Document:

Exhibit
      10.3

    DEBENTURE
      AGREEMENT

     

    THE
      SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
      OF
      1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
      IN
      RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
      SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY
      NOT
      BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
      REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED
      OR
      DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
      AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED
      THE
      MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
      ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

     

    
      
        	
                FACE
                  AMOUNT

              	
                $1,000,000

              
	
                PRICE

              	
                $1,000,000

              
	
                DEBENTURE
                  NUMBER

              	
                June
                  - 2006-101

              
	
                ISSUANCE
                  DATE

              	
                June
                  28, 2006

              
	
                MATURITY
                  DATE

              	
                June
                  28, 2011

              

      

    

     

    FOR
      VALUE
      RECEIVED, Enigma Software, Inc., a Delaware corporation (the “Company”), hereby
      promises to pay DUTCHESS PRIVATE EQUITIES FUND, LP & DUTCHESS PRIVATE
      EQUITIES FUND, II, LP (collectively, the “Holder”) by June 28, 2011 (the
“Maturity Date”), the principal amount of One Million Dollars ($1,000,000) U.S.,
      and to pay interest and the redemption premium on the principal amount hereof,
      and any accrued penalties, in such amounts, at such times and on such terms
      and
      conditions as are specified herein. 

    

    The
      Debenture set forth in this Agreement is subject to automatic conversion at
      the
      end of five (5) years from the date of issuance at which time the Debenture
      outstanding will be automatically converted based upon the formula set forth
      in
      Section 3.2(c). 

    

    Article
      1
 Interest

    

    The
      Company shall pay a twelve percent (12%) annual coupon on the unpaid Face Amount
      of this Debenture. Such payments will be made to the Holder, an "Interest
      Payment," or collectively, the "Interest Payments", on a monthly basis on the
      first day of each business day of each month, commencing August 1, 2006 and
      continuing while there is an outstanding balance on the Debenture, in an amount
      equal to the interest on the balance on the Debenture ("Interest Payment Amount"
      or collectively, the "Interest Payment Amounts") that has accrued since the
      past
      Interest Payment until such time as the Interest Payment is due and
      collected.

    

    The
      Holder shall have the right, but not the obligation, to receive Interest
      Payments through the issuance of common stock, priced at the Conversion Price,
      provided however, that the Company's Common Stock has been trading above a
      minimum price of twenty-five cents ($.25) for the last twenty (20) consecutive
      trading days.

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

       

    

    Any
      monies paid to the Holder in excess of the interest due when paid shall be
      credited toward the Redemption of the Face Amount of the Debenture.

    

    Article
      2 Method
      of Principal Payment

    

    Section
      2.1 Prior
      to
      Registration with the SEC

    

    In
      the
      event that the Effective Date has not occured on or before January 1, 2007
      then,
      the Company will make amortizing cash payments to the Holder (a "Payment,"
      or
      collectively, the "Payments") on a monthly basis on the first day of each
      business day of each month while there is an outstanding balance on the
      Debenture, in the following amounts ("Payment Amount" or collectively, the
      "Payment Amounts") until the earlier of (i) the declaration of an Effective
      Date; or (ii) the Company has paid the Face Amount in full:

    

      
        	
                Payment
                  for January 1, 2007 and each month thereafter

              	 	
                $

              	
                104,166.67

              	 

      

    

    

    Notwithstanding
      any provision to the contrary in this Debenture, the Company may pay in full
      to
      the Holder the Face Amount, or any balance remaining thereon, in readily
      available funds, at any time and from time to time without penalty.

    

    All
      Payments made under Article 2, shall be applied toward the total Redemption
      Amount as outlined in Article 14, herein.

    

    Section
      2.2 Subsequent
      to the Effective Date

    

    After
      the
      date upon which the U.S. Securities and Exchange Commission ("SEC") has declared
      the registration statement for the shares underlying the Debenture
      ("Registration Statement") effective (the "Effective Date the Holder shall
      be
      entitled to convert a portion of the Debenture pursuant to Article 3, below.
      

    

    Nothing
      contained in this Article 2 shall limit the amount the Holder can elect to
      convert during a calendar month except as defined in Section 3.2 (i), below.
      

    

    Section
      2.3 No Penalty for Prepayment.

    

    The
      Company may make additional payments toward Redemption (“Prepayment”) without
      any penalties, which the Holder has the right to refuse in lieu of
      converting.

    

    Section
      2.4 Accelerated Repayment in the Event of a Subsequent Financing by a Third
      Party.

    

    If,
      at
      any time after Closing, the Company receives financing from a third party
      (excluding the Holder), the Company is required to pay to the Holder 100% of
      the
      proceeds raised from the third party in excess of an aggregate amount of
      $1,000,000 (the “Threshold Amount”). The Threshold Amount shall also pertain to
      any assets sold, transferred or disposed of by the Company. The Company agrees
      to pay one hundred percent (100%) of any proceeds raised by the Company over
      the
      Threshold Amount toward the Accelerated Repayment of the Debenture with Interest
      until such time as the Face Amount of the Debenture, including accrued interest
      and penalties, has been paid in full. The accelerated Repayment shall be made
      to
      the Holder upon the Company’s receipt of the financing. Failure to do so will
      result in an Event of Default as defined herein.

     

    
      
        
        

      

      
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    Article
      3 Conversion

     

    Section
      3.1 Conversion
      Privilege

     

    (a) The
      Holder of this Debenture shall have the right to convert any and all amounts
      owing under this Debenture into shares of Common Stock at any time following
      the
      Closing Date and which is before the close of business on the Maturity Date,
      except as set forth in Section 3.2(c)
      below. The number of shares of Common Stock issuable upon the conversion of
      this
      Debenture is
      determined pursuant to Section 3.2
      and
      rounding the result up to the nearest whole share. 

     

    (b) This
      Debenture may not be converted, whether in whole or in part, except in
      accordance with this Article 3.

     

    (c) In
      the
      event all or any portion of this Debenture remains outstanding on the Maturity
      Date, the unconverted
      portion
      of such Debenture will automatically be converted into shares of Common Stock
      on
      such date in the manner set forth in Section 3.2.

     

    Section
      3.2 Conversion
      Procedure  

       

    (a) Conversion
      Procedures. The
      Holder may elect to convert the unpaid Face Amount of and accrued interest
      on
      this Debenture, in whole or in part, at
      any
      time
      following the Closing Date (a “Conversion”). Such Conversion shall be
      effectuated by the Holder sending to the Company a facsimile or electronic
      mail
      version of the signed Notice of Conversion, attached as Exhibit A hereto, which
      evidences the Holder’s intention to convert the Debenture as indicated. The date
      on which the Notice of Conversion is delivered (“Conversion Date”) shall be
      deemed to be the date on which the Holder has delivered to the Company a
      facsimile or electronic mail of the signed Notice of Conversion. Notwithstanding
      the above, any Notice of Conversion received after 5:00 P.M. EST, shall be
      deemed to have been received the next business day,
      with
      receipt being via a confirmation of time of facsimile of the Holder.

     

    (b) Common
      Stock to be Issued. Upon
      the
      Holder's conversion of any Debenture, the Company shall issue the number of
      shares of Common Stock equal to the Conversion. If, at the time of conversion,
      the Registration Statement has been declared effective, the Company shall
      instruct its transfer agent to issue stock certificates without restrictive
      legend (other than a legend referring to the registration statement and
      prospectus delivery requirements) or stop transfer instructions. If, at the
      time
      of the Holder's conversion, the Registration Statement has not been declared
      effective, the Company shall instruct the transfer agent to issue the
      certificates with an appropriate legend. The
      Company shall act as Registrar and shall maintain an appropriate ledger
      containing the necessary information with respect to each Debenture. The
      Company warrants that no instructions, other than these instructions, have
      been
      given or will be given to the transfer agent and that the Common Stock shall
      otherwise be freely resold, except as may be otherwise set forth
      herein.

     

    
      
        
        

      

      
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    (c) Conversion
      Price.  The
      Holder is entitled to convert the
      unpaid Face Amount of this Debenture, plus accrued interest, any time following
      the Closing Date, at the lesser of the following prices (the "Conversion
      Price"): (1) the Maximum Conversion Price of seven cents ($.07); or (2) at
      a
      "Conversion Price" of seventy-five percent (75%) of the lowest closing bid
      price
      of the Common Stock during the twenty (20) trading days immediately preceding
      a
      Conversion Notice. No fractional shares or scrip representing fractions of
      shares will be issued on conversion, but the number of shares issuable shall
      be
      rounded up, in the event of a partial share, to the nearest whole share. The
      Holder shall retain all rights of conversions during any partial trading
      days.

     

    (d) Maximum
      Interest.
      Nothing
      contained in this Debenture shall be deemed to establish or require the Company
      to pay interest to the Holder at a rate in excess of the maximum rate permitted
      by governing law. In the event that the rate of interest required to be paid
      exceeds the maximum rate permitted by governing law, the rate of interest
      required to be paid thereunder shall be automatically reduced to the maximum
      rate permitted under the governing law. In
      the
      event this Section 3.2 (d) applies, the Parties agree that the terms of this
      Debenture remain in full force and effect except as is necessary to make the
      interest rate comply with applicable law.

     

    (e) Opinion
      Letter.
      It shall
      be the Company’s
      responsibility to take all necessary actions and to bear all such costs to
      issue
      the Common Stock 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 Common Stock is to be registered
      shall be treated as a shareholder of record on and after the conversion date.
      Upon surrender of any Debentures that are to be converted in part, the Company
      shall issue to the Holder a new Debenture equal to the unconverted amount,
      if so
      requested in writing by Holder.

     

    (f) Delivery
      of Shares.
      Within
      three (3) business days after receipt of the documentation referred to above
      in
      Section 3.2(a),
      the
      Company shall deliver a certificate, in accordance with Section 3.2(c)
      for
      the number of shares of Common Stock issuable upon the conversion. In the event
      the Company does not make delivery of the Common Stock, as instructed by Holder,
      within five (5) business days after the Conversion Date, the Company shall
      pay
      to Holder in cash, as liquidated damages, an additional three
      percent (3%) per day of the dollar value of the Debentures being converted.
      

     

    If
      the
      failure of the Company to issue the Common Stock pursuant to this Article 3.2
      (f) is due to the unavailability of authorized shares of Common Stock, the
      provisions of this Article 3.2 (f) shall not apply, but instead the provisions
      of Article 3.2 (k) shall apply.

     

    
      
        
        

      

      
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    The
      Company shall make any payments required under this Article
      3.2(f)
      in
      immediately available funds within three (3) business days from the date the
      Common Stock is fully delivered. Nothing herein shall limit the Holder’s right,
      at the Holder's sole discretion, to pursue actual damages or cancel the
      conversion for the Company’s failure to issue and deliver Common Stock to the
      Holder within three (3) business days after the Conversion Date.

     

    The
      Company shall at all times reserve (or make alternative written arrangements
      for
      reservation or contribution of shares) and
      have
      available all Common Stock necessary to meet conversion of the full amount
      of
      the Debentures then outstanding and due to the Holder. If, at any time, the
      Holder
      submits
      a Notice of Conversion and the Company does not have sufficient authorized
      but
      unissued shares of Common Stock (or alternative shares of Common Stock as may
      be
      contributed by Stockholders) available to effect, in full, a conversion of
      the
      Debentures (a “Conversion Default”, the date of such default being referred to
      herein as the “Conversion Default Date”), the Company shall issue to the Holder
      all of the shares of Common Stock which are then available. Any Convertible
      Debentures or any portion thereof, which cannot be converted due to the
      Company's lack of sufficient authorized common stock (the “Unconverted
      Debentures”), may be deemed null and void upon written notice sent by the Holder
      to the Company. The Company shall provide notice of such Conversion Default
      (“Notice of Conversion Default”) to the Holder, by facsimile, within one (1)
      business days of such default.

    

    The
      Company acknowledges that its failure to maintain a sufficient number of
      authorized but unissued shares of Common Stock to effect in full a conversion
      of
      the Debenture will cause the Holder to suffer irreparable harm, and that damages
      will be difficult to ascertain. Accordingly, the parties agree that it is
      appropriate to include in this Agreement a provision for liquidated damages.
      The
      parties acknowledge and agree that the liquidated damages provision set forth
      in
      this section represents the parties’ good faith effort to quantify such damages
      and, as such, agree that the form and amount of such liquidated damages are
      reasonable and will not constitute a penalty. The payment of liquidated damages
      shall not relieve the Company from its obligations to deliver the Common Stock
      pursuant to the terms of this Debenture. Nothing herein shall limit the Holder’s
      right to pursue actual damages for the Company’s failure to maintain a
      sufficient number of authorized shares of Common Stock.

     

    If,
      by
      the third (3rd) business day after the Conversion Date, any portion of the
      shares of the Convertible Debentures have not been delivered to the Holder
      and
      the Holder purchases, in an open market transaction or otherwise, shares of
      Common Stock necessary to make delivery of shares which would have been
      delivered if the full amount of the shares to be converted and delivered to
      the
      Holder by the Company (the "Covering Shares") , then the Company shall pay
      to
      the Holder, in addition to any other amounts due to the Holder pursuant to
      this
      Convertible Debenture, and not in lieu thereof, the Buy-In Adjustment Amount
      (as
      defined below). The "Buy In Adjustment Amount" is the amount equal to the
      excess, if any, of (x) the Holder's total purchase price (including brokerage
      commissions, if any) for the Covering Shares minus (y) the net proceeds (after
      brokerage commissions, if any) received by the Holder from the sale of the
      Sold
      Shares. The Company shall pay the Buy-In Adjustment Amount to the Holder in
      immediately available funds within five (5) business days of written demand
      by
      the Holder. By way of illustration and not in limitation of the foregoing,
      if
      the Holder purchases shares of Common Stock having a total purchase price
      (including brokerage commissions) of $11,000 to cover a Buy-In with respect
      to
      shares of Common Stock it sold for net proceeds of $10,000, the Buy-In
      Adjustment Amount which the Company will be required to pay to the Holder will
      be $1,000.

     

    
      
        
        

      

      
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    (g) Prospectus
      and Other Documents. The
      Company shall furnish to Holder one (1) prospectus and any other documents
      incidental to the registration of the shares of Common Stock underlying the
      Debentures, including any amendment of or supplements thereto. Any filings
      submitted via EDGAR will constitute fulfillment of the Company's obligation
      under this Section. 

    

    (h) Limitation
      on Issuance of Shares.
      If the
      Company’s Common Stock becomes listed on the Nasdaq SmallCap Market after the
      issuance of the Debenture, the Company may be limited in the number of shares
      of
      Common Stock it may issue by virtue of (A) the number of authorized shares
      or
      (B) the applicable rules and regulations of the principal securities market
      on
      which the Common Stock is listed or traded, including, but not necessarily
      limited to, NASDAQ Rule 4310(c)(25)(H)(i) or Rule 4460(i)(1), as may be
      applicable (collectively, the “Cap Regulations”). Without limiting the other
      provisions thereof:
      (i) the
      Company will take all steps necessary to issue shares of Common Stock on
      conversion of the Debentures without violating the Cap Regulations, and (ii)
      if,
      despite taking such steps, the Company cannot issue such shares of Common Stock
      without violating the Cap Regulations or the Holder cannot convert as a result
      of the Cap Regulations (each such Debenture, an “Unconverted Debenture”) the
      Holder shall have the right to elect either of the following options:

    

    (x)
      if
      permitted by the Cap Regulations, require the Company to issue shares of Common
      Stock in accordance with the Holder's Notice of Conversion at a conversion
      purchase price equal to the average of the closing bid price per share of Common
      Stock for any five (5) consecutive Trading Days (subject to certain equitable
      adjustments for certain events occurring during such period) during the sixty
      (60) Trading Days immediately preceding the Conversion Date; or 

    

    (y)
      require the Company to redeem each Unconverted Debenture for an amount (the
      “Redemption Amount”), payable in cash, equal to the sum of (i) one hundred
      twenty-five percent (125%) of the principal of an Unconverted Debenture, plus
      (ii) any accrued but unpaid interest thereon through and including the date
      on
      which the Redemption Amount is paid to the holder (the “Redemption
      Date”).

    

    The
      Holder may elect, without limitation, one of the above remedies with respect
      to
      a portion of such Unconverted Debenture and the other remedy with respect to
      other portions of the Unconverted Debenture. The Debenture shall contain
      provisions substantially consistent with the above terms, with such additional
      provisions as may be consented to by the Holder. The provisions of this section
      are not intended to limit the scope of the provisions otherwise included in
      the
      Debenture.

     

    
      
        
        

      

      
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    (i) Limitation
      on Amount of Conversion and Ownership.
      Notwithstanding anything to the contrary in this Debenture, in no event shall
      the Holder be entitled to convert that amount of Debenture, and in no event
      shall the Company permit that amount of conversion, into that number of shares,
      which when added to the sum of the number of shares of Common Stock beneficially
      owned, (as such term is defined under Section 13(d) and Rule 13d-3 of the
      Securities Exchange Act of 1934, as may be amended, (the “1934 Act”)), by the
      Holder, would exceed 4.99% of the number of shares of Common Stock outstanding
      on the Conversion Date, as determined in accordance with Rule 13d-1(j) of the
      1934 Act. In the event that the number of shares of Common Stock outstanding
      as
      determined in accordance with Section 13(d) of the 1934 Act is different on
      any
      Conversion Date than it was on the Closing Date, then the number of shares
      of
      Common Stock outstanding on such Conversion Date shall govern for purposes
      of
      determining whether the Holder would be acquiring beneficial ownership of more
      than 4.99% of the number of shares of Common Stock outstanding on such
      Conversion Date. However, nothing in this Article 3.2(i) shall be read to reduce
      the amount of principal, interest or penalties, if any, due to the
      Holder.

     

    (j) Legend.
      The
      Holder acknowledges that each certificate representing the Debentures, and
      the
      Common Stock unless registered pursuant to the Registration Rights Agreement,
      shall be stamped or otherwise imprinted with a legend substantially in the
      following form:

    

    THE
      SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD,
      TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT
      TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
      AMENDED, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT
      (OR
      ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES),
      OR
      (iii) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH
      ACT.

     

    (k)
      Prior
      to conversion of the Debenture, if at any
      time
      the
      conversion of all the Debentures and exercise of all the Warrants outstanding
      would result in an insufficient number of authorized shares of Common Stock
      being available to cover all the conversions, then in such event, the Company
      will move to call and hold a shareholder’s meeting or have shareholder action
      with written consent of the proper number of shareholders within thirty (30)
      days of such event, or such greater period of time if statutorily required
      or
      reasonably necessary as regards standard brokerage house and/or SEC requirements
      and/or procedures, for the purpose of authorizing additional shares of Common
      Stock such as necessary to facilitate the Holder's conversions. In such an
      event
      management of the Company shall recommend to all shareholders to vote their
      shares in favor of increasing the authorized number of shares of Common Stock.
      Management of the Company shall vote all of its shares of Common Stock in favor
      of increasing the number of shares of authorized Common Stock to an amount
      equal
      to three hundred percent (300%) of the remaining balance of shares of Common
      Stock underlying the Debenture. The Company represents and warrants that under
      no circumstances will it deny or prevent the Holder’s right to convert the
      Debentures as permitted under the terms of this Subscription Agreement or the
      Registration Rights Agreement. Nothing in this Section shall limit the
      obligation of the Company to make the
      payments set forth in this Article 3.
      The
      Holder, at its sole option, may request the company to authorize and issue
      additional shares if the Holder feels it is necessary for conversions in the
      future. In
      the
      event the Company’s shareholder’s meeting does not result in the necessary
      authorization, the Company shall redeem the outstanding Debentures for an amount
      equal to the sum of the principal of the outstanding Debentures plus accrued
      interest thereon multiplied by 125%.

     

    
      
        
        

      

      
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    Section
      3.3 Fractional
      Shares.
      The
      Company shall not issue fractional shares of Common Stock, or scrip representing
      fractions of such shares, upon the conversion of this Debenture. Instead, the
      Company shall round up, to the nearest whole share.

     

    Section
      3.4 Taxes
      on Conversion. The
      Company shall pay any documentary, stamp or similar issue or transfer tax due
      on
      the issue of shares of Common Stock upon a Conversion. However, the Holder
      shall
      pay any such tax which is due because the shares are issued in a name other
      than
      its name.

     

    Section
      3.5 Company
      to Reserve Stock. The
      Company shall reserve and maintain the number of shares of Common Stock required
      pursuant to and upon the terms set forth in the Subscription Agreement to permit
      the conversion of this Debenture.
      All
      shares of Common Stock which may be issued upon a Conversion hereof shall upon
      issuance by the Company be validly issued, fully paid and nonassessable and
      free
      from all taxes, liens and charges with respect to the issuance
      thereof.

     

    Section
      3.6 Restrictions
      on Sale. This
      Debenture has not been registered under the Securities Act of 1933, as amended
      (the “Act”) and is being issued under Section 4(2) of the Act and Rule 506 of
      Regulation D promulgated under the Act. This Debenture and the Common Stock
      issuable upon a Conversion may
      only be
      sold
      pursuant to registration under or an exemption from the Act.

     

    Section
      3.7 Stock
      Splits, Combinations and Dividends.
      If the
      shares of Common Stock are subdivided or combined into a greater or smaller
      number of shares of Common Stock, or if a dividend is paid on the Common Stock
      in shares of Common Stock, the Conversion Price shall be proportionately reduced
      in the case of a subdivision of shares or stock dividend, or proportionately
      increased in the case of combination of shares, in each such case, by the ratio
      that the total number of shares of Common Stock outstanding immediately after
      such event bears to the total number of shares of Common Stock outstanding
      immediately prior to such event.

    

    Article
      4 Mergers

     

    The
      Company shall not consolidate or merge into, or transfer any or all of its
      assets to, any person, unless such person assumes in writing the obligations
      of
      the Company under this Debenture and immediately after such transaction no
      Event
      of Default exists. Any reference herein to the Company shall refer to such
      surviving or transferee corporation and the obligations of the Company shall
      terminate only upon such written assumption of the Company's
      obligation.
      In the
      event of a merger, or other consolidation, the Company shall give notice to
      the
      Holder simultaneously with the announcement to the public markets.

    

    
      
        
        

      

      
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    Article
      5
Security

    

    This
      Debenture is secured pursuant to Security Agreement (the "Security Agreement")
      of this date between the Company and the Holder.

     

    Article
      6 Defaults
      and Remedies

    Section
      6.1 Events
      of
      Default. An
“Event
      of Default” occurs if any one of the following occur:

    

    (a)
      the
      Company does not make timely Payment or Conversion, in whole or in part,
      necessary to cover as applicable the principal, interest or other sum due on
      the
      Maturity Date, Conversion Date, upon redemption, or otherwise described herein;
      or,

     

    (b)
      the
      Company does not make a Payment in cash for a period of three (3) business
      days
      when due as described in this Agreement; or,

     

    (c)
      any
      of the Company’s representations or warranties contained in the Transaction
      Documents, as defined herein, or this Debenture were false when made or the
      Company fails to comply with any of its other agreements in the Transaction
      Documents (as defined in Article 16 below) and such failure continues for a
      period of five (5) business days; or,

    

    (d)
      the
      Company pursuant to or within the meaning of any Bankruptcy Law: (i) commences
      a
      voluntary case; (ii) consents to the entry of an order for relief against it
      in
      an involuntary case; (iii) consents to the appointment of a Custodian (as
      hereinafter defined) of it or for all or substantially all of its property
      or
      (iv) makes a general assignment for the benefit of its creditors or (v) a court
      of competent jurisdiction enters an order or decree under any Bankruptcy Law
      that (A) is for relief against the Company in an involuntary case; (B) appoints
      a Custodian of the Company or for all or substantially all of its property
      or
      (C) orders the liquidation of the Company, and the order or decree remains
      unstayed and in effect for sixty (60) calendar days; or,

    

    (e)
      the
      Company’s Common Stock is suspended or no longer listed on any recognized
      exchange including electronic over-the-counter bulletin board ("Principal
      Market") for in excess of three (3) consecutive Trading Days.
      Failure
      to comply with the requirements for continued listing on a Principal Market
      for
      a period of five (5) trading days; or notification from a Principal Market
      that
      the Company is not in compliance with the conditions for such continued listing
      on such Principal Market; or,

    

    (f)
      the
      Company breaches any covenant or condition of the Transaction Documents, and
      such breach, if subject to cure, continues for a period of five (5) business
      days; or,

    

    (g)
      the
      Registration Statement underlying the Debenture is not declared effective by
      the
      SEC within twelve (12) months of the Issuance Date.

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    Section
      6.2 Remedies.
      In the
      Event of Default, the Holder may elect to secure a portion of the Company's
      assets in Pledged Collateral (as defined in the Security Agreement). The Holder
      may also elect to garnish revenue from the Company in an amount that will repay
      the Holder on the schedules outlined in this Agreement.

    

    In
      the
      Event of Default, as outlined in this Agreement, the
      Holder
      can exercise its right to increase the Face
      Amount of the Debenture by ten percent (10%) as an initial penalty, and by
      ten
      percent (10%) for each subsequent Event of Default. In addition, the Holder
      may
      elect to increase the
      Face
      Amount by two and one-half percent (2.5%) per month (pro-rata for partial
      periods) paid as liquated damages ("Liquidated Damages"), compounded daily.
      It
      is the intention and acknowledgement of both parties that the Liquidated Damages
      not be deemed as interest or a penalty under the terms of this
      Agreement. 

     

    In
      the
      event of Default, under 6.1 (b), the Holder may elect to lower the Conversion
      Price of the stock, as outlined in Section 3.2 (c) (i) (1) to five cents ($.05)
      per share. The Holder shall also have the right to adjust the Warrant of the
      same date, signed between the Company and the Holder, to the new Conversion
      Price as outlined herein and therein. 

     

    In
      the
      event of Default, under Article 6.1(g), the Holder may elect to switch the
      Conversion Price of the Debenture as outlined in Article 3.2(c) above ("Default
      Conversion Price"). The Default Conversion Price shall be equal to the lesser
      of
      a) the Conversion Price or b) seventy percent (70%) of the lowest closing bid
      price of the Common Stock during the fifteen (15) trading days prior to
      conversion. The Company agrees that the date of consideration for the Debenture
      shall remain the Issuance Date stated herein. The Company shall provide an
      opinion letter from counsel within two (2) business days of written request
      by
      the Holder stating that the date of consideration for the Debenture is the
      Issuance Date and submission of proper Rule 144, promulgated under the
      Securities Act of 1933, support documentation consisting of Form 144, a broker's
      representation letter and a seller's representation letter. In the event the
      Company does not deliver the opinion letter within two business days, the
      Default Conversion Price shall immediately decrease by one percent (1%) for
      each
      business day an opinion letter fails to be delivered. In the event that counsel
      to the Company fails or refuses to render an opinion as required to issue the
      Shares in accordance with this paragraph (either with or without restrictive
      legends, as applicable), then the Company irrevocably and expressly authorizes
      counsel to the Holder to render such opinion and shall authorize the Transfer
      Agent to accept and to rely on such opinion for the purposes of issuing the
      Shares. Any costs incurred by Holder for such opinion letter shall be added
      to
      the Face Amount of the Debenture.

    

    Section
      6.3 Acceleration.
      If
      an
      Event of Default occurs, the Holder by notice to
      the
      Company may declare the remaining principal amount of this Debenture, together
      with all accrued interest and any liquidated damages, to be immediately due
      and
      payable in full. 

     

    Section
      6.4 Seniority. The
      Company warrants that no indebtedness of the Company is senior to this Debenture
      in right of payment, whether with respect to interest, damages or upon
      liquidation or dissolution or otherwise. And, the Company warrants that it
      has
      taken all necessary steps to subordinate its other obligations to the rights
      of
      the Holder hereunder.

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

       

    

    Section
      6.5 Cost
      of Collections. If
      an
      Event of Default occurs, the Company shall pay the Holder's reasonable costs
      of
      collection, including reasonable attorney's fees and costs of
      arbitration.

    

    Article
      7 Registered
      Debentures

     

    Section
      7.1 Record
      Ownership. The
      Company, or the Company's attorney, shall maintain a register of the Holder
      of
      the Debentures (the “Register”) showing their names and addresses and the serial
      numbers and principal amounts of Debentures issued to them. The Register may
      be
      maintained in electronic, magnetic or other computerized form. The Company
      may
      treat the person named as the Holder of this Debenture in the Register as the
      sole owner of this Debenture. The Holder of this Debenture is exclusively
      entitled to receive payments of interest on this Debenture, receive
      notifications with respect to this Debenture, convert it into Common Stock
      and
      otherwise exercise all of the rights and powers as the absolute owner
      hereof.

     

    Worn
      or Lost Debentures. If
      this
      Debenture becomes worn, defaced or mutilated but is still substantially intact
      and recognizable, the Company or its agent may issue a new Debenture in lieu
      hereof upon its surrender. Where
      the
      Holder of this Debenture claims that the Debenture has been lost, destroyed
      or
      wrongfully taken, the Company shall issue a new Debenture in place of the
      Debenture if the Holder so requests by written notice to the Company.

    

    Article
      8 Notice.

    

    Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Debenture must be in writing and will be deemed
      to
      have been delivered (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided a confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one (1) day after deposit with a nationally recognized overnight
      delivery service, in each case properly addressed to the party to receive the
      same. The addresses and facsimile numbers for such communications shall
      be:

    

    If
      to the
      Company:

     

    Colorado
      Stark

    Enigma
      Software Group, Inc.

    2
      Stamford Landing, Suite 100

    Stamford,
      CT 06902 

    Telephone:
      (888) 360-0646 

    Facsimile:
      (203) 621-3334

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    If
      to the
      Investor:

    

    Douglas
      Leighton

    Dutchess
      Capital Management

    50
      Commonwealth Ave, Suite 2

    Boston,
      MA 02116

    Telephone:
      617-301-4702

    Facsimile:
      617-249-0947

    

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

     

    Article
      9 Time

    

    Where
      this Note authorizes or requires the payment of money or the performance of
      a
      condition or obligation on a Saturday or Sunday or a holiday on which the United
      States Stock Markets (“US Markets”) are closed (“Holiday”), such payment shall
      be made or condition or obligation performed on the next business day following
      such Saturday, Sunday or Holiday. A “business day” shall mean a day on which the
      US Markets are open for a full day or half day of trading.

     

    Article
      10 No
      Assignment

    

    This
      Debenture and the obligation hereunder shall not be assignable
      by the Company or the Holder.

    

    Article
      11 Rules
      of
      Construction.

    

    In
      this
      Debenture, unless the context otherwise requires, words in the singular number
      include the plural, and in the plural include the singular, and words of the
      masculine gender include the feminine and the neuter, and when the tense so
      indicates, words of the neuter gender may refer to any gender. The numbers
      and
      titles of sections contained in the Debenture are inserted for convenience
      of
      reference only, and they neither form a part of this Debenture nor are they
      to
      be used in the construction or interpretation hereof. Wherever, in this
      Debenture, a determination of the Company is required or allowed, such
      determination shall be made by a majority of the Board of Directors of the
      Company and if it is made in good faith, it shall be conclusive and binding
      upon
      the Company and the Holder of this Debenture.

     

    Article
      12 Governing
      Law

     

    The
      validity, terms, performance and enforcement of this Debenture 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.
      

     

    Article
      13 Disputes
      Under 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 will submit all
      disputes arising under this agreement to arbitration in Boston, Massachusetts
      before a single arbitrator of the American Arbitration Association (“AAA”). The
      arbitrator shall be selected by application of the rules of the AAA, or by
      mutual agreement of the parties, except that such arbitrator shall be an
      attorney admitted to practice law in the Commonwealth of Massachusetts. No
      party
      to this agreement 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 Agreement from a court of law.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Article
      14  Redemption

    

    The
      Holder shall have the right to be redeemed, in cash, from the Debenture, in
      whole or in part, at a price equal to one hundred and twenty-five percent (125%)
      of the outstanding principal amount of the Debenture, including accrued interest
      (and penalties if applicable). Any Payments, as defined in Article 2 above,
      shall apply to the reduction of the Face Amount and Redemption. 

    

    Article
      15  Holder
      Warrants

    

    As
      an
      additional inducement to the Holder, the Company shall issue to the Holder
      a
      warrant to purchase fifteen million (15,000,000) shares of its common stock
      exercisable at the strike prices outlined in the Warrant Agreement, attached
      hereto and incorporated by reference. 

    

    Article
      16 Transaction
      Documents

    

    The
      Company agrees that contemporaneously with the execution and delivery of this
      Debenture, the parties hereto are executing and delivering a Debenture
      Registration Rights Agreement, Subscription Agreement, Warrant Agreement,
      Security Agreement and the Irrevocable Transfer Agent Agreement between the
      Company and Dutchess Capital Management, LLC (collectively, the "Transaction
      Documents") pursuant to which the Company has agreed to provide certain rights
      and obligations as defined in the Transaction Documents.

    

    Article
      17  Waiver

    

    The
      Holder's delay or failure at any time or times hereafter to require strict
      performance by the Company of any undertakings, agreements or covenants shall
      not waive, affect, or diminish any right of the Holder under this Agreement
      to
      demand strict compliance and performance herewith. Any waiver by the Holder
      of
      any Event of Default shall not waive or affect any other Event of Default,
      whether such Event of Default is prior or subsequent thereto and whether of
      the
      same or a different type. None of the undertakings, agreements and covenants
      of
      the Company contained in this Agreement, and no Event of Default, shall be
      deemed to have been waived by the Holder, nor may this Agreement be amended,
      changed or modified, unless such waiver, amendment, change or modification
      is
      evidenced by an instrument in writing specifying such waiver, amendment, change
      or modification and signed by the Holder. 

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    Article
      18 Integration

    

    This
      Note
      is the FINAL AGREEMENT between the Company and the Holder with respect to the
      terms and conditions set forth herein, and, the terms of this Debenture may
      not
      be contradicted by evidence of prior, contemporaneous, or subsequent oral
      agreements of the Parties. The execution and delivery of this Debenture is
      done
      in conjunction with the execution of the Transaction Documents, as defined
      in
      Article 16.

    

    Article
      19 Failure
      To Meet Obligations by the Company

    

    The
      Company acknowledges that its failure to timely meet any of its obligations
      hereunder, including, but without limitation, its obligations to make Payments,
      deliver shares and, as necessary, to register and maintain sufficient number
      of
      Shares, will cause the Holder to suffer irreparable harm and that the actual
      damage to the Holder will be difficult to ascertain. Accordingly, the parties
      agree that it is appropriate to include in this Debenture a provision for
      liquidated damages. The parties acknowledge and agree that the liquidated
      damages provision set forth in this section represents the parties’ good faith
      effort to quantify such damages and, as such, agree that the form and amount
      of
      such liquidated damages are reasonable and do not constitute a penalty. The
      payment of liquidated damages shall not relieve the Company from its obligations
      to deliver the Common Stock pursuant to the terms of this
      Debenture.

    

    

    *.*.*

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Company has duly executed this Debenture as of the date
      first written above and duly authorized to sign on behalf of:

     

    
      
        	 	 	 
	 	ENIGMA
                SOFTWARE
                GROUP, INC.
	 
 	 
 	 
 
	 	By:  	/s/ Colorado
                Stark
	 	
                
Name: Colorado
                Stark
	 	Title: Executive
                Chairman

        	 	 	 
	 	 
	 
 	 
 	 
 
	 	By:  	/s/ Alvin
                Estevez 
	 	
                
Name:
                Alvin Estevez
	 	Title:
                President and Chief Executive Officer

        	
              	 	 
	 	 
	 
 	 
 	 
 
	 	By:  	/s/ Richard
                M. Scarlata
	 	
                
Name:
                Richard M. Scarlata
	 	Title: Chief
                Financial Officer

      

       

       

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

      

    

     

    
      
         

      

      
        15Unassociated Document

    Exhibit
      10.4

    SHARE
      EXCHANGE AGREEMENT

    

    Among

    

    Enigma
      Software Group, Inc., 

    

    Colorado
      Stark

    

    and

    

    Alvin
      Estevez

    

    

    Dated
      June 28, 2006

    

    
      
        
          NY-446963 v5

        

         

      

      
         

        
          

        

      

      
         

        
        

      

    

    TABLE
      OF CONTENTS

     

     

    
      	 	
              PAGE

            
	 	 
	
              ARTICLE
                I
                REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS

            	
              1

            
	
              Section
                1.01

            	
              Authority

            	
              1

            
	
              Section
                1.02

            	
              No
                Conflict With Other Instruments

            	
              1

            
	
              Section
                1.03

            	
              Valid
                Obligation

            	
              1

            
	
              ARTICLE
                II
                REPRESENTATIONS AND WARRANTIES OF ENIGMA

            	
              2

            
	
              Section
                2.01

            	
              Organization

            	
              2

            
	
              Section
                2.02

            	
              Capitalization

            	
              2

            
	
              Section
                2.03

            	
              Absence
                of Certain Changes or Events

            	
              2

            
	
              Section
                2.04

            	
              Litigation
                and Proceedings

            	
              3

            
	
              Section
                2.05

            	
              No
                Conflict With Other Instruments

            	
              3

            
	
              Section
                2.06

            	
              Compliance
                With Laws and Regulations

            	
              3

            
	
              Section
                2.07

            	
              Approval
                of Agreement

            	
              3

            
	
              Section
                2.08

            	
              Valid
                Obligation.

            	
              3

            
	
              ARTICLE
                III
                PLAN OF EXCHANGE

            	
              3

            
	
              Section
                3.01

            	
              The
                Exchange.

            	
              3

            
	
              Section
                3.02

            	
              Anti-Dilution

            	
              4

            
	
              Section
                3.03

            	
              Closing

            	
              4

            
	
              Section
                3.04

            	
              Closing
                Events

            	
              4

            
	
              ARTICLE
                IV
                SPECIAL COVENANTS

            	
              4

            
	
              Section
                4.01

            	
              Indemnification

            	
              4

            
	
              Section
                4.02

            	
              Sales
                of Securities Under Rule 144, If Applicable

            	
              5

            
	
              ARTICLE
                V
                CONDITIONS PRECEDENT TO OBLIGATIONS OF ENIGMA

            	
              5

            
	
              Section
                5.01

            	
              Accuracy
                of Representations and Performance of Covenants

            	
              5

            
	
              Section
                5.02

            	
              No
                Governmental Prohibition

            	
              5

            
	
              Section
                5.03

            	
              Other
                Items

            	
              6

            
	
              ARTICLE
                VI
                CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS

            	
              6

            
	
              Section
                6.01

            	
              Accuracy
                of Representations and Performance of Covenants

            	
              6

            
	
              Section
                6.02

            	
              Officer's
                Certificate

            	
              6

            
	
              Section
                6.03

            	
              Good
                Standing

            	
              6

            
	
              Section
                6.04

            	
              No
                Governmental Prohibition

            	
              6

            
	
              Section
                6.05

            	
              Consents

            	
              6

            
	
              Section
                6.06

            	
              Other
                Items

            	
              6

            
	
              ARTICLE
                VII
                MISCELLANEOUS

            	
              7

            
	
              Section
                7.01

            	
              Brokers

            	
              7

            
	
              Section
                7.02

            	
              Governing
                Law

            	
              7

            
	
              Section
                7.03

            	
              Notices

            	
              7

            
	
              Section
                7.04

            	
              Attorney's
                Fees

            	
              7

            
	
              Section
                7.05

            	
              Third
                Party Beneficiaries

            	
              8

            
	
              Section
                7.06

            	
              Expenses

            	
              8

            
	
              Section
                7.07

            	
              Entire
                Agreement

            	
              8

            
	
              Section
                7.08

            	
              Survival;
                Termination

            	
              8

            
	
              Section
                7.09

            	
              Counterparts

            	
              8

            
	
              Section
                7.10

            	
              Amendment
                or Waiver

            	
              8

            
	
              Section
                7.11

            	
              Best
                Efforts

            	
              8

            
	 	 	 
	
               

            	 	 
	
              
                Exhibits
                  A.

              

            	
              Exchange

            	 

    

     

    
      
        
          ii

        

         

      

      
         

        
          

        

      

      
         

        
        

      

    

    SHARE
      EXCHANGE AGREEMENT

     

    THIS
      SHARE EXCHANGE AGREEMENT (hereinafter referred to as this “Agreement”) is
      entered into as of this 28 day of June, 2006, by and between Enigma Software
      Group, Inc., a Delaware corporation (hereinafter referred to as “Enigma”), with
      offices at 2 Stamford Landing, Suite 100, Stamford, CT 06902 and the
      stockholders of Enigma listed below (collectively, the “Stockholders”), upon the
      following premises:

     

    Premises

     

    WHEREAS,
      Enigma
      is a publicly held corporation organized under the laws of the state of
      Delaware; 

     

    WHEREAS,
      the
      Stockholders currently own an aggregate of 12,052,001 shares (the “Common
      Shares”) of the common stock, $.001 par value per share, of Enigma (the “Common
      Stock”) in the individual amounts set forth on Schedule A attached hereto,
      constituting all of the shares of common stock including voting power, of Enigma
      held by each such stockholder; and

     

    WHEREAS,
      the
      Stockholders agree to return the Common Shares to Enigma in exchange (the
“Exchange”) for 7,433,988 shares (the “Preferred Shares”) of preferred stock,
      $.001 par value per share (the “Preferred Stock”).

     

    Agreement

     

    NOW
      THEREFORE,
      on the
      stated premises and for and in consideration of the mutual covenants and
      agreements hereinafter set forth and the mutual benefits to the parties to
      be
      derived here from, and intending to be legally bound hereby, it is hereby agreed
      as follows:

     

    ARTICLE
      I

    REPRESENTATIONS
      AND WARRANTIES OF THE
      STOCKHOLDERS

     

    The
      Stockholders each hereby represent and warrant, jointly and not separately,
      on
      their own behalf, as of and at the Closing Date, as follows:

     

    Section
      1.01 Authority

     

    .
      He has
      the full power, authority, and legal right and has taken all action required
      by
      law, and otherwise to consummate the transactions herein
      contemplated.

     

    Section
      1.02 No
      Conflict With Other Instruments

     

    .
      The
      execution of this Agreement and the consummation of the transactions
      contemplated by this Agreement will not result in the breach of any term or
      provision of, constitute a default under, or terminate, accelerate or modify
      the
      terms of any indenture, mortgage, deed of trust, or other material agreement,
      or
      instrument to which a Stockholder is a party or to which any of his assets
      or
      properties are subject.

     

    Section
      1.03 Valid
      Obligation

     

    .
      This
      Agreement and all agreements and other documents executed by Stockholder in
      connection herewith constitute the valid and legally binding obligation of
      Stockholder, enforceable in accordance with its or their terms, except as may
      be
      limited by bankruptcy, insolvency, moratorium or other similar laws affecting
      the enforcement of creditors' rights generally and subject to the qualification
      that the availability of equitable remedies is subject to the discretion of
      the
      court before which any proceeding therefore may be brought.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ARTICLE
      II

    REPRESENTATIONS
      AND WARRANTIES OF ENIGMA

     

    As
      an
      inducement to, and to obtain the reliance of, the Stockholders, except as set
      forth in the schedules of exceptions to these representations and warranties
      to
      be provided to the Stockholders by Enigma (the “Schedules”), Enigma represents
      and warrants, as of the date hereof and as of and at the Closing Date, as
      follows:

     

    Section
      2.01 Organization

     

    .
      Enigma
      is a corporation duly organized, validly existing, and in good standing under
      the laws of the State of Delaware and has the corporate power and is duly
      authorized under all applicable laws, regulations, ordinances, and orders of
      public authorities to carry on its business in all material respects as it
      is
      now being conducted. Included in the Schedules are complete and correct copies
      of the certificate of incorporation and bylaws of Enigma as in effect on the
      date hereof. The execution and delivery of this Agreement does not, and the
      consummation of the transactions contemplated hereby will not, violate any
      provision of Enigma’s certificate of incorporation or bylaws. Enigma has taken
      all action required by law, its certificate of incorporation, its bylaws, or
      otherwise to authorize the execution and delivery of this Agreement, and Enigma
      has full power, authority, and legal right and has taken all action required
      by
      law, its certificate of incorporation, bylaws, or otherwise to consummate the
      transactions herein contemplated.

     

    Section
      2.02 Capitalization

     

    .
      Enigma’s authorized capitalization immediately prior to the closing consists of
      (a) 100,000,000 shares of Common Stock, of which 16,243,267 shares are issued
      and outstanding, and (b) 10,000,000 shares of Preferred Stock, none of which
      are
      issued and outstanding. All issued and outstanding shares are legally issued,
      fully paid, and non-assessable and not issued in violation of the preemptive
      or
      other rights of any person. 

     

    Section
      2.03 Absence
      of Certain Changes or Events

     

    Since
      the
      date of the most recent Enigma balance sheet:

     

    (a) there
      has
      not been any material adverse change in the business, operations, properties,
      assets or condition (financial or otherwise) of Enigma;

     

    (b) Enigma
      has not (i) amended its certificate of incorporation or bylaws except as
      required by this Agreement; (ii) declared or made, or agreed to declare or
      make
      any payment of dividends or distributions of any assets of any kind whatsoever
      to stockholders or purchased or redeemed, or agreed to purchase or redeem,
      any
      of its capital stock; (iii) made any material change in its method of
      management, operation or accounting; (iv) entered into any transactions or
      agreements other than in the ordinary course of business; or (v) made any
      increase in or adoption of any profit sharing, bonus, deferred compensation,
      insurance, pension, retirement, or other employee benefit plan, payment, or
      arrangement, made to, for or with its officers, directors, or employees;
      and

     

    (c) Enigma
      has not (i) granted or agreed to grant any options, warrants, or other rights
      for its stock, bonds, or other corporate securities calling for the issuance
      thereof other than option granted in April 2006; (ii) borrowed or agreed to
      borrow any funds or incurred, or become subject to, any material obligation
      or
      liability (absolute or contingent) except liabilities incurred in the ordinary
      course of business; (iii) sold or transferred, or agreed to sell or transfer,
      any of its assets, properties, or rights, or canceled, or agreed to cancel,
      any
      debts or claims; or (iv) issued, delivered or agreed to issue or deliver, any
      stock, bonds or other corporate securities including debentures (whether
      authorized and unissued or held as treasury stock), except in connection with
      this Agreement.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    Section
      2.04 Litigation
      and Proceedings

     

    There
      are
      no actions, suits, proceedings or investigations pending or, to the knowledge
      of
      Enigma after reasonable investigation, threatened by or against Enigma or
      affecting Enigma or its properties, at law or in equity, before any court or
      other governmental agency or instrumentality, domestic or foreign, or before
      any
      arbitrator of any kind except as disclosed in the Enigma Schedules. Enigma
      has
      no knowledge of any default on its part with respect to any judgment, order,
      writ, injunction, decree, award, rule or regulation of any court, arbitrator,
      or
      governmental agency or instrumentality or any circumstance which after
      reasonable investigation would result in the discovery of such
      default.

     

    Section
      2.05 No
      Conflict With Other Instruments

     

     The
      execution of this Agreement and the consummation of the transactions
      contemplated by this Agreement will not result in the breach of any term or
      provision of, constitute a default under, or terminate, accelerate or modify
      the
      terms of, any indenture, mortgage, deed of trust, or other material agreement
      or
      instrument to which Enigma is a party or to which any of its assets, properties
      or operations are subject.

     

    Section
      2.06 Compliance
      With Laws and Regulations

     

    To
      the
      best of its knowledge, Enigma has complied with all applicable statutes and
      regulations of any federal, state, or other applicable governmental entity
      or
      agency thereof. This compliance includes, but is not limited to, the filing
      of
      all reports to date with federal and state securities authorities. 

     

    Section
      2.07 Approval
      of Agreement

     

     The
      Board of Directors of Enigma has authorized the execution and delivery of this
      Agreement by Enigma and has approved this Agreement and the transactions
      contemplated hereby.

     

    Section
      2.08 Valid
      Obligation.

     

     This
      Agreement and all agreements and other documents executed by Enigma in
      connection herewith constitute the valid and binding obligation of Enigma,
      enforceable in accordance with its or their terms, except as may be limited
      by
      bankruptcy, insolvency, moratorium or other similar laws affecting the
      enforcement of creditors' rights generally and subject to the qualification
      that
      the availability of equitable remedies is subject to the discretion of the
      court
      before which any proceeding therefore may be brought.

     

    ARTICLE
      III

    PLAN
      OF EXCHANGE

     

    Section
      3.01 The
      Exchange.

     

    On
      the
      terms and subject to the conditions set forth in this Agreement, on the Closing
      Date (as defined in Section 3.03), each Stockholder who shall elect to accept
      the exchange offer described herein (the “Accepting Stockholders”) by executing
      this Agreement, shall assign, transfer and deliver, free and clear of all liens,
      pledges, encumbrances, charges, restrictions or known claims of any kind,
      nature, or description, the Common shares. In exchange for the transfer of
      such
      Common Shares by the Stockholders, Enigma shall issue to the Stockholders the
      Preferred Stock. At the Closing, each Stockholder shall, on surrender of his
      certificate or certificates representing such Common Shares to Enigma or its
      registrar or transfer agent, be entitled to receive a certificate or
      certificates evidencing his proportionate interest in the Preferred
      Shares.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    Section
      3.02 Anti-Dilution

     

    The
      number of shares of Common Stock issuable upon exchange pursuant to Section
      3.01
      shall be appropriately adjusted to take into account any other stock split,
      stock dividend, reverse stock split, recapitalization, or similar change in
      the
      Common Stock which may occur between the date of the execution of this Agreement
      and the Closing Date.

     

    Section
      3.03 Closing

     

    The
      closing (“Closing”) of the transactions contemplated by this Agreement shall
      occur immediately following the filing of a Certificate of Designations of
      Series A Preferred Stock of Enigma which shall effectuate the designation of
      the
      rights and preferences of the Preferred Stock. Such Closing shall take place
      at
      a mutually agreeable time and place (the “Closing Date”). 

     

    Section
      3.04 Closing
      Events

     

    At
      the
      Closing, Enigma and each of the Accepting Stockholders shall execute,
      acknowledge, and deliver (or shall ensure to be executed, acknowledged, and
      delivered), any and all certificates, opinions, financial statements, schedules,
      agreements, resolutions, rulings or other instruments required by this Agreement
      to be so delivered at or prior to the Closing, together with such other items
      as
      may be reasonably requested by the parties hereto and their respective legal
      counsel in order to effectuate or evidence the transactions contemplated hereby.
      

     

    ARTICLE
      IV

    SPECIAL
      COVENANTS

     

    Section
      4.01 Indemnification

     

    (a) Enigma
      hereby agrees to indemnify the stockholders as of the date of execution of
      this
      Agreement against any loss, liability, claim, damage, or expense (including,
      but
      not limited to, any and all expense whatsoever reasonably incurred in
      investigating, preparing, or defending against any litigation, commenced or
      threatened, or any claim whatsoever) (“Loss”), to which any of them may become
      subject arising out of or based on any inaccuracy appearing in or
      misrepresentations made under Article II of this Agreement. The indemnification
      provided for in this paragraph shall survive the Closing and consummation of
      the
      transactions contemplated hereby and termination of this Agreement for one
      year
      following the Closing.

     

    (b) The
      Stockholders, individually and not jointly, agree to indemnify Enigma and each
      of the officers, agents and directors of Enigma as of the date of execution
      of
      this Agreement against any Loss, to which it or they may become subject arising
      out of or based on any inaccuracy appearing in or misrepresentations made under
      Article I of this Agreement. The indemnification provided for in this paragraph
      shall survive the Closing and consummation of the transactions contemplated
      hereby and termination of this Agreement for one year following the
      Closing.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    Section
      4.02 Sales
      of Securities Under Rule 144, If Applicable

     

    (a) Enigma
      will use its best efforts to at all times satisfy the current public information
      requirements of Rule 144 promulgated under the Securities Act so that its
      stockholders can sell restricted securities that have been held for one year
      or
      more or such other restricted period as required by Rule 144 as it is from
      time
      to time amended.

     

    (b) Upon
      being informed in writing by any person holding restricted stock of Enigma
      that
      such person intends to sell any shares under Rule 144 promulgated under the
      Securities Act (including any rule adopted in substitution or replacement
      thereof), Enigma will certify in writing to such person that it is compliance
      with Rule 144 current public information requirement to enable such person
      to
      sell such person’s restricted stock under Rule 144, as may be applicable under
      the circumstances.

     

    (c) If
      any
      certificate representing any such restricted stock is presented to Enigma’s
      transfer agent for registration or transfer in connection with any sales
      theretofore made under Rule 144, provided such certificate is duly endorsed
      for
      transfer by the appropriate person(s) or accompanied by a separate stock power
      duly executed by the appropriate person(s) in each case with reasonable
      assurances that such endorsements are genuine and effective, and is accompanied
      by a legal opinion that such transfer has complied with the requirements of
      Rule
      144, as the case may be, Enigma will promptly instruct its transfer agent to
      register such transfer and to issue one or more new certificates representing
      such shares to the transferee and, if appropriate under the provisions of Rule
      144, as the case may be, free of any stop transfer order or restrictive legend.
      

     

    (d) This
      Section 4.02 shall survive the closing of this Agreement for a period of two
      (2)
      years.

     

    ARTICLE
      V

    CONDITIONS
      PRECEDENT TO OBLIGATIONS OF ENIGMA

     

    The
      obligations of Enigma under this Agreement are subject to the satisfaction,
      at
      or before the Closing Date, of the following conditions:

     

    Section
      5.01 Accuracy
      of Representations and Performance of Covenants

     

    The
      representations and warranties made by the Stockholders in this Agreement were
      true when made and shall be true at the Closing Date with the same force and
      effect as if such representations and warranties were made at and as of the
      Closing Date (except for changes therein permitted by this Agreement). The
      Stockholders shall have performed or complied with all covenants and conditions
      required by this Agreement to be performed or complied with by the Stockholders
      prior to or at the Closing. 

     

    Section
      5.02 No
      Governmental Prohibition

     

    No
      order,
      statute, rule, regulation, executive order, injunction, stay, decree, judgment
      or restraining order shall have been enacted, entered, promulgated or enforced
      by any court or governmental or regulatory authority or instrumentality which
      prohibits the consummation of the transactions contemplated hereby.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    Section
      5.03 Other
      Items

     

    Enigma
      shall have received such further opinions, documents, certificates or
      instruments relating to the transactions contemplated hereby as
      Enigma may
      reasonably request.

     

    ARTICLE
      VI

    CONDITIONS
      PRECEDENT TO OBLIGATIONS OF
      THE STOCKHOLDERS

     

    The
      obligations of the Stockholders under this Agreement are subject to the
      satisfaction, at or before the Closing Date, of the following
      conditions:

     

    Section
      6.01 Accuracy
      of Representations and Performance of Covenants

     

    The
      representations and warranties made by Enigma in this Agreement were true when
      made and shall be true as of the Closing Date (except for changes therein
      permitted by this Agreement) with the same force and effect as if such
      representations and warranties were made at and as of the Closing Date.
      Additionally, Enigma shall have performed and complied with all covenants and
      conditions required by this Agreement to be performed or complied with by
      Enigma. 

     

    Section
      6.02 Officer's
      Certificate

     

    The
      Stockholders shall have been furnished with certificates dated the Closing
      Date
      and signed by duly authorized executive officers of Enigma, to the effect that
      no litigation, proceeding, investigation or inquiry is pending, or to the best
      knowledge of Enigma threatened, which might result in an action to enjoin or
      prevent the consummation of the transactions contemplated by this Agreement
      or,
      to the extent not disclosed in the Schedules, by or against Enigma, which might
      result in any material adverse change in any of the assets, properties or
      operations of Enigma. 

     

    Section
      6.03 Good
      Standing

     

    Enigma
      shall have received a certificate of good standing from the Secretary of State
      of the State of Delaware or other appropriate office, dated as of a date within
      ten days prior to the Closing Date certifying that Enigma is in good standing
      as
      a corporation in the State of Delaware and has filed all tax returns required
      to
      have been filed by it to date and has paid all taxes reported as due
      thereon.

     

    Section
      6.04 No
      Governmental Prohibition

     

    No
      order,
      statute, rule, regulation, executive order, injunction, stay, decree, judgment
      or restraining order shall have been enacted, entered, promulgated or enforced
      by any court or governmental or regulatory authority or instrumentality which
      prohibits the consummation of the transactions contemplated hereby.

     

    Section
      6.05 Consents

     

    All
      consents, approvals, waivers or amendments pursuant to all contracts, licenses,
      permits, trademarks and other intangibles in connection with the transactions
      contemplated herein, or for the continued operation of Enigma after the Closing
      Date on the basis as presently operated shall have been obtained.

     

    Section
      6.06 Other
      Items

     

    The
      Stockholders shall have received further opinions, documents, certificates,
      or
      instruments relating to the transactions contemplated hereby as the Stockholders
      may reasonably request.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    ARTICLE
      VII

    MISCELLANEOUS

     

    Section
      7.01 Brokers

     

    The
      parties hereto agree that, there were no finders or brokers involved in bringing
      the parties together or who were instrumental in the negotiation, execution
      or
      consummation of this Agreement. Enigma and the Stockholders each agree to
      indemnify the other against any claim by any third person other than those
      described above for any commission, brokerage, or finder's fee arising from
      the
      transactions contemplated hereby based on any alleged agreement or understanding
      between the indemnifying party and such third person, whether express or implied
      from the actions of the indemnifying party.

     

    Section
      7.02 Governing
      Law

     

    This
      Agreement shall be governed by, enforced, and construed under and in accordance
      with the laws of the United States of America and, with respect to the matters
      of state law, with the laws of the State of New York. Venue for all matters
      shall be in New York, New York, without giving effect to principles of conflicts
      of law thereunder. Each of the parties (a) irrevocably consents and agrees
      that
      any legal or equitable action or proceedings arising under or in connection
      with
      this Agreement shall be brought exclusively in the federal courts of the United
      States. By execution and delivery of this Agreement, each party hereto
      irrevocably submits to and accepts, with respect to any such action or
      proceeding, generally and unconditionally, the jurisdiction of the aforesaid
      court, and irrevocably waives any and all rights such party may now or hereafter
      have to object to such jurisdiction.

     

    Section
      7.03 Notices

     

    Any
      notice or other communications required or permitted hereunder shall be in
      writing and shall be sufficiently given if personally delivered to it or sent
      by
      telecopy, overnight courier or registered mail or certified mail, postage
      prepaid, addressed as follows:

     

    If
      to
the
      Stockholders, to: 

    

    c/o
      Enigma Software Group, Inc.

    2
      Stamford Landing, Suite 100

    Stamford,
      CT 06902

    

    

    If
      to
      Enigma, to the address set forth herein or such other addresses as shall be
      furnished in writing by any party in the manner for giving notices hereunder,
      and any such notice or communication shall be deemed to have been given (i)
      upon
      receipt, if personally delivered, (ii) on the day after dispatch, if sent by
      overnight courier, (iii) upon dispatch, if transmitted by telecopy and receipt
      is confirmed by telephone and (iv) three (3) days after mailing, if sent by
      registered or certified mail.

    

    Section
      7.04 Attorney's
      Fees

     

    In
      the
      event that either party institutes any action or suit to enforce this Agreement
      or to secure relief from any default hereunder or breach hereof, the prevailing
      party shall be reimbursed by the losing party for all costs, including
      reasonable attorney's fees, incurred in connection therewith and in enforcing
      or
      collecting any judgment rendered therein.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    Section
      7.05 Third
      Party Beneficiaries

     

    This
      contract is strictly among Enigma and the Stockholders, and, except as
      specifically provided, no director, officer, stockholder (other than the
      Stockholders), employee, agent, independent contractor or any other person
      or
      entity shall be deemed to be a third party beneficiary of this
      Agreement.

     

    Section
      7.06 Expenses

     

    Subject
      to Section 7.04 above, whether or not the Exchange is consummated, each of
      Enigma and the Stockholders will bear their own respective expenses, including
      legal, accounting and professional fees, incurred in connection with the
      Exchange or any of the other transactions contemplated hereby.

     

    Section
      7.07 Entire
      Agreement

     

    This
      Agreement represents the entire agreement between the parties relating to the
      subject matter thereof and supersedes all prior agreements, understandings
      and
      negotiations, written or oral, with respect to such subject matter.

     

    Section
      7.08 Survival;
      Termination

     

    The
      representations, warranties, and covenants of the respective parties shall
      survive the Closing Date and the consummation of the transactions herein
      contemplated for a period of two (2) years.

     

    Section
      7.09 Counterparts

     

    This
      Agreement may be executed in multiple counterparts, including by facsimile,
      each
      of which shall be deemed an original and all of which taken together shall
      be
      but a single instrument.

     

    Section
      7.10 Amendment
      or Waiver

     

    Every
      right and remedy provided herein shall be cumulative with every other right
      and
      remedy, whether conferred herein, at law, or in equity, and may be enforced
      concurrently herewith, and no waiver by any party of the performance of any
      obligation by the other shall be construed as a waiver of the same or any other
      default then, theretofore, or thereafter occurring or existing. At any time
      prior to the Closing Date, this Agreement may by amended by a writing signed
      by
      all parties hereto, with respect to any of the terms contained herein, and
      any
      term or condition of this Agreement may be waived or the time for performance
      may be extended by a writing signed by the party or parties for whose benefit
      the provision is intended.

     

    Section
      7.11 Best
      Efforts

     

    Subject
      to the terms and conditions herein provided, each party shall use its best
      efforts to perform or fulfill all conditions and obligations to be performed
      or
      fulfilled by it under this Agreement so that the transactions contemplated
      hereby shall be consummated as soon as practicable. Each party also agrees
      that
      it shall use its best efforts to take, or cause to be taken, all actions and
      to
      do, or cause to be done, all things necessary, proper or advisable under
      applicable laws and regulations to consummate and make effective this Agreement
      and the transactions contemplated herein.

     

    

    Signature
      Page Follows

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the corporate parties hereto have caused this Agreement to
      be
      executed by their respective officers, hereunto duly authorized, as of the
      date
      first-above written.

     

    ENIGMA
      SOFTWARE GROUP, INC. 

    

    

    By:
      /s/
      Colorado Stark

    Name:
      Colorado Stark

    Title:
      Executive Chairman

    

    

    STOCKHOLDERS:

    

    Colorado
      Stark

    

    

    /s/
      Colorado Stark

    Colorado
      Stark, as an individual

    

    

    

    

    Alvin
      Estevez

    

    

    /s/
      Alvin Estevez

    Alvin
      Estevez, as an individual 

    

    

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    Exhibit
      A

    

    EXCHANGE

    

    

    
      	
              Name

            	
              Number
                of Shares of 

              Common
                Stock Cancelled

            	
              Number
                of Shares of Preferred Stock 

              to
                be Issued

            
	
              Colorado
                Stark

            	
              6,056,872

            	
              3,736,036

            
	
              Alvin
                Estevez

            	
              5,995,129

            	
              3,697,952

            
	
              TOTAL

            	
              12,052,001

            	
              7,433,988

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