Exhibit 10.5

 

EXECUTION VERSION

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of November 9,
2005, by and among IT&E International Group, a Nevada corporation (the
“Company”), ComVest Investment Partners II LLC, a Delaware limited liability
company (“ComVest”), and the purchasers set forth on the signature
pages attached hereto (each a “Purchaser” and collectively with ComVest the
“Purchasers”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and in
accordance with and in reliance upon the exemption from securities registration
afforded by Section 4(2) of the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder (the “Securities
Act”), including Regulation D (“Regulation D”), and/or upon such other exemption
from the registration requirements of the Securities Act as may be available
with respect to any or all of the investments to be made hereunder, the Company
desires to issue and sell to each Purchaser, and each Purchaser desires to
purchase from the Company (collectively with the other Purchasers) as aggregate
of (i) up to 11,500 shares of Series D Convertible Preferred Stock, stated value
$1,000 per share (the “Series D Preferred Stock”), or senior secured convertible
notes (the “Senior Secured Notes”) in an aggregate principal amount of up to
Eleven Million Five Hundred Thousand Dollars ($11,500,000), (ii) warrants (the
“Warrants”) to purchase up to 82,142,788 shares of common stock, $0.001 par
value per share (“Common Stock”) and (iii) an option to purchase up to an
additional 5,000 shares of Series D Preferred Stock and Warrants for the
purchase of 35,714,256 shares of common stock for an aggregate purchase price of
an additional Five Million Dollars $5,000,000 within six months of the Initial
Closing (as defined herein) on the same terms as set forth herein;

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:

 

ARTICLE I.
DEFINITIONS

 

1.1                                 Definitions.  In addition to the terms
defined elsewhere in this Agreement, for all purposes of this Agreement, the
following terms have the meanings indicated in this Section 1.1:

 

(a)                                  “Action” means any claim, action, suit,
arbitration, inquiry, action or investigation by or before any Governmental
Authority.

 

(b)                                 “Affiliate” means, with respect to any
specified Person, any other Person that directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, such specified Person.

 

(c)                                  “Agreement” shall have the meaning set
forth in the Preamble.

 

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(d)                                 “Business Day” means any day that is not a
Saturday, a Sunday or other day on which banks are required or authorized by Law
to be closed in The City of New York.

 

(e)                                  “Certificate of Designation” means the
Certificate of Designation of Rights and Preferences of Series D Convertible
Preferred Stock of the Company to be filed with the Secretary of State of the
State of Delaware in connection with the issuance of the Series D Preferred
Stock in the form of Exhibit A attached hereto.

 

(f)                                    “Claims” means any and all
administrative, regulatory or judicial actions, suits, petitions, appeals,
demands, demand letters, claims, Encumbrances, notices of noncompliance or
violation, investigations, Actions, consent orders or consent agreements.

 

(g)                                 “Code” means the Internal Revenue Code of
1986, as amended through the date hereof.

 

(h)                                 “Company” shall have the meaning set forth
in the Preamble.

 

(i)                                     “Company Indemnified Party” shall have
the meaning set forth in Section 4.10(b).

 

(j)                                     “Company Intellectual Property” means
Intellectual Property owned by the Company or any Subsidiary.

 

(k)                                  “Company IP Agreements” means (a) licenses
of Intellectual Property by the Company or any Subsidiary to any third party,
(b) licenses of Intellectual Property by any third party to the Company or any
Subsidiary, (c) agreements between the Company or any Subsidiary and any third
party relating to the development or use of Intellectual Property, the
development of data, or the  modification, framing, linking, or advertisement
with respect to Internet web sites and (d) consents, settlements, decrees,
orders, injunctions, judgments or rulings to which the Company or any Subsidiary
is a party, governing the use, validity or enforceability of Company
Intellectual Property.

 

(l)                                     “Company Software” means all Software
(a) material to the operation of its business or (b) manufactured, distributed,
sold, licensed or marketed by the Company or any Subsidiary.

 

(m)                               “Commission” means the Securities and Exchange
Commission.

 

(n)                                 “Common Stock” shall have the meaning set
forth in the Recitals.

 

(o)                                 “Common Stock Equivalents” means any
securities of the Company or the Subsidiaries which would entitle the holder
thereof to acquire at any time Common Stock, including without limitation, any
debt, preferred stock, rights, options, warrants or other instrument that is at
any time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.

 

(p)                                 “Company Counsel” means Foley & Lardner, LLP
with offices located at 402 W. Broadway, Suite 2300, San Diego, California 
92101-3542.

 

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(q)                                 “control” (including the terms “controlled
by” and “under common control with”), with respect to the relationship between
or among two or more Persons, means the possession, directly or indirectly or as
trustee, personal representative or executor, of the power to direct or cause
the direction of the affairs or management of a Person, whether through the
ownership of voting securities, as trustee, personal representative or executor,
by contract, credit arrangement or otherwise.

 

(r)                                    “Conversion Shares” means the shares of
Common Stock issuable upon conversion of the Series D Preferred Stock.

 

(s)                                  “Copyrights” means mask works, rights of
publicity and privacy, and copyrights in works of authorship of any type,
including Software, registrations and applications for registration thereof
throughout the world, all rights therein provided by international treaties and
conventions, all moral and common law rights thereto, and all other rights
associated therewith.

 

(t)                                    “Disclosure Schedule” means the
Disclosure Schedule attached hereto, dated as of the date hereof, delivered by
the Company to Purchasers in connection with this Agreement.

 

(u)                                 “Encumbrance” means any security interest,
pledge, hypothecation, mortgage, Encumbrance (including environmental and tax
Encumbrances), violation, charge, lease, license, encumbrance, servient
easement, adverse claim, reversion, reverter, preferential arrangement,
restrictive covenant, condition or restriction of any kind, including any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership.

 

(v)                                 “Effective Date” means the date that the
Registration Statement is first declared effective by the Commission.

 

(w)                               “Exchange Act” means the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the Commission
promulgated thereunder.

 

(x)                                   “Exempt Issuance” means the issuance of
(a) shares of Common Stock options or shares of Common Stock issued upon the
exercise of any such options to employees, officers or directors of the Company
pursuant to any stock or option plan duly adopted by a majority of the
non-employee members of the Board of Directors (the “Board”) of the Company or a
majority of the members of a committee of non-employee directors established for
such purpose, (b) securities upon the exercise of or conversion of any
convertible securities, options or warrants issued and outstanding on the date
hereof, provided that such securities have not been amended since the date of
this Agreement, (c) the Securities issued or issuable hereunder, (d) issuances
in connection with mergers, acquisitions, joint ventures or other transactions
with an unrelated third party in a bona fide transaction the purpose of which is
not fundraising, or (e) issuances at fair market value to the Company’s
suppliers, consultants and other providers of services and goods not to exceed
$100,000 to any one Person, and not to exceed an aggregate of $250,000 in any
fiscal year without the prior written consent of Purchasers.

 

(y)                                 “GAAP” means United States generally
accepted accounting principles and practices in effect from time to time applied
consistently throughout the periods involved.

 

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(z)                                   “Governmental Authority” means any
federal, national, supranational, state, provincial, local, or similar
government, governmental, regulatory or administrative authority, agency or
commission or any court, tribunal, or judicial or arbitral body.

 

(aa)                            “Governmental Order” means any order, writ,
judgment, injunction, decree, stipulation, determination or award entered by or
with any Governmental Authority.

 

(bb)                          “GT” means Greenberg Traurig, LLP with offices
located at The Met Life Building, 200 Park Avenue, New York, New York 10166.

 

(cc)                            “Indebtedness” means, with respect to any
Person, (a) all indebtedness of such Person, whether or not contingent, for
borrowed money, (b) all obligations of such Person for the deferred purchase
price of property or services, (c) all obligations of such Person evidenced by
notes, bonds, debentures or other similar instruments, (d) all indebtedness
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the Company or lender under such agreement in the event of default
are limited to repossession or sale of such property), (e) all obligations of
such Person as lessee under leases that have been or should be, in accordance
with GAAP, recorded as capital leases, (f) all obligations, contingent or
otherwise, of such Person under acceptance, letter of credit or similar
facilities, (g) all obligations of such Person to purchase, redeem, retire,
defease or otherwise acquire for value any capital stock of such Person or any
warrants, rights or options to acquire such capital stock, valued, in the case
of redeemable preferred stock, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends, (h) all Indebtedness
of others referred to in clauses (a) through (g) above guaranteed directly or
indirectly in any manner by such Person, or in effect guaranteed directly or
indirectly by such Person through an agreement (i) to pay or purchase such
Indebtedness or to advance or supply funds for the payment or purchase of such
Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property, or
to purchase or sell services, primarily for the purpose of enabling the debtor
to make payment of such Indebtedness or to assure the holder of such
Indebtedness against loss, (iii) to supply funds to or in any other manner
invest in the debtor (including any agreement to pay for property or services
irrespective of whether such property is received or such services are rendered)
or (iv) otherwise to assure a creditor against loss, and (i) all Indebtedness
referred to in clauses (a) through (g) above secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Encumbrance on property (including accounts and contract rights)
owned by such Person, even though such Person has not assumed or become liable
for the payment of such Indebtedness.

 

(dd)                          “Indemnified Party” shall mean a Company
Indemnified Party or a Purchaser Indemnified Party, as the case may be;

 

(ee)                            “Indemnifying Party” shall mean Purchasers
pursuant to Section 4.10(a) and the Company pursuant to Section 4.10(b), as the
case may be

 

(ff)                                “Intellectual Property” means (i) patents,
patent applications and statutory invention registrations, (ii) trademarks,
service marks, domain names, trade dress, logos, trade names, corporate names
and other identifiers of source or goodwill, including registrations and

 

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applications for registration thereof and including the goodwill of its business
symbolized thereby or associated therewith, (iii) mask works and copyrights,
including copyrights in computer software, and registrations and applications
for registration thereof, and (iv) confidential and proprietary information,
including trade secrets, know how and invention rights.

 

(gg)                          “IRS” means the Internal Revenue Service of the
United States.

 

(hh)                          “Law” means any federal, national, supranational,
state, provincial, local or similar statute, law, ordinance, regulation, rule,
code, order, requirement or rule of law (including common law).

 

(ii)                                  “Leased Real Property” means the real
property leased by the Company or any Subsidiary as tenant, together with, to
the extent leased by the Company or any Subsidiary, all buildings and other
structures, facilities or improvements currently or hereafter located thereon,
all fixtures, systems, equipment and items of personal property of the Company
or any Subsidiary attached or appurtenant thereto and all easements, licenses,
rights and appurtenances relating to the foregoing.

 

(jj)                                  “Licensed Intellectual Property” means
Intellectual Property licensed to the Company or any Subsidiary pursuant to the
Company IP Agreements.

 

(kk)                            “Lock-up Agreements” means the agreements
between certain executives of the Company and the Company in the form of
Exhibit B attached hereto.

 

(ll)                                  “Material Adverse Effect” means any
circumstance, change in or effect on its business, the Company or any Subsidiary
that, individually or in the aggregate with all other circumstances, changes in
or effects on its business, the Company or any Subsidiary:  (a) is or is
reasonably likely to be materially adverse to its business, operations, assets
or liabilities (including contingent liabilities), employee relationships,
customer or supplier relationships, prospects, results of operations or the
condition (financial or otherwise) of its business, the Company or any
Subsidiary or (b) is reasonably likely to materially adversely effect the
ability of any Purchaser to operate or conduct its business in the manner in
which it is currently or contemplated to be operated or conducted by the Company
or any Subsidiary.

 

(mm)                      “Optional Additional Investment” shall have the
meaning set forth in Section 2.4.

 

(nn)                          “Patents” means United States, foreign and
international patents, patent applications and statutory invention
registrations, including reissues, divisions, continuations,
continuations-in-part, extensions and reexaminations thereof, and all rights
therein provided by international treaties and conventions.

 

(oo)                          “Person” means any individual, partnership, firm,
corporation, limited liability company, association, trust, unincorporated
organization or other entity, as well as any syndicate or group that would be
deemed to be a person under
Section 13(d)(3) of the Exchange Act.

 

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(pp)                          “Preferred Shares” means the shares of Series D
preferred Stock issued to Purchasers pursuant to this Agreement.

 

(qq)                          “Preferred Stock” means the “blank check”
preferred stock designated by the Company.

 

(rr)                                “Purchaser” and “Purchasers” shall have the
meanings set forth in the Preamble.

 

(ss)                            “Purchaser Indemnified Party” shall have the
meaning set forth in Section 4.10(a).

 

(tt)                                “Real Property” means the Leased Real
Property.

 

(uu)                          “Registration Rights Agreement” means the
Registration Rights Agreement, dated as of the date of this Agreement, among the
Company and Purchasers, in the form of Exhibit C attached hereto.

 

(vv)                          “Registration Statement” means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement and covering the resale by Purchasers of the Shares and the Warrant
Shares.

 

(ww)                      “Regulation D” shall have the meaning set forth in the
Recitals.

 

(xx)                              “Regulations” means the Treasury Regulations
(including Temporary Regulations) promulgated by the United States Department of
Treasury with respect to the Code or other federal tax statutes.

 

(yy)                          “Rule 144” means Rule 144 promulgated by the
Commission pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.

 

(zz)                              “SEC Reports” shall have the meaning ascribed
to such term in Section 3.1(g).

 

(aaa)                      “Securities” collectively means the Preferred Shares,
the Conversion Shares, the Senior Secured Notes, the Warrants and the Warrant
Shares.

 

(bbb)                   “Security Agreements” means the Security Agreements
between the Company and Purchasers in the forms of Exhibit D attached hereto.

 

(ccc)                      “Securities Act” shall have the meaning set forth in
the Recitals.

 

(ddd)                   “Senior Secured Notes” shall have the meaning set forth
in the Recitals in the form of Exhibit E attached hereto.

 

(eee)                      “Series D Preferred Stock” shall have the meaning set
forth in the Recitals.

 

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(fff)                            “Software” means computer software, programs
and databases in any form, including Internet web sites, web content and links,
source code, object code, operating systems and specifications, data, databases,
database management code, utilities, graphical user interfaces, menus, images,
icons, forms, methods of processing, software engines, platforms and data
formats, all versions, updates, corrections, enhancements and modifications
thereof, and all related documentation, developer notes, comments and
annotations.

 

(ggg)                   “Subsidiaries” means any and all corporations,
partnerships, limited liability companies, joint ventures, associations and
other entities controlled by the Company directly or indirectly through one or
more intermediaries.

 

(hhh)                   “Tax” or “Taxes” means any and all taxes, fees, levies,
duties, tariffs, imposts, and other charges of any kind (together with any and
all interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including taxes
or other charges on or with respect to income, franchises, windfall or other
profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers’ compensation, unemployment compensation,
or net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added, or gains taxes; license, registration and
documentation fees; and customs’ duties, tariffs, and similar charges.

 

(iii)                               “Tax Returns” means any return, declaration,
report, election, claim for refund or information return or other statement or
form relating to, filed or required to be filed with any Tax authority for the
Company’s fiscal years ended after April 14, 2004 and thereafter, including any
schedule or attachment thereto or any amendment thereof.

 

(jjj)                               “Total Purchase Price” shall be equal to Ten
Million Dollars ($10,000,000).

 

(kkk)                      “Trade Secrets” means trade secrets, know-how and
other confidential or proprietary technical, business and other information,
including manufacturing and production processes and techniques, research and
development information, technology, drawings, specifications, designs, plans,
proposals, technical data, financial, marketing and business data, pricing and
cost information, business and marketing plans, customer and supplier lists and
information, and all rights in any jurisdiction to limit the use or disclosure
thereof.

 

(lll)                               “Trademarks” means trademarks, service
marks, trade dress, logos, trade names, corporate names, URL addresses, domain
names and symbols, slogans and other indicia of source or origin, including the
goodwill of its business symbolized thereby or associated therewith, common law
rights thereto, registrations and applications for registration thereof
throughout the world, all rights therein provided by international treaties and
conventions, and all other rights associated therewith.

 

(mmm)             “Transaction Documents” means this Agreement, the Senior
Secured Notes, the Certificate of Designation, the Warrants, the Security
Agreements and the Registration Rights Agreement and any other documents or
agreements executed in connection with the transactions contemplated hereunder.

 

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(nnn)                   “Warrants” shall have the meaning set forth in the
Recitals in the form of Exhibit F attached hereto.

 

(ooo)                   “Warrant Shares” means the shares of Common Stock
issuable upon exercise of the Warrants.

 

1.2                                 Other Terms.  Other terms may be defined
elsewhere in the text of this Agreement and, unless otherwise indicated, shall
have such meaning throughout this Agreement.

 

1.3                                 Interpretation and Rules of Construction. 
In this Agreement, except to the extent otherwise provided or that the context
otherwise requires:

 

(i)                                     when a reference is made in this
Agreement to an Article, Section, Exhibit or Schedule, such reference is to an
Article or Section of, or a Schedule or Exhibit to, this Agreement unless
otherwise indicated;

 

(ii)                                  references to the “knowledge” of the
Company shall refer to the actual knowledge of any of the Company’s officers or
members of its Board or the knowledge that any such person would reasonably be
expected to have assuming reasonable inquiry;

 

(iii)                               references to “due inquiry” shall mean that
the Company shall have inquired of each of the members of the Board of
Directors, members of executive management and any professional advisors;

 

(iv)                              the headings for this Agreement are for
reference purposes only and do not affect in any way the meaning or
interpretation of this Agreement;

 

(v)                                 whenever the words “include,” “includes” or
“including” are used in this Agreement, they are deemed to be followed by the
words “without limitation”;

 

(vi)                              the words “hereof,” “herein” and “hereunder”
and words of similar import, when used in this Agreement, refer to this
Agreement as a whole and not to any particular provision of this Agreement;

 

(vii)                           all terms defined in this Agreement have the
defined meanings when used in any certificate or other document made or
delivered pursuant hereto, unless otherwise defined therein;

 

(viii)                        the definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms;

 

(ix)                                any Law defined or referred to herein or in
any agreement or instrument that is referred to herein means such Law or statute
as from time to time amended, modified or supplemented, including by succession
of comparable successor Laws;

 

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(x)                                   references to a Person are, in the case of
individuals, also to his or her personal representatives, heirs and permitted
assigns and, in the case of entities, also to its successors and permitted
assigns; and

 

(xi)                                the use of “or” is not intended to be
exclusive unless expressly indicated otherwise.

 

ARTICLE II.
PURCHASE AND SALE

 

2.1                                 Purchase and Sale.  The Company hereby
agrees to sell and the Purchasers agrees to purchase up to Eleven Thousand Five
Hundred (11,500) shares of Series D Preferred Stock or Senior Secured Notes and
Warrants to purchase Common Stock in the aggregate purchase price of up to
$11,500,000 subject to the provisions of Section 2.2 below.  Each of the
Purchasers acknowledges and agrees that if on the date of the Initial Closing,
or the Second Closing, as applicable, the Company’s Series D Preferred Stock is
not duly authorized, the Purchasers shall purchase and the Company shall issue
Senior Secured Notes and Warrants.

 

2.2                                 Closing.

 

(a)                                  The consummation of the initial sale of
Senior Secured Notes (or Preferred Shares) and Warrants (the “Initial Closing”)
shall take place on or before November    , 2005 (the “Closing Date”) and the
second closing shall take place no later than December 31, 2005 (“Second
Closing”) by telecopy exchange of signature pages with originals to follow by
overnight delivery, or in such other manner or at such place as the parties
hereto may agree.  There may be additional closings in connection with the
Optional Investment in accordance with Section 2.4 (each an “Option Closing” and
collectively “Option Closings”).  The Initial Closing, the Second Closing and
any Additional Closings each referred to as a “Closing Date” and collectively
the “Closing Dates.”

 

(b)                                 At the Initial Closing, the Purchasers shall
deliver to the Company up to Eight Million Five Hundred Thousand Dollars
($8,500,000), such amount representing the aggregate purchase price for
(i) Eight Thousand Five Hundred (8,500) Preferred Shares or Senior Secured Notes
in the principal amount of Eight Million Five Hundred Thousand Dollars
$8,500,000, and (ii) Warrants to purchase up to 60,714,234 shares of Common
Stock, by certified check or wire transfer.

 

(c)                                  At the Second Closing, the Purchasers shall
deliver to the Company up to Four Million Five Hundred Thousand Dollars
($4,500,000), such amount representing the aggregate purchase price for (i) Four
Thousand Five Hundred (4,500) Preferred Shares or Senior Secured Notes in the
principal amount of Four Million Five Hundred Thousand Dollars ($4,500,000) and
(ii) Warrants to purchase up to 32,142,830 shares of Common Stock, by certified
check or wire transfer, provided however that in no event shall the aggregate
amounts issued in the Initial Closing and the Second Closing (a) exceed 11,500
shares of Preferred Stock or Senior Secured Notes be in the aggregate principal
amount greater than $11,500,000, or (b) exceed 82,142,788 Warrants.

 

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(d)                                 If ComVest exercises its Option (as defined
in Section 2.4), there shall be Option Closings, at which ComVest shall deliver
to the Company up to an additional $5,000,000, such amount representing the
aggregate purchase price for up to Five Thousand (5,000) Preferred Shares and
Warrants to purchase up to 35,714,25 shares of Common Stock, by certified check
or wire transfer.  ComVest may exercise the Option for a lesser investment
amount and the number of Preferred Shares and shares underlying the Warrants
shall be reduced proportionately.

 

2.3                                 Closing Conditions; Deliveries.

 

(a)                                  At the Initial Closing, the Company shall
deliver or cause to be delivered to Purchasers the following:

 

(i)                                     this Agreement duly executed by the
Company;

 

(ii)                                  the Registration Rights Agreement duly
executed by the Company;

 

(iii)                               the Lock Up Agreements;

 

(iv)                              the Security Agreements duly executed by the
Company and each of its Subsidiaries;

 

(v)                                 the written consent of the shareholders
holding a majority of the Common Stock outstanding in accordance with
Section 2.3(i) below, which consent is in full force and effect and has not been
modified, terminated or revoked;

 

(vi)                              the consent of the Board of Directors in
accordance with Section 2.3(k) below, which consent is in full force and effect
and has not been modified, terminated or revoked;

 

(vii)                           each of the executed Employment Agreements; and

 

(viii)                        evidence of cancellation of all Series A Preferred
Stock.

 

(b)                                 On each of the Closing Dates, the Company
shall deliver or cause to be delivered to the Purchasers the following:

 

(i)                                     a copy of the irrevocable instructions
to the Company’s transfer agent instructing the transfer agent to deliver, on an
expedited basis, a certificate evidencing each of the Preferred Shares, each
registered in the name of such Purchasers or a Senior Secured Promissory Note
registered in the name of such Purchaser;

 

(ii)                                  Warrants registered in the name of each
Purchaser;

 

(iii)                               any material updates to the Disclosure
Schedules;

 

(iv)                              the certificates referred to in
Section 2.3(e)(i) and 2.3(f)(i); and

 

(v)                                 a legal opinion of Company Counsel, in the
form reasonably acceptable to GT.

 

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(c)                                  On the Initial Closing, Purchasers shall
deliver or cause to be delivered to the Company the following:

 

(i)                                     this Agreement duly executed by each
Purchaser;

 

(ii)                                  the Security Agreements duly executed by
each Purchaser; and

 

(iii)                               the Registration Rights Agreement duly
executed by each Purchaser.

 

(d)                                 On each of the Closing Dates, each Purchaser
shall deliver or cause to be delivered to the Company the following:

 

(i)                                     each Purchasers’ respective portion of
the Purchase Price by wire transfer of immediately available funds to the
account as specified in writing by the Company; and

 

(ii)                                  the certificates referred to in
Section 2.3(e)(ii) and 2.3(f)(ii).

 

(e)                                  Accuracy of Representations and Warranties.

 

(i)                                     Each representation and warranty
contained in Section 3.1 shall be true on and as of each Closing with the same
effect as though such representation and warranty had been made on and as of
that date and the Company has delivered to Purchasers a certificate, executed by
the Chief Executive Officer and the Chief Financial Officer of the Company,
dated each of the Closing Dates, certifying to the fulfillment of the conditions
specified in this Section 2.3(e)(i), and as to such other matters as may be
reasonably requested by the Purchasers including, but not limited to
certificates with respect to the Company’s articles of incorporation, by-laws
and Board of Directors’ resolutions relating to the transactions contemplated
hereby.

 

(ii)                                  Each representation and warranty contained
in Section 3.2 shall be true on and as of each Closing with the same effect as
though such representation and warranty had been made on and as of that date and
each of the Purchasers have delivered to the Company a certificate, executed by
the Chief Executive Officer, Chief Financial Officer of each Purchaser (or in
each Purchaser’s individual capacity as applicable), dated each of the Closing
Dates, certifying to the fulfillment of the conditions specified in this
Section 2.3(e)(ii).

 

(f)                                    Performance.

 

(i)                                     The Company shall have performed and
complied with all agreements and conditions contained in this Agreement required
to be performed or complied with by the Company prior to or at each of the
Closings and the Company has delivered to Purchasers a certificate, executed by
the Chief Executive Officer and the Chief Financial Officer of the Company,
dated each of the Closing Dates, certifying to the fulfillment of the conditions
specified in this
Section 2.3(f)(i).

 

11

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(ii)                                  Each Purchaser shall have performed and
complied with all agreements and conditions contained in this Agreement required
to be performed or complied with by Purchaser prior to or at each of the
Closings and each Purchaser has delivered to the Company a certificate, executed
by the Chief Executive Officer or Chief Financial Officer of Purchaser (or in
each Purchaser’s individual capacity as applicable), dated each of the Closing
Dates, certifying to the fulfillment of the conditions specified in this
Section 2.3(f)(ii).

 

(g)                                 Due Diligence.  As of the Initial Closing,
each Purchaser shall, in its sole discretion, have completed its legal and
financial due diligence and the results of such due diligence shall, in its sole
discretion, be acceptable to each Purchaser and its legal counsel.  The updates
to the Disclosure Schedule delivered to each Purchaser in accordance with
Section 2.3(b)(iii) shall not contain any exceptions that are deemed
unacceptable by each Purchaser in its sole discretion, and such Disclosure
Schedule shall be deemed to be materially accurate at each Closing, unless
otherwise updated by the Company and delivered to such Purchaser at such
Closing.

 

(h)                                 Indebtedness.  As of the Closing there shall
be no Indebtedness, other than the Laurus Note as set forth in the SEC Reports
and accounts payable, trade payables and capital lease obligations incurred in
the ordinary course of business.

 

(i)                                     Shareholder Approval.  The shareholders
holding a majority of the Common Stock outstanding of the Company shall have
consented to in writing: (i) the designation and issuance of the Series D
Preferred Stock on the terms set forth in the Certificate of Designation
attached hereto, (ii) the increase in the number of authorized shares of Common
Stock to 650,000,000 shares of Common Stock, (iii) the preparation, filing and
mailing of an information statement in accordance with Schedule 14C of the
Exchange Act, (iv) the reincorporation of the Company into the State of
Delaware, (v) a reverse stock split to be declared by the Board of Directors in
its sole discretion provided that such reverse stock split shall not exceed 1
for 25 and must take place within twelve (12) months after the date of such
written consent, (vi) an increase in the number of shares reserved for issuance
under the 2005 Equity Incentive Plan to 25,000,000 shares of Common Stock,
(vii) the election of the five (5) Designees and (viii) the amendment to the
Bylaws or articles of incorporation of the Company, as necessary, to reflect the
foregoing.

 

(j)                                     Senior Executives Employment Agreement. 
The employment agreements between the Company and each of Peter Sollenne, Kelly
Alberts, Anthony Allocca and David Vandertie (the “Employment Agreements”) shall
have been entered into in the form attached hereto as Exhibit G.

 

(k)                                  Board of Directors.  The Board of the
Company shall have approved and executed a resolution to increase the Board of
Directors by three (3) members to six (6) and three (3) of the Designees (as
defined below) shall have been duly elected and qualified, and the Board of
Directors shall have approved this Agreement and all transactions and actions
contemplated hereby, including but not limited to the preparation, filing and
mailing of an information statement in accordance with Schedule 14C of the
Exchange Act.

 

12

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(l)                                     Series A Conversion.  All of the
Series A Preferred Stock shall have been converted, such that there are no
shares of Series A Preferred Stock or any other shares of preferred stock of the
Company outstanding.

 

2.4                                 Optional Purchase

 

(a)                                  ComVest shall have six-months from the date
of the Initial Closing to invest an additional $5,000,000 (the “Optional
Investment”) on the same terms as set forth herein (the “Option”) for the
purchase of up to Five Thousand (5,000) Preferred Shares and Warrants for the
purchase of up to 35,714,255 shares of Common Stock.

 

(b)                                 In the event that the Company requires
additional cash to fund the purchase price of an acquisition, then the Company
shall have the right to call that part of the Option needed to pay the cash
purchase price upon 30 days prior written notice.  If ComVest elects not to
exercise the Option, in whole or in part, then the amount of the Option called
by the Company, as set forth in the notice, shall be deemed void and of no
further force or effect.

 

ARTICLE III.
REPRESENTATIONS AND WARRANTIES

 

3.1                                 Representations and Warranties of the
Company and Subsidiaries.

 

Except as set forth under the corresponding section of the Disclosure Schedules
which Disclosure Schedules shall be deemed a part hereof, the Company hereby
makes the representations and warranties set forth below to each Purchaser:

 

(a)                                  Authority, Organization and Qualification
of the Company.  The Company is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all necessary power and authority to own, operate or lease the properties
and assets now owned, operated or leased by it and to carry on its business as
it has been and is currently conducted.  The Company is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
the properties owned or leased by it or the operation of its business makes such
licensing or qualification necessary or desirable, except to the extent that the
failure to be so licensed or qualified and in good standing would not
(x) adversely affect the ability of the Company to carry out its obligations
under, and to consummate the transactions contemplated by, this Agreement and
the other Transaction Documents or (y) adversely affect the ability of the
Company and the Subsidiaries to conduct its business, and all such jurisdictions
are set forth in Section 3.1(a) of the Disclosure Schedule.  All corporate
actions taken by the Company have been duly authorized, and the Company has not
taken any action that in any respect conflicts with, constitutes a default under
or results in a violation of any provision of its Certificate of Incorporation
or By-laws.  True and correct copies of the Certificate of Incorporation and
By-laws of the Company, each as in effect on the date hereof, have been
delivered by the Company to Purchasers.

 

(b)                                 Subsidiaries.  The Company has two
non-operating, wholly-owned subsidiaries, IT&E International, a California
corporation and Clinical Trials Assistance Acquisition Corporation, a Nevada
corporation, each of which has no material assets or liabilities other than as
listed in Section 3.1(b) of the Disclosure Schedule.  Each of the agreements
listed

 

13

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in Section 3.1(b) of the Disclosure Schedule are valid and in full force and
effect except to the extent they have previously expired in accordance with
their terms or if the failure to be in full force and effect, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect.   Neither the Company nor any Subsidiary has violated any provision of,
or committed or failed to perform any act which with or without notice, lapse of
time or both would constitute a default under the provisions of, any contract
described above, except in each case for those violations and defaults which,
individually or in the aggregate, would not reasonably be expected to result in
a Material Adverse Effect.

 

(c)                                  Capitalization.

 

(i)                                     The authorized capital stock of the
Company, immediately prior to the Initial Closing, consists of 250,000,000
shares of Common Stock, par value $0.001 per share, 49,669,708 shares of which
are issued and outstanding.  Under the Company’s 2005 Equity Incentive Plan (the
“Plan”), 7,500,000 shares may be issued pursuant to the Plan.  Other than (a) as
set forth in Section 3.1(c)(i) of the Disclosure Schedule, (b) the shares
reserved for issuance under the Plan, (c) the shares of Common Stock issuable
upon conversion of the promissory note in principal amount of $5,000,000 held by
Laurus Master Fund, Ltd. and (d) warrants to purchase 1,924,000 shares of Common
Stock at an average exercise price of $0.22 per share, and (e) the Company’s
obligation to issue to Millennix, Inc. a number of shares of the Company’s
Common Stock equal to $2,500,000 divided by the average closing price per share
of the Company’s Common Stock as quoted on the over-the-counter bulletin board
for the twenty (20) days ending on the date immediately prior to the closing
date of the acquisition of assets from Millennix, Inc., and except as may be
granted pursuant to this Agreement, there are no outstanding options, warrants,
rights (including conversion or preemptive rights and rights of first refusal),
proxy or stockholder agreements, or agreements of any kind for the purchase or
acquisition from the Company of any of its securities.

 

(ii)                                  All issued and outstanding shares of the
Company’s Common Stock and Preferred Stock (a) have been duly authorized,
validly issued and are fully paid and nonassessable, and (b) were issued in
compliance with all applicable state and federal laws concerning the issuance of
securities.

 

(iii)                               When issued in compliance with the
provisions of this Agreement and registered in the name of each respective
Purchaser in the stock records of the Company, the Warrant Shares will be duly
authorized, validly issued and fully paid and the Preferred Shares and the
Conversion Shares when issued in accordance with the terms of the Company’s
articles of incorporation and Certificate of Designations, as the case may be,
will be duly authorized, validly issued, fully paid and nonassessable, and in
each case free of any Encumbrances other than (a) Encumbrances created by each
respective Purchaser and (b) the Preferred Shares, Conversion Shares and Warrant
Shares may be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein or as otherwise required by such laws at the
time a transfer is proposed.

 

(iv)                              There are no outstanding contractual
obligations of the Company to repurchase, redeem, otherwise acquire or issue any
shares of Common Stock or

 

14

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Preferred Stock or to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any other Person.  There are no
voting trusts, stockholder agreements, proxies or other agreements or
understandings in effect with respect to the voting or transfer of any of the
Warrants or Preferred Stock.

 

(v)                                 The Company understands and acknowledges the
potentially dilutive effect to the Common Stock upon the issuance of the
Conversion Shares upon conversion of or otherwise pursuant to the Preferred
Shares and upon the issuance of the Warrant Shares upon the exercise of or
otherwise pursuant to the Warrants.  The Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of or otherwise pursuant
to the Preferred Shares and Warrant Shares upon the exercise of or otherwise
pursuant to the Warrants in accordance with this Agreement, the Certificate of
Designation and the Warrants is absolute, subject only to the terms and
conditions set forth in this Agreement, the Certificate of Designation and the
Warrants, regardless of the dilutive effect that such issuance may have on the
ownership interests of other stockholders of the Company.

 

(vi)                              The terms, designations, powers, preferences
and relative, participating and optional or special rights, and the
qualifications, limitations and restrictions of each series of Preferred Stock
of the Company (other than the Series D Preferred Stock) are as stated in the
Company’s articles of incorporation, filed on or prior to the date hereof.  The
terms, designations, powers, preferences and relative, participating and
optional or special rights, and the qualifications, limitations and restrictions
of the Series D Preferred Stock are as stated in the Certificate of Designation.

 

(d)                                 Corporate Books and Records.  Except as set
forth in Section 3.1(d) of the Disclosure Schedule, the minute books of the
Company and the Subsidiaries contain accurate records of all meetings and
accurately reflect all other actions taken by the stockholders, Boards of
Directors and all committees of the Boards of Directors of the Company and the
Subsidiaries.  To the extent requested, true and accurate copies of all such
minute books and of the stock register of the Company and the Subsidiaries have
been provided by the Company to Purchasers.

 

(e)                                  No Conflicts.  Assuming that all consents,
approvals, authorizations and other actions set forth in Section 3.1(f) of the
Disclosure Schedule have been obtained and all filings and notifications listed
in Section 3.1(e) of the Disclosure Schedule have been made and any applicable
waiting period has expired or been terminated, the execution, delivery and
performance of this Agreement and the other Transaction Documents by the Company
do not and will not (i) violate, conflict with or result in the breach of any
provision of the articles of incorporation or by-laws (or similar organizational
documents) of the Company or the Subsidiary, (ii) conflict with or violate (or
cause an event which could have a Material Adverse Effect as a result of) any
Law or Governmental Order applicable to the Company, any Subsidiary or any of
their assets, properties or businesses, or (iii) except as set forth in
Section 3.1(e)(iii) of the Disclosure Schedule, conflict with, result in any
breach of, constitute a default (or event which with the giving of notice or
lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any
Encumbrance on any of the Securities or any of the assets or properties of the
Company or any Subsidiary pursuant to

 

15

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any note, bond, mortgage or indenture, contract, agreement, lease, sublease,
license, permit, franchise or other instrument or arrangement to which the
Company or any Subsidiary is a party or by which any of the Securities or any of
the assets or properties of the Company or any Subsidiary is bound or affected,
except, in the case of clause (c), to the extent that such conflicts, breaches,
defaults or other matters would not (i) adversely affect the ability of the
Company to carry out its obligations under, and to consummate the transactions
contemplated by, this Agreement and the other Transaction Documents or
(ii) adversely affect the ability of the Company and the Subsidiaries to conduct
its business.

 

(f)                                    Governmental Consents and Approvals. 
Except as set forth in Section 3.1(f) of the Disclosure Schedule, the execution,
delivery and performance of this Agreement and each Transaction Document by the
Company do not and will not require any consent, approval, authorization or
other order of, action by, filing with or notification to, any Governmental
Authority.  The Company knows of no reason why all the consents, approvals and
authorizations necessary for the consummation of the transactions contemplated
by this Agreement will not be received.

 

(g)                                 SEC Reports; Financial Statements.  The
Company has filed all reports required to be filed by it under the Securities
Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing materials,
including the exhibits thereto, being collectively referred to herein as the
“SEC Reports”) on a timely basis or has received a valid extension of such time
of filing and has filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act, and none of the SEC Reports, when filed, contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.  The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing.  Such
financial statements have been prepared in accordance with GAAP, except as may
be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.

 

(h)                                 Material Changes.  Since the date of the
latest financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports, (i) there has been no event,
occurrence or development that has had or that could reasonably be expected to
result in a Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property

 

16

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to its stockholders or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock and (v) the Company has not issued any
equity securities to any officer, director or Affiliate, except pursuant to
existing Company stock option plans.  The Company does not have pending before
the Commission any request for confidential treatment of information.

 

(i)                                     Litigation.  Except as set forth in
Section 3.1(i) of the Disclosure Schedule (which, with respect to each Action
set forth therein, sets forth the parties, nature of the proceeding, date and
method commenced, amount of charges or other relief sought and, if applicable,
paid or granted), there are no Actions by or against the Company or any
Subsidiary (or by or against the Company or any Affiliate thereof and relating
to its business, the Company or any Subsidiary) or affecting any of the Assets
or its business pending before any Governmental Authority (or, to the best
knowledge of the Company after due inquiry, threatened to be brought by or
before any Governmental Authority).  None of the matters set forth in
Section 3.1(i) of the Disclosure Schedule has or has had a Material Adverse
Effect or could affect the legality, validity or enforceability of this
Agreement, any Ancillary Agreement or the consummation of the transactions
contemplated hereby or thereby.  Except as set forth in Section 3.1(i) of the
Disclosure Schedule, none of the Company, the Subsidiaries or any of their
respective assets or properties, including the Assets, is subject to any
Governmental Order (nor, to the best knowledge of the Company after due inquiry,
are there any such Governmental Orders threatened to be imposed by any
Governmental Authority) which has or has had a Material Adverse Effect or could
affect the legality, validity or enforceability of this Agreement, any other
Transaction Document or the consummation of the transactions contemplated hereby
or thereby.

 

(j)                                     Labor Relations.  No material labor
dispute exists or, to the knowledge of the Company, is imminent with respect to
any of the employees of the Company which could reasonably be expected to result
in a Material Adverse Effect.

 

(k)                                  Compliance.

 

(i)                                     Except as set forth in
Section 3.1(k)(i) of the Disclosure Schedule and to the best knowledge of the
Company, after due inquiry, the Company and the Subsidiaries have each conducted
and continue to conduct its business in accordance with all Laws and
Governmental Orders applicable to the Company or any Subsidiary or the Assets,
and to the knowledge of the Company, after due inquiry, neither the Company nor
any Subsidiary is in material violation of any such Law or Governmental Order.

 

(ii)                                  Section 3.1(k)(ii) of the Disclosure
Schedule sets forth a brief description of each Governmental Order applicable to
the Company, any Subsidiary or the Assets, and no such Governmental Order has or
has had a Material Adverse Effect or could affect the legality, validity or
enforceability of this Agreement, any Ancillary Agreement or the consummation of
the transactions contemplated hereby or thereby.

 

(iii)                               To the best knowledge of the Company, after
due inquiry, none of the Company, any Subsidiary or any officer, director,
employee, agent or representative of the Company or any Subsidiary has furthered
or supported any foreign boycott in

 

17

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violation of the Anti-Boycott laws and regulations of the United States
promulgated pursuant to the Export Administration Act of 1979 (50 U.S.C.A. App.
§ 2407, and regulations promulgated thereunder).

 

(l)                                     Regulatory Permits.  The Company and the
Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities necessary to
conduct their respective businesses as described in the SEC Reports, except
where the failure to possess such permits could not have or reasonably be
expected to result in a Material Adverse Effect (“Material Permits”), and
neither the Company nor any Subsidiary has received any notice of Actions
relating to the revocation or modification of any Material Permit.

 

(m)                               Material Contracts.  Except as set forth in
Section 3.1(m) of the Disclosure Schedule, neither the Company nor any
Subsidiary is a party to or bound by any “material contracts” (as such term is
defined in Item 601(b)(10) of Regulation S-K of the Commission) with respect to
the Company or any Subsidiary.  All contracts described in this Section 3.1(m)
are valid and in full force and effect except to the extent they have previously
expired in accordance with their terms or if the failure to be in full force and
effect, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect.  Neither the Company nor any Subsidiary has
violated any provision of, or committed or failed to perform any act which with
or without notice, lapse of time or both would constitute a default under the
provisions of, any contract described above, except in each case for those
violations and defaults which, individually or in the aggregate, would not
reasonably be expected to result in a Material Adverse Effect.

 

(n)                                 Title to Assets.  Neither the Company nor
any Subsidiary own any real property.  The Company and the Subsidiaries have
good and marketable title to personal property owned by them that is material to
its business of the Company and the Subsidiaries, in each case free and clear of
all Encumbrances, except for Encumbrances as do not materially affect the value
of such property and do not materially interfere with the use made and proposed
to be made of such property by the Company and the Subsidiaries and Encumbrances
for the payment of federal, state or other taxes, the payment of which is
neither delinquent nor subject to penalties.  Any real property and facilities
held under lease by the Company and the Subsidiaries are held by them under
valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in material compliance.

 

(o)                                 Patents and Trademarks.  Except as would
not, individually or in the aggregate, have a Material Adverse Effect:

 

(i)                                     Section 3.1(o)(i) of the Disclosure
Schedule sets forth a true and complete list of (A) all patents and patent
applications, registered trademarks and trademark registration applications,
registered copyrights and copyright registration applications, and domain names
included in the Company Intellectual Property, and (B) all material Company IP
Agreements excluding licenses for the use of Company Software to customers of
the Company or its Subsidiaries in the ordinary course of business.

 

18

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(ii)                                  To the best knowledge of the Company,
after due inquiry, the operation of its business as currently conducted or as
contemplated to be conducted, the use of the Company Intellectual Property and
Licensed Intellectual Property in connection therewith and the Company’s and the
Subsidiaries’ transmission, use, linking and other practices related to the
operation of their web sites in connection with its business, the content
thereof and the advertisements contained therein, do not infringe,
misappropriate or otherwise violate the Intellectual Property or other
proprietary rights, including rights of privacy, publicity and endorsement, of
any third party, and no Actions or Claims are pending or threatened against the
Company or any Subsidiary alleging any of the foregoing.

 

(iii)                               To the best knowledge of the Company, after
due inquiry, the Company or a Subsidiary is the exclusive owner of the entire
and unencumbered right, title and interest in and to the Company Intellectual
Property, and the Company or a Subsidiary has a valid right to use the Company
Intellectual Property and Licensed Intellectual Property as currently conducted
or as contemplated to be conducted.

 

(iv)                              Except as disclosed in Section 3.1(o)(iv) of
the Disclosure Schedule, no Company Intellectual Property, or to the best
knowledge of the Company after due inquiry, any Licensed Intellectual Property,
is subject to any outstanding decree, order, injunction, judgment or ruling
restricting the use of such Intellectual Property or that would impair the
validity or enforceability of such Intellectual Property.

 

(v)                                 The Company Intellectual Property and the
Licensed Intellectual Property include all of the Intellectual Property used in
the ordinary day-to-day conduct of the Company’s business, and there are no
other items of Intellectual Property that are material to the ordinary
day-to-day conduct of its business.  The Company Intellectual Property, or to
the best knowledge of the Company, any Licensed Intellectual Property, are
subsisting, valid and enforceable, and has not been adjudged invalid or
unenforceable in whole or part.

 

(vi)                              No Actions or Claims have been asserted or are
pending or, to the best knowledge of the Company after due inquiry, threatened
against the Company or any Subsidiary (i) based upon or challenging or seeking
to deny or restrict the use by the Company or any Subsidiary of any of the
Company Intellectual Property or Licensed Intellectual Property, (ii) alleging
that any services provided by, processes used by, or products manufactured or
sold by the Company or any Subsidiary infringe or misappropriate any
Intellectual Property right of any third party or (iii) alleging that the
Licensed Intellectual Property is being licensed or sublicensed in conflict with
the terms of any license or other agreement.

 

(vii)                           To the best knowledge of the Company, no Person
is engaging in any activity that infringes the Company Intellectual Property or
Licensed Intellectual Property.  Except as set forth in Section 3.1(o)(vii) of
the Disclosure Schedule, neither the Company nor any Subsidiary has granted any
license or other right to any third party with respect to the Company
Intellectual Property or Licensed Intellectual Property except to the customers
of its business to whom the Company or a Subsidiary has

 

19

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licensed such Company Intellectual Property or Licensed Intellectual Property in
the ordinary course of business.  The consummation of the transactions
contemplated by this Agreement and the other Transaction Documents will not
result in the termination or impairment of any of the Company Intellectual
Property.

 

(viii)                        To the best knowledge of the Company, after due
inquiry, the Company Software is free of all viruses, worms, trojan horses and
other material known contaminants.  The Company Software does not incorporate
any GNU or “open” source code or object code under which the Company Software is
subject to the GNU general public license or GNU lesser general public license. 
To the best knowledge of the Company, after due inquiry, the Company or a
Subsidiary has obtained all approvals necessary for exporting the Company
Software outside the United States and importing the Company Software into any
country in which the Company Software is now sold or licensed for use, and all
such export and import approvals in the United States and throughout the world
are valid, current, outstanding and in full force and effect.  No rights in the
Company Software have been transferred to any third party except to the
customers of its business to whom the Company or a Subsidiary has licensed such
Company Software in the ordinary course of business.  The Company or a
Subsidiary has the right to use all software development tools, library
functions, compilers, and other third party software that are material to its
business or that are required to operate or modify the Company Software.

 

(ix)                                The Company and the Subsidiaries have taken
reasonable steps in accordance with normal industry practice to maintain the
confidentiality of the trade secrets and other confidential Intellectual
Property used in connection with its business.  To the best knowledge of the
Company after due inquiry, (i) there has been no misappropriation of any
material trade secrets or other material confidential Intellectual Property used
in connection with its business by any Person; (ii) no employee, independent
contractor or agent of the Company or any Subsidiary has misappropriated any
trade secrets of any other Person in the course of performance as an employee,
independent contractor or agent of its business; and (iii) no employee,
independent contractor or agent of the Company or any Subsidiary is in default
or breach of any term of any employment agreement, nondisclosure agreement,
assignment of invention agreement or similar agreement or contract relating in
any way to the protection, ownership, development, use or transfer of
Intellectual Property.

 

(x)                                   To the best knowledge of the Company,
after due inquiry, the Company’s or any Subsidiary’s operation of any web sites
used in connection with its business, and content thereof and data processed,
collected, stored or disseminated in connection therewith, do not violate any
applicable Law, including European Directive 95/46/EC, and any Person’s right of
privacy or publicity.  The Company or its Subsidiary (i) has obtained all
necessary permits, approvals, consents, authorizations or licenses to lawfully
operate its web sites and to use its data and (ii) is operating its web sites
and using its data in accordance with the scope of such permits, approvals,
consents, authorizations or licenses.  The Company and its Subsidiaries have
taken reasonable steps in accordance with normal industry practice to secure
their web sites and data, and any portion thereof, from unauthorized access by
any Person.

 

20

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(p)                                 Insurance.  The Company and the Subsidiaries
are insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as are prudent and customary in its
businesses in which the Company and the Subsidiaries are engaged.  To the best
of Company’s knowledge, such insurance contracts and policies are accurate and
complete.  Neither the Company nor any Subsidiary has any reason to believe that
it will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business without a significant increase in cost.

 

(q)                                 Employee Benefits.

 

(i)                                     Section 3.1(q)(i) of the Disclosure
Schedule lists (A) all employee benefit plans, bonus, stock option, stock
purchase, restricted stock, incentive, deferred compensation, retiree medical or
life insurance, supplemental retirement, severance or other benefit plans,
programs or arrangements, and all employment, termination, severance or other
contracts or agreements, to which the Company or any Subsidiary is a party, with
respect to which the Company or any Subsidiary has any obligation or which are
maintained, contributed to or sponsored by the Company or any Subsidiary for the
benefit of any current or former employee, officer or director of the Company or
any Subsidiary and (B) any contracts, arrangements or understandings between the
Company or any of its Affiliates and any employee of the Company or any
Subsidiary (collectively, the “Plans”).

 

(ii)                                  Each Plan has been operated in all
material respects in accordance with its terms and the requirements of all
applicable Laws.  The Company and its Subsidiaries have performed all material
obligations required to be performed by it under, is not in any material respect
in default under or in material violation of, and the Company has no knowledge
of any material default or violation by any party to, any Plan.  No action is
pending or, to the knowledge of the Company, threatened with respect to any Plan
(other than claims for benefits in the ordinary course) and, to the knowledge of
the Company, no fact or event exists that could give rise to any such action.

 

(r)                                    Taxes.

 

(i)                                     Except as set forth in
Section 3.1(r)(i) of the Disclosure Schedule, (A) all Tax Returns required to be
filed by or with respect to the Company and each Subsidiary (including the
consolidated federal income Tax Return of the Company and any state, local or
other Tax Return that includes the Company or any Subsidiary on a consolidated,
combined or unitary basis) have been timely filed; (B) all Taxes required to be
shown on such Tax Returns or otherwise due in respect of the Company or any
Subsidiary have been timely paid; (C) all such Tax Returns are true, correct and
complete in all material respects; (D) no adjustment relating to such Tax
Returns has been proposed formally or informally by any Governmental Authority
(insofar as either relates to the activities or income of the Company or any
Subsidiary or could result in liability of the Company or any Subsidiary on the
basis of joint and/or several liability) and, to the best knowledge of the
Company after due inquiry, no basis exists for any such adjustment; (E) there
are no pending Actions or, to the best knowledge of the Company

 

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after due inquiry, Actions threatened for the assessment or collection of Taxes
against the Company or any Subsidiary or (insofar as either relates to the
activities or income of the Company or any Subsidiary or could result in
liability of the Company or any Subsidiary on the basis of joint and/or several
liability) any Person that was included in the filing of a Tax Return with the
Company on a consolidated, combined or unitary basis; (F) to the best knowledge
of the Company, after due inquiry, all sales and license transactions between
the Company and the Company or any Subsidiary, between the Company and any
Subsidiary and between any of the Subsidiaries, have been conducted on an
arm’s-length basis; (G) there are no Tax liens on any assets of the Company or
any Subsidiary; (H) neither Seller nor any Affiliate is a party to any agreement
or arrangement that would result, separately or in the aggregate, in the actual
or deemed payment by the Company or a Subsidiary of any “excess parachute
payments” within the meaning of section 280G of the Code (without regard to
Section 280G(b)(4) of the Code); (I) no acceleration of the vesting schedule for
any property that is substantially unvested within the meaning of the
regulations under Section 83 will occur in connection with the transactions
contemplated by this Agreement; (J) from and after April 14, 2004, the Company
and each Subsidiary have been and continue to be members of the affiliated group
(within the meaning of Section 1504(a)(1) of the Code) for which the Company
files a consolidated return as the common parent, and has not been includible in
any other consolidated return for any taxable period for which the statute of
limitations has not expired; (K) none of the Company or the Subsidiaries has
been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code; (L) the Company and Subsidiary have each
properly and timely withheld, collected and deposited all Taxes that are
required to be withheld, collected and deposited under applicable Law; (M) none
of the Company or Subsidiaries is doing business in or engaged in a trade or
business in any jurisdiction in which it has not filed all required Tax Returns,
and no notice or inquiry has been received from any jurisdiction in which Tax
Returns have not been filed by the Company or any Subsidiary to the effect that
the filing of Tax Returns may be required; (N) neither the Company nor any
Subsidiary has been at any time a member of any partnership or joint venture or
the holder of a beneficial interest in any trust for any period for which the
statute of limitations for any Tax has not expired and (O) neither the Company
nor any Subsidiary is subject to any accumulated earnings tax, personal holding
company Tax or similar Tax.

 

(ii)                                  Except as set forth with reasonable
specificity in Section 3.1(r)(ii) of the Disclosure Schedule, (A) there are no
outstanding waivers or agreements extending the statute of limitations for any
period with respect to any Tax to which the Company or any Subsidiary may be
subject; (B) there are no requests for information currently outstanding that
could affect the Taxes of the Company or any Subsidiary; (C) there are no
proposed reassessments of any property owned by the Company or any Subsidiary or
other proposals that could increase the amount of any Tax to which the Company
or any Subsidiary would be subject; (D) no power of attorney that is currently
in force has been granted with respect to any matter relating to Taxes that
could affect the Company or any Subsidiary; (E) none of the Company or the
Subsidiaries (1) has or is projected to have an amount includible in its income
for the current taxable year under Section 951 of the Code, (2) has been a
passive foreign investment company within the meaning of

 

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Section 1296 of the Code, (3) has an unrecaptured overall foreign loss within
the meaning of Section 904(f) of the Code or (4) has participated in or
cooperated with an international boycott within the meaning of section 999 of
the Code and (F) none of the Company or the Subsidiaries has, to an extent that
would cause a tax liability to the Company, any (1) income reportable for a
period ending after the Closing but attributable to a transaction (e.g., an
installment sale) occurring in, or a change in accounting method made for, a
period ending on or prior to the Closing that resulted in a deferred reporting
of income from such transaction or from such change in accounting method (other
than a deferred intercompany transaction), or (2) deferred gain or loss arising
out of any deferred intercompany transaction.

 

(iii)                               Section 3(r)(iii) of the Disclosure
Schedule (A) lists all income, franchise and similar income-type Tax Returns
(federal, state, local and foreign) filed with respect to each of the Company
and the Subsidiaries for taxable periods ended on or after April 14, 2004,
(B) indicates the most recent income, franchise or similar Tax Return for each
relevant jurisdiction for which an audit has been completed or the statute of
limitations has lapsed and (C) indicates all Tax Returns that currently are the
subject of audit.

 

(iv)                              To the extent reasonably requested by any
Purchaser, the Company has delivered to such Purchaser correct and complete
copies of all federal, state and foreign income, franchise and similar Tax
Returns, examination reports and statements of deficiencies assessed against or
agreed to by the Company or any Subsidiary since April 14, 2004.

 

(v)                                 To the extent reasonably requested by any
Purchaser, the Company has delivered to such Purchaser a true and complete copy
of any tax-sharing or allocation agreement or arrangement involving the Company
or any Subsidiary and a true and complete description of any such unwritten or
informal agreement or arrangement.

 

(vi)                              Except as set forth in Section 3.1(r)(vi) of
the Disclosure Schedule, the Company has established reserves and allowances to
satisfy all liabilities for Taxes relating to the Company and the Subsidiaries
for all taxable periods through the Closing (without regard to the materiality
thereof).

 

(s)                                  Tangible Personal Property.  Section 3.1(s)
of the Disclosure Schedule sets forth a list of all material Tangible Personal
Property having a value of over $50,000 as of the date therein specified.  All
tangible personal property of the Company is reflected in the balance sheet of
the Company.  All of the tangible personal property of the Company is in
reasonably serviceable operating condition and repair (ordinary wear and tear
excepted).

 

(t)                                    Title to Owned and Leased Real Property.

 

(i)                                     Neither the Company nor any Subsidiary
currently, and in the past, has owned any real property.

 

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(ii)                                  As of the date hereof, except as set forth
in Section 3.1(t)(ii) of the Disclosure Schedule, the Company and each
Subsidiary has a valid leasehold interest in the Leased Real Property.

 

(iii)                               The Leased Real Property has not suffered
any material damage by fire, casualty or otherwise which has not heretofore been
repaired and restored in all material respects.

 

(iv)                              Except as set forth in Section 3.1(t)(iv) of
the Disclosure Schedule, there is no default (or event that, with or without the
giving of notice or the lapse of time or both, could constitute a default) that
exists under the leases for the Leased Real Property.

 

(u)                                 Transactions With Affiliates and Employees. 
None of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner, in each
case in excess of $60,000 in any twelve (12) month period other than (i) for
payment of salary or consulting fees for services rendered, (ii) reimbursement
for expenses incurred on behalf of the Company and (iii) for other employee
benefits, including stock option agreements under any stock option plan of the
Company.

 

(v)                                 Sarbanes-Oxley Act.  The Company is in
substantial compliance with the applicable provisions of the Sarbanes-Oxley Act
of 2002 (the “Sarbanes-Oxley Act”), and the rules and regulations promulgated
thereunder, that are effective and intends to comply substantially with other
applicable provisions of the Sarbanes-Oxley Act, and the rules and regulations
promulgated thereunder, upon the effectiveness of such provisions.

 

(w)                               Certain Fees.  No brokerage or finder’s fees
or commissions are or will be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by this Agreement, except
as set forth in Section 3.1(w) of the Disclosure Schedule.  No Purchaser shall
have any obligation with respect to any fees or with respect to any claims made
by or on behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by this
Agreement.

 

(x)                                   Private Placement. Assuming the accuracy
of each respective Purchaser’s representations and warranties set forth in
Section 3.2, no registration under the Securities Act is required for the offer
and sale of the Securities by the Company to such Purchasers as contemplated
hereby. The issuance and sale of the Securities hereunder does not contravene
the rules and regulations of any trading market.

 

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(y)                                 Investment Company. The Company is not, and
is not an Affiliate of, and immediately after receipt of payment for the Shares,
will not be or be an Affiliate of, an “investment company” within the meaning of
the Investment Company Act of 1940, as amended.  The Company shall conduct its
business in a manner so that it will not become subject to the Investment
Company Act.

 

(z)                                   Registration Rights.  Except as set forth
in Section 3.1(z) of the Disclosure Schedule, no Person has any right to cause
the Company to effect the registration under the Securities Act of any
securities of the Company.

 

(aa)                            Application of Takeover Protections.  The
Company and its Board have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the articles of incorporation (or similar charter
documents) or the laws of its state of incorporation that is or could become
applicable to Purchasers as a result of Purchasers and the Company fulfilling
their obligations or exercising their rights under the Transaction Documents,
including without limitation the Company’s issuance of the Securities and
Purchasers’ ownership of the Securities.

 

(bb)                          Disclosure.  The Company understands and confirms
that Purchasers will rely on the foregoing representations and covenants in
effecting transactions in securities of the Company.  All disclosure provided to
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf of
the Company with respect to the representations and warranties made herein are
true and correct with respect to such representations and warranties and do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2 hereof.

 

(cc)                            No Integrated Offering. Assuming the accuracy of
each Purchaser’s representations and warranties set forth in Section 3.2,
neither the Company, nor any of its affiliates, nor any Person acting on its or
their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of the Securities Act or any applicable
shareholder approval provisions, including, without limitation, under the
rules and regulations of any exchange or automated quotation system on which any
of the securities of the Company are listed or designated.

 

(dd)                          General Solicitation.  Neither the Company nor any
person acting on behalf of the Company has offered or sold any of the Securities
by any form of general solicitation or general advertising.  The Company has
offered the Securities for sale only to Purchasers.

 

(ee)                            Foreign Corrupt Practices.  Neither the Company,
nor to the knowledge of the Company, any agent or other person acting on behalf
of the Company, has (i) directly or

 

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indirectly, used any corrupt funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.

 

(ff)                                Accountants.  The Company’s accountants are
set forth in Section 3.1(ff) of the Disclosure Schedule.  Such accountants
expressed their opinion with respect to the financial statements included in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2004, and
the Company expects their opinion with respect to the financial statements for
the year ended December 31, 2005 are independent accountants as required by the
Securities Act.

 

(gg)                          Acknowledgment Regarding Purchasers’ Purchase of
Securities.  The Company acknowledges and agrees that each Purchaser is acting
solely in the capacity of an arm’s length purchaser with respect to the
Transaction Documents and the transactions contemplated hereby.  The Company
further acknowledges that each Purchaser is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any advice given by any
Purchaser or any of its representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely incidental to such
Purchaser’s purchase of the Securities.  The Company further represents to each
Purchaser that the Company’s decision to enter into this Agreement has been
based solely on the independent evaluation of the transactions contemplated
hereby by the Company and its representatives.

 

3.2                                 Representations and Warranties of each
Purchaser.  Each Purchaser hereby represents and warrants as of the date hereof
and as of the Closing Date to the Company as follows:

 

(a)                                  Organization; Authority.  Purchaser is an
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization with full right, corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by Purchaser of
the transactions contemplated by this Agreement have been duly authorized by all
necessary corporate or similar action on the part of Purchaser.  Each
Transaction Document to which it is a party has been duly executed by Purchaser,
and, assuming this Agreement constitutes the valid and binding obligation of the
Company and when delivered by Purchaser in accordance with the terms hereof,
will constitute the valid and legally binding obligation of Purchaser,
enforceable against it in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws relating to or affecting
the rights of creditors’ generally and by general equitable principles
(regardless of whether such enforceability is considered in a Action in equity
or at law).

 

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(b)                                 Investment Intent.  Purchaser understands
that the Securities are “restricted securities” and have not been registered
under the Securities Act or any applicable state securities law and is acquiring
the Securities as principal for its own account for investment purposes only and
not with a view to or for distributing or reselling such Securities or any part
thereof, has no present intention of distributing any of such Securities and has
no arrangement or understanding with any other persons regarding the
distribution of such Securities (this representation and warranty not limiting
Purchaser’s right to sell the Securities pursuant to the Registration Statement
or otherwise in compliance with applicable federal and state securities laws). 
Purchaser is acquiring the Securities hereunder in the ordinary course of its
business. Purchaser does not have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities.

 

(c)                                  Rule 144.  Purchaser understands that the
Securities must be held indefinitely unless such Securities are registered under
the Securities Act or an exemption from registration is available.  Purchaser
acknowledges that it is familiar with Rule 144, and that Purchaser has been
advised that Rule 144 permits resales only under certain circumstances. 
Purchaser understands that to the extent that Rule 144 is not available,
Purchaser will be unable to sell any Securities without either registration
under the Securities Act or the existence of another exemption from such
registration requirement.

 

(d)                                 Purchaser Status.  At the time Purchaser was
offered the Securities, it was, and at the date hereof it is, and on each date
on which it exercises any Warrants, it will be either: (i) an “accredited
investor” as defined in Rule 501(a)(1), (a)(2),
(a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified
institutional buyer” as defined in Rule 144A(a) under the Securities Act. 
Purchaser is not required to be registered as a broker-dealer under Section 15
of the Exchange Act.

 

(e)                                  Experience of Purchaser.  Purchaser, either
alone or together with its representatives, has such knowledge, sophistication
and experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the Securities,
and has so evaluated the merits and risks of such investment.  Purchaser is able
to bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.

 

(f)                                    General.  Purchaser understands that the
Securities are being offered and sold in reliance on a transactional exemption
from the registration requirements of federal and state securities laws and the
Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of Purchaser set
forth herein in order to determine the applicability of such exemptions and the
suitability of Purchaser to acquire the Securities.  Purchaser understands that
no United States federal or state agency or any government or governmental
agency has passed upon or made any recommendation or endorsement of the
Securities.

 

(g)                                 General Solicitation.  Purchaser is not
purchasing the Securities as a result of any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.

 

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The Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.

 

ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES

 

4.1                                 Transfer Restrictions.  (i)  The Securities
may only be disposed of in compliance with state and federal securities laws. 
In connection with any transfer of Securities other than pursuant to an
effective registration statement or Rule 144, to the Company or to an Affiliate
of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b),
the Company may require the transferor thereof to provide to the Company an
opinion of counsel selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion and shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act.  As a
condition of transfer, any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights of a Purchaser under this
Agreement and the Registration Rights Agreement.

 

(a)                                  Each Purchaser agrees to the imprinting, so
long as is required by this Section 4.1(b), of a legend on any of the Securities
in the following form:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.  THESE SECURITIES ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN SECURITIES PURCHASE AGREEMENT, A CERTAIN LOCK-UP
AGREEMENT AND A CERTAIN REGISTRATION RIGHTS AGREEMENT, ALL OF WHICH ARE DATED
NOVEMBER     , 2005 AND ARE AVAILABLE FOR INSPECTION AT THE OFFICES OF THE
COMPANY.

 

(b)                                 Certificates evidencing the Preferred
Shares, Conversion Shares and Warrant Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)), (i) following a sale of such
Preferred Shares, Conversion Shares or Warrant Shares pursuant to an effective
registration statement (including the Registration Statement), or (ii) following
any sale of such Preferred Shares, Conversion Shares or Warrant Shares pursuant
to Rule 144, or (iii) if such Preferred Shares, Conversion Shares or Warrant
Shares are eligible for sale under Rule 144(k), or (iv) if such legend is not
required under applicable requirements of the Securities Act

 

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(including judicial interpretations and pronouncements issued by the Staff of
the Commission); provided, however, that in each of instances (ii) through
(iv) above, (A) each Purchaser shall have provided representations that such
Purchaser is permitted to dispose of such Preferred Shares, Conversion Shares
and/or Warrant Shares without limitation as to amount or manner of sale pursuant
to Rule 144 under the Securities Act and (B) such certificates evidencing the
Preferred Shares, Conversion Shares and/or Warrant Shares shall have been
surrendered along with a notice requesting removal of any legend and requesting
the issuance of new certificates free of the legend to replace those
surrendered.  The Company shall cause its counsel to issue a legal opinion to,
or otherwise instruct, the Company’s transfer agent promptly after receipt of a
request for legend removal in accordance with this Section 4.1(c) if required by
the Company’s transfer agent to effect the removal of the legend hereunder.

 

4.2                                 Integration.  Except as otherwise
contemplated by this Agreement, the Company shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to a Purchaser or that
would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any exchange or quotation service on which any of the
securities of the Company are listed or quoted such that it would require
shareholder approval prior to the closing of such other transaction unless
shareholder approval is obtained before the closing of such subsequent
transaction.

 

4.3                                 Description of the Senior Secured Notes and
Security Agreement.

 

The following summary of the Senior Secured Notes and Security Agreement is
provided for illustrative purposes only.  To the extent there are any
inconsistencies between the summary below and the Senior Secured Notes and/or
Security Agreement, such agreements shall control.

 

(a)                                  Demand Right.  At the request of any
Purchaser, the Company shall pay Purchaser the outstanding principal amount of
the Senior Secured Notes, together with all accrued and unpaid interest thereon,
in cash or Common Stock, at the option of such Purchaser (in accordance with
Section (b) below) on the earliest to occur (the “Demand Date”) of three
(3) months following the Closing Date, or (ii) a merger or combination of the
Company or the sale, transfer or other disposition of all or substantially all
of the assets of the Company or (iii) the acquisition by a single entity, person
or a “group” within the meaning of Rule 13d-1 of the Exchange Act, of more than
fifty percent (50%) of the voting power or capital stock of the Company (on a
fully-diluted basis), or (iv) the Company issues Common Stock or a security
exercisable or convertible into Common Stock, the Company shall pay such
Purchaser up to 50% of the net proceeds received by the Company form such sale,
unless the Note has previously been converted.

 

(b)                                 Payment in Common Stock.  In accordance with
the demand in Section (a) above, such Purchaser may request that the payment be
made in whole or in part in Common Stock, at a conversion price of $0.07 per
share, to the extent the Company has sufficient Common Stock available for
issuance.

 

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(c)                                  Interest.  The Senior Secured Notes shall
bear interest (“Interest”) at a rate per annum as follows:

 

Month 1 of the Senior Secured Notes

 

No interest

Month 2 of the Senior Secured Notes

 

No interest

Month 3 of the Senior Secured Notes

 

No interest

Month 4 of the Senior Secured Notes

 

12% per annum

 

Interest shall be payable quarterly in cash.  If any Event of Default (as
defined in the Senior Secured Notes) has occurred and is continuing, the Senior
Secured Notes shall bear interest at a rate of the then-applicable Interest plus
four percent (4%) per annum until such time as such Event of Default has been
cured.

 

(d)                                 Automatic Conversion.  Each $1,000 of
principal amount of the Notes shall automatically convert into one (1) share of
Series D Preferred Stock as soon as the Company has sufficient Series D
Convertible Preferred Shares available for issuance.

 

(e)                                  Prepayment.  The Senior Secured Notes may
be prepaid, in whole or in part, at any time without penalty or premium, upon
ten (10) days’ prior written notice to the Purchasers.  In the event the Company
issues any Exempt Issuance of securities during the term of the Senior Secured
Notes, the Company shall use at least fifty percent (50%) of the proceeds
therefrom to prepay the Senior Secured Notes; provided, however, that the
Preferred Shares have been redeemed, in whole, in accordance with its terms.

 

(f)                                    Security and Ranking.  The Senior Secured
Notes and all other obligations of the Company under this Agreement and the
other Transaction Documents shall be secured by substantially all of the assets
of the Company, as described in the Security Agreement (collectively, the
“Collateral”), dated as of even date herewith, by and between each Purchaser and
the Company.  As an inducement to each Purchaser to purchase the Senior Secured
Notes and the other Securities described herein and execute and enter into this
Agreement, and to secure prompt payment of the Senior Secured Notes and the
discharge in full of the Company’s obligations under this Agreement and under
the Senior Secured Notes, this Agreement and the other Transaction Documents,
the Company shall grant to the Purchasers a first priority perfected lien and
security interest in the Collateral, which security interest shall rank senior
in lien priority to any other existing or future Indebtedness.

 

4.4                                 Certain Covenants of the Company.

 

(a)                                  Affirmative Covenants.  The Company
covenants that, so long as any portion of any Senior Secured Note, Warrants or
the Preferred Shares is outstanding, it shall take the following actions:

 

(i)                                     The Company shall use the proceeds from
the sale of the Preferred Shares, the Senior Secured Notes, and the Warrants to
repay the Laurus Note in full, to consummate certain acquisitions acceptable to
the Purchasers holding a majority of the Series D Preferred Stock (or the
Purchasers holding a majority in principal amount of the Senior Secured Notes
outstanding), and for working capital purposes.

 

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(ii)                                  The Company shall have received the
written consent of the shareholders holding a majority of the shares outstanding
in accordance with Section 2.3(i) (“Shareholder Approval”) to the following
actions: (a) the designation and issuance of the Series D Preferred Stock on the
terms set forth in the Certificate of Designation attached hereto, (b) the
reincorporation of the Company into the State of Delaware, (c) a reverse stock
split to be declared by the Board of Directors in its sole discretion provided
that such reverse stock split shall not exceed 1 for 25 and must take place
within twelve (12) months after the date of such written consent, (d) an
increase in the number of shares reserved for issuance under the 2005 Equity
Incentive Plan to 25,000,000 shares of Common Stock, (e) an increase in the
number of authorized shares of Common Stock to 650,000,000 shares, (f) the
election of the five (5) Designees and (g) the preparation, filing and mailing
of an information statement in accordance with Schedule 14C of the Exchange
Act.  Within fourteen (14) days after the Initial Closing the Company shall file
a Preliminary Information Statement on Schedule 14C informing each of the other
stockholders of the Company of the foregoing actions, and file a Definitive
Information Statement within ten (10) days thereafter.  On the date that is
twenty-one (21) days after the date the Definitive Information Statement on
Schedule 14C is mailed to the Company’s shareholders, the Company shall effect
the reincorporation into the State of Delaware and file the Certificate of
Designations in the State of Delaware.  The parties acknowledge and agree that
the Company shall be merged with and into a Delaware corporation and such
Delaware corporation shall be the successor in interest and successor issuer to
the Company and that all the rights and obligations of the Company under this
Agreement and each of the other Transaction Documents shall become the rights
and obligations of the Delaware corporation by virtue of the reincorporation and
upon the effective date of the reincorporation.

 

(iii)                               The Company shall increase the number of
members of the Board of the Company by an additional two (2) members to seven
(7) (in addition to the increase in Section 2.3(k)), and all of the Designees
shall be duly elected and qualified.

 

(iv)                              If an Event of Default occurs, the Company
shall, if so requested by any Purchaser, promptly provide the following
information:

 

(A)                              Annual Financial
Statements.                                    Unless filed with the Commission
through EDGAR and publicly available through the EDGAR system, copies of the
consolidated balance sheet of the Company and its Subsidiaries, as of the end of
the immediately preceding fiscal year and the related consolidated statements of
income, stockholders’ equity and cash flows for such fiscal year, prepared in
accordance with generally accepted accounting principles and certified by a firm
of independent public accountants of recognized national standing or such other
independent public accountants, in either case, as unanimously selected by the
Board; provided, however, that, to the extent the information in this
Section 4.4(a)(iv)(A) is requested by any Purchaser, any Purchaser shall hold
and treat all such information confidential;

 

(B)                                Quarterly Financial Statements.  Unless filed
with the Commission through EDGAR and publicly available through the EDGAR
system,

 

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copies of the consolidated balance sheet of the Company and its Subsidiaries,
and the related consolidated statements of income, stockholders’ equity and cash
flows, unaudited but prepared in accordance with generally accepted accounting
principles, such consolidated balance sheet, consolidated statements of income,
stockholders’ equity and cash flows to be as of the end of each quarter
following the end of the immediately preceding fiscal year, in each case with
comparative statements for the prior fiscal year; provided, however, that, to
the extent the information in this Section 4.4(a)(iv)(B) is requested by any
Purchaser, any Purchaser shall hold and treat all such information confidential;

 

(C)                                Accountant’s Letters.  Copies of each
accountant’s management letter and other written report submitted to the Company
by its independent public accountants in connection with an annual or interim
audit of the books of the Company or any of its Subsidiaries;

 

(D)                               Notices.  Copies of notices of all Actions
that could materially and adversely affect the Company or any of its
Subsidiaries; and

 

(E)                                 Other Information.  Any other information
regarding the business, prospects, financial condition, operations, property or
affairs of the Company as any Purchaser may reasonably request;

 

(v)                                 The Company shall maintain and cause each of
its Subsidiaries to maintain their respective corporate existence unless the
Board unanimously approves otherwise;

 

(vi)                              The Company shall obtain and maintain and
cause each of its Subsidiaries to maintain as to their respective properties and
businesses, with financially sound and reputable insurers, insurance against
such casualties and contingencies and of such types and in such amounts as is
customary for companies similarly situated;

 

(vii)                           The Company shall permit and cause each of its
Subsidiaries to permit any Purchaser and such persons as Purchasers may
designate, at such Purchaser’s expense, to visit and inspect any of the
properties of the Company and its Subsidiaries, examine their books and take
copies and extracts therefrom, discuss the affairs, finances and accounts of the
Company and its Subsidiaries with their officers, employees and public
accountants (and the Company hereby authorizes said accountants to discuss with
any Purchaser and its designees such affairs, finances and accounts), and
consult with and advise the management of the Company and its Subsidiaries as to
their affairs, finances and accounts, all at reasonable times and upon
reasonable notice during normal business hours and provided that such Purchaser
or its designees have executed a confidentiality agreement in substance and form
reasonably acceptable to the Company; provided, however, that in no event (other
than an Event of Default) shall the Company be required to provide any Purchaser
or its designees with any information about the Company that is not publicly
available;

 

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(viii)                        The Company shall comply, and cause each
Subsidiary to comply, with all applicable Laws, noncompliance with which could
materially adversely affect its business or condition, financial or otherwise;

 

(ix)                                The Company shall keep, and cause each
Subsidiary to keep, adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting principles
consistently applied, reflecting all financial transactions of the Company and
such Subsidiary, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made; and

 

(x)                                   Within no more than five (5) days
following an Event of Default (as defined in the Senior Secured Notes), the
Company shall notify Purchasers of such Event of Default, the circumstances
causing such default and the proposed course of action to be taken by the
Company to cure such default.

 

(b)                                 Negative Covenants.  The Company covenants
that, so long as any portion of the Senior Secured Notes or any Preferred Shares
is outstanding, it shall not take any of the following actions without the prior
written consent of the Purchasers holding a majority of the Series D Preferred
Stock (or the Purchasers holding a majority in principal amount the Senior
Secured Notes outstanding), which may not be withheld unreasonably:

 

(i)                                     Redeem or repurchase any shares of
Common Stock Equivalents of the Company, except for (A) repurchases contemplated
by this Agreement, or (B) repurchases or redemptions from employees, directors
or consultants of the Company in accordance with agreements existing as of the
date hereof or is otherwise approved by the Board of Directors for the
repurchase or redemption of shares of Common Stock Equivalents in connection
with any termination of service to the Company or any of its Subsidiaries;

 

(ii)                                  Except to the extent required to comply
with its obligations hereunder or with applicable Law, the Company shall not,
nor shall it permit any of its Subsidiaries to, amend its respective articles of
organization, by-laws or regulations, or similar organic documents;

 

(iii)                               the Company shall not, nor shall it permit
any of its Subsidiaries to, incur or guarantee any Indebtedness or enter into
any “keep well” or other agreement to maintain any financial statement condition
of another Person or enter into any arrangement having the economic effect of
any of the foregoing, other than (A) short-term indebtedness and “keep well” or
similar assurances for the benefit of customers, in each case in the ordinary
course of business consistent with past practice or (B) long-term Indebtedness
in connection with the refunding of existing Indebtedness at a lower cost of
funds;

 

(iv)                              Declare or pay any dividend on any class of
Common Stock Equivalents of the Company (except dividends payable solely in
Common Stock Equivalents in connection with a stock split or similar transaction
of the Company);

 

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(v)                                 Enter into any transactions with Affiliates
of the Company other than in the ordinary course of business;

 

(vi)                              Merge or consolidate with any other entity or
have a transaction in which any “person” or “group” (within the meaning of
Sections 13(d) and 14(d)(2) of the Exchange Act), becomes the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
greater than fifty percent (50%) of the shares of Common Stock then outstanding
of the Company, on a fully diluted basis, ordinarily entitled to vote in the
election of directors;

 

(vii)                           Sell all or substantially all of the assets of
the Company;

 

(viii)                        Liquidate, dissolve or wind-up the operations of
the Company;

 

(ix)                                Apply for, or consent to, the appointment of
a receiver, trustee or liquidator for the Company or any Subsidiary or any of
their respective properties ; and

 

(x)                                   Enter into any agreement to do any of the
foregoing.

 

4.5                                 Non-Public Information.  The Company
covenants and agrees that neither it nor any other Person acting on its behalf
will provide any Purchaser or its agents or counsel with any information that
the Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have executed a written agreement regarding the
confidentiality and use of such information; provided, however, that the parties
acknowledge and agree that any Purchaser may be provided material, non-public
information by one or more of the directors designated by such Purchasers in
accordance with Section 4.6 and that the Company shall not be in breach of this
Section 4.5 by virtue of any such disclosure.  The Company understands and
confirms that each Purchaser shall be relying on the foregoing representations
in effecting transactions in securities of the Company.

 

4.6                                 Board Composition.  Purchasers shall have
the right to designate a total of five (5) representatives (the “Designees”) out
of seven (7) for election to the Company’s Board, all of whom shall not have
been involved in any of the events set forth in Item 401(f) of Regulation S-K
during the preceding ten (10) year and shall be qualified to serve as directors
of a reporting company under the Exchange Act as determined by a majority of the
members of a committee of non-employee directors established for such purpose
and at least two of whom shall satisfy the Nasdaq National Market requirements
for an “independent director.”  At least one of such “independent” Designees
shall be appointed to the Company’s Compensation Committee, and any future
increases in the compensation of the Chief Executive Officer, or additional
grants of options to the Chief Executive Officer, shall only be approved by
unanimous consent of the Company’s Compensation Committee.  The remaining two
(2) directors shall be Peter Sollene and Kelly Alberts.  The Board of the
Company shall have been increased by a total of four (4) members in accordance
with Sections 2.3(l) and 4.4(a)(iii) and the Company shall use its best efforts
to have the Designees nominated and elected to the Board.

 

4.7                                 Certain Transactions.  Each Purchaser and
its Affiliates agree not to engage in any “going private” transaction
(including, without limitation, selling all or substantially all of the

 

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Company’s assets, merging the Company, or any other transaction with similar
economic effects) with the Company, without the prior written consent of
ComVest.

 

4.8                                 Indemnification.

 

(a)                                  The Company shall indemnify and hold
harmless each Purchaser, its officers, directors, employees, agents and
consultants (each, a “Purchaser Indemnified Party”), from and against any and
all costs, claims, damages, losses, liabilities and expenses (including
reasonable attorneys’ fees) (together, the “Losses”) which may be suffered or
incurred by such Purchaser Indemnified Party by reason of (i) any material
misrepresentation or breach of warranty by the Company in this Agreement or the
other Transaction Documents or (ii) any material default of any obligation,
agreement or covenant of the Company under this Agreement or the other
Transaction Documents, in each case so long as such Losses were not caused by
the gross negligence or willful misconduct of such Purchaser Indemnified Party.

 

(b)                                 Each Purchaser shall indemnify and hold
harmless the Company and its officers, directors, employees, agents and
consultants (each, a “Company Indemnified Party”), from and against any and all
Losses which may be suffered or incurred by such Company Indemnified Party by
reason of any material misrepresentation or breach of warranty by such Purchaser
in this Agreement or the other Transaction Documents, so long as such Losses
were not caused by the gross negligence or willful misconduct of such Company
Indemnified Party.

 

(c)                                  An Indemnified Party shall give the
Indemnifying Party notice of any matter which an Indemnified Party has
determined has given or could give rise to a right of indemnification under this
Agreement, within thirty (30) days of such determination, stating the amount of
the Loss, if known, and method of computation thereof, and containing a
reference to the provisions of this Agreement in respect of which such right of
indemnification is claimed or arises.

 

(d)                                 If an Indemnified Party shall receive notice
of any action, audit, claim, demand or assessment (each, a “Third Party Claim”)
against it which may give rise to a claim for Loss under this Section 4.8,
within thirty (30) days of the receipt of such notice, the Indemnified Party
shall give the Indemnifying Party notice of such Third Party Claim; provided,
however, that the failure to provide such notice shall not release the
Indemnifying Party from any of its obligations under this Section 4.8 except to
the extent that such failure results in a detriment to the Indemnifying Party
and shall not relieve the Indemnifying Party from any other liability that it
may have to any Indemnified Party other than under this Section 4.8.  The
Indemnifying Party shall be entitled to assume and control the defense of such
Third Party Claim at its expense and through counsel of its choice if it gives
notice of its intention to do so to the Indemnified Party within ten (10) days
of the receipt of such notice from the Indemnified Party.  If the Indemnifying
Party elects to undertake any such defense against a Third Party Claim, the
Indemnified Party may participate in such defense at its own expense.  The
Indemnified Party shall cooperate with the Indemnifying Party in such defense
and make available to the Indemnifying Party, at the Indemnifying Party’s
expense, all witnesses, pertinent records, materials and information in the
Indemnified Party’s possession or under the Indemnified Party’s control relating
thereto as is reasonably required by the Indemnifying Party.  If the
Indemnifying Party elects to direct the defense of any such claim or proceeding,
the Indemnified Party shall not

 

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pay, or permit to be paid, any part of such Third Party Claim unless the
Indemnifying Party consents in writing to such payment or unless the
Indemnifying Party withdraws from the defense of such Third Party Claim
liability or unless a final judgment from which no appeal may be taken by or on
behalf of the Indemnifying Party is entered against the Indemnified Party for
such Third Party Claim.  If the Indemnified Party assumes the defense of any
such claims or proceeding pursuant to this Section 4.8(d) and proposes to settle
such claims or proceeding prior to a final judgment thereon or to forgo any
appeal with respect thereto, then the Indemnified Party shall give the
Indemnifying Party prompt written notice thereof and the Indemnifying Party
shall have the right to participate in the settlement or assume or reassume the
defense of such claims or proceeding.

 

4.9                                 Reservation of Common Stock. As of the date
that the Certificate of Designations is filed with the governmental agency of
the applicable jurisdiction, the Company will have reserved and the Company
shall continue to reserve and keep available at all times, free of preemptive
rights, a sufficient number of shares of Common Stock for the purpose of
enabling the Company to issue the Conversion Shares pursuant to any conversion
of the Preferred Shares and the Warrant Shares pursuant to any exercise of the
Warrants.

 

ARTICLE V.
MISCELLANEOUS

 

5.1                                 Fees and Expenses.  On each of the Closing
Dates, the Company shall pay ComVest a closing fee (the “Closing Fee”) equal to
two and a half percent (2.5%) of the gross proceeds of the Purchase Price of
each Closing, by check or wire transfer.  In addition, the Company shall
reimburse ComVest for its actual out-of-pocket expenses incurred in connection
with the this transaction including, without limitation, the reasonable fees and
disbursements of the ComVest’s counsel and due diligence expenses, not to exceed
$200,000, and in addition the Company shall also retain ComVest Advisors LLC as
a financial advisor, as set forth in Section 5.2 below.

 

5.2                                 ComVest Advisors LLC Advisory Agreement. 
The Company shall enter into a Financial Advisory and Consulting Agreement with
ComVest Advisors LLC at a monthly fee of $22,000, in the form attached hereto as
Exhibit H (the “ComVest Advisory Agreement”).  The Company may reduce the
monthly fee to $10,000 with 30 days notice, and terminate the ComVest Advisory
Agreement once the Purchasers (or any affiliates or members) cease to own more
than 33% of the Common Stock of the Company purchased in this transaction.

 

5.3                                 Rights Upon Termination.  So long as the
Purchasers have proceeded in good faith to consummate this Agreement and the
transactions contemplated hereby, in the event the Company elects not to
consummate this transaction for any reason prior to November     , 2005, the
Company shall pay to ComVest a financial advisory and structuring fee (the
“Advisory Fee”) equal to Three Hundred Fifty Thousand Dollars ($350,000) which
shall, at the sole option of ComVest, be payable in cash or shares of Common
Stock valued at $0.10 per share of Common Stock.  Upon the Company’s election to
terminate this transaction, ComVest shall have ten (10) days in which to make an
election to receive either cash or shares of Common Stock from the Company.  Any
Advisory Fee that becomes due shall be payable to ComVest within five (5) days
following ComVest’s receipt of notice from the Company that the Company has
elected not to consummate this transaction.  Any Advisory Fee paid pursuant to
this Section 5.3 shall be in

 

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addition to any expenses and costs payable by the Company to ComVest in
accordance with Section 5.1 hereof.  The Company hereby acknowledges that, in
the event the Company is required to pay the Advisory Fee in accordance with
this Section 5.3, the Company shall be deemed to have received advisory services
from ComVest in consideration of such Advisory Fee.  In the event the Purchasers
do not consummate the transactions contemplated hereby by November     , 2005 or
otherwise terminate this Agreement prior to such date despite the Company’s good
faith attempts to consummate the transactions contemplated hereby, the terms of
this Section 5.3 shall expire and be of no further force or effect and the
Company shall have no further obligation to pay the Advisory Fee.

 

5.4                                 Entire Agreement.  The Transaction
Documents, together with the exhibits and schedules thereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.

 

5.5                                 Notices.  All notices, requests, consents,
and other communications under this Agreement shall be in writing and shall be
delivered by hand, sent via a reputable nationwide overnight courier service or
mailed by first class certified or registered mail, return receipt requested,
postage prepaid:

 

If to the Company, at 505 Lomas Sante Fe Drive, Suite 200, Solana Beach,
California 92075, Attention: Chief Financial Officer, or at such other address
or addresses as may have been furnished in writing by the Company to Purchaser,
with copies to Foley & Lardner, 402 W. Broadway, Suite 2300, San Diego,
California 92101, Attention Adam C. Lenain; or

 

If to ComVest, at One North Clematis Street, Suite 300, West Palm Beach, Florida
33324, Attention: Carl Kleidman, or at such other address or addresses as may
have been furnished to the Company in writing by ComVest, with a copy to
Greenberg Traurig, LLP, The MetLife Building, 200 Park Avenue, New York, New
York 10166, Attention:  Alan I. Annex, Esq.  If to any other Purchaser, at the
address set forth on the signature page attached hereto.

 

If to the other Purchasers, to the address set forth on the signature
pages attached hereto.

 

Notices provided in accordance with this Section 5.5 shall be deemed delivered
upon personal delivery, one business day after being sent via a reputable
nationwide overnight courier service, or three business days after deposit in
the mail.

 

5.6                                 Amendments; Waivers.  No provision of this
Agreement may be waived or amended except in a written instrument signed, in the
case of an amendment, by the Company and each Purchaser or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought.  No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement

 

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hereof, nor shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right.

 

5.7                                 Construction.  The headings herein are for
convenience only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof.  The language used in
this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied
against any party.

 

5.8                                 Successors and Assigns.  This Agreement
shall be binding upon and inure to the benefit of the parties and their
successors and permitted assigns.  The Company may not assign this Agreement or
any rights or obligations hereunder without the prior written consent of each
Purchaser.  Each Purchaser may assign any or all of its rights under this
Agreement to any Person to whom such Purchaser assigns or transfers any
Securities, provided such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions hereof that apply to such
Purchaser.

 

5.9                                 No Third-Party Beneficiaries.  This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set forth
in Section 4.8.

 

5.10                           Governing Law.  All questions concerning the
construction, validity, enforcement and interpretation of the Transaction
Documents 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
conflicts of law thereof.  Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of
New York, borough of Manhattan for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or Action, any claim that it is not personally subject to the
jurisdiction of any such court or that such Action is improper or inconvenient
venue for such Action.  Each party hereby irrevocably waives personal service of
process and consents to process being served in any such Action by mailing a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof.  Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.  The parties hereby waive all rights to a trial by jury.  If
either party shall commence an Action to enforce any provisions of the
Transaction Documents, then the prevailing party in such Action shall be
reimbursed by the other party for its attorneys’ fees and other costs and
expenses reasonably incurred with the investigation, preparation and prosecution
of such Action.

 

5.11                           Survival.  All agreements, representations, and
warranties contained herein shall survive the execution and delivery of this
Agreement and the closing of the transactions contemplated hereby until thirty
(30) days after the delivery of the Company’s audited financials for the period
ended December 31, 2006, except for any agreements, representations, covenants,

 

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warranties or otherwise, contained in Article IV, each of which shall remain in
effect until there are no Securities outstanding.

 

5.12                           Execution.  This Agreement may be executed in two
(2) or more counterparts, all of which when taken together shall be considered
one and the same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart.  In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile
signature page were an original thereof.

 

5.13                           Severability.  If any provision of this Agreement
is held to be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affected or impaired thereby and the parties
will attempt to agree upon a valid, legal and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.

 

5.14                           Rescission and Withdrawal Right.  Notwithstanding
anything to the contrary contained in (and without limiting any similar
provisions of) the Transaction Documents, whenever any Purchaser exercises a
right, election, demand or option under a Transaction Document and the Company
does not timely perform its related obligations within the periods therein
provided, then Purchaser may rescind or withdraw, in its sole discretion from
time to time upon written notice to the Company, any relevant notice, demand or
election in whole or in part without prejudice to its future actions and rights.

 

5.15                           Remedies.  In addition to being entitled to
exercise all rights provided herein, including without limitation Section 5.3 or
granted by law, including recovery of damages, the Purchasers will be entitled
to specific performance under the Transaction Documents.  The parties agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.

 

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

 

(Signature Page Follows)

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

 

 

COMPANY:

 

 

 

IT & E INTERNATIONAL GROUP

 

 

 

By:

/s/ Peter Sollenne

 

 

Name:  Peter Sollenne

 

Title:  Chief Executive Officer

 

 

 

 

 

PURCHASERS:

 

 

 

 

 

COMVEST INVESTMENT PARTNERS II
LLC

 

 

 

 

 

Investment Amount:

$5,800,000

 

 

 

 

 

 

By:

/s/ Michael Falk

 

 

Name:  Michael Falk

 

Title:  Managing Partner

 

--------------------------------------------------------------------------------

 

 

Investment Amount:

$1,000,000

 

 

 

 

 

 

 

 

 

 

By:

/s/ Charles McCall

 

 

 

Print Name:  Charles McCall

 

 

 

 

Address:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Amount:

$200,000

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Print Name: Matthew Dontzin

 

 

 

Address:

 

 

 

 

 

 

 

 

 

 

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