Document:

EXHIBIT
      10.1

     

    PURCHASE
      AGREEMENT

     

    THIS
      PURCHASE AGREEMENT (the “Agreement”)
      is
      dated as of August 1, 2008 by and among ACT-DE LLC, a Delaware limited liability
      company (“HIG”),
      the
      other “Buyer” parties identified on Schedule 1 hereto (collectively with HIG,
      the “Buyers”),
      and
      ENCOMPASS GROUP AFFILIATES, INC., formerly ADVANCED COMMUNICATIONS TECHNOLOGIES,
      INC., a Florida corporation (the “Company”).

     

    RECITALS:

     

    The
      parties have reached an agreement pursuant to which the Buyers shall make an
      investment in the Company, and the Company shall issue and sell to the Buyer
      shares of Series E Preferred Stock, par value $0.01 per share (the “Series
      E Preferred Stock”),
      of
      the Company all in accordance with the terms hereof.

     

    AGREEMENT:

     

    NOW,
      THEREFORE, in consideration of the mutual premises herein set forth and certain
      other good and valuable consideration, the receipt and sufficiency of which
      is
      hereby acknowledged, the parties hereto agree as follows:

     

    1. ISSUANCE
      OF SHARES AND RELATED TRANSACTIONS.

     

    1.1. Issuance
      of Shares.
      At
      Closing (as defined below), subject to the terms, restrictions and conditions
      of
      this Agreement, each Buyer shall purchase from the Company, and the Company
      shall sell, issue and deliver to each Buyer the number of shares of Series
      E
      Preferred Stock (the “Buyer Stock”)
      set
      forth on Schedule 1 hereto, which shall have the rights and designations set
      forth in the Certificate of Designation attached hereto as Exhibit A (the
“Certificate of Designation”).
      The
      Buyer Stock shall be sold by the Company to the Buyers free and clear of all
      liens, claims, pledges, mortgages, restrictions, obligations, security interests
      and encumbrances of any kind, nature and description (collectively,
“Encumbrances”).

     

    1.2. Purchase
      Price.
      The
      aggregate purchase price (the “Purchase
      Price”)
      for
      the Buyer Stock shall be $4,166.66 per share and shall be paid by the Buyers
      to
      the Company in immediately available funds on the Closing Date (as set forth
      in
      Section 1.3 hereof).

     

    1.3. Closing.
      The
      parties to this Agreement shall consummate the transactions contemplated by
      this
      Agreement at an initial closing (the “Closing”)
      to be
      held on August 1, 2008. The date of the initial Closing is referred to herein
      as
      the “Closing Date.”
The
      Closing shall take place at the offices of counsel to HIG, or at such other
      place as may be mutually agreed upon by the Buyers and the Company. At the
      Closing:

     

    (a) The
      Company shall deliver to the Buyers a filed copy of the Certificate of
      Designation certified by the Florida Department of State.

     

    (b) The
      Company shall deliver to each Buyer certificates representing the Buyer Stock
      (as set forth on Schedule
      1),
      free
      and clear of any Encumbrances.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c) The
      Buyers shall pay to the Company the Purchase Price by wire transfer of
      immediately available funds to an account to be designated by the
      Company.

     

    1.4. Subsequent
      Closing.
      The
      Company may sell additional shares of Series E Preferred Stock to the holders
      of
      the Company’s Series D Preferred Stock (the “Series
      D Stockholders”)
      set
      forth on Schedule 1A hereto in up to the amounts set forth on such schedule
      at a
      subsequent Closing to be held not later than August 13, 2008 (the “Subsequent
      Closing”).
      The
      Buyers, other than HIG, may elect to purchase at the Subsequent Closing, for
      the
      Purchase Price per share, any or all of the shares of Series E Preferred Stock
      described on Schedule 1A that are not purchased by the Series D Stockholders.
      The Company will notify such Buyers of the number of such shares that will
      not
      be purchased by the Series D Stockholders at the Subsequent Closing not later
      than August 8, 2008. Any such Buyer shall notify the Company of its election
      to
      purchase such shares not later than two (2) business days after the delivery
      of
      such notice by the Company. Unless otherwise agreed to among such Buyers, any
      such shares shall be purchased by such Buyers pro rata based on the number
      shares purchased by each such Buyer at the initial Closing. At the Subsequent
      Closing (if any), (i) each Series D Stockholder purchasing shares of Series
      E
      Preferred Stock shall execute a joinder to this Agreement (in a form
      satisfactory to the Company) as a “Buyer” hereunder for purposes of the
      Subsequent Closing, (ii) each Buyer participating in the Subsequent Closing
      shall pay to the Company, by wire transfer of immediately available funds to
      an
      account to be designated by the Company, the aggregate Purchase Price for the
      shares to be purchased by such Buyer and (iii) the Company shall deliver to
      each
      such Buyer certificates representing the Buyer Stock purchased by such Buyer
      at
      the subsequent Closing, free and clear of any Encumbrances.

     

    2. ADDITIONAL
      COVENANTS.

     

    2.1. Public
      Announcements.
      The
      parties will consult with each other before issuing any press releases or
      otherwise making any public statement with respect to this Agreement or any
      of
      the transactions contemplated hereby and no party will issue any such press
      release or make any such public statement without the prior written consent
      of
      the other party, except as may be required by law or by the rules and
      regulations of any governmental authority or securities exchange.

     

    2.2. Access
      and Inspection, Etc.
      The
      Company shall allow the Buyers and their authorized representatives full access
      during normal business hours from and after the date hereof and prior to the
      Closing Date to all of the properties, books, contracts, commitments and records
      of the Company for the purpose of making such investigations as the Buyers
      may
      reasonably request in connection with the transactions contemplated hereby,
      and
      shall cause the Company to furnish any Buyer with such information concerning
      its affairs as such Buyer may reasonably request. The Company has caused and
      shall cause its personnel to assist the Buyers in making such investigation
      and
      shall use their best efforts to cause the counsel, accountants and other
      non-employee representatives of the Company to be reasonably available to Buyers
      for such purposes.

     

    2.3. Further
      Assurances.
      The
      parties shall deliver any and all other instruments or documents required to
      be
      delivered pursuant to, or necessary or proper in order to give effect to, the
      provisions of this Agreement, including, without limitation, to issue the Buyer
      Stock and to consummate the transactions contemplated by this
      Agreement.

     

    
      
        
        

      

      
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    2.4. Notification.
      Each
      party to this Agreement shall promptly notify the other parties in writing
      of
      the occurrence, or threatened occurrence, of any event that would constitute
      a
      breach or violation of this Agreement by any party or that would cause any
      representation or warranty made by the notifying party in this Agreement to
      be
      false or misleading in any respect. The Company will promptly notify the Buyers
      of any event that could have a material adverse effect on the business, assets,
      financial condition or prospects of the Company. The Company shall have the
      right to update the Schedules to this Agreement immediately prior to Closing;
      provided, that if such update discloses any breach of a representation,
      warranty, covenant or obligation of the Company, then the Buyers shall have
      the
      right to then exercise its available rights and remedies hereunder.

     

    3. REPRESENTATIONS,
      COVENANTS AND WARRANTIES OF THE COMPANY.

     

    To
      induce
      Buyers to enter into this Agreement and to consummate the transactions
      contemplated hereby, the Company represents and warrants to and covenants with
      the Buyers, as of the Closing, as follows:

     

    3.1. Organization;
      Compliance.
      The
      Company and each Subsidiary (as defined below) is a corporation or limited
      liability company duly organized, validly existing and in good standing under
      the laws of its jurisdiction of organization. The Company and each Subsidiary
      is: (a) entitled to own or lease its properties and to carry on its business
      in
      all material respects as and in the places where such business is now conducted,
      and (b) duly licensed and qualified in all jurisdictions where the character
      of
      the property owned by it or the nature of the business transacted by it makes
      such license or qualification necessary.

     

    3.2. Capitalization
      and Related Matters.

     

    (a) The
      Company has an authorized capital consisting of 230,000,000,000 shares of Common
      Stock and 25,000,000 shares in total of Series A-2 Convertible Preferred Stock,
      Series D Convertible Preferred Stock, Series C Preferred Stock and collectively
      with the Series E Preferred Stock, “Preferred Stock”,
      of
      which 13,489,918,237 shares of Common Stock and 3,000 shares of Preferred Stock
      are issued and outstanding as of the date hereof (after giving effect to the
      transactions contemplated hereby) as set forth on Schedule
      3.2(a)
      hereto.
      All of the outstanding shares of the Company’s capital stock are, and
      immediately after the Closing will be, validly issued and outstanding, fully
      paid and non-assessable. No such stock (i) was issued in violation of the
      preemptive rights of any shareholder or (ii) is held as treasury stock. All
      of
      the outstanding capital stock of the Company was issued in compliance with
      all
      applicable federal and state securities or “blue sky” laws and
      regulations.

     

    (b) Except
      as
      set forth on Schedule 3.2(b) hereto, there are no outstanding securities
      convertible into Common Stock or any other capital stock of the Company nor
      any
      rights to subscribe for or to purchase, or any options for the purchase of,
      or
      any agreements providing for the issuance (contingent or otherwise) of, or
      any
      calls, commitments or claims of any character relating to, such capital stock
      or
      securities convertible into such capital stock (collectively, “Securities Rights”).
      Except as set forth on Schedule 3.2 hereto the Company (i) is not subject to
      any
      obligation (contingent or otherwise) to repurchase or otherwise acquire or
      retire any of its capital stock; or (ii) has no liability for dividends or
      other
      distributions declared or accrued, but unpaid, with respect to any capital
      stock.

     

    
      
        
        

      

      
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    (c) Except
      as
      set forth on Schedule 3.2(c) hereto, the Company is not a party to any
      agreement, understanding or arrangement, direct or indirect, relating to any
      class or series of the Company’s capital stock, including, without limitation,
      any voting agreement, restriction on resale, shareholder agreement or
      registration rights agreement.

     

    3.3. Subsidiaries
      and Investments.

     

    (a) Schedule
      3.3(a) sets forth, with respect to each Subsidiary (as defined below), (i)
      its
      name, (ii) the jurisdiction of its organization, the number of its authorized
      shares or other equity interests, (iii) the number of its outstanding shares
      or
      other equity interests of each class or series and (iv) the name of the owner
      and the number and percentage of outstanding shares or other equity interests
      of
      each class or series of such Subsidiary owned of record and, if different,
      owned
      beneficially by the Company and any other person. All of the outstanding capital
      stock and other equity interests of each of the Subsidiaries is validly issued,
      fully paid and nonassessable and was issued in compliance with all applicable
      federal and state securities or “blue sky” laws and regulations. There are no
      Securities Rights relating to any shares of capital stock, other equity
      interests or other securities of any of the Subsidiaries. The Company and the
      Subsidiaries have good, marketable and exclusive title to the shares or other
      equity interests disclosed on Schedule 3.3(a) as being owned by each of them,
      free and clear of all Encumbrances. All rights and powers to vote such shares
      or
      other equity interests are held exclusively by the Company, directly or
      indirectly through one or more of the Subsidiaries, as the case may be. For
      the
      purposes hereof, a “Subsidiary”
means
      any corporation, limited liability company, partnership, joint venture or other
      entity in which the Company owns, directly or indirectly, more than 50% of
      the
      outstanding voting securities or equity interests.

     

    (b) Except
      as
      disclosed on Schedule 3.3(b), since August 17, 2007 the Company has not owned
      any equity interest in any corporation, limited liability company, partnership,
      joint venture or other entity.

     

    3.4. Enforceability;
      Authority; Execution; No Inconsistent Agreements; Etc.

     

    (a) This
      Agreement is a valid and binding agreement of the Company, enforceable in
      accordance with its terms, except as such enforcement may be limited by
      bankruptcy or similar laws affecting the enforcement of creditors’ rights
      generally, and the availability of equitable remedies.

     

    
      
        
        

      

      
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    (b) The
      execution and delivery of this Agreement by the Company does not, and the
      consummation of the transactions contemplated hereby will not, constitute a
      breach or violation of the charter or bylaws of the Company, or a default under
      any of the terms, conditions or provisions of (or an act or omission that would
      give rise to any right of termination, cancellation or acceleration under)
      any
      note, bond, mortgage, lease, indenture, agreement or obligation to which the
      Company is a party, pursuant to which the Company otherwise receives benefits,
      or to which any of the properties of the Company is subject. The Company has
      all
      requisite power and full legal right to enter into this Agreement and to enter
      into the transactions contemplated hereby, and to perform all of its agreements
      and obligations hereunder and thereunder, each in accordance with their
      respective terms. This Agreement and the transactions contemplated hereby have
      been approved in accordance with the charter and bylaws of the Company as well
      as the provisions of the Florida Business Corporation Act (including, without
      limitation, Section 607.0832 and Section 607.0901 thereof.

     

    3.5. Corporate
      Records.
      The
      statutory records, including the stock register and minute books of the Company,
      fully reflect all issuances, transfers and redemptions of its capital stock,
      correctly show and will correctly show the total number of shares of its capital
      stock issued and outstanding on the Closing Date, the charter or other
      organizational documents and all amendments thereto, and bylaws as amended
      and
      currently in force. Copies of all such materials have been previously delivered
      to the Buyers by or on behalf of the Company.

     

    3.6. Financial
      Statements; SEC Reporting.

     

    (a) The
      SEC
      Reports (as defined below) contain (i) the audited consolidated financial
      statements of the Company including the consolidated balance sheet of the
      Company and the Subsidiaries as of June 30, 2007, and the consolidated
      statements of operations and cash flow of the Company
      and the
      Subsidiaries
      for the
      fiscal year ended June 30, 2007 as reported on the Company’s Form 10KSB/A and
      (ii) the unaudited consolidated financial statements of the Company including
      the consolidated balance sheet of the Company and the Subsidiaries as of March
      31, 2008 and the consolidated statements of operations and cash flow of the
      Company and the Subsidiaries for the nine months ended March 31, 2008. All
      the
      foregoing financial statements are referred to herein collectively as the
“Company Financial Statements.”

     

    (b) The
      Company Financial Statements have been and will be prepared in accordance with
      U.S. GAAP, applied on a consistent basis (except that the unaudited statements
      do not contain all the disclosures required by GAAP), and fairly reflect and
      will reflect in all material respects the financial condition of the Company
      and
      the Subsidiaries as of the dates thereof and the results of the operations
      of
      the Company and the Subsidiaries for the periods then ended. The Company and
      its
      Subsidiaries (i) make and keep and, for all periods covered by the Company
      Financial Statements, have made and kept books, records and accounts which,
      in
      reasonable detail, accurately and fairly reflect the transactions and
      dispositions of the assets of the Company and its Subsidiaries, and (ii)
      maintain and, for all periods covered by the Financial Statements, have
      maintained a system of internal accounting controls sufficient to provide
      reasonable assurances that transactions are recorded as necessary to permit
      preparation of financial statements in conformity with GAAP. The Company’s and
      its Subsidiaries’ auditors have not notified the Company or any of its
      Subsidiaries of any deficiencies in the design or operation of the Company’s or
      any of its Subsidiaries’ internal controls in connection with its audits of the
      Company Financial Statements.

     

    
      
        
        

      

      
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    (c) Except
      as
      set forth on Schedule 3.6(c), since August 17, 2007, the Company has timely
      filed all reports, schedules, forms, statements and other documents (the
“SEC Reports”)
      required to be filed by it with the United States Securities and Exchange
      Commission (the “Commission”)
      pursuant to reporting requirements under the Exchange Act of 1934, as amended
      (the “Exchange Act”).
      Except as set forth on Schedule 3.6(c), as of their respective dates, the SEC
      Reports complied in all material respects with the requirements of the Exchange
      Act and the rules and regulations of the Commission promulgated thereunder.
      The
      SEC Reports, as of their respective dates, did not contain any untrue statement
      of material fact or omit any material fact required to be stated therein or
      necessary to make the statements therein, in light of the circumstances under
      which they were made, not misleading.

     

    3.7. Liabilities.
      Neither
      the Company nor any Subsidiary has any material debt, liability or obligation
      of
      any kind, whether accrued, absolute, contingent or otherwise, except: (a) those
      reflected in the Company Financial Statements, including the notes thereto,
      and
      (b) liabilities incurred in the ordinary course of business
      thereafter.

     

    3.8. Absence
      of Changes.
      Except
      as described in Schedule 3.8 and in the other Schedules to this Agreement,
      from
      the date of the most recent Company Financial Statements to the date of this
      Agreement:

     

    (a) there
      has
      not been any adverse change in the business, assets, liabilities, results of
      operations or financial condition of the Company or any Subsidiary or in each
      of
      their relationships with suppliers, customers, employees, lessors or others
      other than changes in the ordinary course of business, none of which, singularly
      or in the aggregate, have had or will have a material adverse effect on the
      business, properties or financial condition of the Company or any Subsidiary,
      except for the incurrence of additional accrued expenses in connection with
      the
      transactions contemplated by this Agreement, including the acquisition of
      Tritronics, Inc. (all of which have been paid as of the date hereof);
      and

     

    (b) the
      Company and each Subsidiary has complied with the covenants and restrictions
      set
      forth in Section 5 to the same extent as if this Agreement had been executed
      on,
      and had been in effect since, the date of the most recent Company Financial
      Statements.

     

    3.9. Title
      to Properties.
      The
      Company and each Subsidiary has good and marketable title to all of its
      properties and assets, real and personal, including, but not limited to, those
      reflected in the Company Financial Statements (except as since sold or otherwise
      disposed of in the ordinary course of business, or as expressly provided for
      in
      this Agreement), free and clear of all Encumbrances of any kind or character
      except: (a) those securing liabilities of the Company or any Subsidiary incurred
      in the ordinary course (with respect to which no material default exists);
      and
      (b) imperfections of title and Encumbrances, if any, which, in the aggregate
      (i)
      are not substantial in amount; (ii) do not detract from the value of the
      property subject thereto or impair the operations of the Company or any
      Subsidiary; and (iii) do not have a material adverse effect on the business,
      properties or assets of the Company or any Subsidiary.

     

    3.10. Compliance
      With Law.
      The
      business and activities of the Company and each Subsidiary has at all times
      since August 17, 2007 been conducted in accordance with its charter and bylaws
      (or other governing documents) and any applicable law, regulation, ordinance,
      order, License (defined below), permit, rule, injunction or other restriction
      or
      ruling of any court or administrative or governmental agency, ministry, or
      body,
      including, without limitation, the Exchange Act, the Securities Act of 1933,
      as
      amended (the “Securities Act”),
      the
      Sarbanes-Oxley Act of 2002 and the rules and regulations of the Commission
      promulgated under those acts, except where the failure to do so would not result
      in a material adverse effect on the Company or any Subsidiary.

     

    
      
        
        

      

      
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    3.11. Taxes.
      The
      Company and each Subsidiary has duly filed all material federal, state, local
      and foreign tax returns and reports, and all returns and reports of all other
      governmental units having jurisdiction with respect to taxes imposed on it
      or on
      its income, properties, sales, franchises, operations or employee benefit plans
      or trusts, all such returns were complete and accurate when filed, and all
      taxes
      and assessments payable by the Company or any Subsidiary have been paid to
      the
      extent that such taxes have become due. All taxes accrued or payable by the
      Company or any Subsidiary for all periods through June 30, 2007 have been
      accrued or paid in full, whether or not due and payable and whether or not
      disputed. The Company and each Subsidiary has withheld proper and accurate
      amounts from its employees for all periods in full compliance with the tax
      withholding provisions of applicable foreign, federal, state and local tax
      laws.
      There are no waivers or agreements by the Company or any Subsidiary for the
      extension of time for the assessment of any taxes. The tax returns of the
      Company and each Subsidiary have never, since July 31, 2002, been examined
      by
      any authority or other administrative body or court of any state or country.
      There are not now any examinations of the income tax returns of the Company
      or
      any Subsidiary pending, or to the Company’s knowledge any proposed deficiencies
      or assessments against the Company or any Subsidiary of additional taxes of
      any
      kind. The Company and each Subsidiary shall duly and timely prepare and file
      all
      material federal, state, local and foreign tax returns and reports for 2007,
      and
      all returns and reports of all other governmental units having jurisdiction
      with
      respect to taxes imposed on the Company or on its income, properties, sales,
      franchises, operations or employee benefit plans or trusts, and all such returns
      will be complete and accurate when filed.

     

    3.12. Real
      Properties.
      Neither
      the Company nor any Subsidiary has an interest in any real property, except
      for
      the Leases (as defined below).

     

    3.13. Leases
      of Real Property.
      All
      leases pursuant to which the Company or any Subsidiary is lessee or lessor of
      any real property (the “Leases”)
      are
      listed on Schedule 3.13 and are valid and enforceable in accordance with their
      terms. There is not under any of such Leases (a) any material default or any
      claimed material default by the Company or any Subsidiary or any event of
      default or event which with notice or lapse of time, or both, would constitute
      a
      material default by the Company or any Subsidiary and in respect to which the
      Company or such Subsidiary has not taken adequate steps to prevent a default
      on
      its part from occurring or (b) to the knowledge of the Company, any material
      default by any lessee of the Company or any Subsidiary or any event of default
      or event which with notice or lapse of time, or both, would constitute a
      material default by any such lessee. The copies of the Leases heretofore
      furnished to Buyers are true, correct and complete, and such Leases have not
      been modified in any respect since the date they were so furnished, and are
      in
      full force and effect in accordance with their terms. The Company and each
      Subsidiary is lawfully in possession of all real properties of which it is
      a
      lessee (the “Leased Properties”).

     

    
      
        
        

      

      
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    3.14. Contingencies.
      Except
      as disclosed on Schedule 3.14, there are no actions, suits, claims or
      proceedings pending, or to the knowledge of the Company threatened against,
      by
      or affecting, the Company or any Subsidiary in any court or before any
      arbitrator or governmental agency that may have a material adverse effect on
      the
      Company or any Subsidiary or which could materially and adversely affect the
      right or ability of the Company to consummate the transactions contemplated
      hereby. To the knowledge of the Company, there is no valid basis upon which
      any
      such action, suit, claim, or proceeding may be commenced or asserted against
      it.
      There are no unsatisfied judgments against the Company or any Subsidiary and
      no
      consent decrees or similar agreements to which the Company or any Subsidiary
      is
      subject and which could have a material adverse effect on the Company or any
      Subsidiary.

     

    3.15. Products
      Liability; Warranties; Insurance.
      Neither
      the Company nor any Subsidiary has incurred any unpaid loss, damage, liability,
      fine, penalty, cost or expense (each, a “Liability”)
      that
      is not fully covered by insurance relating to any product manufactured,
      distributed or sold by the Company or any Subsidiary prior to the Closing,
      pursuant to a claim or potential claim that such products are or were defective
      or improperly designed or manufactured or are in breach of any express or
      implied product warranty.

     

    3.16. Intellectual
      Property Rights.

     

    (a) The
      Company and each Subsidiary owns and possesses all right, title and interest
      in
      and to, or has a valid license to use, all of its Proprietary Rights (as defined
      below) necessary for the operation of its business as presently conducted and
      none of such Proprietary Rights have been abandoned;

     

    (b) No
      claim
      by any third party contesting the validity, enforceability, use or ownership
      of
      any such Proprietary Rights has been made, is currently outstanding or, to
      the
      knowledge of the Company, is threatened, and to the knowledge of the Company
      there is no reasonable basis for any such claim.

     

    (c) Neither
      the Company, any Subsidiary nor any registered agent of any of the foregoing
      has
      received any notice of, nor is the Company aware of any reasonable basis for
      an
      allegation of, any infringement or misappropriation by, or conflict with, any
      third party with respect to such Proprietary Rights, nor has the Company, any
      Subsidiary or any registered agent of any of them received any claim of
      infringement or misappropriation of or other conflict with any Proprietary
      Rights of any third party.

     

    (d) Neither
      the Company nor any Subsidiary has infringed, misappropriated or otherwise
      violated any Proprietary Rights of any third parties, and the Company is not
      aware of any infringement, misappropriation or conflict which will occur as
      a
      result of the continued operation of the Company or any Subsidiary as presently
      operated and as contemplated to be operated or as a result of the consummation
      of the transactions contemplated hereby.

     

    (e) All
      employees who have contributed to or participated in the conception and/or
      development of all or any part of the Proprietary Rights which are not licensed
      to the Company or a Subsidiary from a third party either (i) have been party
      to
      a “work-for-hire” arrangement or agreement with the Company or the Subsidiary,
      in accordance with applicable federal and state law, that has accorded the
      Company or the Subsidiary full, effective, exclusive, and original ownership
      of
      all tangible and intangible property thereby arising or (ii) have executed
      appropriate instruments of assignment in favor of the Company or the Subsidiary
      as assignee that have conveyed to the Company or the Subsidiary full, effective
      and exclusive ownership of all tangible and intangible property thereby
      arising.

     

    
      
        
        

      

      
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    (f) The
      consummation of the transactions contemplated by this Agreement will not
      adversely affect the right of the Company or any Subsidiary to continue to
      use
      the Proprietary Rights. To the extent that the registration of any Proprietary
      Right is required by law, such Proprietary Right has been duly and validly
      registered or filed, and any fees that are necessary to maintain in force any
      Proprietary Rights or registrations thereof have been paid. Schedule 3.16(f)
      sets forth a list and description of the copyrights, trademarks, service marks,
      trade dress, trade names and domain names used or held by the Company or any
      Subsidiary and, where appropriate, the date, serial or registration number,
      and
      place of any registration thereof.

     

    (g) As
      used
      herein, the term “Proprietary Rights”
means
      all proprietary information of the Company or any Subsidiary, as the case may
      be, including all patents, patent applications, patent disclosures and
      inventions (whether or not patentable and whether or not reduced to practice),
      all trademarks, service marks, trade dress, trade names, corporate names, domain
      names, copyrights, all trade secrets, confidential information, ideas, formulae,
      compositions, know-how, processes and techniques, drawings, specifications,
      designs, logos, plans, improvements, proposals, technical and computer data,
      documentation and software, financial, business and marketing plans, and related
      information and all other proprietary, industrial or intellectual property
      rights relating to the business of the Company or any Subsidiary.

     

    3.17. Material
      Contracts.
      Schedule 3.17 contains a complete list of all contracts of the Company and
      its
      Subsidiaries that (i) involve consideration in excess of the equivalent of
      $50,000, (ii) have a term of one year or more, (iii) is a collective bargaining
      or similar agreement, (iv) is a tax sharing or similar agreement or (iv)
      materially restricts a Company from engaging in any business activity anywhere
      in the world (the “Material Contracts”).
      Except as disclosed on Schedule 3.17, (a) the Company or the applicable
      Subsidiary has performed all material obligations to be performed by them under
      all such contracts, and is not in material default thereof, (b) no condition
      exists or has occurred which with the giving of notice or the lapse of time,
      or
      both, would constitute a material default by the Company or the Subsidiary
      or
      accelerate the maturity of, or otherwise modify, any such contract, and (c)
      all
      such contracts are in full force and effect. No material default by any other
      party to any of such contracts is known or claimed by the Company or any
      Subsidiary to exist.

     

    3.18. Employee
      Benefit Matters.

     

    (a) Except
      as
      disclosed on Schedule 3.18, the Company and the Subsidiaries do not provide,
      nor
      are any of them obligated to provide, directly or indirectly, any benefits
      for
      employees other than salaries, sales commissions and bonuses, including, but
      not
      limited to, any pension, profit sharing, stock option, retirement, bonus,
      hospitalization, insurance, severance, vacation or other employee benefits
      (including any housing or social fund contributions) under any practice,
      agreement or understanding.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (b) Each
      employee benefit plan maintained by or on behalf of the Company, any Subsidiary
      or any other party (including any terminated pension plans) which covers or
      covered any employees or former employees of the Company or any Subsidiary
      (collectively, the “Employee Benefit Plan”)
      is
      listed on Schedule 3.18. The Company has delivered to Buyers true and complete
      copies of all such plans and any related documents. With respect to each such
      plan (a) no litigation, administrative or other proceeding or claim is pending,
      or to the knowledge of the Company, threatened or anticipated involving such
      plan; (b) there are no outstanding requests for information by participants
      or
      beneficiaries of such plan; and (c) such plan has been administered in
      compliance in all material respects with all applicable laws and
      regulations.

     

    (c) The
      Company, or the applicable Subsidiary, has timely made payment in full of all
      contributions to all of the Employee Benefit Plans which the Company, or the
      applicable Subsidiary, was obligated to make prior to the date hereof; and
      there
      are no contributions declared or payable by the Company, or the applicable
      Subsidiary, to any Employee Benefit Plan which, as of the date hereof, have
      not
      been paid in full.

     

    3.19. Possession
      of Franchises, Licenses, Etc.
      The
      Company and each Subsidiary (a) possesses all material franchises, certificates,
      licenses, permits and other authorizations (collectively, the “Licenses”)
      from
      governmental authorities, political subdivisions or regulatory authorities
      that
      are necessary for the ownership, maintenance and operation of its business
      in
      the manner presently conducted; (b) is not in violation of any provisions
      thereof, except to the extent that such violations, in the aggregate would
      not
      have a material adverse effect on the Company; and (c) has maintained and
      amended, as necessary, all Licenses and duly completed all filings and
      notifications in connection therewith.

     

    3.20. Environmental
      Matters.
      Except
      as set forth on Schedule 3.20, (i) neither the Company nor any Subsidiary is
      in
      violation, in any material respect, of any Environmental Law (as defined below);
      (ii) the Company and each Subsidiary has received all permits and approvals
      with
      respect to emissions into the environment and the proper collection, storage,
      transport, distribution or disposal of Wastes (as defined below) and other
      materials required for the operation of its business at present operating
      levels; and (iii) neither the Company nor any Subsidiary is liable or
      responsible for any material clean up, fines, liability or expense arising
      under
      any Environmental Law, as a result of the disposal of Wastes or other materials
      in or on the property of the Company (whether owned or leased), or in or on
      any
      other property, including property no longer owned, leased or used by the
      Company or any Subsidiary. As used herein, (a) “Environmental Laws”
means,
      collectively, the Comprehensive Environmental Response, Compensation and
      Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization
      Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances
      Control Act, as amended, the Clean Air Act, as amended, the Clean Water Act,
      as
      amended, any other “Superfund” or “Superlien” law or any other federal, or
      applicable state or local statute, law, ordinance, code, rule, regulation,
      order
      or decree (foreign or domestic) regulating, relating to, or imposing liability
      or standards of conduct concerning, Wastes, or the environment; and (b)
“Wastes”
means
      and includes any hazardous, toxic or dangerous waste, liquid, substance or
      material (including petroleum products and derivatives), the generation,
      handling, storage, disposal, treatment or emission of which is subject to any
      Environmental Law.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    3.21. Agreements
      and Transactions with Related Parties.
      Except
      as disclosed on Schedule 3.21 or in the SEC Reports, neither the Company nor
      any
      Subsidiary is, and since the date of the Company Balance Sheet has not been,
      a
      party to any contract, agreement, lease or transaction with, or any other
      commitment to, (a) a shareholder, (b) any person related by blood, adoption
      or
      marriage to shareholder, (c) any director or officer of the Company or any
      Subsidiary, (d) any corporation or other entity in which any of the foregoing
      parties has, directly or indirectly, at least five percent (5%) beneficial
      interest in the capital stock or other type of equity interest in such
      corporation or other entity, or (e) any partnership in which any such party
      is a
      general partner or a limited partner having a five percent (5%) or more interest
      therein (any or all of the foregoing being herein referred to as a “Related Party”
and
      collectively as the “Related Parties”).
      Without limiting the generality of the foregoing, except as set forth on
      Schedule 3.21, (a) no Related Party, directly or indirectly, owns or controls
      any assets or properties which are or have since the date of the Company Balance
      Sheet been used in the business of the Company or any Subsidiary and (b) no
      Related Party, directly or indirectly, engages in or has any significant
      interest in or connection with any business: (i) which is or which within the
      last two (2) years has been a competitor, customer or supplier of, or has done
      business with, the Company or any Subsidiary or (ii) which as of the date hereof
      sells or distributes products or provides services which are similar or related
      to the products or services of the Company or any Subsidiary.

     

    3.22. Business
      Practices.
      Except
      as set forth in Schedule 3.22, neither the Company nor any Subsidiary has,
      at
      any time, directly or indirectly, made any contributions or payment, or provided
      any compensation or benefit of any kind, to any municipal, county, state,
      federal or foreign governmental officer or official, or any other person charged
      with similar public or quasi-public duties, or any candidate for political
      office. The Company’s and the Subsidiaries’ books, accounts and records
      (including, without limitation, customer files, product packaging and invoices)
      accurately describe and reflect, in all material respects, the nature and amount
      of the Company’s products, purchases, sales and other transactions. Without
      limiting the generality of the foregoing, neither the Company nor any Subsidiary
      has engaged, directly or indirectly, in: (a) the practice known as
“double-invoicing” or the use or issuance of pro-forma or dummy invoices; or (b)
      the incorrect or misleading labeling, marketing or sale of refurbished goods as
      new goods.

     

    3.23. Shareholder
      Matters.
      None of
      the transactions or matters contemplated by this Agreement require the approval
      of the Company’s shareholders (other than the consent of Holders of a majority
      of the outstanding shares of Series C Preferred Stock).

     

    3.24. Full
      Disclosure.
      No
      representation or warranty of the Company contained in this Agreement, and
      none
      of the statements or information concerning the Company or any of its
      Subsidiaries contained in this Agreement and the Schedules, when taken together
      as a whole, contains or will contain any untrue statement of a material fact
      nor
      will such representations, warranties, covenants or statements taken as a whole
      omit a material fact required to be stated therein or necessary in order to
      make
      the statements therein, in light of the circumstances under which they were
      made, not misleading.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    4. REPRESENTATIONS
      AND WARRANTIES OF BUYER.

     

    To
      induce
      the Company to enter into this Agreement and to consummate the transactions
      contemplated hereby, each Buyer represents and warrants, severally and not
      jointly, to and covenants with the Company as follows:

     

    4.1. Organization.
      The
      Buyer is a corporation, limited liability company or limited partnership duly
      organized, validly existing and in good standing under the laws of its
      jurisdiction. The Buyer has all requisite power and authority to execute,
      deliver and carry out the terms of this Agreement and the consummation of the
      transactions contemplated herein.

     

    4.2. Execution;
      No Inconsistent Agreements; Etc.

     

    (a) The
      execution and delivery of this Agreement and the performance of the transactions
      contemplated hereby have been duly and validly authorized and approved by the
      Buyer and this Agreement is a valid and binding agreement of the Buyer,
      enforceable against the Buyer in accordance with its terms, except as such
      enforcement may be limited by bankruptcy or similar laws affecting the
      enforcement of creditors’ rights generally, and the availability of equitable
      remedies.

     

    (b) The
      execution and delivery of this Agreement by the Buyer does not, and the
      consummation of the transactions contemplated hereby will not, constitute a
      breach or violation of the charter or bylaws of the Buyer, or a default under
      any of the terms, conditions or provisions of (or an act or omission that would
      give rise to any right of termination, cancellation or acceleration under)
      any
      material note, bond, mortgage, lease, indenture, agreement or obligation to
      which the Buyer is a party, pursuant to which any of them otherwise receive
      benefits, or by which any of their properties may be bound.

     

    4.3. Investment
      Representations.

     

    (a) The
      Buyer
      is purchasing the Series E Preferred Stock for investment purposes and not
      with
      a view to the sale or distribution, by public or private sale or other
      disposition, and the Buyer has no present intention of selling, granting any
      participation in or otherwise distributing or disposing of any of the Series
      E
      Preferred Stock.

     

    (b) The
      Buyer
      has been offered the opportunity to ask questions of, and receive answers from
      the Company’s management, and the Buyer has been given full and complete access
      to all available information and data relating to the business and assets of
      the
      Company and has obtained such additional information about the Company as the
      Buyer has deemed necessary in order to evaluate the opportunities, both
      financial and otherwise, with respect to the Company and, except as set forth
      herein, has not relied on any representation, warranty or other statement
      concerning the Company and its evaluation of the decision to consummate the
      transactions contemplated herein. In its judgment, the Buyer is sufficiently
      familiar with the Company to enable the Buyer to proceed with the transactions
      contemplated hereby.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    (c) The
      Buyer
      is an “accredited investor,” as such term is defined in Rule 501 of Regulation D
      promulgated under the Securities Act.

     

    (d) The
      Buyer
      is a sophisticated investor familiar with the type of risks inherent in the
      acquisition of securities such as the shares of the Company and the Buyer’s
      financial position is such that the Buyer can afford to retain its shares of
      Company Series E Preferred Stock for an indefinite period of time without
      realizing any direct or indirect cash return on its investment.

     

    5. RESERVED.

     

    6. CONDITIONS
      TO OBLIGATIONS OF ALL PARTIES.

     

    The
      obligation of Buyers and the Company to consummate the transactions contemplated
      by this Agreement are subject to the satisfaction, on or before the Closing,
      of
      each of the following conditions; any or all of which may be waived in whole
      or
      in part by the joint agreement of Buyers and the Company: 

     

    6.1. Absence
      of Actions.
      No
      action or proceeding shall have been brought or threatened before any court
      or
      administrative agency to prevent the consummation or to seek damages in a
      material amount by reason of the transactions contemplated hereby, and no
      governmental authority shall have asserted that the within transactions (or
      any
      other pending transaction involving Buyers or the Company when considered in
      light of the effect of the within transactions) shall constitute a violation
      of
      law or give rise to material liability on the part of the Company or the
      Buyers.

     

    6.2. Governmental
      Consents.
      All
      applicable notices, approvals and consents to or from all governmental
      authorities and self regulatory organizations that are required to be made
      or
      obtained in connection with the consummation of the transactions contemplated
      by
      this Agreement, shall have been made or obtained.

     

    7. CONDITIONS
      TO OBLIGATIONS OF THE BUYERS.

     

    All
      obligations of the Buyers to consummate the transactions contemplated by this
      Agreement are subject to the fulfillment and satisfaction of each and every
      of
      the following conditions on or prior to the initial Closing, any or all of
      which
      may be waived in whole or in part by Buyers:

     

    7.1. Representations
      and Warranties.
      The
      representations and warranties contained in Section 3 of this Agreement and
      in
      any certificate, instrument, schedule, agreement or other writing delivered
      by
      or on behalf of the Company in connection with the transactions contemplated
      by
      this Agreement shall be true, correct and complete in all material respects
      (except for representations and warranties which are by their terms qualified
      by
      materiality, which shall be true, correct and complete in all respects) as
      of
      the date when made and shall be deemed to be made again at and as of the Closing
      Date and shall be true, correct and complete at and as of the Closing Date
      in
      all material respects (except for representations and warranties which are
      by
      their terms qualified by materiality, which shall be true, correct and complete
      in all respects).

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    7.2. Compliance
      with Agreements and Conditions.
      The
      Company shall have performed and complied with all material agreements and
      conditions required by this Agreement to be performed or complied with by it
      prior to or on the Closing Date.

     

    7.3. Absence
      of Material Adverse Changes.
      No
      material adverse change in the business, assets, financial condition, or
      prospects of the Company and its Subsidiaries (taken as a whole) shall have
      occurred, no substantial part of the assets of the Company or any Subsidiary
      not
      substantially covered by insurance shall have been destroyed due to fire or
      other casualty, and no event shall have occurred which has had or could
      reasonably be expected to have a material adverse effect on the business,
      assets, financial condition or prospects of the Company and its Subsidiaries
      (taken as a whole).

     

    7.4. Closing
      Covenants.
      The
      Company shall have taken all of the actions required to be taken by it at or
      prior to the Closing pursuant to Section 1.3 herein.

     

    7.5. Opinion.
      The
      Company shall have delivered to the Buyers an opinion of counsel of the Company
      in form and substance satisfactory to HIG.

     

    7.6. Proceedings
      and Documents Satisfactory.
      The
      Company shall have delivered to the Buyers such other documents and instruments
      as the Buyers deem reasonably necessary or desirable to consummate the
      transactions contemplated hereby. All proceedings in connection with the
      transactions contemplated by this Agreement and all certificates and documents
      delivered to the Buyers in connection with the transactions contemplated by
      this
      Agreement shall be satisfactory in all reasonable respects to the Buyers, and
      the Buyers shall have received the originals or certified or other copies of
      all
      such records and documents as the Buyers may reasonably request. The Buyers
      shall have completed its due diligence investigation of the Company and shall
      be
      satisfied, in its sole discretion, with the results of such
      investigation.

     

    8. CONDITIONS
      TO OBLIGATIONS OF THE COMPANY.

     

    All
      of
      the obligations of the Company to consummate the transactions contemplated
      by
      this Agreement are subject to the fulfillment and satisfaction of each and
      every
      of the following conditions on or prior to the Closing, any or all of which
      may
      be waived in whole or in part by the Company:

     

    8.1. Representations
      and Warranties.
      The
      representations and warranties contained in Section 4 of this Agreement and
      in
      any certificate, instrument, schedule, agreement or other writing delivered
      by
      or on behalf of Buyers in connection with the transactions contemplated by
      this
      Agreement shall be true and correct in all material respects (except for
      representations and warranties which are by their terms qualified by
      materiality, which shall be true, correct and complete in all respects) when
      made and shall be deemed to be made again at and as of the Closing Date and
      shall be true at and as of the Closing Date in all material respects (except
      for
      representations and warranties which are by their terms qualified by
      materiality, which shall be true, correct and complete in all
      respects).

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    8.2. Compliance
      with Agreements and Conditions.
      The
      Buyers shall have performed and complied with all material agreements and
      conditions required by this Agreement to be performed or complied with by the
      Buyers prior to or on the Closing Date.

     

    9. INDEMNITY.

     

    9.1. Indemnification
      by the Company.
      The
      Company shall defend, indemnify and hold harmless the Buyers, each of their
      direct and indirect parent corporations, subsidiaries and affiliates, and each
      of their officers, members, directors, employees, attorneys and agents
      (hereinafter collectively called “Buyer Indemnitees”)
      against and in respect of any and all loss, damage, liability, fine, penalty,
      cost and expense, including reasonable attorneys’ fees and amounts paid in
      settlement (collectively, “Buyer Losses”),
      suffered or incurred by any Buyer Indemnitee by reason of, or arising out
      of:

     

    (a) any
      misrepresentation, breach of warranty or breach or nonfulfillment of any
      covenant, obligation or agreement of the Company contained in this Agreement
      or
      in any certificate, schedule, instrument or document delivered to the Buyers
      by
      or on behalf of the Company pursuant to the provisions of this Agreement
      (without regard to materiality thresholds contained therein); and

     

    (b) any
      action instituted against a Buyer or a Buyer Indemnitee relating to any of
      the
      transactions contemplated by this Agreement (unless such action is based upon
      a
      breach of the Buyer’s representations, warranties or covenants under this
      Agreement or any violations by the Buyer of state or federal securities laws
      or
      any conduct by Buyer which constitutes fraud or willful
      misconduct).

     

    9.2. Defense
      of Claims.

     

    (a) A
      Buyer
      Indemnitee seeking indemnification hereunder: (i) shall provide the Company
      written notice of any claim or action by a third party for which the Company
      may
      be liable under the terms of this Agreement, within thirty (30) days after
      such
      claim or action arises and is known to the Buyer Indemnitee, and (ii) shall
      give
      the Company a reasonable opportunity to participate in any proceedings and
      to
      settle or defend any such claim or action. The expenses of all proceedings,
      contests or lawsuits with respect to such claims or actions shall be borne
      by
      the Company. If the Company wishes to assume the defense of such claim or
      action, the Company shall give written notice to the Buyer Indemnitee within
      ten
      (10) days after notice from the Buyer Indemnitee of such claim or action, and
      the Company shall thereafter assume the defense of any such claim or liability,
      through counsel reasonably satisfactory to the Buyer Indemnitee, provided that
      the Buyer Indemnitee may participate in such defense at their own expense,
      and
      the Company shall, in any event, have the right to control the defense of the
      claim or action. The failure of the Buyer Indemnitee to give any notice required
      by this Section shall not affect any of such party’s rights under this Section
      or otherwise, except and to the extent that such failure is actually prejudicial
      to the rights or obligations of the Company.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    (b) If
      the
      Company shall not assume the defense of, or if after so assuming it shall fail
      to defend, any such claim or action, the Buyer Indemnitee may defend against
      any
      such claim or action in such manner as they may deem appropriate and the Buyer
      Indemnitee may settle such claim or litigation on such terms as they may deem
      appropriate but subject to the Company’s approval, such approval not to be
      unreasonably withheld; provided, however, that any such settlement shall be
      deemed approved by the Company if the Company fails to object thereto, by
      written notice to the Buyer Indemnitee, within fifteen (15) days after the
      Company’s receipt of a written summary of such settlement. The Company shall
      promptly reimburse the Buyer Indemnitee for the amount of all expenses, legal
      and otherwise, incurred by the Buyer Indemnitee in connection with the defense
      and settlement of such claim or action.

     

    (c) If
      a
      non-appealable judgment is rendered against any Buyer Indemnitee in any action
      covered by the indemnification hereunder, or any lien attaches to any of the
      assets of any of the Buyer Indemnitees, the Company shall immediately upon
      such
      entry or attachment pay such judgment in full or discharge such lien unless,
      at
      the expense and direction of the Company, an appeal is taken under which the
      execution of the judgment or satisfaction of the lien is stayed. If and when
      a
      final judgment is rendered in any such action, the Company shall forthwith
      pay
      such judgment or discharge such lien before any Buyer Indemnitee is compelled
      to
      do so.

     

    9.3. Waiver.
      The
      failure of any Buyer Indemnitee to give any notice or to take any action
      hereunder shall not be deemed a waiver of any of the rights of such Buyer
      Indemnitee hereunder, except to the extent that the Company is actually
      prejudiced by such failure. The Company hereby acknowledges and agrees that
      the
      Buyer Indemnitees are third party beneficiaries of this Agreement for purposes
      of this Section 9.

     

    10. EXCHANGE
      TRANSACTIONS.

     

    10.1. The
      parties acknowledge that (a) the Series E Preferred Stock investment is being
      funded as preferred stock initially to provide for a shortfall in debt financing
      for the Company’s contemplated strategic transactions and (b) the parties may
      continue to discuss and negotiate terms upon which the preferred stock could
      be
      converted to or refinanced with proceeds of indebtedness, or, in the
      alternative, converted to, or redeemed with the proceeds of, other equity
      securities. In the event that an Exchange Transaction (as defined below) is
      negotiated and approved by (i) the Board of Directors of the Company, (ii)
      an
      independent committee comprised of disinterested members of the Board of
      Directors of the Company and (iii) a majority of the holders of the Series
      E
      Preferred Stock (an “Approved
      Transaction”),
      each
      Buyer agrees to enter into such Approved Transaction and hereby consents to,
      waives all rights to object to or dissent from, such Approved Transaction.
      The
      Company and the Buyers hereby agree to cooperate fully in any Approved
      Transaction and not to take any action prejudicial to or inconsistent with
      such
      Approved Transaction. Without limiting the generality of the foregoing, each
      Buyer hereby agrees to (i) exchange or convert such Buyer's shares of
      Series E Preferred Stock, or take such other actions in respect of such Buyer's
      shares of Series E Preferred Stock, to effectuate the Approved Transaction
      and
      (ii) upon request, deliver such Buyer's shares of Series E Preferred Stock
      (together with executed instruments of transfer) in escrow to the Company
      pending the completion of such Approved Transaction. The term "Exchange
      Transaction"
      means a
      transaction pursuant to which the shares of Series E Preferred Stock are
      converted into or otherwise exchanged for one or more other equity or debt
      securities of the Company and in which all of the Buyers will receive the same
      shares or other units of such security or securities on a pro rata basis based
      upon the number of shares of Series E Preferred Stock held by each Buyer. The
      consummation of any Exchange transaction shall remain subject to any applicable
      consent or approval rights of any lender of the Company that may be set forth
      in
      the Company’s financing agreements with any such lender.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    10.2. Each
      Buyer hereby appoints the Majority Buyers as Buyer’s true and lawful proxy and
      attorney in connection with any Approved Transaction, with full power of
      substitution, to vote or exercise consent rights with respect to all shares
      of
      Series E Preferred Stock owned by such Buyer or over which such Buyer has voting
      control to effectuate the Approved Transaction. The proxies and powers granted
      by each Buyer pursuant to this Section 10.2 are coupled with an interest and
      are
      given to secure the performance of such Buyer’s duties under this Section 10.
      Such proxies are irrevocable for so long as this Section 10 remains in effect
      and will survive the death, incompetence or disability of any Buyer who is
      an
      individual and the merger, liquidation or dissolution of any Buyer that is
      a
      corporation, limited liability company, partnership or other
      entity.

     

    11. DEFINED
      TERMS

     

    11.1. Definitions.
      Definitions for the terms listed below can be found in the following
      sections:

     

    
      	
              Defined
                Term

            	 	
              Section
                Reference

            
	
              Agreement

            	 	
              Recitals

            
	
              Buyers

            	 	
              Recitals

            
	
              Company

            	 	
              Recitals

            
	
              Series
                E Preferred Stock

            	 	
              Recitals

            
	
              Buyer
                Stock

            	 	
              1.1

            
	
              Certificate
                of Designation

            	 	
              1.1

            
	
              Encumbrances

            	 	
              1.1

            
	
              Purchase
                Price

            	 	
              1.2

            
	
              Closing

            	 	
              1.3

            
	
              Closing
                Date

            	 	
              1.3

            
	
              Preferred
                Stock

            	 	
              3.2(a)

            
	
              Securities
                Rights

            	 	
              3.2(b)

            
	
              Subsidiary
                

            	 	
              3.3(a)

            
	
              Company
                Financial Statements

            	 	
              3.6(a)

            
	
              SEC
                Reports

            	 	
              3.6(c)

            
	
              Commission

            	 	
              3.6(c)

            
	
              Exchange
                Act

            	 	
              3.6(c)

            
	
              Securities
                Act

            	 	
              3.10

            
	
              Leases

            	 	
              3.13

            
	
              Leased
                Properties

            	 	
              3.13

            
	
              Liability

            	 	
              3.15

            

    

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    
      	
              Defined
                Term

            	 	
              Section
                Reference

            
	
              Proprietary
                Rights

            	 	
              3.16(g)

            
	
              Material
                Contracts

            	 	
              3.17

            
	
              Employee
                Benefit Plan

            	 	
              3.18(b)

            
	
              Licenses

            	 	
              3.19

            
	
              Environmental
                Laws

            	 	
              3.20

            
	
              Wastes

            	 	
              3.20

            
	
              Related
                Party

            	 	
              3.21

            
	
              Buyer
                Indemnitees

            	 	
              9.1

            
	
              Buyer
                Losses

            	 	
              9.1

            

    

     

    12. MISCELLANEOUS.

     

    12.1. Notices.

     

    (a) All
      notices, requests, demands, or other communications required or permitted
      hereunder shall be in writing and shall be deemed to have been duly given upon
      receipt if delivered in person or by facsimile, or upon the expiration of one
      (1) days after the date sent, if sent by federal express (or similar overnight
      courier service) to the parties at the following addresses:

     

    (i) If
      to a
      Buyer other than HIG, the address set forth on Schedule 1 hereto. If to
      HIG:

     

    c/o
      H.I.G. Capital Management, Inc.

    855
      Boylston Street, 11th
      Floor

    Boston,
      MA 02116

    Attention:
      John Black, William Nolan

    Telephone:
      617-262-8455

    Telecopy:
      617-262-1505

     

    with
      a
      copy to:

     

    Bingham
      McCutchen LLP

    399
      Park
      Avenue

    New
      York,
      NY 10022

    Attention:
      Neil W. Townsend, Esq.

    Telephone:
      212-705-7722

    Telecopy:
      212-702-3644

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    (ii) If
      to the
      Company:

     

    Encompass
      Group Affiliates, Inc.

    420
      Lexington Avenue, Suite 2739

    New
      York,
      New York 10170

    Attention: John
      Donahue

    Telephone: (646)
      227-1600

    Facsimile: (646)
      227-1666

     

    With
      a
      copy to:

     

    Eckert
      Seamans Cherin & Melott, LLC

    Two
      Liberty Place

    50
      South
      16th Street, 21st Floor

    Philadelphia,
      PA 19102

    Attention:
      Gary A. Miller

    Telephone: (215)
      851-8472

    Facsimile: (215)
      851-8383

    

    (b) Notices
      may also be given in any other manner permitted by law, effective upon actual
      receipt. Any party may change the address to which notices, requests, demands
      or
      other communications to such party shall be delivered or mailed by giving notice
      thereof to the other parties hereto in the manner provided herein.

     

    12.2. Survival.
      The
      representations, warranties, agreements and indemnifications of the parties
      contained in this Agreement or in any writing delivered pursuant to the
      provisions of this Agreement shall survive any investigation heretofore or
      hereafter made by the parties and the consummation of the transactions
      contemplated herein and shall continue in full force and effect after the
      Closing.

     

    12.3. Counterparts;
      Interpretation.
      This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed an original, and all of which shall constitute one and the same
      instrument. This Agreement supersedes all prior discussions and agreements
      between the parties with respect to the subject matter hereof, and this
      Agreement contains the sole and entire agreement among the parties with respect
      to the matters covered hereby. All Schedules hereto shall be deemed a part
      of
      this Agreement. This Agreement shall not be altered or amended except by an
      instrument in writing signed by or on behalf of all of the parties hereto.
      No
      ambiguity in any provision hereof shall be construed against a party by reason
      of the fact it was drafted by such party or its counsel. For purposes of this
      Agreement: “herein”, “hereby”, “hereunder”, “herewith”, “hereafter” and
“hereinafter” refer to this Agreement in its entirety, and not to any particular
      subsection or paragraph. References to “including” means including without
      limiting the generality of any description preceding such term. Nothing
      expressed or implied in this Agreement is intended, or shall be construed,
      to
      confer upon or give any person other than the parties hereto any rights or
      remedies under or by reason of this Agreement.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    12.4. Governing
      Law.
      This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the State of New York without regard to the principles of conflict of laws.
      The
      parties further agree that any action between them shall be heard exclusively
      in
      the Borough of Manhattan, New York, New York, and expressly consent to the
      jurisdiction and venue of the state and federal courts therein, for the
      adjudication of any civil action asserted pursuant to this paragraph. Each
      party
      hereby irrevocably waives, to the fullest extent it may effectively do so,
      the
      defense of an inconvenient forum to the maintenance of any such action in the
      forum selected hereby.

     

    12.5. Successors
      and Assigns; Assignment.
      This
      Agreement shall be binding upon and shall inure to the benefit of the parties
      hereto and their respective heirs, executors, legal representatives, and
      successors; provided, however, that the Company may not assign this Agreement
      or
      any rights hereunder, in whole or in part.

     

    12.6. Partial
      Invalidity and Severability.
      All
      rights and restrictions contained herein may be exercised and shall be
      applicable and binding only to the extent that they do not violate any
      applicable laws and are intended to be limited to the extent necessary to render
      this Agreement legal, valid and enforceable. If any terms of this Agreement
      not
      essential to the commercial purpose of this Agreement shall be held to be
      illegal, invalid or unenforceable by a court of competent jurisdiction, it
      is
      the intention of the parties that the remaining terms hereof shall constitute
      their agreement with respect to the subject matter hereof and all such remaining
      terms shall remain in full force and effect. To the extent legally permissible,
      any illegal, invalid or unenforceable provision of this Agreement shall be
      replaced by a valid provision which will implement the commercial purpose of
      the
      illegal, invalid or unenforceable provision.

     

    12.7. Waiver.
      Any
      term or condition of this Agreement may be waived at any time by the party
      which
      is entitled to the benefit thereof, but only if such waiver is evidenced by
      a
      writing signed by such party. No failure on the part of a party hereto to
      exercise, and no delay in exercising, any right, power or remedy created
      hereunder, shall operate as a waiver thereof, nor shall any single or partial
      exercise of any right, power or remedy by any such party preclude any other
      future exercise thereof or the exercise of any other right, power or remedy.
      No
      waiver by any party hereto to any breach of or default in any term or condition
      of this Agreement shall constitute a waiver of or assent to any succeeding
      breach of or default in the same or any other term or condition
      hereof.

     

    12.8. Headings.
      The
      headings as to contents of particular paragraphs of this Agreement are inserted
      for convenience only and shall not be construed as a part of this Agreement
      or
      as a limitation on the scope of any terms or provisions of this
      Agreement.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    12.9. Expenses.
      At the
      Closing, the Company shall reimburse the Buyers for fees and expenses of the
      Buyers incurred in connection with its due diligence investigation of the
      Company prior to the Closing and the negotiation of this Agreement and the
      transactions contemplated hereby (including, without limitation, the fees,
      expenses and disbursements of the Buyers’ legal, accounting and other
      professional advisors). The Company shall also promptly reimburse the Buyers
      for
      or pay any and all costs and expenses (including, without limitation, the fees,
      expenses and disbursements of the Buyers’ legal, accounting and other
      professional advisors) incurred by the Buyers in connection with (A) the waiver
      of, enforcement of, or the preservation of any rights under, this Agreement
      or
      the Company’s Articles of Incorporation or other governing documents; (B) any
      stamp and other taxes (other than income taxes) payable with respect to this
      Agreement or the Buyer Shares; and (C) any filing required by applicable law,
      rule or regulation with any governmental authority or self regulatory
      organization with respect to a Buyer’s purchase or holding of the Buyer Stock.
      Without duplication of any other obligation of the Company to reimburse a Buyer
      for expenses, the Company shall reimburse each Buyer and its representatives
      for
      all reasonable travel expenses incurred in connection with attending any
      management meeting or any board meetings or board committee meetings. Any fees
      and expenses to be paid pursuant to this Section 12.9 (other than those to
      be
      paid or reimbursed at the Closing) shall be paid or reimbursed within five
      (5)
      business days of having been invoiced for such amounts. The Company shall pay
      the fees and expenses of its advisers, counsel, accountants and other experts,
      if any, and all other expenses incurred by such party incident to the
      negotiation, preparation, execution, delivery and performance of this Agreement.
      For the avoidance of doubt, the foregoing provisions shall not apply to any
      Series D Stockholders that become “Buyers” upon any Subsequent
      Closing.

     

    12.10. Finder’s
      Fees.
      The
      Buyers represent to the Company that no broker, agent, finder or other party
      has
      been retained by it in connection with the transactions contemplated hereby
      and
      that no other fee or commission has been agreed by the Buyers to be paid for
      or
      on account of the transactions contemplated hereby. The Company represents
      to
      the Buyer that, no broker, agent, finder or other party has been retained by
      the
      Company in connection with the transactions contemplated hereby and that no
      other fee or commission has been agreed by the Company to be paid for or on
      account of the transactions contemplated hereby.

     

    12.11. Gender.
      Where
      the context requires, the use of the singular form herein shall include the
      plural, the use of the plural shall include the singular, and the use of any
      gender shall include any and all genders.

     

    12.12. Acceptance
      by Fax.
      This
      Agreement shall be accepted, effective and binding, for all purposes, when
      the
      parties shall have signed and transmitted to each other, by telecopier, email
      or
      otherwise, copies of the signature pages hereto.

     

    12.13. VB
      Securities.
      The
      shares of Series E Preferred Stock that may be purchased by any Series D
      Stockholder pursuant hereto shall be deemed to be "VB Securities" of such person
      for purposes of that certain Stockholder Agreement, dated August 17, 2007,
      among
      the Company, HIG and the holders of Series D Preferred Stock of the
      Company.

     

    12.14. NO
      JURY TRIAL.
      THE
      PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY
      OF
      THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
      OR
      ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY DOCUMENT
      CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
      COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
      PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF
      THIS AGREEMENT.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    EXHIBIT
      10.1

     

    IN
      WITNESS WHEREOF, the parties have executed this Agreement or caused this
      Agreement to be duly executed by their duly authorized officers as of the day
      and year first above written.

     

    
      	 	
              COMPANY:

            
	 	 
	 	
              ENCOMPASS
                GROUP AFFILIATES, INC.

            
	 	 
	 	
              By:

            	
              /s/
                Wayne I. Danson

            
	 	 	
              Name:
                Wayne I. Danson

            
	 	 	
              Title:   President
                and CEO

            
	 	 
	 	
              BUYERS:

            
	 	 
	 	
              ACT-DE
                LLC

            
	 	 
	 	
              By:  

            	
              /s/
                William J. Nolan

            
	 	 	
              Name:
                William J. Nolan

            
	 	 	
              Title:  
                Executive Vice President

            

    

     

    [Remainder
      of page left intentionally blank.]

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    
      	 	
              PROSPECT
                HARBOR CREDIT

            
	 	
              PARTNERS,
                L.P.

            
	 	 
	 	
              By:  

            	
              /s/
                Tim Barns

            
	 	 	
              Name: 
                Tim Barns

            
	 	 	
              Title:   
                Managing Director

            
	 	 
	 	
              SANKATY
                CREDIT OPPORTUNITIES II, L.P.

            
	 	 
	 	
              By:

            	
              /s/
                Tim Barns

            
	 	 	
              Name: 
                Tim Barns

            
	 	 	
              Title:   
                Managing Director

            
	 	 
	 	
              SANKATY
                CREDIT OPPORTUNITIES III, L.P.

            
	 	 
	 	
              By:

            	
              /s/
                Tim Barns

            
	 	 	
              Name: 
                Tim Barns

            
	 	 	
              Title:   
                Managing Director

            
	 	 
	 	
              RGIP,
                LLC

            
	 	 
	 	
              By:

            	
              /s/
                Ann L. Milner

            
	 	 	
              Name: 
                Ann L. Milner

            
	 	 	
              Title:   
                Managing Member

            

    

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    EXHIBIT
      10.1

     

    Schedule
      1

     

    
      	
              Buyer

            	 	
              Shares

            	 	
              Purchase Price ($)

            	 
	 	 	 	 	 	 
	
              ACT-DE
                LLC

            	 	 	
              840

            	 	
              $

            	
              3,500,000

            	 
	 	 	 	 	 	 	 	 
	
              Prospect
                Harbor Credit Partners, L.P.

            	 	 	
              7.10

            	 	
              $

            	
              29,600

            	 
	 	 	 	 	 	 	 	 
	
              Sankaty
                Credit Opportunities II, L.P.

            	 	 	
              14.03

            	 	
              $

            	
              58,457.15

            	 
	 	 	 	 	 	 	 	 
	
              Sankaty
                Credit Opportunities III, L.P.

            	 	 	
              46.75

            	 	
              $

            	
              194,800

            	 
	 	 	 	 	 	 	 	 
	
              RGIP,
                LLC

            	 	 	
              0.69

            	 	
              $

            	
              2,857.14

            	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      10.1

     

    Schedule
      1A

    

    
      	
              Series D Stockholder

            	 	
              Aggregate Price

            	 	
              Number of Shares of Series E

            	 
	 	 	 	 	 	 
	
              Fred
                V. Baldwin

            	 	
              $

            	
              119,047.62

            	 	 	
              28.57

            	 
	
              Robert
                Coolidge

            	 	
              $

            	
              214,285.71

            	 	 	
              51.43

            	 
	
              Scott
                Cameron

            	 	
              $

            	
              47,619.05

            	 	 	
              11.43Unassociated Document

    EXHIBIT
      10.2

     

    AMENDMENT
      NO. 1

    TO

    STOCKHOLDER
      AGREEMENT

     

    This
      AMENDMENT NO. 1, dated as of August 1, 2008, is among (a) ENCOMPASS GROUP
      AFFILIATES, INC., formerly Advanced Communications Technologies, Inc., a Florida
      corporation (the “Company”),
      (b) ACT-DE, LLC (“HIG”)
      and
      (c) the Persons identified on Schedule 1
      as
“Sankaty Investors” (the “Sankaty
      Investors”)
      to the
      Original Agreement, and (d) any other Person who becomes a party to the
      Original Agreement as hereby amended by executing an Instrument of Accession
      thereto. Capitalized terms used herein but not otherwise defined herein shall
      have the meanings ascribed to such terms in the Original Agreement.

     

    W
      I T
      N E S S E T H:

     

    WHEREAS,
      HIG, the Sankaty Investors and the Company are parties to that certain Purchase
      Agreement, of even date herewith, pursuant to which HIG and the Sankaty
      Investors will purchase Series E Preferred Stock of the Company;

     

    WHERAS,
      in connection therewith, HIG, the Sankaty Investors and the Company are parties
      to that certain Stockholder Agreement, dated August 17, 2007 (the “Original
      Agreement”);
      and

     

    WHEREAS,
      the parties desire to supplement and amend the Original Agreement in accordance
      with the terms set forth herein.

     

    NOW,
      THEREFORE, for good and valuable consideration, the receipt of which is hereby
      acknowledged, the parties hereto agree as follows:

     

    1. Section
      1
      of the Original Agreement is hereby amended to add the following
      definition:

     

    “2008
      Purchase Agreement.
      2008
      Purchase Agreement shall mean the Purchase Agreement, dated August 1, 2008,
      among the Company, HIG and the Sankaty Investors.” 

     

    2. Section
      1
      of the Original Agreement is hereby amended to amend and restate subpart (a)
      of
      the definition of “HIG Securities” as follows:

     

    “the
      shares of Series C Preferred Stock issued to HIG pursuant to the Purchase
      Agreement and the shares of Series E Preferred Stock issued to HIG pursuant
      to
      the 2008 Purchase Agreement,” 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3. Section
      1
      of the Original Agreement is hereby amended to amend and restate subpart (a)
      of
      the definition of “Sankaty Securities” as follows:

     

    “the
      shares of Series C Preferred Stock issued to the Sankaty Investors pursuant
      to
      the Purchase Agreement and the shares of Series E Preferred Stock issued to
      the
      Sankaty Investors pursuant to the 2008 Purchase Agreement,”

     

    4. Section
      1
      of the Original Agreement is hereby amended to amend and restate in its entirety
      the definition of Preferred Stock as follows:

     

    “Preferred
      Stock.
      Preferred Stock shall mean (a) the Company’s Series C Preferred Stock, $0.01 par
      value per share (the “Series C Preferred Stock”), (b) the Company’s Series D
      Preferred Stock, $0.01 par value per share, (c) the Company’s Series A-2
      Preferred Stock, $0.01 par value per share (d) the Company’s Series E Preferred
      Stock, $0.01 par value per share (the “Series E Preferred Stock”) and (e) any
      capital stock of the Company which is (i) preferred as to distributions upon
      a
      liquidation of the Company or dividends over any other class of stock of the
      Company, (ii) subject to redemption pursuant to the terms thereof or (iii)
      issued to the holders of Preferred Stock upon any reclassification
      thereof.”

     

    5. The
      introductory sentence of Section 2.1 of the Original Agreement is hereby amended
      to delete “Series C” such that Section 2.1 applies to all “Preferred
      Stock.”

     

    6. The
      first
      paragraph of Section 2.3 of the Original Agreement is hereby amended and
      restated in its entirety as follows: 

     

    “No
      HIG
      Stockholder may make a Transfer of Preferred Stock pursuant to clause (a)(iv)
      of
      Section 2.1 unless such HIG Stockholder complies with the provisions of
      this Section 2.3. The transferring HIG Stockholder (the “TransferringStockholder”)
      shall
      deliver a written notice (the “Offer Notice”)
      to the
      Company and to each Sankaty Stockholder that holds the series of Preferred
      Stock
      proposed to be transferred. The Offer Notice will disclose in reasonable detail
      the proposed number of shares of such series of Preferred Stock to be
      Transferred, the proposed price, terms and conditions of the Transfer and the
      identity of the transferee. Each of the Sankaty Stockholders holding such series
      of Preferred Stock may elect to participate in the contemplated sale by
      delivering written notice to the Transferring Stockholder within 10 days after
      receipt of the Offer Notice. If any of such Sankaty Stockholders elects to
      participate in such sale (the “Participating Stockholders”),
      each
      of the Transferring Stockholder and the Participating Stockholders will be
      entitled to sell in the contemplated sale a number of shares of such series
      of
      Preferred Stock equal to the product of (i) the fraction, the numerator of
      which is the number of shares of such series of Preferred Stock held by such
      Person, and the denominator of which is the aggregate number of such series
      of
      Preferred Stock owned by the Transferring Stockholder and the Participating
      Stockholders, multiplied
      by
      (ii) the number of shares of such series of Preferred Stock to be sold by
      the Transferring Stockholder and the Participating Stockholders in the
      contemplated sale.”

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    7. Section
      6
      of the Original Agreement is hereby amended to delete “or” prior to subpart (d)
      thereof and to include the following as subpart (e) thereof:

     

    “,
      or (e)
      vote for or consent to any amendment to the Certificate of Designation of the
      Series E Preferred Stock.”

     

    8. The
      Original Agreement, as hereby amended and supplemented, shall remain in full
      force and effect.

     

    9. This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed and delivered shall be deemed an original, but all of which
      counterparts together shall constitute but one and the same
      instrument.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    EXHIBIT
      10.2

     

    IN
      WITNESS WHEREOF, the parties have executed and delivered this instrument as
      of
      the date first above written.

     

    
      	
              ENCOMPASS
                GROUP AFFILIATES, INC..

            
	 
	
              By:/s/
                Wayne I.
                Danson                            
                 

            
	
              Name:
                Wayne I. Danson

            
	
              Title:
                President and CEO

            
	 
	
              ACT-DE,
                LLC

            
	 
	
              By:
                /s/ William J.
                Nolan                               
                 

            
	
              Name:
                William J. Nolan

            
	
              Title:
                Executive Vice President

            

    

     

    [Remainder
      of page left intentionally blank]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      10.2

     

    
      	
              PROSPECT
                HARBOR CREDIT PARTNERS, L.P.

            
	 
	
              By:
                /s/
                Tim
                Barns                                                     
                

            
	
              Name:
                Tim Barns

            
	
              Title:
                Managing Director

            
	 
	
              SANKATY
                CREDIT OPPORTUNITIES II, L.P.

            
	 
	
              By:
                /s/
                Tim
                Barns                                                    
                

            
	
              Name:
                Tim Barns

            
	
              Title:
                Managing Director

            
	 
	
              SANKATY
                CREDIT OPPORTUNITIES III, L.P.

            
	 
	
              By:
                /s/
                Tim
                Barns                                                  
                

            
	
              Name:
                Tim Barns

            
	
              Title:
                Managing Director

            
	 
	
              RGIP,
                LLC

            
	 
	
              By:
                /s/
                Ann L.
                Milner                                           
                

            
	
              Name:
                Ann L. Milner

            
	
              Title:
                Managing Member

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