EXHIBIT 10.1

Dutchess Private Equities Fund, II, L.P.

August 18, 2006

Securac Corp.
Suite 100, 301-14th Street NW
Calgary, Alberta T2N 2A1
Attn: Mr. Paul Hookham

Re:
Payoff and Settlement Letter

Dear Mr. Hookham:

Reference is made to that certain Debenture Agreement, Security Agreement,
Debenture Registration Rights Agreement, Subscription Agreement and Escrow
Agreement, each effective as of September 30, 2005 (as heretofore amended, the
“Transaction Documents”), between Securac Corp. (the “Borrower” or “you”) and
Dutchess Private Equities Fund, II, L.P. (the “Holder” or “we”) (sometimes
hereinafter the Borrower and the Holder are referred to collectively as the
"parties"). Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Transaction Documents, and are
incorporated by reference. Copies of the Transaction Documents are attached as
exhibits 10.1 through 10.4 and 10.8 to the Borrower’s Current Report on Form 8-K
filed with the Securities and Exchange Commission on October 6, 2005.

The parties are entering into this agreement to settle a dispute regarding
amounts claimed to be owing by Borrower to Holder under the Transaction
Documents and to avoid unnecessary expense associated with litigation and a
protracted resolution of such dispute.
 
The Borrower and the Holder hereby agree that upon satisfaction of each of the
following (the “Closing Date”), which is anticipated to occur on or about
September 8, 2006:

(i) payment in immediately available funds of $441,344.14, representing
principal, interest and redemption premium owing as of the date hereof on the
Debenture, plus interest accruing on the principal amount thereof from the date
hereof until the date of payment in the daily amount of $117.00 (the “Payout
Amount”) by wire transfer to Holder’s bank account: [intentionally omitted];

(ii) delivery of instructions by the Borrower to the escrow agent under the
Escrow Agreement referred to above instructing the escrow agent to release all
909,090 shares of common stock of the Borrower held thereunder to the Holder
(“Debenture Shares”), it being understood that the Debenture is being
converted/recapitalized as of the Closing Date with respect to all penalties and
other amounts owing under the Debenture in excess of the Payoff Amount and that
such shares are being released to satisfy such conversion/recapitalization
(accompanied by a letter to Holder from Borrower’s counsel confirming its view
as to the commencement of the Rule 144 holding period with respect to such
shares beginning on October 31, 2006, and its willingness to deliver a Rule 144
opinion to that effect following receipt of reasonable and customary Rule 144
supporting documentation demonstrating compliance with the other provisions of
the Rule (such letter and opinion also to cover the shares underlying the
warrants referred to below, assuming cashless exercise); and

 
 

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(iii) delivery of certificates evidencing an aggregate of 1,000,000 Pledged
Shares (as defined under the above-referenced Security Agreement) registered in
the name of the holders, accompanied by stock powers duly executed in blank, in
form sufficient to transfer the same to the Holder, (it being understood that we
shall be entitled to piggyback registration rights, for all Debenture Shares and
Pledged Shares then held by us in excess of one percent of Borrower’s total
outstanding shares and not then saleable under Rule 144(k),with respect to the
next registration statement filed by you on a form for which such shares are
eligible to be included, as determined by SEC rules and regulations;

all of your liabilities and obligations to us, including those arising under the
Transaction Documents, shall have been deemed satisfied and paid in full, and:

(i) all of our liens on, and security interests in, all of the assets and
properties of the Borrower and any other assets or properties pledged to us for
the benefit of the Borrower, shall terminate automatically; and we hereby
authorize you or any person authorized by you to file termination statements for
any Uniform Commercial Code Financing Statements, or comparable forms, in any
jurisdiction listing the Holder as a secured party and the Borrower as a debtor
without any further action by us; and we also hereby agree to promptly, but in
any event within three business days after the date hereof, deliver to you or as
you shall direct any of your or such other person’s assets that we are holding
as Pledged Property;

(ii) all of your obligations to us under the Transaction Documents, shall
terminate automatically; and

(iii) the warrants issued by you to us to purchase 181,819 shares of your common
stock pursuant to that certain warrant agreement dated as of September 30, 2005
(the “Warrant Agreement”) shall be deemed automatically amended such that (A)
the Exercise Price shall be equal to the closing bid price of your common stock
on the business day preceding the Closing Date and the number of underlying
shares shall remain at 181,819 and (B) you shall be relieved of any and all
registration obligations with respect to the Warrant Agreement and, in lieu
thereof, we shall be entitled to piggyback registration rights, for the
underlying shares in excess of one percent of the Borrower’s total outstanding
shares and not then saleable under Rule 144(k) assuming a cashless exercise,
with respect to the next registration statement filed by you on a form for which
our shares are eligible to be included, as determined by SEC rules and
regulations. (Except as modified hereby, the terms of the Warrant Agreement
shall remain unchanged).

In furtherance of the foregoing, upon receipt of the Payout Amount and the other
deliveries referred to above, Holder and Borrower, and their respective
officers, directors, stockholders, attorneys, members, agents, representatives,
employees, subsidiaries, affiliates, partners, predecessors and successors in
interest, and assigns and all other persons, firms or corporations with whom any
of the former have been, or are now, affiliated (hereinafter “Releasors”) hereby
completely release and forever discharge each other and their respective
officers, directors, stockholders, attorneys, members, agents, representatives,
employees, subsidiaries, affiliates, partners, predecessors and successors in
interest, and assigns and all other persons, firms, associations or corporations
with whom any of the former have been, or are now, affiliated (hereinafter
“Releasees”) of and from any and all past and present claims, demands, actions,
causes of action, debts and dues both in law and in equity of any nature or
description whatsoever, whether now known or unknown, anticipated or
unanticipated, asserted or unasserted, whether based on statute, contract, tort,
or otherwise, on account of or in any way growing out of, related to, resulting
or to result from the Transaction Documents. Holder agrees to execute and
deliver from time to time after receipt of the Payoff Amount and other
deliveries referred to above any documents, at your expense, as shall be
reasonably requested by you to evidence such release and termination. This
letter agreement shall be a fully binding and complete settlement and release
between the Holder, Borrower and Releasees with respect to the matters addressed
herein upon receipt by Holder of the Payoff Amount and other deliveries referred
to above.

 
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The parties warrant and represent that:

 
(i)
the parties have been fully informed and have full knowledge of the terms,
conditions, and effects of this agreement, and have read this agreement and are
executing it under advice of counsel;

 
(ii)
the parties have investigated, to each party’s satisfaction, all of the facts
surrounding the various claims, controversies, and disputes and are satisfied
with the terms and effects of this agreement;

 
(iii)
the parties have executed and agreed to this agreement as a complete compromise
of matters involving disputed issues of law and fact and fully assume the risk
that the facts or law may be other than they believe; and

 
(iv)
no relative, or other person or entity, has or has had any interest in the
claims, demands, obligations, or causes of action referred to in this agreement;
that they have the sole right and exclusive authority to execute this agreement
and pay or receive the sums specified in it; and that they have not sold,
assigned, transferred, conveyed or otherwise disposed of any of the claims,
demands, obligations or causes of actions referred to in this agreement.

The Borrower acknowledges that its failure to timely (i) instruct it's
consultants including but not limited to: Borrower's Counsel and transfer agent
("Borrower's Agents"), to use it's commercially reasonable best efforts to
comply with the Holder's Rule 144 sales and (ii) satisfy the piggyback
registration obligations referred to herein will cause the Holder to suffer
irreparable harm and that the actual damage to the Holder will be difficult to
ascertain. Accordingly, the parties agree that it is appropriate to include in
this Settlement Agreement, a provision for liquidated damages. The parties
acknowledge and agree that the liquidated damages provision set forth in this
section represents the parties’ good faith effort to quantify such damages and,
as such, agree that the form and amount of such liquidated damages are
reasonable and do not constitute a penalty. The payment of liquidated damages
shall not relieve the Borrower from such obligations. The Holder shall have the
right to charge the Borrower five thousand dollars ($5,000) per day for failure
by the Borrower or the Borrower's Agents to act in a timely manner for the
obligations described herein.

We hereby acknowledge that all share calculations discussed herein shall include
the total aggregate amount of Pledged Shares, Debenture Shares or shares
underlying the Warrant then held by us.

The parties agree and acknowledge that this agreement is a full and complete
compromise of all matters involving disputed issues and that neither this
agreement nor the negotiations for this settlement (including all statements,
admissions or communications) by Holder or Borrower or their attorneys or
representatives shall be considered admissions by any of said parties, and that
no past or present wrongdoing or liability on the part of any party shall be
implied by such settlement or negotiations.

 
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Please indicate your agreement to the foregoing by signing in the space provided
below. This agreement may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed to be but one and the same
agreement. Delivery by any party hereto of a signature page to this agreement by
facsimile shall be effective as delivery of a counterpart manually executed by
such party of this agreement. This agreement shall be governed by the laws of
the State of New York without giving effect to its choice of law principles.

  Very truly yours,        DUTCHESS PRIVATE EQUITIES FUND, II, L.P.        BY:
ITS GENERAL PARTNER DUTCHESS   
CAPITAL MANAGEMENT, LLC 
      By: /s/ Douglas H. Leighton    Name: Douglas H. Leighton    Title: A
Managing Member 

AGREED:                SECURAC CORP.    
By: /s/ Terry Allen
Name: Terry Allen
Title: CEO
    By: /s/ Paul Hookham
Name: Paul Hookham
Title: CFO

 
 
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