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Unassociated Document

    EXHIBIT
      10.46

    

     

    

    STOCK
      EXCHANGE AGREEMENT

    

    BY
      AND AMONG

    

    BRIGHTSTAR
      INFORMATION TECHNOLOGY GROUP, INC.

    

    MYPUBLICINFO,
      INC. 

    

    HAROLD
      KRAFT

    

    PAT
      DANE

    

    AND

    

    THE
      INVESTORS LISTED ON EXHIBIT A 

     

     

    
 

    Dated
      as of July 25,
      2006

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    STOCK
      EXCHANGE AGREEMENT

    

    This
      Stock Exchange Agreement (this “Agreement”)
      is
      entered into as of July 25, 2006, by and among BrightStar Information Technology
      Group, Inc., a Delaware corporation (the “BrightStar”),
      Harold Kraft, an individual residing at 2020 N 14th Street, #700, Arlington,
      Virginia 22201 (“Kraft”),
      Pat
      Dane, an individual residing at 801 North Caswell, Southport, North Carolina
      28461 (“Dane”),
      the
      investors listed on Exhibit
      A
      hereto
      (the “Investors”),
      and
      MyPublicInfo, Inc., a Delaware corporation (the “Company”).
      Kraft
      and Dane are each sometimes referred to herein individually as a “Seller”
and
      collectively as, the “Sellers”
and
      each of the parties named in the foregoing sentence is sometimes referred to
      herein individually as a “Party”
and
      collectively with all of the other parties named in the foregoing sentence
      as,
      the “Parties.”

    

    PRELIMINARY
      STATEMENTS

    

    A. The
      Company engages in the business of providing background check information as
      well as other tools designed to prevent identity theft through its website,
      www.mypublicinfo.com (the “Business”).

    

    B. Each
      of
      the Sellers owns the number of shares of common stock of the Company, par value
      $.0001 per share (“Company
      Common Stock”),
      set
      forth opposite such Seller’s name on Exhibit
      A
      hereto,
      and each of the Investors owns the number of company Common Stock issued upon
      conversion of the Convertible Promissory Note (as defined in Article 1) or
      Company issued options held by such Investor set forth opposite such Investor’s
      name on Exhibit
      A
      hereto
      (all of such shares being sometimes referred to herein collectively as, the
      “Company
      Shares”).

    

    C. BrightStar
      desires to acquire the Company Shares in exchange for, and each of the Sellers
      and Investors desires to exchange his Company Shares for, newly issued shares
      of
      BrightStar’s Series B Preferred Stock, par value $.001 per share, upon the terms
      and conditions herein set forth.

    

    NOW,
      THEREFORE, in consideration of the foregoing and the mutual promises and
      covenants herein contained, and for other good and valuable consideration,
      the
      receipt and sufficiency of which are hereby acknowledged, the Parties, intending
      to be legally bound, hereby agree as follows:

    

    ARTICLE
      1

     

    DEFINITIONS

     

    Capitalized
      terms used but not otherwise defined herein shall
      have the meanings set forth below:

    

    
      	
              1.1

            	
              “Adverse
                Consequences”
                means all proceedings, charges, complaints, claims, demands, injunctions,
                judgments, orders, decrees, rulings, damages, investigation and/or
                remediation costs, dues, penalties, fines, costs of defense and other
                costs, amounts paid in settlement, Liabilities, responsibilities,
                Taxes,
                liens, losses, expenses, and fees, including court costs and reasonable
                attorneys’ fees and expenses.

            

    

    

    
      	
              1.2

            	
              “Affiliate”
                has the meaning set forth in Rule 12b-2 of the regulations promulgated
                under the Exchange Act.

            

    

    

    
      	
              1.3

            	
              “Agreement”
                means this Stock Exchange
                Agreement.

            

    

    

    
      	
              1.4

            	
              “Ancillary
                Agreements”
                means
                all other agreements and instruments
                to be executed and delivered
                pursuant to this Stock Exchange
                Agreement.

            

    

    

    
      	
              1.5

            	
              “BrightStar
                Common Stock”
                means
                common stock, par value $.001 per share, of
                BrightStar.

            

    

    

    
      	
              1.6

            	
              “BrightStar
                Disclosure Schedule”
                means the disclosure schedule delivered by BrightStar to Sellers
                and the
                Company.

            

    

    

    
      	1.7	
              “Business”
                has the meaning set forth in Paragraph A. of the Preliminary Statements
                herein.

            

    

    

    
      	1.8	
              “Closing”
                has the meaning set forth in Section
                2.2.

            

    

    

    
      
         

      

      
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          2 -

        
          

        

      

      
         

      

    

    
      	1.9	
              “Closing
                Date”
                has the meaning set forth in Section
                2.2.

            

    

    

    
      	1.10	
              “Code”
                means the Internal Revenue Code of 1986, as
                amended.

            

    

    

    
      	1.11	
              “Company”
                has the meaning first set forth
                above.

            

    

    

    
      	
              1.12

            	
              “Company
                Common Stock”
                has the meaning set forth in Paragraph B. of the Preliminary Statements
                herein.

            

    

    

    
      	
              1.13

            	
              “Company
                Intellectual Property”
                means all intellectual property and all right, title and interest
                therein
                currently owned or used by the
                Company.

            

    

    

    
      	1.14	
              “Company
                Disclosure Schedule”
                has the meaning set forth in preamble to Article
                3 hereof.

            

    

    

    
      	
              1.15

            	
              “Company
                Shares”
                has
                the meaning set forth in Paragraph B of the Preliminary Statements
                herein.

            

    

    

    
      	
              1.16
                

            	
              “Convertible
                Promissory Notes”
                means
                the convertible promissory notes of the Company held by, or previously
                held by a Seller or Investor.

            

    

    

    
      	
              1.17

            	
              “Encumbrance”
                means
                any claim, mortgage, servitude, easement, encroachment, restrictive
                covenant, right of way, survey defect, equitable interest, lease
                or other
                possessory interest, lien, option, pledge, security interest, preference,
                priority, right of first refusal, environmental use restriction or
                similar
                restriction. 

            

    

    

    
      	1.18	
              “Exchange
                Act”
                means
                the United States Securities Exchange Act of 1934, as
                amended.

            

    

    

    
      	1.19	
              “Filing”
                has the meaning set forth in Section
                3.22.
                

            

    

    

    
      	
              1.20

            	
              “GAAP”
                means United States generally accepted accounting principles as in
                effect
                as of the date of any document purported to be prepared in accordance
                with
                GAAP. 

            

    

    

    
      	
              1.21

            	
              “Governmental
                Authorization”
                means any approval, consent, ratification, waiver, authorization,
                franchise, license, permit (including environmental permits) or
                registration issued, granted, given or otherwise made available by
                or
                under the authority of any Governmental Body or pursuant to any
                Law.

            

    

    

    
      	
              1.22

            	
              “Governmental
                Body”
                means any (i) nation, region, state, province, county, municipality,
                city, town, village, district or other jurisdiction, (ii) Federal,
                state, provincial, local, municipal, foreign or other government,
                (iii) governmental or quasi-governmental authority of any nature
                (including any governmental agency, branch, department or other entity
                and
                any court or other tribunal), (iv) multinational organization,
                (v) body exercising, or entitled to exercise, any administrative,
                executive, judicial, legislative, policy, regulatory or taxing authority
                or power of any nature or (vi) official of any of the
                foregoing.

            

    

    

    
      	
              1.23

            	
              “Investors”
                means the holders of outstanding Convertible Promissory Notes of
                the
                Company, as listed on Exhibit
                A
                hereto.

            

    

    

    
      	
              1.24

            	
              “IRS”
                means the United States Internal Revenue Service or any successor
                agency
                and, to the extent relevant, the United States Department of
                Treasury.

            

    

    

    
      	
              1.25

            	
              “Law”
                means
                any foreign, Federal, state and local statute, law, constitution,
                treaty,
                rule, regulation, by-law, ordinance, code, regulation, resolution,
                order,
                determination, writ, injunction, awards (including, without limitation,
                awards of any arbitrator), judgment, decree, binding case law, principle
                of common law or notice of any Governmental Body (for the avoidance
                of
                doubt, including, but not limited to, the laws of the United States
                of
                America).

            

    

    

    
      	
              1.26

            	
              “Liabilities”
                includes liabilities, commitments, indebtedness or obligations of
                any
                nature, whether known or unknown, whether absolute, accrued, contingent,
                choate, inchoate or otherwise, whether due or to become due, and
                whether
                or not required to be reflected on a balance sheet prepared in accordance
                with GAAP, including any liability for
                Taxes.

            

    

    

    
      
         

      

      
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          3 -

        
          

        

      

      
         

      

    

    
      	
              1.27

            	
              “Material
                Adverse Effect”
                means any event or circumstance that has, or is reasonably likely
                to have,
                a significant adverse effect on the financial condition, assets,
                goodwill,
                Business, results of operation or prospects of the Company taken
                as a
                whole.

            

    

    

    
      	
              1.28

            	
              “Material
                Contracts”
                has the meaning set forth in Section
                3.19.

            

    

    

    
      	1.29	
              “Party”
                and “Parties”
                have the meanings first set forth
                above.

            

    

    

    
      	
              1.30

            	
              “Person”
                means an individual or an entity, including a Governmental Body or
                any
                other body with legal personality separate from its equityholders
                or
                members, including if established by any Governmental
                Body.

            

    

    

    
      	
              1.31

            	
              “Proceeding”
                means any action, arbitration, audit, examination, investigation,
                claim,
                demand, inquiry, hearing, litigation, suit or appeal (whether civil,
                criminal, administrative, judicial or investigative, whether formal
                or
                informal, and whether public or private) commenced, brought, conducted,
                heard by or before or otherwise involving any Governmental Body or
                arbitrator.

            

    

    

    
      	1.32	
              “SEC”
                means the United States Securities and Exchange
                Commission.

            

    

    

    
      	1.33	
              “Securities
                Act”
                means the United States Securities Act of 1933, as
                amended.

            

    

    

    
      	1.34	
              “Seller”
                and “Sellers”
                each have the meaning set forth in the Preliminary
                Statement.

            

    

    

    
      	
              1.35

            	
              “Series
                B Preferred”
                means Series B Preferred Stock of BrightStar, par value $.001 per
                share,
                with such relative rights and preferences as are set forth in Exhibit
                B
                hereto.

            

    

    

    
      	
              1.36

            	
              “Tax”
                means any Federal, state, local, or foreign income, gross receipts,
                license, payroll, employment, excise, severance, stamp, occupation,
                premium, windfall profits, environmental, customs duties, capital
                stock,
                franchise, profits, withholding, social security (or similar),
                unemployment, disability, real property, personal property, sales,
                use,
                transfer, registration, value added, alternative or add-on minimum,
                estimated, or other tax of any kind whatsoever, including any interest,
                penalty, or addition thereto, whether disputed or
                not.

            

    

    

    
      	
              1.37

            	
              “Tax
                Return”
                means any return, declaration, report, claim for refund, or information
                return or statement required to be supplied to any governmental authority
                relating to Taxes, including any schedule or attachment thereto,
                and
                including any amendment thereof.

            

    

    

    ARTICLE
      2

     

    EXCHANGE
      OF SHARES; closing

     

    2.1 Exchange
      of Shares.
      On the
      Closing Date, and upon the terms and subject to the conditions set forth herein,
      the Sellers and the Investors shall sell, assign, transfer, convey and deliver
      the Company Shares to BrightStar, and BrightStar shall accept the Company Shares
      from the Sellers and the Investors and, in exchange therefor, shall issue and
      deliver to each Seller and Investor the number of shares of Series B Preferred
      set forth opposite such Seller’s or Investor’s name on the signature page or
Exhibit
      A
      hereto,
      as applicable. 

     

    2.2 Closing.
      The
      closing of the transactions contemplated by this Agreement (the “Closing”)
      shall
      take place at the offices of Guzov Ofsink, LLC, 600 Madison Avenue, New York,
      New York 10022, on July 25, 2006, or such other date or at such other location
      or time as may be agreed upon by
      the
      Parties
      (the
“Closing
      Date”).
      At
      the Closing, each Seller and Investor shall deliver to BrightStar all
      certificates evidencing Company Shares owned by him or her, duly endorsed in
      blank, against the delivery by BrightStar to such Seller or Investor of one
      or
      more certificates, in definitive form and registered in the name of such Seller
      or Investor, evidencing the number of shares of Series B Preferred issuable
      to
      such Seller or Investor hereunder.

    
      
         

      

      
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          4 -

        
          

        

      

      
         

      

    

    

    ARTICLE
      3

     

    REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY AND SELLERS

     

    The
      Company and Sellers jointly and severally represent and warrant to BrightStar
      that, with respect to the Company and Sellers, except as set forth in the
      disclosure schedule to be delivered by the Company to BrightStar at the Closing
      (the “Company
      Disclosure Schedule”):
      (i)
      all statements contained in this Article
      3
      are
      true, correct and complete on the date hereof; and (ii) all such statements
      shall be true, correct and complete on the Closing Date as if first made on
      such
      date. The Company and Sellers further agree that, notwithstanding anything
      contained herein to the contrary, nothing in the Company Disclosure Schedule
      shall be deemed adequate to disclose an exception to a representation or
      warranty made herein unless the applicable paragraph of the Company Disclosure
      Schedule identifies such exception with reasonable particularity and describes
      the relevant facts in reasonable detail in light of the corresponding section
      of
      this Article
      3.
      Each
      Investor, severally and not jointly, represents and warrants to BrightStar
      that,
      with respect to such Investor, all statements contained in Section 3.22 and
      Sections 3.24 through 3.28 are true, correct and complete on the date hereof
      and
      shall be true, correct and complete on the Closing Date as if first made on
      such
      date.

    

    3.1 Organization
      and Standing; Capacity. (a) The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Delaware, with full and unrestricted corporate
      power and authority to: (i) own, operate and lease its assets; (ii) carry on
      the
      Business as currently conducted and proposed to be conducted; (iii) execute
      and
      deliver this Agreement and each Ancillary Agreement to which it is a party;
      (iv)
      perform its obligations hereunder and thereunder; and (v) consummate the
      transactions contemplated hereby and thereby. The Company is duly qualified
      to
      do business and is in good standing in all jurisdictions in which either the
      ownership or use of the properties owned or used by it, or the nature of the
      activities conducted by it, requires such qualification, except where the
      failure to so qualify will not have a Material Adverse Effect. The
      Company does not have any subsidiaries.

     

    (b)
      Each
      Seller has full capacity and is competent to execute and deliver this Agreement
      and all Ancillary Agreements to which such Seller is a party.

    

    3.2 Authorization
      of Transaction.
      (a)
      The
      execution and delivery by the Company of this Agreement and each of the
      Ancillary Agreements to which it is a party, and the consummation by the Company
      of the transactions contemplated hereby and thereby, have been duly authorized
      by all necessary corporate actions, including all required board and shareholder
      approvals. 

     

    (b)
      Assuming the due and valid execution of this Agreement and each of the Ancillary
      Agreements to which the Company is a party by the other parties hereto and
      thereto, this Agreement and each of such Ancillary Agreements constitute the
      valid and legally binding obligations
      of the Company, enforceable in accordance with their respective terms, except
      as
      such enforcement may be limited by bankruptcy, reorganization, insolvency and
      other similar Laws and court decisions relating to or affecting the enforcement
      of creditors rights generally and by the application of general equitable
      principles. Except as otherwise required by applicable Federal or state
      securities Laws, the Company need not provide any notice to, make any filing
      with or obtain any authorization, consent, or approval of any Governmental
      Body
      or any other Person in order to execute and deliver this Agreement and each
      Ancillary Agreement to which the Company is a party or to consummate the
      transactions contemplated hereby and thereby.

     

    (c)
      With
      respect to each Seller, assuming
      the due and valid execution of this Agreement and each of the Ancillary
      Agreements to which such Seller is a party by the other parties hereto and
      thereto, this Agreement and each of such Ancillary Agreements constitute the
      valid and legally binding obligations of such Seller, enforceable in accordance
      with their respective terms, except as such enforcement may be limited by
      bankruptcy, reorganization, insolvency and other similar Laws and court
      decisions relating to or affecting the enforcement of creditors rights generally
      and by the application of general equitable principles and will effectively
      vest
      in BrightStar good, valid and marketable title to all Company Shares owned
      by
      such Seller, free and clear of all Encumbrances. Except as otherwise required
      by
      applicable Federal or state securities Laws, no Seller need provide any notice
      to, make any filing with, or obtain any authorization, consent, or approval
      of
      any Governmental Body or any other Person in order to consummate the
      transactions contemplated by this Agreement and each Ancillary Agreement to
      which such Seller is a party.

     

    3.3
       Noncontravention. (a) The
      execution and delivery by the Company of this Agreement and each Ancillary
      Agreement to which the Company is a party, the performance by the Company of
      its
      obligations hereunder and thereunder, and the consummation by the Company of
      the
      transactions contemplated hereby and thereby, do not and will not: (i) conflict
      with or violate any provision of any Law to which the Company is subject or
      by
      which any of its assets or properties is bound or affected; (ii) conflict with
      or violate or any provision of the Company’s Certificate of Incorporation or
      By-laws; (iii) conflict with, result in any breach of or constitute a default
      under any agreement,
      contract or other arrangement (whether written or oral) to
      which
      the Company is a party or by which any of its assets is bound or affected;
      or
      (iv) result in or require the creation or imposition of or result in the
      acceleration of any indebtedness, or of any Encumbrance of any nature upon,
      or
      with respect to any of the Company’s assets.

     

    
      
         

      

      
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          5 -

        
          

        

      

      
         

      

    

    (b) The
      execution and delivery by each Seller of this Agreement and each Ancillary
      Agreement to which such Seller is a party, the performance by such Seller of
      its
      obligations hereunder and thereunder, and the consummation by such Seller of
      the
      transactions contemplated hereby and thereby, do not and will not: (i) conflict
      with or violate any provision of any Law to which such Seller is subject or
      by
      which any of his assets or properties (including the Company Shares) is bound
      or
      affected; (ii) conflict with, result in any breach of or constitute a default
      under any agreement, contract or other arrangement (whether written or oral)
      to
      which such Seller is a party or by which any of his assets (including the
      Company Shares) is bound or affected; or (iii) result in or require the creation
      or imposition of or result in the acceleration of any indebtedness, or of any
      Encumbrance of any nature upon or with respect to any of such Seller’s assets
      including, but not limited to, the Company Shares.

     

    3.4 Capitalization. The
      entire authorized capital stock of the Company consists of (i) 10,000,000 shares
      of Company Common Stock, of which 1,984,273 shares
      are issued and outstanding. No other capital stock or equity securities of
      or
      interests in the Company are authorized or outstanding, and except as set forth
      in Section 3.4(a) of the Company Disclosure Schedule, there are no shares of
      capital stock or other securities of the Company reserved for future issuance.
      All of the issued and outstanding shares of Company Common Stock have been
      duly
      authorized, are validly issued, fully paid and nonassessable, were issued in
      compliance with all applicable Federal and state securities Laws and any other
      applicable Laws. Except as set forth in Section
      3.4(b)
      of the
      Company Disclosure Schedule, there are no outstanding or authorized options,
      warrants, purchase rights, subscription rights, rights of first refusal,
      pre-emptive rights, conversion rights, exchange rights or other contracts or
      commitments (whether written or oral) that could require the Company to issue,
      sell or otherwise cause to become outstanding any of its capital stock
      (including any instruments or securities convertible into capital stock); and
      the Company has no outstanding or authorized stock appreciation, phantom stock,
      profit participation or similar rights. There are no voting trusts, proxies,
      or
      other agreements or understandings with respect to the voting of the Company
      Common Stock. 

     

    3.5 Financial
      Statements.
      Attached
      hereto as Exhibit
      C
      are the
      Company’s unaudited Balance Sheet and Statements of Income, Changes in
      Stockholders’ Equity and Cash Flow (collectively, the “Financial
      Statements”)
      as of
      and for the year ended December 31, 2005 and for the fiscal quarter ended March
      31, 2006 and the six months ended June 30, 2006. The Financial Statements
      (including the notes thereto) are in accordance with the books and records
      of
      the Company, have been prepared in accordance with GAAP consistently applied
      and
      present fairly the financial condition of the Company as of the dates and for
      the periods indicated. 

     

    3.6 Absence
      of Litigation. There
      is
      no Proceeding pending or threatened by or before any Governmental Body against
      the Company or any Seller nor is there any basis for any such Proceeding. As
      of
      the date hereof, there is no Proceeding pending or, to the Company’s or any
      Seller’s knowledge, threatened by or before any Governmental Body (i) seeking to
      prevent, hinder, modify or challenge any of the transactions contemplated by
      this Agreement, or (ii) that would cause any of the transactions contemplated
      by
      this Agreement to be illegal, invalid, voidable or otherwise
      rescinded.

     

    3.7 Title
      to Assets.
      The
      Company has good and marketable title to, or a valid leasehold interest in,
      all
      properties and assets owned or used by it or located on its premises or
      necessary or advisable for
      the
      conduct of the Business as currently conducted or proposed to be conducted,
      free
      and clear of all Encumbrances. 

     

    3.8 Employment
      Practices. (a)
      None
      of
      the Company’s employees is
      covered
      by or subject to any collective bargaining agreement, union contract,
      labor agreement or conciliation agreement. To
      Sellers’ knowledge, (i) none of the Company’s employees has any plans to
      terminate employment with the Company; (ii) the Company has not experienced
      any strikes, grievances, claims of unfair labor practices or other collective
      bargaining disputes; (iii) there are no outstanding or pending grievances,
      claims of unfair labor practices or other employee or collective bargaining
      disputes against or involving the Company; (iv) the Company has not
      committed any unfair labor practice; (v) no organizational effort is
      presently being made or threatened by or on behalf of any labor union with
      respect to any of the Company’s employees; and (vi) no (A) charges of
      discrimination (relating to sex, age, race, national origin, handicap or veteran
      status), or (B) allegations that would be investigated by agencies such as
      the Department Of Labor, Occupational Safety and Health Administration, Office
      Federal Contract Compliance Programs, Internal Revenue Services or any other
      Federal, state or local agency, involving the Company or any of its employees
      are pending before any Governmental Body nor, to Sellers’ knowledge, have any
      such charges been threatened. Section 3.8(a)
      of the
      Company Disclosure Schedule sets forth a correct and complete list (including
      the name, hire date, current compensation and benefits payable to such persons
      for the current calendar year) of all the Company’s employees. 

     

    
      
         

      

      
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          6 -

        
          

        

      

      
         

      

    

    (b) The
      Company has complied with all applicable Laws relating to employment practices
      in all material respects. Neither the Company nor any Seller is aware that
      any
      officer or key employee, or any group of key employees, intends to terminate
      their employment with the Company, nor is there any present intention by the
      Company or any Seller to terminate the employment of any officer, key employee
      or group of key employees.

    

    (c)
      Section
      3.8(b) of the Company Disclosure Schedule
      lists
      all current directors, officers and employees of the Company, showing each
      such
      Person’s name, position, and annual remuneration, bonuses and fringe benefits
      for the current fiscal year. Except
      as set forth in Section
      3.8(c) of the Company Disclosure Schedule,
      the
      Company has no written employment agreements with any of its directors, officers
      and employees and all of its employees are employed “at will.” 

    

    3.9 Employee
      Benefit Plans. Section
      3.9 of the Company Disclosure Schedule
      lists
      all benefit plans maintained by the Company and all individual or group
      compensation arrangements to which the Company is a party (collectively, the
      “Plan”). Except as set forth in Section
      3.9 of the Company Disclosure Schedule:
      

     

    (i) Each
      Plan, the administrator and fiduciaries of each Plan, and the Company have
      complied in all material respects with the applicable requirements of ERISA
      (including, but not limited to, the fiduciary responsibilities imposed by Part
      4
      of Title I, Subtitle B of ERISA) and the prohibited transaction requirements
      of
      ERISA Section 406), the Code (including, but not limited to, the prohibited
      transaction requirements of Code Section 4975) and any other applicable laws,
      rules and regulations governing each Plan, and each Plan has at all times been
      properly administered in compliance with its terms and in accordance with all
      such laws, rules and regulations; 

     

    (ii) each
      Plan
      intended to qualify under Code Section 401(a) is the subject of a favorable,
      unrevoked determination letter issued by the IRS as to its qualified status
      under the Code and the tax-exempt status of the Plan’s trust under Code Section
      501(a) upon which the Company may still rely, and no circumstances have occurred
      that would reasonably be expected to adversely affect the tax-qualified status
      of any such Plan;

     

    (iii) the
      Company has never contributed, or been obligated to contribute, to any (i)
      Defined Benefit Plan (within the meaning of ERISA Section 3(35)) or (ii)
      Multiemployer Plan (within the meaning of ERISA Sections 3(37) and 4001) and
      is
      not subject to any funding or withdrawal liability with respect to any such
      Plan;

     

    (iv) all
      contributions (including all employer contributions and employee salary
      reduction contributions), premiums and other payments that would be (without
      regard to the transactions contemplated hereby and by the Ancillary Agreements),
      but are not yet, due from the Company to or under any Plan have been adequately
      and properly provided for by the Company in accordance with such
      Plan;

     

    (v) there
      is
      no matter pending (other than routine determination letter filings) or, to
      the
      knowledge of Sellers, threatened with respect to any Plan before the Internal
      Revenue Service, the Department of Labor, the SEC, the Pension Benefit Guaranty
      Corporation or any other Federal or state government agency or any
      court;

     

    (vi) no
      Plan
      that is an employee Welfare Benefit Plan (within the meaning of ERISA Section
      3(1)) provides for continuing benefits or coverage for any participant or
      beneficiary of a participant after such participant’s termination of employment,
      except to the extent required by law, and there has been no violation of Code
      Section 4980B or ERISA Sections 601 et seq. or the Health Insurance Portability
      and Accountability Act with respect to any such Plan that could result in any
      material liability to BrightStar; 

     

    (vii) no
      Plan
      obligates the Company to pay any separation, severance, termination or similar
      benefit to any current employee as a result of any transaction contemplated
      by
      this Agreement or any of the Ancillary Agreements as a result of a change in
      control or ownership within the meaning of the Plan or Code Section 280G;
      and

     

    (viii) with
      respect to each Plan, true, correct, and complete copies of the applicable
      following documents have been filed or distributed appropriately and made
      available to BrightStar: (i) all current Plan documents and any amendment
      thereto; (ii) the most recent Forms 5500, summary annual reports, financial
      statements, and actuarial reports for the last three (3) Plan years; (iii)
      summary plan descriptions and any summary of material modifications; (iv) the
      most recent determination letter received from the IRS; and (v) the related
      trust agreements, insurance contracts and other funding agreements that
      implement such Plans.

    

    
      
         

      

      
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    3.10 Intellectual
      Property.
      The
      Company owns or has a right to use all Company Intellectual Property, free
      and
      clear of any and all Encumbrances of any kind, except where the failure to
      own
      or have a right to use such property or such lien or encumbrance would not
      have
      a Material Adverse Effect. All
      Company Intellectual Property and a listing of all names under which the Company
      has operated are set forth in Section
      3.10 to the Company Disclosure Schedule.
      The
      Company has provided to BrightStar correct and complete copies of all patents,
      copyright and trademark registrations, licenses, agreements and other written
      documentation related to, or evidencing the Company’s ownership or right to use,
      the Company Intellectual Property. The Company is the sole and exclusive owners
      of and possesses all right, title, and interest in and to, the Company
      Intellectual Property, free and clear of all Encumbrances. The legality,
      validity, enforceability, ownership, use of and right to use the Company
      Intellectual Property have not been and are not currently being challenged,
      interfered with, or infringed upon and, to the Company’s and Sellers’ knowledge,
      are not subject to any such challenge. The Company has taken all reasonably
      necessary action to maintain and protect the Company Intellectual Property
      and
      will continue to maintain those rights until the Closing so as not to adversely
      affect the validity or enforcement of the Company Intellectual Property. The
      use
      of the Company Intellectual Property by the Company does not conflict with,
      infringe upon, violate or interfere with or constitute an appropriation of
      any
      right, title, interest or goodwill, including, without limitation, any
      intellectual property right, trademark, trade name, domain name, patent, service
      mark, brand mark, brand name, database, industrial design, trade secrets,
      technology, software, customer lists, copyright or any pending application
      therefor of any other Person, and neither the Company nor any Seller has
      knowledge of any claims therefor. The use of all Company Intellectual Property
      will not be adversely affected by the transactions contemplated in this
      Agreement.

     

    3.11 Notes
      and Accounts Receivables.
      

     

    (a) Section
      3.11 of the Company Disclosure Schedule
      lists
      all promissory notes of the Company, the issue and maturity dates thereof,
      the
      outstanding principal balances thereunder and the interest rate applicable
      thereto. All of such notes are reflected properly on the Financial Statements.
      

     

    (b) Section
      3.11 of the Company Disclosure Schedule
      lists
      all accounts payable and receivable of the Company and the respective ages
      thereof. All
      accounts payable are current and are not in default. All accounts
      receivable are
      valid
      receivables not subject to setoffs or counterclaims and are current and
      collectible.
      All
      accounts payable and accounts receivable are properly reflected on the Financial
      Statements.

     

    3.12 Tax
      Matters.
      

     

    (a)
      The
Company
      has: 

     

    (i)
      timely filed all Tax Returns required to have been filed by it. All such Tax
      Returns are true, correct and complete in all respects and all Taxes required
      to
      be paid, with respect to the Business, have been paid or reserves for such
      Taxes
      have been established on the Company’s accounting books;

     

    (ii)
      there are no Liens on any of the Company’s assets that arose in connection with
      any failure (or alleged failure) by any Person to pay any Tax;

     

    (ii)
      withheld and paid all Taxes required to have been withheld and paid in
      connection with amounts paid or owing to any employee, independent contractor,
      creditor, stockholder or other third party;

     

       (iii) not
      waived any statute of limitations with respect to any Tax or agreed to any
      extension of time with respect to a Tax assessment or deficiency;
      and

     

    (b)
      There
      are no pending, or to Sellers’ knowledge threatened, audits, investigations,
      disputes or claims concerning any Tax liability of the Company with respect
      to
      the Business.

     

    
      
         

      

      
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    (c)
      The
      Company is not a party to any Tax allocation or sharing agreement and does
      not
      have any liability for the Taxes of any Person under Treasury Regulation Section
      1.1502-6, as a transferee or successor, by contract or otherwise.

     

    (d)
      The
      Company is not currently the beneficiary of any extension of time within which
      to file any Tax Return.

     

    3.13 Books
      and Records.
      The
      books
      of account, minute books, equity record books and other records of the Company,
      all of which have been or will be made available to BrightStar prior to the
      Closing, are accurate and complete in all material respects and have been
      maintained in accordance with sound business practices. Each transaction of
      the
      Company is properly and accurately recorded on the books and records of the
      Company. 

     

    3.14 Powers
      of Attorney.
      There
      are
      no outstanding powers of attorney executed on behalf of the Company or any
      Seller.

     

    3.15 Brokers’
      Fees. Neither
      the Company nor any Seller has any Liability to pay any fees or commissions
      or
      other consideration to any broker, finder, or agent with respect to the
      transactions contemplated by this Agreement or for which BrightStar could become
      liable or obligated.

     

    3.16 Conduct
      of Business.
      With
      respect to the Business and except as disclosed in Section 3.16 of the Company
      Disclosure Schedule, since December 31, 2005, the Company has not: (i) incurred
      any material obligation or Liability except normal trade or Business obligations
      or Liabilities incurred in the ordinary and normal course of the Business;
      (ii)
      failed to discharge or satisfy any lien or pay any obligation or Liability,
      other than in the ordinary and normal course of the Business; (iii) sold,
      assigned, transferred, leased, exchanged or otherwise disposed of any of its
      properties or assets other than current assets in the ordinary and normal course
      of the Business; (iv) made any general wage or salary increase, increased the
      compensation of any employee, entered into any employment contract with any
      employee, or instituted any employee welfare, bonus, stock option,
      profit-sharing, retirement or similar plan or arrangement; (v) suffered any
      material damage, destruction or loss, whether as the result of fire, explosion,
      earthquake, accident, casualty, labor trouble, requisition or taking of property
      by any governmental authority, flood, windstorm, embargo, riot or Act of God
      or
      the enemy, or other similar casualty or event or otherwise, and whether or
      not
      covered by insurance adversely affecting the Business; (vi) canceled or
      compromised any debt or claim other than in the ordinary and normal course
      of
      the Business; (vii) entered into any transaction, contract or commitment outside
      the ordinary and normal course of the Business which would have a Material
      Adverse Effect; (viii) acquired or sold any real estate, real property options,
      leaseholds, or leasehold improvements; (ix) terminated, discontinued, closed
      or
      disposed of any operation of the Business; (x) suffered any Material Adverse
      Effect; (xi) made (or committed to make) any material capital expenditures
      in
      connection with the operation of the Business; (xii) failed to operate the
      Business only in the ordinary and normal course, ordinary and normal course
      of
      the Business consistent with past practice; (xiv) failed to pay the trade
      payables of the Business in the ordinary and normal course of the Business
      consistent with past practice; (xv) failed to pay or discharge material
      Liabilities relating to the Business as and when due and payable; (xvi) failed
      to keep in full force and effect insurance covering its assets and the Business
      in amounts consistent with past practice; (xvii) entered into any contract
      other
      than in the ordinary and normal course of the Business consistent with past
      practice nor permitted any amendment or termination of any contract or that
      is
      material to the Business; and (xviii) experienced no adverse change in its
      employee, customer or supplier relationships other than changes in the ordinary
      and normal course of the Business. 

     

    

    3.17. Insurance.
      Section
      3.17 of the Company Disclosure Schedule sets forth the following information
      with respect to each insurance policy (including policies providing property,
      casualty, liability, product liability and workers’ compensation coverage and
      bond and surety arrangements) to which the Company is a party: (i) the name
      of
      the insurer, the name of the policy holder and the name of each covered insured;
      (ii) the policy number and the period of coverage and type of coverage; and
      (iii) a description of any retroactive premium adjustments or other loss sharing
      arrangements. Section 3.17 of the Company Disclosure Schedule contains a summary
      of all claims submitted, pending or paid under such policies within the past
      five (5) years. With respect to each such insurance policy: (i) the policy
      is
      legal, valid, binding, enforceable in accordance with its terms and in full
      force and effect; (ii) neither the Company nor, to Sellers’ knowledge, any other
      party to the policy is in breach or default (including with respect to the
      payment of premiums or the giving of notices), and no event has occurred which,
      with notice or lapse of time, would constitute such a breach or default, or
      permit termination, modification or acceleration, under the policy; (iii)
      neither the Company nor, to Sellers’ knowledge, any other party to the policy
      has repudiated any provision thereof; and (iv) up to the Closing Date, the
      policy and the insurance coverage provided by the policy will be maintained
      in
      full force and effect and will not be canceled, modified or changed without
      the
      prior written consent of BrightStar. There are no outstanding sureties or other
      bonds securing any obligations of the Company, and the Company has no Liability
      (accrued, contingent or otherwise) with respect to surety or other
      bonds.

    

    
      
         

      

      
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    3.18 Compliance
      with Law. The
      Company is in compliance with all applicable Laws, including Federal, foreign,
      state, county or local laws, statutes and regulations relating to equal
      employment opportunities, fair employment practices, unfair labor practices,
      terms of employment, professional licenses, business and other licenses,
      occupational health and safety, wages and hours and discrimination, and zoning
      ordinances and building codes. Copies of all notices of violation of any of
      the
      foregoing that the Company or any Seller has received in the past five (5)
      years
      or since the Company’s inception, whichever is shorter, are set forth in Section
      3.18 of the Company Disclosure Schedule.

    

    3.19 Contracts
      and Commitments. (a)
      Except as set forth in Section 3.19 of the Company Disclosure Schedule, the
      Company is not a party to, nor are any of its assets bound by or subject to,
      any
      oral or written:

    (i) contract,
      lease or other similar document that has an aggregate value of $10,000 or more
      or cannot be terminated or canceled without further liability to the Company
      or
      the Business upon the giving of no more than thirty (30) days
      notice;

     

    (ii) contract
      with any consultant, or for the employment of any person, including any
      consultant, who is engaged in the conduct of the Business, 

     

    (iii) contract
      or commitment limiting or restraining the Company or any successor thereto
      from
      engaging or competing in any manner or limiting or controlling the use or
      disclosure of confidential information, nor, to Sellers’ knowledge, is any
      employee of the Company subject to any such contract or commitment;

     

    (iv) license,
      assignment, franchise, distributorship or other similar contract that relates
      in
      whole or in part to any software (other than readily available “off-the-shelf”
software), patent, trademark, trade name, service mark or copyright or to any
      ideas, technical assistance or know-how or other Intellectual Property of or
      used by the Company in the conduct of the Business; 

     

    (v) contract
      relating to borrowed money or other indebtedness (including any letters of
      credit) or the mortgaging, pledging or otherwise placing a lien or other
      encumbrance on any material asset of the Company;

     

    (vi) contracts
      relating to joint ventures or agreements involving a sharing of
      profits;

     

    (vii) contract
      relating to investigating, testing, handling, removal, cleanup, abatement or
      other actions in connection with environmental liabilities;

     

    (viii) contract
      for the future purchase of fixed assets or the maintenance thereof or for the
      future purchase of materials, supplies or equipment in excess of the Company’s
      normal operating requirements; or

     

    (ix) contract
      containing any provision for delayed damages, liquidated damages,
      indemnification not fully covered by insurance, or extraordinary remedies,
      including potential liability for consequential damages; 

     

    (b)
      Each
      of the contracts, leases and other agreements and commitments listed in Section
      3.19 of the Company Disclosure Schedule shall be collectively referred to herein
      as the “Material Contracts.” All Material Contracts are legal, valid, binding
      and enforceable in accordance with their terms, in full force and effect and
      binding upon the other parties thereto. There is no breach or default in any
      material respect by the Company or, to Sellers’ knowledge, any other party in
      the performance, observance or fulfillment of any obligations, covenants,
      liabilities or conditions contained in any of the Material Contracts, and no
      event has occurred or condition exists that with or without notice, lapse of
      time or the happening or occurrence of any other event would constitute a breach
      or default in any material respect, or permit termination, modification or
      acceleration, by any party to, or bound by, the Material Contracts. The Company
      has not assigned, secured, pledged, transferred, conveyed, mortgaged, deeded
      in
      trust or encumbered in any way any interest in any of the Material Contracts.
      There are no disputes, oral agreements or forbearance programs in effect as
      to
      any Material Contract. Complete and accurate copies of all Material Contracts
      that are in writing (including any amendments or supplements thereto) have
      been
      delivered to BrightStar by the Company and any oral Material Contract has been
      summarized in Section 3.19 of the Company Disclosure Schedule. Subject to
      receipt of any required consents or approvals set forth in Section 3.19 of
      the
      Company Disclosure Schedule, the consummation of the transactions contemplated
      by this Agreement will not result in the termination, default or breach of
      any
      Material Contract, and immediately after the Closing, all Material Contracts
      will continue in full force and effect without the imposition of any additional
      condition or obligation on the Company or the Business resulting from the
      consummation of the transactions contemplated hereby and by the Ancillary
      Agreements. 

    

    3.20 Consents.
      No
      consents or approvals of, or notices to, or filings, registrations or
      qualifications with, any third person and no consents or waivers from, or
      notices to, any other parties to leases, licenses, franchises, permits,
      indentures, contracts or other instruments are required for the consummation
      by
      the Company and Sellers of the transactions contemplated hereby and by the
      Ancillary Agreements.

    

    3.21 No
      Undisclosed Liabilities. The
      Company has no Liabilities except: (i) Liabilities which are reflected and
      reserved against on the face of the Balance Sheet (which shall not include
      any
      disclosure in any financial footnotes thereto) which have not been paid or
      discharged since the date thereof; (ii) accounts payable and accrued expenses
      incurred in the ordinary course of the Business consistent with past practice
      which have not caused the level of the Company’s accounts payable or accrued
      expenses to increase materially from the amounts reflected on the face of the
      Balance Sheet (which shall not include any disclosure in any financial footnotes
      thereto); (iii) liabilities arising in the ordinary course of business
      consistent with past practice under contracts or real property leases (other
      than any liability resulting from, arising out of, relating to, in the nature
      of, or caused by any breach of contract, breach of warranty, tort, infringement
      or violation of law); (iv) Liabilities which would not be required by GAAP
      to be
      set forth on a balance sheet and could not, in the aggregate, reasonably be
      expected to have a material adverse effect on the financial condition, operation
      or prospects of the Company or the Business, or (v) as set forth on Section
      3.22
      of the Company Disclosure Schedule. The Company is not a guarantor or otherwise
      liable for any Liability of any other Person.

    

    
      
         

      

      
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    3.22 Ownership
      of Company Shares.
      All
      of
      the Company Shares have been duly and validly issued and are fully paid and
      non-assessable. 
      Each
      Seller or each Investor, as applicable, is the record and beneficial owner
      of
      the Company Shares set forth opposite his name on Exhibit
      A,
      free
      and clear of any and all Encumbrances, and has the power and authority to sell,
      transfer, assign and deliver such Company Shares as provided in this Agreement,
      and such delivery will convey to BrightStar good and marketable title to such
      Company Shares, free and clear of any and all Encumbrances. No Seller or
      Investor, as applicable, is a party to any contract with respect to any equity
      securities of the Company, including, but not limited to, any contract that
      could require such Seller or Investor, as applicable to sell, transfer, or
      otherwise dispose of any of his Company Shares other than pursuant to this
      Agreement. 

     

    3.23
       Certain
      Business Practices.
      The
      Company has, at all times, complied with the Controlling the Assault of
      Non-Solicited Pornography and Marketing Act of 2003, known as the CAN-SPAM
      Act,
      to the extent applicable to the Company’s activities.

    

    3.24 No
      Registration. Sellers
      or the Investors, as applicable, understand that neither the Series B Preferred
      nor the shares of BrightStar Common Stock issuable upon conversion of the Series
      B Preferred has been registered under the Securities Act or any state securities
      laws; and that all of such shares will be issued in reliance upon exemptions
      contained in the Securities Act or interpretations thereof and in the applicable
      state securities laws and cannot be offered for sale, sold or otherwise
      transferred unless they are registered or qualify for exemption from
      registration under the Securities Act. Each Seller or Investor, as applicable,
      is an “accredited” investor as such term is defined in Rule 502 promulgated
      under Regulation D under the Securities Act.

     

    3.25 Acquisition
      for Investment. The
      Series B Preferred and the shares of BrightStar Common Stock issuable upon
      conversion of the Series B Preferred are being acquired under this Agreement
      by
      Sellers or Investors, as applicable, in good faith solely for their own
      respective accounts, for investment and not with a view toward distribution
      within the meaning of the Securities Act. 

     

    3.26 Risks
      of Investment. Sellers
      or Investors, as applicable, understand and are able to bear any economic risks
      associated with an investment in BrightStar (including, without limitation,
      holding the shares of Series B Preferred and any shares of BrightStar Common
      Stock issuable on conversion of the Series B Preferred.

     

    3.27 Disclosure
      of Information.
      Sellers
      or Investors, as applicable, acknowledge
      that Sellers or Investors, as applicable, have had full access to all the
      information it considers necessary or appropriate to make an informed investment
      decision with respect to the Series B Preferred to be issued pursuant to this
      Agreement. Sellers or Investors, as applicable, further acknowledge that they
      have had an opportunity to ask questions and receive answers from BrightStar
      regarding its business and to obtain additional information (to the extent
      BrightStar possessed such information or could acquire it without unreasonable
      effort or expense) necessary to verify any information furnished to Sellers
      or
      to which Sellers had access.

     

    
      	
              3.28

            	
              Full
                Disclosure. The
                representations and warranties and statements made by the Company
                and
                Sellers or the Investors, as applicable, in this Agreement are true,
                accurate, correct and complete in every respect 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 and information contained
                herein
                not false or misleading.

            

    

     

     

    
      
         

      

      
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    ARTICLE
      4 

     

    REPRESENTATIONS
      AND WARRANTIES OF BRIGHTSTAR

     

    BrightStar
      represents and warrants to the Company and Sellers that: (i) all statements
      contained in this Article
      4
      are
      true, correct and complete on the date hereof; and (ii) all such statements
      shall be true, correct and complete on the Closing Date as if first made on
      such
      date. BrightStar further agrees that, notwithstanding anything contained herein
      to the contrary, nothing in the BrightStar Disclosure Schedule shall be deemed
      adequate to disclose an exception to a representation or warranty made herein
      unless the applicable paragraph of the BrightStar Disclosure Schedule identifies
      such exception with reasonable particularity and describes the relevant facts
      in
      reasonable detail in light of the corresponding section of this Article
      4.

    

    4.1 Organization
      and Standing. BrightStar
      represents and warrants that it is a corporation duly organized and validly
      existing under the laws of the State of Delaware, with full corporate power
      and
      authority to: (i) own, operate and lease its assets to carry on its business
      as
      currently conducted and as proposed to be conducted; (ii) execute and deliver
      this Agreement and each Ancillary Agreement to which it is a party; (iii)
      perform its obligations hereunder and thereunder; and (iv) consummate the
      transactions contemplated hereby and by the Ancillary Agreements to which it
      is
      a party. 

     

    4.2 Authorization
      of Transaction. Assuming
      its due and valid execution and delivery by each other Party hereto, this
      Agreement constitutes the valid and legally binding obligation of BrightStar,
      enforceable in accordance with its terms, except to the extent that such
      enforcement may be limited by bankruptcy, reorganization, insolvency and other
      similar Laws and court decisions relating to or affecting the enforcement of
      creditors rights generally and by the application of general equitable
      principles. Except as otherwise required by applicable Federal or state
      securities Laws, BrightStar need not provide any notice to, make any filing
      with, or obtain any authorization, consent, or approval of any Governmental
      Body
      or any other Person in order to consummate the transactions contemplated by
      this
      Agreement.

     

    4.3 Brokers’
      Fees. BrightStar
      has no Liability to pay any fees or commissions or other consideration to any
      broker, finder, or agent with respect to the transactions contemplated by this
      Agreement or for which the Company or any Seller could become liable or
      obligated.

     

    4.4 Noncontravention. The
      execution, delivery and performance by BrightStar of this Agreement, the
      fulfillment of and compliance with the respective terms and provisions hereof
      and thereof, and the consummation by BrightStar of the transactions contemplated
      hereby, do not and will not: (i) conflict with or violate any provision of,
      any
      Law having applicability to BrightStar or any of its assets, or any provision
      of
      the Certificate of Incorporation or By-laws of BrightStar; (ii) conflict with,
      or result in any breach of, or constitute a default under any agreement,
      contract or other arrangement (whether written or oral) to which BrightStar
      is a
      party or by which BrightStar or any of its assets may be bound; or (iii) result
      in or require the creation or imposition of or result in the acceleration of
      any
      indebtedness, or of any Encumbrance of any nature upon, or with respect to
      any
      of the assets of BrightStar, including the Series B Preferred.

     

    4.5 Capitalization. The
      entire authorized capital stock of BrightStar consists of: (i) 747,000,000
      shares of common stock, par value $.001 per share, of which 70,707,518 shares
      are issued and outstanding; and (ii) 136,585 shares of Series A Preferred Stock,
      par value $.001 per share, all of which are issued and outstanding and held
      of
      record by Stellar McKim LLC; and (iii) 2,863,415 shares of undesignated
      Preferred Stock, par value $.001 per share, none of which is issued
      or outstanding.
      As of the Closing, 1,984,273 shares
      of
      such undesignated preferred stock shall be designated as Series B Preferred
      Stock, par value $.001 per share, as contemplated by this Agreement. Except
      as
      set forth in the BrightStar Disclosure Schedule, there are no outstanding or
      authorized options, warrants, purchase rights, subscription rights, rights
      of
      first refusal, pre-emptive rights, conversion rights, exchange rights or other
      contracts or commitments (whether written or oral) that could require BrightStar
      to issue, sell or otherwise cause to become outstanding any of its capital
      stock
      (including any instruments or securities convertible into capital stock). There
      are no outstanding or authorized stock appreciation, phantom stock, profit
      participation or similar rights with respect to BrightStar. To BrightStar’s
      knowledge, there are no voting trusts, proxies, or other agreements or
      understandings with respect to the voting of any outstanding BrightStar capital
      stock.

     

    4.6 Due
      and Valid Issuance.
       The
      Series B Preferred, when issued as provided in this Agreement, will be duly
      and
      validly issued, fully paid and non-assessable and will be issued in compliance
      with all applicable Federal and state securities Laws and any other applicable
      Laws. 

     

    
      
         

      

      
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    4.7 No
      Registration. BrightStar
      understands that the Company Shares have not been registered under the
      Securities Act or any state securities laws and will be issued in reliance
      upon
      exemptions contained in the Securities Act or interpretations thereof and in
      the
      applicable state securities laws, and cannot be offered for sale, sold or
      otherwise transferred unless such shares are registered or qualify for exemption
      from registration under the Securities Act.

     

    4.8 Disclosure
      of Information. BrightStar
      acknowledges that it has had full access to all the information it considers
      necessary or appropriate to make an informed investment decision with respect
      to
      the Company Shares to be purchased pursuant to this Agreement. BrightStar
      further acknowledges that is has had an opportunity to ask questions and receive
      answers from the Company regarding the Business and to obtain additional
      information (to the extent the Company possessed such information or could
      acquire it without unreasonable effort or expense) necessary to verify any
      information furnished to BrightStar or to which BrightStar had
      access.

    

    4.9 Full
      Disclosure. The
      representations and warranties and statements made by BrightStar in this
      Agreement are true, accurate, correct and complete in every respect 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 and information contained herein
      not false or misleading. 

      

    ARTICLE
      5

     

    CONDITIONS
      TO OBLIGATIONS OF BRIGHTSTAR

     

    The
      obligations of BrightStar to perform its obligations hereunder and under the
      Ancillary Agreements and to consummate the transactions contemplated hereby
      and
      by the Ancillary Agreements are subject to satisfaction of the following
      conditions:

     

    5.1 Representations
      and Warranties.
      The
      representations and warranties made by the Company,Sellers and the Investors
      herein and in the Ancillary Agreements shall be true and correct in all material
      respects on and as of the Closing Date, as though made on and as of such date
      (for purposes of this Section
      5.1,
      any
      representation or warranty that is qualified by a materiality standard shall
      be
      read without regard to any such materiality qualification as if such
      qualification were not contained therein), and the Company and Sellers shall
      deliver to BrightStar a certificate, signed by an executive officer of the
      Company and by each Seller, to such effect at the Closing, with respect to
      the
      representations and warranties made by the Company and Sellers;

     

    5.2 No
      Breach.
      The
      Company and each Seller shall have performed in all material respects all
      obligations and complied in all material respects with all agreements, covenants
      and conditions required under this Agreement and under the Ancillary Agreements
      to be performed or complied with by them prior to the Closing, and shall deliver
      to BrightStar a certificate, signed by an executive officer of the Company
      and
      by each Seller, to such effect at the Closing; 

    

    5.3 Due
      Diligence Investigation.
      BrightStar
      shall have completed to its satisfaction a due diligence investigation of the
      Company and the Business, the results of which shall have been satisfactory
      to
      BrightStar in its sole discretion. Such due diligence may include, but not
      be
      limited to, a thorough review of financial, legal, contractual, environmental,
      tax, insurance, labor, patent and trademark, pension and benefit, and any other
      matters that BrightStar and its auditors, tax and legal counsel and other
      advisors may deem relevant. Further, BrightStar and its advisors shall have
      had
      access to the operating management of the Business and have been permitted
      inspection of any and all sites where the Business is conducted.
      

    

    5.4 Operation
      in Ordinary Course.
      Sellers
      shall have continued to operate the Company and the Business in the ordinary
      course from the date hereof until the Closing, and no Material Adverse Effect
      shall have occurred from the date hereof until the Closing.

    

    5.5 Conversion
      of Outstanding Notes and Exercise of Outstanding
      Options.
      Any
      and
      all Convertible Promissory Notes and Company Options shall have been converted
      or exercised into shares of Company Common Stock, which shares shall be included
      in the Company Shares being purchased hereunder. 

    

    5.6 Deliveries.
      The
      Company and/or Sellers (as applicable) shall have delivered to BrightStar all
      of
      the following items:

    

    
      
         

      

      
        -
          13 -

        
          

        

      

      
         

      

    

       

    
      	 	 	 

      	 	(a) 	A copy of the Company’s Certificate of Incorporation, as
              amended to date, certified to by the Secretary of State of
              Delaware. 

      	 	 	 

      	 	(b) 	A copy of the Company’s By-laws, certified to by the
              Company’s Secretary. 

      	 	 	 

      	 	(c) 	An incumbency certificate with respect to the executive
              officers of the Company, signed by the Company’s
              Secretary. 

      	 	 	 

      	 	(d) 	A certificate of the Secretary of State of Delaware
              as to
              the continued good standing of the
              Company.  

      	 	 	 

      	 	(e)  	Certificates, duly endorsed for
              transfer in
              blank, evidencing all of the Company Shares.

      	 	 	 

      	 	
              (f)

            	
              Minute
                and stock books, ledgers, accounting books and other records of the
                Company, as reasonably required.

            

    

     

    
      	 	
              (g)

            	
              An
                executed management and administrative service agreement in the form
                annexed hereto as Exhibit
                D.

            

    

    

    
      	 	
              (h)

            	
              Documents
                evidencing a Waiver executed by Affinion Group (fka Trilegiant
                Corporation) with respect to certain contractual rights by and between
                the
                Company and Affinion Group. 

            

    

    

    
      	 	
              (i)

            	
              The
                Company Disclosure Schedule in a form acceptable to Brightstar in
                its
                reasonable discretion.

            

    

    

    ARTICLE
      6

    

    CONDITIONS
      TO OBLIGATIONS OF THE COMPANY AND SELLERS

    

    The
      obligations of the Company and Sellers to perform their respective obligations
      hereunder and under the Ancillary Agreements and to consummate the transactions
      contemplated hereby and by the Ancillary Agreements are subject to satisfaction
      of the following conditions:

    

    6.1 Representations
      and Warranties.
      The
      representations and warranties made by BrightStar herein and in the Ancillary
      Agreements shall be true and correct in all material respects on and as of
      the
      Closing Date, as though made on and as of such date (for purposes of this
      Section 6.1, any representation or warranty that is qualified by a materiality
      standard shall be read without regard to any such materiality qualification
      as
      if such qualification were not contained therein), and BrightStar shall deliver
      to the Company and Sellers a certificate, signed by an executive officer of
      BrightStar, to such effect at the Closing;

     

    6.2 No
      Breach.
      BrightStar shall have performed in all material respects all obligations and
      complied in all material respects with all agreements, covenants and conditions
      required under this Agreement and under the Ancillary Agreements to be performed
      or complied with by it prior to the Closing, and shall deliver to the Company
      and Sellers a certificate, signed by an executive officer of BrightStar, to
      such
      effect at the Closing;

    

    6.3 Delivery
      of Stock Certificates.
      BrightStar
      shall have delivered to Sellers and the Investors certificates evidencing the
      shares of Series B Preferred to be issued to such Parties at the
      Closing.

    

    6.4
       Investment
      of $5 million.
      BrightStar
      shall have deposited an aggregate of $5 million into a bank account controlled
      by it for use by the Company. The
      $5
      million will be used for the Company’s working capital and investment purposes.

    

    ARTICLE
      7

    

    CONDITIONS
      TO OBLIGATIONS OF ALL PARTIES

    

    The
      obligations of all parties hereto to perform their respective obligations
      hereunder and under the Ancillary Agreements and to consummate the transactions
      contemplated hereby and by the Ancillary Agreements are subject to satisfaction
      of the following conditions:

    

    
      
         

      

      
        -
          14 -

        
          

        

      

      
         

      

    

    7.1 Litigation;
      Proceedings.
      No
      litigation or other proceeding by any Governmental Body or other third Person
      shall have been commenced that challenges the validity or legality of any of
      the
      transactions contemplated hereby and by the Ancillary Agreements; and no
      judgment order, injunction or decree issued by any Governmental Body or other
      legal restraint or prohibition preventing the consummation of any of such
      transactions shall be in effect. No Law shall have been enacted, entered,
      promulgated or enforced by any Governmental Body that prohibits, materially
      restricts or makes illegal the consummation of any of the transactions
      contemplated hereby or by the Ancillary Agreements.

    

    7.2 Consents;
      Filings.
      All
      material authorizations, consents and exemptions by Governmental Bodies and
      other third Persons shall have been obtained, and all filings required to
      consummate the transactions contemplated hereby and by the Ancillary Agreements,
      including the Certificate of Designations, substantially in the form annexed
      hereto as Exhibit
      E,
      with
      respect to the Series B Preferred shall have been made, and all of the foregoing
      shall be in full force and effect.

    

    7.3 Employment
      Agreements.
      Each
      of
      Pat Dane and Harold Kraft shall have entered into Employment Agreements with
      the
      Company, substantially in the form annexed hereto as Exhibits
      F-1
      and
F-2.
      

    

    ARTICLE
      8

     

    INDEMNIFICATION

     

    8.1 Survival
      of Representations and Warranties.
      All
      the
      representations, warranties, covenants, indemnities and other agreements
      contained in this Agreement shall survive for a period of two years from the
      Closing. 

     

    8.2 Indemnification
      of the Parties. (a) In
      the
      event
      that either BrightStar, on the one hand, or the Company or Sellers, on the
      other
      hand, breaches any of such Party’s representations, warranties and covenants
      contained herein (ignoring, for purposes of determining whether or not any
      such
      breach has occurred, any materiality qualifiers), then BrightStar or (in the
      case of a breach by the Company or Sellers) Sellers shall indemnify, defend
      and
      hold harmless the other Party and its directors, officers, employees, agent,
      representatives or Affiliates (each, an “Indemnified
      Party”)
      from
      and against the entirety of any Adverse Consequences they may suffer through
      and
      after the date of the claim for indemnification resulting from, arising out
      of,
      relating to, in the nature of, or caused by such breach.
      

     

    

    8.3 Matters
      Involving Third Parties. (a)
      If
      any third party shall notify any Indemnified Party with respect to any matter
      (a
“Third
      Party Claim”)
      which
      may give rise to a claim for indemnification against any other Party (the
“Indemnifying
      Party”)
      under
      this Article
      8,
      then
      each Indemnified Party shall promptly notify the Indemnifying Party thereof
      in
      writing; provided,
      however,
      that no
      delay on the part of the Indemnified Party in notifying any Indemnifying Party
      shall relieve the Indemnifying Party from any obligation hereunder unless (and
      then solely to the extent) the Indemnifying Party thereby is actually and
      materially prejudiced.

     

    (b) Any
      Indemnifying Party will have the right to defend the Indemnified Party against
      the Third Party Claim with counsel of its choice reasonably satisfactory to
      the
      Indemnified Party so long as: (i) the Indemnifying Party notifies the
      Indemnified Party in writing within fifteen (15) days after the Indemnified
      Party has given notice of the Third Party Claim that the Indemnifying Party
      will
      indemnify the Indemnified Party from and against the entirety of any Adverse
      Consequences the Indemnified Party may suffer resulting from, arising out of,
      relating to, in the nature of, or caused by the Third Party Claim;
      (ii) the Indemnifying Party provides the Indemnified Party with evidence
      reasonably acceptable to the Indemnified Party that the Indemnifying Party
      will
      have the financial resources to defend against the Third Party Claim and fulfill
      its indemnification obligations hereunder; (iii) the Third Party Claim involves
      only money damages and does not seek an injunction or other equitable relief;
      (iv) settlement of, or an adverse judgment with respect to, the Third Party
      Claim is not, in the good faith judgment of the Indemnified Party, likely to
      establish a precedential custom or practice adverse to the continuing business
      interests of the Indemnified Party; and (v) the Indemnifying Party conducts
      the
      defense of the Third Party Claim actively and diligently.

    

    
      
         

      

      
        -
          15 -

        
          

        

      

      
         

      

    

    (c) So
      long
      as the Indemnifying Party is conducting the defense of the Third Party Claim
      in
      accordance with Section
      8.3(b):
      (i)
      the Indemnified Party may retain separate co-counsel at its sole cost and
      expense and participate in the defense of the Third Party Claim; (ii) the
      Indemnified Party will not consent to the entry of any judgment or enter into
      any settlement with respect to the Third Party Claim without the prior written
      consent of the Indemnifying Party (not to be withheld unreasonably); and (iii)
      the Indemnifying Party will not consent to the entry of any judgment or enter
      into any settlement with respect to the Third Party Claim without the prior
      written consent of the Indemnified Party (not to be withheld
      unreasonably).

    

    (d) In
      the
      event any of the conditions in Section
      8.3(b)
      is or
      becomes unsatisfied: (i) the Indemnified Party may defend against, and consent
      to the entry of any judgment or enter into any settlement with respect to,
      the
      Third Party Claim in any manner it reasonably may deem appropriate (and the
      Indemnified Parties need not consult with, or obtain any consent from, any
      Indemnifying Party in connection therewith); (ii) the Indemnifying Parties
      will
      reimburse the Indemnified Party promptly and periodically for the costs of
      defending against the Third Party Claim (including reasonable attorneys’ fees
      and expenses); and (iii) the Indemnifying Party will remain responsible for
      any
      Adverse Consequences the Indemnified Party may suffer resulting from, arising
      out of, relating to, in the nature of, or caused by the Third Party Claim to
      the
      fullest extent provided in this Article
      8.

    

    

    ARTICLE
      9

    

    EVENTS
      OF DEFAULT; TERMINATION

    

    9.1 Events
      of Default.
      It
      shall
      be an Event of Default under this Agreement and under each of the Ancillary
      Agreements, if any one of the following events shall occur for any reason
      whatsoever (each, an “Event
      of Default”):

    

    (a) If
      BrightStar shall fail to deliver the certificates representing the Series B
      Preferred as provided herein;

    

    (b) If
      Sellers fail to deliver certificates evidencing all of the Company Shares,
      duly
      endorsed for transfer in blank, to BrightStar at the Closing; 

    

    (b) If
      BrightStar shall fail to perform any of its obligations under this Agreement
      or
      any of the Ancillary Agreements, as the case may be, and fails to cure such
      default within ten (10) days after notice thereof from the Company and
      Sellers;

     

    (c) If
      the
      Company or any Seller shall fail to perform any of its or his obligation under
      this Agreement or any of the Ancillary Agreements, as the case may be, and
      Seller fails to cure such default within ten (10) days after notice thereof
      from
      BrightStar; 

    

    (d) Any
      representation, warranty, condition, covenant or agreement made by BrightStar
      in
      this Agreement or in any Ancillary Agreement shall prove to have been incorrect
      in any material respect on or as of the date made or deemed made, and BrightStar
      fails to cure such default within twenty (20) days after notice thereof from
      the
      Company and Sellers; or

     

    (e) Any
      representation, warranty, condition, covenant or agreement made by the Company
      and Sellers in this Agreement or in any Ancillary Agreement shall prove to
      have
      been incorrect in any material respect on or as of the date made or deemed
      made,
      and the Company and Sellers fail to cure such default within ten (10) days
      after
      notice thereof from BrightStar; or(f) The
      Company or any Seller: (i) makes an assignment for the benefit of creditors;
      (ii) admits in writing that it is unable to pay its debts generally as they
      become due; (iii) files a petition in bankruptcy under the Bankruptcy Code;
      (iv)
      has a petition in bankruptcy filed against it which petition is not dismissed
      within thirty (30) days of the filing thereof; (v) consents to the appointment
      of a receiver or trustee for all or a substantial part of its property; (vi)
      has
      a petition filed against it for the appointment of a receiver which petition
      is
      not dismissed within thirty (30) days of the filing thereof; or (vii) commences
      any proceeding under a state or Federal statute permitting readjustment of
      debt;
      or

    

    (g) The
      Company fails to obtain the agreement of the Investors: (i) to convert the
      outstanding principal balances of all Convertible Promissory Notes and the
      exercise of all outstanding company options into Company Common Stock; and
      (ii)
      to include all shares of Company Common Stock issued upon such conversion in
      the
      Company Shares being exchanged for shares of Series B Preferred pursuant to
      this
      Agreement.

    

    9.2. Termination.
      This
      Agreement may be terminated: (i) by the written agreement of the Company,
      Sellers and BrightStar; (ii) by the Company or Sellers, upon the occurrence
      of
      an Event of Default by BrightStar; or (iii) by BrightStar, upon the occurrence
      of an Event of Default by the Company or any Seller.

    

    
      
         

      

      
        -
          16 -

        
          

        

      

      
         

      

    

    9.3 Effect
      of Termination.
      Termination
      of this Agreement shall not constitute or be deemed to be a waiver or release
      of, or otherwise affect, the claims, rights and remedies of the parties arising
      under this Agreement or any Ancillary Agreement. The provisions of Article
      8 and
      Article 10 hereof shall survive termination of this Agreement. 

    

    ARTICLE
      10 

     

    MISCELLANEOUS

     

    10.1 Press
      Releases and Public Announcements.
      None
      of
      the Company, the Sellers or the Investors shall issue any press release or
      make
      any public announcement relating to the subject matter of this Agreement or
      the
      transactions contemplated hereby except as may be required under applicable
      Laws.

     

    10.2 No
      Third Party Beneficiaries.
      This
      Agreement shall not confer any rights or remedies upon any Person other than
      the
      Parties and their respective successors and permitted assigns.

     

    10.3 Entire
      Agreement. This
      Agreement (including any Ancillary Agreements) constitutes the entire agreement
      among the Parties and supersedes any prior understandings, agreements, or
      representations by or among the Parties, written or oral, to the extent they
      related in any way to the subject matter hereof.

    

    10.4 Succession
      and Assignment.
      This
      Agreement shall be binding upon and inure to the benefit of the Parties named
      herein and their respective successors and permitted assigns. No Party may
      assign either this Agreement or any of his or its rights, interests, or
      obligations hereunder without the prior written approval of the other Party;
      provided, however, that any Investor may (i) assign any or all of its
      rights and interests hereunder to one or more of its Affiliates and
      (ii) designate one or more of its Affiliates to perform its obligations
      hereunder (in any or all of which cases the Investor shall no longer remain
      responsible for the performance of all of its obligations
      hereunder).

    

    10.5 Counterparts. This
      Agreement may be executed in two or more counterparts, each of which shall
      be
      deemed an original but all of which together will constitute one and the same
      instrument.

    

    10.6 Headings. The
      section headings contained in this Agreement are inserted for convenience only
      and shall not affect in any way the meaning or interpretation of this
      Agreement.

    

    10.7 Notices.
       All
      notices, consents, waivers and other communications under this Agreement must
      be
      in writing and will be deemed given to a Party when (a) delivered to the
      appropriate address by hand or by nationally recognized overnight courier
      service (costs prepaid), (b) sent by facsimile or e-mail with confirmation
      of transmission by the transmitting equipment, or (c) received or rejected
      by the addressee, if sent by certified mail, return receipt requested; in each
      case to the following addresses, facsimile numbers or e-mail addresses and
      marked to the attention of the individual (by name or title) designated below
      (or to such other address, facsimile number, e-mail address or individual as
      a
      party may designate by notice to the other parties):

     

    If
      to
      BrightStar:

    

    BrightStar
      Information Technology Group, Inc.

    6160
      Stoneridge Mall Road, Suite 250

    Pleasanton,
      CA 94588

    Attention:
      Ian Scott-Dunne

    Telephone
      No.: 925-251-0000

    Facsimile
      No.: 925-251-0001

    E-mail:
      ian@stellarfianancial.com 

    

    With
      a copy (which shall not constitute notice) to: 

     

    Guzov
      Ofsink, LLC

    600
      Madison Avenue, 14th Floor

    New
      York,
      New York 10022

    Attention:
      Darren L. Ofsink

    Telephone
      No.: (212) 371-8008

    Facsimile
      No.: (212) 688-7273

    E-mail:
      dofsink@golawintl.com

    

    
      
         

      

      
        -
          17 -

        
          

        

      

      
         

      

    

    

    If
      to the
      Company:

    

    MyPublicInfo,
      Inc.

    2020
      N
      14th Street, #700

    Arlington,
      Virginia 22201

    Tel:
      (703) 598-1369

    Fax:
      (202) 403-3300

    

    

    With
      a copy (which shall not constitute notice) to:

    

    James
      R.
      Hagerty, Esq.

    Kalbian
      Hagerty LLP

    888
      17th
      Street, NW, Suite 1000 

    Washington,
      DC 20006

    

    

    If
      to
      Sellers:

    

    Harold
      Kraft

    2020
      North 14th Street, #700

    Arlington,
      VA 22201

    C:
      703.598.1369

    O:
      202.575.3000 x 5000

    hhk@MyPublicInfo.com

    

    

    Pat
      Dane

    801
      North
      Caswell

    Southport,
      North Carolina 28461 

    Tel:
      (910) 547-0002

    

    

    With
      a copy (which shall not constitute notice) to: 

    

    James
      R.
      Hagerty, Esq.

    Kalbian
      Hagerty LLP

    888
      17th
      Street, NW, Suite 1000 

    Washington,
      DC 20006

    

    

    If
      to an
      Investor:

    

    The
      address of such Investor as set forth below such Investor’s name on the
      signatory page 

    

    

    10.8  Controlling
      Law; Venue.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York without regard to choice of law provisions, statutes,
      regulations or principles of this or any other jurisdiction. Each Party hereby
      irrevocably submits to the exclusive jurisdiction (including personal
      jurisdiction) of the state and federal courts of the State of New York for
      any
      action, suit or proceeding arising in connection with this Agreement, and agrees
      that any such action suit or proceeding shall be brought only in such court
      (and
      waives any objection based on forum non conveniens or any other jurisdiction
      to
      venue therein). Process
      in any Proceeding under this Agreement may be served on any Party anywhere
      in
      the world. 

     

    
      
         

      

      
        -
          18 -

        
          

        

      

      
         

      

    

    10.9  Amendments
      and Waivers. No
      amendment of any provision of this Agreement shall be valid unless the same
      shall be in writing and signed by the Parties. No waiver by any Party of any
      default, misrepresentation, or breach of warranty or covenant hereunder, whether
      intentional or not, shall be deemed to extend to any prior or subsequent
      default, misrepresentation, or breach of warranty or covenant hereunder or
      affect in any way any rights arising by virtue of any prior or subsequent such
      occurrence. 

     

    10.10  Severability. Any
      term
      or provision of this Agreement that is invalid or unenforceable in any situation
      in any jurisdiction shall not affect the validity or enforceability of the
      remaining terms and provisions hereof or the validity or enforceability of
      the
      offending term or provision in any other situation or in any other jurisdiction.
      Furthermore, in lieu of such invalid or unenforceable provision, there shall
      be
      added automatically as part of this Agreement a provision as similar in terms
      to
      such invalid or unenforceable provision as may be possible and be legal, valid
      and enforceable.

     

    10.11  Expenses.
       Each
      Party shall bear all costs and expenses incurred by it in connection with the
      Agreement and the transactions contemplated hereby. 

     

    10.12  Construction. The
      Parties have participated jointly in the negotiation and drafting of this
      Agreement. In the event an ambiguity or question of intent or interpretation
      arises, this Agreement shall be construed as if drafted jointly by the Parties
      and no presumption or burden of proof shall arise favoring or disfavoring any
      Party by virtue of the authorship of any of the provisions of this Agreement.
      Any reference to any federal, state, local, or foreign statute or law shall
      be
      deemed also to refer to all rules and regulations promulgated thereunder, unless
      the context requires otherwise. The word “including” shall mean including
      without limitation. The Parties intend that each representation, warranty,
      and
      covenant contained herein shall have independent significance. If any Party
      has
      breached any representation, warranty, or covenant contained herein in any
      respect, the fact that there exists another representation, warranty, or
      covenant relating to the same subject matter (regardless of the relative levels
      of specificity) which the Party has not breached shall not detract from or
      mitigate the fact that the Party is in breach of the first representation,
      warranty, or covenant.

     

    10.13  Incorporation
      of Exhibits.
       The
      Exhibits identified in this Agreement are incorporated herein by reference
      and
      made a part hereof.

     

    

    (Remainder
      of page intentionally left blank)

    

    
      
         

      

      
        -
          19 -

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the Parties have executed and delivered this Agreement as
      of
      the date first set forth above.

    

    BRIGHTSTAR
      INFORMATION TECHNOLOGY

    GROUP,
      INC.

    

    

    By:
      _____________________________________       

    Name: 
      _____________________________________       

    Title: 
      _____________________________________       

    

    

    MYPUBLICINFO,
      INC.

    

    

    By: 
      _____________________________________       

    Name: 
      _____________________________________       

    Title: 
      _____________________________________       

    

    

    SELLERS:

    

    

     _____________________________________

    Harold
      Kraft

    

    

     _____________________________________

    Pat
      Dane

    

    

    
      
         

      

      
        -
          20 -

        
          

        

      

      
         

      

    

    

    

    EXHIBIT
      A

    

    INVESTORS

     

     

     

    __________________________________________

    Sondra
      Block

    Address:

    

    

    __________________________________________

    Stewart
      Block

    Address:

    

    

    __________________________________________

    Al
      Hinton

    Address:

    

    __________________________________________

    Don
      Hinton

    Address:

     

    __________________________________________

    Devin
      Hinton

    Address:

     

     

    __________________________________________

    Tod
      Narum

    Address:

     

    __________________________________________

    Laurie
      Narum

    Address:

     

     

    __________________________________________

    Barbara
      Collazo

    Address:

     

     

    __________________________________________

    Mark
      Meninger

    Address:

     

     

    __________________________________________

    Jill
      C.
      Meninger

    Address:

     

     

    __________________________________________

    Anthony
      Besson

    Address:

     

    
      
         

      

      
        -
          21 -

        
          

        

      

      
         

      

    

     

    __________________________________________

    Julie
      Besson

    Address:

     

     

    __________________________________________

    William
      Percich

    Address:

     

     

    __________________________________________

    Monica
      Van Appel Percich

    Address:

     

     

    __________________________________________

    Brett
      Jerome Percich

    Address:

     

     

    __________________________________________

    Steven
      Billmyer

    Address:

     

     

    __________________________________________

    Roberta
      Billmyer

    Address:

     

     

    __________________________________________

    Leisha
      Holmes

    Address:

     

     

    __________________________________________

    Garret
      Holmes 

    Address:

    

    
      
         

      

        -
          22 -THIS
      NOTE HAS 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.

    

    
      	 	 	 
	
              No.
                B1

            	
              U.S.
                $266,000.00

            	
              Original
                Issue Date: May 31, 2006

            
	
              Holder:

            	
              John
                Fife

            	 
	 	 	 
	
              Address:

            	
              303
                East Wacker Drive

            	 
	 	
              Suite
                301

            	 
	 	
              Chicago,
                IL 60601

            	 

    

    

     SERIES
      2006 SECURED NOTE DUE AUGUST 12, 2006

    

    THIS
      Note
      is one of a duly authorized issue of Notes of POWER 3 MEDICAL PRODUCTS, INC.,
      a
      New York corporation, having a principal place of business at 3400 Research
      Forest Drive, The Woodlands, Texas 77381 (the “Company”),
      designated as its Note (the “Note”),
      due
      upon the earlier of (i) August 12, 2006; or (ii) on the fifth day following
      the
      effective date of the Company’s registration statement on Form SB-2 (file no.
      ________) (“Maturity Date”), in an aggregate face amount of up Two Hundred Sixty
      Six Thousand and 00/100 Dollars ($266,000.00). 

    

    FOR
      VALUE
      RECEIVED, the Company promises to pay to the Holder or registered assigns,
      the
      principal sum of Two Hundred Sixty Six Thousand and 00/100 Dollars
      ($266,000.00), on the Maturity Date. Upon default, all amounts due hereunder
      shall bear interest at the rate of 18% per annum from the day such interest
      is
      due hereunder through and including the date of payment. If any payment is
      not
      received by the Holder within fifteen (15) days
      following its due date, without limiting any right or remedy under this Note,
      the Holder may charge a late fee equal to one and one-half (1.5%) percent of
      the
      total amount overdue. The principal of, and interest on, this Note are payable
      in such coin or currency of the United States of America as at the time of
      payment is legal tender for payment of public and private debts, at the address
      of the Holder last appearing on the Note Register.

    

    This
      Note
      is subject to the following additional provisions:

    

    Section
      1.
      The
      Notes are exchangeable for an equal aggregate principal amount of Notes of
      different authorized denominations, as requested by the Holder surrendering
      the
      same but shall not be issuable in denominations of less than integral multiples
      of Twenty Thousand Dollars ($20,000) unless such amount represents the full
      principal balance of Notes outstanding to such Holder. No service charge will
      be
      made for such registration of transfer or exchange.

    

    Section
      2. 

     

    (a) The
      Holder, by acceptance hereof, agrees to give written notice to the Company
      before transferring this Note; such notice will describe briefly the proposed
      transfer and will give the Company the name, address, and tax identification
      number of the proposed transferee, and will further provide the Company with
      an
      opinion of the Holder’s counsel that such transfer can be accomplished in
      accordance with federal and applicable state securities laws (unless such
      transaction is permitted by the plan of distribution in an effective
      Registration Statement). Promptly upon receiving such written notice, the
      Company shall present copies thereof to the Company’s counsel. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (i) If
      in the
      opinion of such counsel the proposed transfer may be effected without
      registration or qualification (under any federal or state securities laws),
      the
      Company, as promptly as practicable, shall notify the Holder of such opinion,
      whereupon the Holder shall be entitled to transfer this Note or to dispose
      of
      Underlying Shares received upon the previous conversion of this Note, all in
      accordance with the terms of the notice delivered by the Holder to the Company;
      provided that an appropriate legend may be endorsed on this Note respecting
      restrictions upon transfer thereof necessary or advisable in the opinion of
      counsel and satisfactory to the Company to prevent further transfers which
      would
      be in violation of Section 5 of the Securities Act and applicable state
      securities laws; and provided further that the prospective transferee or
      purchaser shall execute such documents and make such representations,
      warranties, and agreements as may be required solely to comply with the
      exemptions relied upon by the Company for the transfer or disposition of the
      Note.

     

    (ii) If
      in the
      opinion of the counsel referred to in this Section 2, the proposed transfer
      or
      disposition of this Note described in the written notice given pursuant to
      this
      Section 2 may not be effected without registration or qualification of this
      Note, the Company shall promptly give written notice thereof to the Holder,
      and
      the Holder will limit its activities in respect to such as, in the opinion
      of
      such counsel, are permitted by law.

     

    (b) Prior
      to
      transfer of this Note in compliance with this Section 2, the Company and any
      agent of the Company may treat the person in whose name this Note is duly
      registered on the Note Register as the owner hereof for the purpose of receiving
      payment as herein provided and for all other purposes, whether or not this
      Note
      is overdue, and neither the Company nor any such agent shall be affected by
      notice to the contrary.

    

    Section
      3. Events
      of Default.

     

    "Event
      of Default"
      wherever used herein, means any one of the following events (whatever the reason
      and whether it shall be voluntary or involuntary or effected by operation of
      law
      or pursuant to any judgment, decree or order of any court, or any order, rule
      or
      regulation of any administrative or governmental body):

    

    (i) any
      default in the payment of the principal of, interest on, or other obligations
      in
      respect of, this Note, free of any claim of subordination, as and when the
      same
      shall become due and payable, (whether on the Maturity Date or by acceleration
      or otherwise);

    

    (ii) the
      Company or any Pledgor shall fail to observe or perform any other covenant,
      agreement or warranty contained in, or otherwise commit any breach of, this
      Note
      or the Stock Pledge Agreement, including but not limited to the obligation
      of
      the Pledgor to issue additional Collateral , and such failure or breach shall
      not have been remedied within 10 days after the date on which notice of such
      failure or breach shall have been given;

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (iii) the
      Company shall commence a voluntary case under the United States Bankruptcy
      Code
      or insolvency laws as now or hereafter in effect or any successor thereto (the
      "Bankruptcy
      Code");
      or an
      involuntary case is commenced against the Company under the Bankruptcy Code
      and
      the petition is not controverted within 30 days, or is not dismissed within
      60
      days, after commencement of such involuntary case; or a "custodian" (as defined
      in the Bankruptcy Code) is appointed for, or takes charge of, all or any
      substantial part of the property of the Company or the Company commences any
      other proceeding under any reorganization, arrangement, adjustment of debt,
      relief of debtors, dissolution, insolvency or liquidation or similar law of
      any
      jurisdiction whether now or hereafter in effect relating to the Company or
      there
      is commenced against the Company any such proceeding which remains undismissed
      for a period of 60 days; or the Company is adjudicated insolvent or bankrupt;
      or
      any order of relief or other order approving any such case or proceeding is
      entered; or the Company suffers any appointment of any custodian or the like
      for
      it or any substantial part of its property which continues undischarged or
      unstayed for a period of 60 days; or the Company makes a general assignment
      for
      the benefit of creditors; or the Company shall fail to pay, or shall state
      that
      it is unable to pay its debts generally as they become due; the Company shall
      call a meeting of all of its creditors with a view to arranging a composition
      or
      adjustment of its debts; or the Company shall by any act or failure to act
      indicate its consent to, approval of or acquiescence in any of the foregoing;
      or
      any corporate or other action is taken by the Company for the purpose of
      effecting any of the foregoing;

    

    (iv) the
      Company shall default in any of its obligations under any mortgage, credit
      agreement or other facility, indenture, agreement or other instrument under
      which there may be issued, or by which there may be secured or evidenced any
      indebtedness of the Company in an amount exceeding $2,000,000.00, whether such
      indebtedness now exists or shall hereafter be created and such default shall
      result in such indebtedness becoming or being declared due and payable prior
      to
      the date on which it would otherwise become due and payable; 

    

    (v) the
      Company shall be a party to any Change of Control Transaction (as defined in
      Section 6), shall agree to sell or dispose of all or in excess of 49% of its
      assets (based on book value calculation as reflected in the Company’s most
      recent financial statements) in one or more transactions (whether or not such
      sale would constitute a Change of Control Transaction); or

    

    (vi) The
      Company shall have its Common Stock suspended or delisted from trading for
      in
      excess of three (3) Trading Days:

    

    Section
      4. Interest
      Rate Limitation.
      The
      parties intend to conform strictly to the applicable usury laws in effect from
      time to time during the term of the Loan. Accordingly, if any transaction
      contemplated hereby would be usurious under such laws, then notwithstanding
      any
      other provision hereof: (i) the aggregate of all interest that is contracted
      for, charged, or received under this Agreement or under any other Loan Document
      shall not exceed the maximum amount of interest allowed by applicable law (the
      "Highest Lawful Rate"), and any excess shall be promptly credited to Borrower
      by
      Lender (or, to the extent that such consideration shall have been paid, such
      excess shall be promptly refunded to Borrower by Lender); (ii) neither Borrower
      nor any other Person now or hereafter liable hereunder shall be obligated to
      pay
      the amount of such interest to the extent that it is in excess of the Highest
      Lawful Rate; and (iii) the effective rate of interest shall be reduced to the
      Highest Lawful Rate. All sums paid, or agreed to be paid, to Lender for the
      use,
      forbearance, and detention of the debt of Borrower to Lender shall, to the
      extent permitted by applicable law, be allocated throughout the full term of
      the
      Note until payment is made in full so that the actual rate of interest does
      not
      exceed the Highest Lawful Rate in effect at any particular time during the
      full
      term thereof. If at any time the rate of interest under the Note exceeds the
      Highest Lawful Rate, the rate of interest to accrue pursuant to this Agreement
      shall be limited, notwithstanding anything to the contrary in this Agreement,
      to
      the Highest Lawful Rate, but any subsequent reductions in the Base Rate shall
      not reduce the interest to accrue pursuant to this Agreement below the Highest
      Lawful Rate until the total amount of interest accrued equals the amount of
      interest that would have accrued if a varying rate per annum equal to the
      interest rate under the Note had at all times been in effect. If the total
      amount of interest paid or accrued pursuant to this Agreement under the
      foregoing provisions is less than the total amount of interest that would have
      accrued if a varying rate per annum equal to the interest rate under the Note
      had been in effect, then Borrower agrees to pay to Lender an amount equal to
      the
      difference between (x) the lesser of (A) the amount of interest that would
      have
      accrued if the Highest Lawful Rate had at all times been in effect, or (B)
      the
      amount of interest that would have accrued if a varying rate per annum equal
      to
      the interest rate under the Note had at all times been in effect, and (y) the
      amount of interest accrued in accordance with the other provisions of this
      Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Section
      5. Prepayment.

    

    (a) The
      Company shall have the right to prepay this Note in whole or in part thereon
      prior to the Maturity Date. 

    

    (b) The
      Company shall give at least five (5) business days, but not more than ten (10)
      business days, written notice of any intention to prepay this Note prior to
      the
      Maturity Date to the Holder which notice shall specify the “Prepayment
      Date”.

    

    Section
      6. Definitions.
      For the
      purposes hereof, the following terms shall have the following
      meanings:

    

    "Business
      Day"
      means
      any day except Saturday, Sunday and any day which shall be a legal holiday
      or a
      day on which banking institutions in the State of New York are authorized or
      required by law or other government action to close.

    

    "Change
      of Control Transaction"
      means
      the occurrence of any of (i) an acquisition after the date hereof by an
      individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
      promulgated under the Exchange Act) of in excess of 49% of the voting securities
      of the Company coupled with a replacement of more than one-half of the members
      of the Company's board of directors which is not approved by those individuals
      who are members of the board of directors on the date hereof in one or a series
      of related transactions, or (ii) the merger of the Company with or into another
      entity, consolidation or sale of all or substantially all of the assets of
      the
      Company in one or a series of related transactions, unless following such
      transaction, the holders of the Company's securities continue to hold at least
      40% of such securities following such transaction. The execution by the Company
      of an agreement to which the Company is a party or by which it is bound
      providing for any of the events set forth above in (i) or (ii) does not
      constitute the occurrence of the event until after the event in fact occurs.
      

    

    Section
      7. Except
      as
      expressly provided herein, no provision of this Note shall alter or impair
      the
      obligation of the Company, which is absolute and unconditional, to pay the
      principal of, interest and liquidated damages (if any) on, this Note at the
      time, place, and rate, and in the coin or currency, herein prescribed. This
      Note
      is a direct obligation of the Company. 

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Section
      8. If
      this
      Note shall be mutilated, lost, stolen or destroyed, the Company shall execute
      and deliver, in exchange and substitution for and upon cancellation of a
      mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed
      Note, a new Note for the principal amount of this Note so mutilated, lost,
      stolen or destroyed but only upon receipt of evidence of such loss, theft or
      destruction of such Note, and of the ownership hereof, and indemnity, if
      requested, all reasonably satisfactory to the Company.

    

    Section
      9. Legal
      Expenses.

    

    In
      consideration the agreements herein and in order to induce the Holder to make
      and maintain the Loan pursuant to the Note, the Company hereby agrees to pay
      the
      reasonable fees and expenses of one counsel for the Holder. 

    

    Section
      10. Choice
      of Law and Venue; Submission to Jurisdiction; Service of Process.

    

    (a) The
      validity of this note, its construction, interpretation, and enforcement, and
      the rights of the parties hereto shall be determined under, governed by, and
      construed in accordance with the laws of the state of New York (without
      reference to the choice of law principles thereof). The parties agree that
      all
      actions or proceedings arising in connection with this note shall be tried
      and
      litigated only in the state and federal courts located in the county of New
      York, state of New York or, at the sole option of holder, in any other court
      in
      which holder shall initiate legal or equitable proceedings and which has subject
      matter jurisdiction over the matter in controversy. 

    

    (b) company
      hereby submits for itself and in respect of its property, generally and
      unconditionally, to the jurisdiction of the aforesaid courts and waives, to
      the
      extent permitted under applicable law, any right it may have to assert the
      doctrine of forum non conveniens or to object to venue to the extent any
      proceeding is brought in accordance with this section. 

    

    (c) company
      hereby waives personal service of the summons, complaint, or other process
      issued in any action or proceeding and agrees that service of such summons,
      complaint, or other process may be made by registered or certified mail
      addressed to company.

    

    (d) nothing
      in this agreement shall be deemed or operate to affect the right of holder
      to
      serve legal process in any other manner permitted by law, or to preclude the
      enforcement by holder of any judgment or order obtained in such forum or the
      taking of any action under this agreement to enforce same in any other
      appropriate forum or jurisdiction.

    

    (e)
       To
      the
      extent determined by such court, the Company shall reimburse the Holder for
      any
      reasonable legal fees and disbursements incurred by the Holder in enforcement
      of
      or protection of any of its rights under any of this Note.

    

    Section
      11. Any
      waiver by the Company or the Holder of a breach of any provision of this Note
      shall not operate as or be construed to be a waiver of any other breach of
      such
      provision or of any breach of any other provision of this Note. The failure
      of
      the Company or the Holder to insist upon strict adherence to any term of this
      Note on one or more occasions shall not be considered a waiver or deprive that
      party of the right thereafter to insist upon strict adherence to that term
      or
      any other term of this Note. Any waiver must be in writing.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    Section
      12. 
      If any
      provision of this Note is invalid, illegal or unenforceable, the balance of
      this
      Note shall remain in effect, and if any provision is inapplicable to any person
      or circumstance, it shall nevertheless remain applicable to all other persons
      and circumstances.

     

    Section
      13. Whenever
      any payment or other obligation hereunder shall be due on a day other than
      a
      Business Day, such payment shall be made on the next succeeding Business Day
      (or, if such next succeeding Business Day falls in the next calendar month,
      the
      preceding Business Day in the appropriate calendar month).

    

    Section
      14. Security.
      The
      obligation of the Company for payment of principal, interest and all other
      sums
      hereunder, in the event of a default and failure of the Company to perform
      hereunder, is secured by the pledge of certain securities (the “Pledged
      Shares”)
      by
      Steven B. Rash and Ira Goldknopf as Pledgors under the terms and conditions
      of a
      Stock Pledge Agreement, and a Guaranty executed and delivered by such
      parties.

    

    Section
      15.
      Registration
      Rights.
      If,
      at
      any time prior to payment in full of this Note, the Company participates
      (whether voluntarily or by reason of an obligation to a third party) in the
      registration of any shares of the Company’s stock (other than a registration on
      Form S-4, S-8 or successor form), the Company shall give written notice thereof
      to the Holder and the Holder shall have the right, exercisable within ten (10)
      business days after receipt of such notice, to demand inclusion of all or a
      portion of the Pledged Shares in such registration statement. If the Holder
      exercises such election, the Pledged Shares so designated shall be included
      in
      the registration statement at no cost or expense to the Holder (other than
      any
      costs or commissions which would be borne by the Holder ). The Holder’s rights
      under this Section 7 shall expire at such time as the Holder can sell all of
      the
      Pledged Shares under Rule 144(k) without volume or other restrictions or
      limit.

    

    Section
      16.
      Waiver
      of Jury Trial.
      Company
      hereby waives its respective rights to a jury trial of any claim or cause of
      action based upon or arising out of this Note. Company represents that it has
      reviewed this waiver and knowingly and voluntarily waives its jury trial rights
      following consultation with legal counsel. In the event of litigation, a copy
      of
      this agreement may be filed as a written consent to a trial by the
      court.

    

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    IN
      WITNESS WHEREOF,
      the
      Company has caused this instrument to be duly executed by an officer duly
      authorized for such purpose, as of the date first above indicated.

     

    
      	 	
              POWER
                3 MEDICAL PRODUCTS, INC.

               

              

              By:
                /s/:
                Steven B.
                Rash                                       
                

              Steven
                B. Rash, Chief Executive Officer

            

    

    

    Attest:

    

    

    By:
      /s/:
      Linh
      Rivera

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