XcelMobility, Inc.: Exhibit 10.1 - Filed by newsfilecorp.com






INVESTMENT AGREEMENT 

INVESTMENT AGREEMENT (this “AGREEMENT”), dated as of April 23,
2013 by and between XCELMOBILITY, INC. a Nevada corporation (the “Company”), and
Dutchess Opportunity Fund, II, LP, a Delaware Limited Partnership (the
“Investor”).

WHEREAS, the parties desire that, upon the terms and subject to
the conditions contained herein, the Investor shall invest up to two million
dollars ($2,000,000) to purchase the Company's Common Stock with $.001 par value
per share (the “Common Stock”);

WHEREAS, such investments will be made in reliance upon the
provisions of Section 4(2) under the Securities Act of 1933, as amended (the
“1933 Act”), Rule 506 of Regulation D, and the rules and regulations promulgated
thereunder, and/or upon such other exemption from the registration requirements
of the 1933 Act as may be available with respect to any or all of the
investments in Common Stock to be made hereunder; and

WHEREAS, contemporaneously with the execution and delivery of
this Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form attached hereto (the “Registration
Rights Agreement”) pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act, and the rules and regulations
promulgated thereunder, and applicable state securities laws.

NOW THEREFORE, in consideration of the foregoing recitals,
which shall be considered an integral part of this Agreement, the covenants and
agreements set forth hereafter, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and the
Investor hereby agree as follows:

SECTION 1. DEFINITIONS.

          As
used in this Agreement, the following terms shall have the following meanings
specified or indicated below, and such meanings shall be equally applicable to
the singular and plural forms of such defined terms.

          “1933
Act” shall have the meaning set forth in the recitals of this Agreement.

          “1934
Act” shall mean the Securities Exchange Act of 1934, as it may be
amended.

          “AAA”
shall have the meaning specified in Section 12. 

          “Affiliate”
shall have the meaning specified in Section 5(H).

          “Agreement”
shall mean this Investment Agreement.

          “Articles
of Incorporation” shall have the meaning specified in Section 4(C).

          “By-laws”
shall have the meaning specified in Section 4(C).

          “Closing”
shall have the meaning specified in Section 2(F).

          “Closing
Date” shall have the meaning specified in Section 2(F).




          “Common
Stock” shall have the meaning set forth in the recitals of this
Agreement.

          “Company”
shall have the meaning set forth in the preamble of this Agreement. 

          “Control”
or “Controls” shall have the meaning specified in Section 5(H).

          “DTC”
shall have the meaning specified in Section 2(F). 

          “DWAC”
shall have the meaning specified in Section 2(F). 

          “Effective
Date” shall mean the date the SEC declares effective under the 1933 Act the
Registration Statement covering the Securities.

          “Equity
Line Transaction Documents” shall mean this Agreement and the Registration
Rights Agreement.

          “FAST”
shall have the meaning specified in Section 2(F). 

          “Indemnities”
shall have the meaning specified in Section 11.

          “Indemnified
Liabilities” shall have the meaning specified in Section 11.

          “Indemnitor”
shall have the meaning specified in Section 11.

          “Investor”
shall have the meaning indicated in the preamble of this Agreement.

          “Material
Adverse Effect” shall have the meaning specified in Section 4(A).

          “Maximum
Common Stock Issuance” shall have the meaning specified in Section 2(G).

          “Minimum
Acceptable Price” with respect to any Put Notice Date shall be the price
defined by the Company in the applicable Put Notice.

          “Open
Market Adjustment Amount” shall have the meaning specified in Section
2(H).

          “Open
Market Share Purchase” shall have the meaning specified in Section 2(H).

          “Open
Period” shall mean the period beginning on and including the Trading Day
immediately following the Effective Date and ending on the earlier to occur of
(i) the date which is thirty-six (36) months from the Effective Date; or (ii)
termination of the Agreement in accordance with Section 9, below.

          “Pricing
Period” shall mean the five (5) consecutive Trading Days beginning on the
Put Notice Date and ending on and including the date that is four (4) Trading
Days after such Put Notice Date.

          “Principal
Market” shall mean the Nasdaq Capital Market, the NYSE Amex, the New York
Stock Exchange, the Nasdaq Global Market, the Nasdaq Global Select Market or the
OTC Bulletin Board, whichever is the principal market on which the Common Stock
is listed.

          “Prospectus”
shall mean the prospectus, as supplemented by any prospectus supplement, used in
connection with the Registration Statement.




          “Purchase
Amount” shall mean the total amount being paid by the Investor on a
particular Closing Date to purchase the Securities.

          “Purchase
Price” shall mean ninety-five percent (95%) of the lowest daily VWAP (as
defined herein) of the Common Stock during the Pricing Period.

          “Put”
shall have the meaning set forth in Section 2(B) hereof.

          “Put
Amount” shall have the meaning set forth in Section 2(B) hereof.

          “Put
Notice” shall mean a written notice in the form attached hereto as Exhibit
C, sent to the Investor by the Company stating the Put Amount in U.S. dollars
the Company intends to sell to the Investor pursuant to the terms of the
Agreement and stating the current number of Shares issued and outstanding on
such date.

          “Put
Notice Date” shall mean the Trading Day, as set forth below, immediately
following the day on which the Investor receives a Put Notice, however a Put
Notice shall be deemed delivered on (a) the Trading Day it is received by
facsimile or email by the Investor if such notice is received prior to noon
Eastern Time, or (b) the immediately succeeding Trading Day if it is received by
facsimile or otherwise after noon Eastern Time on a Trading Day. No Put Notice
may be deemed delivered on a day that is not a Trading Day.

          “Put
Restriction” shall mean the days during the Pricing Period. During this
time, the Company shall not be entitled to deliver another Put Notice.

          “Put
Shares Due” shall have the meaning specified in Section 2(H).

          “Registration
Rights Agreement” shall have the meaning set forth in the recitals of this
Agreement.

          “Registration
Statement” means the registration statement of the Company filed under the
1933 Act covering the resale by the Investor of the Common Stock issuable
hereunder.

          “Related
Party” shall have the meaning specified in Section 5(H).
“Resolutions” shall have the meaning specified in Section 8(E).
“SEC” shall mean the U.S. Securities & Exchange Commission.

          “SEC
Documents” shall have the meaning specified in Section 4(G).

          “Securities”
shall mean the shares of Common Stock issued pursuant to the terms of the
Agreement.

          “Shares”
shall mean the shares of the Company’s Common Stock.

          “Subsequent
Purchasers” shall have the meaning specified in Section 2(I). 

          “Subsidiaries”
shall have the meaning specified in Section 4(A). 

          “Suspension
Price” shall have the meaning specified in Section 2(C). 

3 




          “Trading
Day” shall mean any day on which the Principal Market for the Common Stock
is open for trading, from the hours of 9:30 am until 4:00 pm Boston Time.

          “VWAP”
shall mean the volume weighted average price during a Trading Day.

SECTION 2. PURCHASE AND SALE OF COMMON STOCK.

          (A)      PURCHASE
AND SALE OF COMMON STOCK. Subject to the terms and conditions set forth herein,
the Company may issue and sell to the Investor, and the Investor shall purchase
from the Company, up to that number of Shares having an aggregate Purchase Price
of two million dollars ($2,000,000).

          (B)      DELIVERY
OF PUT NOTICES. Subject to the terms and conditions of the Equity Line
Transaction Documents, and from time to time during the Open Period, the Company
may, in its sole discretion, deliver a Put Notice to the Investor which states
the dollar amount (designated in U.S. Dollars) (the “Put Amount”) of Shares
which the Company intends to sell to the Investor on a Closing Date (the “Put”).
The Put Amount shall be equal to up to either 1) two hundred percent (200%) of
the average daily volume (U.S. market only) of the Common Stock for the three
(3) Trading Days prior to the applicable Put Notice Date, multiplied by the
average of the three (3) daily closing prices immediately preceding the Put Date
or 2) one hundred thousand dollars ($100,000). During the Open Period, the
Company shall not be entitled to submit a Put Notice until the Pricing Period
for the prior Put has been completed. The Common Stock identified in the Put
Notice shall be purchased for a price equal to the Purchase Price. 

          (C)      COMPANY’S
RIGHT TO SUSPEND. On each Put Notice submitted to the Investor by the Company,
the Company shall have the option to specify a suspension price for that Put
(the “Suspension Price”). In the event the Common Stock falls below the
Suspension Price, the Put shall be temporarily suspended. The Put shall resume
at such time as the Common Stock is above the Suspension Price, provided the
dates for the Pricing Period for that particular Put are still valid. In the
event the Pricing Period has been complete, any shares above the Suspension
Price due to the Investor shall be sold to the Investor by the Company at the
Suspension Price under the terms of this Agreement. The Suspension Price for a
Put may not be changed by the Company once submitted to the Investor. 

          (D)     
CONDITIONS TO INVESTOR'S OBLIGATION TO PURCHASE SHARES. Notwithstanding anything
to the contrary in this Agreement, the Company shall not be entitled to deliver
a Put Notice and the Investor shall not be obligated to purchase any Shares at a
Closing unless each of the following conditions are satisfied:

                    (1)     
a Registration Statement shall have been declared effective and shall remain
effective and available for the resale of all the Registrable Securities (as
defined in the Registration Rights Agreement) at all times until the Closing
with respect to the subject Put Notice;

                    (2)      at
all times during the period beginning on the related Put Notice Date and ending
on and including the related Closing Date, the Common Stock shall have been
listed on the Principal Market and shall not have been suspended from trading
thereon for a period of two (2) consecutive Trading Days, and the Company shall
not have received any final and non-appealable notice that the listing or
quotation of the Common Stock on the Principal Market shall be terminated on a
date certain; 




                    (3)     
the Company has complied with its obligations and is otherwise not in material
breach of or in default under this Agreement or the Registration Rights
Agreement which has not been cured prior to delivery of the Put Notice;

                    (4)      no
injunction shall have been issued and remain in force, or action commenced by a
governmental authority which has not been stayed or abandoned, prohibiting the
purchase or the issuance of the Securities; and

                    (5)      the
issuance of the Securities pursuant to this Agreement will not violate any
shareholder approval requirements of the Principal Market.

If any of the events described in clauses (1) through (5) above
occurs during a Pricing Period, then the Investor shall have no obligation to
purchase the Common Stock subject to the applicable Put Notice.

          (E)     
INTENTIONALLY OMITTED. 

          (F)      MECHANICS
OF PURCHASE OF SHARES BY INVESTOR. The closing of the purchase by the Investor
of Shares (a “Closing”) shall occur on the date which is no later than ten (10)
Trading Days following the applicable Put Notice Date (each a “Closing Date”).
On each Closing Date, (I) the Company shall deliver to the Investor pursuant to
this Agreement, certificates representing the Shares to be issued to the
Investor on such date and registered in the name of the Investor; and (II) the
Investor shall deliver to the Company the Purchase Price to be paid for such
Shares, based on the Put Amount set forth in Section 2(B). In lieu of delivering
physical certificates representing the Securities and provided that the
Company's transfer agent then is participating in The Depository Trust Company
(“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the
Investor, the Company shall use all commercially reasonable efforts to cause its
transfer agent to electronically transmit the Securities by crediting the
account of the Investor's prime broker (as specified by the Investor within a
reasonable period in advance of the Investor's notice) with DTC through its
Deposit Withdrawal Agent Commission (“DWAC”) system.

          The
Company understands that a delay in the issuance of Securities beyond the
Closing Date could result in economic damage to the Investor. After the
Effective Date, as compensation to the Investor for such loss, the Company
agrees to make payments to the Investor for late issuance of Securities
(delivery of Securities after the applicable Closing Date) in accordance with
the following schedule (where “No. of Days Late” is defined as the number of
trading days beyond the Closing Date, with the Amounts being cumulative.):


  	LATE PAYMENT FOR EACH NO. OF DAYS LATE 
	1 	$100 
	2 	$200 
	3 	$300 
	4 	$400 
	5 	$500 
	6 	$600 
	7 	$700 
	8 	$800 
	9 	$900 




5 






  	10 	$1000 
	Over 10 	$1,000 + $200 for each Business
    
	  	Day late beyond
      10 days 



          The
Company shall make any payments incurred under this Section in immediately
available funds upon demand by the Investor. Nothing herein shall limit the
Investor's right to pursue actual damages for the Company's failure to issue and
deliver the Securities to the Investor, except that such late payments shall
offset any such actual damages incurred by the Investor, and any Open Market
Adjustment Amount, as set forth below.

          (G)     
OVERALL LIMIT ON COMMON STOCK ISSUABLE. Notwithstanding anything contained
herein to the contrary, if during the Open Period the Company becomes listed on
an exchange that limits the number of shares of Common Stock that may be issued
without shareholder approval, then the number of Shares issuable by the Company
and purchasable by the Investor, shall not exceed that number of the shares of
Common Stock that may be issuable without shareholder approval (the “Maximum
Common Stock Issuance”). If such issuance of shares of Common Stock could cause
a delisting on the Principal Market, then the Maximum Common Stock Issuance
shall first be approved by the Company's shareholders in accordance with
applicable law and the By-laws and Articles of Incorporation of the Company, as
amended. The parties understand and agree that the Company's failure to seek or
obtain such shareholder approval shall in no way adversely affect the validity
and due authorization of the issuance and sale of Securities or the Investor's
obligation in accordance with the terms and conditions hereof to purchase a
number of Shares in the aggregate up to the Maximum Common Stock Issuance
limitation, and that such approval pertains only to the applicability of the
Maximum Common Stock Issuance limitation provided in this Section 2(H).

          (H)     
OPEN MARKET ADJUSTMENT. If, by the third (3rd) business day after a Closing
Date, the Company fails to deliver any portion of the Securities subject to a
Put Notice to the Investor (the “Put Shares Due”) and the Investor purchases, in
an open market transaction or otherwise, shares of Common Stock necessary to
make delivery by the Investor of shares in respect of sales to subsequent
purchasers, pursuant to transactions entered into before the Closing Date
(“Subsequent Purchasers”), which such shares of Common Stock would have been
delivered to the Investor by the Company but for the Company’s failure to so
deliver (the “Open Market Share Purchase”), then the Company shall pay to the
Investor, in addition to any other amounts due to Investor pursuant to the Put,
and not in lieu thereof, the Open Market Adjustment Amount (as defined below).
The “Open Market Adjustment Amount” is the amount equal to the excess, if any,
of (x) the Investor's total purchase price (including brokerage commissions, if
any) for the Open Market Share Purchase minus (y) the net proceeds (after
brokerage commissions, if any) received by the Investor from the sale of the Put
Shares Due to such Subsequent Purchasers. The Company shall pay the Open Market
Adjustment Amount to the Investor in immediately available funds within five (5)
business days of written demand by the Investor. By way of illustration and not
in limitation of the foregoing, if the Investor purchases shares of Common Stock
having a total purchase price (including brokerage commissions) of $11,000 to
cover an Open Market Share Purchase with respect to shares of Common Stock it
sold to Subsequent Purchasers for net proceeds of $10,000, the Open Market
Adjustment Amount which the Company will be required to pay to the Investor will
be $1,000.




          (I)     
LIMITATION ON AMOUNT OF OWNERSHIP. Notwithstanding anything to the contrary in
this Agreement, in no event shall the Investor be entitled to purchase that
number of Shares, which when added to the sum of the number of shares of Common
Stock beneficially owned (as such term is defined under Section 13(d) and Rule
13d-3 of the 1934 Act), by the Investor, would exceed 4.99% of the number of
shares of Common Stock outstanding on the Closing Date, as determined in
accordance with Rule 13d-1(j) of the 1934 Act.

SECTION 3. INVESTOR'S REPRESENTATIONS, WARRANTIES AND
COVENANTS. The Investor represents and warrants to the Company, and covenants,
that:

          (A)      SOPHISTICATED
INVESTOR. The Investor has, by reason of its business and financial experience,
such knowledge, sophistication and experience in financial and business matters
and in making investment decisions of this type that it is capable of (1)
evaluating the merits and risks of an investment in the Securities and making an
informed investment decision; (2) protecting its own interest; and (3) bearing
the economic risk of such investment for an indefinite period of time.

          (B)     
AUTHORIZATION; ENFORCEMENT. The Investor has the requisite power and authority
to enter into and perform this Agreement and the Registration Rights Agreement.
The execution and delivery of the Equity Line Transaction Documents by the
Investor and the consummation by it of the transactions contemplated hereby and
thereby have been duly and validly authorized by the Investor's general partners
and no further consent or authorization is required by its partners. This
Agreement has been duly and validly authorized, executed and delivered on behalf
of the Investor and is a valid and binding agreement of the Investor enforceable
against the Investor in accordance with its terms, subject as to enforceability
to general principles of equity and to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies.

          (C)     
SECTION 9 OF THE 1934 ACT. During the term of this Agreement, the Investor will
comply with the provisions of Section 9 of the 1934 Act, and the rules
promulgated thereunder, with respect to transactions involving the Common Stock.
The Investor agrees not to sell the Company's stock short, either directly or
indirectly through its affiliates, principals or advisors, the Company's common
stock during the term of this Agreement.

          (D)      ACCREDITED
INVESTOR. Investor is an “Accredited Investor” as that term is defined in Rule
501(a) of Regulation D of the 1933 Act.

          (E)      NO
CONFLICTS. The execution, delivery and performance of the Transaction Documents
by the Investor and the consummation by the Investor of the transactions
contemplated hereby and thereby will not (1) result in a violation of the
partnership agreement or other organizational documents of the Investor, (2)
conflict with, or constitute a material default (or an event which with notice
or lapse of time or both would become a material default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any material agreement, contract, indenture mortgage, indebtedness or instrument
to which the Investor is a party, or to the Investor’s knowledge result in a
violation of any law, rule, regulation, order, judgment or decree (including
United States federal and state securities laws and regulations) applicable to
the Investor or by which any property or asset of the Investor is bound or
affected.

7 




          (F)      NO
VIOLATIONS. Except as disclosed in Schedule 3(f), the Investor is not in
violation of any term of, or in default under, the partnership agreement of
other organizational documents of the Investor or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Investor, except for
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations that would not, individually or in the aggregate, constitute or
reasonably be expected to constitute a material adverse effect on the Investor.
The business of the Investor is not being conducted, and shall not be conducted,
in violation of any law, statute, ordinance, rule, order or regulation of any
governmental authority or agency, regulatory or self-regulatory agency, or
court, except for violations the sanctions for which either, individually or in
the aggregate, would not have or reasonably be expected to have a material
adverse effect on the Investor. Except as specifically contemplated by this
Agreement and as required under the 1933 Act or any securities laws of any
states, to the Investor’s knowledge, the Investor is not required to obtain any
consent, authorization, permit or order of, or make any filing or registration
(except the filing of a registration statement as outlined in the Registration
Rights Agreement) with, any court, governmental authority or agency, regulatory
or self-regulatory agency or other third party in order for it to execute,
deliver or perform any of its obligations under, or contemplated by, the Equity
Line Transaction Documents in accordance with the terms hereof or thereof except
for those consents, authorizations, permits, orders or filings as have been
obtained or effected on or prior to the date hereof and are in full force and
effect as of the date hereof. Except as disclosed in Schedule 3(f), the Investor
is unaware of any facts or circumstances which might give rise to any violation
or default set forth in this Section 3(F).

          (G)     
OPPORTUNITY TO DISCUSS. The Investor has received all materials relating to the
Company's business, finance and operations which it has requested. The Investor
has had an opportunity to discuss the business, management and financial affairs
of the Company with the Company's management.

          (H)      INVESTMENT
PURPOSES. The Investor is purchasing the Securities for its own account for
investment purposes and not with a view towards distribution and agrees to
resell or otherwise dispose of the Securities solely in accordance with the
registration provisions of the 1933 Act (or pursuant to an exemption from such
registration provisions).

          (I)     
NO REGISTRATION AS A DEALER. The Investor is not and will not be required to be
registered as a “dealer” under the 1934 Act, either as a result of its execution
and performance of its obligations under this Agreement or otherwise.

          (J)      GOOD
STANDING. The Investor is a Limited Partnership, duly organized, validly
existing and in good standing in the state of Delaware.

          (K)      TAX
LIABILITIES. The Investor understands that it is liable for its own tax
liabilities.

SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the Schedules attached hereto, or as disclosed in the
Company's SEC Documents, the Company represents and warrants to the Investor
that:

          (A)     
ORGANIZATION AND QUALIFICATION. The Company is a corporation duly organized and
validly existing in good standing under the laws of the State of Nevada, USA and
has the requisite corporate power and authorization to own its properties and to
carry on its business as now being conducted. Both the Company and the companies
it owns or controls (“Subsidiaries”) are duly qualified to do business and are in
good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this Agreement, “Material
Adverse Effect” means any material adverse effect on (1) the properties, assets,
operations, results of operations, or financial condition of the Company and its
Subsidiaries, if any, taken as a whole, (2) the transactions contemplated hereby
or by the agreements and instruments to be entered into in connection herewith,
or (3) the authority or ability of the Company to perform its obligations under
the Equity Line Transaction Documents other than as a result of (a) changes
adversely affecting the United States economy (so long as the Company is not
disproportionately affected thereby), (b) changes adversely affecting the
industry in which the Company operates (so long as the Company is not
disproportionately affected thereby), (c) the announcement or consummation of
the transactions contemplated by this Agreement, and (d) changes in the market
price of the Common Stock.




          (B)      AUTHORIZATION;
ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS.

                    (1)     
The Company has the requisite corporate power and authority to enter into and
perform the Equity Line Transaction Documents, and to perform its obligations
contemplated hereby and thereby.

                    (2)      The
execution and delivery of the Equity Line Transaction Documents by the Company
and the consummation by it of the transactions contemplated hereby and thereby,
including without limitation the reservation for issuance and the issuance of
the Securities pursuant to this Agreement, have been duly and validly authorized
by the Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors, or its shareholders.

                    (3)      The
Equity Line Transaction Documents have been duly and validly executed and
delivered by the Company.

                    (4)      The
Equity Line Transaction Documents constitute the valid and binding obligations
of the Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies.

          (C)      CAPITALIZATION.
As of the date hereof, the authorized capital stock of the Company consists of
100,000,000 shares of Common Stock with $.001 par value per share, of as of
April 22, 2013, 60,940,781 shares were issued and outstanding. Except as
disclosed in the Company’s publicly available filings with the SEC: (1) no
shares of the Company's capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company; (2) there are no outstanding debt securities; (3) there are no
outstanding shares of capital stock, options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries; (4) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except the Registration Rights Agreement);
(5) there are no outstanding securities of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries; (6) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities as described in this Agreement; (7) the Company does
not have any stock appreciation rights or “phantom stock” plans or agreements or
any similar plan or agreement; and (8) there is no dispute as to the
classification of any shares of the Company's capital stock.

9 




          The
Company has furnished to the Investor, or the Investor has had access through
the SEC’s EDGAR website to, true and correct copies of the Company's Articles of
Incorporation, as amended and in effect on the date hereof (the “Articles of
Incorporation”), and the Company's By-laws, as in effect on the date hereof (the
“By-laws”), and the terms of all securities convertible into or exercisable for
Common Stock and the material rights of the holders thereof in respect
thereto.

          (D)      ISSUANCE
OF SHARES. The Company has reserved up to $2,000,000 in Shares for issuance
pursuant to this Agreement, which have been duly authorized and reserved for
issuance (subject to adjustment pursuant to the Company's covenant set forth in
Section 5(F) below) pursuant to this Agreement. Upon issuance in accordance with
this Agreement, the Securities will be validly issued, fully paid for and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof. In the event the Company cannot register a sufficient number of
Shares for issuance pursuant to this Agreement, the Company will use its best
efforts to authorize and reserve for issuance the number of Shares required for
the Company to perform its obligations hereunder as soon as reasonably
practicable.

          (E)     
NO CONFLICTS. The execution, delivery and performance of the Equity Line
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby will not (I) result in a violation
of the Articles of Incorporation, any Certificate of Designations, Preferences
and Rights of any outstanding series of preferred stock of the Company or the
By-laws; or (II) conflict with, or constitute a material default (or an event
which with notice or lapse of time or both would become a material default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, contract, indenture mortgage,
indebtedness or instrument to which the Company or any of its Subsidiaries is a
party, or to the Company's knowledge result in a violation of any law, rule,
regulation, order, judgment or decree (including United States federal and state
securities laws and regulations and the rules and regulations of the Principal
Market or principal securities exchange or trading market on which the Common
Stock is traded or listed) applicable to the Company or any of its Subsidiaries
or by which any property or asset of the Company or any of its Subsidiaries is
bound or affected. Except as disclosed in Schedule 4(e), neither the Company nor
its Subsidiaries is in violation of any term of, or in default under, the
Articles of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of preferred stock of the Company or the
By-laws or their organizational charter or by-laws, respectively, or any
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its Subsidiaries, except for possible conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations that would not
individually or in the aggregate have or constitute a Material Adverse Effect. The
business of the Company and its Subsidiaries is not being conducted, and shall
not be conducted, in violation of any law, statute, ordinance, rule, order or
regulation of any governmental authority or agency, regulatory or
self-regulatory agency, or court, except for possible violations the sanctions
for which either individually or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act or any securities laws of any states, to the
Company's knowledge, the Company is not required to obtain any consent,
authorization, permit or order of, or make any filing or registration (except
the filing of a registration statement as outlined in the Registration Rights
Agreement between the Parties) with, any court, governmental authority or
agency, regulatory or self-regulatory agency or other third party in order for
it to execute, deliver or perform any of its obligations under, or contemplated
by, the Equity Line Transaction Documents in accordance with the terms hereof or
thereof. All consents, authorizations, permits, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof and are
in full force and effect as of the date hereof. Except as disclosed in Schedule
4(e), the Company and its Subsidiaries are unaware of any facts or circumstances
which might give rise to any violation or default of any of the foregoing. The
Company is not, and will not be, in violation of the listing requirements of the
Principal Market as in effect on the date hereof and on each of the Closing
Dates and is not aware of any facts which would reasonably lead to delisting of
the Common Stock by the Principal Market in the foreseeable future.




          (F)     
SEC DOCUMENTS; FINANCIAL STATEMENTS. As of the date hereof, the Company has
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC pursuant to the reporting requirements of the 1934
Act (all of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
Documents"). The Company has delivered to the Investor or its representatives,
or they have had access through the SEC’s EDGAR website to, true and complete
copies of the SEC Documents. As of their respective filing dates, the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles, and in
accordance with the standards of the Public Companies Accounting Oversight Board
("PCAOB") consistently applied, during the periods involved (except (I) as may
be otherwise indicated in such financial statements or the notes thereto, or
(II) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other written information provided by or on behalf of the
Company to the Investor which is not included in the SEC Documents, including,
without limitation, information referred to in Section 4(D) of this Agreement,
contains any untrue statement of a material fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstance under which they are or
were made, not misleading. Neither the Company nor any of its Subsidiaries or
any of their officers, directors, employees or agents have provided the Investor
with any material, nonpublic information which was not publicly disclosed prior
to the date hereof and any material, nonpublic information provided to the
Investor by the Company or its Subsidiaries or any of their officers, directors,
employees or agents prior to any Closing Date shall be publicly disclosed by the
Company prior to such Closing Date.

11 




          (G)      ABSENCE
OF CERTAIN CHANGES. Except as otherwise set forth in the SEC Documents, the
Company does not intend to change the business operations of the Company in any
material way. The Company has not taken any steps, and does not currently expect
to take any steps, to seek protection pursuant to any bankruptcy law nor has the
Company or its Subsidiaries received written notice that its creditors intend to
initiate involuntary bankruptcy proceedings.

          (H)      ABSENCE
OF LITIGATION AND/OR REGULATORY PROCEEDINGS. Except as set forth in the SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory organization
or body pending or, to the knowledge of the executive officers of Company or any
of its Subsidiaries, threatened against or affecting the Company, the Common
Stock or any of the Company's Subsidiaries or any of the Company's or the
Company's Subsidiaries' officers or directors in their capacities as such, in
which an adverse decision could have a Material Adverse Effect. 

          (I)      ACKNOWLEDGMENT
REGARDING INVESTOR'S PURCHASE OF SHARES. The Company acknowledges and agrees
that the Investor is acting solely in the capacity of an arm's length purchaser
with respect to the Equity Line Transaction Documents and the transactions
contemplated hereby and thereby. The Company further acknowledges that the
Investor is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Equity Line Transaction Documents and
the transactions contemplated hereby and thereby and any advice given by the
Investor or any of its respective representatives or agents in connection with
the Equity Line Transaction Documents and the transactions contemplated hereby
and thereby is merely incidental to the Investor's purchase of the Securities,
and is not being relied on by the Company. The Company further represents to the
Investor that the Company's decision to enter into the Equity Line Transaction
Documents has been based solely on the independent evaluation by the Company and
its representatives.

          (J)      NO
UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES. Except as set
forth in the SEC Documents, as of the date hereof, no event, liability,
development or circumstance has occurred or exists, or to the Company's
knowledge is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, assets, prospects,
operations or financial condition, that would be required to be disclosed by the
Company under applicable securities laws on a registration statement filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.

          (K)      EMPLOYEE
RELATIONS. Neither the Company nor any of its Subsidiaries is involved in any
union labor dispute nor, to the knowledge of the Company or any of its
Subsidiaries, is any such dispute threatened. Neither the Company nor any of its
Subsidiaries is a party to a collective bargaining agreement, and the Company
and its Subsidiaries believe that relations with their employees are good. No
executive officer (as defined in Rule 501(f) of the 1933 Act) has notified the Company that such officer intends to
leave the Company's employ or otherwise terminate such officer's employment with
the Company.




          (L)     
INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
rights necessary to conduct their respective businesses as now conducted. Except
as set forth in the SEC Documents, none of the Company's trademarks, trade
names, service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, government authorizations,
trade secrets or other intellectual property rights necessary to conduct its
business as now or as proposed to be conducted have expired or terminated, or
are expected to expire or terminate within two (2) years from the date of this
Agreement. The Company and its Subsidiaries do not have any knowledge of any
infringement by the Company or its Subsidiaries of trademark, trade name rights,
patents, patent rights, copyrights, inventions, licenses, service names, service
marks, service mark registrations, trade secret or other similar rights of
others, or of any such development of similar or identical trade secrets or
technical information by others and, except as set forth in the SEC Documents,
there is no claim, action or proceeding being made or brought against, or to the
Company's knowledge, being threatened against, the Company or its Subsidiaries
regarding trademark, trade name, patents, patent rights, invention, copyright,
license, service names, service marks, service mark registrations, trade secret
or other infringement; and the Company and its Subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing. The
Company and its Subsidiaries have taken commercially reasonable security
measures to protect the secrecy, confidentiality and value of all of their
intellectual properties.

          (M)     
ENVIRONMENTAL LAWS. The Company and its Subsidiaries (I) are, to the knowledge
of the Company and its Subsidiaries, in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"); (II)
have, to the knowledge of the Company, received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses; and (III) are in compliance, to the knowledge of the
Company, with all terms and conditions of any such permit, license or approval
where, in each of the three (3) foregoing cases, the failure to so comply would
have, individually or in the aggregate, a Material Adverse Effect.

          (N)     
TITLE. The Company and its Subsidiaries have good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in the SEC Documents or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company or any of its
Subsidiaries. Any real property and facilities held under lease by the Company
or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.

          (O)     
INSURANCE. Each of the Company's Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company reasonably believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any of its Subsidiaries has been refused any
insurance coverage sought or applied for and neither the Company nor its
Subsidiaries has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.

13 




          (P)     
REGULATORY PERMITS. The Company and its Subsidiaries have in full force and
effect all certificates, approvals, authorizations and permits from the
appropriate federal, state, local or foreign regulatory authorities and
comparable foreign regulatory agencies, necessary to own, lease or operate their
respective properties and assets and conduct their respective businesses, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
approval, authorization or permit, except for such certificates, approvals,
authorizations or permits which if not obtained, or such revocations or
modifications which, would not have a Material Adverse Effect.

          (Q)     
INTERNAL ACCOUNTING CONTROLS. The Company and each of its Subsidiaries maintain
a system of internal accounting controls sufficient to provide reasonable
assurance that (I) transactions are executed in accordance with management's
general or specific authorizations; (II) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and standards of the PCAOB and to maintain asset
accountability; (III) reasonable controls to safeguard assets are in place; and
(IV) the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.

          (R)     
INTENTIONALLY OMITTED.

          (S)      TAX
STATUS. The Company and each of its Subsidiaries has made or filed all United
States federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.

          (T)     
CERTAIN TRANSACTIONS. Except as set forth in the SEC Documents filed at least
ten (10) days prior to the date hereof and except for arm's length transactions
pursuant to which the Company makes payments in the ordinary course of business
upon terms no less favorable than the Company could obtain from disinterested
third parties and other than the grant of stock options disclosed in the SEC
Documents or stock options granted in the future as contemplated by current
compensation agreements or plans disclosed in the SEC Documents, none of the
officers, directors, or employees of the Company is presently a party to any
transaction with the Company or any of its Subsidiaries (other than for services
as employees, officers and directors), 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 corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.




          (U)     
DILUTIVE EFFECT. The Company understands and acknowledges that the number of
shares of Common Stock issuable upon purchases pursuant to this Agreement will
increase in certain circumstances including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines during the
period between the Effective Date and the end of the Open Period. The Company's
executive officers and directors have studied and fully understand the nature of
the transactions contemplated by this Agreement and recognize that they have a
potential dilutive effect on the shareholders of the Company. The Board of
Directors of the Company has concluded, in its good faith business judgment, and
with full understanding of the implications, that such issuance is in the best
interests of the Company. The Company specifically acknowledges that, subject to
such limitations as are expressly set forth in the Equity Line Transaction
Documents, its obligation to issue shares of Common Stock upon purchases
pursuant to this Agreement is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
shareholders of the Company.

          (V)      INTENTIONALLY
OMITTED.

          (W)      NO
GENERAL SOLICITATION. Neither the Company, nor any of its affiliates, nor any
person acting on its behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection with the
offer or sale of the Common Stock to be offered as set forth in this
Agreement.

          (X)      NO
BROKERS, FINDERS OR FINANCIAL ADVISORY FEES OR COMMISSIONS. No brokers, finders
or financial advisory fees or commissions will be payable by the Company, its
agents or Subsidiaries, with respect to the transactions contemplated by this
Agreement, except as otherwise disclosed in this Agreement.

SECTION 5. COVENANTS OF THE COMPANY

          (A)      EFFORTS.
The Company shall use all commercially reasonable efforts to timely satisfy each
of the conditions set forth in Section 8 of this Agreement.

          (B)     
BLUE SKY. The Company shall, at its sole cost and expense, on or before each of
the Closing Dates, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for, or obtain exemption for the Securities
for, sale to the Investor at each of the Closings pursuant to this Agreement
under applicable securities or “Blue Sky” laws of such states of the United
States, and if requested by the Investor, shall provide evidence of any such
action so taken to the Investor on or prior to each such Closing Date.

          (C)     
REPORTING STATUS. Until one of the following occurs, the Company shall use its
commercially reasonable efforts to file all reports required to be filed with
the SEC pursuant to the 1934 Act, and the Company shall not terminate its
status, or take an action or fail to take any action, which would terminate its
status as a reporting company under the 1934 Act: (1) this Agreement terminates
pursuant to Section 9, or (2) the date on which the Investor has sold all the Securities; provided that the Investor shall promptly
notify the Company after the Investor has sold all the Securities.

15 




          (D)      USE
OF PROCEEDS. The Company will use the proceeds from the sale of the Securities
(excluding amounts paid by the Company for fees as set forth in the Equity Line
Transaction Documents) for general corporate and working capital purposes and
acquisitions or assets, businesses or operations or for other purposes that the
Board of Directors, in its good faith, deems to be in the best interest of the
Company.

          (E)      FINANCIAL
INFORMATION. During the Open Period, the Company agrees to make available to the
Investor via the SEC’s EDGAR website or other electronic means the following
documents and information on the forms set forth: (1) within five (5) Trading
Days after the filing thereof with the SEC, a copy of its Annual Reports on Form
10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and
any Registration Statements or amendments filed pursuant to the 1933 Act; (2)
copies of any notices and other information made available or given to the
shareholders of the Company generally, contemporaneously with the making
available or giving thereof to the shareholders; and (3) within two (2) calendar
days of filing or delivery thereof, copies of all documents filed with, and all
correspondence sent to, the Principal Market, any securities exchange or market,
or the Financial Industry Regulatory Authority, unless such information is, in
the Company’s sole discretion, material nonpublic information.

          (F)     
RESERVATION OF SHARES. The Company shall reserve up to $2,000,000 in Shares for
the issuance of the Securities to the Investor as required hereunder. In the
event that the Company determines that it does not have a sufficient number of
authorized shares of Common Stock to reserve and keep available for issuance as
described in this Section 5(F), the Company shall use all commercially
reasonable efforts to increase the number of authorized shares of Common Stock
by seeking shareholder approval for the authorization of such additional
shares.

          (G)      LISTING.
The Company shall promptly secure and maintain the listing of all of the
Registrable Securities (as defined in the Registration Rights Agreement) on the
Principal Market and each other national securities exchange and automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, such listing of all
Registrable Securities from time to time issuable under the terms of the Equity
Line Transaction Documents. Neither the Company nor any of its Subsidiaries
shall take any action which would be reasonably expected to result in the
delisting or suspension of the Common Stock on the Principal Market (excluding
suspensions of not more than one (1) trading day resulting from business
announcements by the Company). The Company shall promptly provide to the
Investor copies of any notices it receives from the Principal Market regarding
the continued eligibility of the Common Stock for listing on such automated
quotation system or securities exchange, unless such information is, in the
Company’s sole discretion, material nonpublic information. The Company shall pay
all fees and expenses in connection with satisfying its obligations under this
Section 5(G).

          (H)      TRANSACTIONS
WITH AFFILIATES. The Company shall not, and shall cause each of its Subsidiaries
not to, enter into, amend, modify or supplement, or permit any Subsidiary to
enter into, amend, modify or supplement, any agreement, transaction, commitment
or arrangement with any of its or any Subsidiary's officers, directors, persons
who were officers or directors at any time during the previous two (2) years,
shareholders who beneficially own 5% or more of the Common Stock, or Affiliates
or with any individual related by blood, marriage or adoption to any such individual or with any
entity in which any such entity or individual owns a 5% or more beneficial
interest (each a “Related Party”), except for (1) customary employment
arrangements and benefit programs on reasonable terms, (2) any agreement,
transaction, commitment or arrangement on an arms-length basis on terms no less
favorable than terms which would have been obtainable from a disinterested third
party other than such Related Party,(3) any agreement, transaction, commitment
or arrangement which is approved by a majority of the disinterested directors of
the Company, or (4) extensions or amendments of any existing employment
agreement. For purposes hereof, any director who is also an officer of the
Company or any Subsidiary of the Company shall not be a disinterested director
with respect to any such agreement, transaction, commitment or arrangement.
“Affiliate” for purposes hereof means, with respect to any person or entity,
another person or entity that, directly or indirectly, (1) has a 5% or more
equity interest in that person or entity, (2) has 5% or more common ownership
with that person or entity, (3) controls that person or entity, or (4) is under
common control with that person or entity. “Control” or “Controls” for purposes
hereof means that a person or entity has the power, directly or indirectly, to
conduct or govern the policies of another person or entity.




          (I)      FILING
OF FORM 8-K. On or before the date which is four (4) Trading Days after the date
of execution of this Agreement, the Company shall file a Current Report on Form
8-K with the SEC describing the terms of the transaction contemplated by the
Equity Line Transaction Documents in the form required by the 1934 Act, if such
filing is required.

          (J)      CORPORATE
EXISTENCE. The Company shall use all commercially reasonable efforts to preserve
and continue the corporate existence of the Company.

          (K)     
NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE A
PUT. The Company shall promptly notify the Investor upon the occurrence of any
of the following events in respect of a Registration Statement or related
prospectus in respect of an offering of the Securities: (1) receipt of any
request for additional information by the SEC or any other federal or state
governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to the Registration Statement or related
prospectus; (2) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of any
Registration Statement or the initiation of any proceedings for that purpose;
(3) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Securities for sale
in any jurisdiction or the initiation or notice of any proceeding for such
purpose; (4) the happening of any event that makes any statement made in such
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of a Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (5) the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate, and the Company
shall promptly make available to Investor any such supplement or amendment to
the related prospectus. The Company shall not deliver to the Investor any Put
Notice during the continuation of any of the foregoing events in this Section
5(K).

17 




          (L)     
REIMBURSEMENT. If (I) the Investor becomes involved in any capacity in any
action, proceeding or investigation brought by any shareholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Equity Line Transaction Documents, or if the Investor is
impleaded in any such action, proceeding or investigation by any person (other
than as a result of a breach of the Investor’s representations and warranties
set forth in this Agreement); or (II) the Investor becomes involved in any
capacity in any action, proceeding or investigation brought by the SEC against
or involving the Company (unless the Company is involved in the action,
proceeding or investigation as a witness only) or in connection with or as a
result of the consummation of the transactions contemplated by the Equity Line
Transaction Documents (other than as a result of a breach of the Investor’s
representations and warranties set forth in this Agreement), or if this Investor
is impleaded in any such action, proceeding or investigation by any person, then
in any such case, the Company will reimburse the Investor for its actual,
reasonable legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith, as such expenses are incurred. In
addition, other than with respect to any matter in which the Investor is a named
party, the Company will pay to the Investor the charges, as reasonably
determined by the Investor, for the time of any officers or employees of the
Investor devoted to appearing and preparing to appear as witnesses, assisting in
preparation for hearings, trials or pretrial matters, or otherwise with respect
to inquiries, hearing, trials, and other proceedings relating to the subject
matter of this Agreement. The reimbursement obligations of the Company under
this section shall be in addition to any liability which the Company may
otherwise have, shall extend upon the same terms and conditions to any
affiliates of the Investor that are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees, attorneys,
accountants, auditors and controlling persons (if any), as the case may be, of
Investor and any such affiliate, and shall be binding upon and inure to the
benefit of any successors of the Company, the Investor and any such affiliate
and any such person. However, in all events, if the Investor is found to be
guilty of violations of the federal or state securities laws (or pleads “no
contest” or other similar plea or settles an investigation or pleading without a
specific finding of liability but is still subject to civil or criminal
liability), the Company will have no responsibility to pay any of the Investor’s
fees and expenses regardless of whether or not the Company is or is also found
to have liability. Furthermore, without limiting the foregoing, the Company will
have no obligation or liability hereunder to the extent that such fees and
expenses resulted from a breach of any of the Investor’s representations,
warranties, covenants or agreements contained in any of the Equity Line
Transaction Documents, or from any acts or failures to act undertaken or omitted
to be taken by the Investor through its negligence, recklessness, willful
misconduct or bad faith. 

          (M)     
TRANSFER AGENT. Upon effectiveness of the Registration Statement, and for so
long as the Registration Statement is effective, the Company shall deliver
instructions to its transfer agent to issue Shares to the Investor that are
covered for resale by the Registration Statement free of restrictive
legends.

          (N)      ACKNOWLEDGEMENT
OF TERMS. The Company hereby represents and warrants to the Investor that: (1)
it is voluntarily entering into this Agreement of its own freewill, (2) it is
not entering this Agreement under economic duress, (3) the terms of this
Agreement are reasonable and fair to the Company, and (4) the Company has had
independent legal counsel of its own choosing review this Agreement, advise the
Company with respect to this Agreement, and represent the Company in connection
with this Agreement.

SECTION 6. INTENTIONALLY OMITTED. 




SECTION 7. CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL. The
obligation hereunder of the Company to issue and sell the Securities to the
Investor is further subject to the satisfaction, at or before each Closing Date,
of each of the following conditions set forth below. These conditions are for
the Company's sole benefit and may be waived by the Company at any time in its
sole discretion.

          (A)      The
Investor shall have executed this Agreement and the Registration Rights
Agreement and delivered the same to the Company.

          (B)      The
Investor shall have delivered to the Company the Purchase Price for the
Securities being purchased by the Investor between the end of the Pricing Period
and the Closing Date via a Put Settlement Sheet (hereto attached as Exhibit D).
Immediately after receipt of confirmation of delivery of such Securities to the
Investor, the Investor, by wire transfer of immediately available funds pursuant
to the wire instructions provided by the Company, will disburse the funds
constituting the Purchase Amount. 

          (C)      The
representations and warranties of the Investor shall be true and correct in all
material respects as of the date when made and as of the applicable Closing Date
as though made at that time and the Investor shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by the Equity Line Transaction Documents to be performed, satisfied or
complied with by the Investor on or before such Closing Date.

          (D)     
No statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.

SECTION 8. FURTHER CONDITIONS OF THE INVESTOR'S OBLIGATION TO
PURCHASE. The obligation of the Investor hereunder to purchase Shares is subject
to the satisfaction, on or before each Closing Date, of each of the following
conditions set forth below.

          (A)      The
Company shall have executed the Equity Line Transaction Documents and Commitment
Shares and delivered the same to the Investor.

          (B)     
The Common Stock shall be authorized for quotation on the Principal Market and
trading in the Common Stock shall not have been suspended by the Principal
Market or the SEC, at any time beginning on the date hereof and through and
including the respective Closing Date (excluding suspensions of not more than
two (2) Trading Days resulting from business announcements by the Company,
provided that such suspensions occur prior to the Company's delivery of the Put
Notice related to such Closing).

          (C)      The
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the applicable Closing Date
as though made at that time and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by the Equity Line Transaction Documents to be performed, satisfied or
complied with by the Company on or before such Closing Date. The Investor may
request an update as of such Closing Date regarding the representation contained
in Section 4(C) above.

19 




          (D)     
The Company shall have executed and delivered to the Investor the certificates
representing, or have executed electronic book-entry transfer of, the Securities
(in such denominations as the Investor shall request) being purchased by the
Investor at such Closing.

          (E)     
The Board of Directors of the Company shall have adopted resolutions consistent
with Section 4(B)(2) above (the “Resolutions”) and such Resolutions shall not
have been amended or rescinded prior to such Closing Date.

          (F)     
INTENTIONALLY OMITTED. 

          (G)      No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement.

          (H)      The
Registration Statement shall be effective on each Closing Date and no stop order
suspending the effectiveness of the Registration statement shall be in effect or
to the Company's knowledge shall be pending or threatened. Furthermore, on each
Closing Date (1) neither the Company nor the Investor shall have received notice
that the SEC has issued or intends to issue a stop order with respect to such
Registration Statement or that the SEC otherwise has suspended or withdrawn the
effectiveness of such Registration Statement, either temporarily or permanently,
or intends or has threatened to do so (unless the SEC's concerns have been
addressed and Investor is reasonably satisfied that the SEC no longer is
considering or intends to take such action), and (2) no other suspension of the
use or withdrawal of the effectiveness of such Registration Statement or related
prospectus shall exist.

          (I)     
At the time of each Closing, the Registration Statement (including information
or documents incorporated by reference therein) and any amendments or
supplements thereto shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading or which would require public
disclosure or an update supplement to the prospectus. 

          (J)     
If applicable, the shareholders of the Company shall have approved the issuance
of any Shares in excess of the Maximum Common Stock Issuance in accordance with
Section 2(H) or the Company shall have obtained appropriate approval pursuant to
the requirements of Nevada law and the Company’s Articles of Incorporation and
By-laws. 

          (K)      The
conditions to such Closing set forth in Section 2(E) shall have been satisfied
on or before such Closing Date.

          (L)     
The Company shall have certified to the Investor the number of Shares of Common
Stock outstanding when a Put Notice is given to the Investor. The Company's
delivery of a Put Notice to the Investor constitutes the Company's certification
of the reservation for issuance of the necessary number of shares of Common
Stock subject to a Put Notice.

SECTION 9. TERMINATION. This Agreement shall terminate upon any
of the following events:

          (A)      when
the Investor has purchased an aggregate of two million dollars $2,000,000 in the
Common Stock of the Company pursuant to this Agreement; or,




          (B)      on
the date which is thirty-six (36) months after the Effective Date; or,

          (C)      upon
written notice of the Company to the Investor. Any and all shares, or penalties,
if any, due under this Agreement shall be immediately payable and due upon
termination of this Agreement.

SECTION 10. SUSPENSION. The Company’s right to cause the
Investor to purchase Shares pursuant to a Put Notice, and the Investor’s
obligation to purchase Shares under this Agreement shall be suspended upon any
of the following events, and shall remain suspended until such event is
rectified:

          (A)      The
trading of the Common Stock is suspended by the SEC, the Principal Market or
FINRA for a period of two (2) consecutive Trading Days during the Open Period;
or,

          (B)     
The Common Stock ceases to be registered under the 1934 Act or listed or traded
on the Principal Market. Immediately upon the occurrence of one of the
above-described events, the Company shall send written notice of such event to
the Investor.

SECTION 11. INDEMNIFICATION. In consideration of the parties’
mutual obligations set forth in the Transaction Documents, each of the parties
(in such capacity, an “Indemnitor”) shall defend, protect, indemnify and hold
harmless the other and all of the other party's shareholders, officers,
directors, employees, counsel, and direct or indirect investors and any of the
foregoing person's agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the “Indemnitees”) from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and reasonable expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as
a result of, or arising out of, or relating to (A) any material
misrepresentation or breach of any representation or warranty made by the
Indemnitor in the Equity Line Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby; (B) any material breach
of any covenant, agreement or obligation of the Indemnitor contained in the
Equity Line Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby; or (C) any cause of action, suit or
claim brought or made against such Indemnitee by a third party and arising out
of or resulting from the execution, delivery, performance or enforcement of the
Equity Line Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, except insofar as (Y) any such
misrepresentation, breach or any untrue statement, alleged untrue statement,
omission or alleged omission is made in reliance upon and in conformity with
information furnished to Indemnitor which is specifically intended for use in
the preparation of any such Registration Statement, preliminary prospectus,
prospectus or amendments to the prospectus, (Z) any such Indemnified Liabilities
resulted or arose from the breach by the Indemnitee party hereto of any
representation, warranty, covenant or agreement of such Indemnitee contained in
the Equity Line Transaction Documents or the negligence, recklessness, willful
misconduct or bad faith of such Indemnitee. To the extent that the foregoing
undertaking by the Indemnitor may be unenforceable for any reason, the
Indemnitor shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law. The indemnity provisions contained herein shall be in addition to any cause
of action or similar rights Indemnitor may have, and any liabilities the
Indemnitor or the Indemnitees may be subject to.

21 









SECTION 12. GOVERNING LAW; DISPUTES SUBMITTED TO ARBITRATION. All disputes arising under this agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts, without regard to principles of conflict
of laws. The parties to this agreement will submit all disputes arising under this agreement to arbitration in Boston, MA before a single arbitrator of the American Arbitration Association (“AAA”).  The arbitrator shall be selected by
application of the rules of the AAA, or by mutual agreement of the parties, except that such arbitrator shall be an attorney admitted to practice law in Commonwealth of Massachusetts. No party to this Agreement will challenge the jurisdiction or
venue provisions as provided in this section. No party to this agreement will challenge the jurisdiction or venue provisions as provided in this section.  Nothing contained herein shall prevent the party from obtaining an injunction.


SECTION 13. LEGAL EXPENSES; AND MISCELLANEOUS EXPENSES. Except as otherwise set forth in the Equity Line Transaction Documents, each party shall pay the fees and expenses of its advisers, counsel, the accountants and other experts, if any, and all
other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. Any attorneys' fees and expenses incurred by either the Company or the Investor in connection with the
preparation, negotiation, execution and delivery of any amendments to this Agreement or relating to the enforcement of the rights of any party, after the occurrence of any breach of the terms of this Agreement by another party or any default by
another party in respect of the transactions contemplated hereunder, shall be paid on demand by the party which breached the Agreement and/or defaulted, as the case may be. The Company shall pay all stamp and other taxes and duties levied in
connection with the issuance of any Securities.  The Company will pay $10,000 toward the preparation of the Equity Line Transaction Document. $5,000 has been paid and the remaining $5,000 shall be due upon the earlier of 1) Closing of
the first Put; or, 2) one hundred and twenty (120) days from the date of this Agreement. If the Company is not DWAC eligible at the time of a Put Closing, there will be a $2,000 charge on each Closing Date to cover costs associated with, but not
limited to: deposit costs, legal review fees and wire fees. If the Company is DWAC eligible at the time of a Put Closing, there will be a $250 charge on each Closing Date. 


SECTION 14. COUNTERPARTS. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to
the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original signature.


SECTION 15. HEADINGS; SINGULAR/PLURAL. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. Whenever required by the context of this Agreement, the singular
shall include the plural and masculine shall include the feminine.


SECTION 16. SEVERABILITY. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.


SECTION 17. ENTIRE AGREEMENT; AMENDMENTS. This Agreement is the FINAL AGREEMENT between the Company and the Investor with respect to the terms and conditions set forth herein, and, the terms of this Agreement may not be contradicted by evidence of
prior, contemporaneous, or subsequent oral agreements of the Parties.
No provision of this Agreement may be amended or waived by the parties from and
after the date that is one Trading Day immediately preceding the initial filing
of the Registration Statement with the Commission. Subject to the immediately
preceding sentence, no provision of this Agreement may be amended other than by
an instrument in writing signed by the Company and the Investor, and no
provision hereof may be waived other than by an instrument in writing signed by
the party against whom enforcement is sought. The execution and delivery of the
Equity Line Transaction Documents shall not alter the force and effect of any
other agreements between the Parties, and the obligations under those
agreements.






SECTION 18. NOTICES. Any notices or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (A) upon receipt, when
delivered personally; (B) upon receipt, when sent by facsimile or email with the
signed document attached in PDF format (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (C) one (1) day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:

If to the Company:

XCELMOBILITY, INC.
303 Twin Dolphins Drive, Suite 600

Redwood City, CA 94065

  Telephone: (650) 632-4210 

If to the Investor:

Dutchess Opportunity Fund, II, LP
50 Commonwealth Avenue,
Suite 2
Boston, MA 02116

  Telephone: (617) 301-4700

Each party shall provide five (5) days prior written notice to
the other party of any change in address or facsimile number.

SECTION 19. NO ASSIGNMENT. This Agreement and any rights,
agreements or obligations hereunder may not be assigned, by operation of law,
merger or otherwise, without the prior written consent of the other party
hereto, and any purported assignment by a party without prior written consent of
the other party will be null and void and not binding on such other party.
Subject to the preceding sentence, all of the terms, agreements, covenants,
representations, warranties and conditions of this Agreement are binding upon,
and inure to the benefit of and are enforceable by, the parties and their
respective successors and assigns.

SECTION 20. NO THIRD PARTY BENEFICIARIES. This Agreement is
intended for the benefit of the parties hereto and is not for the benefit of,
nor may any provision hereof be enforced by, any other person, except that the
Company acknowledges that the rights of the Investor may be enforced by its
general partner.

23 




SECTION 21. SURVIVAL. The indemnification provisions set forth
in Section 11, shall survive each of the Closings and the termination of this
Agreement.

SECTION 22. PUBLICITY. The Company and the Investor shall
consult with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and no party
shall issue any such press release or otherwise make any such public statement
without the prior consent of the other party, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be required
if such disclosure is required by law, in which such case the disclosing party
shall provide the other party with prior notice of such public statement. The
Investor acknowledges that this Agreement and all or part of the Equity Line
Transaction Documents may be deemed to be “material contracts” as that term is
defined by Item 601(b)(10) of Regulation S-B, and that the Company may therefore
be required to file such documents as exhibits to reports or registration
statements filed under the 1933 Act or the 1934 Act. The Investor further agrees
that the status of such documents and materials as material contracts shall be
determined solely by the Company, in consultation with its counsel.

SECTION 23. FURTHER ASSURANCES. Each party shall do and
perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.

SECTION 24. INTENTIONALLY OMITTED. 

SECTION 25. NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party, as the parties mutually agree that each has had a full and fair
opportunity to review this Agreement and seek the advice of counsel on it.

SECTION 26. REMEDIES. The Investor shall have all rights and
remedies set forth in this Agreement and the Registration Rights Agreement and
all rights and remedies which such holders have been granted at any time under
any other agreement or contract and all of the rights which the Investor has by
law. Any person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any default or breach of any
provision of this Agreement, including the recovery of reasonable attorneys fees
and costs, and to exercise all other rights granted by law.

SECTION 27. PAYMENT SET ASIDE. To the extent that the Company
makes a payment or payments to the Investor hereunder or under the Registration
Rights Agreement or the Investor enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred. 




SECTION 28. PRICING OF COMMON STOCK. For purposes of this
Agreement, the VWAP of the Common Stock shall be as reported on a direct feed
service.

SECTION 29. NON-DISCLOSURE OF NON-PUBLIC INFORMATION.

          (A)      The
Company shall not disclose non-public information concerning the Company to the
Investor, its advisors, or its representatives.

          (B)      Nothing
herein shall require the Company to disclose non-public information to the
Investor or its advisors or representatives, provided, however, that
notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, immediately notify the advisors and representatives of the
Investor and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public information
(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed in
the prospectus included in the Registration Statement would cause such
prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein, in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section 29 shall be construed to mean that such persons or entities
other than the Investor (without the written consent of the Investor prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms of this
Agreement and nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due diligence by such
persons or entities, that the Registration Statement contains an untrue
statement of material fact or omits a material fact required to be stated in the
Registration Statement or necessary to make the statements contained therein, in
light of the circumstances in which they were made, not misleading.

[Signature Page Follows] 

25 




SIGNATURE PAGE OF INVESTMENT AGREEMENT 

          Your
signature on this Signature Page evidences your agreement to be bound by the
terms and conditions of the Investment Agreement and the Registration Rights
Agreement as of the date first written above.

          The
undersigned signatory hereby certifies that he has read and understands the
Investment Agreement, and the representations made by the undersigned in this
Investment Agreement are true and accurate, and agrees to be bound by its
terms.

DUTCHESS OPPORTUNITY FUND, II,
LP

	 	By: 	/s/ Douglas H. Leighton 
	 	 	Douglas H. Leighton 
	 	 	Managing Member of: 
	 	 	Dutchess Capital Management, II,
      LLC 
	 	 	General Partner to: 
	 	 	Dutchess Opportunity Fund, II, LP
    


XCELMOBILITY, INC. 


By: /s/ Ronald E.
Strauss                                                        
Ronald
E. Strauss, Executive Chairman 




LIST OF EXHIBITS 

	EXHIBIT A 	Registration
      Rights Agreement 
	EXHIBIT B 	Opinion of Company's Counsel
  
	EXHIBIT C 	Put Notice 
	EXHIBIT D 	Put Settlement Sheet 
	EXHIBIT E 	Amended Articles
      of Incorporation Amending Par Value of Shares 





 

EXHIBIT A 

REGISTRATION RIGHTS AGREEMENT 

(Attached) 

 

 

A-1 



 

EXHIBIT B 

OPINION OF COMPANY’S COUNSEL 

(Attached)

 

 

B-1 




EXHIBIT C 

FORM OF PUT NOTICE 

Date:________________________

RE: Put Notice Number  _________

Dear Mr. Leighton: 

This is to inform you that as of today, XCELMOBILITY, INC. an
Nevada corporation (the "Company"), hereby elects to exercise its
right pursuant to the Investment Agreement entered into with Dutchess
Opportunity Fund II, LP (“Dutchess”) to require Dutchess to
purchase shares of its common stock. The Company hereby certifies that:

1. The undersigned is the duly elected ______________ of the
Company. 

2. There are no fundamental changes to the information set
forth in the Registration Statement which would require the Company to file a
post effective amendment to the Registration Statement. 

3. The Company has performed in all material respects all
covenants and agreements to be performed by the Company and has complied in all
material respects with all obligations and conditions contained in this
Agreement on or prior to the Put Notice Date, and shall continue to perform in
all material respects all covenants and agreements to be performed by the
Company through the applicable Put Date. All conditions to the delivery of this
Put Notice are satisfied as of the date hereof. 

4. The undersigned hereby represents, warrants and covenants
that it has made all filings (“SEC Filings”) required to be made by it
pursuant to applicable securities laws (including, without limitation, all
filings required under the Securities Exchange Act of 1934, which include Forms
10-Q, 10-K, 8-K, etc.). All SEC Filings and other public disclosures made by the
Company, including, without limitation, all press releases, analysts meetings
and calls, etc. (collectively, the “Public Disclosures”), have been
reviewed and approved for release by the Company’s attorneys and, if containing
financial information, the Company’s independent certified public accountants.
None of the Company’s Public Disclosures contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. 

5. The amount of this put is up to ___________________________
shares.

6. The Pricing Period runs from until
___________________________. 

7. The Suspension Price is $ ___________________________. 

8. The current number of shares issued and outstanding as of
the Company are: ___________________________

9. The number of shares currently available for resale pursuant
to the Registration Statement on Form S-1 for the Equity Line are:
___________________________. 

[Company Name] 


By:      
_________________________________________
Name: 
_________________________________________
Title:   
_________________________________________




EXHIBIT D 

FORM OF PUT SETTLEMENT SHEET 

Date:________________________

RE: XCELMOBILITY, INC. 

Dear ________________________: 

Pursuant to the Put given by XCELMOBILITY, INC. to Dutchess
Opportunity Fund, II, LP on 20__, we are now submitting the amount of common
shares for you to issue to Dutchess.

Please deliver __________shares without restrictive legend via
book entry to Dutchess Opportunity Fund, II, LP immediately and send via DWAC to
the following account:

XXXXXX

Once these shares are received by us, we will have the funds
wired to the Company. 

 

Regards, 

 

Douglas H. Leighton





	DATE 	 	PRICE
    
	Date of Day 1 	 	VWAP of Day 1 
	Date of Day 2 	 	VWAP of Day 2 
	Date of Day 3 	 	VWAP of Day 3 
	Date of Day 4 	 	VWAP of Day 4 
	Date of Day 5 	 	VWAP of Day 5




 

 

	LOWEST VWAP IN PRICING PERIOD 	______________________________
	 	 
	PUT AMOUNT 	______________________________ 
	 	 
	PURCHASE PRICE (NINETY-FIVE PERCENT (95%)) 	______________________________
	 	 
	AMOUNT OF SHARES DUE 	______________________________


The undersigned has completed this Put as of this ___th day of
_________, 200_.

XCELMOBILITY, INC. 

By:      
_________________________________________
Name: 
_________________________________________
Title:   
_________________________________________