[WHERIFY WIRELESS, INC. LETTERHEAD]

Lightyear will be merged into a newly created wholly owned subsidiary of Wherify (the “Merger Sub”) in a transaction (the “Merger”) pursuant to which, after taking into account (i) all then current outstanding fully-diluted shares of Wherify and (ii) those shares to be issued in connection with the Merger and the Recapitalization Financing (as defined below), will result in the shareholders of Lightyear owning not less than 51% of the fully diluted shares of Wherify that will be outstanding on the closing date of the Merger (the “Merger Closing Date”).

On the Merger Closing Date, Wherify and its subsidiaries will have the following proforma debt and other liability capitalization:

The Lightyear Debt: Merger Sub will assume, in connection with the Merger, current Lightyear debt in an amount not to exceed $16 million (the “Lightyear Debt”), such Lightyear Debt having the following basic terms:

Amount:

Not more than $10,000,000

Form:

Senior Secured Term Note

Interest:

Libor + 4 (capped at 7.5%), payable on a current basis quarterly in arrears

Term:

3 years

Prepayment:

Anytime in whole or part without penalty

Security:

Lightyear and Merger Sub customer contracts, accounts receivable and inventory existing on or after the Merger Closing Date. The holder of the Lightyear Debt shall not have a security interest in any of the assets of Wherify or Wherify California

Amount:

$6,000,000

Form:

Senior Subordinated Note

Interest Rate:

9% p.a., payable quarterly in arrears in cash or, at the option of the Merger Sub, in additional notes

Term:

3 years

Conversion:

The holder of the note may convert the note into Wherify common stock at any time in whole or part at a conversion price (the “Conversion Price”) equal to 125% of the underlying price per share associated with the securities issued in the Recapitalization Financing (as defined in Section 3 below)

The Wherify Obligations: The entirety of Wherify’s approximate $22 million in existing debt and other payables, overdue vendor obligations and liabilities for prior taxes and workers compensation as of the date of this letter (collectively, the “Wherify Obligations”) shall be restructured as follows:

Amount:

$2,500,000

Interest:

12% per annum, payable quarterly in arrears

Maturity:

3 years

Payments:

Commencing on the thirteen month anniversary date from the Merger Closing Date, and continuing on the like day of each month thereafter, the makers shall make monthly principal payments in the amount of $83,333.33 each. At maturity of the YA Replacement Note, the then outstanding principal balance plus any accrued and unpaid interest, and any other amounts due under the YA Replacement Note shall be due and payable in full.

Prepayment:

Anytime in whole or part without penalty

Security:

YA Global shall continue to hold a first perfected security interest in all assets of Wherify and Wherify California, whether existing as of the Merger Closing Date or acquired thereafter (including, without limitation, Wherify’s and Wherify California’s intellectual property). YA Global shall not have a security interest in the assets of the Merger Sub. YA Global’s security documents shall provide that Wherify and Wherify Califonria may license or utilize their intellectual property in the ordinary course of business in any reasonable way, provided that (a) any license of the intellectual property shall be expressly subordinate to the security interest of YA Global, and (b) Wherify and/or Wherify California shall not sell or transfer title to such intellectual property or grant exclusive licenses or the like without the prior written consent of YA Global¹. Wherify and Wherify California shall covenant and agree that none of their assets will be transferred to the Merger Sub either in connection with the Merger or otherwise without the prior written consent of YA Global.

On the Merger Closing Date, Wherify will have net cash on hand from a new equity financing (the “Recapitalization Financing”) of not less than $6.5 million (the “Closing Date Working Capital Requirement”), after taking into consideration (i) the fees and expenses associated with raising such Recapitalization Financing and (ii) any cash used therefrom to satisfy resolution of the Wherify Obligations as set forth in Section 2 above. Exhibit II appended hereto illustrates that the aggregate funding requirements the parties hereto contemplate will need to be covered by the Recapitalization Financing is equal to $15 million. It is contemplated that investors providing the equity for the Recapitalization Financing will receive preferred stock in Wherify in exchange for their investment. Such preferred stock shall contain provisions providing that no cash dividends or cash distributions of any nature may be made to the holder of such preferred stock, and no put, redemption, buyback, or similar provision may be exercised, unless and until the payment in full of all amounts due under the YA Replacement Note. In addition, the parties hereto understand and agree that the investors providing the Recapitalization Financing will likely require holders of preferred or common stock or warrants exercisable for preferred or common stock, who hold shares, or warrants exercisable for shares, or some combination thereof, which, in the aggregate, are in excess of 1% of the capital stock of Wherify (on a fully diluted basis), to enter into an “Orderly Market Resale Program” or similar agreement which may, among other things, limit the amount of shares such parties may sell at one time and the timing of such sales, and by accepting or consenting to this Agreement, such parties agree that they will not unreasonably withhold their consent to such an Agreement provided that all such parties to which the foregoing applies, and all directors and officers and other insiders of Wherify, shall be subject to the same rules and restrictions. For the purposes of illustration, reference is made to Exhibit I appended hereto for the projected percentages of stock and warrants to be held by each party after the closing on the Merger.

On the Merger Closing Date (or as soon thereafter as practicable), the following will occur:

The name of the Merger Sub will be changed to Lightyear Network Solutions, Inc.

The Lightyear shareholders will have the right to choose 60% of the merged company Board of Directors and, in that connection, Sherm Henderson will be designated as Chairman.

Among other things, it shall be a condition of closing the Merger that:

Wherify obtain by requisite proxy approval:

favorable consent to the transaction and, in that regard, GPS Associates LLC, the holder of the Wherify Preferred Stock, shall have expressly consented to (x) the Merger, (y) the conversion of the Wherify Preferred Stock and (z) release any and all claims that it may have against Wherify, its officers and directors (the “GPS Consent and Release”); and

all due authorizations necessary to complete the Merger and transactions contemplated herein, including, without limitation:

any reverse split or other share authorizations that may be required;

the Name Change; and

all other matters requiring approval of the Wherify shareholders.

Wherify obtain all required creditor approvals.

Lightyear obtain all required shareholder and creditor approvals to the Merger.

The parties agree to work expeditiously to complete the transactions contemplated herein, including without limitation:

Signing, to the extent practicable within 20 days from the Effective Date hereof, a Definitive Merger Agreement conditioned solely upon completion of all the transactions contemplated herein;

The restructuring of the Lightyear Debt as contemplated in Section 2(a);

The restructuring of the Wherify Obligations as contemplated in Section 2(b), including for these purposes, a determination at the earliest possible date of the cash amount that will be required;

The preparation of offering materials for use in soliciting investor interest in the Recapitalization Financing, including a mutually agreed description of the business, prospects and proforma financial condition of each of Lightyear, Wherify and the combined companies; and

The preparation of all required proxy materials and, in the case of Lightyear, all required audit work necessary to comply with the SEC financial reporting requirements on and after the Merger Closing Date.

The parties agree that each will bear for its own account the cost each incurs in connection with working to complete the transactions contemplated herein.

This Agreement will become effective (the “Effective Date”) when:

signed by the parties in the spaces provided below; and

there is evidence satisfactory to Lightyear that Wherify shall have access to interim working capital (the “Bridge Loan”) for use in carrying Wherify during the process of trying to satisfy the conditions precedent to closing the Merger as contemplated herein. Exhibit IV sets forth the principal terms of the proposed Bridge Loan.

BY:

________________________

BY:

______________________________

Vincent D. Sheeran

J. Sherman Henderson

ITS:

Chief Executive Officer

ITS: