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).


 


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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





















 


(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





















 


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





















 


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





















 


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





















 


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





















 


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





















 


(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





















 


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





















 


(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 


 


21





















 


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 


 


22





















 


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.


 


23





















 


(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.


 


24





















 


(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 


 


25





















 


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).


 


26





















 


(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.


 


27





















 


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 


 


28





















 


(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.


 


29





















 


(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.


 


30





















 


(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, 


 


31





















 


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;


 


32





















 


(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);


 


33





















 


(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 


 


34





















 


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 


 


35





















 


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 


 


36





















 


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 


 


37





















 


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, 


 


38





















 


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)


 


39





















 


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: