Document:

debtconversionagmt.htm

    Exhibit 10.18

       

       

       

       

      DEBT CONVERSION
AGREEMENT

       

      THIS DEBT CONVERSION AGREEMENT
(this “Agreement”)
is made and entered into as of  November 4, 2009, by and between
Locateplus Holdings Corporation, a Delaware corporation (the “Company”),
100 Cummings Center, No. 235M, Beverly, MA 01915 and Dutchess Private Equities
Fund Ltd., a Cayman Islands exempted company (“Dutchess”),
50 Commonwealth Avenue, Suite 2, Boston, MA 02116.

       

      RECITALS

       

          WHEREAS,
approximately $1,817,828 in principal and accrued interest is currently owed to
Dutchess by the Company and is outstanding on the books and records of the
Company, which amount is comprised of: (i) that Convertible Debenture between
Dutchess and the Company dated December 30, 2005 and (ii) that Convertible
Debenture between Dutchess and the Company dated March 16, 2007 issued to
Dutchess by the Company (the “Debentures”),
true copies of which are attached as Exhibit
A;

       

          WHERAS,
Dutchess holds a warrant to purchase up to 1,125,000 shares of the Company’s
Common Stock at an exercise price of $.10 per share (the “Warrant”)
a true copy of which is also attached as Exhibit
B;

         

          WHEREAS,
Dutchess desires to convert all amounts outstanding under the Debentures and
Warrant (collectively, the “Obligations” and each an “Obligation”)
into an aggregate of 72,000 shares of Series A Preferred Stock, Par Value $1.00
per share (“Preferred
Stock”), of the Company (the “Preferred
Shares”), and the Company desires to convert such Obligations into such
Preferred Shares.

       

          NOW,
THEREFORE, for and in consideration of the foregoing premises, the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as
follows:

         

          1. Conversion
of the Obligations; Issuance of the Preferred
Shares.

       

             1.1 At the
Closing (as defined in Section 2 hereof) and
subject to the terms and conditions of this Agreement, Dutchess hereby agrees to
convert all of the Obligations into the Preferred Shares
at a conversion price of twenty-five dollars ($25.00) per share, and the
Company hereby agrees to issue an aggregate of seventy-two thousand (72,000)
Preferred
Shares to Dutchess.  By converting the Obligations into the
Preferred
Shares, Dutchess acknowledges and agrees that the Obligations will be
cancelled and terminated in all respects and for all purposes and that Dutchess
will be deemed to have released all claims held by Dutchess with respect to the
Obligations, including the payment of principal and interest thereon, and any
fees and other amounts payable with respect to the Obligations.

       

             1.2 For
purposes of calculating the holding periods for the Preferred
Shares, Dutchess shall tack back to the holding period(s) for the
specific Debenture(s) under which Dutchess became entitled to receive the Preferred
Shares pursuant to this Agreement.  The Company shall not adopt
a position inconsistent with the foregoing or contest such tacking for any
reason and shall cooperate with Dutchess in any efforts Dutchess may undertake
to assert such tacking in connection with the future sale of any Preferred
Shares.

       

          2. Closing; Delivery of
Preferred Shares.

       

             2.1 Closing.  The
closing of the conversion of the Obligations and the issuance of the Preferred
Shares (the “Closing”) shall occur at 10:00 a.m.
local time on a date to be mutually agreed upon on or before December 31, 2009
(the “Closing
Date”) at the offices of the Company, or at such other location as shall
be agreed by the parties.

       

             2.2 Deliveries.  At the
Closing, the Company shall deliver to Dutchess (i) a stock certificate
representing the Preferred
Shares in the name of Dutchess; and (ii) and Stipulation of Dismissal
without Prejudice of the current case of LocatePLUS Holdings
Corporation v Dutchess Private Equities Fund,
Ltd.  in Suffolk Superior Court, Civil Action No. 09 - 1385A
and Dutchess shall deliver (i) instruments of cancellation of the Obligations,
(ii) an assignment to the Company of all shares of capital stock of the Company
or rights thereto owned by Dutchess or any of its affiliates and (iii) an
assignment of certain Debt pursuant to a Debt Purchase Agreement dated as of
November 4, 2009 between the parties.  .

       

          3. Representations
and Warranties of Dutchess. Dutchess represents and
warrants to the Company as follows.

       

             3.1 Acquisition for Own Account for
Investment.  Dutchess is acquiring the Preferred
Shares for Dutchess’s own account for investment purposes only and not
with a view to, or for sale in connection with, a distribution of the Preferred
Shares within the meaning of the Securities Act of 1933, as amended (the
“1933
Act”).

       

             3.2 Understanding of
Risks.  Dutchess is aware of the highly speculative nature of
the investment in the Preferred
Shares and the financial hazards involved in such
investment.

       

             3.3 Dutchess’s
Qualifications.  By reason of Dutchess’s business or financial
experience, Dutchess is capable of evaluating the merits and risks of this
investment, has the ability to protect Dutchess’s own interests in this
transaction, and is financially capable of bearing a total loss of the
investment.

       

            3.4 No General Solicitation; Place of
Sale.  At no time was Dutchess presented with or solicited by
any publicly issued or circulated newspaper, mail, radio, television or other
form of general advertising or solicitation in connection with the offer, sale
and purchase of the Preferred
Shares.

       

             3.5 Compliance with Securities
Laws.  Dutchess understands and acknowledges that the Preferred
Shares are not being registered with the United States Securities and
Exchange Commission (the “Commission”)
under the 1933 Act, but instead are being sold under an exemption or exemptions
from the registration and qualification requirements of the 1933 Act or
applicable state securities laws that impose certain restrictions on Dutchess’s
ability to transfer the Preferred Shares.

       

             3.6 Restrictions on
Transfer.  Dutchess understands that Dutchess may not transfer
any Preferred
Shares unless such Preferred
Shares are registered under the 1933 Act or applicable state securities
laws, or unless exemptions from such registration and qualification requirements
are available.

       

             3.7 Representation by
Counsel.  Dutchess has been represented by its own counsel,
accountant and tax specialist in connection with the acquisition of the Preferred
Shares and entering into this Agreement and acknowledges that Dutchess is
not relying on any securities, tax, accounting or other advice from the Company
or its counsel or advisors.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

          4. Representations
and Warranties of the Company. The Company represents and
warrants to Dutchess as follows.

       

             4.1 Authority.  The
Company has the power and authority to enter into and perform its obligations
under this Agreement and to issue the Preferred Shares
to Dutchess. The
Company has been duly organized and is validly existing in good standing under
the laws of the jurisdiction of its organization as the type of entity that it
purports to be.  The execution and delivery of this Agreement by the
Company, and the consummation by the Company of the transactions contemplated
hereby, have been duly authorized by all necessary action and no other
proceeding on the part of the Company is necessary to authorize the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby.

       

             4.2 Valid Issuance of Preferred
Shares.  The Preferred Shares, when issued and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid and non-assessable shares
of  Series A Preferred Stock. The Company’s obligation to issue such
Preferred
Shares and to close according to the terms and conditions of this
Agreement are contingent upon the Company’s having obtained all required
authorizations.

       

             4.3 Representation by
Counsel.  The Company has been represented by its own counsel,
accountant and tax specialist in connection with the issuance of the Preferred
Shares and entering into this Agreement and acknowledges that the Company
is not relying on any securities, tax, accounting or other advice from Dutchess
or its counsel or advisors.

       

             4.4 Consent. No consent, approval,
authorization or order of any court or governmental authority or third-party is
required in connection with the execution, delivery or performance of this
Agreement by the parties.

       

          5. Covenants
of the Company.  The Company
hereby covenants to Dutchess as follows:

       

             5.1 Within
ten (10) days of the execution of this Agreement the Company shall commence to
obtain the necessary authorizations to create and issue the Preferred
Shares and shall    file any and all necessary
paperwork with the Delaware Secretary of State and the Board of Directors shall
approve the execution of a Certificate of Designations, Preferences and Rights
of Series A Preferred Stock, Par Value $1.00 per share  (the “Certificate”)  substantially
in the form of Certificate attached as Exhibit C to this
Agreement.  which shall include, among other rights, privileges and
preferences, the following:

       

       a.           Dividends
shall be paid quarterly, in cash or in  Series A Preferred Stock, at
the option of the Corporation,, at the rate of  twenty five cents
($.25) per share..  Dividends shall be cumulative.

       

       b.           At
the option of the holder thereof, each share of Preferred Stock may be converted
into 41.66 shares of the Company’s common stock, par value $0.01 per share
(“Common
Stock”), as set forth in the Certificate.

       

      c.   The
Series A Preferred Stock shall be senior in rights, privileges and preferences
to all other series of preferred or common stock of the Company, including with
respect to dividend, distribution and liquidation rights, privileges and
preferences.

       

             5.2 The
Company shall purchase pro rata from all the holders of the Preferred
Shares, at the beginning of each calendar quarter, those amounts of Preferred
Shares at a price of $25 per share, all  as set forth
below:

       

      
        	
                i.  

              	
                From
      the Closing through December 31 2010 – 600  Preferred
      Shares

              

      

       

      
        	
                ii.  

              	
                From
      March 31, 2011 through December 31, 2011 – 1,000  Preferred
      Shares

              

      

       

      
        	
                 
      

              	
                iii.

              	
                From
      March 31, 2012 through December 31, 2012 – 1,400  Preferred
      Shares.

              

      

       

             The specified number
of Preferred Shares
which the Company is obliged to purchase by any specified date shall be
reduced by the number of Preferred
Shares converted to Common Stock before such date and by the number of
Preferred
Shares purchased by the Company before such date pursuant to any Puts as
set forth below.

       

             5.3  Each
holder of Preferred
Shares shall have the right, at its sole option, after November 1, 2009,
to request that the Company buy a specified number of shares of Preferred
Shares owned by such holder in exchange for payment by the Company of the
Put Consideration (as defined below).  In order to exercise this
right, the holder shall send the Company a  signed and dated notice in
writing setting forth the number of shares of Preferred
Shares that the holder intends to sell and a computation of the Put
Consideration.  The “Put
Consideration” is the product of the number of Preferred
Shares that the holder intends to sell multiplied by twenty-five dollars
($25.00) per Share (the “Put
Price”). The total Put Consideration payable by the Company during any
calendar quarter shall not exceed fifteen thousand dollars ($15,000) through the
last quarter of 2010, twenty five thousand dollars ($25,000) per quarter through
the last quarter of 2011 and thirty five thousand dollars ($35,000) thereafter.
The Company, in its sole discretion, may determine whether to agree to an
increase in the Put Consideration as described above.

       

             5.4  While
the Preferred Shares
are outstanding, the Company shall authorize and reserve a sufficient
number of its previously authorized but unissued shares of Common Stock to
satisfy the rights of conversion and purchase of the holders of the Preferred
Shares, which amounts shall be determined by reference to the
Certificate.

       

             Acknowledgements. The parties hereby
acknowledge and agree that, as of the date hereof, the outstanding balances
under the Debentures, are as set forth on Exhibit D attached
hereto.

       

          6. Restrictive
Legend.

       

             6.1
Legend.  Dutchess understands and agrees that the Company may
place the legend set forth below or a similar legend on any stock certificates
evidencing the Preferred
Shares, or any Common Stock into which the Preferred
Shares are converted, together with any other legends that may be
required by state or federal securities laws or the Company’s Certificate of
Incorporation or Bylaws:

       

             THE SECURITIES
REPRESENTED THIS CERTIFICATE  HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF
CERTAIN STATES.  THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND 

             MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM..

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

          7. Compliance
with Laws and Regulations.  The sale and transfer of the Preferred
Shares will be subject to and conditioned upon compliance by the Company
and Dutchess with all applicable state and federal laws and regulations and with
all applicable requirements of any stock exchange or automated quotation system
on which the Company’s Common Stock may be listed or quoted at the time of such
issuance or transfer.

       

          8.General
Provisions.

       

             8.1 Successors and
Assigns; Assignment.  Except as otherwise provided in this
Agreement, this Agreement, and the rights and obligations of the parties
hereunder, will be binding upon and inure to the benefit of their respective
successors, assigns, heirs, executors, administrators and legal
representatives.  This Agreement is not assignable without the prior
written consent of the parties hereto, except that Dutchess may assign this
Agreement to any affiliate upon notice to, and without the consent of the
Company.

       

             8.2 Governing
Law.  The validity, terms, performance and enforcement of this
Agreement shall be governed and construed by the provisions hereof and in
accordance with the laws of the Commonwealth of Massachusetts applicable to
agreements that are negotiated, executed, delivered and performed solely in the
Commonwealth of Massachusetts.

       

             8.3  Notices.  Any
and all notices required or permitted to be given to a party pursuant to the
provisions of this Agreement will be in writing and will be effective and deemed
to provide such party sufficient notice under this Agreement on the earliest of
the following: (i) at the time of personal delivery, if delivery is in person;
(ii) one (1) business day after deposit with an express overnight courier for
United States deliveries, or two (2) business days after such deposit for
deliveries outside of the United States, with proof of delivery from the courier
requested; or (iii) three (3) business days after deposit in the United States
mail by certified mail (return receipt requested) for United States
deliveries.  All notices for delivery outside the United States will
be sent by express courier.  All notices not delivered personally will
be sent with postage and/or other charges prepaid and properly addressed to the
party to be notified at the address first set forth above or at such other
address as such party may designate by one of the indicated means of notice
herein to the other party hereto.

       

             8.4 Further
Assurances.  The parties agree to execute such further
docu­ments and instruments and to take such further actions as may be
reasonably necessary to carry out the purposes and intent of this
Agreement.

       

             8.5 Titles and
Headings.  The titles, captions and headings of this Agreement
are included for ease of reference only and will be disregarded in interpreting
or construing this Agreement.

         

             8.6 Entire
Agreement.  This Agreement constitutes the entire agreement and
understanding of the parties with respect to the subject matter of this
Agreement, and supersedes all prior understandings and agreements, whether oral
or written, between or among the parties hereto with respect to the specific
subject matter hereof.

       

             8.7
Counterparts.  This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered will be deemed an
original, and all of which together shall constitute one and the same
agreement.

       

             8.8 Facsimile
Signatures.  This Agreement may be executed and delivered by
facsimile and upon such delivery the facsimile signature will be deemed to have
the same effect as if the original signature had been delivered to the other
party

       

             8.9 Amendment and
Waivers.  This Agreement may be amended only by a written
agreement executed by each of the parties hereto.  No amendment of or
waiver of, or modification of any obligation under this Agreement will be
enforceable unless set forth in a writing signed by the party against which
enforcement is sought.  Any amendment effected in accordance with this
section will be binding upon all parties hereto and each of their respective
successors and assigns.  No delay or failure to require performance of
any provision of this Agreement shall constitute a waiver of that provision as
to that or any other instance.  No waiver granted under this Agreement
as to any one provision herein shall constitute a subsequent waiver of such
provision or of any other provision herein, nor shall it constitute the waiver
of any per­formance other than the actual performance specifically
waived.

       

             8.10 Third-Party
Beneficiaries.  Nothing in this Agreement is intended to confer
upon any other person, whether or not named herein, and rights or remedies of
any nature whatsoever under or by reason of this Agreement.

       

             8.11 Disputes Under
the Agreement. 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 shall submit all disputes arising
under this Agreement to arbitration in Boston, Massachusetts before a single
arbitrator pursuant to the commercial arbitration rules of the American
Arbitration Association (the “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 the Commonwealth of Massachusetts.  No party hereto will
challenge the jurisdiction or venue provisions as provided in this section. The
decisions of the arbitrator shall be final and binding on all parties, shall not
be subject to appeal and may be enforced by any party in a court of applicable
jurisdiction.  Nothing in this section shall limit the
Holder's right to obtain an injunction for a breach of this
Agreement  from a court of law.  Any injunction obtained shall remain in
full force and effect until the arbitrator, as set forth herein, fully
adjudicates the dispute.

       

      

       

      
        	
                 
      

              	
                [Signature
      page follows]

              

      

       

      

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      

      IN WITNESS WHEREOF, the
Company and Dutchess have caused this Debt Conversion Agreement to be executed
and delivered as of the date first written above.

       

      

       

      
        	 
      	 
      	
                DUTCHESS
      PRIVATE EQUITIES FUND, LTD.:

              
	 
      	 
      	
                 

                By:___________________

                Name:  Douglas
      H. Leighton

                Title:    Director

              
	 
      	 
      	 
      
	 
      	 
      	
                THE
      COMPANY:

                 

              
	 
      	 
      	
                LOCATEPLUS
      HOLDINGS CORPORATION

              
	 
      	 
      	
                 

                By:
      ____________________

                Name:  Geoffrey
      Lee

                Its:        Interim
      Chief Executive Officer

              

      

      

       

      
        
           

        

        
          7stockpurchaseagmt.htm

    Exhibit 10.19

       

       

       

       

      SERIES
A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

       

      THIS SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT (this “Agreement”)
is made and entered into as of November 4, 2009 by and among LocatePLUS Holdings
Corporation , a Delaware corporation, (collectively, the “Company”),
and the investors listed on Schedule 1 attached hereto (who shall execute
this Agreement and who are collectively referred to as the “Investors”).

       

      RECITALS

       

          WHEREAS, the
Company and the Investors are executing and delivering this Agreement in
reliance upon an exemption from securities registration pursuant to Section 4(2)
and/or Rule 506 of Regulation D (“Regulation
D”) as promulgated by the United States Securities and Exchange
Commission (the “Commission”)
under the Securities Act of 1933, as amended (the “Securities
Act”);

       

          WHEREAS, the
Company desires to authorize, issue and sell seventy two thousand (72,000)
shares of its Series A Convertible Preferred Stock, $1.00 par value per share
(the “Series
A
Stock”) to the Investors, and the Investors desire to purchase the Series
A Stock, all on the terms and subject to the conditions herein set forth;
and

       

          WHEREAS, on
November 4, 2009 the Company and Dutchess Private Equities Fund,
Ltd.   executed and delivered a Debt Conversion Agreement (the
“Debt
Conversion Agreement”) to take effect upon such time as the fulfillment
of the Company obligations herein for duly authorized issuance of the Series A
Stock.

       

          NOW,
THEREFORE, for and in consideration of the foregoing premises, the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as
follows:

       

       

              1. Authorization of
Securities.  The Company has duly obtained the authorization
authorizations for  issuance of  the preferred stock of
which the Series A Stock is a part (the “Preferred Stock”)  set forth
in the Company’s Amended Certificate  of Incorporation
and  the Certificate of Designation for the Series A
Stock,   containing the rights, privileges
and preferences as described in the Debt Conversion Agreement The Company has
authorized and reserved a sufficient number of shares of Common Stock to satisfy
the rights of conversion and purchase of the holders of the Series A
Stock.  (the “Conversion
Shares”).

       

              2. Sale and Purchase of Series
A
Stock.  Subject to the terms and conditions herein, the Company
agrees to sell to the Investors, and each of the Investors severally agrees to
purchase from the Company on the date hereof in accordance with this Agreement,
the number of shares of Series A Stock set forth opposite such Investor’s name
on Schedule 1
at a purchase price of Twenty-Five dollars ($25.00) per share in accordance with
the terms and conditions of the Debt Conversion Agreement (the “Purchase
Commitment”).  The Company’s agreement with each Investor is a
separate agreement, and the sale of the Series A Stock to each Investor is a
separate sale.

       

              3. The Closing.  The
closing of the sale of the Series A Stock shall take place at 10:00 a.m. Boston
time (the “Closing”)
on the date hereof.  The date and time on which the Closing occurs
shall be referred to as the “Closing
Date”.  On the Closing Date, the Company shall deliver to each
of the Investors purchasing shares of the Series A Stock on such date a stock
certificate for the number of shares of Series A Stock being acquired by such
Investor, which shares shall be registered in the Investor’s name or as
otherwise designated by the Investor.

       

              4. Representations and Warranties by the
Company.  As a material inducement to each of the Investors to
enter into this Agreement and to purchase the number of shares of the Series A
Stock set forth after such Investor’s name on Schedule 1, with the
understanding that each Investor will be relying thereon in consummating the
transactions contemplated hereunder, the Company hereby represents and warrants
to each Investor as of the date of this Agreement that, except as set forth (i)
in the Disclosure Schedule attached hereto and prepared and delivered by the
Company to the Investors on the date hereof (the “Disclosure
Schedule”), (ii) the Transaction Documents or (iii) SEC Form 10-K of the
Company for the year ended December 31, 2008 and the SEC Form 10-Q of the
Company for the six months ended June 30, 2009 (the “SEC Documents”, the
statements contained in this Section 4 are true and correct.  The
Disclosure Schedule is arranged in sections corresponding to the sections and
subsections of this Section 4:

       

               
4.1. Organization, Qualification and
Power.  The Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has all requisite corporate power and authority, and all
governmental licenses, governmental authorizations, governmental consents and
governmental approvals, required to carry on its business as now conducted and
to own, lease and operate the assets and properties of the Company as now owned,
leased and operated.  The Company is duly qualified or licensed to do
business as a foreign corporation and is in good standing in every jurisdiction
in which the character or location of its properties and assets owned, leased or
operated by the Company or the nature of the business conducted by the Company
requires such qualification or licensing, except where the failure to be so
qualified, licensed or in good standing in such other jurisdiction could not,
individually or in the aggregate, have a Material Adverse Effect (as defined
herein) on the Company.  The Company has heretofore delivered to the
Investors complete and accurate copies of its Articles of Incorporation and
Bylaws, as currently in effect. The Company has previously delivered to the
Investors a complete and accurate list of all jurisdictions in which the Company
is qualified or licensed to do business as of the date hereof.

       

               
4.2. Authorization;
Enforcement.  The Company has full power and authority to enter
into this Agreement, the related Debt Conversion Agreement, any and all
agreements referenced herein or therein, and all agreements and documents
related to the foregoing (collectively, the “Transaction
Documents”) and, to carry out the transactions contemplated in the
Transaction Documents. Subject to the terms and conditions of the Debt
Conversion Agreement, The Board of Directors of the Company and the Company’s
stockholders have taken all action required by law, the Company’s charter
documents and otherwise to duly and validly authorize and approve the execution,
delivery and performance by the Company of the Transaction Documents and the
consummation by the Company of the transactions contemplated in the Transaction
Documents and no other corporate proceedings on the part of the Company are
necessary to authorize the Transaction Documents or to consummate the
transactions contemplated thereby.  The Transaction Documents have
been duly and validly executed and delivered by the Company and constitute the
legal, valid and binding obligations of the Company, enforceable against it in
accordance with their respective terms, subject to laws of general application
relating to bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors’ rights generally and rules of law governing specific
performance, injunctive relief or other equitable remedies.

       

             4.3. Capitalization of the
Company.  The Company has authorized (a) 50,000,000 shares of
Common Stock, 49,993,987 of which shares are issued and outstanding, and (b)
1,000,000 shares of Preferred Stock of which 72,000 shares of Series A Preferred
Stock have been authorized but none of which is  issued and
outstanding (together with the Common Stock, the “Capital
Stock”).  All of the issued and outstanding shares of the
Capital Stock are duly authorized, validly issued, fully paid, non-assessable
and free of preemptive rights.  Except as set forth in the Disclosure
Schedule, the Transaction Documents or the SEC Documents (a) there are no
outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any of its securities,  (b) there are no stockholder
agreements, voting trusts or other agreements or understandings to which the
Company is a party or by which it is bound relating to the voting or
registration of any shares of Capital Stock,  (c) there are no
outstanding 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, (d) there are no 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, (e) there are no outstanding debt securities, (f) 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 Securities
Act, (g) there are no outstanding registration statements or comment letters
from the SEC or any other regulatory agency and (h)there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Preferred Stock as described in this
Agreement.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

             4.4. Non-Contravention.  Neither
the execution, delivery and performance by the Company of the Transaction
Documents nor the consummation of the transactions contemplated therein will (i)
contravene or conflict with the Certificate of Incorporation or
By-Laws  of the Company, (ii) contravene or conflict with or
constitute a violation of any provision of any Applicable Law (as defined
herein) binding upon or applicable to the Company or any of the Company’s
assets, (iii) result in the creation or imposition of any Lien (as defined
herein) on any of the Company’s assets, other than Permitted Liens (as defined
herein), (iv) be in conflict with, constitute (with or without due notice or
lapse of time or both) a default under, result in the loss of any material
benefit under, or give rise to any right of termination, cancellation, increased
payments or acceleration under any terms, conditions or provisions of any
material note, bond, lease, mortgage, indenture, license, contract, franchise,
permit, instrument or other agreement or obligation to which the Company is a
party, or by which any of its properties or assets may be bound, or (v) to the
knowledge of the Company, materially disrupt or impair any business relationship
with any material supplier, customer, distributor, sales representative or
employee of the Company.  Except as set forth in the Disclosure
Schedule, the Transaction Documents or the SEC Documents , neither the Company
nor its subsidiaries is in violation of any term of or in default under its
Certificate of Incorporation or By-laws  or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or its
subsidiaries.  The business of the Company and its subsidiaries is not
being conducted, and shall not be conducted in violation of any material law,
ordinance, or regulation of any governmental entity.  Except as
specifically contemplated by the Transaction Documents  and as
required under the Securities Act and any Applicable Law, the Company is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by the
Transaction Documents in accordance with the terms thereof.  All
consents, authorizations, 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.  The Company and its
subsidiaries are unaware of any facts or circumstance, which might give rise to
any of the foregoing.

       

             4.5. Consents and
Approvals.  No consent, approval, order or authorization of or
from, or registration, notification, declaration or filing with (hereinafter
sometimes separately referred to as a “Consent”
and sometimes collectively as “Consents”),
of any Person, including, without limitation, any Governmental Authority (as
defined herein), is required in connection with the execution, delivery or
performance of the Transaction Documents by the Company or the consummation by
the Company of the transactions contemplated therein.  To the
knowledge of the Company, there are no facts relating to the identity or
circumstances of the Company that would prevent or materially delay obtaining
any of the Consents.

       

             4.6. Financial Statements; Undisclosed
Liabilities.

       

                (a) The
Company has previously delivered to the Investors complete and accurate copies
of the audited financial statements  of the Company as of December 31,
2008 Latest
Financial Statements and the unaudited financial statements of the
Company for the six months   ended June 30, 2009 all, as included
in the 

      SEC Documents  (
the “Latest
Financial Statements”).  The Latest Financial Statements are
based upon the information contained in the books and records of the Company and
fairly and accurately present the financial condition of the Company as of the
dates thereof and results of operations for the periods referred to
therein.  The Latest Financial Statements have been prepared in
accordance with GAAP (as defined herein). The financial statements for the
period ended June 30, 2009 have been prepared in accordance with GAAP applicable
to unaudited interim financial statements and thus may not contain all notes and
may not contain prior period comparative data which are required by GAAP for
audited financial statements)They reflect all adjustments necessary to a fair
and accurate statement of the financial condition and results of operations of
the Company for the interim periods presented.

       

                (b) All
accounts, books and ledgers related to the business of the Company and its
subsidiaries are properly and accurately kept, are complete in all material
respects, and there are no material inaccuracies or discrepancies of any kind
contained or reflected therein subject to the year end adjustments made
by the outside 

      accountant
which shall be in accordance with prior practice.

       

                (c) Except as
and to the extent reflected in the Latest Financial
Statements  subject to year end adjustments made in accordance with
prior practice, the Company does not have any Liabilities (as defined herein) of
any nature (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due,  and 

      regardless
of when asserted), other than Liabilities incurred in the Ordinary Course of
Business (as defined herein) since the date of the Latest Financial Statements
and Liabilities arising in connection with this Agreement and the transactions
contemplated herein. 

       

             4.7. Assets and
Properties.

       

                (a) Except as
previously disclosed in the SEC Documents, the Company has good and valid right,
title and interest in and to or, in the case of leased properties or properties
held under license, good and valid leasehold or license interests in, all of
their assets and properties, including, but not limited to, all of the
machinery, 

      equipment,
terminals, computers, vehicles, and all other assets and properties (real,
personal or mixed, tangible or intangible) reflected in the Latest Financial
Statements and all of the assets purchased or otherwise acquired since the date
of the Latest Financial Statements, except those assets and properties disposed
of in the Company’s ordinary course of business after the date of the Latest
Financial Statements.  The Company holds title to each such property
and asset free and clear of all Liens, except Permitted Liens.

       

                (b) Except as
previously disclosed in the SEC Documents, the material equipment owed by the
Company has been properly maintained and is in good operating condition and
repair and is adequate for the uses for which they are currently being put by
the Company, normal wear and tear excepted.  To the knowledge of the

      Company,
no such asset is in need of maintenance or repair, except for routine
maintenance and repairs that are in the ordinary course.

       

                (c) Except as
previously disclosed in the SEC Documents, the Company owns or has the right to
use all material property, real or personal, tangible or intangible, which is
necessary for the operation of its business in substantially the same manner as
it has been conducted during the period covered by the Latest Financial

      Statements.

       

             4.8. Compliance with Applicable
Laws.  Except as set forth in the Transaction Documents, the
SEC Documents or the Disclosure Schedule, the Company has not violated or
infringed, nor is it in violation or infringement of, any Applicable Law or any
order, writ, injunction or decree of any Governmental Authority in connection
with its activities.  The Company, and its officers, directors, agents
and employees, have complied with all Applicable Laws.  No claims have
been filed against the Company alleging a violation of any Applicable
Law.

       

             4.9. Permits.  The
Company has conducted its business in compliance with all material terms and
conditions of all licenses, permits, quotas, authorizations, registrations and
other approvals that are necessary to the operation of, or relate solely to, the
Company’s business (collectively, the “Permits”).  Each
Permit is valid and in full force and effect and none of the Permits will be
terminated, revoked, modified or become terminable or impaired in any respect
for any reason, except as would not have a Material Adverse Effect.

       

             4.10. Receivables.  The
accounts receivable and other receivables reflected on the Latest Financial
Statements, and those arising after the date thereof, are valid receivables that
have arisen from bona fide transactions in the Company’s ordinary course of
business, and the Company is not aware  that such accounts are subject
to valid counterclaims or setoffs, and are collectible in accordance with their
terms, except as and to the extent of the bad debt allowance reflected on the
Latest Financial Statements.

       

             4.11. Litigation.  Except
as set forth in the Transaction Documents, the SEC Documents or the Disclosure
Schedule, there are no (a) actions, suits, claims, hearings, arbitrations,
proceedings (public or private) or governmental investigations that have been
brought by or against any Governmental Authority or any other Person, nor any
investigations or reviews by any Governmental Authority against or affecting the
Company, pending or, to the Company’s knowledge, threatened, against or by the
Company or any of its assets or which seek to enjoin or rescind the transactions
contemplated by this Agreement; or (b) existing
orders, judgments or decrees of any Governmental Authority naming the Company as
an affected party or otherwise affecting any of the assets or the business of
the Company.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

             4.12. Labor and Employment
Matters.  Except as set forth in the Transaction Documents, the
SEC Documents or the Disclosure Schedule, the Company has previously
provided  to the Investors a complete and accurate list of all current
employees, officers and directors of the Company, which list includes their base
salaries and bonus.  All employees of the Company are employed on an
at-will basis.  Neither the Company nor any of its subsidiaries is
involved in any labor dispute nor, to the knowledge of the Company or any of its
subsidiaries, is any such dispute threatened.  None of the Company’s
or its subsidiaries’ employees is a member of a union and the Company and its
subsidiaries believe that their relations with their employees are
good

       

             4.13. Tax Matters.  Except
as set forth in the Transaction Documents, the SEC Documents or the Disclosure
Schedule as and with the exception of its corporate federal and state income tax
return for the year ended December 31, 2008,  the Company has, or will
have prior to Closing (a) properly completed and filed on a timely basis all tax
returns (federal, provincial, state, county, local and other) relating to all
excise, payroll, real estate, capital stock, intangible, value-added, income,
sales, use, service, employment, property and, without limitation of the
foregoing, all other taxes of every kind and nature which the Company is
required to file in connection with its business prior to the Closing Date
(i.e., the due date for such tax return being on or before the Closing Date) and
for which the non-payment of, or failure to file, could result in a Lien on any
of the Company’s assets, or result in the Investors becoming liable or
responsible therefore, and (b) paid in full all Taxes (as defined herein),
interest, penalties, assessments or deficiencies shown to be due to any taxing
authority on such returns.  The Company is not currently the
beneficiary of any extension of time within which to file any such return. The
Company is not a party to any pending or, to the knowledge of the Company, any
threatened action or proceeding against the Company for the assessment or
collection of Taxes by any Governmental Authority, and there is no basis for any
such action or proceeding.  There are no audits pending with respect
to any liabilities for Taxes of the Company.

       

             4.14. Indemnification, Guarantee or
Assumption of Liability Obligations.  Except as permitted by
Applicable Law or set forth in the Company‘s Certificate of Incorporation or
By-laws or set forth in
the Transaction Documents, the SEC Documents or the Disclosure Schedule the
Company is not a party to any Contract that contains any provisions requiring
the Company to indemnify, guarantee or assume liabilities of any Person except
as made in the ordinary course of business with routine agreements.

       

             4.15. Employee Benefit
Plans.  Except as set forth in the Transaction Documents, the
SEC Documents or the Disclosure Schedule the Company does not have any liability
arising directly or indirectly under Section 412 of the Code, or Section 302 of
Title IV of ERISA. The Company does not have any liability arising directly or
indirectly to or with respect to any “multiemployer plan” within the meaning of
Section 4001(a)(3) of ERISA.  The Company does not have any liability
arising under the Consolidated Omnibus Reconciliation Act of 1985, as amended,
Section 4980B of the Code and Part 6 of Subtitle B of Title I of
ERISA.  Nothing has occurred or failed to occur with respect to any
the Company Pension Plan that could result in any liability to the
Investors.

      
       4.16. Disclosure.  To the
best of the knowledge and belief of the management of the Company, no
representation or warranty by the Company in this Agreement and no statement
contained or to be contained in any document, certificate or other writing
furnished by the Company to the Investors in connection with the transactions
contemplated by this Agreement, contains or will contain any untrue statement of
a material fact or omits or will omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.  There is no fact that has not
been disclosed to the Investors of which any officer or director of the Company
is aware which has or could reasonably be expected to have a Material Adverse
Effect.

       

             4.17. Insurance.  The
Company and each of its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its subsidiaries are engaged.

       

             4.18. Regulatory
Permits.  The Company and its subsidiaries possess all material
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to 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, authorization or permit.

       

             4.19. 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 to maintain asset accountability, and (iii)
the recorded amounts for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

       

             4.20. SEC Documents:
Financial Statements. Except as set forth in the Disclosure Schedule,
since the date hereof, the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the Commission
under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) The Company has made available through the Commission’s website at
www.sec.gov., complete and accurate copies of the SEC Documents.  As
of their respective dates, the financial statements of the Company disclosed in
the SEC Documents (the “Financial
Statements”) complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto.  Such financial statements have been
prepared in accordance with generally accepted accounting principles,
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).

       

             4.21. Acknowledgment
Regarding Investor’s Purchase of the Preferred Stock. The Company
acknowledges and agrees that the Investors are acting solely in the capacity of
an arm’s-length purchaser with respect to the Transaction Documents and the
transactions contemplated thereby.  The Company further acknowledges
that the Investors are not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated thereby and any advice given by the Investors
or any of their respective representatives or agents in connection with the
Transaction Documents and the transactions contemplated thereby is merely
incidental to such Investor’s purchase of the Preferred Stock or the Conversion
Shares.  The Company further represents to the Investor that the
Company’s decision to enter into the Transaction Documents has been based solely
on the independent evaluation by the Company and its
representatives.

       

             4.22. No General
Solicitation.  None of the Company, its subsidiaries or
Affiliates (as defined herein), nor any person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D under the Securities Act) in connection with the
offer or sale of the Preferred Stock.

       

             4.23. No Integrated
Offering.  None of the Company, its subsidiaries or Affiliates,
nor any person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of the Preferred Stock under
the Securities Act or cause this offering of the Preferred Stock to be
integrated with prior offerings by the Company for purposes of the Securities
Act.

       

             4.24. Certain
Transactions.  Except as permitted by Applicable Law or set
forth in the Company‘s Certificate of Incorporation or By-laws or set forth in the
Transaction Documents, the SEC Documents or the Disclosure
Schedule  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 third parties and other than the
grant of stock options disclosed in the SEC Documents, none of the officers,
directors, or employees of the Company, its subsidiaries or Affiliates is
presently a party to any transaction with the Company, its subsidiaries or
Affiliates (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.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

             4.25. Rights of First
Refusal.  The Company is not obligated to offer the securities
offered hereunder on a right of first refusal basis or otherwise to any third
parties, including but not limited to, current or former shareholders of the
Company, its subsidiaries, Affiliates, underwriters, brokers, agents or other
third parties.

       

             4.27. Cancelleation
of Debentures and Warrants.  The Investors and the Company
agree that at  and subject to the conditions of Closing hereunder,
Dutchess Private Equities Fund, Ltd will cancel all Convertible Debentures
issued by the Company to Dutchess Private Equities Fund, Ltd. and all Warrants
held by Dutchess Private Equities Fund, Ltd. and all indebtedness and other
obligations of the Company associated with such  Debentures
and Warrants.

       

          5. Representations of the
Investors.  Each of the Investors severally represents to the
Company that:

       

             5.1. Investment
Intent.  The shares of the Series A Stock and the Conversion
Shares into which such shares may be converted that are being acquired by the
Investor are being purchased for investment for the Investor’s own account and
not with a view to, or for resale in connection with, any distribution or public
offering thereof.  The Investor has no present plan or intention to
engage in a sale, exchange, transfer, distribution, redemption, reduction in any
way of the Investor’s risk of ownership by short sale or otherwise, or other
disposition, directly or indirectly of the Series A Stock being acquired by the
Investor pursuant to the Transaction Documents or the Conversion Shares into
which such shares may be converted.  The Investor is able to bear the
economic risk of its investment and has the knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks (including tax considerations) of its investment, including the high
degree of risk of loss of the Investor’s entire investment herein.

       

             5.2. Restrictions on Resale, Rule
144.  The Investor understands that the shares of the Series A
Stock and the Conversion Shares have not been registered under the Securities
Act or any state securities laws by reason of their contemplated issuance in
transactions exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) thereof or Rule 504, 505 or 506 promulgated under the
Securities Act and applicable state securities laws, and that the reliance of
the Company and others upon these exemptions is predicated in part upon this
representation by the Investor.  The Investor further understands that
the Series A Stock and the Conversion Shares may not be transferred or resold
without (i) registration under the Securities Act and any applicable state
securities laws, or (ii) an exemption from the requirements of the Securities
Act and applicable state securities laws.  The Investor also
understands that the Conversion Shares will be issued without prior registration
thereof under the Securities Act or applicable state securities laws in reliance
upon Section 4(2) of the Securities Act and transactional exemptions from
registration under applicable state securities laws based upon appropriate
representations of the Investor.  As such, the Conversion Shares will
be subject to transfer restrictions similar to restrictions applicable to the
Series A Stock.  The Investor understands that (i) an exemption from
such registration is presently available pursuant to Rule 144 promulgated under
the Securities Act by the Commission, (ii) the Company has made a commitment to
remain eligible for Rule 144,.  The Investor understands that any
sales pursuant to Rule 144 can be made only in full compliance with the
provisions of Rule 144.

       

             If so requested by
the Investors, the Company shall instruct counsel to write a Rule 144 opinion
letter provided the necessary paperwork has been submitted and such counsel can
write an opinion that the proposed transaction fits within the Exemption (as
defined herein) .  

       

             5.3 Location of
Principal Office, Qualification as an Accredited Investor,
etc.  The state in which the Investor’s principal office (or
domicile, if the Investor is an individual) is located is the state set forth in
the Investor’s address on Schedule 1.  The Investor by execution of
this Agreement hereby represents that he, she or it qualifies as an “accredited
investor” for purposes of Regulation D promulgated under the Securities
Act.  The Investor (i) is an investor in securities of companies
similar to the Company and acknowledges that it is able to fend for itself, and
bear the loss of its entire investment in the Series A Stock, and (ii) has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the investment to be made by it pursuant to
this Agreement.  If other than an individual, the Investor also
represents it has not been organized solely for the purpose of acquiring the
Series A Stock or the Conversion Shares.

       

             5.4. Acts and
Proceedings.  The Investor has full power and authority to
enter into and perform under the Transaction Documents in accordance with their
respective terms.  The Transaction Documents have been duly authorized
by all necessary action on the part of the Investor, has been duly executed and
delivered by the Investor, and each is a valid and binding agreement of the
Investor and enforceable against the Investor in accordance with their terms,
except as enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting the enforcement of creditors’
rights generally and to judicial limitations on the remedy of specific
enforcement and other equitable remedies.

       

             5.5. Exculpation
Among Investors.  The Investor acknowledges that in making the
decision to invest in the Company, the Investor is not relying on any other
Investor or upon any person, firm or company, other than the Company and its
officers, employees and/or directors.  The Investor agrees that none
of any of the other Investor, nor their partners, employees, officers or
controlling persons, shall be liable for any actions taken by the Investor, or
omitted to be taken by the Investor, in connection with such
investment.

       

             5.6. Disclosure of
Information.  The Investor represents that the Company has made
available to the Investor at a reasonable time prior to the execution of the
Transaction Documents the  opportunity to ask questions and receive
answers from the Company’s management concerning the Company’s business,
management and financial affairs, the terms and conditions of the offering of
the Series A Stock and to obtain any additional information (that the Company
possesses or can acquire without unreasonable effort or expense) as may be
necessary to verify the accuracy of information furnished to such
Investor.  Investor further represents that it, except as otherwise
provided by law, is entering into the Transaction Documents and is acquiring the
Series A Stock without any representation or warranty, express or implied, by
the Company or any of its officers, directors, employees or affiliated, except
as expressly set forth in this Agreement.  The foregoing, however,
does not limit or modify the representations and warranties of the Company in
the Transaction Documents or the right of the Investors to rely
thereon.

       

             5.7. Legend; Stop
Transfer.  The Series A Stock, and any Conversion Shares issued
upon conversion thereof, shall bear a legend substantially similar to the
following:

       

      THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER EITHER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE BLUE SKY LAWS,
AND ARE SUBJECT TO CERTAIN INVESTMENT REPRESENTATIONS.  THESE
SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION UNDER THE ACT AND SUCH APPLICABLE BLUE SKY LAWS, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.

       

      The
Company shall make a notation regarding the restrictions on transfer of the
Series A Stock and any such Conversion Shares in its books and the Series A
Stock and any such Conversion Shares shall be transferred on the books of the
Company only if transferred or sold pursuant to an effective registration
statement under the Securities Act covering the securities to be transferred or
an opinion of counsel satisfactory to the Company that such registration is not
required.

       

      Any
legend endorsed on a certificate pursuant to Section 5.7 hereof shall be
removed, and the Company shall issue a certificate without such legend to the
holder of such security, if such security is being disposed of pursuant to a
registration under the Securities Act or pursuant to Rule 144 or any similar
rule then in effect.

       

             It shall be the
Company’s responsibility to take all necessary actions and to bear all such
costs to issue the Conversion Shares as provided herein, including the
responsibility and cost for delivery of an opinion letter to the transfer agent,
if so required.  The person or entity in whose name the certificate of
Conversion Shares is to be registered shall be treated as a shareholder of
record on and after the Conversion Date.  The Company hereby
acknowledges that the date of consideration for this Debenture is the Issuance
Date of the original Obligations, as outlined in the Debt Conversion Agreement,
and shall use all commercially reasonable best efforts to facilitate sales under
Rule 144 of the Securities Act

       

             5.8 No Brokers or
Finders.  No person, firm or corporation has or will have, as a
result of any contractual undertaking by the Investor, any right, interest or
valid claim against the Investor or the Company for any commission, fee or other
compensation as a finder or broker, or in any similar capacity, in connection
with the transactions contemplated by the Transaction Documents.  Each
responsible Investor will indemnify and hold the Company harmless against any
and all liability with respect to any such commission, fee or other compensation
which may be payable or determined to be payable.

       

             5.9. No Governmental
Review.  Each Investor understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Preferred Stock or
the Conversion Shares, or the fairness or suitability of the investment in the
Preferred Stock or the Conversion Shares, nor have such authorities passed upon
or endorsed the merits of the offering of the Preferred Stock or the Conversion
Shares.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

             5.10. Receipt of
Documents.  Each Investor and his or its counsel has received
and read in their entirety: (i) the Transaction Documents and each
representation, warranty and covenant set forth therein; (ii) all due diligence
and other information requested by the Investor to verify the accuracy and
completeness of such representations, warranties and covenants; (iii) the
Company’s Form 10-KSB for the fiscal year ended December 31, 2008; (iv) the
Company’s Form 10-QSB for the six months  ended June  30,
2009 and (v) answers to all questions each Investor submitted to the Company
regarding an investment in the Company; and each Investor has relied on the
information contained therein.

       

             5.11. Due Formation
of Corporate and Other Investors.  If the Investors is a
corporation, trust, partnership or other entity that is not an individual
person, it has been formed and validly exists and has not been organized for the
specific purpose of purchasing the Series A Stock and is not prohibited from
doing so.

       

             5.12. No Legal Advice
From the Company.  Each Investor acknowledges, that it had the
opportunity to review the Transaction Documents and the transactions
contemplated thereby with his or its own legal counsel and investment and tax
advisors.  Each Investor is relying solely on such counsel and
advisors and not on any statements or representations of the Company, its
subsidiaries, Affiliates or any of their respective representatives or agents
for legal, tax or investment advice with respect to this investment, the
transactions contemplated by the Transaction Documents or the securities laws of
any jurisdiction.

       

          6. Covenants.

       

             6.1. Best Efforts.  Each
party shall use its best efforts to timely satisfy each of the conditions to be
satisfied by it as provided in Sections 7 and 8 hereof.

       

             6.2. Reporting
Status.  Until the earlier of (i) the date as of which the
Investors may sell all of the Conversion Shares without restriction pursuant to
Rule 144(k) promulgated under the Securities Act (or successor thereto), or (ii)
the date on which (A) the Investors shall have sold all the Conversion Shares
and (B) none of the Series A Stock are outstanding (the “Registration
Period”), the Company shall file in a timely manner all reports required
to be filed with the Commission pursuant to the Exchange Act and the regulations
of the Commission thereunder, and the Company shall not terminate its status as
an issuer required to file reports under the Exchange Act even if the Exchange
Act or the rules and regulations thereunder would otherwise permit such
termination.

       

             6.3. Reservation of
Shares.  The Company shall take all action reasonably necessary
to at all times have authorized, and reserved for the purpose of issuance, such
number of shares of Common Stock as shall be necessary to effect the issuance of
the Conversion Shares.  If at any time the Company does not have
available such shares of Common Stock as shall from time-to-time be sufficient
to effect the conversion of all of the Conversion Shares, then the Company and
its management shall, upon the written request of the Investors, do the
following: (i) call and hold a special meeting of the shareholders or initiate a
request for consents of shareholders within thirty (30) days of such occurrence
for the sole purpose of increasing the number of shares authorized, (ii)
recommend to the shareholders that they vote in favor of increasing the number
of shares of Common Stock authorized, and (iii) vote all of their shares in
favor of increasing the number of authorized shares of Common
Stock.

       

             6.4. Listings or
Quotation.  If not already done prior to the Closing, the
Company shall promptly secure the listing or quotation of the Conversion Shares
upon each national securities exchange, automated quotation system or The
National Association of Securities Dealers Inc.’s Over-The-Counter Bulletin
Board (“OTCBB”) or
other market, if any, upon which shares of Common Stock are then listed or
quoted.  The Company shall use its best efforts to maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares from time-to-time issuable under the terms of this
Agreement.  The Company shall maintain the Common Stock’s
authorization for quotation on the OTCBB.

       

             6.5. Fees and
Expenses.  Each of the Company and the Investors shall pay all
costs and expenses incurred by such party in connection with the negotiation,
investigation, preparation, execution and delivery of the Transaction
Documents.

       

             6.6. Transfer Agent.  The
Company covenants and agrees that, in the event that the Company’s agency
relationship with the transfer agent should be terminated for any reason after
the Closing Date, the Company shall immediately appoint a new transfer agent and
shall require that the new transfer agent agree to be bound by the terms of any
transfer agent instructions issued by the Company and in place as of the date
hereof.

       

          7. Conditions To The Company’s
Obligation To Sell.  The obligation of the Company hereunder to
issue and sell the Preferred Stock to the Investors at the Closing is subject to
the satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company’s sole benefit
and may be waived by the Company at any time in its sole
discretion:

       

             7.1. The
Investor and Company shall have executed the Debt Conversion Agreement,
Certificate of Designation and this Agreement (collectively, the “Transaction
Documents”) .

       

             7.2. All
necessary consents and approvals from regulatory and other authorities and all
filings with such authorities and all other consents and approvals required by
the Transaction Documents shall have been obtained and made to the Company’s
satisfaction.

       

             7.3. The
representations and warranties of the Investors shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
specific date), and the Investors shall have performed, satisfied and complied
in all material respects with the covenants, agreements and conditions required
by the Transaction Documents to be performed, satisfied or complied with by the
Investors at or prior to the Closing Date.

       

      

               7.4. Cancellation of
Debentures and Warrants.  Dutchess Private Equities Fund, Ltd
shall have cancelled all Convertible Debentures issued by the Company to
Dutchess Private Equities Fund, Ltd. and all Warrants held by Dutchess Private
Equities Fund, Ltd. and all indebtedness and other obligations of the Company
associated with such  Debentures and Warrants and instruments of
cancellation of all such documents and the Company's obligations hereunder shall
have been executed and delivered to the Companyin form and substance acceptable
to the Company in its sole discretion.

      

         

          8. Conditions To The Investor’s
Obligation To Purchase.  The obligation of the Investors
hereunder to purchase the Series A Stock at the Closing(s) is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Investor’s sole benefit
and may be waived by that Investor at any time in the Investor’s sole
discretion:

       

             8.1. The
Company shall have executed the Transaction Documents and delivered the same to
the Investors.

       

             8.2. The
Common Stock shall be authorized for quotation on the OTCBB and trading in the
Common Stock shall not have been suspended for any reason.

       

             8.3. The
representations and warranties of the Company shall be true and correct in all
material respects (except to the extent that any of such representations and
warranties is  qualified herein  as of the date when made
and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the Company
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by the Transaction Document to be
performed, satisfied or complied with by the Company at or prior to the Closing
Date.  If requested by the Investor, the Investor shall have received
a certificate, executed by the President of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may be reasonably
requested by the Investor.

       

             8.4. The
Company shall have delivered to the Investors the Series A Stock in the
respective amounts set forth opposite each Investors name on Schedule 1 attached
hereto.

       

             8.5. The
Company shall have delivered to the Investors a certificate of good standing
from the Delaware Secretary of State.

       

             8.6. The
Company shall have reserved out shares of Common Stock to effect the conversion
of all of the Conversion Shares then outstanding.

       

             8.7. No Events
of Default past any applicable cure period, shall have occurred under the
Transaction Documents.

       

             8.8. The
Company shall deliver to the Investor a board resolution stating that all
management, director and officers have authorized the Debt Conversion Agreement
and this Agreement.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

          9. Indemnification.

      
       9.1. In
consideration of the Investor’s execution and delivery of this Agreement and
acquiring the Preferred Stock and the Conversion Shares hereunder, and in
addition to all of the Company’s other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless the
Investors and each other holder of the Preferred Stock and the Conversion
Shares, and all of their officers, directors, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by the Transaction Documents) (collectively, the “Investor
Indemnitees”) from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Investor
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 the Investor Indemnitees or any of them as a
result of, or arising out of, or relating to (a) any misrepresentation or breach
of any representation or warranty made by the Company in the Transaction
Documents or any other certificate, instrument or document contemplated thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents or any other certificate, instrument or document
contemplated thereby, or (c) any cause of action, suit or claim brought or made
against such Indemnitee and arising out of or resulting from the execution,
delivery, performance or enforcement of the Transaction Documents or any other
instrument, document or agreement executed pursuant thereto, provided that no
indemnification shall be provided for any such actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses
resulting directly or indirectly from willful or negligent conduct of any
Investor or in breach of any of the Transaction Documents.   To
the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities, which is permissible
under applicable law.

       

             9.2. In
consideration of the Company’s execution and delivery of the Transaction
Documents, and in addition to all of the Investor’s other obligations under the
Transaction Documents, the Investor shall defend, protect, indemnify and hold
harmless the Company and all of its officers, directors, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by the Transaction Documents) (collectively, the
“Company
Indemnitees”) from and against any and all Indemnified Liabilities
incurred by the Indemnitees or any of them as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Investors in the Transaction Documents, instrument or
document contemplated thereby or executed by the Investor, (b) any breach of any
covenant, agreement or obligation of the Investors contained in the Transaction
Documents or any other certificate, instrument or document contemplated thereby
or executed by the Investor, or (c) any cause of action, suit or claim brought
or made against such Company Indemnitee based on material misrepresentations or
due to a material breach and arising out of or resulting from the execution,
delivery, performance or enforcement of the Transaction Documents or any other
instrument, document or agreement executed pursuant thereto by any of the
parties thereto, including, specifically, documents executed in settlement of
any litigation.  To the extent that the foregoing undertaking by each
Investor may be unenforceable for any reason, each Investor shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.

       

          10. Definitions.  The
following terms, as used herein, have the following meanings:

       

             10.1. “Affiliate”
means, with respect to any person or entity, another person or entity that,
directly or indirectly, (i) has a ten percent (10%) or more equity interest in
that person or entity, 

      (ii) has
ten percent (10%) or more common ownership with that person or entity, (iii)
controls that person or entity, or (iv) shares common control  with
that
person or entity.  

      “Control”
or “controls”
for purposes hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or
entity.

       

             10.2. “Agreement”
has the meaning set forth in the Introduction.

      
       10.3. “Applicable
Law” means, with respect to any Person, any domestic or foreign, federal,
state or local common law or duty, case law or ruling, statute, law, ordinance,

      policy,
guidance, rule, administrative interpretation,
regulation, code, order, writ, injunction, directive, judgment, decree or other
requirement of any Governmental  

      Authority
applicable to such Person or any of its Affiliates or Plan Affiliates
or any of
their respective properties, assets, officers, directors, employees, consultants

      or agents
(in connection with such officer’s, director’s, employee’s, consultant’s or
agent’s activities on behalf of such
Person or any of its Affiliates or Plan Affiliates).

       

             10.4. “Capital
Stock” has the meaning set forth in Section 4.3 hereof.

       

             10.5. “Certificate of
Incorporation” means the Company’s Certificate of Incorporation as filed
with the Delaware Secretary of State, as may be amended from time to
time.

       

             10.6. “Closing”
has the meaning set forth in Section 3 hereof.

       

             10.7. “Closing
Date” has the meaning set forth in Section 3 hereof.

       

             10.8. “Code”
means the Internal Revenue Code of 1986, as amended, and the regulations or
other binding pronouncements promulgated thereunder.

       

             10.9. “Common
Stock” has the meaning set forth in Section 1 hereof.

       

             10.10. “Company”
has the meaning set forth in the Introduction.

       

             10.11. “Compensation
Plan” means any material benefit or arrangement that is not either a
Pension Plan or a Welfare Plan, including, without limitation, (i) each
employment or consulting 

      agreement,
(ii) each
arrangement providing for insurance coverage or workers’ compensation benefits,
(iii) each bonus, incentive bonus or deferred bonus
arrangement, (iv) each 

      arrangement
providing
termination allowance, severance or similar benefits, (v) each equity
compensation plan, (vi) each current or deferred compensation agreement,
arrangement 

      or
policy, and (vii) each
compensation policy and practice maintained by the Company or any ERISA
Affiliate of the Company covering the employees, former employees, directors

      and
former directors of the Company and the
beneficiaries of any of them.

       

             10.12. “Consent”
or “Consents”
have the meanings set forth in Section 4.5 hereof.

       

             10.13. “Contracts”
means all contracts, agreements, options, leases, licenses, sales and accepted
purchase orders, commitments and other instruments of any kind, whether written
or oral, 

      to which
the Company is a party on the Closing Date, including the Scheduled
Contracts.

      
       10.14. “Conversion
Shares” has the meaning set forth in Section 1 hereof.

       

             10.15. “Disclosure
Schedule” has the meaning set forth in Section 4 hereof.

       

             10.16. “Effective
Date” has the meaning set forth in Section 6.3 hereof.

       

             10.17. “Employee Benefit
Plan” means all Pension Plans, Welfare Plans and Compensation
Plans.

       

             10.18. “ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.

       

             10.19. “ERISA
Affiliate” means any “person,” within the meaning of Section 7701(a)(1)
of the Code, that together with the Company is considered a single employer
pursuant to 

      Section
414(b), (c), (m) or (o) of the Code or Section 3(5) or 4001(b)(1) of
ERISA.

       

             10.20. “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

       

             10.21. “Filing
Date” has the meaning set forth in Section 6.3 hereof.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

             10.22. “GAAP”
means generally accepted accounting principles in the United States,
consistently applied.

       

             10.23. “Governmental
Authority” means any foreign, domestic, federal, territorial, state or
local governmental authority, quasi-governmental authority, instrumentality,
court, government

      or
self-regulatory organization, commission, tribunal or organization or any
regulatory, administrative or other agency, or any political or other
subdivision,
department or branch of 

      any of
the foregoing.

       

             10.24. “Intellectual
Property” means all rights in patents, patent applications, trademarks
(whether registered or not), trademark applications, service mark registrations
and service 

      mark
applications, trade
names, trade dress, logos, slogans, tag lines, uniform resource locators,
Internet domain names, Internet domain name applications, corporate
names,

      copyright
applications, registered copyrighted
works and commercially significant unregistered copyrightable works (including
proprietary software, books, written materials, 

      prerecorded
video or audio tapes, and other copyrightable works),
technology, software, trade secrets, know-how, technical documentation,
specifications, data, designs and 

      other
intellectual property and proprietary rights used in or necessary to the conduct
of the
business of the Company, but excluding third-party off-the-shelf computer
programs.

       

             10.25. “Investors”
has the meaning set forth in the Introduction.

       

             10.26. “Latest Financial
Statements” has the meaning set forth in Section 4.6(a)
hereof.

       

             10.27.  “Liability”
or “Liabilities”
means any liabilities, obligations or claims of any kind whatsoever whether
absolute, accrued or un-accrued, fixed or contingent, matured or un-matured,

      asserted
or unasserted, known or unknown, direct or indirect, contingent or otherwise and
whether due or to become due, including without limitation any
foreign or domestic tax 

      liabilities
or deferred tax liabilities incurred in respect of or measured by the Company’s
income, or any other debts, liabilities or obligations relating to or arising
out of any act, 

      omission,
transaction, circumstance, sale of goods or services, state of facts or other
condition which occurred or existed on or before the date hereof, whether or not
known, due or payable.

       

             10.28. “Lien”
means, with respect to any asset, any mortgage, title defect or objection, lien,
pledge, charge, security interest, hypothecation, restriction, encumbrance,
adverse claim 

      or charge
of any
kind in respect of such asset.

       

             10.29. “Material Adverse
Effect” means, with respect to the Company, any change in or effect on
its business, customers, customer relations, operations, properties, working

      capital
condition (financial
or otherwise), assets, properties, liabilities or prospects (financial or
otherwise) that is materially adverse to its business, properties, working

      capital
condition (financial or otherwise),assets,
liabilities or prospects (financial or otherwise).

       

             10.30. “Material
Customers” has the meaning set forth in Section 4.17 hereof.

       

             10.31. “Ordinary Course
of Business” means any action taken by the Company that is (i) consistent
with its past practices and is taken in the ordinary course of its normal

      day-to-day
operations, and (ii)
not required to be specifically authorized by its Board of
Directors.

       

             10.32. “Penalty
Date” has the meaning set forth in Section 6.3 hereof.

       

             10.33. “Pension
Plan” means an “employee pension benefit plan” as such term is defined in
Sections 3(2) or 3(3) of ERISA and all other material employee benefit
arrangements or 

      programs
relating to the
Company’s business, including, without limitation, any such arrangements or
programs providing severance pay, sick leave, vacation pay,
salary 

      continuation
for disability, retirement benefits,
deferred compensation, bonus pay, incentive pay, stock options, hospitalization
insurance, medical insurance and life 

      insurance,
sponsored or maintained by the Company or any Affiliate
of the Company or to which the Company or any Affiliate of the Company is
obligated to contribute 

      thereunder
on behalf of any current or former employee who performed services with
respect to the Company’s business.

       

             10.34. “Permits”
has the meaning set forth in Section 4.9 hereof.

       

             10.35. “Permitted
Liens” means (i) Liens for Taxes or governmental assessments, charges or
claims the payment of which is not yet due, or for Taxes the validity of which
are being 

      contested
in good faith by
appropriate proceedings; (ii) statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen and other similar
Persons 

      and other
Liens imposed by Applicable Law
incurred in the Ordinary Course of Business for sums not yet delinquent or being
contested in good faith; (iii) Liens relating to 

      deposits
made in the Ordinary Course of Business in connection with
workers’ compensation, unemployment insurance and other types of social security
or to secure the 

      performance
of leases, trade contracts or other similar agreements; and (iii) other Liens
set forth
on the Disclosure Schedule; provided, however, that, with respect to each of

      clauses
(i) through (iii), to the extent that any such Lien on that arose prior to the
date of the Latest Financial Statements
and relates to, or secures the payment of, a Liability 

      that is
required to be accrued for under GAAP, such Lien shall not be a Permitted Lien
unless all such Liabilities have been fully accrued
or otherwise reflected on the 

      Latest
Financial Statements.  Notwithstanding the foregoing, no Lien arising
under the Code or ERISA with respect to the operation, termination, restoration
or
funding of any 

      Employee
Benefit Plan sponsored by, maintained by or contributed to by the Company or any
of its ERISA Affiliates or arising in connection with any excise tax or penalty
tax 

      with
respect to such Employee Benefit Plan shall be a Permitted Lien.

       

             10.36. “Person”
means an individual, corporation, partnership, limited liability company,
association, trust, estate or other entity or organization, including a
Governmental Authority.

       

             10.37. “Plan
Affiliate” means, with respect to any Person, any Employee Benefit Plan
sponsored by, maintained by or contributed to by such Person, and with respect
to any Employee 

      Benefit
Plan, any Person
sponsoring, maintaining or contributing to such plan or
arrangement.

       

             10.38. “Preferred
Stock” has the meaning set forth in Section 1 hereof.

       

             10.39. “Purchase
Commitment” has the meaning set forth in Section 2 hereof.

       

             10.40. “Scheduled
Contracts” has the meaning set forth in Section 4.12 hereof.

       

             10.41. “SEC
Documents” has the meaning set forth in Section 4.26 hereof.

       

             10.42. “Securities
Act” means the Securities Act of 1933, as amended.

       

             10.43.  “Series
A
Stock” has the meaning set forth in the Recitals.

       

             10.44. “Tax” or
“Taxes”
means all taxes imposed of any nature including federal, state, local or foreign
net income tax, alternative or add-on minimum tax, profits or excess profits
tax, 

      franchise
tax, grossincome,
adjusted gross income or gross receipts tax, employment related tax (including
employee withholding or employer payroll tax, FICA or
FUTA), 

      real or
personal property tax or ad valorem tax,
sales or use tax, excise tax, stamp tax or duty, any withholding or back up
withholding tax, value added tax, severance tax, prohibited 

      transaction
tax, premiums tax, environmental tax, intangibles
tax or occupation tax, together with any interest or any penalty, addition to
tax or additional amount imposed by any 

      Governmental
Authority (domestic or foreign) responsible for the
imposition of any such tax.  The term Tax shall also include any
Liability of the Company for the Taxes of any 

      other
Person under U.S. Treasury Regulations Section 1.1502-6 (or similar provisions
of state,
local or foreign law), as a transferee or successor by contract or
otherwise.

       

             10.45. “Tax
Return” means all returns, declarations, reports, estimates, forms,
information returns and statements or other information required to be filed
with respect to any Tax.

       

             10.46. “Transaction
Documents” has the meaning set forth in Section 4.2 hereof.

       

             10.47. “Welfare
Plan” means an “employee welfare benefit plan” as such term is defined in
Section 3(1) of ERISA (including without limitation a plan excluded from
coverage by 

      Section 4
of ERISA).

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

          11. Miscellaneous.

       

             11.1. Waivers, Amendments and
Approvals.  In each case in which approval of any of the
Investors is required by the terms of this Agreement, such requirement shall be
satisfied by a vote or the written action of such Investor.  With the
written consent of any Investor, the obligations of the Company to that Investor
under this Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively) and with the written approval of
such  Investor, the Company may enter into a supplementary agreement
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement applicable to such Investor;
provided, however, that no such waiver or supplemental agreement shall be
effective to amend the terms of the shares of the Series A Stock under
circumstances where  such amendment to the terms of the shares of
Series A Stock shall require the vote of the holders of shares of Series A Stock
called for by the Certificate of Incorporation or Certificate of Designation
and  such vote shall not have been obtained.

       

             11.2. Written Changes, Waivers,
Etc.  Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, except by a statement in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, except to the extent provided in Section
11.1 hereof.

       

             11.3. Notices.  Any and
all notices required or permitted to be given to a party pursuant to the
provisions of this Agreement will be in writing and will be effective and deemed
to provide such party sufficient notice under this Agreement on the earliest of
the following: (i) at the time of personal delivery, if delivery is in person;
(ii) one (1) business day after deposit with an express overnight courier for
United States deliveries, or two (2) business days after such deposit for
deliveries outside of the United States, with proof of delivery from the courier
requested; or (iii) three (3) business days after deposit in the United States
mail by certified mail (return receipt requested) for United States
deliveries.  All notices for delivery outside the United States will
be sent by express courier.  All notices not delivered personally will
be sent with postage and/or other charges prepaid and properly addressed to the
party or parties to be notified at such address or addresses as such party or
parties may designate by one of the indicated means of notice herein to the
other party or parties hereto.  If the notice shall be given to the
Company, a copy of which shall simultaneously be given to Michael Lorenz,
residing at 5109 Waterford Wood Way, Fayetteville, NY 13066

       

             11.4. Survival of Representations,
Warranties, Etc.  All representations, warranties, covenants
and agreements contained herein, including the indemnification obligations set
forth in Section 9 hereof, shall survive after the execution and delivery of
this Agreement or such certificate or document, as the case may be, for a period
of two (2) years.

       

             11.5. Delays or
Omissions.  Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any party under this
Agreement shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
thereto, or of a similar breach or default thereafter occurring; nor shall any
waiver of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring.  Any waiver, permit,
consent or approval of any kind or character on the part of any party hereto of
any breach or default under this Agreement, or any waiver on the part of any
party of any provisions or conditions of this Agreement, must be in writing and
shall be effective only to the extent specifically set forth in such
writing.

       

             11.6. Other Remedies.  Any
and all remedies herein expressly conferred upon a party shall be deemed
cumulative with, and not exclusive of, any other remedy conferred hereby or by
law on such party, and the exercise of anyone remedy shall not preclude the
exercise of any other.

       

             11.7. Attorney
Fees.  Should suit be brought to enforce or interpret any part
of this Agreement, the prevailing party shall be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorney fees to be
fixed by the court (including, without limitation, costs, expenses and fees on
any appeal).  The prevailing party shall be the party entitled to
recover its costs of suit, regardless of whether such suit proceeds to final
judgment.  A party not entitled to recover its costs shall not be
entitled to recover attorney fees.  No sum for attorney fees shall be
counted in calculating the amount of a judgment for purposes of determining if a
party is entitled to recover costs or attorney fees.

       

             11.8. Entire
Agreement.  This Agreement including the exhibits hereto and
the other Transaction Documents constitute the entire understanding and
agreement of the parties hereto with respect to the subject matter hereof and
thereof and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect hereto and thereto.  The express
terms hereof control and supersede any course of performance or usage of the
trade inconsistent with any of the terms hereof.

       

             11.9. Severability.  Should
any one or more of the provisions of this Agreement or of any agreement entered
into pursuant to this Agreement be determined to be illegal or unenforceable,
all other provisions of this Agreement and of each other agreement entered into
pursuant to this Agreement, shall be given effect separately from the provision
or provisions determined to be illegal or unenforceable and shall not be
affected thereby.  The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
which will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.

       

             11.10. Successors and
Assigns.  The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon and be enforceable by the successors
and assigns of the parties hereto, including the holder(s) from time-to-time of
any of the Series A Stock.  This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other Person.

       

             11.11. Governing Law.  The
validity, terms, performance and enforcement of this Agreement shall be governed
and construed by the provisions hereof and in accordance with the laws of the
Commonwealth of Massachusetts applicable to agreements
that are negotiated, executed, delivered and performed solely in the
Commonwealth of Massachusetts.

       

             11.12. Counterparts.  This
Agreement may be executed concurrently in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

       

             11.13. Publicity.  The
Company and the Investors shall have the right to approve, before issuance any
press release or any other public statement with respect to the transactions
contemplated hereby made by any party; provided, however, that the Company shall
be entitled, without the prior approval of the Investors, to issue any press
release or other public disclosure with respect to such transactions required
under applicable securities or other laws or regulations (the Company shall use
its best efforts to consult the Investors in connection with any such press
release or other public disclosure prior to its release and Investors shall be
provided with a copy thereof upon release thereof).

       

             11.14. 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.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

             11.15. Tacking.  For
purposes of calculating under SEC Rule 144 the holding period for the Series A
Stock purchased pursuant to this Agreement and the Conversion Shares, the
Investors shall claim a holding period tacking back to the Closing Date of the
original Debentures, as defined in the Debt Conversion Agreement.  The
Company shall not adopt a position inconsistent with the foregoing or contest
such tacking for any reason, and the Company shall use its best efforts to
cooperate with the Investors in any efforts the Investors may undertake to
assert such tacking in connection with the future sale of the Series A Stock or
the Conversion Shares.

       

             11.16. 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.

       

             11.17. Headings.  The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.

       

             11.18. Disputes Under Debenture. 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 shall
submit all disputes arising under this Agreement to arbitration in Boston,
Massachusetts before a single arbitrator of the American Arbitration Association
(the “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 the Commonwealth of
Massachusetts.  No party hereto will challenge the jurisdiction or
venue provisions as provided in this section.  Nothing in this section
shall limit the Holder's right to obtain an injunction for a breach of this
Debenture from a court of law.  Any injunction obtained shall remain
in full force and effect until the arbitrator, as set forth in herein, fully
adjudicates the dispute.

       

       

       

      
 

       

      IN WITNESS WHEREOF, the
parties hereto have caused this Series A Convertible Preferred Stock Purchase
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.

       

      
        	 
      	 
      	
                THE
      COMPANY:

                LOCATEPLUS
      HOLDINGS CORPORATION

              
	 
      	 
      	
                 

                By:___________________

                Name:
      Geoffrey Lee

                 

                Its:
      Interim Chief Executive Officer

                 

              

      

       

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

       

       

      SCHEDULE
1

      List
of Investors, Signatures and Purchase Commitments

      

      
        	
                
                  Name

                

              	
                
                  Signature

                

              	
                
                  Address/Facsimile

                  Number
      of Investor

                

              	
                
                  Purchase
      Commitment ($)

                

              	
                
                  Purchase
      Commitment (# Shares)

                

              
	 
      	 
      	 
      	 
      	 
      
	
                 

                Dutchess
      Private Equities Fund Ltd.

              	
                 

                 

                ___________________

                Douglas
      H. Leighton, Director

              	
                 

                 

                 

                Douglas
      H. Leighton

                c/o
      Dutchess Capital Management

                50
      Commonwealth Ave., Suite 2

                Boston,
      MA 02116

                Tel:  617-301-4700

                Fax:  617-249-0947

              	
                 

                 

                $1,817,828

              	
                 

                 

                   72,000

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00171-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00171-of-00352.parquet"}]]