Exhibit
10.7


 


EXECUTION VERSION


 


SECURITY AGREEMENT


 


	
  DATE:

  	
   

  	
  November 9,
  2005

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DEBTOR:

  	
   

  	
  IT &
  E International Group

  	
   

  	
  EIN: 77-0436157

  	
   

  
	
  (Collectively)

  	
   

  	
  505 Lomas
  Sante Fe Drive

  	
   

  	
  Organization I.D.           

  	
   

  
	
   

  	
   

  	
  Suite 200

  	
   

  	
   

  
	
   

  	
   

  	
  Solana
  Beach, California 92075

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECURED
  PARTIES:

  	
   

  	
  ComVest
  Investment Partners II LLC

  	
   

  	
   

  
	
   

  	
   

  	
  One North
  Clematis Street

  	
   

  	
   

  
	
   

  	
   

  	
  Suite 300

  	
   

  	
   

  
	
   

  	
   

  	
  West Palm
  Beach, Florida 33324

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  And each of
  the Purchasers set forth on the signature page attached hereto.

  



 


1.                                       Security
Interest and Collateral.  To secure
the payment of outstanding principal and interest on certain Secured
Convertible Promissory Notes in the aggregate principal amount of up to
$15,000,000 issued by Debtor from time to time in a private placement and through
an Option for an additional investment as described in the Securities Purchase
Agreement, of even date herewith between the Debtor and the Secured Parties by
Debtor to Secured Parties (each a “Note” and collectively the “Notes”)
and the performance of every liability and obligation of every type and
description that Debtor may now or at any time hereafter owe to Secured Parties
under the Notes, whether such debt, liability or obligation now exists or is
hereafter created or incurred, and whether it is absolute or contingent,
liquidated or unliquidated, or sole, joint, several or joint and several (all
such debts, liabilities and obligations and any amendments, extensions,
renewals or replacements thereof collectively referred to herein as the “Obligations”),
Debtor hereby grants Secured Parties a first priority security interest (the “Security
Interest”) in all of Debtor’s property (the “Collateral”), including
without limitation the following:


 


A.                                   Inventory.  All inventory of Debtor, whether now owned or
hereafter acquired and wherever located and other tangible personal property
held for sale or lease or furnished or to be furnished under contracts of
service or consumed in Debtor’s business, and all goods of Debtor, whether now
owned or hereafter acquired and wherever located, including without limitation
all computer programs embedded in goods, and all other Inventory and Goods of
the Debtor, as such terms may be defined in the Uniform Commercial Code as may
be in effect in the State of Nevada from time to time (the “UCC”);


 


B.                                     Equipment.  All equipment of Debtor, whether now owned or
hereafter acquired and wherever located, including but not limited to all
present and future equipment, machinery, tools, motor vehicles, trade fixtures,
furniture, furnishings,


 





















 


office and
recordkeeping equipment and all goods for use in Debtor’s business and all
other Equipment of the Debtor, as such term may be defined in the UCC, together
with all parts, equipment and attachments relating to any of the foregoing;


 


C.                                     Accounts,
Contract Rights and Other Rights to Payment:  Each and every right of Debtor to the payment
of money, whether such right to payment now exists or hereafter arises, whether
such right to payment arises out of a sale, lease, license, assignment or other
disposition of goods or other property by Debtor, out of a rendering of
services by Debtor, out of a loan by Debtor, out of the overpayment of taxes or
other liabilities of Debtor, or otherwise arises under any contract or
agreement, whether such right to payment is or is not already earned by
performance, and howsoever such right to payment may be evidenced, together
with all other rights and interests (including all liens and security
interests) which Debtor may at any time have by law or agreement against any
account debtor or other obligor obligated to make any such payment or against
any of the property of such account debtor or other obligor; all including but
not limited to all present and future debt instruments, chattel paper,
accounts, license fees, contract rights, loans and obligations receivable and
tax refunds and all other Accounts of the Debtor, as such term may be defined
in the UCC;


 


D.                                    Instruments:  All instruments, chattel paper, letters of
credit or other documents of Debtor, whether now owned or hereafter acquired,
including but not limited to promissory notes, drafts, bills of exchange and
trade acceptances; all rights and interests of Debtor, whether now existing or
hereafter created or arising, under leases (where Debtor is the lessor),
licenses or other contracts, in each case where assignment for security
purposes is not expressly prohibited by the terms of such instruments and all
other Instruments of the Debtor, as such term may be defined in the UCC;


 


E.                                      Deposit
Accounts and Investment Property: 
All right, title and interest of Debtor in all deposit and investment
accounts maintained with any bank, savings and loan association, broker,
brokerage, or any other financial institution, together with all monies and
other property deposited or held therein, including, without limitation, any
checking account, savings account, escrow account, savings certificate and
margin account, and all securities, whether certificated or uncertificated,
security entitlements, securities accounts, commodity contracts, and commodity
accounts and all other Deposit Accounts and Investment Property of the Debtor,
as such terms may be defined in the UCC;


 


F.                                      General
Intangibles:  All general intangibles
of Debtor, whether now owned or hereafter acquired, including, but not limited
to, applications for patents, patents, copyrights, trademarks, trade secrets,
good will, tradenames, customer lists, permits and franchises, software, all
licenses of any of the foregoing and the right to use Debtor’s name, and any
and all membership interests, governance rights, and financial rights in each
and every limited liability company, and all payment


 





















 


intangibles
and all other General Intangibles of the Debtor, as such term may be defined in
the UCC;


 


G.                                     Chattel
Paper:  All Chattel Paper of the
Debtor, whether tangible or electronic, as such term may be defined in the UCC;
and


 


H.                                    Supporting
Obligations, Embedded Software, etc.: 
All of Debtor’s rights, whether now existing or hereafter acquired, in
promissory notes, documents, embedded software, letter of credit rights and
supporting obligations (and security interests and liens securing them) as such
terms may be defined in the UCC.


 


together with all substitutions and replacements for and products of
any of the foregoing property and proceeds of any and all of the foregoing
property together with (i) all accessories, attachments, parts, equipment,
accessions and repairs and embedded software now or hereafter attached or
affixed to or used in connection with any such goods, (ii) all warehouse
receipts, bills of lading and other documents of title now or hereafter
covering such goods, and (iii) all books and records of Debtor related to
the Collateral.


 


2.                                       Representations,
Warranties and Agreements.  Debtor
jointly and severally represents, warrants and agrees that:


 


2.1.                              Debtor
is a corporation duly organized, validly existing and in good standing under
the laws of the state of Nevada, and the state of Nevada has been Debtor’s
state of organization since the date of Debtor’s organization.  Debtor has full power and authority to
execute this Agreement, to perform Debtor’s obligations hereunder and to
subject the Collateral to the Security Interest.  Debtor’s taxpayer identification number is
the number shown at the beginning of this Agreement.  Debtor’s organizational identification number
is the number shown at the beginning of this Agreement.


 


2.2.                              Debtor’s
chief place of business is, located at the address shown at the beginning of
this Agreement.  Debtor’s records concerning
its accounts and contract rights are kept at such address.  The Collateral is located at the address
shown at the beginning of this Agreement, and there are no other locations
where any of the Collateral may be kept except as set forth on Schedule 2.2
hereto.  All Collateral has been located
at the address shown at the beginning of this Agreement or at the locations set
forth on Schedule 2.2, prior to execution of this Agreement.  Debtor will give at least 30 days’ advance
written notice to Secured Parties of any change in Debtor’s jurisdiction of
organization or chief place of business and any change in or addition of any
Collateral location.  Debtor will take
all such actions as Secured Parties may reasonably request to permit Secured
Parties to establish and perfect the Security Interest in all jurisdictions
Secured Parties deems necessary, including but not limited to the execution,
delivery or endorsement of any and all instruments, documents, assignments,
security agreements and other agreements and writings that Secured Parties may
at any time reasonably request in order to secure, protect, perfect or enforce
the Security Interest and Secured Parties’ rights under this Agreement.


 





















 


2.3.                              Debtor
has (or will have at the time Debtor acquires rights in Collateral hereafter
arising) absolute title to each item of Collateral free and clear of all
security interests, liens and encumbrances. 
Debtor will keep all Collateral free and clear of all security interests,
liens and encumbrances except the Security Interest, and will defend the
Collateral against all claims or demands of all persons other than Secured
Parties.  Debtor will promptly pay or
properly and timely contest all taxes and other governmental charges levied or
assessed upon or against any Collateral or upon or against the creation,
perfection or continuance of the Security Interest.


 


2.4.                              Until
the Obligations are satisfied in full, Debtor will not, without the prior
written consent of the Secured Parties, sell any of the Collateral or enter
into any agreement that is inconsistent with Debtor’s obligations or Secured
Parties’ rights under this Agreement, except that Debtor may sell or discard
the Collateral in the ordinary course of business so long as such agreements
are not inconsistent with Secured Parties’ rights or Debtor’s obligations under
this Agreement.  Debtor further agrees
that it will not take any action, or permit any action to be taken by others
under its control, or fail to take any action, that would affect the validity
of the Collateral or enforcement of Secured Parties’ rights in the
Collateral.  In addition, Debtor agrees
not to enter into any instruments, chattel paper, letters of credit or other
documents, including but not limited to promissory notes, drafts, bills of exchange
and trade acceptances, which expressly prohibit assignment for security
purposes.


 


2.5.                              This
Agreement has been duly and validly authorized by all necessary action by
Debtor.


 


2.6.                              Debtor
will keep all tangible Collateral in good repair, working order and condition,
normal depreciation excepted, and will, from time to time, replace any worn,
broken or defective parts thereof.


 


2.7.                              Debtor
will at all reasonable times permit Secured Parties or their respective
representatives to examine or inspect any Collateral, wherever located, and to
examine, inspect and copy Debtor’s books and records pertaining to the
Collateral and its business and financial condition.


 


2.8.                              If
Secured Parties at any time so request after the occurrence of an Event of
Default, Debtor will promptly transfer to Secured Parties any instrument,
document, chattel paper, or investment properties constituting the Collateral,
duly endorsed or assigned by Debtor.


 


2.9.                              Debtor
will keep accurate and complete records pertaining to the Collateral and
pertaining to Debtor’s business and financial condition and submit to Secured
Parties such periodic reports concerning the Collateral and Debtor’s business
and financial condition as Secured Parties may from time to time reasonably
request.


 


2.10.                        Debtor
will at all times keep all tangible Collateral insured against risks of fire
(including so-called extended coverage), theft, and such other risks and in
such


 





















 


amounts as
Secured Parties may reasonably request, with any loss payable to Secured Parties
to the extent of their respective interest.


 


2.11.                        Debtor
will pay when due or reimburse Secured Parties on demand for all costs of
collection of any of the Obligations and all other out-of-pocket expenses
(including all reasonable attorneys’ fees) incurred by Secured Parties in
connection with the creation, perfection, satisfaction, protection, defense or
enforcement of the Security Interest or the creation, continuance, protection,
defense or enforcement of this Agreement or any or all of the Obligations,
including expenses incurred in any litigation or bankruptcy or insolvency
proceedings.


 


2.12.                        The
Obligations have been incurred and the Collateral will be used primarily for
business purposes.


 


2.13.                        All rights
to payment and all instruments, documents, chattel papers and other agreements
constituting or evidencing Collateral are (or will be when arising or issued)
the valid, genuine and legally enforceable obligation, subject to no defense,
set-off or counterclaim (other than those arising in the ordinary course of
business) of each account debtor or other obligor named therein or in Debtor’s
records pertaining thereto as being obligated to pay such obligation.  Debtor will not agree to any modification,
amendment or cancellation of any such obligation without Secured Parties’ prior
written consent except discounts provided by Debtor in the ordinary course of
business, and will not subordinate any such right to payment to claims of other
creditors of such account debtor or other obligor.


 


2.14.                        Debtor
will promptly notify Secured Parties of any material loss of or damage to any
Collateral or of any adverse change in the prospect of payment of any material
sums due on or under any instrument, chattel paper, account or contract right
constituting Collateral.


 


2.15.                        Debtor will from time to time
execute such financing statements or control agreements as Secured Parties may
reasonably deem necessary in order to perfect the Security Interest and, if any
Collateral is covered by a certificate of title, execute such documents as may
be required to have the Security Interest properly noted on a certificate of
title.  In addition, Debtor authorizes
Secured Parties to file any financing statement any Secured Party deems necessary,
describing any liens held by such Secured Party.  Such financing
statements may describe the Collateral in the same manner as described herein
or may contain an indication or description of the Collateral that describes
such property in any other manner as the Secured Parties may determine, in its
reasonable discretion, is necessary to ensure the perfection of the Security
Interest, including, without limitation, describing such property as “all
assets” or “all personal property.”


 


2.16.                        Debtor
will not use or keep any Collateral, or permit it to be used or kept, for any
unlawful purpose or in violation of any federal, state or local law, statute or
ordinance.


 





















 


2.17.                        If Debtor
at any time fails to perform or observe any agreement contained in this Section 2,
and if such failure shall continue for a period of 30 calendar days after
Secured Parties give Debtor written notice thereof, Secured Parties may (but
need not) perform or observe such agreement on behalf and in the name, place
and stead of Debtor (or, at Secured Parties’ option, in such Secured Party’s
own name) and may (but need not) take any and all other actions that such
Secured Party may reasonably deem necessary to cure or correct such
failure.  Debtor shall pay such Secured
Party on demand the amount of all monies expended and all costs and expenses
(including reasonable attorneys’ fees) incurred by such Secured Party in
connection with or as a result of such Secured Party’s performing or observing
such agreements or taking such actions, together with interest thereon from the
date expended or incurred by such Secured Party at the highest rate then
applicable to any of the Obligations.  To
facilitate the performance or observance by such Secured Party of such
agreements of Debtor (in the event Debtor does not cure any such failure during
the above-described 30-day period), Debtor hereby irrevocably appoints (which
appointment is coupled with an interest) such Secured Party, or its delegate,
as the attorney-in-fact of Debtor with the right (but not the duty) from time
to time to create, prepare, complete, execute, deliver, endorse or file, in the
name and on behalf of Debtor, any and all instruments, documents, financing
statements, and other agreements and writings required to be obtained,
executed, delivered or endorsed by Debtor under this Section 2.


 


3.                                       Account
Verification and Collection Rights of Secured Parties.  Each Secured Party shall have the right to
verify any accounts in the name of Debtor or in any Secured Party’s own name;
and Debtor, whenever requested pursuant to the terms of this Section, shall
furnish such Secured Party with duplicate statements of the accounts, which
statements may be mailed or delivered by Secured Party for that purpose.  Each Secured Party may at any time after the
occurrence of an Event of Default notify any account debtor, or any other
person obligated to pay any amount due, that such chattel paper, account, or
other right to payment has been assigned or transferred to a Secured Party for
security and shall be paid directly to such Secured Party.  If any Secured Party so requests at any time
after the occurrence of an Event of Default, Debtor will so notify such account
debtors and other obligors in writing and will indicate on all invoices to such
account debtors or other obligors that the amount due is payable directly to
the Secured Parties.  At any time after
the Secured Parties or Debtor gives such notice to an account debtor or other
obligor, Secured Parties may (but need not), in Secured Parties’ respective own
names or in Debtor’s name, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of, or securing, any such
chattel paper, account, or other right to payment, or grant any extension to,
make any compromise or settlement with or otherwise agree to waive, modify,
amend or change the obligations (including collateral obligations) of any such
account debtor or other obligor.


 


4.                                       Events
of Default.  The occurrence of any of
the following shall, at the sole option of the Secured Parties, be an Event of
Default:


 


A.                                   Any
“Event of Default” (as defined in such agreement) by Debtor under the Notes or
any other agreement evidencing the Obligations, which default is not cured
within any grace period granted with respect to such default or, if no specific
grace period is granted with respect to such default, where such default is not


 





















 


cured within
five (5) business days after written notice thereof from any Secured
Party;


 


B.                                     Debtor’s
failure to comply with any representation, warranty or covenant hereunder if
not cured within thirty (30) days after written notice;


 


C.                                     Transfer
or disposition of any of the Collateral, except as permitted by this Agreement;
or


 


D.                                    Attachment,
execution or levy on any of the Collateral.


 


5.                                       Remedies
upon Event of Default.  Upon the
occurrence of an Event of Default and at any time thereafter, the Secured
Parties may exercise any one or more of the following rights and remedies:


 


5.1.                              declare
all Obligations to be immediately due and payable, which shall then be immediately
due and payable, without presentment or other notice or demand;


 


5.2.                              exercise
and enforce any or all rights and remedies available upon default to a secured
party under the Uniform Commercial Code, including but not limited to the right
to take possession of any Collateral, proceeding without judicial process if
permitted by law or by judicial process, and the right to use, sell, lease or
otherwise dispose of any or all of the Collateral, and in connection therewith,
Secured Parties may require Debtor to make the Collateral available to Secured
Parties at a place to be designated by Secured Parties that is reasonably
convenient to all parties, and if notice to Debtor of any intended disposition
of Collateral or any other intended action is required by law in a particular
instance, such notice shall be deemed commercially reasonable if given (in the
manner specified in Section 8.2) at least 10 business days prior to the
date of intended disposition or other action; or


 


5.3.                              exercise
or enforce any or all other rights or remedies available to Secured Parties by
law or agreement against the Collateral, including specifically the right to
use the Collateral, against Debtor or against any other person or property.


 


All rights and remedies of Secured Parties shall be cumulative and may
be exercised singularly or concurrently, at Secured Parties’ option, and the
exercise or enforcement of any one such right or remedy shall neither be a
condition to nor bar the exercise or enforcement of any other.


 


6.                                       Other
Personal Property.  Unless at the
time the Secured Parties take possession of any tangible Collateral, or within
seven days thereafter, Debtor gives written notice to Secured Parties of the
existence of any goods, papers or other property of Debtor, not affixed to or
constituting a part of such Collateral, but which are located or found upon or
within such Collateral, Secured Parties shall not be responsible or liable to
Debtor for any action taken or omitted by or on behalf of Secured Parties with
respect to such property without actual knowledge of the existence of any such
property or without actual knowledge that it was located or to be found upon or
within such Collateral.


 





















 


7.                                       Assignment
of Insurance.  Debtor hereby assigns
to Secured Parties, as additional security for the payment of the Obligations,
any and all moneys (including but not limited to proceeds of insurance and
refunds of unearned premiums) due or to become due under, and all other rights
of Debtor under or with respect to, any and all policies of insurance covering
the Collateral, and Debtor hereby directs the issuer of any such policy to pay
any such moneys directly to Secured Parties. 
Both before and after the occurrence of an Event of Default, Secured
Parties may (but need not), in Secured Parties’ respective names or in Debtor’s
name, execute and deliver proofs of claim, receive all such moneys, endorse
checks and other instruments representing payment of such moneys, and adjust,
litigate, compromise or release any claim against the issuer of any such
policy.


 


8.                                       Miscellaneous.


 


8.1.                              This
Agreement can be waived, modified, amended, terminated or discharged, and the
Security Interest can be released, only explicitly in a writing signed by each
Secured Party.  A waiver signed by each
Secured Party shall be effective only in the specific instance and for the
specific purpose given.  Mere delay or
failure to act shall not preclude the exercise or enforcement of any of such
Secured Party’s rights or remedies.


 


8.2.                              All
notices to be given to Debtor shall be deemed sufficiently given if delivered
or mailed by registered or certified mail, postage prepaid, to Debtor at its
address set forth above or at such other address as Debtor may subsequently
provide to each Secured Party.


 


8.3.                              Each
Secured Party’s duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if such Secured Party exercises
reasonable care in physically safekeeping such Collateral or, in the case of
Collateral in the custody or possession of a bailee or other third person,
exercises reasonable care in the selection of the bailee or other third person,
and such secured Party need not otherwise preserve, protect, insure or care for
any Collateral.  Such Secured Party shall
not be obligated to preserve any rights Debtor may have against prior parties,
to realize on the Collateral at all or in any particular manner or order, or to
apply any cash proceeds of Collateral in any particular order of application.


 


8.4.                              This
Agreement shall be binding upon and inure to the benefit of Debtor and each
Secured Party and their respective successors and assigns and shall take effect
when signed by Debtor and delivered to the Secured Parties, and Debtor waives
notice of Secured Parties’ acceptance hereof.


 


8.5.                              A
carbon, photographic or other reproduction of this Agreement or of any
financing statement signed by Debtor shall have the same force and effects as
the original for all purposes of a financing statement.


 


8.6.                              This
Agreement shall be governed by the internal laws of the State of New York.  If any provision or application of this
Agreement is held unlawful or unenforceable in any respect, such illegality or
unenforceability shall not affect other


 





















 


provisions or
applications which can be given effect and this Agreement shall be construed as
if the unlawful or unenforceable provision or application had never been
contained herein or prescribed hereby. 
Any dispute arising out of or relating to this Agreement, including the
formation, interpretation or alleged breach hereof, shall be brought in the
state or federal courts located in                   
County, [Nevada],
and the parties hereto consent to the personal jurisdiction and venue of such
courts.


 


8.7.                              All
representations and warranties contained in this Agreement shall survive the
execution, delivery and performance of this Agreement and the creation and
payment of the Obligations.


 


(signature page on
following page)


 





















 


ACCORDINGLY,
this Agreement has been duly executed by the parties as of the date first set
forth above.


 


	
   

  	
  IT &
  E INTERNATIONAL GROUP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter
  Sollenne

  	
   

  
	
   

  	
   

  	
  Name:  Peter Sollenne

  
	
   

  	
   

  	
  Title:  CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMVEST
  INVESTMENT PARTNERS II, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael
  Falk

  	
   

  
	
   

  	
   

  	
  Name:  Michael Falk

  
	
   

  	
   

  	
  Title:  Managing Partner

  
						



 





















 


Schedule 2.2


 


Other Locations


 


 


1