restated Notes. 
      Upon
      request of the Company, each Lender agrees to deliver to the Company any of
      the
      June 2005 Notes, the September 2005 Notes, the November 2005 Notes or the
      January 2006 Notes issued to them, in exchange for an amended and restated
      Note
      (the “Replacement
      Note”)
      incorporating the amendments set forth in this Omnibus Amendment and Consent.
      

    

    5. Subordination
      Agreement.  Each
      Lender and Additional Watson Holder agrees to the provisions of this Omnibus
      Amendment and Consent, including without limitation, to the amendments to the
      June 2005, September 2005 Notes, the November 2005 Notes and the January 2006
      Notes and acknowledges that the Subordination Agreement shall remain in full
      force and effect .

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    6.  Notes
      and Agreements Not Assigned. The
      undersigned Lenders and Additional Watson Holders acknowledge that they have
      not
      transferred, conveyed or assigned any of the Watson Note, the June 2005 Notes,
      the September 2005 Notes, the November 2005 Notes or the January 2006 Notes
      issued to them and the undersigned Lenders and Additional Watson Holders
      acknowledge that they have not assigned any rights under the Loan Documents
      or
      under the Subordination Agreement.

    

    7.  Interest
      Payable to VC Lenders in Stock. Notwithstanding
      anything in the Loan Documents to the contrary, the Company may, at the
      Company’s option, in full payment of the next scheduled payment of interest on
      the Notes to the undersigned VC Lenders (“Interest
      Due”)
      make
      payment of the Interest Due in such number of shares of Common Stock of the
      Company equal to the quotient of the Interest Due such Lender, divided by the
      average of the closing bid and asked price of the Company’s Common Stock for the
      five (5) trading days immediately preceding the due date of the Interest Due,
      as
      reported by the Nasdaq OTCBB. 

    

    8.
       Counterparts:
      This
      Omnibus Amendment and Consent may be executed in one or more counterparts and
      by
      different parties hereto in separate counterparts, including by facsimile,
      each
      of which when so executed and delivered shall be deemed an original, but all
      such counterparts together shall constitute but one and the same instrument.
      

    

    9.
       Governing
      Law:
      THIS
      OMNIBUS AMENDMENT AND CONSENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
      HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF
      THE
      STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
      LAWS.

    

      
        
          
             

          

          
          

        

        
          3

          
            

          

        

        
          
          

          
          

        

      

    

     

    IN
      WITNESS WHEREOF, each of the Parties have caused this Omnibus Amendment and
      Consent to be duly executed and delivered as of the day and year first above
      written.

     

    
      	 	 	 
	 	ACURA
              PHARMACEUTICALS, INC.
	 
 	 
 	 
 
	 	By:  	/s/ Peter
              A.
              Clemens
	 	
              
Name:
              Peter A. Clemens
	 	Title:
              Sr. Vice President and CFO

      	 	 	 
	 	 	 
	 	
              ACURA
                PHARMACEUTICAL

              TECHNOLOGIES
                , INC.

            
	 
 	 
 	 
 
	 	By:  	/s/ Peter
              A.
              Clemens
	 	
              
Name:
              Peter A. Clemens
	 	Title:
              Sr. Vice President and CFO

      	LENDER
              AND AGENT:
              GALEN
                PARTNERS III, L.P.

            	 	 	LENDER:
              CARE
                CAPITAL OFFSHORE INVESTMENTS II, LP

            
	 	 	 	 
	
            	 	 	
            
	
              By:
                Claudius, L.L.C., General Partner

              610
                Fifth Avenue, 5th
                Fl.

              New
                York, New York 10019

            	 	 	
              By:
                Care Capital II, LLC, as general partner

              47
                Hulfish Street, Suite 310

              Princeton,
                NJ 08542

            

    

     

    
      
        	 	 	 	 	 	 
	 	/s/ Bruce
                Wesson 	 	 	By:
	/s/ David
                Ramsay 
	By: 	
                
Bruce
                Wesson	 	 	By:
	
                
David
                R. Ramsay
	Its:
                	General
                Partner	 	 	Its:	Authorized
                Signatory

      

      	
              
                LENDER:

                GALEN
                  PARTNERS INTERNATIONAL, III, L.P.

              

            	 	 	
              
                LENDER:

                CARE
                  CAPITAL INVESTMENTS II, LP

              

            
	 	 	 	 
	
            	 	 	
            
	
              By:
                Claudius, L.L.C., General Partner

              610
                Fifth Avenue, 5th
                Fl.

              New
                York, New York 10019

            	 	 	
              By:
                Care Capital II, LLC, as general partner

              47
                Hulfish Street, Suite 310

              Princeton,
                NJ 08542

            

       

      
        
          	 	 	 	 	 	 
	 	/s/ Bruce
                  Wesson 	 	 	By:
	/s/ David
                  Ramsay 
	By: 	
                  
Bruce
                  Wesson	 	 	By:
	
                  
David
                  R. Ramsay
	Its:
                  	General
                  Partner	 	 	Its:	Authorized
                  Signatory

        

         

        
          
            
            

          

          
            4

            
              

            

          

          
            
            

          

        

        	
                
                  
                    LENDER:

                    GALEN
                      EMPLOYEE FUND III, L.P.

                  

                

              	 	 	
                
                  
                    LENDER:

                    ESSEX
                      WOODLANDS HEALTH 

                    VENTURES
                      V, L.P.

                  

                

              
	 	 	 	 
	
              	 	 	
              
	
                
                  
                    By:
                      Wesson Enterprises, Inc.

                    610
                      Fifth Avenue, 5th
                      Floor

                    New
                      York, New York 10020

                  

                

              	 	 	
                
                  
                    190
                      South LaSalle Street, Suite 2800

                    Chicago,
                      IL 60603

                  

                

              

      

    

    
       

      
        
          	 	 	 	 	 	 
	 	/s/ Bruce
                  Wesson 	 	 	By:
	/s/ Immanuel
                  Thangaraj 
	By: 	
                  
Bruce
                  Wesson	 	 	By:
	
                  
Immanuel
                  Thangaraj
	Its:
                  	General
                  Partner	 	 	Its:	Managing
                  Director

        

         

      

    

    
      	LENDER:	 	 	LENDER:
	MICHAEL WEISBROT 
              1136
                Rock Creek Road

              Gladwyne,
                Pennsylvania 19035

            	 	 	
              SUSAN
                WEISBROT

              1136
                Rock Creek Road

              Gladwyne,
                Pennsylvania 19035

            
	 	 	 	 
	 	 	 	 
	 /s/
              Michael
              Weisbrot	 	 	 /s/
              Susan
              Weisbrot 
	
              

            	 	 	
              

            
	 	 	 	 

      	LENDER:	 	 	LENDER:
	
              DENNIS
                ADAMS

              120
                Kynlyn Road

              Radnor,
                Pennsylvania 19312

            	 	 	
              
                GEORGE
                  E. BOUDREAU

                222
                  Elbow Lane

                Haverford,
                  PA 19041

              

            
	 	 	 	 
	 	 	 	 
	 /s/
              Dennis
              Adams	 	 	 /s/
              George
              Boudreau 
	
              

            	 	 	
              

            
	 	 	 	 

      	ADDITIONAL WATSON HOLDER	 	 	ADDITIONAL WATSON HOLDER:
	
              
                PETER
                  STIEGLITZ

                RJ
                  Palmer LLC

                156
                  West 56th Street, 5th Floor

                New
                  York, New York 10019

              

            	 	 	
              
                
                  JOHN
                    E. HEPPE, JR. 

                  237
                    W. Montgomery Avenue

                  Haverford,
                    Pennsylvania 19041

                

              

            
	 	 	 	 
	 	 	 	 
	 /s/
              Peter
              Stieglitz 	 	 	 /s/
              John
              Heppe
	
              

            	 	 	
              

            
	 	 	 	 

    
      
        
        

      

      
        5SUBSCRIPTION
      AGREEMENT

     

     

    THIS
      SUBSCRIPTION AGREEMENT
      (this
“Agreement”),
      dated
      as of October ___, 2006, 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 $6,250,000 (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”),
      the
      Warrants and the Warrant Shares are collectively referred to herein as the
      “Securities”;
      and

     

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

     

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

     

    1. 
      (a) 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. Each date upon which a Closing occurs is a
“Closing
      Date”.

     

    (b) Initial
      Closing.
      Subject
      to the satisfaction or waiver of the terms and conditions of this Agreement,
      on
      the Initial Closing Date, each Subscriber shall purchase and the Company shall
      sell to each Subscriber a Note in the principal amount designated on the
      signature page hereto (“Initial
      Closing Notes”)
      and
      Warrants as described in Section 2 of this Agreement (“Initial
      Closing Warrants”).
      The
      Aggregate Purchase Amount of the Notes to be purchased by the Subscribers on
      the
      Initial Closing Date shall be up to $3,125,000 in exchange for up to $2,500,000
      of Aggregate Purchase Price (the “Initial
      Closing Purchase Price”).
      The
“Initial
      Closing Date”
shall
      be the date that the Initial Closing Purchase Price is transmitted by wire
      transfer or otherwise to or for the benefit of the Company. 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. Each of the Initial Closing Date and Second Closing Date (as
      defined in Section 1(b) below) is referred to herein as a “Closing
      Date”.

     

    (c) Second
      Closing.
      The
      closing date in relation to up to $3,125,000 in exchange for $2,500,000 of
      Aggregate Purchase Price (the “Second
      Closing Purchase Price”)
      shall
      be on ten business days prior notice by the Company to the Subscribers on or
      before the forty-fifth day after the satisfaction of the Second Closing
      Condition (as defined in Section 1.(d) below) and satisfaction of the other
      conditions to Closing stated therein (the “Second
      Closing Date”).
      Subject to the satisfaction or waiver of the conditions to closing on the Second
      Closing Date, each Subscriber shall purchase and the Company shall sell to
      each
      Subscriber a Note in the Aggregate Principal Amount designated on the signature
      page hereto (“Second
      Closing Notes”).
      The
      Second Closing Notes shall be nearly identical to the Notes issuable on the
      Initial Closing Date and have the same maturity date as the Initial Closing
      Notes. The Conversion Price (defined in Section 2.1 (b) of the Note) of the
      Second Closing Notes shall be the same as the Conversion Price of the Initial
      Closing Notes in effect on the Second Closing Date.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (d) Conditions
      to Second Closing.
      The
      occurrence of the Second Closing is expressly contingent on (i) the truth and
      accuracy, on the Closing Date and the Second Closing Date of the representations
      and warranties of the Company and Subscriber contained in this Agreement, (ii)
      continued compliance with the covenants of the Company set forth in this
      Agreement, (iii) the non-occurrence of any Event of Default (as defined in
      the
      Note) or event that with the passage of time or the giving of notice could
      become an Event of Default, or other default by the Company of its obligations
      and undertakings contained in this Agreement, (iv) the delivery on the Second
      Closing Date of Second Closing Notes and Second Closing Warrants, and (v) the
      Company’s regularly employed certified public accountant, chief financial
      officer, chief accounting officer or chief executive officer has provided a
      certificate to the Subscribers that the Company has been for sixty days and
      reasonably has the expectation of being “cash flow break even” for the twelve
      months following the date such certificate is delivered to Subscribers and
      which
      information has been disclosed by the Company in a public announcement. “Cash
      flow break even” shall be defined as revenues from continuing, recurring
      operations less the following expenses: cost of goods sold; cash-based
      compensation and related taxes and benefits; cash-based accounting and other
      cash-based professional fees (non legal); and rent, leases and
      utilities.

    

    (e) Second
      Closing Deliveries.
      On the
      Second Closing Date, the Company will deliver the Second Closing Notes and
      Second Closing Warrants to the Escrow Agent and each Subscriber will deliver
      his
      portion of the Second Closing Purchase Price to the Escrow Agent. On the Second
      Closing Date, the Company will deliver a certificate (“Second
      Closing Certificate”)
      signed
      by its chief executive officer or chief financial officer (i) representing
      the
      truth and accuracy of all the representations and warranties made by the Company
      contained in this Agreement, as of the Initial Closing Date, and the Second
      Closing Date, as if such representations and warranties were made and given
      on
      all such dates, (ii) certifying that the information contained in the schedules
      and exhibits hereto is substantially accurate as of the Second Closing Date,
      except for changes that do not constitute Material Adverse Effect [as defined
      in
      Section 5(a)], (iii) adopting and renewing the covenants and representations
      set
      forth in Sections 5, 7, 8, 9, 10, 11, and 12 of this Agreement in relation
      to
      the Second Closing Date, Second Closing Notes and Second Closing Warrants,
      (iv)
      representing the timely compliance by the Company with the Company’s
      registration requirements set forth in Section 11 of this Agreement, and (v)
      certifying that an Event of Default has not occurred. A legal opinion nearly
      identical to the legal opinion referred to in Section 6 of this Agreement shall
      be delivered to each Subscriber at the Second Closing in relation to the Company
      and Second Closing Notes (“Second
      Closing Legal Opinion”).

    

    (f) Additional
      Subscriber Investments.
      The
      Company and Subscriber agree that, subject to Section 3 below, the Company
      may
      issue to other subscribers (“Additional
      Subscribers”)
      Aggregate Principal Amount of Notes for up to $3,750,000 of Aggregate Purchase
      Price on the same terms and conditions as the Offering in tranches of $2,500,000
      and $1,250,000, of Aggregate Purchase Price providing the closing on $2,500,000
      of Aggregate Purchase Price occurs not later than forty-five days after the
      Initial Closing Date, and the closings on $1,250,000 of Aggregate Purchase
      Price
      occurs on the Second Closing Date. The investments described above which may
      be
      made by the Additional Subscribers is referred to as the “Additional
      Subscriber Investments.”

    

    2. Warrants.
      On each
      Closing Date, the Company will issue and deliver Warrants to the Subscribers.
      One Class C 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 in effect on each such Closing Date. The per
      Warrant Share exercise price to acquire a Warrant Share upon exercise of a
      Class
      C Warrant shall be equal to 110% of the closing bid price of the Common Stock
      as
      reported by Bloomberg L.P. for the trading day preceding the Initial Closing
      Date. The Class C Warrants shall be exercisable until five years after each
      Closing Date.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3. Security
      Interest.
      On or
      about July 5, 2005, January 6, 2006, and February 2, 2006 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) below). The Company and Subscribers agree that Schedule
      3
      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 further agree that the Additional Subscribers [as defined
      in Section 1(f)] will become parties to the Security Agreements and Collateral
      Agent Agreement in connection with the Additional Subscriber Investments [as
      defined in Section 1(f)] except that the Obligations owed to the Subscribers
      under the Transaction Documents as defined in this Agreement and the Obligations
      that will be owed to the Additional Subscribers in connection with the
      Additional Subscriber Investments will be pari-passu and subordinate to all
      other Obligations owing to the Subscribers. The Subscribers agree, and as a
      condition of the Additional Subscriber Investments, the Additional Subscribers
      must agree to execute such documents and agreements as reasonably requested
      by
      the Subscribers to memorialize the foregoing agreements and subordination,
      and
      appoint the Collateral Agent pursuant to the Collateral Agent. 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 and Additional Subscribers in connection
      with
      the Obligations and Additional Subscriber Investments and shall remain in full
      force and effect except as modified in this Agreement. The Subscribers and
      Additional Subscribers agree that for so long as any Obligations relating to
      the
      Obligations as set forth on Schedule
      3
      hereto
      and other sums which may become Obligations which derive from such stated
      Obligations (“Schedule
      3 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 3 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. 

    

    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-KSB for the year ended December 31, 2005
      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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (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."

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (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) Special
      Waiver.
      Provided an Event of Default has not occurred prior to the six month anniversary
      of the Initial Closing Date, then the Subscribers and signators hereto who
      hold
      Notes included in the Obligations as of the Initial Closing Date defer the
      payment of liquidated damages that will have accrued as of such six month
      anniversary as a result of the Company’s non-compliance with its registration
      obligations in connection with such other Notes included in the Obligations
      until such six month anniversary.

    

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (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, Security Agreement
      and
      Collateral Agent 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 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. 

     

    (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

     

    (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.

     

    (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 [as defined in Section 9(b)] 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.

     

    (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 Initial
      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 each Closing Date, shall
      be
      true and correct in all material respects as of each 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
      D.
      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, Rule 144 under the 1933 Act,
      or
      an exemption from registration.

    

    7.1. Conversion
      of Note.

    

    (a) Upon
      the
      conversion of a Note or part thereof, the Company shall, at its own cost and
      expense, take all necessary action, including obtaining and delivering, an
      opinion of counsel to assure that the Company's transfer agent shall issue
      stock
      certificates in the name of Subscriber (or its permitted nominee) or such other
      persons as designated by Subscriber and in such denominations to be specified
      at
      conversion representing the number of shares of Common Stock issuable upon
      such
      conversion. The Company warrants that no instructions other than these
      instructions have been or will be given to the transfer agent of the Company's
      Common Stock and that the certificates representing such shares shall contain
      no
      legend other than the usual 1933 Act restriction from transfer legend. If and
      when the Subscriber sells the Shares and Warrant Shares, assuming (i) the
      Registration Statement (as defined below) is effective and the prospectus,
      as
      supplemented or amended, contained therein is current and (ii) the Subscriber
      confirms in writing to the transfer agent that the Subscriber has complied
      with
      the prospectus delivery requirements, the restrictive legend can 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”).
      In
      the event the Shares are electronically transferable, then delivery of the
      Shares must
      be made
      by electronic transfer provided request for such electronic transfer has been
      made by the Subscriber
      and the Subscriber has complied with all applicable securities laws in
      connection with the sale of the Common Stock, including, without limitation,
      the
      prospectus delivery requirements. 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.

    

    (d) 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.

    

    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.

    

    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, the Company may not refuse conversion or exercise
      based on any claim that such Subscriber or any one associated or affiliated
      with
      such Subscriber has been engaged in any violation of law, or for any other
      reason, unless, an injunction from a court, on notice, restraining and or
      enjoining conversion of all or part of such Note or exercise of all or part
      of
      such 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 outstanding principal and interest of the Note, or
      aggregate purchase price of the Shares and Warrant Shares which are sought
      to be
      subject to the injunction, which bond shall remain in effect until the
      completion of arbitration/litigation of the dispute and the proceeds of which
      shall be payable to such Subscriber to the extent Subscriber obtains judgment
      in
      Subscriber’s favor.

    

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

     

    (a) Finder’s
      Fee.
      The
      Company on the one hand, and each Subscriber (for himself only) on the other
      hand, agree to indemnify the other against and hold the other harmless from
      any
      and all liabilities to any persons claiming brokerage commissions or finder’s
      fees 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 other parties entitled to receive fees,
      commissions, or similar payments in connection with the Offering except as
      described on Schedule
      8(a)
      hereto.

    (b)  Legal
      Fees.
      The
      Company shall pay to Grushko & Mittman, P.C., a fee of $35,000
      (“Legal
      Fees”)
      as
      reimbursement for services rendered to the Subscribers in connection with this
      Agreement and the purchase and sale of the Notes, and Warrants (the
“Offering”)
      and
      acting as Escrow Agent for the Offering. The Legal Fees will be payable on
      the
      Initial Closing Date out of funds held pursuant to the Escrow Agreement. Grushko
      & Mittman, P.C. will be reimbursed on the Closing Date for all UCC search
      and filing fees.

     

    (c) Due
      Diligence Fee.
      The
      Company will pay a due diligence fee (“Due
      Diligence Fee”)
      and
“Lead
      Subscriber Fee”
      described on Schedule
      8
      hereto
      the Lead Subscribers and parties identified on Schedule
      8
      hereto
      (each a “Fee
      Recipient”).

     

    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 of Common Stock 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
      Second Closing Date, or (ii) until all the Shares and Warrant Shares have been
      resold or transferred by all the Subscribers pursuant to the Registration
      Statement or pursuant to Rule 144, without regard to volume limitations, the
      Company will (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 Second 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.

     

    (f) Reservation.
      After
      the
      Reservation Approval (as described in Section 9(s) 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, no
      shares of Common Stock will 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.

     

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

     

    (n) Further
      Registration Statements.
      Except
      for a registration statement filed on behalf of the Subscribers pursuant to
      Section 11 of this Agreement, and as set forth on Schedule
      11.1
      hereto,
      the Company will not file any registration statements or amend any already
      filed
      registration statement to increase the amount of Common Stock registered
      therein, or reduce the price of which such Common Stock is registered therein,
      including but not limited to Forms S-8, with the Commission or with state
      regulatory authorities without the consent of the Subscriber 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. The Exclusion Period will be tolled during the
      pendency of an Event of Default as defined in the Note.

     

    (o) Blackout.
      The
      Company undertakes and covenants that until the end of the Exclusion Period,
      the
      Company will not enter into any acquisition, merger, exchange or sale or other
      transaction that could have the effect of delaying the effectiveness of any
      pending Registration Statement or causing an already effective Registration
      Statement to no longer be effective or current for a period of twenty (20)
      or
      more days in the aggregate.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (p) Non-Public
      Information.
      The
      Company covenants and agrees that neither it nor any other person acting on
      its
      behalf will provide any Subscriber or its agents or counsel with any information
      that the Company believes constitutes material non-public information, unless
      prior thereto such Subscriber shall have agreed in writing to receive such
      information. The Company understands and confirms that each Subscriber shall
      be
      relying on the foregoing representations in effecting transactions in securities
      of the Company. The Company will offer to the Subscriber an opportunity to
      review and comment on the Registration Statement thereto between three and
      five
      business days prior to the proposed filing date thereof.

     

    (q) Offering
      Restrictions.
      Until
      the expiration of the Exclusion Period and 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 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.

    

    (r) Additional
      Negative Covenants.
      So long
      as at least twenty-five percent (25%) of the principal amount of the Notes
      issued on each Closing Date is outstanding and during the pendency of an Event
      of Default (as defined in the Note), except as described on Schedule
      9(r),
      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;

     

    (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.

    

    (s) Shareholder
      Approval.
      The
      Company and Subscribers agree that until the Company obtains shareholder
      approval (“Shareholder
      Approval”)
      of an
      increase in the authorized Common Stock of the Company to not less than
      250,000,000 Shares of Common Stock, files an amendment to the Company’s Articles
      of Incorporation and reserves 200% of the amount of shares of Common Stock
      necessary to allow the conversion of the entire Note principal and interest
      that
      may accrue thereon and 100% of the Common Stock issuable upon exercise of all
      of
      the Warrants issued in connection with this Agreement (collectively such shares
      of Common Stock being the “Reserve
      Amount”
and
      the
      Shareholder Approval, amendment and reservation being the “Reservation”),
      each
      Subscriber may not convert the Note nor exercise any Warrants. The Company
      undertakes to file a preliminary proxy statement for a meeting of the Company’s
      shareholders relating to the Reservation with the Commission not later than
      October 25, 2006 (“Proxy
      Filing Date”).
      The
      Company covenants to use its best efforts to obtain the Reservation. Failure
      to
      file the preliminary proxy on or before the Proxy Filing Date or to obtain
      the
      Reservation on or before December 20, 2006 (each a “Reservation
      Default”)
      is an
      Event of Default under the Note 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. Liquidated damages for a
      Reservation Default that accrues at the same time as a Non-Registration Event
      (as defined in Section 11.4 hereof) shall be limited to the greater of the
      amount of such damages which may accrue.

     

    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.

     

    (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 Registrable Securities
      (as
      defined herein).

     

    (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.

     

    (i) On
      one
      occasion, for a period commencing February 1, 2007, but not later than two
      (2)
      years after the Initial Closing Date, upon a written request therefor from
      any
      record holder or holders of more than 50% of the Shares issued and issuable
      upon
      conversion of the outstanding Notes and outstanding Warrant Shares, the Company
      shall prepare and file with the Commission a registration statement under the
      1933 Act registering the Registrable Securities, as defined in Section 11.1(iv)
      hereof, which are the subject of such request for unrestricted public resale
      by
      the holder thereof. For purposes of Sections 11.1(i) and 11.1(ii), Registrable
      Securities shall not include Securities which are (A) registered for resale
      in
      an effective registration statement, (B) included for registration in a pending
      registration statement, or (C) which have been issued without further transfer
      restrictions after a sale or transfer pursuant to Rule 144 under the 1933 Act.
      Upon the receipt of such request, the Company shall promptly give written notice
      to all other record holders of the Registrable Securities that such registration
      statement is to be filed and shall include in such registration statement
      Registrable Securities for which it has received written requests within fifteen
      (15) days after the Company gives such written notice. Such other requesting
      record holders shall be deemed to have exercised their demand registration
      right
      under this Section 11.1(i).

     

    (ii) If
      the
      Company at any time proposes to register any of its securities under the 1933
      Act for sale to the public, whether for its own account or for the account
      of
      other security holders or both, except with respect to registration statements
      on Forms S-4, S-8 or another form not available for registering the Registrable
      Securities for sale to the public, provided the Registrable Securities are
      not
      otherwise registered for resale by the Subscribers or Holder pursuant to an
      effective registration statement, each such time it will give at least 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(ii) shall be,
      in
      whole or in part, an underwritten public offering of common stock of the
      Company, the number of shares of Registrable Securities to be included in such
      an underwriting may be reduced by the managing underwriter if and to the extent
      that the Company and the underwriter shall reasonably be of the opinion that
      such inclusion would adversely affect the marketing of the securities to be
      sold
      by the Company therein; provided, however, that the Company shall notify the
      Seller in writing of any such reduction. Notwithstanding the foregoing
      provisions, or Section 11.4 hereof, the Company may withdraw or delay or suffer
      a delay of any registration statement referred to in this Section 11.1(ii)
      without thereby incurring any liability to the Seller.

     

    (iii) If,
      at
      the time any written request for registration is received by the Company
      pursuant to Section 11.1(i), the Company has determined to proceed with the
      actual preparation and filing of a registration statement under the 1933 Act
      in
      connection with the proposed offer and sale for cash of any of its securities
      for the Company's own account and the Company actually does file such other
      registration statement, such written request shall be deemed to have been given
      pursuant to Section 11.1(ii) rather than Section 11.1(i), and the rights of
      the
      holders of Registrable Securities covered by such written request shall be
      governed by Section 11.1(ii).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (iv) The
      Company shall file with the Commission a Form SB-2 registration statement (the
      “Registration
      Statement”)
      (or
      such other form that it is eligible to use) in order to register the Registrable
      Securities for resale and distribution under the 1933 Act on or before January
      2, 2007 (the
      “Filing
      Date”),
      and
      cause to be declared effective not
      later
      than March 31, 2007 (the
      “Effective
      Date”).
      The
      Company will register not less than a number of shares of common stock in the
      aforedescribed registration statement that is equal to 130%
      of
      the Shares issuable upon conversion of all of the Notes issuable to the
      Subscribers, and 100% of the Warrant Shares issuable pursuant to this Agreement
      upon exercise of the Warrants (collectively the “Registrable
      Securities”).
      The
      Registrable Securities shall be reserved and set aside exclusively for the
      benefit of each Subscriber and Warrant holder, pro rata,
      and not
      issued, employed or reserved for anyone other than each such Subscriber and
      Warrant holder. The Registration Statement will immediately be amended or
      additional registration statements will be immediately filed by the Company
      as
      necessary to register additional shares of Common Stock to allow the public
      resale of all Common Stock included in and issuable by virtue of the Registrable
      Securities. Except with the written consent of the Subscriber, no securities
      of
      the Company other than the Registrable Securities will be included in the
      Registration Statement. It shall be deemed a Non-Registration Event if at any
      time after the date the Registration Statement is declared effective by the
      Commission (“Actual
      Effective Date”)
      the
      Company has registered for unrestricted resale on behalf of the Subscribers
      fewer than 120%
      of
      the amount of Common Shares issuable upon full conversion of all sums due under
      the Notes and 100% of the Warrant Shares issuable upon exercise of the Warrants.
      The foregoing sentence shall also apply to all registration statements filed
      on
      behalf of the Subscribers pursuant to Section 11.1(iv) and Section 11.1(v)
      with
      respect to the Registrable Securities required to be included therein. The
      foregoing notwithstanding, in the event the Company has provided to Subscribers
      on or before December 1, 2006 the certificate described in Section 1(d) herein
      disclosing that the Company has been profitable for at least thirty (30) days
      prior to the Filing Date, then the Filing Date will be extended to on or before
      February 1, 2007, which extension period may be shortened by
      Subscribers.

     

    (v) The
      amount of Registrable Securities required to be included in the Registration
      Statement as described in Section 11.1(iv) (“Initial
      Registrable Securities”)
      shall
      be limited to not less than 85% of the maximum amount (“Rule
      415 Amount”)
      of
      Common Stock which may be included in a single Registration Statement without
      exceeding registration limitations imposed by the Commission pursuant to Rule
      415 of the 1933 Act. Not more than 15% of the Rule 415 Amount may be registered
      in the Registration Statement on behalf of any persons who are not holders
      of
      Notes and Warrants issued to the Subscribers on the Initial Closing Date and
      Second Closing Date or which are included in the Obligations as of the Initial
      Closing Date. In the event that less than all of the Initial Registrable
      Securities are included in the Registration Statement as a result of the
      limitation described in this Section 11.1(v), then the Company will file
      additional Registration Statements, seriatem,
      until
      all of the Initial Registrable Securities have been registered. The Filing
      Date
      and Effective Date of each such additional Registration Statement shall be,
      respectively, forty-five (45) and one hundred and twenty (120) days after the
      Actual Effective Date of the prior Registration Statement.

     

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

     

    (A) Notes
      included in Obligations issued prior to the Closing Date.

     

    (B) Notes
      issued on the Initial Closing Dates.

     

    (C) Notes
      issued on the Second Closing Dates.

     

    (D) Warrants
      issued to the Subscribers at any time based on exercise prices, with the lower
      exercise priced Warrant Shares being registered first and then the higher
      exercise priced Warrant Shares. In the case of Warrants with the same exercise
      prices but different Issue Dates, the later issued Warrant Shares will be
      registered first.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    11.2. Registration
      Procedures.
      If and
      whenever the Company is required by the provisions of Section 11.1(i) or
      11.1(ii) 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);

     

    (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. 

     

    11.4. Non-Registration
      Events.
      The
      Company and the Subscribers agree that the Sellers will suffer damages if any
      Registration Statement is not filed by the Filing Date and not declared
      effective by the Commission by the Effective Date, and any registration
      statement required under Section 11.1(i) or 11.1(ii) is not filed within 60
      days
      after written request and declared effective by the Commission within 120 days
      after such request, and maintained in the manner and within the time periods
      contemplated by Section 11 hereof, and it would not be feasible to ascertain
      the
      extent of such damages with precision. Accordingly, if (A) any Registration
      Statement is not filed on or before the Filing Date, (B) is not declared
      effective on or before the Effective Date, (C) due to the action or inaction
      of
      the Company the Registration Statement is not declared effective within three
      (3) business days after receipt by the Company or its attorneys of a written
      or
      oral communication from the Commission that any Registration Statement will
      not
      be reviewed or that the Commission has no further comments, (D) if the
      registration statement described in Sections 11.1(i) or 11.1(ii) is not filed
      within 60 days after such written request, or is not declared effective within
      120 days after such written request, or (E) any registration statement described
      in Sections 11 is filed and 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 referred to in clauses A through E of this Section 11.4 is
      referred to herein as a "Non-Registration
      Event"),
      then
      the Company shall deliver to the holder of Registrable Securities, as
Liquidated
      Damages,
      an
      amount equal to two percent (2%) for each thirty (30) days (or such lesser
      pro-rata amount for any period of less than thirty (30) days) of the Purchase
      Price 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 by the Filing Date but is withdrawn prior to
      being declared effective by the Commission, then such Registration Statement
      will be deemed to have not been filed and Liquidated Damages will be calculated
      accordingly. All
      oral
      or written comments received from the Commission relating to the Registration
      Statement must be satisfactorily responded to within
      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. 

     

    (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.

     

    (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.

     

    (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 to the Subscribers prior to the
      Closing Date, until the later of one year after the Actual Effective Date 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. 

     

    (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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c) Maximum
      Exercise of Rights.
      In the
      event the exercise of the rights described in Sections 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.

    (d) Trickle
      Out.
      Each
      Subscriber agrees, that commencing on the Initial Closing Date and ending six
      months thereafter, the Subscriber will not sell or otherwise dispose of, on
      any
      trading day more than each such Subscriber’s Pro Rata Portion of thirty percent
      (30%) of the volume of the Common Stock as reported by Bloomberg LP for the
      Principal Markets for each such trading day. The foregoing restriction
      notwithstanding, a Subscriber may sell each calendar month up to the greater of
      the amount determined pursuant to the foregoing sentence or up to fifteen
      percent (15%) of the Common Stock owned by and issuable to the Subscriber upon
      conversion of Notes and owned by the Subscriber, as of the Initial Closing
      Date
      and which are included in the Obligations. In the event the Subscriber does
      not
      sell or transfer the entire amount of Common Stock that such Subscriber was
      permitted, transfer or sale of on a particular trading day or during any month,
      then such Common Stock may be sold during any subsequent period without regard
      to the restrictions set forth in this Section 12(d). The Company and Subscribers
      further agree that any other transfer or trading restriction agreed to by a
      Subscriber prior to the Initial Closing Date shall be superseded by and modified
      to be the same as set forth in this Section 12(d). The foregoing
      notwithstanding, any sales by Subscribers of Shares of the Company’s Common
      Stock at a per share sales price of more than $.75 shall not be subject to
      the
      restrictions of this Section 12(d).

     

    13. Miscellaneous.

     

    (a) Notices.
      All
      notices, demands, requests, consents, approvals, and other communications
      required or permitted hereunder shall be in writing and, unless otherwise
      specified herein, shall be (i) personally served, (ii) deposited in the mail,
      registered or certified, return receipt requested, postage prepaid, (iii)
      delivered by reputable air courier service with charges prepaid, or (iv)
      transmitted by hand delivery, telegram, or facsimile, addressed as set forth
      below or to such other address as such party shall have specified most recently
      by written notice. Any notice or other communication required or permitted
      to be
      given hereunder shall be deemed effective (a) upon hand delivery or delivery
      by
      facsimile, with accurate confirmation generated by the transmitting facsimile
      machine, at the address or number designated below (if delivered on a business
      day during normal business hours where such notice is to be received), or the
      first business day following such delivery (if delivered other than on a
      business day during normal business hours where such notice is to be received)
      or (b) on the second business day following the date of mailing by express
      courier service, fully prepaid, addressed to such address, or upon actual
      receipt of such mailing, whichever shall first occur. The addresses for such
      communications shall be: (i) if to the Company, to: VoIP,
      Inc., 12330 SW53 Street, Suite 712, Cooper City, Florida 33330, Attn: Anthony
      Cataldo, CEO, telecopier: (954) 434-2877, with a copy by telecopier only to:
      Sichenzia
      Ross Friedman Ference LLP, 1065 Avenue of Americas, New York, NY 10018, Attn:
      Marc Ross, Esq., telecopier:
      (212) 930-9725, 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.

     

    (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 13(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.

     

    (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 80% 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.

     

     

    [THIS
      SPACE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (A)

     

    

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

     

    
      	 	 	 
	 	
              VOIP,
                INC.

              a Texas corporation

            
	 
 	 
 	 
 
	 	By:  	
              /s/
                Robert Staats

            
	 	
              
Name:
Robert
              Staats
	 	Title:
              Chief
              Accounting Officer
	 	 
	 	Dated: October 17,
              2006

    
    

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE - INITIAL CLOSING

            	
              AGGREGATE
                PRINCIPAL AMOUNT - INITIAL CLOSING

            	
              AGGREGATE
                PURCHASE PRICE - SECOND CLOSING

            	
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              PRO-RATA
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              ALPHA
                CAPITAL ANSTALT

              Pradafant
                7

              9490
                Furstentums

              Vaduz,
                Lichtenstein

              Fax:
                011-42-32323196

               

               

               

               

              /s/
                Konrad
                Ackermann                                    
                

              (Signature)

              By:
                Konrad Ackermann 

            	
              $280,000.00

            	
              $350,000.00

            	
              $280,000.00

            	
              $350,000.00

            	 

    

    

    

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (B)

     

    

    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
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      agreement between us.

    
      
         

        
          	 	 	 
	 	
                  VOIP,
                    INC.

                  a Texas corporation

                
	 
 	 
 	 
 
	 	By:  	
                  /s/
                    Robert Staats

                
	 	
                  
Name:
Robert
                  Staats
	 	Title:
                  Chief
                  Accounting Officer
	 	 
	 	Dated: October 17,
                  2006

      

    

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE - INITIAL CLOSING

            	
              AGGREGATE
                PRINCIPAL AMOUNT - INITIAL CLOSING

            	
              AGGREGATE
                PURCHASE PRICE - SECOND CLOSING

            	
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              PRO-RATA
                PORTION

            
	
              BRISTOL
                INVESTMENT FUND, LTD.

              69
                Dr. Roy’s Drive

              George
                Town, Grand Cayman, Cayman Islands

              Fax:
                (310) 696-0334

               

               

               

               

              /s/
                Paul
                Kessler                                              
                

              (Signature)

              By:
                Paul Kessler  

            	
              $448,000.00

            	
              $560,000.00

            	
              $448,000.00

            	
              $560,000.00

            	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (C)

     

    

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

    
      
         

        
          	 	 	 
	 	
                  VOIP,
                    INC.

                  a Texas corporation

                
	 
 	 
 	 
 
	 	By:  	
                  /s/
                    Robert Staats

                
	 	
                  
Name:
Robert
                  Staats
	 	Title:
                  Chief
                  Accounting Officer
	 	 
	 	Dated: October 17,
                  2006

      

    

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE - INITIAL CLOSING

            	
              AGGREGATE
                PRINCIPAL AMOUNT - INITIAL CLOSING

            	
              AGGREGATE
                PURCHASE PRICE - SECOND CLOSING

            	
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              PRO-RATA
                PORTION

            
	
              ELLIS
                INTERNATIONAL LTD.

              53rd
                Street Urbanizacion Obarrio

              Swiss
                Tower, 16th
                Floor, Panama

              Republic
                of Panama

              Fax:
                (516) 887-8990

               

               

               

               

              /s/
                Wilhelm
                Ungar                                                 
                

              (Signature)

              By:
                Wilhelm Ungar 

            	
              $242,000.00

            	
              $302,500.00

            	
              $242,000.00

            	
              $302,500.00

            	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (D)

     

    

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

    
      
         

        
          	 	 	 
	 	
                  VOIP,
                    INC.

                  a Texas corporation

                
	 
 	 
 	 
 
	 	By:  	
                  /s/
                    Robert Staats

                
	 	
                  
Name:
Robert
                  Staats
	 	Title:
                  Chief
                  Accounting Officer
	 	 
	 	Dated: October 17, 2006

        

         

      

       

    

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE - INITIAL CLOSING

            	
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                PURCHASE PRICE - SECOND CLOSING

            	
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              PRO-RATA
                PORTION

            
	
              PLATINUM
                LONG TERM GROWTH II INC.

              152
                West 57th
                Street

              New
                York, New York 10019

              Attn:
                Mark Nordlicht

              Fax:
                (212)

               

               

               

              /s/
                Mark
                Nordlicht                                              
                

              (Signature)

              By:
                Mark Nordlicht  

            	
              $140,000.00

            	
              $175,000.00

            	
              $140,000.00

            	
              $175,000.00

            	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (E)

     

    

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

     

    
      
        
          	 	 	 
	 	
                  VOIP,
                    INC.

                  a Texas corporation

                
	 
 	 
 	 
 
	 	By:  	
                  /s/
                    Robert Staats

                
	 	
                  
Name:
Robert
                  Staats
	 	Title:
                  Chief
                  Accounting Officer
	 	 
	 	Dated: October 17, 2006

        

         

      

    

    

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE - INITIAL CLOSING

            	
              AGGREGATE
                PRINCIPAL AMOUNT - INITIAL CLOSING

            	
              AGGREGATE
                PURCHASE PRICE - SECOND CLOSING

            	
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              PRO-RATA
                PORTION

            
	
              CMS
                CAPITAL

              9612
                Ventura Blvd., Suite 108

              Panorama
                City, CA 91402

              Attn:
                Judah Zavdi

              Fax:
                (818) 907-3372

               

               

               

              /s/
                Menachem
                Lipshin                                         
                

              (Signature)

              By:
                Menachem Lipshin 

            	
              $42,000.00

            	
              $52,500.00

            	
              $42,000.00

            	
              $52,500.00

            	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (F)

     

    

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

     

    
      
        
          
            	 	 	 
	 	
                    VOIP,
                      INC.

                    a Texas corporation

                  
	 
 	 
 	 
 
	 	By:  	
                    /s/
                      Robert Staats

                  
	 	
                    
Name:
Robert
                    Staats
	 	Title:
                    Chief
                    Accounting Officer
	 	 
	 	Dated: October 17, 2006

          

           

        

      

    

     

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE - INITIAL CLOSING

            	
              AGGREGATE
                PRINCIPAL AMOUNT - INITIAL CLOSING

            	
              AGGREGATE
                PURCHASE PRICE - SECOND CLOSING

            	
              AGGREGATE
                PRINCIPAL AMOUNT - SECOND CLOSING

            	
              PRO-RATA
                PORTION

            
	
              DKR
                SOUNDSHORE OASIS HOLDING FUND LTD.

              C/o
                DKR Capital Partners, L.P.

              1281
                East Main Street

              Stamford,
                CT 06902

              Fax:
                (203) 674-4737

               

               

               

              /s/
                Barbara
                Burger                                                       
                

              (Signature)

              By:
                Barbara Burger 

            	
              $280,000.00

            	
              $350,000.00

            	
              $280,000.00

            	
              $350,000.00

            	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (G)

     

    

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

    
       

      
        
          
            
              	 	 	 
	 	
                      VOIP,
                        INC.

                      a Texas corporation

                    
	 
 	 
 	 
 
	 	By:  	
                      /s/
                        Robert Staats

                    
	 	
                      
Name:
Robert
                      Staats
	 	Title:
                      Chief
                      Accounting Officer
	 	 
	 	Dated: October 17, 2006

            

             

          

        

      

    

     

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE - INITIAL CLOSING

            	
              AGGREGATE
                PRINCIPAL AMOUNT - INITIAL CLOSING

            	
              AGGREGATE
                PURCHASE PRICE - SECOND CLOSING

            	
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                PRINCIPAL AMOUNT - SECOND CLOSING

            	
              PRO-RATA
                PORTION

            
	
              OSHER
                CAPITAL INC.

              5
                Sansberry Lane

              Spring
                Valley, NY 10977

              Fax:
                (212) 586-8244

               

               

               

               

              /s/
                Yisroel
                Klueger                                                 
                

              (Signature)

              By:
                Yisroel Klueger 

            	
              $21,000.00

            	
              $25,250.00

            	
              $21,000.00

            	
              $25,250.00

            	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (H)

     

    

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

     

    
      
        
          
            
              
                	 	 	 
	 	
                        VOIP,
                          INC.

                        a Texas corporation

                      
	 
 	 
 	 
 
	 	By:  	
                        /s/
                          Robert Staats

                      
	 	
                        
Name:
Robert
                        Staats
	 	Title:
                        Chief
                        Accounting Officer
	 	 
	 	Dated: October 17, 2006

              

               

            

          

        

      

    

    

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE - INITIAL CLOSING

            	
              AGGREGATE
                PRINCIPAL AMOUNT - INITIAL CLOSING

            	
              AGGREGATE
                PURCHASE PRICE - SECOND CLOSING

            	
              AGGREGATE
                PRINCIPAL AMOUNT - SECOND CLOSING

            	
              PRO-RATA
                PORTION

            
	
              WHALEHAVEN
                CAPITAL FUND LIMITED

              3rd
                Floor, 14 Par-Laville Road

              Hamilton,
                Bermuda HM08

              Fax:
                (441) 292-1373

               

               

               

               

              /s/
                Evan
                Schemenauer                                          
                

              (Signature)

              By:
                Evan Schemenauer 

            	
              $556,500.00

            	
              $695,625.00

            	
              $556,500.00

            	
              $695,625.00

            	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (I)

     

    

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

    
       

      
        
          
            
              
                
                  	 	 	 
	 	
                          VOIP,
                            INC.

                          a Texas corporation

                        
	 
 	 
 	 
 
	 	By:  	
                          /s/
                            Robert Staats

                        
	 	
                          
Name:
Robert
                          Staats
	 	Title:
                          Chief
                          Accounting Officer
	 	 
	 	Dated: October 17, 2006

                

                 

              

            

          

        

      

    

     

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE - INITIAL CLOSING

            	
              AGGREGATE
                PRINCIPAL AMOUNT - INITIAL CLOSING

            	
              AGGREGATE
                PURCHASE PRICE - SECOND CLOSING

            	
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                PRINCIPAL AMOUNT - SECOND CLOSING

            	
              PRO-RATA
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              CHESTNUT
                RIDGE PARTNERS LP

              50
                Tice Boulevard

              Woodcliff
                Lake, NJ 07677

              Fax:
                (201) 802-9450

               

               

               

               
/s/
              Kenneth Holz,
              CFO                                         
              
              (Signature)

              By:
                Kenneth Holz, CFO

            	
              $70,000.00

            	
              $87,500.00

            	
              $70,000.00

            	
              $87,500.00

            	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (J)

     

    

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

     

    
      
        
          
            
              
                
                  
                    	 	 	 
	 	
                            VOIP,
                              INC.

                            a Texas corporation

                          
	 
 	 
 	 
 
	 	By:  	
                            /s/
                              Robert Staats

                          
	 	
                            
Name:
Robert
                            Staats
	 	Title:
                            Chief
                            Accounting Officer
	 	 
	 	Dated: October 17, 2006

                  

                   

                

              

            

          

        

      

    

     

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE - INITIAL CLOSING

            	
              AGGREGATE
                PRINCIPAL AMOUNT - INITIAL CLOSING

            	
              AGGREGATE
                PURCHASE PRICE - SECOND CLOSING

            	
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                PRINCIPAL AMOUNT - SECOND CLOSING

            	
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              GRUSHKO
                & MITTMAN, P.C.

              551
                Fifth Avenue, Suite 1601

              New
                York, NY 10176

              Fax:
                (212) 697-3575

               

               

               

               

              

                 

                /s/
                  Barbara
                  Mittman                                              
                  

              

              (Signature)

              By:
                Barbara
                Mittman 

            	
              $25,200.00

            	
              $31,500.00

            	
              $25,200.00

            	
              $31,500.00

            	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (K)

     

    

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

     

    
      
        
          
            
              
                
                  
                    
                      	 	 	 
	 	
                              VOIP,
                                INC.

                              a Texas corporation

                            
	 
 	 
 	 
 
	 	By:  	
                              /s/
                                Robert Staats

                            
	 	
                              
Name:
Robert
                              Staats
	 	Title:
                              Chief
                              Accounting Officer
	 	 
	 	Dated: October 17, 2006

                    

                     

                     

                  

                

              

            

          

        

      

    

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE - INITIAL CLOSING

            	
              AGGREGATE
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              AGGREGATE
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                PRINCIPAL AMOUNT - SECOND CLOSING

            	
              PRO-RATA
                PORTION

            
	
              IROQUOIS
                CAPITAL

              641
                Lexington Avenue, 26th
                Floor

              new
                York, NY 10022

              Fax:
                (212) 207-1412

               

               

               

               

               

              /s/
                Joshua
                Silverman                                          

              (Signature)

              By:
                Joshua Silverman 

            	
              $70,000.00

            	
              $87,500.00

            	
              $70,000.00

            	
              $87,500.00

            	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT (L)

     

    

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

     

    
      
        
          
            
              
                
                  
                    
                      
                        	 	 	 
	 	
                                VOIP,
                                  INC.

                                a Texas corporation

                              
	 
 	 
 	 
 
	 	By:  	
                                /s/
                                  Robert Staats

                              
	 	
                                
Name:
Robert
                                Staats
	 	Title:
                                Chief
                                Accounting Officer
	 	 
	 	Dated: October 17, 2006

                      

                       

                    

                  

                

              

            

          

        

      

    

    

    
      	
              SUBSCRIBER

            	
              AGGREGATE
                PURCHASE PRICE - INITIAL CLOSING

            	
              AGGREGATE
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              AGGREGATE
                PURCHASE PRICE - SECOND CLOSING

            	
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                PRINCIPAL AMOUNT - SECOND CLOSING

            	
              PRO-RATA
                PORTION

            
	
              BRIO
                CAPITAL L.P.

              523
                Albermarle Road

              Cedarhurst,
                NY 11516

              Fax:
                (646) 390-2158

               

               

               

              /s/
                Shaye
                Hrsen                                                
                

              (Signature)

              By:
                Shaye Hrsen 

            	
              $150,000.00

            	
              $187,500.00

            	
              $150,000.00

            	
              $187,500.00

            	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SUBSIDIARY
      SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

    

    The
      undersigned, on behalf of the Subsidiaries of VoIP, Inc., agree to the terms
      and
      conditions of the Subscription Agreement dated at or about October 5, 2006
      among
      VoIP, Inc., and Subscribers (as defined therein) to which this signature page
      is
      annexed.

    

      

      
        	
                VOIPSOLUTIONS

              	 	
                EGLOBALPHONE

              
	
                a
                  Florida corporation

              	 	
                a
                  Florida corporation

              
	
                 

              	 	
                 

              
	
                By:
                  /s/
                  Robert
                  Staats                                                           
                  

              	 	
                By:
                  /s/ Robert
                  Staats                                                           
                  

              
	
                Its:
                  Chief Accounting Officer

              	 	
                Its:
                  Chief Accounting Officer

              
	
                 

              	 	
                 

              
	
                CAERUS,
                  INC

              	 	
                VOX
                  CONSULTING GROUP, INC.

              
	
                a
                  Delaware corporation

              	 	
                a
                  Florida corporation

              
	
                 

              	 	
                 

              
	
                By:
                  /s/ Robert
                  Staats                                                           
                  

              	 	
                By:
                  /s/ Robert
                  Staats                                                           
                  

              
	
                Its:
                  Chief Accounting Officer

              	 	
                Its:
                  Chief Accounting Officer

              
	
                 

              	 	
                 

              
	
                VCG
                  TECHNOLOGIES

              	 	
                VOLO
                  COMMUNICATIONS, INC.

              
	
                a
                  Florida corporation

              	 	
                a
                  Delaware corporation

              
	
                 

              	 	
                 

              
	
                By:
                  /s/ Robert
                  Staats                                                           
                  

              	 	
                By:
                  /s/ Robert
                  Staats                                                           
                  

              
	
                Its:
                  Chief Accounting Officer

              	 	
                Its:
                  Chief Accounting Officer

              
	
                 

              	 	
                 

              
	
                CAERUS
                  BILLING, INC.

              	 	
                CAERUS
                  NETWORKS, INC.

              
	
                a
                  Delaware corporation

              	 	
                a
                  Delaware corporation

              
	
                 

              	 	
                 

              
	
                By:
                  /s/ Robert
                  Staats                                                           
                  

              	 	
                By:
                  /s/ Robert
                  Staats                                                           
                  

              
	
                Its:
                  Chief Accounting Officer

              	 	
                Its:
                  Chief Accounting Officer

              
	
                 

              	 	
                 

              
	
                VOICEONE
                  COMMUNICATIONS, LLC

              	 	
                VOIP
                  ACQUISITION COMPANY

              
	
                a
                  Delaware Limited Liability corporation

              	 	
                a
                  Delaware corporation

              
	
                 

              	 	
                 

              
	
                By:
                  /s/ Robert
                  Staats                                                           
                  

              	 	
                By:
                  /s/ Robert
                  Staats                                                           
                  

              
	
                Its:
                  Chief Accounting Officer

              	 	
                Its:
                  Chief Accounting Officer

              

      

       

    

     

    TERMS
      OF SUBSCRIPTION AGREEMENT AND TRANSACTION DOCUMENTS

    ACKNOWLEDGED
      AND APPROVED:

    

    STONESTREET
      LIMITED PARTNERSHIP

    

    

    By:__________________________________

    Name:    

    Title:

    

    Pro
      Rata
      Portion: _______________________

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    LIST
      OF EXHIBITS AND SCHEDULES

     

     

    

      
        	
                Exhibit
                  A

              	 	
                Form
                  of Note

              
	 	 	 
	
                Exhibit
                  B

              	 	
                Form
                  of Class C Warrant

              
	 	 	 
	
                Exhibit
                  C

              	 	
                Escrow
                  Agreement

              
	 	 	 
	
                Exhibit
                  D

              	 	
                Form
                  of Legal Opinion

              
	 	 	 
	
                Exhibit
                  E

              	 	
                Form
                  of Form 8-K or Public Announcement

              
	 	 	 
	
                Schedule
                  3

              	 	
                Outstanding
                  Obligations

              
	 	 	 
	
                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 Recipient

              
	 	 	 
	
                Schedule
                  9(e)

              	 	
                Use
                  of Proceeds

              
	 	 	 
	
                Schedule
                  9(r)

              	 	
                Permitted
                  Payments

              
	 	 	 
	
                Schedule
                  11.1

              	 	
                Other
                  Registrable Securities

              
	 	 	 

      

      

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

    

    SCHEDULE
      8

    

    

    DUE
      DILIGENCE FEE

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00111-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00111-of-00352.parquet"}]]