EXCHANGE AGREEMENT

THIS EXCHANGE AGREEMENT, dated as of June __, 2008, is made by and between
Lattice Incorporated, a Delaware corporation (“Company”), and Barron Partners
LP, a Delaware Limited Partnership (the “Holder”).

WHEREAS, the Holder is the owner of 7,861,698 shares of the Company’s Series A
Preferred Stock (the “Series A Preferred”) and 1,955,132 Warrants A to purchase
shares of the Company’s common stock with an exercise price of $0.35 per share
expiring 9/19/2011 registered pursuant to an SB2 registration statement filed on
2/12/07 and subsequently amended. (the “Registered Warrant”).

WHEREAS, the Holder also owns 10,544,868 unregistered Warrants A to purchase
shares of the Company’s common stock with an exercise price of $0.35 per share
expiring 9/19/2011, 12,500,000 Warrants B to purchase shares of the Company’s
common stock with an exercise price of $0.875 per share expiring 9/19/2011 and
1,900,000 warrants to purchase shares of the Company’s common stock with an
exercise price of $0.50 expiring 2/8/2012(collectively, the “Unregistered
Warrants”).

WHEREAS, pursuant to the Certificate of Designation, the Conversion Price of the
Series A Preferred, as adjusted in accordance with Section 7(c) of the
Certificate of Designation is currently $0.161 per share and the Conversion
Ratio is 3.5714;

WHEREAS, the Company and the Holder currently desire that the Holder return the
Unregistered Warrants to the Company for cancellation;

WHEREAS, in consideration for the cancellation of the Unregistered Warrants, the
Company desires to issue 520,000 of its newly designated Series C Preferred
Stock (“Series C Preferred”) to the Holder, 5,200,000 shares of the Company’s
common stock will be issuable to the Holder upon conversion of the Series C
Preferred shares owned by the Holder;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which the parties hereby acknowledge, the parties agree as follows:

1. a. Cancellation and Reissue of Warrants. The Company and the Holder agree
that the Holder will return the Unregistered Warrants to the Company for
cancellation. The Company and the Holder also agree that the Holder will return
the Registered Warrants to be reissued by the Company with the same terms as
currently stated within 5 days of the receipt.

b. Filing of Certificate of Designation and Issuance of Series C shares. The
Company and the Holder agree that upon the return and cancellation of the
Unregistered Warrants, the Company shall within five (5) days of the signing of
this Agreement, file the Certificate of Designation for the Series C Preferred,
a copy of which is annexed hereto as Exhibit A, such that each share of Series C
Preferred shall be convertible into 10 shares of the Company’s common stock
subject to adjustment pursuant to the Certificate of Designation. Upon the
effectiveness of the Certificate of Designation, the Company shall promptly
issue certificates to the Holder representing the Series C Preferred shares.

 
 

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3. Further Assurances. In connection with the exchange and the cancellation of
the Unregistered Warrants and amendment to the Certificate of Designation, the
Holder, by entering into this Exchange Agreement, agrees to execute all
agreements and other documents as reasonably requested by the Company.

4. Investor Representations and Warranties and Covenants. The Holder represents,
warrants and covenants to the Company as follows:

a.  No Registration. The Holder understands that the Series C Preferred Shares
have not been, and will not be, registered under the Securities Act of 1933, as
amended (the “Securities Act”) by reason of a specific exemption from the
registration provisions of the Securities Act, the availability of which depends
upon, among other things, the bona fide nature of the investment intent and the
accuracy of such Holder’s representations as expressed herein or otherwise made
pursuant hereto.

b. Investment Intent. The Holder acquired the Series C Preferred Shares, for
investment for its own account, not as a nominee or agent, and not with the view
to, or for resale in connection with, any distribution thereof, and such Holder
has no present intention of selling, granting any participation in, or otherwise
distributing the same. Such Holder further represents that it will not violate
the Securities Act and does not have any contract, undertaking, agreement or
arrangement with any person or entity to sell, transfer or grant participation
to such person or entity or to any third person or entity with respect to the
Preferred Shares.

c. Investment Experience. Such Holder has substantial experience in evaluating
and investing in private placement transactions of securities in companies
similar to the Company and acknowledges that such Holder can protect its own
interests. Such Holder has such knowledge and experience in financial and
business matters so that such Holder is capable of evaluating the merits and
risks of its investment in the Company.

d. Transfer Restrictions. The Holder acknowledges that the shares of the
Company’s common stock issuable upon conversion of the Series C Preferred have
not been registered under the 1933 Act, and may not be transferred unless (i)
they are subject to a current and effective registration statement under the
1933 Act, or (ii) the Investor shall have delivered to the Company an opinion of
counsel, which counsel and opinion shall be reasonably satisfactory to the
Company, to the effect that the securities to be sold or transferred may be sold
or transferred pursuant to an exemption from such registration; and (b) any sale
of the securities made in reliance on Rule 144 promulgated under the 1933 Act
may be made only in accordance with the terms of said Rule, to the extent that
such Rule is applicable.
 
e. Access to Data. The Holder and its advisors, if any, have been furnished with
or have been given access to all materials relating to the business, finances
and operations of the Company and any reasonably requested materials requested
by the Holder. The Holder and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and its management and have received
complete and satisfactory answers to any such inquiries.

 
 

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f. Accredited Investor. The Holder is an “accredited investor’ within the
meaning of Regulation D, Rule 501(a), promulgated by the Securities and Exchange
Commission under the Securities Act and shall submit to the Company such further
assurances of such status as may be reasonably requested by the Company.

g. Restrictive Legend. The Holder acknowledges and agrees that the Series A
Preferred Shares and the shares of the Company’s common stock issuable upon
conversion of the Series C Preferred Shares shall bear a restrictive legend and
a stop-transfer order may be placed against transfer of any such securities
except that the requirement for a restrictive legend shall not apply to shares
sold pursuant to a current and effective registration statement or a sale
pursuant Rule 144 or any successor rule

h. Authorization.

i. The Holder has all requisite power and authority to execute and deliver this
Exchange Agreement, and to carry out and perform its obligations under the terms
hereof. All action on the part of the Holder necessary for the authorization,
execution, delivery and performance of this Exchange Agreement, and the
performance of all of the Holder’s obligations herein, has been taken.

ii. This Exchange Agreement, when executed and delivered by the Holder, will
constitute valid and legally binding obligations of the Holder, enforceable in
accordance with its terms except: (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, and (ii) as limited by
laws relating to the availability of specific performance, injunctive relief or
other equitable remedies or by general principles of equity.

iii. No consent, approval, authorization, order, filing, registration or
qualification of or with any court, governmental authority or third person is
required to be obtained by the Holder in connection with the execution and
delivery of this Exchange Agreement by the Holder or the performance of the
Holder’s obligations hereunder.

i. Tax Advisors. Such Holder has reviewed with its own tax advisors the U.S.
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Exchange Agreement. With respect to such
matters, such Holder relies solely on such advisors and not on any statements or
representations of the Company or any of its agents, written or oral. The Holder
understands that it (and not the Company) shall be responsible for its own tax
liability that may arise as a result of this investment or the transactions
contemplated by this Exchange Agreement.
 
j.  All parties acknowledge and represent that: (a) they have read this Exchange
Agreement; (b) they clearly understand the Exchange Agreement and each of its
terms; (c) they fully and unconditionally consent to the terms of this Exchange
Agreement; (d) they have had the benefit and advice of counsel of their own
selection; (e) they have executed this Exchange Agreement, freely, with
knowledge, and without influence or duress; (f) they have not relied upon any
other representations, either written or oral, express or implied, made to them
by any person; and (g) the consideration received by them has been actual and
adequate.

 
 

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k.  This Exchange Agreement contains the entire agreement and understanding
concerning the subject matter hereof between the parties and supersedes and
replaces all prior negotiations, proposed agreement and agreements, written or
oral. Each of the parties hereto acknowledges that neither any of the parties
hereto, nor agents or counsel of any other party whomsoever, has made any
promise, representation or warranty whatsoever, express or implied, not
contained herein concerning the subject hereto, to induce it to execute this
Exchange Agreement and acknowledges ands warrants that it is not executing this
Exchange Agreement in reliance on any promise, representation or warranty not
contained herein.

l.  This Exchange Agreement may not be modified or amended in any manner except
by an instrument in writing specifically stating that it is a supplement,
modification or amendment to the Exchange Agreement and signed by each of the
parties hereto.

m.  Should any provision of this Exchange Agreement be declared or be determined
by any court or tribunal to be illegal or invalid, the validity of the remaining
parts, terms or provisions shall not be affected thereby and said illegal or
invalid part, term or provision shall be severed and deemed not to be part of
this Exchange Agreement.

n.  This Exchange Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to principles of
conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York. Both parties, and the individuals executing this Exchange Agreement
and other agreements 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.

o.  This Exchange Agreement may be executed in counterparts, each of which, when
all parties have executed at least one such counterpart, shall be deemed an
original, with the same force and effect as if all signatures were appended to
one instrument, but all of which together shall constitute one and the same
Exchange Agreement.

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IN WITNESS WHEREOF, the parties have caused this Exchange Agreement to be duly
executed by their respective officers thereonto duly authorized as of the day
and year first above written.
 

LATTICE INCORPORATED
 
 
By:__________________________________________
  Name: Paul Burgess
  Title: Chief Executive Officer

 
 

 
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SIGNATURE PAGES FOR HOLDERS TO FOLLOW]

 
 

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[SIGNATURE PAGE OF HOLDERS TO LATTICE INCORPORATED EXCHANGE AGMT]

Name of Holder: BARRON PARTNERS LP
By: Barron Capital Advisors, LLC, its General Partner 

By:________________________________
Andrew Barron Worden
Managing Partner
730 Fifth Avenue, 25th Floor
New York NY 10019

 
 

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