8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  April 2, 2008

VISUAL MANAGEMENT SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Nevada (State or other jurisdiction of incorporation)	333-133936 (Commission File Number)	68-0634458 (IRS Employer Identification Number)
1000 Industrial Way North, Suite C Toms River, New Jersey  08755 (Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (732) 281-1355

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2 (b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4 (c))

ITEM 1.01                  ENTRY INTO A DEFINITIVE MATERIAL AGREEMENT

ITEM 2.01                  COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS

On April 3, 2008, Visual Management Systems, Inc (the “Company”) entered into an agreement with Intelligent Digital Systems, LLC (“IDS”) pursuant to which the Company purchased substantially all the assets of IDS.  In exchange for these assets, the Company issued to IDS (i) an unsecured Convertible Note (the “Note”) in the principal amount of $1.544 million, bearing no interest until its maturity date, which is April 3, 2011 and (ii) $42,000 in cash, for a total purchase price of $1.586 million.  If not converted or paid within 30 days of maturity, then from and after the maturity date, the Note will bear annual interest at 12% per annum.  The Note is convertible at IDS’ discretion into shares of the Company’s common stock at a conversion price of $1.15 per share after May 31, 2010, or upon the approval of a majority in interest of the holders of the Company’s then outstanding 5% Senior Secured Convertible Debentures (the “Debentures”), or any securities issued on conversion thereof.  The Company has agreed to register the shares issuable upon conversion of the Note for public resale.

As part of the transaction the Company and IDS entered into a joint venture to obtain approval of certain patent applications formerly held by IDS that are relevant to the Company’s industry which have been assigned to the joint venture.  The joint venture has granted the Company an exclusive license to use the technology which is the subject of the patent applications in the manufacture, distribution, integration and installation of digital video surveillance devices for the security industry.  If the patents are ultimately issued, the joint venture will seek to promote and market the technology underlying the patent applications, and will pursue claims against any parties potentially infringing on the protected technology.  Each of the Company and IDS has a 50% interest in the joint venture.

The Company and Jay Edmond Russ, the principal shareholder of IDS, have entered into a four year consulting agreement which requires the Company to pay Mr. Russ $75,000 per year for consulting services.

The description of the transaction contained herein is qualified in its entirety by reference to the definitive agreements governing the transaction, which are filed as Exhibits to this report and incorporated herein by reference

ITEM 5.02                   DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTOR; APPOINTMENT OF PRINCIPAL OF OFFICERS

On April 2, 2008, the Company appointed Caroline Gonzalez its Chief Operating Officer, pending approval of the Board of Directors of the Company.  Ms. Gonzalez previously served the Company as Chief Information Officer.  Kevin Sangirardi the former Chief Operating Officer was named the Company’s Director of Operations.

ITEM 3.02                   UNREGISTERED SALES OF EQUITY SECURITIES

On April 2, 2008, the Company issued 600,000 shares of its common stock to Mirador Consulting Inc. (“Mirador”) as compensation to Mirador for investor relations services offered to the Company pursuant to a March 24, 2008 Addendum to the Strategic Alliance Agreement between the Company and Mirador.  That Addendum extends the original Agreement until September 2009 and removes any cash component of Mirador’s compensation.  The Company relied upon the exemption provided by Section 4(2) of the Securities Act of 1933, as amended, in making such issuance.

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ITEM 4.02                   NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A RELATED AUDIT REPORT OR COMPLETED INTERIM REVIEW

On April 7, 2008, the Audit Committee of the Company’s Board of Directors concluded that the previously issued financial statements contained in the Company’s Quarterly Reports on Form 10-QSB for the three and six months ended August 31, 2007, the three and nine months ended September 30, 2007, and thepro forma consolidating balance sheet as of May 31, 2007, pro forma statement of operations for the three months ended May 31, 2007, and pro forma statement of operations for the 12 months ended February 28, 2007 contained in the Company’s Form 8-K/A filed with the Securities and Exchange Commission (the “SEC”) on January 31, 2008 (which amended our Form 8-K filed on July 23, 2007) should not be relied upon because of errors that require a restatement of such financial statements.

In April 2008, in conjunction with the audit of the Company’s financial statements for the year ended December 31, 2007, the Company’s management, after discussions with the Company’s independent registered public accounting firm, determined that its previously issued financial statements for the periods identified above overstated revenues and misstated costs of goods sold, inventory and equity due to, among other things, the failure to properly account for intercompany sales and inventory and the failure to maintain proper controls over accounting procedures. 

The Company will file with the SEC a Quarterly Report on Form 10-QSB/A for the three months ended August 31, 2007, a Form 10-QSB/A for the quarter ended September 30, 2007  and a Form 8-K/A containing a pro forma consolidating balance sheet as of May 31, 2007, pro forma statement of operations for the 3 months ending May 31, 2007, and pro forma statement of operations for the 12 months ending February 28, 2007, to reflect the changes required as a result of the restatement.  Management is still in the process of quantifying the full impact of these restatements and cannot, at this time, accurately disclose the total effect on the financial statements that will be restated.

The Company’s Audit Committee has discussed this matter with the Company’s independent registered public accounting firm.  The Company’s independent registered public accounting firm has been given a copy of the disclosure that the Company is making in this Item 4.02 of this Report on Form 8-K and has been asked to furnish a letter to the Securities and Exchange Commission stating whether it agrees with the statements made by the Company in this Item 4.02.  A copy of a letter from the independent registered public accounting firm advising that it agrees with the statements in this Item 4.02 is filed as Exhibit 7.1 hereto.

ITEM 9.01                   FINANCIAL STATEMENTS AND EXHIBITS

(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED

It is not practicable to provide the financial statements required to be filed as a result of the acquisition of the assets of IDS described in Items 1.01 and 2.01 hereof (the “Financial Statements”) on the date that this report is being filed with the Securities and Exchange Commission.  The Financial Statements will be filed by amendment to this Form 8-K as soon as practicable, but in any event not later than 60 days after the date by which this report was required to be filed.

(b) PRO FORMA FINANCIAL INFORMATION

It is not practicable to provide the pro forma financial information required to be filed as a result of the acquisition of the assets of IDS described in Items 1.01 and 2.01 hereof (the “Pro Forma Information”) on the date that this report is being filed with the Securities and Exchange Commission.  The Pro Forma Information will be filed by amendment to this Form 8-K as soon as practicable, but in any event not later than 60 days after the date by which this report was required to be filed.

(c) EXHIBITS

Exhibit No.	Exhibits
2.2	Asset Purchase Agreement dated as of April 3, 2008 among Visual Management Systems, Inc., Intelligent Digital Systems, LLC, IDS Patent Holding LLC and Jay Edmond Russ.
4.11	Unsecured Convertible Promissory Note dated April 3, 2008 issued to Intelligent Digital Systems, LLC.
7.1	Letter from Sobel & Co., LLC.
10.14	Consulting Agreement dated as of April 3, 2008 between Visual Management Systems, LLC and Jay Edmond Russ.
10.15	Operating Agreement of IDS Patent Holding LLC effective as of April 2, 2008.
10.16	Exclusive Patent and Trade Secret License Agreement effective as of April 2, 2008 between Visual Management Systems, Inc. and IDS Patent Holding Company, LLC.
10.17	Registration Rights Agreement dated as of April 2, 2008 between Visual Management Systems, Inc. and Intelligent Digital Systems, LLC.
99.1	Financial Statements of Intelligent Digital Systems, LLC as of and for the years ended December 31, 2007 and 2006 (to be filed by amendment).
99.2	Pro Forma Financial Information (to be filed by amendment).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Visual Management Systems, Inc.
(Registrant)
By:	/s/ Jason Gonzalez
Name:	Jason Gonzalez
Title:	President and Chief Executive Officer

Dated:  April 8, 2008

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EX-2.2

EXHIBIT 2.2

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (the “Agreement”) is made and entered into this 2nd day of April, 2008, by and between Visual Management Systems, Inc. a Nevada corporation, with an address of 1000 Industrial Way North Suite C, Toms River, NJ 08755 (“VMS”), Intelligent Digital Systems, LLC, a Delaware limited liability company, with an address of 543 Broadway, Massapequa, New York 11758, (“IDS”), IDS Patent Holding LLC, a New York limited liability company with an address of 543 Broadway, Massapequa, New York 11758 (“IPH”) and, solely with respect to Section 9 of this Agreement, Jay Russ, an individual maintaining a business address at 543 Broadway, Massapequa, New York 11758 (the “Member”).

RECITALS

A. IDS is the owner of certain assets including but not limited to digital video recorder (“DVR”) software source code and computer hardware, product inventory, intellectual property rights including trademarks (but excluding patent applications), existing customers accounts and lists, and other things of value, a list of which is attached hereto and incorporated herein by reference as Exhibit A (the “Assets”).

B. IDS is also the owner of certain other assets including but not limited to certain intellectual property including pending patent applications and any patents issued in respect thereof, claims for infringement in respect thereof and other things of value, a list of which is attached hereto and incorporated herein by reference as Exhibit B (the “Other Assets”).

C. VMS desires to purchase and acquire from IDS the Assets, and to direct the contribution of the Other Assets to IPH, a new entity to be jointly owned by VMS and IDS, and IDS desires to transfer and convey the Assets to VMS and to contribute the Other Assets to IPH, in accordance with the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the mutual representations, warranties and covenants contained herein, and on the terms and subject to the conditions herein set forth, the parties hereby agree as follows:

Section 1 Definitions

As used in this Agreement, the following terms shall have the meanings set forth below:

1.1           Closing. “Closing” shall mean the closing of the transaction contemplated by this Agreement, which shall occur at 5:00 p.m., on the Closing Date in the offices of VMS, or at such other time and place as shall be mutually agreed in writing by the parties hereto.

1.2           Closing Date. “Closing Date” shall mean the date hereof.

1.3           The Assets.  “The Assets” shall mean, such property belonging to IDS, listed in Exhibit A of this Agreement, which shall be conveyed to VMS pursuant to this Agreement.

1.4           The Other Assets.  “The Other Assets” shall mean, such property belonging to IDS, listed in Exhibit B of this Agreement, which shall be contributed by IDS to IPH pursuant to this Agreement.

Section 2 Purchase , Sale and Contribution

2.1           Sale and Purchase of Assets. Subject to and upon the terms and conditions contained herein, IDS shall, at the Closing, sell, transfer, assign, convey, and deliver to VMS, free and clear of all liens, claims and encumbrances, and VMS shall, at the Closing, purchase, accept and acquire from IDS the Assets listed in Exhibit A of this Agreement.

2.2           Assets Purchase Price. The total purchase price for the Assets shall be ONE MILLION FIVE-HUNDRED EIGHTY-SIX THOUSAND DOLLARS ($1,586,000.00), payable by VMS to IDS in the form of (a) cash in the amount of $42,000, payable in seven equal monthly installments with the first payment being made on the Closing Date and each subsequent monthly payment thereafter being made on the last day of each month until paid in full, and (b) an unsecured convertible promissory note issued by VMS in the amount of ONE MILLION FIVE-HUNDRED FORTY FOUR THOUSAND DOLLARS ($1,544,000.00) (the “Note”) in the form annexed as Exhibit C hereto.

2.3           Contribution of Other Assets.  Subject to and upon the terms and conditions contained herein, for the good and valuable consideration conferred by VMS upon IDS pursuant to Section 2.2 of this Agreement, and conferred upon VMS by IPH pursuant to Section 2.4 of this Agreement, IDS shall, at the Closing contribute to IPH, free and clear of all liens and encumbrances created by IDS, and IPH shall, at the Closing accept and acquire from IDS the Other Assets listed in Exhibit B of this Agreement.

2.4           Issuance of Membership Interest.  Subject to and upon the terms and conditions contained herein, for the good and valuable consideration conferred by VMS upon IDS pursuant to Section 2.2 of this Agreement, IDS shall, at the Closing, cause IPH to issue and deliver in whatever form necessary to VMS, a 50% membership interest in IPH, with the rights and on the terms set forth in the Operating Agreement of IPH (the “IPH Operating Agreement”) a copy of which is annexed hereto as Exhibit D.

2.5           Grant of License.  Subject to and on the terms and conditions contained herein, for good and valuable consideration conferred by VMS upon IDS pursuant to Section 2.2 of this Agreement, IPH shall, at the Closing, grant to VMS an exclusive perpetual license to use the technology and know how covered by such patent applications conveyed to IPH by IDS as part of the Other Assets pursuant and subject to an Exclusive Patent and Trade Secret License Agreement in the form annexed hereto as Exhibit E (the “License Agreement”).  The license granted to VMS pursuant to the License Agreement shall be exclusive except as otherwise set forth in the License Agreement.

2.6           Instruments of Transfer; Further Assurances.

2.6.1        At the Closing, IDS shall deliver to VMS:

2.6.1.1     An Assignment and Assumption Agreement and Bill of Sale with respect to the Assets, in form and substance satisfactory to VMS;

2.6.1.2     Such other instrument or instruments of transfer as shall be necessary or appropriate, as VMS shall reasonably request, to vest in VMS good and marketable title to the Assets.

2.6.1.3     The IPH Operating Agreement, duly executed by IDS.

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2.6.2        At the Closing, IDS shall deliver to IPH:

2.6.2.1     Assignment of Patent Applications with respect to the Other Assets, in form and substance satisfactory to VMS;

2.6.2.2     Such other instrument or instruments of transfer as shall be necessary or appropriate, as VMS shall reasonably request, to vest in IPH good and marketable title to the Other Assets.

2.6.3        At the Closing, VMS shall deliver to IDS:

2.6.3.1     The Note duly executed by VMS;

2.6.3.2     The IPH Operating Agreement, duly executed by VMS;

2.6.3.3     The Registration Rights Agreement, between VMS and IDS, in the form annexed as Exhibit F hereto, duly executed by VMS;

2.6.3.4     Consulting Agreement, between VMS and Member, in the form annexed as Exhibit G hereto, duly executed by VMS;

2.6.3.5     An Assignment and Assumption Agreement and Bill of Sale with respect to the Assumed Liabilities, in form and substance satisfactory to IDS; and

2.6.3.6     Such other instrument or instruments as shall be necessary or appropriate, as IDS shall reasonably request.

2.6.4        At the Closing IPH shall deliver to VMS:

2.6.4.1     The License Agreement, duly executed by IPH.

2.7           Allocation.  The purchase price for the Assets (and all other capitalized costs, including all Assumed Liabilities) shall be allocated as mutually determined by VMS and IDS in accordance with applicable requirements of the Internal Revenue Code of 1986, as amended from time to time, and reflecting the value of the various Assets being purchased and sold pursuant to this Agreement.  These allocations will be binding on VMS and IDS for federal and state income tax purposes in connection with the purchase and sale of the Assets, and will be consistently reflected by each party on its federal, state and local income tax returns.

Section 3 Assumed Liabilities

3.1.           Assumed Liabilities.  At the Closing and upon the terms and conditions contained in this Agreement, VMS shall assume and agree to discharge and perform the following (and only the following) liabilities of IDS (the "Assumed Liabilities"):

3.1.1.        Trade Payables. All current trade accounts payable of Seller outstanding as of the Closing Date, but only to the extent such payables (i)  were incurred in the ordinary course of business consistent with past practice; and (ii) do not result from any failure to pay when and as due or  any other breach of the terms and conditions of any agreement (written or oral) by and between Seller and the vendor or supplier to which such payable  is due, including, without limitation, any penalties, late charges or  interest accrued on or before the Closing Date.  A full accounting of assumed payables is disclosed in the Schedule of Payables attached hereto as Exhibit H to this Agreement.  At the Closing, IDS shall be responsible for the production of any and all agreements necessary to effectuate assignment of the relevant assumed payables.

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3.1.2.        Warranty Obligations.  Warranty obligations of IDS in respect of the equipment listed on Exhibit I, which (i) were made in the ordinary course of business consistent with past practice, and (ii) are assigned to VMS pursuant to this Agreement, in each case to the extent such liabilities relate to performance on or after the Closing Date and do not result from any breach of warranty lawsuit that existed before the Closing Date.  For purposes of clarification and without in any way affecting the generality of the foregoing sentence , the term “Assumed Liabilities” includes any warranty repairs or services in process as of the Closing Date.  At closing IDS shall be responsible for the production of any and all agreements necessary to effectuate assignment by IDS and assumption by VMS of the relevant assumed warranty obligations.

3.1.3.        Customer Contracts.  Liabilities of IDS under any written customer contract by which IDS is bound on the Closing Date (each, a “Contract”), which (i) were made in the ordinary course of business consistent with past practice, (ii) were disclosed in the Schedule of Contracts attached hereto as Exhibit J, and (iii) are assigned to VMS pursuant to this Agreement, in each case to the extent such liabilities relate to performance on or after the Closing Date and do not result from any breach of contract, tort, claim or lawsuit arising out of or related to any matter that existed or occurred before the Closing Date.

3.2.           Excluded Liabilities.  Other than the Assumed Liabilities, VMS shall have no responsibility whatsoever with respect to any liabilities, contracts, commitments, and other obligations of IDS of any nature or kind, liquidated or contingent, whether or not incurred in the ordinary course of business, which shall remain obligations and liabilities of IDS (the  "Excluded Liabilities") including, without limitation:  (i) accrued expenses as of the Closing Date,  including, without limitation, salaries, vacation accrual, severance liabilities, bonus and commission accrual and deductions payable, and other  employee-related liabilities; (ii) notes payable;  (iii) liabilities for Taxes (as defined below) either accruing or relating to  the periods before the Closing Date; (iv) claims, liabilities, or other  obligations that relate to injuries, actions, omissions, conditions or events that occurred or existed on or prior to the Closing Date, and any liabilities for any claim, judgment, penalty, settlement agreement or  other obligation to pay in respect of any such claims or events.

3.3           Taxes.  As used in this Agreement, "Tax" shall mean all taxes, charges,  fees, levies or other assessments, including, without limitation, income,  excise, gross receipts, personal property, real property, sales, use, ad valorem, transfer, franchise, profits, license, withholding, payroll,  employment, severance, stamp, occupation, windfall profits, social security  and unemployment or other taxes imposed by the United States or any agency or instrumentality thereof, any state, county, local or foreign government, or any agency or instrumentality thereof, and any interest or fines, and any and  all penalties or additions relating to such taxes, charges, fees, levies or  other  assessments.

Section 4 Representations and Warranties of VMS

VMS represents and warrants to IDS that the following are true and correct as of this date and will be true and correct through the Closing Date as if made on that date:

4.1           Organization and Good Standing. VMS is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, with all the requisite power and authority to carry on the business in which it is engaged, to own the properties it owns and to execute and deliver this Agreement and to consummate the transactions contemplated hereby.

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4.2           Authorization and Validity. The execution, delivery and performance by VMS of this Agreement and the other agreements contemplated hereby, and the consummation of the transactions contemplated hereby, have been duly authorized by VMS. This Agreement and each other agreement contemplated hereby have been or will be prior to Closing duly executed and delivered by VMS and constitute or will constitute legal, valid and binding obligations of VMS, enforceable against VMS in accordance with their respective terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

4.3           No Violation. Neither the execution and performance of this Agreement or the other agreements contemplated hereby, nor the consummation of the transactions contemplated hereby or thereby, will (a) conflict with, or result in a breach of the terms, conditions and provisions of, or constitute a default under, the Articles of Incorporation or Bylaws of VMS or any agreement, indenture or other instrument under which VMS is bound, or (b) violate or conflict with any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over VMS or the properties or assets of VMS.

4.4           Consents. No further authorization, consent, approval, waiver, permit or license of, or filing with, any governmental or public body or authority, any lender, lessor or holder of securities or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement or the agreements contemplated hereby on the part of VMS.

Section 5 Representations and Warranties of IDS

IDS represents and warrants to VMS that the following are true and correct as of this date and will be true and correct through the Closing Date as if made on that date:

5.1           Organization and Good Standing. IDS is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware and has all the requisite power and authority to carry on the business in which it is engaged, to own the properties it owns and to execute and deliver this Agreement and to consummate the transactions contemplated hereby.

5.2           Authorization and Validity. The execution, delivery and performance by IDS of this Agreement and the other agreements contemplated hereby, and the consummation of the transactions contemplated hereby, have been duly authorized by all requisite action on the part of IDS. This Agreement and each other agreement contemplated hereby have been or will be prior to Closing duly executed and delivered by IDS and constitute or will constitute legal, valid and binding obligations of IDS, enforceable against IDS in accordance with their respective terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

5.3           Title. (i) IDS has good and marketable title to the Assets which are the subject of this Agreement. Upon consummation of the transactions contemplated hereby, VMS shall receive good, valid and marketable title to all the Assets free and clear of all liens, claims, and encumbrances.  (ii) IDS has good and marketable title to the Other Assets which are the subject of this Agreement. Upon consummation of the transactions contemplated hereby, IPH shall receive good, valid and marketable title to all the Other Assets free and clear of all liens and encumbrances created by IDS, including tax liens.

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5.4           Commitments. IDS has not entered into, nor are the Assets or Other Assets of IDS bound by, whether or not in writing, any (i) partnership or joint venture agreement; (ii) deed of trust or other security agreement; (iii) guaranty or suretyship, indemnification or contribution agreement or performance bond; (iv) employment, consulting or compensation agreement or arrangement; (v) labor or collective bargaining agreement; (vi) debt instrument, loan agreement or other obligation relating to indebtedness for borrowed money or money lent to another; (vii) deed or other document evidencing an interest in or contract to purchase or sell real property; (viii) agreement with dealers or sales or commission agents, public relations or advertising agencies, accountants or attorneys; (ix) lease of real or personal property, whether as lessor, lessee, sublessor, or sublessee; (x) agreement relating to any material matter or transaction in which an interest is held by a person or entity which is an affiliate of IDS; (xi) powers of attorney; or (xii) contracts containing noncompetition covenants.

5.5           Adverse Agreements. IDS is not a party to any agreement or instrument or any judgment, order, writ, injunction, decree, rule or regulation which materially and adversely affects or, so far as IDS can now reasonably foresee, will in the future materially and adversely affect the Assets as listed in Exhibit A, or the Other Assets as listed in Exhibit B.

5.6            No Violation. Neither the execution and performance of this Agreement or the other agreements contemplated hereby, nor the consummation of the transactions contemplated hereby or thereby, will (a) conflict with, or result in a breach of the terms, conditions and provisions of, or constitute a default under, any agreement, indenture or other instrument under which IDS may be bound, or (b) violate or conflict with any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over IDS or the properties or assets of IDS.

5.7           Consents. No authorization, consent, approval, permit or license of, or filing with, any governmental or public body or authority, any lender or lessor or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement or the agreements contemplated hereby on the part of IDS.

5.8           [Reserved]

5.9           Proceedings. No action, proceeding or order by any court or governmental body or agency has been threatened in writing, asserted, instituted or entered against IDS to restrain or prohibit the carrying out of the transactions contemplated by this Agreement.

5.10         Financial Statements.  IDS has delivered to VMS audited balance sheets as of December 31, 2007, 2006 and 2005 and statements of operations and cash flows for the fiscal years ended December 31, 2007, 2006 and 2005 (collectively, the “Financial Statements”).  The Financial Statements are based upon the information contained in the books and records of IDS, have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) consistently applied throughout the periods indicated and fairly present the financial condition and results of operations of IDS as of the dates and for the respective periods presented.

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5.11         Absence of Certain Changes.  Since December 31, 2007, there has not been  any damage, destruction or other casualty loss with respect to any asset or property owned, leased or otherwise used by it, whether or not covered by insurance, which damage, destruction or loss is reasonably likely, individually or in the aggregate, to have a material adverse effect on IDS’ financial condition, properties, assets, business or results of operations.

5.12         Litigation and Liabilities.  There are no (i) civil, criminal or administrative actions, suits, claims, hearings, investigations or proceedings pending or, to the knowledge of IDS, threatened against IDS or (ii) obligations or liabilities, whether or not accrued, contingent or otherwise, or any other facts or circumstances, in either such case, of which IDS has knowledge that are reasonably likely to result in any claims against or obligations or liabilities of IDS.

5.13         Compliance with Laws.  The business of IDS has not been, and is not being, conducted in violation of any law, statute, ordinance, regulation, judgment, order, decree, injunction, arbitration award, license, authorization, opinion, agency requirement or permit (collectively, “Laws”) of any governmental or regulatory authority, court, agency, commission, body or other governmental entity (“Governmental Entity”).  No investigation or review by any Governmental Entity with respect to IDS is pending or, to the knowledge of IDS, threatened, nor has any Governmental Entity indicated in writing an intention to conduct the same, except for tax proceedings.  To the knowledge of IDS, no material change is required in IDS’ processes, properties or procedures in connection with any such Laws, and it has not received any notice or communication of any material noncompliance with any such Laws that has not been cured as of the date hereof.  IDS has all permits, licenses, franchises, variances, exemptions, orders and other governmental authorizations, consents and approvals necessary to conduct its business as presently conducted.

5.14          Taxes.  IDS has prepared in good faith and duly and timely filed (taking into account any extension of time within which to file) all material tax returns required to be filed by it and all such filed tax returns are complete and accurate in all material respects and: (i) IDS has paid all taxes that are shown as due on such filed tax returns or that IDS is obligated to withhold from amounts owing to any employee, creditor or third party, except with respect to matters contested in good faith or for such amounts that, alone or in the aggregate, are not reasonably likely to have a material adverse effect on it; (ii) except as otherwise specified on Schedule 5.14 annexed hereto, as of the date hereof, there are no pending or, to the knowledge of IDS, threatened, any audits, examinations, investigations or other proceedings in respect of taxes or tax matters; and (iii) except as otherwise specified on Schedule 5.14 annexed hereto, there are not, to the knowledge of IDS, any unresolved questions or claims concerning IDS’ tax liability that are reasonably likely to have a material adverse effect on IDS.

5.15         Labor Matters.  IDS is not the subject of any proceeding asserting that it has committed an unfair labor practice or is seeking to compel it to bargain with any labor union or labor organization nor is there pending or, to the knowledge of its executive officers, threatened, nor has there been for the past  five years, any labor strike, dispute, walkout, work stoppage, slow-down or lockout involving it.

5.16         No Default.  IDS is not currently and does not expect  to be in the future, in violation or breach of or in default under, and no conditions exist that, with the giving of notice or the lapse of time or both, would constitute a default under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which IDS is a party or by which it or any of its properties or assets may be bound, except any such violation, breach or default that is not reasonably likely to have a material adverse effect on its financial condition, properties, assets, business or results of operations.

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5.17          Intellectual Property Rights.  Schedule 5.17 contains an accurate and complete description of all material domestic and foreign patents, trademarks, trademark registration, service marks, service marks registration, logos, trade names, assumed names, copyrights and copyright registrations and all applications therefor, presently owned or held by IDS or under which IDS owns or holds any license, or in which IDS owns or holds any direct or indirect interest, and to IDS’ knowledge no others are necessary for the use of the Assets or Other Assets in accordance with past practice.  To the knowledge of IDS, no products sold or services provided by IDS, nor any patents, formulae, know-how, secrets, trademarks, trademark registrations, service marks, service marks registration, logos, trade names, assumed names, copyrights, copyright registrations, or designation used or licensed for use in connection with the Assets or Other Assets, infringe on any patents, trademarks, licenses, or copyrights, or any other rights, of any person.  IDS is the sole owner of, has the sole and exclusive right to use, has the right and power to sell, and has taken all reasonable measures to maintain and protect, the patents, trademarks, trademark registrations, logos, trade names, assumed names, copyrights, copyright registrations, service marks and service mark registrations listed in Schedule 5.17 as owned by it.  Except as set forth in Schedule 5.17, no claims have been asserted against IDS in writing by any person and received by it challenging the use of any such patents, trademarks, trademark registrations, service marks, service mark registrations, logos, trade names, assumed names, copyrights and copyright registrations or challenging or questioning the validity or effectiveness of any such license or agreement, or the use of any formula, know-how or secrets used in connection with the Assets  or Other Assets and, to the knowledge of IDS, there is no valid basis for any such claim.  To IDS’ knowledge,  no other party is infringing on the patents, trademarks, trademark registrations, logos, tradenames, assumed names, copyrights copyright registrations, service marks and service mark registrations listed in Schedule 5.17.

5.18         Accounts Receivable.  The value of all IDS accounts receivable do not exceed $20,000 in the aggregate.

5.19          Brokerage.  No third party shall be entitled to receive any brokerage commissions, finder’s fees, fees for financial advisory services or similar compensation in connection with the transactions contemplated by this Agreement based upon any arrangement or agreement made by IDS or the Member.

Section 6 Representations and Warranties of IPH

IPH represents and warrants that the following are true and correct as of this date and will be true and correct through the Closing Date as if made on that date:

6.1           Organization and Good Standing. IPH is a limited liability company duly formed, validly existing and in good standing under the laws of the State of New York and has all the requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby.  IPH has engaged in no business other than its organizational activities and actions related to this Agreement and the transactions contemplated hereby, and, other than this Agreement, is not a party to any agreement, indenture or other instrument under which it or its properties may be bound.

6.2           Authorization and Validity. The execution, delivery and performance by IPH of this Agreement and the other agreements contemplated hereby, and the consummation of the transactions contemplated hereby, have been duly authorized by all requisite action on the part of IPH. This Agreement and each other agreement contemplated hereby have been or will be prior to Closing duly executed and delivered by IPH and constitute or will constitute legal, valid and binding obligations of IPH, enforceable against IPH in accordance with their respective terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

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6.3           Adverse Agreements. IPH is not a party to any agreement or instrument or any judgment, order, writ, injunction, decree, rule or regulation which materially and adversely affects or, so far as IPH can now reasonably foresee, will in the future materially and adversely affect its membership rights.

6.4           No Violation. Neither the execution and performance of this Agreement or the other agreements contemplated hereby, nor the consummation of the transactions contemplated hereby or thereby, will violate or conflict with any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over IPH or the properties or assets of IPH.

6.5           Consents. No authorization, consent, approval, permit or license of, or filing with, any governmental or public body or authority, any lender or lessor or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement or the agreements contemplated hereby on the part of IPH.

6.6           Compliance with Laws. There are no existing violations by IPH of any applicable federal, state or local law or regulation, except to the extent that any such violations would not have a material adverse effect on the property or business of IPH.

6.7           [Reserved]

6.8           Proceedings. No action, proceeding or order by any court or governmental body or agency has been threatened in writing, asserted, instituted or entered against IPH to restrain or prohibit the carrying out of the transactions contemplated by this Agreement.

Section 7 Indemnification

7.1           IDS’s Indemnity. Subject to the terms of this Section 7, IDS hereby agrees, to indemnify, defend and hold harmless VMS and its officers, directors, employees, agents, attorneys, accountants and affiliates from and against any and all losses, claims, obligations, demands, assessments, penalties, liabilities, costs, damages, reasonable attorneys’ fees and expenses (“Damages”) asserted against or incurred by VMS or IPH by reason of or resulting from (i) a breach by IDS of any representation, warranty or covenant contained herein, or in any agreement executed pursuant hereto or (ii) any claim, action, suit or proceeding arising out of the conduct of IDS’ business prior to the Closing Date, other than with respect to the Assumed Liabilities;.

7.2           VMS’s Indemnity. Subject to the terms of this Section 7, VMS hereby agrees to indemnify, defend and hold harmless IDS and its members, employees, agents, attorneys, accountants and affiliates from and against any and all Damages asserted against or incurred by IDS or IPH by reason of or resulting from (i) a breach by VMS of any representation, warranty or covenant contained herein, or in any agreement executed pursuant hereto or (ii) a failure to timely pay or perform any Assumed Liability or (iii) any claim, action, suit or proceeding arising out of the conduct of any aspect of the business of IDS acquired by VMS hereunder, including (without limitation) the possession, use or application of any of the Assets, on or after the Closing Date.

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7.3           IPH’s Indemnity. Subject to the terms of this Section 7, IPH hereby agrees to indemnify, defend and hold harmless VMS and its officers, directors, employees, agents, attorneys, accountants and affiliates from and against any and all Damages asserted against or incurred by VMS or IDS by reason of or resulting from a breach by IPH of any representation, warranty or covenant contained herein, or in any agreement executed pursuant hereto.

7.4            Indemnification Procedures.  In the case of any claim asserted by a third party against a party entitled to indemnification under this Agreement (the “Indemnified Party”), notice shall be given by the Indemnified Party to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and the Indemnified Party shall permit the Indemnifying Party (at the expense of such Indemnifying Party) to assume the defense of any claim or any litigation resulting therefrom, provided, that (i) counsel for the Indemnifying Party who shall conduct the defense of such claim or litigation shall be reasonably satisfactory to the Indemnified Party, and the Indemnified Party may participate in such defense at such Indemnified Party’s expense, and (ii) the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its indemnification obligation under this Agreement except to the extent that such failure results in a lack of actual notice to the Indemnifying Party and such Indemnifying Party is materially prejudiced as a result of such failure to give notice.  Except with the prior written consent of the Indemnified Party, no Indemnifying Party, in the defense of any such claim or litigation, shall consent to entry of any judgment or enter into any settlement that provides for injunctive or other nonmonetary relief affecting the Indemnified Party or that does not include as an unconditional term thereof the giving by each claimant or plaintiff to such Indemnified Party of a release from all liability with respect to such claim or litigation.  In no event shall a party guilty of fraud or willful misconduct be entitled to indemnity with respect to any matter involving such fraud or willful misconduct.  In the event that the Indemnified Party shall in good faith determine that the Indemnified Party may have available to it one or more material defenses or counterclaims that are inconsistent with one or more of those that may be available to the Indemnifying Party in respect of such claim or any litigation relating thereto, the Indemnified Party shall have the right at all times to take over and assume control over the defense, settlement, negotiations or litigation relating to any such claim at the sole cost of the Indemnifying Party, provided, that if the Indemnified Party does so take over and assume control, the Indemnified Party shall not settle such claim or litigation without the written consent of the Indemnifying Party, such consent not to be unreasonably withheld.  In the event that the Indemnifying Party does not accept the defense of any matter as above provided, the Indemnified Party shall have the full right to defend against any such claim or demand, and shall be entitled to settle or agree to pay in full such claim or demand, subject to the written consent of the Indemnifying Party such consent not to be unreasonably withheld.  In any event, except to the extent that they have an interest adverse to the other, the parties hereto shall cooperate in the defense of any claim or litigation subject to this Section 7 and the records of each shall be available to the other with respect to such defense.

7.5           Remedies Not Exclusive. The remedies provided for in this Section shall not be exclusive of any other rights or remedies available by one party against the other, either at law or in equity.  Notwithstanding the foregoing, the parties hereto hereby acknowledge and agree that with respect to any Damages for which VMS is entitled to indemnification from IDS pursuant to Section 7.1 above, in the event that VMS makes demand for indemnification for any such Damages in accordance with the terms of this Section 7 and IDS fails to provide indemnification required to be made by it under the terms of this Section 7, VMS shall be entitled, as its sole and exclusive remedy under this Section 7, (i) first, to reduce the principal amount and any accrued interest thereon payable by VMS to IDS under the terms of the Note by the amount of such Damages, and if after application of the such reduction of the principal amount of the Note, any amount of Damages remain unpaid, then (ii) second, if all or any portion of the Note has been converted by IDS into shares of common stock of VMS (the “Conversion Shares”), to apply the remaining amount of such Damages to the repurchase by VMS of Conversion Shares having an aggregate value equal to the remaining amount of any such Damages (with each Conversion Share having a value equal to the greater of its then most recent closing sales price on the OTC Bulletin Board or other applicable trading market or the Conversion Price (as defined in the Note)) (each such reduction described in (i) or (ii) above, a “Set-off”).  VMS agrees that prior to application of any such Set-off pursuant to this Section 7, it shall provide ten (10) days advance written notice of such Set-off and the basis for such Set-off to IDS in accordance with the terms of Section 10.3 hereof.

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Section 8 Closing

8.1            The Closing.  The closing shall occur on the Closing Date at the the offices of VMS outside Counsel Giordano, Halleran & Ciesla, 125 Half Mile Road, Red Bank, NJ 07701.

8.2           Modification of Closing.  Any desired modifications to the time or location of the Closing must be made in writing, with timely notification to all parties.  Upon the mutual written agreement of the parties following such notification, the Closing may be rescheduled, approval of such rescheduling not being unreasonably withheld by any party.

Section 9 Non-Competition and Non-Solicitation

9.1           Non-Competition.  Each of IDS and Member agrees that during the five year period beginning on the date of this Agreement (the “Restricted Period”), neither IDS nor Member shall, directly or indirectly, be employed by, serve as an advisor or consultant to, or have an ownership interest in any Competing Business.  For purposes of this Agreement, the term “Competing Business” shall mean: (a) the business of developing, marketing, selling or installing video surveillance systems or (b) furnishing technical and/or assistance to anyone who engages in a business described in clause (a) above; provided, however, that this Section 9.1 shall not prevent either IDS or Member from owning any interest in IPH or 5% or less of the capital stock of any publicly held entity.

9.2           Non-Solicitation of Customers.  Each of IDS and Member agrees that during the Restricted Period neither IDS nor Member shall (a) interfere with VMS’ business relationship with any of its customers, (b) encourage any such customer to cease or reduce its business with VMS or (c) solicit the business of any such customer (or any party that has been a customer of VMS within the prior two years) on behalf of a Competing Business.

9.3           Non-Solicitation of Employees.  Each of IDS and Member agrees that during the Restricted Period, neither IDS nor Member shall, directly or indirectly, on behalf of themselves or a Competing Business, solicit or induce or attempt to solicit or induce any employee of VMS to leave VMS for any reason, or hire any person who was employed by VMS at any time during the two year period preceding the date of hiring.

9.4           Severability.  The covenants contained in this Section 9 herein shall be construed as a series of separate and severable covenants which are identical in terms except for subject matter and temporal duration.  If any court of competent jurisdiction determines that any such separate covenant is not fully enforceable, such covenant shall be deemed modified or severed and that the remainder of such covenant and of this Agreement shall be enforced to the fullest extent permitted by applicable law.

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9.5            Injunctive Relief.  IDS and Member acknowledge and agree that breach of the covenants herein would cause irreparable harm.  VMS shall have the right to injunctive relief, in addition to all of its other rights and remedies at law or in equity, to enforce the provisions of this Section 9.

9.6           Early Termination of Restrictions.  In the event that, at any time during the Restricted Period, any “event of default” (as such term is defined in the Note) occurs under the Note, all obligations of and restrictions on IDS under this Section 9 shall terminate and be of no further effect effective as of the date of such “event of default” under the Note.

9.7           Permitted Activities.  The parties hereto acknowledge that Jay Russ, Managing Member of IDS (“Russ”), is a licensed and practicing attorney-at-law, currently practicing with the law firm Russ & Russ P.C.  Notwithstanding anything to the contrary contained in this Agreement, Russ shall in no way be prohibited, restricted or otherwise limited from practicing law or otherwise providing legal services of any kind or nature to any person or entity, whether directly or indirectly through any firm or organization.

Section 10 Miscellaneous Provisions

10.1         Amendment and Modification. Subject to applicable law, this Agreement may be amended, modified or supplemented only by a written agreement signed by VMS, IDS and IPH.

10.2         Waiver of Compliance; Consents.

10.2.1      Any failure of any party to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the performance of such obligation, covenant or agreement or who has the benefit of such condition, but such waiver or failure to insist upon strict compliance with such obligation, covenant, or agreement or condition will not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

10.2.2      Whenever this Agreement requires or permits consent by or on behalf of any party hereto, such consent will be given in a manner consistent with the requirements for a waiver of compliance as set forth above.

10.3         Notices. All Notices, requests, demands and other communications required or permitted hereunder will be in writing and will be deemed to have been duly given when delivered by (i) hand; (ii) reliable overnight delivery service; or (iii) facsimile transmission.

If to VMS, to: 1000 Industrial Way North Suite C, Toms River, NJ 08751

If to IDS, via facsimile addressed to IDS at the facsimile number (516) 541-1077.

If to IPH, via facsimile addressed to IPH at the facsimile number (516) 541-1077.

10.4         Titles and Captions. All section titles or captions contained in this Agreement are for convenience only and shall not be deemed part of the context nor effect the interpretation of this Agreement.

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10.5         Entire Agreement. This Agreement contains the entire understanding between and among the parties and supersedes any prior understandings and agreements among them respecting the subject matter of this Agreement.

10.6         Agreement Binding. This Agreement shall be binding upon the heirs, executors, administrators, successors and assigns of the parties hereto.

10.7         Attorneys’ Fees. In the event a suit or action is brought by any party under this Agreement to enforce any of its terms, or in any appeal therefrom, it is agreed that each party thereto shall pay its own respective legal fees, with no contribution from any other party.

10.8         Computation of Time. In computing any period of time pursuant to this Agreement, the day of the act, event or default from which the designated period of time begins to run shall be included, unless it is a Saturday, Sunday or a legal holiday, in which event the period shall begin to run on the next day that is not a Saturday, Sunday or legal holiday.

10.9         Pronouns and Plurals. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the person or persons may require.

10.10       Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE PARTIES AGREE THAT ANY LITIGATION RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT MUST BE BROUGHT BEFORE AND DETERMINED BY A COURT OF COMPETENT JURISDICTION WITHIN THE STATE OF NEW YORK.

10.11       Presumption. This Agreement or any Section thereof shall not be construed against any party due to the fact that said Agreement or any section thereof was drafted by said party.

10.12       Further Action. The parties hereto shall execute and deliver all documents, provide all information and take or forbear from all such action as may be necessary or appropriate to achieve the purposes of the Agreement.

10.13       Confidentiality. The parties shall keep this Agreement and its terms confidential, but any party may make such disclosures as it reasonably considers are required by law or necessary to obtain financing. In the event that the transactions contemplated by this Agreement are not consummated for any reason whatsoever, the parties hereto agree not to disclose or use any confidential information they may have concerning the affairs of other parties, except for information which is required by law to be disclosed. Confidential information includes, but is not limited to, financial records, surveys, reports, plans, proposals, financial information, information relating to personnel contracts, stock ownership, liabilities and litigation.

10.14       Costs, Expenses and Legal Fees. Whether or not the transactions contemplated hereby are consummated, each party hereto shall bear its own costs and expenses (including attorneys’ fees).

10.15       Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws in effect during the term hereof, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom. Furthermore, in lieu of such illegal, invalid and unenforceable provision, there shall be added automatically as part of this Agreement a provision as similar in nature in its terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

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10.16       Continuing Nature. All representations and warranties contained in this Agreement shall survive the Closing for a period of two (2) years and, if applicable, all covenants, which, according to their terms are to be performed after the execution of this Agreement, shall survive the Closing for a period of two (2) years.

10.17       Counterparts.  This Agreement may be executed in any number of counterparts (which may be delivered by facsimile), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[Signature page follows]

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IN WITNESS WHEREOF, the parties hereto have set their hands this 2nd day of April, 2008.

VISUAL MANAGEMENT SYSTEMS, INC.

By:___________________________________

Name:  Jason Gonzalez

Title:  President

INTELLIGENT DIGITAL SYSTEMS, LLC

By:___________________________________

Name: Jay Russ

Title:  Managing Member

IDS PATENT HOLDING, LLC

By:	INTELLIGENT DIGITAL SYSTEMS, LLC, its Managing Member
	By:___________________________________
	Name:  Jay Russ
	Title:  Managing Member

Jay Russ, on his own behalf and solely with respect to Section 9 hereof

___________________________________

Name: Jay Russ

Certain Schedules and Exhibits to the Asset Purchase Agreement are not presented herein or delivered herewith.  Copies of such Schedules and Exhibits will be provided to the Securities Exchange Commision upon request.

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EXHIBIT A

Assets

1.              All IDS DVR software source code.

2.             All IDS DVR inventory located at 213A Higbie Lane, West Islip, NY, including but not limited to video capture boards, hardware, spare parts, but excluding any and all equipment.

3.              All IDS accounts receivable.

4.              The following IDS owned trademarks:

 TECHEYE (Reg. No. 2,757,211)

 SEEITLIVE (Reg. No. 3,034,652)

 SEEITLIVE.COM (Reg. No. 2,955,550)

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EXHIBIT B

Other Assets

1.             The following patent applications and any related trade secrets or know-how:

 U.S. Patent Application Serial Number 10/145,058

 U.S. Patent Application Serial Number 10/279,279

2.              All rights to assert claims or collect damages or seek other relief in respect of the items listed in item 1.

3.              All goodwill associated with the items listed in item 1.

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EX-4.11

EXHIBIT 4.11

THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED

Principal Amount: $1,544,000.00 Issue Date: April 2, 2008

Unsecured Convertible Promissory Note

FOR  VALUE  RECEIVED,  Visual Management Systems,  Inc., a Nevada corporation with an address at 1000 Industrial Way North Suite C, Toms River, NJ 08755 (the "Company"), hereby promises to pay to the order of Intelligent Digital Systems, LLC, a Delaware limited liability company, with an address at 543 Broadway, Massapequa, New York 11758 or its registered  assigns  or  successors  in  interest (the “Holder”), the sum of One Million Five-Hundred Forty Four Thousand Dollars  ($1,544,000.00), on April 2, 2011 (the "Maturity Date") or such earlier date as this Unsecured Convertible Promissory Note (this “Note”) is required or permitted to be repaid as provided hereunder  If not converted, or paid within 30 days of maturity, then from and after the maturity date this Note shall bear interest at the rate 12% per annum.

Section 1. Definitions.

	For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Asset Purchase Agreement dated as of even date herewith among the Company, Holder, Jay Russ and IDS Patent Holding, LLC (the “Asset Purchase Agreement”) and (b) the following terms shall have the following meanings:
1.1	“Affiliate” of a specified Person means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, that Person, as such terms are used in and construed under Rule 405 under the Securities Act.
1.2	“Common Stock” means the Company’s common stock, par value $0.001 per share.
1.3	“Conversion Date” means the date upon which the Company receives written notice from Holder, of Holder’s desire and right (pursuant to the terms of this Note) to convert any or all of the principal amount or accrued interest under this Note into shares of Common Stock of the Company.  For the purposes of this definition, the date of receipt of said notice shall be the date such notice is sent in accordance with Section 8.1 below
1.4	“Conversion Price” means the conversion price in effect on any given date, which initially shall be equal to $1.15 but which shall be subject to adjustment as described herein.
1.5	“Conversion Shares” or “Shares” means the shares of Common Stock issued or issuable upon conversion of any or all of the principal amount or accrued interest under this Note.

1.6	“Effective Date” means the effective date of any registration statement filed with the SEC covering all or such portion of the Conversion Shares as may be specified in such registration statement.
1.7	“Exchange Act” means the Securities Exchange Act of 1934, as amended to date.
1.8	“Mandatory Default Amount” means the sum of (a) the outstanding principal amount of this Note, plus interest thereon calculated at the rate of 12% per annum from the date of the Event of Default and (b) all other amounts, costs, expenses due in respect of this Note.
1.9	“Permitted Issuances” means an issuance of (a) shares of Common Stock issued in connection with a stock split or stock dividend described in Section 4.1, (b) shares of Common Stock issued upon conversion of any or all of the principal amount or accrued interest under this Note, (c) shares of capital stock of the Company (or options, warrants or other rights to purchase such capital stock) issuable or issued to employees, officers, consultants or directors of the Company pursuant to agreements or plans approved by the Board of Directors of the Company, or (d) shares of capital stock of the Company subject to options, warrants or convertible securities that are outstanding as of the date hereof.
1.10	“Registration Statement” means a registration statement that registers the resale of such number of Conversion Shares of the Holder as shall be permitted or required to be registered under the terms of the Registration Rights Agreement, names such Holder as a “selling stockholder” therein, and meets all other requirements of the Registration Rights Agreement.
1.11	“Specified Debenture Holders” shall mean the holders of a majority of the then outstanding 5% Senior Secured Original Issue Discount Convertible Debentures (the “Debentures”) issued by the Company.
1.12	“Trading Day” means a day on which the New York Stock Exchange is open for business.

Section 2. Principal and Interest

2.1	Principal.  The principal amount due to the Holder of this Note shall be One Million Five-Hundred Forty Four Thousand Dollars ($1,544,000.00), which shall be payable in full on the Maturity Date to Holder or its registered assigns or successors, unless otherwise previously paid in full or converted.  The principal of this Note may not be prepaid, in whole or in part, prior to the Maturity Date except with the prior consent of Holder.
2.2	Interest.  No interest shall accrue hereunder until the Maturity Date.  If not paid in full or converted in full prior to the Maturity Date, then from and after the Maturity Date simple interest shall accrue on the outstanding principal amount at the annual rate of 12%.
2.3	Interest Calculations. Interest shall be calculated on the basis of a 365-day year, and shall accrue daily commencing on the Maturity Date. until payment or conversion in full of the principal amount due hereunder, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. Interest shall not accrue with respect to any principal amount previously converted.

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Section 3.  Conversion

3.1	Voluntary Conversion.  This Note will be convertible in whole or in part at any time and from time to time at the discretion of the Holder, into the Company’s Common Stock from and after the earliest to occur of the following:
	3.1.1	May 31, 2010;
	3.1.2	The approval of the conversion of this Note by the Specified Debenture Holders; provided, however, that such approval shall be deemed to have been given from and after the first date on which no Debentures that are outstanding on the date hereof remain outstanding; or
	3.1.3	Any of the following is agreed to or publicly announced: (i) the sale of all or substantially all of the assets of the Company, (ii) the purchase by any party of more than 25% of the outstanding common stock of the Company, (iii) the commencement of a tender offer with respect to 25% or more of the outstanding common stock of the Company, (iv) a merger transaction which results in the shareholders of Company immediately before the transaction owning less than 50% of the outstanding common stock of the surviving entity after the transaction or (v) a secondary registered offering by one or more holders of more than 5% of the outstanding common stock of the Company, other than pursuant to the Form SB-2 Registration Statement filed by the Company on December 21, 2007 which has been converted to a Form S-1 Registration Statement (any such transaction, a “Company Sale Transaction”).
3.2	Conversion Price. The initial conversion price in effect on any Conversion Date shall be equal to $1.15, subject to adjustment as described herein (the “Conversion Price”).
3.3	[Reserved]
3.4	Mechanics of Conversion.
	3.4.1	Conversion Shares Issuable Upon Conversion of Principal Amount. Subject to and in compliance with the provisions of this Note and the Asset Purchase Agreement, the Holder has the right to convert the principal or any portion thereof, into, an amount of shares of Common Stock equal to the amount of principal plus any accrued interest thereon being converted divided by the Conversion Price (the number of shares so calculated the “Conversion Number”). Upon conversion, the Company will issue to Holder a number of shares of Common Stock equal to the Conversion Number.
	3.4.2	Approval of the Specified Debenture Holders.  Except where approval is deemed given pursuant to Section 3.1.2 of this Note, all requests by the Holder for the permission of the Specified Debenture Holders to initiate conversion pursuant to Section 3.1.2 of this Note shall be made through the Company.  Upon receipt of written notice from the Holder, the Company shall promptly submit the Holder’s request to the Specified Debenture Holders.  The Company shall not be responsible for the timeliness of any response to the Holder’s request by the Specified Debenture Holders, nor for the substance of their response.  In the case of the Specified Debenture Holder’s denial of Holder’s request to initiate conversion, Holder agrees to hold the Specified Debenture Holders and the Company blameless and without liability for any injury or loss to the Holder resulting from the inability to initiate conversion.  Holder agrees that it has no recourse against the Company or the Specified Debenture Holder’s for the Specified Debenture Holder’s denial of Holder’s request to initiate conversion.

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	3.4.3	Notice of Conversion.  In compliance with the terms of section 3.1 of this Note relevant to Holder’s right to initiate conversion of principal or accrued interest, Holder shall indicate to Company its intention to initiate conversion by delivering to the Company written notice of its intention in a form substantially compliant with that of the Notice of Conversion included as Annex A of this Note.  The date upon which the Company receives said notice shall be deemed the Conversion Date.  Except where approval is deemed given pursuant to Section 3.1.2 of this Note, for purposes of conversions requiring approval of the Specified Debenture Holders, the conversion date shall be deemed the date upon which the Company receives notice from the Specified Debenture Holders as to their approval of the conversion.
	3.4.4	Tolling of Conversion Date.  If the Company shall reasonably believe that Holder is as of the date notice of conversion is received, not entitled to initiate conversion under the terms of this Section 3, the Company shall as soon as practicable indicate said belief in writing to the Holder.  The Conversion Date shall then be tolled until receipt of written proof to the Company’s reasonable satisfaction that the Holder is entitled to initiate conversion.
	3.4.5	Delivery of Certificate Upon Conversion. Not later than seven Trading Days after each Conversion Date, the Company shall deliver, or cause to be delivered, to the Holder a certificate or certificates representing the Conversion Shares which prior to the Effective Date with respect to such Conversion Shares, shall contain such restrictive legends as may be required pursuant to the Securities Act. Such certificate or certificates shall represent the number of shares of Common Stock being acquired upon the conversion of this Note. On or after the Effective Date with respect to such Conversion Shares, the Company shall use its best efforts to deliver any certificate or certificates required to be delivered by the Company under this Section 3 electronically through the Depository Trust Company or another established clearing corporation performing similar functions.
3.5	Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of this Note free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other Holders of the Notes), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 4) upon the conversion of the outstanding principal amount of this Note. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable and, if the Registration Statement is then effective under the Securities Act, shall be registered for public sale in accordance with such Registration Statement.

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3.6

Fractional Shares. Upon a conversion hereunder, the Company shall not be required to issue stock certificates representing fractions of shares of Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Conversion Price at such time.

3.7

Transfer Taxes. Company shall not be required to pay any documentary, stamp or similar taxes that may be payable in respect of the issue or delivery of certificates representing conversion shares, and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

Section 4.  Certain Adjustments

	The Conversion Price shall be adjusted from time to time by the Company as follows:.
4.1	Stock Dividends and Stock Splits.  If the Company, at any time while this Note is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which shall not include any shares of Common Stock issued by the Company upon conversion of, or payment of interest on, this Note); (B) subdivides outstanding shares of Common Stock into a larger number of shares; (C) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares; or (D) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
4.2	Dilutive Issuances.
4.2.1	If, at any time while this Note is outstanding, the Company shall: (A) issue any options, warrants or other rights (excluding Permitted Issuances) entitling the record or beneficial holder thereof to subscribe for, or purchase, shares of Common Stock for a consideration per share less than the then-effective Conversion Price; (B) issue or sell securities of the Company convertible into, or exchangeable for, shares of Common Stock for a consideration per share less than the then-effective Conversion Price; or (C) issue or sell additional shares of Common Stock for a consideration per share less than the then-effective Conversion Price (any of the foregoing events described in clauses (A), (B), and (C), a “Dilutive Issuance”); then the Conversion Price shall be adjusted to a price determined by multiplying the Conversion Price in effect immediately prior to such Dilutive Issuance by a fraction the numerator of which shall be the sum of the number of shares of Common Stock (i) outstanding immediately prior to such Dilutive Issuance, (ii) issuable upon exchange or conversion of any exchangeable or convertible securities outstanding immediately prior to such Dilutive Issuance, (iii) issuable upon the exercise of all options, warrants or similar rights outstanding immediately prior to such Dilutive Issuance and (iv) which the aggregate consideration received by the Company for such Dilutive Issuance would purchase at the Conversion Price in effect immediately prior to such Dilutive Issuance, and the denominator of which shall be the sum of the number of shares of Common Stock in clauses (i), (ii) and (iii) above plus the number of shares of Common Stock issued or issuable in such Dilutive Issuance at the stated issue or exercise price thereof.

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4.2.2	In the case of a Dilutive Issuance of securities for cash, the consideration shall be deemed to be the amount of cash paid therefor before deducting any discounts, commissions or other expenses allowed, paid or incurred by the Company for any underwriting or otherwise in connection with the issuance and sale thereof.
4.2.3	In the case of a Dilutive Issuance of securities for consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as determined in good faith by the Board of Directors of the Company irrespective of any accounting treatment.
4.2.4	In the case of a Dilutive Issuance of options to purchase or rights to subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common Stock or options to purchase or rights to subscribe for such convertible or exchangeable securities, the following provisions shall apply for all purposes of this Section 4:
		4.2.4.1	The aggregate maximum number of shares of Common Stock deliverable upon exercise (assuming the satisfaction of any conditions to exercisability, including, without limitation, the passage of time, but without taking into account potential antidilution adjustments) of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in Sections 4.2.2 and 4.2.3), if any, received by the Company upon the issuance of such options or rights plus the minimum aggregate exercise price provided in such options or rights (without taking into account potential antidilution adjustments) for the Common Stock covered thereby.
		4.2.4.2	The aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange (assuming the satisfaction of any conditions to convertibility or exchangeability, including, without limitation, the passage of time, but without taking into account potential antidilution adjustments) for any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a consideration equal to the consideration, if any, received by the Company for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the minimum aggregate additional consideration, if any, to be received by the Company (without taking into account potential antidilution adjustments) upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in Sections 4.2.2 and 4.2.3).

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		4.2.4.3	In the event of any change in the number of shares of Common Stock deliverable or in the consideration payable to the Company upon exercise of such options or rights or upon conversion of or in exchange for such convertible or exchangeable securities, including, but not limited to, a change resulting from the antidilution provisions hereof, the Conversion Price, to the extent in any way affected by or computed using such options, rights or securities, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the exercise of any such options or rights or the conversion or exchange of such securities.
		4.2.4.4	The number of shares of Common Stock deemed issued and the consideration deemed paid therefor pursuant to Sections 4.2.4.1 and 4.2.4.2 shall be appropriately adjusted to reflect any change, termination or expiration of the type described in Section 4.2.4.3.
4.3	Fundamental Transaction. If, at any time while this Note is outstanding, (A) the Company effects any merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one transaction or a series of related transactions, (C) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one (1) share of Common Stock (the “Alternate Consideration”).  For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following such Fundamental Transaction.  To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new note consistent with the foregoing provisions and evidencing the Holder’s right to convert such note into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 4 and insuring that this Note (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

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4.4	For purposes of this Section 4, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company so long as the Company does not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company, but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock.
4.5	Notice to the Holder.
	4.5.1	Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 4, the Company shall promptly mail to the Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
	4.5.2	Notice to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder at its last known address, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to convert this Note during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice.

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Section 5.  Event of Default

5.1.	Event of Default.  “Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
	5.1.1.	The Company shall fail to pay the principal amount of this Note within ten (10) days of when due;
	5.1.2.	The Company shall fail to observe or perform any other covenant or agreement contained in this Note (other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion), which failure is not cured, if possible to cure, within 30 calendar days after notice of such failure sent by the Holder to the Company;
	5.1.3.	(A) the Company commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency, liquidation or similar law of any jurisdiction relating to the Company; (B) there is commenced against the Company any such case or proceeding that is not dismissed within 60 days after commencement; (C) the Company is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (D) the Company suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment; (E) the Company makes a general assignment for the benefit of creditors; (F) the Company calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (G) the Company, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing; or
	5.1.4.	The Company shall fail for any reason to deliver certificates to a holder of this Note prior to the seventh Trading Day after a Conversion Date or the Company shall provide at any time notice to such holder, including by way of public announcement, of the Company’s intention to not honor requests for conversions of any portion of the principal amount or accrued interest under this Note in accordance with the terms hereof.
5.2.	Remedies Upon Event of Default. If any Event of Default shall have occurred, the Mandatory Default Amount shall become immediately due and payable in cash. Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of this Note until such time, if any, as the Holder receives full payment pursuant to this Section 5.2. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

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5.3. Company Contract Default as Event of Default.  In the event that the Company fails to perform or otherwise breaches any obligation or agreement under the terms of that certain Consulting Agreement by and between the Company and Jay Russ, dated as of the date hereof (the “Consulting Agreement”), then in any such case, Holder shall have the right, exercisable by delivery of written notice thereof to the Company in accordance with the terms of Section 8.1 of this Note, from the date of the occurrence of such failure or breach to declare such failure or breach thereunder an Event of Default hereunder.  Any declared Event of Default pursuant to this Section 5.3 shall be effective as of the date of such failure or breach under the Consulting Agreement and shall be subject to the terms of Section 5.2 of this Note in all respects as an Event of Default hereunder.

Section 6. Acceleration of Maturity Date

Acceleration Upon Sale of Company.  In the event the Company consummates a transaction involving either (a) the sale of all or substantially all of the assets or outstanding shares of capital stock of the Company, or (b) a merger pursuant to which 51% or more of the shares of capital stock of the Company are converted into the right to receive cash therefor, then in any such case, Holder shall have the right at any time thereafter, exercisable by delivery of written notice thereof to the Company in accordance with the terms of Section 8.1 of this Note, to accelerate the Maturity Date and cause any then outstanding indebtedness or obligation under this Note to immediately become due and payable.

Section 7. Assignments

7.1	Assignable in Whole Only.  This Note may only be assigned in whole to a third party, and any and all rights and obligations under this Note will pass in full to any assignee who shall by accepting the assignment agree to all relevant terms of this Note as to their valid and legally binding status.
7.2	Notice to the Company.  The Holder must notify the Company in writing of any intent to make assignment of this Note to any party prior to execution of any agreements to effectuate such.  Included in said notice the Holder must submit to the Company proof of the assignee’s legal ability to hold this Note and comply with its terms, and any other documentation reasonably requested by the Company regarding assignee’s identity.  Upon approval by the Company, not to be unreasonably withheld, the Holder may then proceed with the desired assignment.
7.3	Registration of Assignment.  Upon execution of any and all assignments of this Note, the Holder shall submit to the Company all relevant agreements governing the assignment transaction.  Upon final receipt by the Company of said agreements the assignment shall be considered a Registered Assignment, and the assignee a Registered Assignee, and the new Holder of this Note.

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Section 8. Miscellaneous

8.1	Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, facsimile number 732-281-1365, Attention: Chief Financial Officer or such other facsimile number or address as the Company may specify for such purpose by notice to the Holder delivered in accordance with this Section 8. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered by facsimile addressed to the Holder (a) at the facsimile number (516) 541-1077, or (b) if such facsimile transmission is unsuccessful after the Company’s good faith effort to deliver notice to Holder at such facsimile number, then by a nationally recognized overnight courier service to the Holder’s principal place of business. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section 8 prior to 5:30 p.m. (New Jersey time ), (ii) the date immediately following the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section 8 between 5:30 p.m. (New Jersey time) and 11:59 p.m. (New Jersey time) on any date, (iii) the second Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.
8.2	Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal amount and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed.
8.3	Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.
8.4	Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated hereby (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in New York, New York (the “New York Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

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8.5	Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. Any waiver by the Company or the Holder must be in writing.
8.6	Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such power as though no such law has been enacted.
8.7	Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

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8.8 Assumption. Except as otherwise provided in Section 4, any successor to the Company or any surviving entity in a Fundamental Transaction shall (i) assume, prior to such Fundamental Transaction, all of the obligations of the Company under this Note pursuant to written agreements in form and substance satisfactory to the Holder (such approval not to be unreasonably withheld or delayed) and (ii) issue to the Holder a new Note of such successor entity evidenced by a written instrument substantially similar in form and substance to this Note, including, without limitation, having a principal amount and interest rate equal to the principal amount and the interest rate of this Note and having similar ranking to this Note, which shall be satisfactory to the Holder (any such approval not to be unreasonably withheld or delayed). The provisions of this Section 8.8 shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations of this Note.

[Signature page follows]

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.

VISUAL MANAGEMENT SYSTEMS, INC.
By:
Name:	Jason Gonzalez
Title:	Chief Executive Officer

WITNESS:

_______________________________

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ANNEX A

NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the Unsecured Convertible Promissory Note issued April 2, 2008 of Visual Management Systems, Inc., a Nevada corporation (the “Company”), into shares of common stock (the “Common Stock”), of the Company according to the conditions hereof, as of the date written below.  If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.  No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.

Conversion calculations:
	Date to Effect Conversion:
	Principal Amount of Note to be Converted:
	Payment of Interest in Common Stock __ yes  __ no
		If yes, $_____ of Interest Accrued on Account of Conversion at Issue.
	Number of shares of Common Stock to be issued:
	Signature:
	Name:
	Address for Delivery of Common Stock Certificates:
	Or
	DWAC Instructions:
	Broker No:     _______________
	Account No:  _______________

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ANNEX B

CONVERSION SCHEDULE

The Unsecured Convertible Promissory Note issued on April 2, 2008 in the aggregate principal amount of $1,544,000.00 is issued by Visual Management Systems, Inc.  This Conversion Schedule reflects conversions made under Section 3 of the above referenced Note.

Dated:

Date of Conversion   Amount of Conversion Aggregate Principal Amount Remaining Subsequent to Conversion   Company Attest

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EX-7.1

EXHIBIT 7.1

April 8, 2008

Securities and Exchange Commission

450 Fifth Street, N.W.

Washington, D.C. 20549

Commissioners:

We have read the statements made by Visual Management Systems, Inc., which we understand will be filed with the Commission, pursuant to Item 4.02 of Form 8-K, as part of the Company's Form 8-K report dated April 8, 2008. We agree with the statements in Item 4.02 of such Form 8-K.

Very truly yours,

/s/ Sobel & Co., LLC

Sobel & Co., LLC

EX-10.14

EXHIBIT 10.14

Consulting Agreement

This Consulting Agreement (the "Agreement") is entered into as of this 2nd day of April, 2008, by and between Visual Management Systems, Inc., a Nevada corporation, with its principal place of business at 1000 Industrial Way North Suite C, Toms River, NJ 08755 (the “Company”) and Jay Edmond Russ, an individual ("Consultant").

Recitals

WHEREAS, the Company is in need of guidance and consultation with respect to its digital video surveillance and digital video recorder (“DVR”) businesses;

WHEREAS, the Company requires access to the expertise of the Consultant as to certain strategic elements of the digital video surveillance industry; and

WHEREAS, Consultant has agreed to make himself reasonably available to provide consulting services to the Company in connection with its digital video surveillance and DVR businesses as requested by the Company;

NOW, THEREFORE, the parties hereby agree as follows:

	Consultant's Services. Consultant shall make himself reasonably available by telephone to the Company during regular business hours during the Term (as defined below) of this Agreement, subject in all respects to his other business obligations, to provide to the Company professional consulting services in connection with its digital video surveillance and DVR businesses and other related activities as reasonably requested from time to time (the “Consulting Services”).  In providing the Consulting Services as described in this Agreement, Consultant shall give the Company full access to his range of knowledge and professional contacts in the digital video surveillance industry, with a view  towards the Company leveraging his industry relationships to expand its DVR and digital video surveillance product distribution, and increase its fully integrated system install revenue.
1.	Compensation.
	1.1.	Base Compensation.  In consideration for the Consulting Services to be performed by Consultant under this Agreement, the Company will pay Consultant the annualized sum of $75,000.00.  During the first nine (9) months of this Agreement, payment shall be made to Consultant in equal monthly installments on the last day of each calendar month during which this Agreement is effective, and thereafter, payment shall be made to Consultant in equal quarterly installments on the first day of each quarter during which this Agreement is effective.
	1.2.	Expenses.  Consultant shall be responsible for all his own normal business expenses.  Extraordinary expenses must be submitted to the Company for approval or no reimbursement shall occur for any reason whatsoever.

2.	Independent Contractor.  Nothing herein shall be construed to create an employer-employee relationship between the Company and Consultant. Consultant is an independent contractor and not an employee of the Company or any of its subsidiaries or affiliates. The consideration set forth in Section 2 shall be the sole consideration due Consultant for the services rendered hereunder. It is understood that the Company will not withhold any amounts for payment of taxes from the compensation of Consultant hereunder. Consultant will not represent to be or hold himself out as an employee of the Company.  The parties hereto acknowledge that Consultant is a licensed and practicing attorney-at-law, currently practicing with the law firm Russ & Russ P.C. Notwithstanding anything to the contrary contained in this Agreement, Consultant shall in no way be prohibited, restricted or otherwise limited from practicing law or otherwise providing legal services of any kind or nature to any person or entity, whether directly or indirectly through any firm or organization.
3.	Confidentiality.  In the course of performing the Consulting Services, the parties recognize that Consultant may come in contact with or become familiar with information which the Company or its subsidiaries or affiliates may consider confidential. This information may include, but is not limited to, information pertaining to the Company’s business and technology systems, which information may be of value to a competitor. Consultant agrees to keep all such information confidential and not to discuss or divulge it to anyone other than appropriate Company personnel or their designees.
4.	Term. This Agreement shall commence on April 2, 2008 and shall terminate on April 1, 2012 (the “Term”).
5.	Company Contract Default.  In the event that the Company fails to perform any obligations or otherwise breaches any agreement under the terms of that certain Unsecured Convertible Promissory Note, issued by the Company and dated as of the date hereof (the “Note”), and such failure or breach constitutes an “event of default” (as such term is defined in the Note) under such Note, then in any such case, Consultant shall have the right, exercisable by delivery of written notice thereof to the Company in accordance with Section 7 of this Agreement, to immediately terminate this Agreement and all of his obligations hereunder without liability of any kind.  In addition, in the event this Agreement is terminated by Consultant prior to the end of the Term pursuant to this Section 6, then notwithstanding such termination, the Company shall immediately pay to Consultant an amount equal to the full amount of compensation that Consultant would have received under this Agreement for the remaining Term hereof had this Agreement not been so terminated.
6.	Notice.  Any notice or communication permitted or required by this Agreement shall be deemed effective when personally delivered or deposited, postage prepaid, in the first class mail of the United States properly addressed to the appropriate party at the address set forth below or delivered via facsimile to the appropriate party at the facsimile number set forth below (so long as delivery of such facsimile to the correct facsimile number is evidenced by electronic confirmation).

Notices to Consultant:

Jay Edmond Russ

Facsimile: (516) 541-1077

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Notices to the Company:

Visual Management Systems, Inc.

1000 Industrial Way North Suite C

Toms River, NJ 08755

7.	Miscellaneous.
	7.1.	Entire Agreement and Amendments.  This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and replaces and supersedes all other agreements or understandings, whether written or oral. No amendment or extension of the Agreement shall be binding unless in writing and signed by both parties.
	7.2.	Binding Effect, Assignment.  This Agreement shall be binding upon and shall inure to the benefit of Consultant and the Company and to their respective successors and assigns.  Nothing in this Agreement shall be construed to permit the assignment by either party hereto of either of the respective parties rights or obligations hereunder, and any such assignment is expressly prohibited without the prior written consent of the other party hereto.  Any attempted or purported assignment in violation of this Section 8.2 shall be void and of no force or effect.
	7.3.	Governing Law, Severability.  This Agreement shall be governed by the laws of the State of New York, without regard to the conflicts of laws principles thereof. The invalidity or unenforceability of any provision of the Agreement shall not affect the validity or enforceability of any other provision.

[Signature page follows]

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IN WITNESS WHEREOF, the parties hereto have set their hands this 2nd day of April, 2008.

Visual Management Systems, Inc.

By:

_____________________________________________

Jason Gonzalez, Chief Executive Officer

_____________________________________________

Jay Edmond Russ, Consultant

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EX-10.15

EXHIBIT 10.15

OPERATING AGREEMENT

OF

IDS PATENT HOLDING, LLC

This Operating Agreement (“Agreement”), effective this 2nd day of April, 2008, is among IDS Patent Holding, LLC, a New York limited liability company (the “Company”), and the Members of the Company set forth on Schedule 2.3.

SECTION 1 DEFINITIONS

Unless defined elsewhere in this Agreement, capitalized terms used in this Agreement will have the meanings ascribed to them in the attached Appendix A.

SECTION 2 COMPANY

2.1	Organization.  The Company was organized as a New York limited liability company pursuant to the Act on March 6, 2008.
2.2	Name of the Company.  The name of the  Company heretofore formed is IDS Patent Holding, LLC.  The Company may do business under that name and under any other name or names which the Managing Member selects.  If the Company does business under a name other than that set forth in its Articles of Organization, then the Company shall file a certificate with the Department of State of the State of New York as required by the Act.
2.3	Company Information.  Schedule 2.3 sets forth the following Company information:
	(a)	the name of each Member;
	(b)	the number of Units owned by each Member;
	(c)	each Member’s contribution to the Company, together with the date and value of the contribution;
	(d)	the value of each Member’s capital account;
	(e)	the address or other contact information of the Company and each Member;
	(f)	the Tax Matters Member of the Company; and
	(g)	the name of each officer of the Company, if any.

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2.4 Amendment.  The Company will promptly amend and restate Schedule 2.3 to account for any changes in the information set forth on Schedule 2.3 resulting from matters that occur in accordance with the Act, the Articles of Organization, and this Agreement.  Upon an amendment, the Company will promptly deliver to each Member a copy of the amended and restated Schedule 2.3.

SECTION 3 PURPOSES AND POWERS

3.1	Purposes.  The Company has been organized to own all rights in and to certain United States patent applications (the “Patent Applications”) filed by Member, Intelligent Digital Systems, LLC (“IDS”), to process appeals therefore, to pursue such patent rights, and to hold and commercially exploit any patents granted thereon, by threatening, commencing, prosecuting and settling litigation to enforce those patents, if granted, to recover damages for infringement, if granted, and to pursue, negotiate and settle claims for license fees for use of patented technologies, if granted, to maintain such patents, and other acts related to the ownership, use and sale of such patent rights, if granted, all to the extent deemed advisable by the Managing Member. The Patent Applications are identified on attached Exhibit A.
3.2	Duties.  The Company shall utilize the knowledge, experience, expertise, and know how of the Members, their advice and consultation, and their managerial, operational and financial resources, so that the Company performs its obligations and discharges its duties as stated herein.
3.3	Good Faith.  The Members acknowledge that the terms and conditions of each and every specific role of the Members within the Company may not have been fully set forth herein. The Members agree to act cooperatively and in good faith to supplement their understanding as to their specific roles within the Company so that the objectives and purpose set forth herein are accomplished.
3.4	Costs.  The Managing Member shall have the right to cause the Company to incur such costs as it determines are appropriate to pursue the purposes set forth in Section 3.1 and the Members shall contribute to such costs as provided in Section 6 below.
3.5	Limitation.  The Company will not conduct or promote any other business.
3.6	Powers.
	(a)	Unless the Articles of Organization provide otherwise, the duration of the Company will be perpetual, subject to termination as set forth in Section 17;
	(b)	Unless the Articles of Organization provide otherwise, and subject to the Act, the Company may have and exercise all powers and do every other act not inconsistent with law, which is necessary, convenient or incidental to promote and effect any and all of the purposes for which the Company is organized.

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SECTION 4                           OFFICE AND AGENT

4.1	Registered Office.  The Company must continuously maintain in the State of New York a registered office, which shall be such place as the Managing Member shall designate and which may be, but need not be, the same as any of its places of business.
4.2	Registered Agent.  The Company must continuously maintain in the State of New York a registered agent, which registered agent shall be such agent as the Managing Member shall designate and which must be:
	(a)	an individual who resides in the State of New York and whose business office is identical to the registered office, or
	(b)	a domestic limited liability company, a domestic corporation or a domestic professional corporation whose business office is identical to the registered office.

SECTION 5 MANAGEMENT AND MANAGEMENT RIGHTS OF MEMBERS

5.1 Management.

(a)                 Managing Member.  The Company is a Member-managed limited liability company. The Company shall be managed by Member IDS, which is and shall be its Managing Member.  The Managing Member shall have full, exclusive, and complete discretion, power and authority, subject in all cases to the other provisions of this Agreement  and the requirements of applicable law, to manage, control, administer, and operate the business and affairs of the Company for the purposes herein stated, and to make all decisions affecting such business and affairs, including, without limitation, for Company purposes, the power to:

(i)            enter into agreements and contracts and give receipts, releases, and discharges;

(ii)           purchase liability and other insurance to protect the Company’s properties and business;

(iii)          execute any and all other instruments and documents which may be necessary or in the opinion of the Managing Member desirable to carry out the intent and purpose of this Agreement;

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(iv)          make any and all expenditures which the Managing Member, in its sole discretion, deems necessary or appropriate in connection with the management of the affairs of the Company and the carrying out of its obligations and responsibilities under this Agreement, including, without limitation, all legal, accounting and other related expenses incurred in connection with the organization and operation of the Company, except that if the expenditures for any given calendar year exceed One Hundred Thousand Dollars ($100,000.00) in the aggregate, Member VMS shall have the right to exert veto authority over all additional expenditures for the remainder of said given calendar year.  Upon the expenditure in the aggregate of $100,000 by the Company in a given year, the Managing Member must submit in writing all additional planned expenditures to Member VMS at least 10 days prior to payment of the expense; and

(v)           enter into any kind of activity necessary to, in connection with, or incidental to, the accomplishment of the purposes of the Company.

(b)                Limitation on Authority of Members.  No Member is an agent of the Company solely by virtue of being a Member, and no Member has authority to act for the Company solely by virtue of being a Member.  This Section 5.1(b) supersedes any authority granted to the Members pursuant to Section 401 of the Act.  Any Member who takes any action or binds the Company in violation of this Section 5.1(b) shall be solely responsible for any loss and expense incurred by the Company as a result of the unauthorized action and shall indemnify and hold the Company and the other Member harmless with respect to the loss or expense.  Notwithstanding the foregoing, Member, Visual Management Systems Inc. (“VMS”) shall not have a management right, but shall have the right to approve any transaction between the Company and the Managing Member or an affiliate thereof, including the payment of salary or distributions of income, or compensation of any kind to the Managing Member or an affiliate thereof, except for (i) distributions to the Members made pursuant to and in accordance with Section 10 hereof and (ii) loans to the Company on commercially reasonable terms, of less than $50,000.00 in the aggregate when summed with all other loans from the Managing Member to the Company, in any given calendar year.

5.2	Member Proxy.  A Member may appoint a proxy to vote or otherwise act for the Member by signing an appointment instrument, either personally or by the Member’s attorney-in-fact.
5.3	Member Duties and Standards of Conduct.
	(a)	Each Member’s duty of loyalty to the Company and the other Member includes the following:
		(1)	to account to the Company and hold for it any property, profit, or benefit derived by the Member in the conduct and winding up of the Company’s business or derived from a use by the Member of Company property, including the appropriation of a Company opportunity; and

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	(2)	except as provided in Section 5.3(d) and Section 5.3(e), to refrain from dealing with the Company in a manner adverse to the Company and to refrain from representing a person with an interest adverse to the Company, in the conduct or winding up of the Company’s business; and
	(3)	to refrain from competing with the Company in the conduct of the business of the Company before the dissolution of the Company.
(b)	Each Member’s duty of care to the Company and the other Members in the conduct and winding up of the business of the Company also includes refraining from grossly negligent or reckless conduct, intentional misconduct, or a violation of applicable regulation or law.
(c)	Each Member will discharge the duties to the Company and the other Members under the Act or under this Agreement and exercise any rights consistent with the obligation of good faith and fair dealing.
(d)	A Member does not violate a duty or obligation under the Act or under this Agreement merely because the Member’s conduct furthers the Member’s own interest.
(e)	A Member may lend money to or transact other business with the Company, provided that any loan or transaction between the Member and the Company must be:
	(1)	fair to the Company;
	(2)	authorized by this Agreement; or
	(3)	authorized or ratified by the Managing Member after full disclosure of all material facts.
(f)	Loans and other transactions between the Company and a Member are binding on the parties in the same manner as transactions between the Company and persons who are not Members, subject to other applicable law.
(g)	Member IDS is owned by Jay Edmond Russ, Esq. (“Russ”).  Russ is, or may in the future become, a member of the Board of Directors of Member VMS.  Russ is, or may in the future become, a compensated consultant to Member VMS.  The parties hereto acknowledge and agree that Member IDS may act as Managing Member of the Company, without limitation, notwithstanding these positions and any others, which Russ may now, or hereafter, hold with Member VMS, or otherwise.  In the event Russ is or becomes a member of the Board of Directors of Member VMS, Russ may vote as a member of such Board of Directors of Member VMS on any and all matters affecting VMS, the Company, or both, without limitation and Member VMS hereby waives any conflict of interest, actual or perceived, in relation thereto, and in relation to the purpose of the Company.

5 - OPERATING AGREEMENT

5.4	Limitation of Liability and Indemnification.
		(a)	The Managing Member shall not be liable, responsible, or accountable, in damages or otherwise, to any Member or to the Company for any act or omission performed by it within the scope of the authority conferred by this Agreement, except for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of applicable regulation or law or any transaction from which the Member derives an improper personal benefit.
		(b)	The Company will indemnify the Managing Member for any act or omission performed by it within the scope of the authority conferred by this Agreement, except for acts or omissions not in good faith or which involve gross recklessness, intentional misconduct or a knowing violation of applicable regulation or law or any transaction from which the Member derives an improper personal benefit.
5.5	Liability of Members.  The debts, obligations, and liabilities of the Company, whether arising in contract, tort, or otherwise, are solely the debts, obligations, and liabilities of the Company.  A Member is not and shall not be personally liable for a debt, obligation, or liability of the Company solely by reason of being or acting as a Member.

SECTION 6 CONTRIBUTIONS

6.1	Contributions.  The Members each acknowledge and agree that the funding for the business activities of the Company as set forth in Section 6.3(b) below shall be borne by the Members, based upon each member’s pro rata ownership of Units.  The contributions of a Member to the Company may consist of cash, property, services rendered, or a promissory note or other obligation to contribute cash or to perform services, each as acceptable to the Managing Member.
6.2	Liability for Contributions.
	(a)	A promise by a Member to contribute to the Company is not enforceable unless it is set out in writing and signed by the Member.
	(b)	The obligation of a Member to make a contribution may be compromised only by consent of both Members.

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6.3	Contributions.  Contemporaneously with the execution and delivery of this Agreement, each Member will contribute to the Company the contribution of the Member set forth on Schedule 2.3 (the “Initial Contribution”) as of the date of this Agreement.  From time to time after the date hereof, the Managing Member may make requests for additional contributions by the Members hereunder (each such request, a “Capital Call”), and each Member hereby agrees that it shall within thirty (30) days contribute its share of any Capital Call to the Company, based upon each Member’s pro rata ownership of Units; provided, that under no circumstances shall a Member be required to make any contribution in response to a Capital Call hereunder unless:
	(a)	The amount of such contribution in respect of such Capital Call, together with the amounts of all prior contributions made by such Member hereunder, including the Initial Contribution and any additional contributions made pursuant to prior Capital Calls hereunder, does not exceed $250,000 in the aggregate; and
	(b)	The contributions in respect of any such Capital Call are to be used only for the purposes of either (i) prosecution of the Patent Applications, including (without limitation) the preparation and filing of any applications, amendments, supplemental materials, appeals or similar activities in connection with the pursuit of any and all patent rights thereunder, (ii) commercially exploiting any patents granted on the Patent Applications, if any, or (iii) preserving, maintaining or protecting any patents granted on the Patent Applications, if any, including (without limitation) by threatening, commencing, prosecuting and settling litigation to enforce or prevent or seek damages in respect of the infringement of those patents, if granted, or to pursue, negotiate and settle claims for license fees for use of patented technologies, if granted.
6.4	No Interest on Contributions.  A Member shall not be paid any interest on any contribution.
6.5	Return of Contributions.  Except as otherwise provided in this Agreement, a Member shall not have the right to receive any return of any contribution.  If a Member is entitled to receive a return of a contribution, the Company may distribute cash, property or a combination thereof to the Member in return of the contribution at the discretion of the Managing Member, and pursuant to any relevant terms of this Agreement.
6.6	Failure to Make Contributions.  If any Member shall fail to make timely payment in full of any required additional capital contribution pursuant to Section 6.3 (a “FundingDefault”), the defaulting Member shall have five (5) days in which to cure such Funding Default.  If, after such five (5) days, the defaulting Member has not cured such Funding Default, the non-defaulting Member shall have the following rights, as applicable, in each case exercisable by giving written notice to the defaulting Member in accordance with Section 19.4:

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(a)

in the case of a Funding Default by a Member other than the Managing Member, the Managing Member shall have the right to cause such defaulting Member to sell all of the Units that such defaulting Member then owns to the Managing Member for an amount equal to the Buy-out Amount (as defined below).  Within five (5) days following receipt by the defaulting Member of a notice from the Managing Member pursuant to this Section 6.6, the defaulting Member shall sell, transfer, assign, convey and deliver to the Managing Member all of its right, title and interests in the Units of such defaulting Member (the “Forced Sale Units”), free and clear of all liens.  Simultaneously with the sale, transfer, assignment, conveyance and delivery by the defaulting Member of the Forced Sale Units to the Managing Member, the Managing Member shall deliver or cause to be delivered to the defaulting Member the Buy-out Amount. Thereafter, the defaulting Member shall cease to be a Member for any and all purposes under this Agreement.  For purposes of this Agreement, the term “Buy-out Amount” shall mean, the amount that represents, at the election of such defaulting Member, either (i) the defaulting Member’s then-current Capital Account balance, which amount will be payable by the Managing Member in the form of a non-interest bearing, subordinated promissory note, which note shall be due and payable on the five (5) year anniversary of the date of its issuance, or (ii) fifty percent (50%) of the defaulting Member’s then-current Capital Account balance, which amount will be paid in cash.  If such defaulting Member fails to make an election by written notice to the Managing Member with respect to its Buy-out Amount hereunder within five (5) days following receipt by such defaulting Member of the notice from the Managing Member pursuant to this Section 6.6(a), then such defaulting Member shall be deemed to have elected payment in accordance with Section 6.6(a)(i) above.

(b)

in the case of a Funding Default by the Managing Member, the non-defaulting Member shall have the right to cause the Managing Member to purchase all of the Units that such non-defaulting Member then owns for an amount equal to such non-defaulting Member’s then-current Capital Account balance, which amount will be payable by the Managing Member in cash.  Within five (5) days following receipt by the Managing Member of a notice from the non-defaulting Member pursuant to this Section 6.6, the non-defaulting Member shall sell, transfer, assign, convey and deliver to the Managing Member all of its right, title and interests in the Units of such non-defaulting Member (the “Forced Purchase Units”), free and clear of all liens.  Simultaneously with the sale, transfer, assignment, conveyance and delivery by the non-defaulting Member of the Forced Purchase Units to the Managing Member, the Managing Member shall deliver or cause to be delivered to the non-defaulting Member the cash in an amount equal to such non-defaulting Member’s then-current Capital Account balance.  Thereafter, the non-defaulting Member shall cease to be a Member for any and all purposes under this Agreement.

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SECTION 7 CAPITAL ACCOUNTS

7.1	Capital Accounts.  The Company will maintain a separate Capital Account for each Member.
7.2	Section 704(c) Considerations.  In cases where IRC § 704(c) and Treas Reg § 1.704-3 apply to Company property, the Members’ Capital Accounts will be adjusted in accordance with Treas Reg § 1.704-1(b)(2)(iv)(g) for allocations to them of income, gain, loss, and deduction, including depreciation, depletion, amortization, or other cost recovery as computed for book purposes, with respect to the property.
7.3	Revaluations of Property
	(a)	Subject to Section 7.3(c), the Managing Member may increase or decrease the Capital Accounts of the Members to reflect a revaluation of Company property, including intangible assets such as goodwill on the Company’s books upon the occurrence of any of the following events:
		(1)	a contribution of money or other property to the Company by a Member as consideration for Units; or
		(2)	a distribution of Company property by the Company to a Member as consideration for Units.
	(b)	Subject to Section 7.3(c), the Managing Member will increase or decrease the Capital Accounts of the Members to reflect a revaluation of Company property including intangible assets such as goodwill on the Company’s books upon the liquidation of the Company.
	(c)	Adjustments to Capital Accounts under this Section 7.3 may be made only if:
		(1)	the adjustments are based on the fair market value of Company property taking IRC § 7701(g) into account on the date of adjustment;
		(2)	the adjustments reflect the manner in which the unrealized income, gain, loss, or deduction inherent in such property that has not been reflected in the Capital Accounts previously would be allocated among the Members if there were a taxable disposition of such property for such fair market value on that date;

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		(3)	the Members’ Capital Accounts are adjusted in accordance with Treas Reg § 1.704-1(b)(2)(iv)(g) for allocations to them of depreciation, depletion, amortization, and gain or loss, as computed for book purposes, with respect to such property; and
		(4)	the Members’ distributive shares of depreciation, depletion, amortization, and gain or loss, as computed for tax purposes, with respect to such property will be determined so as to take account of the variation between the adjusted tax basis and book value of such property in the same manner as under IRC § 704(c) and Treas Reg § 1.704-1(b)(4)(i).
7.4	Section 754 Elections.  Upon adjustment to the adjusted tax basis of Company property under IRC § 732, IRC § 734, or IRC § 743, the Capital Accounts of the Members will be adjusted as provided in Treas Reg § 1.704-1(b)(2)(iv)(m).
7.5	Negative Capital Account Balances  No Member will have the obligation to contribute to the Company any amount in respect of such Member’s negative Capital Account balance.

SECTION 8 ALLOCATION OF PROFITS AND LOSSES

8.1	Allocation of Profits and Losses  After giving effect to the allocation provisions set forth on Schedule 8.1, Profits and Losses will be allocated to the Members based upon each Members Unit ownership percentage, which shall be determined by dividing the number of Units owned by such Member by the total number of Units owned by all Members.
8.2	Distributions In Kind  The Profits or Losses attributable to any asset in kind that is distributed to one or more Members:
	(a)	will be determined as if the asset had been sold at its fair market value before the dissolution and winding up of the Company; and
	(b)	will be allocated as provided in Section 8.1.

SECTION 9 ACCOUNTING, TAXES, AND BANKING

9.1	Books of Account   The Company will keep complete and accurate books of account and records in a manner sufficient to effect and carry out this Agreement.  The books of account and records will be kept in accordance with sound accounting practices consistently applied.
9.2	Taxable Year.  The Company will have a taxable year ending on December 31.

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9.3	Bank Accounts.  All Company funds will be deposited in one or more bank accounts in the Company’s name.  The Managing Member will determine the banks, the types of accounts, and the individuals who have authority with respect to the accounts and the funds therein.  Company funds will not be commingled with the funds of any Member.
9.4	Tax Returns.  The Company will cause to be prepared all federal, state, and local income tax returns for the Company.  Within ninety (90) days after the end of a taxable year, the Company will deliver to each Member:
	(a)	any financial statements of the Company for the taxable year, which may be unaudited;
	(b)	a statement showing the share of Company income, gain, loss, credit, and deduction for income tax purposes allocated to each Member for the taxable year; and
	(c)	any other information concerning the Company that the Member may require to complete the Member’s federal, state, and local income tax returns.
9.5	Reporting.  Each Member will report the Member’s share of Company income, gain, loss, credit, and deduction for income tax purposes in a manner consistent with this Agreement.
9.6	Tax Matters Member.  The Company will have a Tax Matters Member who will have all of the powers and obligations of a “tax matters member” under IRC § 6231(a)(7).  The Tax Matters Member shall be the Managing Member.
9.7	Tax Elections.  The Tax Matters Members will make all of the Company’s tax elections permitted under the Internal Revenue Code, including but not limited to elections under IRC § 754.

SECTION 10 DISTRIBUTIONS

10.1	Allocation of Interim Distributions.  Any distributions of cash or other assets of the Company before the dissolution and winding up of the Company will be allocated to the Members based on each Member’s pro rata ownership of Units, except as set forth in Section 8.1.
10.2	Right to Distributions.  A Member is entitled to receive distributions from the Company before the dissolution and winding up of the Company to the extent and at the times the Managing Member determines, based upon each Member’s pro rata ownership of Units.

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SECTION 11 WITHDRAWAL

11.1	Withdrawal.  A Member may voluntarily withdraw from the Company upon not less than twenty (20) days prior written notice to the Company and the other Member.  If such a notice is provided, the Member receiving the notice may waive any portion or all of the twenty (20) days, thereby causing the Member providing the notice to withdraw on an earlier date.  A notice of withdrawal may not be amended or revoked.  Upon the effectiveness of the withdrawal of a Member pursuant to this Section 11.1, all Units owned by such withdrawn Member shall be immediately cancelled and will no longer be outstanding, and the withdrawn Member shall no longer have any rights hereunder, including (without limitation) any right to return of any of its contributions hereunder.
11.2	No Expulsion.  A Member may not be expelled from the Company but the following acts or omissions by a Member, including the Managing Member, shall entitle the other Member to treat such act or omission as a Funding Default hereunder subject in all respects to the terms of Section 6.6 hereof and/or to hold the Member responsible and liable for damages and other remedies in an arbitration proceeding in accordance with Section 11.3, for such acts or omissions:
	(a)	the Member has willfully or persistently committed a material breach of the Articles of Organization or this Agreement or otherwise breached a duty owed to the Company or another Member (including but not limited to violation of the Transfer, Non-competition, or Non-disclosure Provisions hereof).
11.3	Arbitration.  Except as set forth in Section 6.6 or 19.18, any disagreement, claim or dispute between the Members, shall be resolved by binding arbitration.  The arbitration hereunder shall be before one arbitrator in New York County, New York, selected in accordance with procedures established by JAMS Endispute.  Judgment on the award may be entered in any court having jurisdiction.  Each Member shall be responsible for its own fees related to any arbitration.  The Members intend that the arbitration be an expedited forum and, therefore, waive pre-arbitration discovery, depositions, document production and the like, except if, in the opinion of the arbitrator, same may be completed within ten (10) days.  Each Member may be present at all proceedings and may be represented by counsel, who shall have the right to participate, make argument and cross-examine witnesses.  There shall be a full record of the proceedings.  The arbitrator shall render a decision in writing with findings of fact and conclusions of law.

SECTION 12 DISSOLUTION

12.1	Dissolution.  The Company will be dissolved and its affairs will be wound up upon the earliest to occur of any of the following Dissolution Events:
	(a)	upon reaching the time for dissolution, if any, specified in the Articles of Organization;

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	(b)	by the consent of the Members;
	(c)	at such time as the Company has no Members; or
	(d)	upon entry of a decree of judicial dissolution under the Act.
12.2	Distribution.  Upon the winding up of the Company, the assets of the Company will be distributed, and applied by the Company in the following priority:
	(a)	to the extent permitted by law, to creditors, including Members and former Members who are creditors, in satisfaction of liabilities of the Company;
	(b)	with respect to non-cash assets of the Company, to the Managing Member; and
	(c)	after giving effect to the allocation and other provisions under Section 8.1, all other assets of the Company to the Members based upon their respective pro rata ownership of Units.
12.3	Winding Up.  Upon dissolution, the Company will continue its existence, but may not carry on any business, except that which is appropriate to wind up and liquidate its business and affairs. The Member who has not wrongfully dissolved the Company may wind up the Company’s affairs, including:
		(1)	collecting its assets;
		(2)	disposing of its properties that will not be distributed in kind to the Members;
		(3)	discharging or making provision for discharging its liabilities;
		(4)	distributing its remaining property among the Members in accordance with Section 12.2; and
		(5)	doing every other act necessary to wind up and liquidate its business and affairs.

SECTION 13 RECORDS AND REPORTS

13.1	Company Records.
	(a)	The Company will keep at its principal office or registered office the following:
		(1)	a current list of the full name and last-known business, residence, or mailing address of each Member;

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		(2)	a copy of the Articles of Organization and all amendments to the Articles of Organization, together with executed copies of any powers of attorney pursuant to which any amendment has been executed;
		(3)	copies of the Company's federal, state, and local income tax returns and reports, if any, for the three most recent years; and
		(4)	a copy of this Agreement and all restated operating agreements, copies of any writings permitted or required under the Act, and copies of any financial statements of the Company for the three most recent years.
	(b)	Any of the foregoing Company records are subject to inspection and copying by any Member at such Member’s reasonable request and at such Member’s expense during ordinary business hours.
13.2	Scope of Inspection Right.
	(a)	A Member’s agent or attorney has the same inspection and copying rights as the Member.
	(b)	The right to copy records includes, if reasonable, the right to receive copies made by photographic, xerographic, or other means.

SECTION 14 OFFICERS

14.1	Officers.
	(a)	The Company may have any officers or assistant officers designated by the Managing Member.
	(b)	The same individual may simultaneously hold more than one office in the Company.
14.2	Duties.  Each officer has the authority and will perform the duties set forth in this Agreement or, to the extent consistent with this Agreement, the duties prescribed by the Managing Member or by direction of an officer authorized by the Managing Member to prescribe the duties of other officers.
14.3	Designation and Removal.  An officer:
	(a)	must be designated, appointed, elected, removed, or replaced by vote, approval, or consent of the Managing Member; and
	(b)	holds office until a successor has been appointed and qualified, unless the officer sooner resigns or is removed.

14 - OPERATING AGREEMENT

14.4	President.The Managing Member may designate a President.  If designated, the President will supervise, direct, manage and administer the business and affairs of the Company as directed by the Managing Member.
14.5	Treasurer.  The Managing Member may designate a Treasurer.  If designated, the Treasurer will:
	(a)	have general charge of and be responsible for all funds of the Company;
	(b)	receive and give receipts for monies due and payable to the Company from any source and deposit the monies in the name of the Company in banks, trust companies, or other depositories selected by the Managing Member or an authorized officer; and
	(c)	perform all duties commonly incident to the office of Treasurer and other duties prescribed by the Managing Member or an authorized officer.
14.6	Secretary.  The Managing Member may designate a Secretary.  If designated, the Secretary will.
	(a)	prepare minutes of the Members’ and Managing Member’s meetings and authenticate records of the Company;
	(b)	ensure that all notices by the Company under the Act, the Articles of Organization, or this Agreement are given;
	(c)	keep and maintain the records of the Company specified in Section 13.1(a); and
	(d)	perform all duties commonly incident to the office of Secretary and other duties prescribed by the Managing Member or an authorized officer.

SECTION 15 REPRESENTATIONS, WARRANTIES, AND COVENANTS OF MEMBERS

Each Member represents, warrants, and covenants to the other Member as follows:
15.1	Status. Member is duly organized and validly existing under the laws of the state specified under the Member’s name on Schedule 2.1.
15.2	Authority.  Member has full power and authority to sign and deliver this Agreement and to perform all of Member’s obligations under this Agreement.
15.3	Binding Obligation.  This Agreement is the legal, valid, and binding obligation of Member, enforceable against Member in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, or other similar laws of general application or by general principles of equity.

15 - OPERATING AGREEMENT

15.4	No Conflicts.  The signing and delivery of this Agreement by Member and the performance by Member of all of Member’s obligations under this Agreement will not:
	(a)	conflict with Member’s articles of incorporation, bylaws, articles of organization, operating agreement, certificate of limited partnership, partnership agreement, trust agreement, or other similar organizational documents, if any;
	(b)	breach any agreement to which Member is a party, or give any person the right to accelerate any obligation of Member;
	(c)	violate any law, judgment, or order to which Member is subject; or
	(d)	require the consent, authorization, or approval of any person, including but not limited to any governmental body.
15.5	Speculative Investment.  Member understands that:
	(a)	Acquiring or purchasing the Units is a speculative investment and involves a high degree of risk of loss of Member’s investment; and.
	(b)	Member may be unable to liquidate Member’s investment in the Units because the Units are subject to substantial transfer restrictions in that Units may only be sold or transferred to the other Member, and because no public market exists for the Units.
15.6	Sophistication.
	(a)	Member has the knowledge and experience in technological, financial and business matters necessary to make Member capable of evaluating the merits and risks of an investment in the Units.
	(b)	Member has had the opportunity to ask questions and receive answers concerning the Company and the terms and conditions of the purchase of the Units, and to obtain any additional information deemed necessary by Member to evaluate the merits and risks of an investment in the Units.  Member has obtained all of the information desired in connection with the purchase of the Units.

16 - OPERATING AGREEMENT

15.7	Investment Intent.
	(a)	Member is acquiring the Units solely for Member’s own account, for investment, and not with a view to or for resale in connection with any distribution of the Units.
	(b)	Member has no oral or written agreement or plan to sell or transfer or otherwise dispose of the Units.
	(c)	Member understands that Member must bear the economic risk of owning the Units for an indefinite period of time.
15.8	No Registration.  Member understands that the Units have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws and that the Company is not obligated to register the Units.
15.9	Release and Indemnification.  Member understands that the Company is relying on Member’s representations, warranties, and covenants in this Agreement to issue the Units pursuant to one or more exemptions from the registration and qualification requirements of the Securities Act and applicable state securities laws.  Member releases and will defend and indemnify the Company and the other Member and authorized representative of the Company and other Member, from and against any and all claims, actions, proceedings, damages, liabilities, and expenses of every kind, whether known or unknown, including but not limited to reasonable attorney’s fees, resulting from or arising out of a breach by Member of any representation, warranty, or covenant in this Section 15.

SECTION 16                         ADDITIONAL PROVISIONS

The following provisions are incorporated by reference into this Agreement:
	(a)	Definitions;
	(b)	the Transfer Provisions attached as Appendix B;
	(c)	the Non-competition Provisions attached as Appendix C; and
	(d)	the Non-disclosure Provisions attached as Appendix D.

SECTION 17 TERMINATION

17.1 Agreement.  This Agreement will terminate (which will not relieve the Members from, thereafter, complying with the Non-competition Provisions, Non-disclosure Provisions, Dissolution matters and remedies of the Members) upon the earliest to occur of the following:

17 - OPERATING AGREEMENT

(a)	upon the written agreement of the Members; or
(b)	upon the merger of the Company with another business entity, if the Company is not the surviving business entity; or
(c)	upon the conversion of the Company into another business entity; or
(d)	as set forth in Section 11.2; or
(e)	the Bankruptcy of the Company.

SECTION 18 EQUITABLE RELIEF

The parties acknowledge that the remedies available at law for any breach of this Agreement will, by their nature, be inadequate.  Accordingly, each party may obtain injunctive relief or other equitable relief to restrain a breach or threatened breach of this Agreement or to specifically enforce this Agreement, without proving that any monetary damages have been sustained.

SECTION 19 GENERAL

19.1	No Assignment.  Except as specifically set forth herein, a Member may neither assign nor delegate any of the Member’s rights or obligations under this Agreement to any person or entity, and any attempted or purported assignment in violation of this provision shall be void and of no effect.  An assignment includes but is not limited to a transfer or encumbrance or series of transfers or encumbrances of fifty (50%) percent or more of the Units or other ownership interests of a Member, regardless of whether the transfer or encumbrance occurs voluntarily or involuntarily, by operation of law, or because of any act or occurrence.
19.2	Binding Effect.  This Agreement will be binding on the Members and their respective representatives and successors.
19.3	Amendment.  This Agreement may be amended only by a written agreement signed by the Members, except that the Company may amend Schedule 2.3 in accordance with Section 2.4 without the consent of the other parties.
19.4	Notices.  All notices or other communications required or permitted by this Agreement:
	(a)	must be in writing;

18 - OPERATING AGREEMENT

	(b)	must be delivered to the Members at the addresses or facsimile numbers set forth on Schedule 2.3, or any other address or contact information that a Member may designate by notice to the other Members; and
	(c)	are considered delivered:
		(1)	upon actual receipt if delivered personally or by facsimile, e-mail, or an overnight delivery service; and
		(2)	at the end of the third business day after the date of deposit in the United States mail, postage pre-paid, certified, return receipt requested.
19.5	Waiver.  No waiver will be binding on a Member unless it is in writing and signed by the Member making the waiver.  A Member’s waiver of a breach of a provision of this Agreement will not be a waiver of any other provision or a waiver of a subsequent breach of the same provision.
19.6	Severability.  If a provision of this Agreement is determined to be unenforceable in any respect, the enforceability of the provision in any other respect and of the remaining provisions of this Agreement will not be impaired.
19.7	Further Assurances.  The Members will sign other documents and take other actions reasonably necessary to further effect and evidence this Agreement.
19.8	No Third-Party Beneficiaries.  The Members do not intend to, and do not, confer any right or remedy on any third party.
19.9	Termination.  The termination of this Agreement, regardless of how it occurs, will not relieve a party of obligations that have accrued before the termination.
19.10	Survival.  All provisions of this Agreement that would reasonably be expected to survive the termination of this Agreement will do so.
19.11	Attachments.  Any exhibits, schedules, and other attachments referenced in this Agreement are part of this Agreement.
19.12	Remedies.  The Members will have all remedies available to them at law or in equity.  All available remedies are cumulative and may be exercised singularly or concurrently.
19.13	Governing Law.  This Agreement and all rights, benefits and privileges hereunder are governed by the laws of the State of New York without giving effect to any conflict-of-law principle of any jurisdiction.

19 - OPERATING AGREEMENT

19.14	Venue.  Any action or proceeding arising out of this Agreement will be litigated in courts located in New York or Nassau County, New York.  Each party consents and submits to the jurisdiction of any local, state, or federal court located in New York or Nassau County, New York.
19.15	Attorney’s Fees.  Each Member shall be responsible for its own attorney’s and other fees related to any arbitration or litigation.
19.16	Entire Agreement.  This Agreement contains the entire understanding of the Members regarding the subject matter of this Agreement and supersedes all prior and contemporaneous negotiations and agreements, whether written or oral, between the parties with respect to the subject matter of this Agreement.
19.17	Signatures.  This Agreement may be signed in counterparts.  A fax transmission of a signature page will be considered an original signature page.  At the request of a Member, the other Member will confirm a fax-transmitted signature page by delivering an original signature page to the requesting Member.
19.18	Member VMS Contract Default.  In the event that Member VMS fails to perform any obligation or otherwise breaches any agreement under the terms of either (a) that certain Unsecured Convertible Promissory Note issued by Member VMS to Member IDS, dated as of the date hereof (the “Note”), (b) that certain Consulting Agreement between Member VMS and Jay Russ, dated as of the date hereof (the “Consulting Agreement), or (c) that certain Exclusive Patent and Trade Secret License Agreement, by and between Member VMS and the Company, dated as of the date hereof (the “License Agreement,” and together with the Note and the Consulting Agreement, the “IDS Agreements”), and in the case of (a) above, such failure constitutes an “event of default” (as such term is defined in the Note) under such Note, then in any such case, Member VMS shall be deemed to have committed a Funding Default under Section 6.6 of this Agreement and, thereafter, Member IDS shall be entitled to all remedies available to it under this Agreement for such Funding Default.

[Signature pages to follow]

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Company:

IDS Patent Holding, LLC, by

Intelligent Digital Systems, LLC, its Managing Member, by

___________________________________

Jay Edmond Russ, Esq., Managing Member

Members:

Intelligent Digital Systems, LLC, by

___________________________________

Jay Edmond Russ, Esq., Managing Member

Visual Management Systems, Inc., by

______________________________

Jason Gonzalez, President

21 - OPERATING AGREEMENT

APPENDIX A

Definitions

“Act” means the New York Limited Liability Company Act, as amended from time to time.

“Articles of Organization” means the document described in the Act for the purpose of forming the Company, including articles of organization as they may be amended or restated, articles of conversion, and articles of merger.

“Bankruptcy” means, with respect to a person:

(a)	assignment by the person for the benefit of creditors;
(b)	commencement of a voluntary bankruptcy case by the person;
(c)	adjudication of the person as bankrupt or insolvent;
(d)	filing by the person of a petition or answer seeking for the person any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or rule;
(e)	filing by the person of an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the person in any proceeding of this nature;
(f)	seeking, consenting to, or acquiescing in the appointment of a trustee, receiver, or liquidator of the person or of all or any substantial part of the person’s properties;
(g)	commencement of an involuntary bankruptcy case against the person that has not been dismissed on or before the 120th day after the commencement of the case; or
(h)	appointment, without the person’s consent, of a trustee, receiver, or liquidator either of the person or of all or any substantial part of the person’s properties that is not:
	(1)	vacated or stayed on or before the 90th day after appointment; or
	(2)	vacated on or before the 90th day after expiration of a stay.

“Capital Account” means a capital account to be maintained in accordance with Treas Reg § 1.704-1(b)(2)(iv).

“Member” means a person with an ownership interest in the Company and all of the rights and obligations of a Member specified in the Act, the Articles of Organization, and this Agreement, including the Member’s share of Profits and Losses, the right to receive distributions of the Company’s assets, and any right to vote or participate in management.

“Profit” and “Loss” means for each taxable year of the Company or other period for which profits and losses must be computed the Company’s taxable income or loss determined in accordance with IRC § 703(a), with the following adjustments:

(i)	all items of income, gain, loss, deduction, or credit required to be stated separately under IRC § 703(a)(1) will be included;
(j)	any tax-exempt income of the Company not otherwise taken into account in this definition will be included;
(k)	any expenditures of the Company under IRC § 705(a)(2)(B) or treated as such under Treas Reg § 1.704-1(b)(2)(iv)(i) not otherwise taken into account in this definition will be excluded;
(l)	gain or loss resulting from any taxable disposition of property will be computed by reference to the adjusted book value of the property disposed of, notwithstanding the fact that the adjusted book value of the property differs from the adjusted basis of the property for federal income tax purposes;
(m)	in lieu of the depreciation, amortization, or cost recovery deductions allowable in computing taxable income or loss, there will be taken into account the depreciation or amortization computed for book purposes; and
(n)	any items which are allocated under Schedule 8.1 will not be taken into account.

“Transfer” means any transfer, including but not limited to any sale, exchange, gift, encumbrance, foreclosure of an encumbrance, or attachment.

“Units” means units that evidence an ownership interest in the Company.

APPENDIX B

Transfer Provisions

SECTION 20                         DEFINITIONS

Unless defined elsewhere in this Agreement, capitalized terms used in these Transfer Provisions will have the meanings ascribed to them in Appendix A.

SECTION 21                         RESTRICTION ON TRANSFER

21.1	Restriction.  No Transfer of Units may be made unless the Transfer is expressly permitted by this Agreement.
21.2	Securities Laws.  No offer or Transfer of Units may be made unless pursuant to an effective registration statement filed under the Securities Act and applicable state securities laws, or unless the Company receives an opinion of counsel, in form and from counsel satisfactory to the Company, that the offer or Transfer is exempt from the registration requirements of the Securities Act and applicable state securities laws.
21.3	Prohibited Transfers.  Any Transfer of Units that is not expressly permitted by this Agreement will be null and void and have no force or effect.
21.4	Indemnification.  Each Member will defend and indemnify the Company and the other Member from any and all claims, actions, proceedings, damages, liabilities, and expenses of every kind, whether known or unknown, including but not limited to reasonable attorney’s fees, resulting from or arising out of any attempted or purported Transfer of Units by the Member that is not expressly permitted by this Agreement.

SECTION 22                         PERMITTED TRANSFERS

A Member may Transfer Units only with the prior written consent of all other Members.

APPENDIX C

Non-competition Provisions

SECTION 23                         DEFINITIONS

For purposes of these Non-competition Provisions, the following terms have the following meanings:
“Restricted Period” means with respect to a Member the period beginning on the date of this Agreement and ending after the earlier to occur of the following:
	(a)	the Member ceases being a party to this Agreement; and
	(b)	this Agreement terminates.
“Restrictions” means the restrictions set forth in Section 20, Section 21, and Section 22of these Non-competition Provisions.

SECTION 24                         NON-COMPETITION

During a Member’s Restricted Period, the Member will not advise, invest in, own, manage, operate, control, be employed by, provide services to, lend the Member’s name to, or otherwise assist any person or entity that competes with the Company.

SECTION 25                         NON-SOLICITATION

25.1	Employees.  During a Member’s Restricted Period, except as expressly contemplated in this Agreement or as expressly authorized by all Members, the Member will not:
	(a)	solicit any employee of the Company or the other Member to become an employee or independent contractor of the Member or any other person; or
	(b)	suggest to an employee of the Company or the other Member that the employee should reduce or terminate the employee’s relationship with the Company or other Member.
25.2	Business Relations.  During a Member’s Restricted Period, the Member will not suggest to a business relation of the Company or the other Member that the business relation should reduce or terminate the business relation’s business or relationship with the Company or other Member.

SECTION 26                         NO HIRE

During a Member’s Restricted Period, except as expressly contemplated by this Agreement or as expressly authorized by all Members, the Member will not, for the Member, or on behalf of any person or entity, hire as an employee or engage as an independent contractor any person who was an employee of the Company or the other Member at any time during the Member’s Restricted Period.

SECTION 27                         RESTRICTIONS

27.1	Reasonableness.  Each Member acknowledges and agrees that each Restriction is reasonable in scope and that the Restrictions afford a fair protection to the interests of the Company and the other Member.
27.2	Enforceability.  The parties intend that each Restriction be enforceable to the fullest extent permitted by law.  If a Restriction is determined to be unenforceable to any extent, the Restriction will automatically be amended to the extent necessary to make it enforceable.
27.3	Breach.  If a Member breaches a Restriction, the Member’s Restricted Period for all Restrictions will be extended by the duration of the breach.

 APPENDIX D

Non-disclosure Provisions

SECTION 28                         DEFINITIONS

For purposes of these Non-disclosure Provisions, the following terms have the following meanings:
“Confidential Information” means all information related to the Company or its business that is disclosed to a Member, including but not limited to business models, financial and technical information, trade secrets, know-how, ideas, designs, drawings, specifications, techniques, programs, systems, processes, and computer software.
“Representatives” means directors, officers, managers, employees, subcontractors, agents, consultants, advisors, and other authorized representatives.
“Restricted Period” means with respect to a Member the period beginning on the date of this Agreement and ending after the earlier to occur of the following:
	(a)	the Member ceases being a party to this Agreement; and
	(b)	this Agreement terminates.

SECTION 29                         OBLIGATIONS OF MEMBERS

29.1	Use Restrictions and Nondisclosure Obligations.  During a Member’s Restricted Period:
	(a)	the Member will not use Confidential Information for any purpose without the Company’s specific prior written authorization, except the Member may use Confidential Information to promote and effect the purposes of the Company;
	(b)	the Member will not disclose Confidential Information to any person without the Company’s specific prior written authorization, except the Member may disclose Confidential Information on a need-to-know basis, to Representatives of the Member who are informed by the Member of the confidential nature of the Confidential Information and the obligations of the Member under these Non-disclosure Provisions and each Member will cause the Member’s Representatives to comply with the provisions of this Section 24.
29.2	Notification and Assistance Obligations.  During a Member’s Restricted Period, the Member will:

	(a)	promptly notify the Company of any unauthorized use or disclosure of Confidential Information, or any other breach of these Non-disclosure Provisions; and
	(b)	assist the Company in every reasonable way to retrieve any Confidential Information that was used or disclosed by the Member or the Member’s Representatives without the Company’s specific prior written authorization and to mitigate the harm caused by the unauthorized use or disclosure.
29.3	Exceptions.  A Member will not breach Section 24.1 or Section 24.2 of these Non-disclosure Provisions by using or disclosing Confidential Information if the Member demonstrates that the information used or disclosed:
	(a)	is generally available to the public other than as a result of a disclosure by the Member or a Representative of the Member;
	(b)	was received by the Member from another person without any limitations on use or disclosure, but only if the Member had no reason to believe that the other person was prohibited from using or disclosing the information by a contractual or fiduciary obligation; or
	(c)	was independently developed by the Member without using Confidential Information.
29.4	Return of Confidential Information.  Upon the Company’s request, each Member will promptly return to the Company all materials furnished by the Company containing Confidential Information, together with all copies and summaries of Confidential Information in the possession or under the control of the Member.

SECTION 30                                NO TRANSFER

These Non-disclosure Provisions do not transfer any ownership rights to any Confidential Information.

SECTION 31                                NO REPRESENTATIONS OR WARRANTIES

No party makes any representations or warranties, either express or implied, with respect to the accuracy or completeness of Confidential Information.

SCHEDULE 2.3

Company Information as of April 2, 2008.

(a) Name of each Member:

Intelligent Digital Systems, LLC

Visual Management Systems, Inc.

(b) Number of Units owned by each Member:

Member	Units
Intelligent Digital Systems, LLC	50 Units
Visual Management Systems, Inc.	50 Units

(c) Each Member’s contribution to the Company, together with the date and value of the contribution:

Member	Contributions	Date of Contribution	Value
Intelligent Digital Systems, LLC	U.S. Patent Applications, Serial Numbers 10/145,058 and 10/279,279	4/2/08	$5,000*
Visual Management Systems, Inc.	Cash	4/2/08	$5,000

* Represents the agreed value of certain assets contributed pursuant to that certain Asset Purchase Agreement, dated as of April 2, 2008, by and among Intelligent Digital Systems, LLC, Visual Management Systems, Inc. and the IDS Patent Holding, LLC.

(d) Value of each Member’s capital account:

Member	Value of Capital Account
Intelligent Digital Systems, LLC	$5,000
Visual Management Systems, Inc.	$5,000

(e) Address or other notice information of the Company and each Member (for purposes of all notices hereunder):

IDS Patent Holding, LLC

Facsimile: (516) 541-1077

Intelligent Digital Systems, LLC

Facsimile: (516) 541-1077

Visual Management Systems, Inc.

1000 Industrial Way North Suite C

Toms River, New Jersey  08755

(f) Tax Matters Member of the Company:

Intelligent Digital Systems, LLC

(g) Name of each officer of the Company:

Jay Russ - - President

SCHEDULE 8.1

Allocation of Profits and Losses

SECTION 1                                CONTRIBUTED PROPERTY

To the extent permitted or required by IRC § 704(c) and the regulations thereunder, income, gain, loss, and deduction with respect to property contributed to the Company will be allocated among the Members so as to take account of the variation between the basis of the property to the Company and its fair market value at the time of contribution.  Allocations made under this Section 1 are solely for tax purposes and will not affect any Member’s Capital Account, share of Profits and Losses, or the right to receive distributions of the Company’s assets.

SECTION 2 SECTION 754 ELECTIONS

If the Capital Accounts of the Members are adjusted under Treas Reg § 1.704-1(b)(2)(iv)(m) because of an adjustment to the adjusted tax basis of Company property under IRC § 732, IRC § 734, or IRC § 743:
	(a)	the amount of the adjustment to the Capital Accounts will be treated as an item of gain if the basis of the property increases;
	(b)	the amount of the adjustment to the Capital Accounts will be treated as an item of loss if the basis of the property decreases; and
	(c)	the gain or loss will be allocated to the Members in a manner consistent with the manner in which their Capital Accounts are adjusted under Treas Reg § 1.704-1(b)(2)(iv)(m).

SECTION 3 GUARANTEED PAYMENTS

To the extent that any compensation paid to a Member by the Company is determined by the Internal Revenue Service not to be a guaranteed payment under IRC § 707(c) or not to be a transaction between the Member and the Company under IRC § 707(a), the Member will be allocated income in an amount equal to the compensation payment and the Member’s Capital Account will be adjusted to treat the compensation payment as a distribution.

SECTION 4 RECAPTURE

In making any allocation among the Members of income or gain from a sale or other disposition of a Company asset, the ordinary income portion, if any, of the income or gain resulting from the recapture of cost recovery or other deductions will be allocated among those Members who were previously allocated, or whose predecessors-in-interest were previously allocated, the cost recovery deductions or other deductions resulting in the recapture items, in proportion to the amount of the cost recovery deductions previously allocated to them.

SECTION 5 WITHHOLDING

All amounts required to be withheld under IRC § 1446 or any other provision of applicable federal, state, or local tax law will be treated as amounts actually distributed to the affected Members.

SECTION 6 OTHER ALLOCATIONS

If this Agreement does not provide for the allocation of any items of Company income, gain, loss, credit, or deduction among the Members the items will be allocated among the Members in the same proportions as they share profits.

EX-10.16

EXHIBIT 10.16

EXCLUSIVE PATENT AND TRADE SECRET LICENSE AGREEMENT

This Exclusive Patent and Trade Secret License Agreement (this “Agreement”) is made effective as of April 2, 2008 by and between: Visual Management Systems, Inc, a Nevada corporation ("Licensee"), having its principal place of business at 1000 Industrial Way North Suite C, Toms River, NJ 08755; and IDS Patent Holding, LLC, a New York limited liability company ("the Licensor"), with a principal place of business at 543 Broadway, Massapequa, New York 11758 (each individually a “Party” to this Agreement or jointly the “Parties”).

WITNESSETH:

WHEREAS, the Licensor desires to license to the Licensee and the Licensee desires to obtain a license from the Licensor to use the  intellectual property owned or controlled by the Licensor as described in U.S. Patent Application Serial Numbers: 10/145,058 and 10/279,279 (the “Patent Applications”) filed by the Licensor, and any related Trade Secrets or know how (collectively, the “Licensed Technology”), and to maintain said license as regards any issued patents included in the Licensed Technology for the entire unexpired term of such patents, and as regards any Trade Secret, perpetually.

WHEREAS, the Licensee desires to make exclusive use of the Licensed Technology only in the business of the manufacture, distribution, integration and installation of digital video surveillance devices for the security industry (the “Licensed Use”), which security industry (the “Industry”) is the Licensee’s normal line of business, and Licensor desires to grant to Licensee an exclusive license for the Licensed Use within the Industry, excepting that upon certain conditions as set forth herein Licensor may grant third party licenses for the Licensed Use within the Industry.

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for good and valuable other consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows:

ARTICLE I — GRANTS OF LICENSES

1.01           Grant

(a)	Subject to Section 1.01(b), Licensor grants to the Licensee and its Related Companies an exclusive (subject to the terms of this Agreement) license to the Licensed Technology to make, have made, use and sell products utilizing the Licensed Technology and to practice the Licensed Technology worldwide during the term of this Agreement, for the Licensed Use in the Industry.
(b)	The license granted in Section 1.01(a) shall be exclusive to Licensee for the Licensed Use in the Industry, subject to Section 1.01(c)
(c)	The Licensor shall not retain the right to use the Licensed Technology for the Licensed Use in the Industry for any purpose whatsoever, except in the case of settlement of any or all claims made by Licensor against third-parties for infringement of any kind of the Licensed Technology.  Licensor retains the right, in such situations to, in its reasonable business judgment, enter into one or more further licenses of the Licensed Technology in the Industry, except where use of any such Licensed Technology would compete in any material respect with the then current business of Licensee.

1.02           Duration

All licenses granted herein for any Licensed Patent component of the Licensed Technology and any Licensed Use shall continue until expiration of any issued patents that form a part of the Licensed Technology, subject in all respects to Article II, below.  All licenses granted herein for any Trade Secret component of the Licensed Technology, for the lesser of (i) in perpetuity or (ii) until the Trade Secret is no longer protectable as a trade secret, subject in all respects to Article II, below.

1.03           Scope

(a)	The licenses granted herein are licenses to (i) make, have made, use, lease, sell, export and import digital video surveillance devices or other Industry products utilizing the Licensed Technology (the “Licensed Products”); (ii) make, have made, use, export and import machines, tools, materials and other instrumentalities, insofar as such machines, tools, materials and other instrumentalities are involved in, incidental to or otherwise desirable for the development, manufacture, testing or repair of Licensed Products which are or have been made, used, leased, owned, sold, exported or imported by the grantee of such license; and (iii) convey to any customer, with respect to any Licensed Product which is sold or leased to such customer, rights to use and resell such Licensed Product as sold or leased (whether or not as part of a larger combination), (iv) combine and/or bundle such Licensed Products (as sold or leased) with any other product utilized in the Industry, (v) a method or process which is other than the inherent use of such Licensed Product itself (as sold or leased), (vi) a method or process involving the use of a Licensed Product to manufacture (including associated testing) any other product utilized in the Industry, and (vii) all other rights in respect of the Licensed Product held by the Licensor with respect to Industry applications.
(b)	The grant of each license hereunder includes the right to grant sublicenses within the scope of such license.  Any such sublicense may be made effective retroactively, but not prior to the effective date hereof.
(c)	Notwithstanding anything to the contrary contained herein, the licenses granted hereunder and all other terms and conditions hereof shall be subject to all restrictions imposed by all other agreements between the Parties and any restrictions imposed on the Licensor by law.
(d)	If the scope of the license provided for in this Agreement is found by any court having jurisdiction to be too broad or too restrictive, then the license shall nevertheless remain effective, but shall be considered amended to a point considered by said court as reasonable and, as so amended, shall be fully enforceable.

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1.04           Future Licensor Patents and Trade Secrets

(a)

Licensor shall give Licensee prompt written notice of all material developments in the Patent Applications.  Licensor shall, at Licensee’s expense, provided Licensee with such additional information and documents with regard to any Licensor Patents and Trade Secrets which Licensee may reasonably request from time to time.

(b)

Licensor hereby grants and agrees to grant to Licensee and its Related Companies and their duly authorized agents, under 37 CFR § 1.14(a) and comparable rules of foreign patent practice, a power of inspection of all U.S. and foreign patent applications included in the Licensed Patents and Licensor further agrees to execute and deliver to Licensee and its Related Companies such further documents and take such further action as may be requested to carry out the intent of this provision.  Licensor shall keep Licensee fully informed of the progress of the prosecution of all such Licensed Patents.

1.05           Confidentiality of Trade Secrets

The parties hereto shall hold the Trade Secrets in confidence, shall reproduce the Trade Secrets only to the extent necessary or desirable for the exercise of its rights hereunder or for further research and development related to the Trade Secrets and shall restrict disclosure of such Trade Secrets to those individuals who have a reasonable need to know, provided, however, that confidentiality obligations hereunder shall not apply to any Trade Secrets which (a) have been or become published or otherwise known to the public or in the industry through no breach of this Agreement on the part of a party, (b) are independently developed by the Licensee or its Related Companies without the use of or reference to any Trade Secrets provided by Licensor, or (c) are required to be disclosed pursuant to a valid and proper requirement of a governmental agency or court of competent jurisdiction.  The parties shall use reasonable efforts to provide each other with prompt written notice of any requirement of a governmental agency or court to disclose such Trade Secrets after receipt of written notice thereof and shall use reasonable efforts to assist the other party in preventing such disclosure or limiting the disclosure, if prevention is not possible.

1.06           Ability to Provide Licenses

(a)	Licensor warrants that, upon execution hereof by it and as of the effective date hereof, there are no commitments or restrictions which will limit the licenses and rights which are purported to be granted hereunder by it, except, as otherwise imposed upon the Licensor by law.
(b)	Licensor’s failure to meet any obligation hereunder, due to the assignment of title to any Licensed Patent, or the granting of any licenses, to the United States Government or any agency or designee thereof pursuant to a statute or regulation of, or contract with, such Government or agency, shall not constitute a breach of this Agreement.

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1.07           Representations of Licensor

(a)

Licensee acknowledges and understands that the Patent Applications as filed with the United States Patent and Trademark Office (the “USPTO”) were finally rejected by the USPTO examiner, and that such rejections are currently the subject of an appeal by the Licensor.  As such, Licensor gives no assurances that a patent will be issued with respect to one or both of the Patent Applications.  The Licensee agrees that the use of the Licensed Technology is at Licensee’s risk.  The Licensed Technology is provided “AS IS” “WITH ALL FAULTS” and without warranty of any kind.

(b)

LICENSOR MAKES NO WARRANTY OF ANY KIND TO LICENSEE OR ANY THIRD PARTY, EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE LICENSED TECHNOLOGY, OR OUTPUT OF OR RESULTS OBTAINED FROM THE LICENSED TECHNOLOGY, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, ACCURACY, OPERABILITY OR NON-INFRINGEMENT AND ALL SUCH WARRANTIES ARE HEREBY EXCLUDED BY LICENSOR AND WAIVED BY LICENSEE.

1.08           Patent Maintenance and Other Fees

(a) Licensor shall pay all sums required and necessary for payment of all fees, including, without limitation, governmental and attorneys’, and other amounts payable and/or owing to any entity relating to prosecution of the Licensed Technology and for maintenance fees for all of the Licensed Technology, including without limitation any and all fees related to Licensed Patent maintenance, provided, however, that such obligation is subject to the Licensor receiving capital contributions from its members sufficient for such purposes. Licensor shall provide Licensee with a list of all United States and foreign patents now or hereafter included within the Licensed Technology that are issued by the USPTO or any foreign patent office and the dates upon which maintenance fees are due, should any such patents issue.  Licensor shall supplement this list upon the issuance of any new patents in the future which are included within the Licensed Technology.  Licensor shall provide Licensee with written confirmation of payment of all maintenance fees within 5 business days of payment thereof.  If, for any reason, Licensor fails to make a required maintenance fee payment, Licensee and/or its Related Companies may, in its sole discretion, make the required maintenance fee payment.  Licensor hereby appoints Licensee and its Related Companies as Licensor’s attorney-in-fact for the purpose of making any such maintenance fee payment.

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ARTICLE II  — TERMINATION

2.01           Breach or Bankruptcy

In the event of a breach of this agreement by or bankruptcy of either party, the other party may, in addition to any other remedies that it may have, at any time terminate this Agreement by not less than thirty days' written notice specifying such breach, unless within the period of such notice all breaches specified therein shall have been remedied.

2.02           Voluntary Termination

By written notice from the Licensee to the Licensor, the Licensee may voluntarily terminate all or a specified portion of the licenses and rights granted to it hereunder.  Such notice shall specify the effective date (not more than six (6) months prior to the giving of said notice) of such termination and shall clearly specify any affected Licensed Patent, Trade Secret, Invention or product.

2.03           Abandonment

The Licensee shall be deemed to have abandoned those rights granted hereunder if both the Licensee and its Related Companies exercise none of their rights hereunder in respect of any (i) Licensed Technology within four years from the date on which the first of the Licensed Patents, if granted, is issued by the USPTO and the Licensee has received notice thereof pursuant to Section 1.04(a) or (ii) Trade Secret within four years from the date of this Agreement.   If the Licensee and its Related Companies abandon any of their rights hereunder, the Licensor may terminate (by written notice from the Licensor to the Licensee) all or a specified portion of only those rights granted hereunder which have been abandoned.  Such notice shall specify the effective date of such termination and shall clearly specify the Licensed Patent and/or Trade Secret rights to which it applies.

2.04           Expiration of Term

This Agreement shall continue from the date hereof until terminated pursuant to its terms.

2.05           Breach By Licensee of Other Agreements

In the event that the Licensee fails to perform any obligation or otherwise breaches any agreement under the terms of either (a) that certain Unsecured Convertible Promissory Note, issued by the Licensee to Intelligent Digital Systems, LLC, dated as of the date hereof (the “Note”), (b) that certain Operating Agreement of Licensor, dated as of the date hereof (the “IPH Operating Agreement), or (c) that certain Consulting Agreement, by and between the Licensee and Jay Russ, dated as of the date hereof (the “Consulting Agreement,” and together with the Note and the IPH Operating Agreement , the “IDS Agreements”), and in the case of (a) above, such failure constitutes an “event of default” (as such term is defined in the Note) under such Note, then in any such case, Licensor shall have the right, exercisable by delivery of written notice thereof to the Licensee in accordance with the terms of Section 3.09 of this Agreement, to immediately terminate this Agreement and all of Licensor’s obligations hereunder without liability of any kind.

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2.06           Survival

Any termination of licenses and rights of a party under the provisions of this Article II shall not affect such party's licenses, rights and obligations with respect to any Licensed Product made prior to such termination, and shall not affect the other party's licenses and rights (and obligations related thereto) hereunder.

ARTICLE III — MISCELLANEOUS PROVISIONS

3.01           Disclaimer

Licensor makes no representations, extends no warranties of any kind, and confers no right by implication, estoppel or otherwise, other than the licenses, rights and warranties herein expressly granted.

3.02           Negative Covenant

Licensor shall not, without the prior written consent of the Licensee, engage in any research or development activities relating to the Licensed Technology for the benefit of any third party other than Licensee or governmental authorities and not-for-profit entities providing funding therefor.

3.03           Infringement

Upon learning of any infringement by any third party of any claim of any Licensed Patent or the unauthorized disclosure of any Trade Secret to any person or entity (other than the parties hereto and their employees), the party learning of such infringement or disclosure shall promptly notify the other party hereto in writing thereof providing factual details thereof.  The right to proceed against third parties and/or institute a suit for any cause arising out of such unlicensed use or settle any such suit or dispute rests with Licensor.  Licensee agrees to reasonably cooperate with Licensor in all respects, including to be named as a plaintiff in any suit or proceeding brought against any third party, to have any of Licensee’s employees testify when requested by Licensor, and to make available any records, papers, information, specimens, and the like, each at Licensor’s sole cost and expense.  Any recovery received pursuant to such suit, proceeding or settlement shall belong exclusively to Licensor.  Should Licensor fail to institute a suit or undertake actions to prevent the continuation of the unlicensed use within two (2) months of notification by Licensee, then Licensee shall have the right to initiate a suit, proceeding and/or settlement, Licensee shall have the right to control and manage such suit, proceeding and/or settlement and Licensor agrees to be named as a plaintiff (if necessary) and assist and cooperate with Licensee in all respects as reasonably requested by Licensee in bringing and proceeding with any such suit, at Licensee’s sole cost and expense.  Any recovery received pursuant to such suit, proceeding or settlement shall be allocated among the parties as follows:  To first pay for or reimburse Licensee for all costs and expenses relating to such suit or proceeding initiated by Licensee; and second, any remaining balance to Licensor.

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3.04           Patent Reexamination

Upon learning of the filing of any petition with the USPTO or any foreign governmental patent authority for the reexamination of a Licensed Patent included in the Licensed Technology (a “Reexamination”), the party learning of such Reexamination shall promptly notify the other party hereto in writing thereof providing factual details thereof.  Licensor and Licensee and/or their Related Companies shall each have the option either alone or jointly to take such measures as may be required to defend such Reexamination or otherwise protect such Licensed Patent(s).  If both parties elect to defend any such Reexamination, they shall cooperate and assist in the preparation and defense of such proceeding and any other related action.  Costs and expenses, including attorneys’ and experts’ fees shall be split evenly by the Licensor and the Licensee.

3.05           Commercialization of Licensed Products

Licensee and its Related Companies shall have no obligation to commercialize, develop, market and sell Licensed Products, and shall be free to sell such Licensed Products at any price determined by the Licensee and/or its Related Companies in its sole and absolute discretion, except to the extent any such obligation is otherwise imposed upon Licensor by law.

3.06           Indemnification

(a)	Licensee shall defend, indemnify and hold Licensor harmless from all liabilities, losses and expenses arising from (i) any act or omission of Licensee which results in the breach of any restriction imposed by law on the Licensor arising in connection with the Licensee’s acquisition or development of the Licensed Technology, or (ii) the use by Licensee of any of the rights granted hereunder.
(b)	The parties shall defend, indemnify and hold each other harmless from all liabilities, losses and expenses arising from any negligent act of omission which results in the misappropriation of any Trade Secret.
(c)	If in connection with any infringement action, Reexamination or related action, one party elects not to participate in such action, then the party pursuing such action shall defend, indemnify and hold the other party harmless from all liabilities, losses and expenses arising from such infringement action, Reexamination or related action, other than liability for costs and expenses (including reasonable attorney’s fees) otherwise expressly provided for herein.

3.07           Further Assurances

The parties hereto agree to execute and deliver any and all further documents and to perform such other acts as may be necessary or desirable to carry out and make effective the transactions contemplated by this Agreement and to protect the rights of the parties hereunder.  Without limiting the generality of the foregoing, Licensor shall, at Licensee’s expense, execute such assignments, memoranda or other documents to be recorded with the U.S. Patent and Trademark Office and/or the U.S. Copyright Office as the Licensee may reasonably request.

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3.08           Nonassignability

The parties hereto have entered into this Agreement in contemplation of personal performance, each by the other, and intend that the licenses and rights granted hereunder to a party not be extended to entities (other than the Licensee’s Related Companies) without the other party's express written consent.  Notwithstanding the foregoing, Licensee and its Related Companies shall have the right to grant exclusive or nonexclusive sublicenses within the scope of this license in any country upon such terms and conditions as Licensee and/or its Related Companies deems appropriate.

3.09           Addresses

Any notice or other communication hereunder shall be sufficiently given to the Licensee when sent by certified mail addressed to:

Visual Management Systems, Inc.

1000 Industrial Way North Suite C

Toms River, NJ 08755

or to Licensor when sent by certified mail addressed to:

IDS Patent Holding, LLC

Facsimile: (516) 541-1077

Changes in such addresses may be specified by written notice.

3.10           Choice of Law

The parties desire and agree that the law of the State of New York (without regard to principles of conflicts of laws) shall apply in any dispute arising with respect to this Agreement.

3.11           Integration

This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges all prior discussions between them.  Neither of the parties shall be bound by any warranties, understandings or representations with respect to such subject matter other than as expressly provided herein or in a writing signed with or subsequent to execution hereof by an authorized representative of the party to be bound thereby.

3.12           Cumulative Rights

The rights, powers and remedies of each party shall be in addition to, and not in limitation of, all rights, powers and remedies provided at law or in equity, or under any other agreement between the parties hereto.  All of such rights, powers and remedies shall be cumulative, and may be exercised successively or concurrently.

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3.13           Counterparts

This Agreement may be executed in any number of copies or counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

[Signature page follows]

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IN WITNESS WHEREOF, each of the parties has caused this Exclusive Patent and Trade Secret License Agreement to be executed in duplicate originals by its duly authorized representatives on the respective dates entered below.

Visual Management Systems, Inc.

By: _______________________________

Name: Jason Gonzalez

Title: President

Date: April 2, 2008

IDS Patent Holding, LLC.

By:  Intelligent Digital Systems, LLC, its Managing Member

By: _______________________________

Name: Jay Russ

Title: Managing Member

Date: April 2, 2008

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DEFINITIONS APPENDIX

GENERAL DEFINITIONS:

“Invention” means any idea, discovery, or other invention in which Licensor has rights and that are covered by the Patent Applications, including without limitation those patentable, covered by a patent or any application for patent filed in any country prior to the termination of this Agreement or otherwise protectable under Title 35 of the United States Code (or any comparable foreign laws), or any federal and/or state laws relating to ideas, discoveries, inventions or trade secrets, specifically including, without limitation, any new process, method, machine, manufacture or composition of matter or any improvement of any of the foregoing.

“Licensed Patents” means all patents issued (including, without limitation, any reissues, extensions or reexaminations thereof) in respect of the Patent Applications or applied for in any or all countries of the world for Inventions:

(i)	which Inventions are owned (either solely or jointly with others), licensed or controlled at any time by Licensor or any of Licensor’s Related Companies, or
(ii)	with respect to which Inventions Licensor shall at any time otherwise have the right to grant the licenses and rights which are herein granted by Licensor (but only to the extent of such right).

“Licensed Product” means any tangible property, the manufacture or sale of which by the Licensee or any of its Related Companies would, but for licenses or rights under this Agreement, constitute (i) infringement of Licensed Patents or Trade Secrets by the Licensee or such Related Company or (ii) any other violation of applicable law by the Licensee or such Related Company for which Licensor would be entitled to compensation or other remedy on account thereof.

“misappropriated” and “misappropriation” shall have the meaning ascribed to such terms under the UTSA.

“Related Companies” of an entity are those entities so designated by notice given by the Licensee to the Licensor together with the now existing or hereafter arising Subsidiaries and affiliates of such entity for so long as such Subsidiaries and affiliates constitute Subsidiaries and affiliates of such entity.

“Subsidiary” means a corporation or other legal entity (i) the majority of whose shares or other securities entitled to vote for election of directors (or other managing authority) is now or hereafter controlled by such company either directly or indirectly; or (ii) which does not have outstanding shares or securities but the majority of whose ownership interest representing the right to manage such corporation or other legal entity is now or hereafter owned and controlled by such company either directly or indirectly; but any such corporation or other legal entity shall be deemed to be a Subsidiary of such company only as long as such control or ownership and control exists.

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“Trade Secrets” means all of Licensor’s trade secrets (as defined under the UTSA), know-how, and other confidential information, including, without limitation, applications, technical and business data, know-how, formulae, processes, models, designs, plans, drawings, specifications, samples, reports, data charts, customer lists, studies, price lists, findings, inventions and ideas relating to any of the Licensed Patents or Inventions and all copyright in any of the foregoing (a) which are owned (either solely or jointly with others), licensed or controlled at any time by Licensor or any of Licensor’s Related Companies, or (b) with respect to which Inventions Licensor shall at any time otherwise have the right to grant the licenses and rights which are herein granted by Licensor (but only to the extent of such right).

“UTSA” means the Uniform Trade Secret Act adopted by the National Commissioners on Uniform State Laws in 1979, as amended in 1985.

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EX-10.17

EXHIBIT 10.17

Registration Rights Agreement

THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of April 2, 2008 (the "Effective Date"), by and among Visual Management Systems, Inc., a Nevada corporation, with a principal place of business at 1000 Industrial Way North Suite C, Toms River, NJ 08755 (the "Company"), and Intelligent Digital Systems, LLC, a Delaware limited liability company (the “Holder”).

Recitals

WHEREAS, the Company may issue shares of its Common Stock, par value $0.001 per share (the "Common Stock"), to the Holder pursuant to the terms of the Unsecured Convertible Promissory Note of even date herewith (the "Note”) issued pursuant to that certain Asset Purchase Agreement of even date herewith by and among the Company, the Holder, Jay Russ, an individual, and IDS Patent Holding, LLC, a New York limited liability company (the "Asset Purchase Agreement");

WHEREAS, it is a condition precedent to the consummation of the transaction contemplated by the Asset Purchase Agreement that the Company provide for the rights set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereto further agree as follows:

1.	Definitions.  For purposes of this Agreement:
	1.1.	The term "1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
	1.2.	The term "Act" means the Securities Act of 1933, as amended.
	1.3.	The term “Registration Statement” means any such form under the Act as in effect on the date hereof or any registration form under the Act subsequently adopted by the SEC that functions to register publicly tradable shares of the Common Stock of the Company
	1.4.	The terms "Register," "Registered," and "Registration" refer to a registration effected by preparing and filing a Registration Statement or similar document in compliance with the Act, and the declaration or ordering of effectiveness of such Registration Statement or document.
	1.5.	The term "Registrable Securities" means (a) all shares of  Common Stock, issuable to the Holder upon conversion of all or any portion of the principal amount or accrued interest under the Note, and (b) any shares of Common Stock issued or issuable by the Company in exchange or substitution for or otherwise in respect of any shares referred to in the foregoing clause (a) by way of stock dividend or split or in connection with a combination or subdivision of shares, reclassification, recapitalization, merger, consolidation or other reorganization of the Company.
	1.6.	The term "Rule 144" shall mean Rule 144 as promulgated by the SEC under the Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the SEC.
	1.7.	The term "Rule 145" shall mean Rule 145 as promulgated by the SEC under the Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the SEC.
	1.8.	The term "SEC" shall mean the Securities and Exchange Commission.

2.	Demand Registration.  At any time after the Note shall have become convertible into Common Stock in accordance with its terms, if the Company shall receive a written request from the Holder that the Company file a Registration Statement under the Securities Act with respect to any or all of the Registrable Securities, then the Company shall use its best efforts as soon as practicable, and in any event within ninety (90) days of the receipt of such a request, to file such Registration Statement and, as expeditiously as reasonably possible, cause such Registration Statement to become effective under the Act.  The Company shall be obligated to effect only one (1) registration pursuant to this Section 2.
3.	Piggyback Registration Rights.  If at any time after the Note shall have become convertible into Common Stock in accordance with its terms (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for its shareholders) any of its stock or other securities under the Act in connection with a public offering of such securities solely for cash, other than: (i) a registration on Form S-8 or other similar successor form, relating solely to the sale of securities to participants in a Company stock plan or to other compensatory arrangements to the extent includable on Form S-8, or other similar successor form, or (ii) a registration on Form S-4, or other similar successor form, the Company shall, at such time, promptly give to the Holder written notice of such registration.  Upon the written request of the Holder given within twenty (20) days after receipt by the Holder of such notice by the Company, the Company shall use its best efforts to cause to be registered under the Act all of the Registrable Securities that the Holder has requested to be included and  registered on such Registration Statement.  In the event that in connection with an underwritten offering the managing underwriter advise the Company that market factors require a limitation of the number of shares to be underwritten, then subject to the terms of any other agreements to which the Company is a party, the Company and its underwriter shall allocate the number of shares requested to be registered as follows: (i) first, to the Company, and (ii) second, to the Holder and other security holders requesting registration of securities pro rata according to the number of shares requested to be registered by each such security holder.  The Company shall have no obligations under this Section 3 to make any offering of its securities, or to complete an offering of its securities that it proposes to make, and shall incur no liability to the Holder for its failure to do so.  In connection with any offering involving an underwriting of shares being issued by the Company, the Company shall not be required to include any of the Registrable Securities in such underwriting unless the Holder accepts the terms of such underwriting as agreed upon by the Company and such underwriter(s).
4.	Expenses.  All expenses incurred in complying with Sections 2 and 3 hereof, including without limitation all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company and independent public accountants for the Company, any state securities or “blue sky” fees and expenses, fees of the National Association of Securities Dealers, Inc., reasonable fees and disbursements of one (1) counsel to the Holder, fees and expenses of transfer agents and registrars, but excluding any Selling Expenses (as  hereinafter defined), are herein called “Registration Expenses”.  All underwriting discounts and selling commissions applicable to the sale of Registrable Securities are herein called “Selling Expenses”.  The Holder will pay all Selling Expenses in connection with each Registration Statement filed pursuant to Section 2 or Section 3 hereof on a pro rata basis (based on the number of shares registered) with each other party that registers shares pursuant to such registration.  The Company will pay all Registration Expenses in connection with each Registration Statement filed pursuant to Sections 2 and 3 hereof.
5.	Obligations of the Parties
	5.1.	Obligations of the Company.  Whenever required under this Agreement to affect the registration of any Registrable Securities, the Company shall use its commercially reasonable efforts to:

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	5.1.1.	Prepare and file with the SEC a Registration Statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such Registration Statement to become effective, and, upon the request of the Holder, keep such Registration Statement effective until the earlier of: (x) the date six months from the date of effectiveness thereof, or (y) the date on which all of the Registrable Securities are sold;
	5.1.2.	Prepare and file with the SEC such amendments and supplements to such Registration Statement and the prospectus used in connection with such Registration Statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all Registrable Securities covered by such Registration Statement;
	5.1.3.	Use commercially reasonable efforts to register and qualify the securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Holder, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.
	5.1.4.	Notify Holder at any time when a prospectus relating thereto is required to be delivered under the Act, of the happening of any event as a result of which the prospectus included in such Registration Statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of Holder, the Company will prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain any untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading;
	5.1.5.	Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder, not later than the effective date of such Registration Statement;
	5.1.6.	Advise the Holder promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the SEC suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for such purpose and use commercially reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued.
5.2.	Obligations of the Holder.  It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 2 or Section 3 with respect to the Registrable Securities of the Holder, that the Holder shall furnish to the Company such information regarding itself and the Registrable Securities held by it to effect the registration of the Holder's Registrable Securities.  The Holder agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any Registration Statements applicable to its Registrable Securities, and agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 5.1.4 above, such Holder will immediately discontinue disposition of Registrable Securities pursuant the Registration Statement covering such Registrable Securities until such Holder’s receipt of the copies of the supplemental or amended prospectus contemplated by Section 5.1.4 and, if so directed by the Company, Holder shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in such Holder’s possession of the prospectus covering such Registrable Securities current at the time of receipt of such notice.

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6.	Delay of Registration.  No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any Registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Agreement.
7.	Indemnification.
	7.1.	To the extent permitted by law, the Company will indemnify and hold harmless the Holder against any losses, claims, damages, or liabilities to which they may become subject under the Act, the 1934 Act or other federal or state securities law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or  violations (collectively, a "Violation"):
		7.1.1.	Any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto (collectively, the "Filings");
		7.1.2.	The omission or alleged omission to state in the Filings a material fact required to be stated therein, or necessary to make the statements therein not misleading; or
		7.1.3.	Any violation or alleged violation by the Company of the Act, the 1934 Act, any state securities law or any rule or regulation promulgated under the Act, the 1934 Act or any state securities law; and the Company will pay any legal or other expenses reasonably incurred by any person to be indemnified pursuant to this Section in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation that occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such Registration by any such Holder.
	7.2.	To the extent permitted by law, the Holder, will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the Registration Statement, its legal counsel and accountants, each person, if any, who controls the Company within the meaning of the Act, any underwriter, any other holder of securities, selling securities in such Registration Statement and any controlling person of any such underwriter or other holder of securities, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Act, the 1934 Act or other federal or state securities law insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any violation of the Act, the 1934 Act or other federal or state securities law, in each case to the extent (and only to the extent) that such violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such Registration; and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this subsection 7.2, in connection with defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 7.2 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, that, in no event shall any indemnity under this subsection exceed the net proceeds from the offering received by the Holder less the aggregate amount of any damages which the Holder has otherwise been required to pay in respect of such loss, claim, damage or liability or any substantially similar loss, claim, damage or liability arising from the sale of such Registrable Securities.

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7.3.	Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section.
7.4.	If the indemnification provided for in this Section 7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect of any loss, claim, damage or expense referred to therein, then the indemnifying party in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim or expense as well as any other relevant equitable considerations.  The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  In no event shall any Holder be required to contribute an amount in excess of the net proceeds from the offering received by such Holder less the aggregate amount of any damages which the Holder has otherwise been required to pay in respect of such loss, claim, damage or liability or any substantially similar loss, claim, damage or liability arising from the sale of such Registrable Securities.
7.5.	Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions of the underwriting agreement shall control.
7.6.	The obligations of the Company and Holders under this Section 7 shall survive the completion of any offering of Registrable Securities in a Registration Statement under this Agreement and/or the termination of this Agreement.

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8.	Reports Under Securities Exchange Act of 1934.  With a view to making available the benefits of certain rules and regulations of the SEC, including Rule 144 that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:
	8.1.	Make and keep public information available, as those terms are understood and defined in Rule 144, at all times after the effective date of the first Registration Statement filed by the Company for the offering of its securities to the general public;
	8.2.	Take such action, including the voluntary registration of its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first Registration Statement filed by the Company for the offering of its securities to the general public is declared effective; and
	8.3.	File with the SEC in a timely manner all reports and other documents required of the Company under the Act and the 1934 Act.
9.	Assignment of Registration Rights.  The rights to cause the Company to register Registrable Securities pursuant to this Section may be assigned (but only with all related obligations) by the Holder to a transferee or assignee of such securities who acquires:
	9.1.	All of the Holder's Registrable Securities from such Holder; or
	9.2.	Is a subsidiary, parent, constituent partner or other affiliate of the Holder; provided that the Company is, furnished with written notice of the transfer in accordance with the terms of the Note, such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement, and such assignment shall be effective only if immediately following such transfer the further disposition of such Registrable Securities by the  transferee or assignee is restricted under the Act.
10.	"Market Stand-Off" Agreement.  The Holder hereby agrees that upon receipt by it of notification of the commencement of a public offering by the Company, it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to such public offering by the Company and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (l80) calendar days) do any of the following:
	10.1.	Lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter  acquired); or
	10.2.	Enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any securities of the Company, including (without limitation) shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether now owned or hereafter acquired), whether any such transaction described in clause 10.1 or 10.2 above is to be settled by delivery of securities, in cash or otherwise.  The foregoing covenants shall not apply to the sale of any Registrable Securities pursuant to this Agreement or to an underwriter pursuant to an underwriting agreement and shall only be applicable to the Holder if all officers and directors of the Company enter into similar agreements.

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11.	Miscellaneous Terms.
	11.1.	Termination of Registration Rights.  The Holder shall not be entitled to exercise any right provided for in this Agreement after such time at which all Registrable Securities held by such Holder can be sold in any three-month period without registration in compliance with Rule 144 or Rule 145 of the Act.
	11.2.	Governing Law.  This agreement in all respects shall be governed by the laws of the state of New York.
	11.3.	Waivers and Amendments.  Any term of this Agreement may be amended or amended and restated and the observance of any term of this Agreement may be waived (either generally or in a particular instance and prospectively but not retroactively), only with the written consent of the Company and the written consent of the Holder.
	11.4.	Successors and Assigns.  Except as otherwise expressly provided herein, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto
	11.5.	Entire Agreement.  This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject matter hereof.
	11.6.	Notices.  All notices and other communications required or permitted hereunder shall be in writing and may be delivered in person or by facsimile, electronic mail, courier or U.S. mail, in which event it may be mailed by first-class, certified or registered, postage prepaid, addressed (a) to the Holder, at the address set forth in the Company's records or, at such other address as the Holder shall have furnished to the Company or (b) if to the Company, at its address set forth in the introductory paragraph of this Agreement, or at such other address as the Company shall have furnished to the Holder.  All such notices and other communications shall be deemed given upon personal delivery, upon confirmation of facsimile transfer, upon confirmation of electronic mail transmission, upon delivery by courier or three business days after deposit in the United States mail.
	11.7.	Titles and Subtitles.  The titles of the paragraphs and subparagraphs of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.
	11.8.	Severability.  If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be reformed to the greatest extent possible and limited to any jurisdiction finding such illegality or, if such reformation is not possible, such provision shall be excluded from this Agreement, and the balance of the Agreement shall be interpreted as if such provision were so excluded, and shall be enforceable in accordance with its terms.

[Signature page follows]

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IN WITNESS WHEREOF, the parties hereto have set their hands this 2nd day of April, 2008.

VISUAL MANAGEMENT SYSTEMS, INC.

By:___________________________________

Name:  Jason Gonzalez

Title:  President

INTELLIGENT DIGITAL SYSTEMS, LLC

By:___________________________________

Name:  Jay Russ

Title:  Managing Member

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