Document:

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EXHIBIT 10.40

                            ASSET PURCHASE AGREEMENT

     THIS ASSET PURCHASE  AGREEMENT,  dated as of July 31, 2002, is by and among
INTEGRATED  TRADING SOLUTIONS,  INC., a Delaware  corporation (the "PURCHASER"),
A.B. WATLEY GROUP INC., a Delaware corporation ("ABW"), and A.B. WATLEY, INC., a
New York corporation  ("INC." and, with ABW,  referred to at times as a "SELLER"
or "SELLERS").

                              W I T N E S S E T H:

     WHEREAS, the Sellers desires to sell, transfer and assign to the Purchaser,
and the  Purchaser  desires to purchase and assume from the Sellers,  all of the
Sellers` proprietary software assets,  certain related intellectual property and
contract  rights,  and certain other assets,  all as set forth in EXHIBIT A (the
"ASSETS"),  pursuant to and in accordance  with the terms and conditions of this
Agreement.

     NOW,  THEREFORE,  in consideration of the premises and the mutual covenants
contained  herein,  the parties  hereto,  intending to be legally bound,  hereby
agree as follows:

                                   ARTICLE I

               SALE OF ASSETS; ASSUMPTION OF LIABILITIES; CLOSING

     1.1. SALE OF ASSETS. Subject to the terms and conditions of this Agreement,
at the Closing (as defined herein), the Sellers shall sell, assign, transfer and
deliver to the Purchaser, and the Purchaser shall purchase from the Sellers, all
of the Sellers` right, title and interest in and to the Assets.

     1.2.  ASSUMPTION OF  LIABILITIES.  The Purchaser  does not assume and shall
have no liability  whatsoever  for any  liability or obligation of any nature of
the  Sellers,   other  than  those  liabilities  and  obligations  arising  from
agreements assigned to Purchaser by Sellers (and for which Sellers and Purchaser
have obtained the written consent of applicable  third parties) after Closing to
the extent the same are expressly noted as accepted in writing by Purchaser in a
separate  written notice provided by Purchaser to Sellers at or after Closing or
are noted as "Assumed Liabilities" on EXHIBIT A subject to any limitations noted
on EXHIBIT A (collectively,  the "ASSUMED  LIABILITIES").  Subject solely to the
effect of the terms set forth on EXHIBIT A and/or in any separate written notice
referred to in the first  sentence of this Section,  Purchaser  shall  reimburse
Sellers  for the costs  incurred  by  Sellers  in  connection  with the  Assumed
Liabilities.  Notwithstanding  anything to the contrary in the first sentence of
this  Section,  Purchaser  shall  not be  obligated  to  assume  the  agreements
comprising  Assumed  Liabilities unless such assumption is on terms satisfactory
to Purchaser,  provided that  Purchaser  agrees to use  commercially  reasonable
efforts to reach such acceptable  terms with any third party to such agreements,
provided, further, that Sellers understand and agree that the decision to assume
any such agreement shall be in Purchaser`s  sole  discretion  (for example,  and
without  limitation,  (a) the  failure of a third party to provide a license for
its products that will enable Purchaser to utilize such products for itself (and
not just for the benefit of Sellers) to enable global service bureau operations,
offsite  licensing and product sales, (b) any increase proposed by a third party
with respect to its fees or costs,  (c) any  requirement  that Purchaser  assume
liabilities  of Sellers  that exist or  existed  prior to June 1, 2002,  (d) any
determination  by Purchaser  or a third party that Sellers are not  sufficiently
participating in the settlement of outstanding  issues or indebtedness,  and (e)
any  determination  by  Purchaser  that it would  have to accept  an  obligation
related to providing  multiple server or  connectivity  redundancy or technology
facilities  or  service  of any  kind  from any  physical  location  other  than
Purchaser`s  facility  in Texas,  would  excuse  Purchaser  from  concluding  an
assignment).  At the reasonable request of any Seller,  Purchaser shall consider
in good faith (but without any  obligation)  incurring  costs for other  unknown
equipment  useful in operating the Assets to the extent  Sellers agree to reduce

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the cost of other  Assumed  Liabilities  in a manner that  offsets any  proposed
increased cost.

     1.3. PURCHASE PRICE. As consideration  for the purchase of the Assets,  the
Purchaser  agrees to pay or cause to be paid to ABW a purchase  price as follows
(the "PURCHASE PRICE"):

          (a) At the Closing,  Two Million One Hundred  Fifty  Thousand  Dollars
($2,150,000) in principal amount of indebtedness owing by ABW, that was assigned
to Penson Financial  Services,  Inc. ("PENSON") prior to the Closing by Atlantic
Group, Steven Malin and LAN/WAN,  and all interest owing in connection therewith
shall no longer be deemed by Penson to be an  outstanding  obligation  of ABW in
favor of Penson (it being  agreed  that  Purchaser  and its  affiliates  make no
representation   of  any  kind  as  to  the  actual   value  of  such   assigned
indebtedness);

          (b) At the  Closing,  One  Million Two  Hundred  Sixty Eight  Thousand
Fifteen Dollars ($1,268,015) in principal amount of indebtedness owing by ABW to
Penson under the  Promissory  Note dated as of March 27,  2002,  as amended (the
"NOTE"),  shall no longer be deemed by Penson to be an outstanding obligation of
ABW in favor of Penson;

          (c) An additional  Two Million One Hundred Fifty Thousand Nine Hundred
Ninety Four Dollars  ($2,150,994) in principal  amount of indebtedness  owing by
ABW to Penson under the Note (subject, however, to the operation of SECTION 3(F)
of the Note notwithstanding anything to the contrary herein),  together with all
accrued  interest in relation to such Note,  shall no longer be deemed by Penson
to be an outstanding obligation of ABW in favor of Penson on such date as Penson
has received no less than Five Million Dollars  ($5,000,000)  in revenues,  from
and after the Closing Date but prior to the thirty-sixth month after the Closing
Date, under the Fully Disclosed  Clearing Agreement dated as of October 3, 1996,
as amended,  between  Penson and Inc.  (for  purposes of this clause  "revenues"
means the amount received by Penson that equals the sum of (i) wholesale  ticket
charges for transactions introduced by Inc. charged by Penson to Inc. (i.e., any
mark up of such charges by Inc. to its  customers and  regulatory  charges shall
not be included in the  calculation of revenues  received) and (ii) net interest
income  earned by Penson  from  Inc.`s  customers  to the extent  such  interest
payments are for Penson`s  sole  benefit,  it being  understood  and agreed that
Penson`s ordinary course records of such charges and amounts shall be conclusive
and binding evidence as to the total of such charges and amounts absent manifest
error);  provided,  further that (i)  notwithstanding  the above  provision (but
subject  to the  effect  of  SECTION  3(F)  of the  Note)  the  cancellation  of
outstanding  obligations  referenced in this SECTION  1.3(C) shall occur on such
earlier date on which the Sellers  provide  written  notice to Penson  (together
with  all  relevant  documentation  evidencing  (A) in the  case  of new  equity
investment,  compliance with the condition  regarding  redemption and other cash
payment  provisions  set forth  below,  and (B) in other cases such  evidence as
Penson may request,  in each such case such evidence to be in form and substance
acceptable to Penson),  and Penson confirms by written notice (such confirmation
by Penson to be delivered  no later than 10 business  days after the date Penson
receives  appropriate  evidence of the new equity investment described above and
such  confirmation  to be  delivered no later than 30 days after the date Penson
receives other evidence referred to above, in each case assuming the appropriate
evidence and the terms of this  Agreement  and the Related  Documents  have been
complied  with) to  Sellers  its  satisfaction  with the  applicable  supporting
documentation  therefor,  that at least Four Million Dollars ($4,000,000) in new
equity capital (with any equity not permitted to have any cash payment  pursuant
to mandatory redemption or other cash payment provisions affecting the principal
amount of the investment  made in obtaining such equity prior to 18 months after
the  Closing  Date) is raised and  received  by  Sellers  (which  shall  include
forgiveness of debt after the Closing Date (but not any inchoate debt or payment
obligation  of Sellers  such as a guaranty by any  Seller)  solely to the extent
debt is forgiven by unaffiliated  third parties that are not shareholders of ABW
and where such debt forgiveness does not occur as a result of Purchaser`s or its

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affiliates`  acceptance  of any  Assumed  Liabilities,  in  connection  with any
provision for debt forgiveness  under this Agreement or any Related Document (as
defined below)) or as a result of any payment or  reimbursement  by Purchaser or
an  affiliate  in  respect  of any such  debt  forgiveness,  provided  that such
cancellation  shall not in any event be effective prior to nine (9) months after
the  Closing  Date,  and (ii) if Sellers  raise less than Four  Million  Dollars
($4,000,000) in such new equity  capital,  Penson shall in good faith consider a
reduction in whole or in part of such indebtedness;

          (d) From the Closing Date,  the Purchaser  shall pay royalties to ABW,
if any are  received,  with respect to the Licensed  Software (as defined in the
License  Agreement  dated the date  hereof  among  the  Purchaser  and  Sellers)
licensed by the Purchaser to third parties within 30 days after the  Purchaser`s
receipt  thereof as follows to the extent ABW makes an introduction to the third
parties  listed below (other than Sungard Data Systems,  Inc. and E*TRADE Group,
Inc., for which no introduction shall be required):

          [*]
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PROVIDED, HOWEVER, that notwithstanding any of the forgoing to the contrary, (A)
ABW shall not be entitled to any  payments  for amounts  that do not  constitute
royalties or license fees for licensed sales or licenses (by way of example, and
without  limitation,  all  software  maintenance  fees and  expenses,  technical
consulting  fees and  expenses  and  operational  pass through fees and expenses
shall not be shared with ABW) provided that  Purchaser  shall not  intentionally
structure  any such  licenses so that amounts  that would  normally be paid as a
royalty or a license fee are  classified as some other type of payment (it being
acknowledged  and agreed by Sellers that software  maintenance,  consulting  and
similar charges may vary on a deal-by-deal basis based on numerous factors), (B)
with respect to each such licensed  sale or license,  ABW`s  entitlement  to any
sharing of royalties or license fees shall cease with respect to any period that
occurs five (5) years after the initial license period begins, and shall include
any renewals  (except to the extent any renewal is extended  beyond such initial
five (5) year time period by the Purchaser in its sole discretion),  and (C) all
documentation relating to licenses of the Licensed Software shall be in form and
substance satisfactory to the Purchaser in its sole discretion;

PROVIDED,  FURTHER, that for purposes of this SECTION 1.3(D), Purchaser shall be
deemed to include any  affiliates  of Purchaser but without any  implication  or
agreement that any such entity is a guarantor of any obligations of Purchaser.

          (e) after the Closing Date,  Penson shall promptly release as directed
by ABW in a written  document  delivered prior to the occurrence of the Closing,
any and all amounts in that certain depositary account maintained at Mellon Bank
under the terms of the Consent and  Agreement  dated as of May 27, 2002  between
E*TRADE Group, Inc. and ABW (the "CONSENT") and

          (f)  Penson`s  forbearance  from the exercise of all of its rights and
remedies under the Note and related loan  documents  until the Closing Date, and
on the Closing Date, the remaining  indebtedness shall be restructured  pursuant
to the  Amendment  to the Note  attached  hereto as EXHIBIT F, and all  existing
defaults on or prior to the Closing Date under such indebtedness and the Related
Documents (as defined  herein) shall be waived  subject to the effect of SECTION
9.3.

     1.4. PURCHASE PRICE ALLOCATION. The Purchase Price shall be allocated among
the Assets as determined in good faith by Purchaser after  soliciting input from
Sellers. Each of the Sellers and the Purchaser agree that each will never take a
position that is in any way inconsistent  with such allocation on any income tax
return,  before any government  agency charged with the collection of any income
tax or in any judicial proceeding.

     1.5.  CLOSING.  The  closing of the  purchase  and sale of the Assets  (the
"CLOSING")  shall take place at the  offices of the  Purchaser  as  promptly  as
practicable  after  the  satisfaction  of the  closing  conditions  set forth in
Articles V and VI (the "CLOSING  DATE").  At the Closing,  the  Purchaser  shall
deliver the portion of the Purchase  Price due in  accordance  with SECTION 1.3,
the  Sellers  shall  deliver  or  cause to be  delivered  to the  Purchaser  the
certificates,  documents  and  instruments  described  in  ARTICLE  V,  and  the
Purchaser   shall   deliver  or  cause  to  be  delivered  to  the  Sellers  the
certificates, documents and instruments described in ARTICLE VI.

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                                   ARTICLE II

                  REPRESENTATIONS AND WARRANTIES OF THE SELLERS
                  ---------------------------------------------

     The Sellers  hereby  jointly  and  severally  represent  and warrant to the
Purchaser as follows,  provided that all of such  representations and warranties
shall be subject to, and qualified by, the attached Disclosure Schedules:

     2.1.  ORGANIZATION AND GOOD STANDING.  Except as set forth on SCHEDULE 2.1,
ABW is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and is duly qualified to transact business and
is in good standing in each  jurisdiction  in which the character or location of
the properties owned or leased by it or the nature of the business  conducted by
it makes such  qualification  necessary.  Inc. is a corporation  duly organized,
validly  existing and in good  standing  under the laws of the State of New York
and is duly  qualified  to  transact  business  and is in good  standing in each
jurisdiction  in which the  character  or  location of the  properties  owned or
leased  by it or  the  nature  of  the  business  conducted  by  it  makes  such
qualification necessary.

     1.6.  CORPORATE  AUTHORITY.  Each  Seller  has  full  corporate  power  and
authority to own and use its property,  including the Assets, as currently being
conducted.  Subject to  satisfaction  of the condition set forth in SECTION 6.9,
each Seller has full  corporate  power and  authority  to  execute,  deliver and
perform all of its  respective  obligations  under this  Agreement and all other
agreements,  including,  without  limitation,  amendments  to documents  and the
documents they amend,  executed in connection with this Agreement (and including
the  Transaction  Documents  as  defined in the  Master  Subordination,  Waiver,
Release  and  Indemnification  Agreement  dated as of March 27,  2002  among the
Sellers and the other parties thereto,  referred to collectively as the "RELATED
DOCUMENTS"),  that are to be executed,  delivered and performed by it hereunder.
Subject to  satisfaction  of the condition set forth in SECTION 6.9, each Seller
has taken all necessary corporate action to authorize and approve the execution,
delivery and performance of this Agreement and the Related Documents to which it
is a party  (including  approval by the Board of Directors).  This Agreement and
each  Related  Document  to which a Seller is a party has been duly and  validly
executed and delivered by each Seller and constitutes a legal, valid and binding
obligation of each Seller,  enforceable against it in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent conveyance, moratorium and similar
laws affecting creditors` rights and general equity principles.

     1.7. NO CONFLICT;  CONSENTS.  Except as set forth on SCHEDULE 2.3,  neither
the execution and delivery of this  Agreement and any Related  Document to which
any  Seller  is a  party,  nor the  consummation  or  performance  of any of the
transactions contemplated hereby or under any Related Document, (i) will violate
or conflict with any provision of the Certificate of Incorporation or By-laws of
either Seller, (ii) is prohibited by or requires either Seller to obtain or make
any consent, authorization,  approval, registration or filing under any statute,
law, ordinance,  regulation, rule, injunction,  judgment, order, decree, ruling,
charge or other  restriction  of any  government,  governmental  agency,  court,
bureau,  body,  department  or  authority  or of any other  person,  (iii)  will
conflict  with,  result  in  the  breach,  acceleration  or  termination  of any
provision of, create in any party the right to accelerate,  terminate, modify or
cancel or  exercise  any remedy  under,  or require any notice or  constitute  a
breach or default under, any note, bond, indenture,  lease, contract,  agreement
or other  instrument or obligation to which either Seller is a party or by which
any of the Assets may be subject,  bound or affected, or (iv) will result in the
creation or imposition of any lien, claim, charge, restriction or encumbrance of
any kind or give to any person (other than the  Purchaser) any interest or right
in or with  respect to any of the Assets.  Except as set forth on SCHEDULE  2.3,
each Seller is not a party to any  contract or subject to any legal  restriction
that would prevent or restrict complete  fulfillment by any Seller of all of the
terms and  conditions  of this  Agreement or any Related  Document or compliance
with any of its obligations hereunder.

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     2.3.  FINANCIAL  INFORMATION.  Attached  hereto as SCHEDULE 2.4 is Sellers`
list of all outstanding amounts owing with respect to each Assigned Contract (as
defined in EXHIBIT  A).  All of the  information  included  in  SCHEDULE  2.4 is
correct and  complete in all  respects  and fairly and  accurately  presents the
financial obligations with respect to each Assigned Contract.

     2.4. ASSETS  INFORMATION.  Attached hereto as SCHEDULE 2.5 is a list of all
software products (third party and proprietary  software) used as of the Closing
Date in order to render the Licensed Software fully functional as it is deployed
and used on the Closing Date.  All such  information  is correct and complete in
all respects.

     2.5.  RIGHTS OF THIRD  PARTIES IN ASSETS.  Except as set forth on  SCHEDULE
2.6, no party  other than the  Purchaser,  the Sellers or a counter  party to an
Assigned  Contract  (but solely with respect to the  Assigned  Contract to which
such counter  party is a signatory)  has any right title or interest of any kind
(whether  accrued,  absolute,  contingent,  inchoate or  otherwise) in or to the
Assets or has sold,  transferred or otherwise disposed of any interest in any of
the Assets. Except as set forth on SCHEDULE 2.6:

          (a) Neither Seller has been notified of any investigation,  inquiry or
request  for  information  from  any  governmental  or other  regulatory  agency
relating to the Assets or the transactions contemplated by this Agreement or any
Related Document; and

          (b) Neither Seller has entered into any transaction (whether or not in
writing) not in the ordinary course of its business affecting the Assets.

     2.6. TITLE TO AND CONDITION OF ASSETS. Except as set forth on SCHEDULE 2.7,
the Sellers  have and at the Closing  will  transfer to the  Purchaser  good and
marketable  title  to all of the  Assets,  free and  clear of all  encumbrances,
liens, charges, claims or other restrictions of any kind or character other than
those  created by Purchaser  and its  affiliates,  including  such rights as are
being  granted  by  Purchaser  to Sellers  pursuant  to this  Agreement  and the
documents referenced herein.

     2.7.  LITIGATION.  Except as set forth on SCHEDULE 2.8, there is no action,
suit, proceeding or investigation,  either at law or in equity, by or before any
governmental or other  instrumentality  or agency, or any other entity or person
pending or, to the Sellers`  best  knowledge,  threatened or proposed or, to the
Seller`s best knowledge,  any circumstances that could reasonably form the basis
of any action,  suit,  proceeding or investigation,  against or affecting any of
the Sellers or any of their properties or assets which, if determined  adversely
to any Seller,  are reasonably  likely to (i) adversely affect the Assets;  (ii)
question  the validity of this  Agreement or any Related  Document or any of the
transactions contemplated hereby or thereby; or (iii) seek to delay, prohibit or
restrict  any actions  taken or to be taken by any of the Sellers  hereunder  or
under any Related Document.

     2.7. TAXES. Except as set forth on SCHEDULE 2.9, the Sellers have filed, or
prior to the  Closing  will  file,  within  the  times  and  within  the  manner
prescribed  by  law,  all  federal,   state,  local  and  foreign  tax  returns,
information returns, forms, reports,  declarations and all other tax reports and
returns (collectively, "RETURNS") which are required to be filed by them through
the  Closing  Date or that may affect  title to any Asset.  Each Return is true,
correct  and  complete  and  accurately  reflects  or will fully and  accurately
reflect all  required  and  appropriate  liability  for taxes of the  applicable
Seller for the  periods  covered  thereby  and no Return has been  amended.  All
federal,  state,  local and foreign  income,  profits,  franchise,  sales,  use,
occupancy, excise and other taxes and assessments, including estimated taxes and
interest  and  penalties  (collectively,  "TAXES"),  payable  by or due from the
Sellers  have been,  or prior to the Closing  will be,  fully and timely paid or
fully provided for in the books and records of the applicable  Seller except for
such Taxes which are being contested in good faith, by appropriate  proceedings,
and as to which  adequate  reserves  (determined  in accordance  with  generally
accepted accounting  principles  consistently applied) have been provided in the

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Sellers` financial  statements.  No Seller has waived any statute of limitations
in  respect  of Taxes or agreed to any  extension  of time with  respect  to the
filing of any Return or the payment of any Tax  assessment  or  deficiency.  All
Taxes that each Seller is or was  required to withhold or collect have been duly
withheld or collected and, to the extent required,  have been paid to the proper
governmental authority.

     2.8.  INTELLECTUAL  PROPERTIES.  SCHEDULE 2.10 contains a true and complete
list of all copyrights,  trade names,  trademarks,  service marks, domain names,
URLs and all registrations and applications therefor and licenses thereto, owned
or used by the Sellers in the operation of the Assets  (collectively,  including
without limitation the Licensed Software, the "INTELLECTUAL  PROPERTY").  Except
as set forth on SCHEDULE 2.10, the Intellectual Property is owned by the Sellers
free and clear of all liens, claims, restrictions and encumbrances of any nature
whatsoever,  and the Sellers have the  exclusive  right to use the  Intellectual
Property  without  payment to a third  party  other  than the rights  granted to
E*TRADE  Group,  Inc.  and the  rights  being  granted by  Purchaser  to Sellers
pursuant to this Agreement and the documents  referenced herein. No Intellectual
Property infringes or, to the Sellers` best knowledge,  is infringed upon by any
rights of third  parties  or is  involved  in any  opposition,  invalidation  or
cancellation action.

     2.9.   SOFTWARE AND  INFORMATION  SYSTEMS.  The Sellers have all  necessary
right, title or interest,  including without limitation the right to use, to all
electronic data  processing  systems,  information  systems,  computer  software
programs,  program specifications,  source codes, input data, data bases, report
layouts and formats,  record file layouts,  functional  specifications and other
related material utilized by the Sellers in operating the Assets  (collectively,
the  "SOFTWARE  ASSETS").  SCHEDULE  2.11  contains a true and complete list and
summary  description  of all Software  Assets owned or leased by the Sellers and
identifies  Software  Assets owned by the Sellers and any licensees  thereof and
Software  Assets  licensed by the Sellers and any other Software Assets in which
the Sellers have any use,  possessory or proprietary  rights.  After the Closing
Date,  the Sellers will retain no copies of source code relating to the Software
Assets.

     2.10.  COMPLIANCE  WITH LAWS.  Except as set forth on  SCHEDULE  2.12,  the
Sellers are in compliance in all material  respects  with all  applicable  laws,
rules, regulations,  ordinances, orders, judgments and decrees of each and every
jurisdiction  applicable to the Assets, this Agreement or the Related Documents.
The  Sellers  have not  received  any  notice  or other  communication  from any
governmental or regulatory authority or agency regarding any actual,  alleged or
potential  violation of, or failure to comply with, any law,  rule,  regulation,
ordinance,  order,  judgment or decree relating to the Assets, this Agreement or
the Related Documents, and, to the Sellers` best knowledge, there does not exist
any  reasonable  basis  for any  claim of  material  default  under or  material
violation  of any such law,  rule,  regulation,  ordinance,  order,  judgment or
decree.

     2.12. MATERIAL CONTRACTS. Attached hereto as SCHEDULE 2.13 is a list of all
contracts,  commitments  and  agreements of the Sellers  relating to the Assets.
Correct and complete  copies of all such  material  contracts,  commitments  and
agreements have been provided to the Purchaser. All such contracts,  commitments
and  agreements are valid and binding  agreements,  in full force and effect and
enforceable in accordance  with their  respective  terms and neither the Sellers
nor, to the best knowledge of the Sellers, any other party thereto, is in breach
or default in any material respect of any of the terms thereof.

     2.13. BROKER`S OR FINDER`S FEES. No agent, broker, person or firm acting on
behalf of the Sellers is or will be entitled  to any  commission  or broker`s or
finder`s  fees  from any of the  parties  hereto in  connection  with any of the
transactions contemplated herein.

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     2.14.  DISCLOSURE.   Except  as  disclosed  herein  or  in  the  Disclosure
Schedules,  no representation or warranty of the Sellers in this Agreement or in
any schedule,  agreement or certificate  delivered in accordance  with the terms
hereof by the Sellers  contains any untrue statement of a material fact or omits
to state any material fact necessary,  in the light of the  circumstances  under
which  made,  in order to make the  statements  contained  herein or therein not
misleading.

                                  ARTICLE III

                 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

         The Purchaser hereby represents and warrants to the Sellers as follows:

     3.1.  ORGANIZATION  AND GOOD STANDING.  The Purchaser is a corporation duly
organized,  validly existing and in good standing under the laws of the State of
Delaware.

     3.2.  CORPORATE  AUTHORITY.  The  Purchaser  has full  corporate  power and
authority  to execute,  deliver  and perform  this  Agreement  and each  Related
Document to be executed, delivered and performed by the Purchaser hereunder; the
execution,  delivery and performance of this Agreement and each Related Document
to which  Purchaser  is a party has been duly  authorized  and  approved  by all
necessary corporate action of the Purchaser; and this Agreement and each Related
Document to which  Purchaser  is a party has been duly and validly  executed and
delivered by the Purchaser and constitutes a valid and binding obligation of the
Purchaser,  enforceable  against the  Purchaser  in  accordance  with its terms,
subject to bankruptcy, insolvency, fraudulent conveyance, moratorium and similar
laws affecting creditors` rights and general equity principles.

     3.3. NO  CONFLICT;  CONSENTS.  Neither the  execution  and delivery of this
Agreement or any Related  Document to which the  Purchaser  is a party,  nor the
consummation or performance of any of the transactions  contemplated hereby will
violate or conflict with any provision of the  Certificate of  Incorporation  or
By-laws  of  the  Purchaser  or any  constitution,  statute,  regulation,  rule,
injunction,  judgment, order, decree, ruling, charge or other restriction of any
government,  governmental  agency or court to which the  Purchaser or any of its
assets or properties  is subject or any material  contract or agreement to which
it is a party.  No  authorization,  consent or  approval  of any public  body or
authority  or any third party is  necessary  to permit the  consummation  of the
transactions  contemplated  by this  Agreement or any Related  Document to which
Purchaser is a party.

         3.4 LITIGATION.  There is no action, suit, proceeding or investigation,
either  at  law  or  in  equity,   by  or  before  any   governmental  or  other
instrumentality  or agency,  or any other  entity or person  pending  or, to the
Purchaser`s  best knowledge,  threatened or proposed or, to the Purchaser`s best
knowledge, any circumstances that could reasonably form the basis of any action,
suit, proceeding or investigation,  against or affecting Purchaser or any of its
properties or assets which, if determined adversely to Purchaser, are reasonably
likely to (i)  adversely  affect the Assets;  (ii) question the validity of this
Agreement or any Related Document or any of the transactions contemplated hereby
or thereby; or (iii) seek to delay, prohibit or restrict any actions taken or to
be taken by Purchaser hereunder or under any Related Document.

         3.5 BROKER`S OR FINDER`S FEES. No agent, broker,  person or firm acting
on behalf of the Purchaser is or will be entitled to any  commission or broker`s
or finder`s  fees from  Purchaser  in  connection  with any of the  transactions
contemplated herein.

         3.6 DISCLOSURE.  No representation or warranty of the Purchaser in this
Agreement or in any schedule,  agreement or certificate  delivered in accordance
with the terms  hereof by the  Purchaser  contains  any  untrue  statement  of a
material  fact or omits to state any material  fact  necessary,  in light of the
circumstances under which made, in order to make the statements contained herein
or therein not misleading.

                                       8
<PAGE>

                                   ARTICLE IV

                                    COVENANTS

     4.1.  CONDUCT OF BUSINESS.  The Sellers jointly and severally  covenant and
agree  that from and after the date  hereof and until the  Closing  Date (or the
earlier  termination  of this  Agreement  pursuant to SECTION 7.1  hereof),  and
except as  otherwise  consented to or approved by an  authorized  officer of the
Purchaser in writing:

          (a) the Assets shall be deployed and utilized only in the ordinary and
usual course of business and consistent with past practices;

          (b) no change shall be made in the  Certificate  of  Incorporation  or
By-laws of the Sellers;

          (c) the Sellers shall not (i) acquire, sell, lease, license,  transfer
or dispose of any Assets;  (ii)  terminate  or modify any  contract or agreement
relating  to the  Assets;  or (iii)  enter  into any  contract,  arrangement  or
commitment  relating to the Assets other than in the ordinary course of business
consistent with past practice;

          (d) the Sellers  shall use their  commercially  reasonable  efforts to
preserve the Assets intact, to preserve its relationship with current customers,
regulators  and others with whom  business  relationships  currently  exist with
respect to the Assets and to preserve  their  goodwill and keep intact the value
of the Assets; and

          (e) the  Sellers  shall not take,  agree to take or permit to be taken
any action or do or permit to be done anything in the conduct of their  business
or otherwise  which would be in breach of any of the terms of this  Agreement or
any  Related  Document or which  would  cause any of their  representations  and
warranties  contained  herein or therein to be or become  untrue in any material
respect.

     4.2.  ACCESS AND  INFORMATION.  From the date of this  Agreement  until the
Closing Date (or the earlier  termination of this Agreement),  the Sellers shall
grant  the  Purchaser  and its  authorized  representatives  (including  but not
limited to lawyers, accountants,  bankers and other advisors) full access to the
Sellers` assets, properties and employees and shall permit the Purchaser and its
authorized representatives to inspect and make copies of all documents,  records
and  information,  in each case only with respect to the Assets as the Purchaser
and its authorized representatives shall from time to time reasonably request.

     4.3.  INSURANCE AND  MAINTENANCE  OF ASSETS.  The Sellers shall continue to
insure the Assets  against all  insurable  risks in the manner and to the extent
the Assets were insured on December 31, 2001 and any insurance proceeds received
from any loss of, or damage or destruction  to, its assets and properties  since
such date shall be maintained for the account of the Purchaser.  Risk of loss of
or damage or  destruction  to the Assets shall be borne by the Sellers until the
Closing Date.

     4.4.  TRANSFER OF ASSETS INVOLVING THIRD PARTIES.  Subject to the effect of
limitations  contained  in SECTION 1.2  relating  to the  conduct of  Purchaser,
immediately upon execution of this Agreement by all parties,  all parties hereto
shall use their commercially  reasonable efforts to cause all third parties with

                                       9
<PAGE>

rights to any of the Assets to permit  the  transfer  of Assets  subject to such
rights to the Purchaser as soon as reasonably  practical on terms  acceptable to
the Purchaser in its sole  discretion.  The Sellers further agree to provide the
Purchaser  with  such  assistance,  documentation  and  information  as shall be
reasonably  necessary and appropriate to facilitate the transfer of such Assets.
On the Closing Date, the Sellers shall deliver to the Purchaser all of the books
and records  maintained in connection  with such Assets for periods prior to the
Closing Date. As promptly as  practicable  after the execution of this Agreement
by all parties, the Sellers and the Purchaser shall cooperate in the preparation
and  distribution  of letters to all of the Sellers`  vendors and other  parties
having rights in and to the Assets  concerning the transfer of the Assets to the
Purchaser.  Any written  communication  to such vendors and other parties may be
made  independently  by each party but shall be agreed to by each of the Sellers
and the Purchaser in advance, acting reasonably.

     4.5. TAX MATTERS.

          (a) The Sellers  shall be  responsible  for the timely,  accurate  and
complete  payment of all Taxes and preparation of all Returns of the Sellers for
all Tax periods that began before,  and ended before,  on or after,  the Closing
Date in connection with the Assets and Assumed Liabilities. Notwithstanding this
subparagraph  (a),  each of the  Sellers  and the  Purchaser  believe  that  the
transfer of Assets and Assumed  Liabilities  to the  Purchaser  should be exempt
from any such Taxes,  and each of the Sellers and the  Purchaser  agrees that it
will use reasonable  efforts (as determined by Purchaser in its sole discretion,
it being  understood  and agreed  that  Purchaser  shall have no  obligation  to
violate  any  applicable  law or rule  of any  government  agency  or  order  or
directive  in any  judicial  or other  proceeding  or to incur  any  expense  in
connection  therewith)  not to take a position  or act in a manner  inconsistent
with such belief in respect of such Taxes,  including without  limitation before
any government agency or in any judicial or other proceeding. In the event after
the Closing Date Purchaser is advised by its legal and/or accounting advisers or
any  governmental  agency  that  Purchaser  should  change its  belief  that the
transfer of Assets and Assumed  Liabilities  to the  Purchaser  should be exempt
from any such Taxes, Purchaser agrees to use commercially  reasonable efforts to
notify the Sellers of such change, it being understood that Purchaser`s  failure
to so notify  Sellers  shall not result in any claim for damages or liability of
any kind for Taxes or otherwise for Purchaser.

          (b) The Sellers shall be jointly and severally  liable for and pay any
and all excise, sales, use, stamp,  documentary,  filing,  recordation and other
transfer  Taxes  arising in  connection  with the transfer of the Assets and the
Assumed Liabilities to the Purchaser hereunder and the Sellers shall jointly and
severally indemnify,  defend and hold the Purchaser harmless against any and all
such transfer Taxes.

     4.6.  The  Sellers  and the  Purchaser  agree  to  furnish  or  cause to be
furnished  to each  other,  upon  request,  as  promptly  as  practicable,  such
information and assistance  (including  access to books and records) relating to
the Assets as is  reasonably  necessary  for the  preparation  of any Return for
Taxes or claim for  refund,  the  conduct  of any audit and the  prosecution  or
defense of any claim, suit or proceeding  relating to any proposed adjustment of
any Tax. The Sellers and the Purchaser agree to (i) retain all books and records
with  respect  to Tax  matters  concerning  the Assets  and any  taxable  period
beginning  before  the  Closing  Date  until the  expiration  of the  statute of
limitations and any extensions thereof and (ii) give each other reasonable prior
written notice before transferring,  destroying or discarding any such books and
records  and,  if the other  party so  requests,  allow the other  party to take
possession of such books and records.

     4.7.  PUBLIC  ANNOUNCEMENTS.  Except  as  necessary  to comply  with  their
obligations  under  applicable  securities  laws (in which case each party shall
nonetheless use commercially reasonable efforts to provide at least two business
days prior notice of its intent to make a public  announcement  together  with a
copy of the text to be disseminated), provided, further, that, in the event of a
public announcement  relating to the Closing, each party shall provide the other

                                       10
<PAGE>

parties with no less than 2 business days prior written  notice of its intent to
make a public announcement together with a copy of the text to be disseminated),
none of the  parties  hereto nor any of their  respective  employees,  agents or
representatives shall make any public disclosure or announcement  concerning the
terms of this transaction without the prior written consent of the other parties
hereto.

     4.8. WEBSITE ADJUSTMENTS. Sellers also agree to remove all material related
to their  ownership of the Assets from their  websites,  but may continue to use
such websites to promote the software  products and services which are a part of
the Assets in a manner reasonably  acceptable to the Purchaser,  it being agreed
that Seller`s  promotion of such products and services by stating it is "powered
by Integrated  Trading Solutions,  Inc." is acceptable,  subject to such further
requirements as Purchaser may impose to protect its intellectual property rights
in the  Assets.  The  Sellers  agree  not to post,  or cause to be  posted,  any
material to such websites that are reasonably likely to materially and adversely
affect the Purchasers` interest in the Assets. The Sellers shall be permitted to
promote such products and services on a "private  label" basis,  subject to such
further  requirements  as  Purchaser  may  impose to  protect  its  intellectual
property  rights in the Assets.  The Sellers  obligations in the immediately two
preceding  sentences  shall be broadly  construed to apply to all other tangible
material and documents produced by or on behalf of the Sellers.

                                   ARTICLE V

                    CONDITIONS TO THE PURCHASER`S OBLIGATIONS

     5. CONDITIONS TO THE PURCHASER`S OBLIGATIONS. The Purchaser`s obligation to
purchase  the  Assets  and take the other  actions  required  to be taken by the
Purchaser at the Closing is conditional upon receipt by the Purchaser of all the
documents  required to be delivered  by the Sellers  pursuant to this Article V,
and  compliance  by the Sellers  with all of the terms of this Article V, unless
any such  condition  shall  have been  waived by an  authorized  officer  of the
Purchaser in its sole discretion in writing.

     5.1. TRANSFER DOCUMENTS.  The Sellers shall have delivered to the Purchaser
bills of sale,  assignments,  certificates  and other  appropriate  documents of
transfer in form and substance  satisfactory to the Purchaser,  transferring the
Assets to the Purchaser.

     5.2. TRUTH OF  REPRESENTATIONS  AND  WARRANTIES.  The  representations  and
warranties of the Sellers  contained in this Agreement shall be true and correct
in all material  respects as of the date of this Agreement and as of the Closing
Date,  as though  made on and as of the Closing  Date,  except (i) to the extent
such representations and warranties are by their express provisions made as of a
specified  date and (ii) for the  effect of  transactions  contemplated  by this
Agreement,  and an executive  officer of each Seller shall have delivered to the
Purchaser a certificate, dated the Closing Date, to such effect.

     5.3.  DELIVERY OF SOURCE  CODE.  The Sellers  shall have  delivered  to the
Purchaser  the source code for all Licensed  Software  together with all related
documentation.

     5.4.  LICENSE  AGREEMENT.  Sellers shall have entered into and delivered to
the  Purchaser  a  Software  License  Agreement  (the  "License  Agreement")  in
substantially  the form attached hereto as EXHIBIT B for the use of the Licensed
Software.

     5.5.  PERFORMANCE  OF  AGREEMENTS.  Each and all of the  agreements  of the
Sellers to be  performed  on or before the  Closing  Date  pursuant to the terms
hereof shall have been duly performed in all material respects, and an executive
officer of each Seller  shall have  delivered  to the  Purchaser a  certificate,
dated the Closing Date, to such effect.

                                       11
<PAGE>

     5.5. NO  LITIGATION  THREATENED.  No action or  proceeding  shall have been
instituted or, to the Sellers` best knowledge, shall have been threatened before
a court or other  government  body or by any public  authority  to  restrain  or
prohibit  any of the  transactions  contemplated  hereby or which  would  have a
material adverse effect on the Assets. An executive officer of each Seller shall
have delivered to the Purchaser a  certificate,  dated the Closing Date, to such
effect.

     5.6.  CONSENTS AND APPROVALS.  The Sellers shall have received all consents
and approvals  necessary for the consummation of the  transactions  contemplated
hereby (including,  without limitation, the consents of SDS Merchant Fund, L.P.,
DMG Legacy  International  Ltd., DMG Legacy  Institutional  Fund LLC, DMG Legacy
Fund LLC,  International  and  Institutional  Fund LLC,  and New York  Community
Investment  Company L.L.C.) and such consents and approvals shall be in form and
substance satisfactory to the Purchaser and received by the Purchaser.

     5.8.  CLEARING  AGREEMENT  AMENDMENT.  Inc.  shall  have  entered  into and
delivered to Purchaser an Amendment to the Fully  Disclosed  Clearing  Agreement
dated as of October 3, 1996, as amended,  between Penson and Inc. (the "Clearing
Agreement") in form and substance satisfactory to Penson.

     5.9. INTENTIONALLY OMITTED.

     5.10. COPYRIGHT TRANSFER.  ABW shall have entered into and delivered to the
Purchaser a Copyright  Transfer  Agreement in  substantially  the form  attached
hereto as EXHIBIT C.

     5.11.  AMENDMENT  TO MASTER  AGREEMENT.  Sellers and such other  parties as
Purchaser shall request shall have entered into and delivered to the Purchaser a
Third Amendment to the Master Subordination  Agreement in substantially the form
attached hereto as EXHIBIT D.

     5.12. AMENDMENT TO NOTE; OTHER PROMISSORY NOTES. Sellers shall have entered
into and  delivered  an Amended  and  Restated  Note in  substantially  the form
attached hereto as EXHIBIT E as well as documents  relating to the assignment of
the promissory note referred to in SECTION 1.3(B) as Purchaser shall request.

     5.13 LEGAL  OPINION.  Sellers  shall have  caused to be  delivered  a legal
opinion of Morris, Nichols, Arsht & Tunnel in form and substance satisfactory to
Purchaser  that Sellers are not  required to obtain  shareholder  consent  under
Section 271 of the Delaware General  Corporation Law in connection with the sale
of the Assets to Purchaser.

     5.14 ASSIGNMENT AND  ACKNOWLEDGEMENT  OF LICENSE  AGREEMENT.  Sellers shall
have delivered an Assignment and  Acknowledgement of the License Agreement dated
as of June 1, 2002 among Sellers and Penson in  substantially  the form attached
as EXHIBIT F.

     5.15 DELIVERY OF TRANSACTION DOCUMENTS.  Sellers shall have delivered fully
executed  versions of the First  Amendment  and Second  Amendment  to the Master
Subordination  Agreement,  the preferred  stock  certificate  in favor of Penson
required by the Transaction  Documents and such other fully executed Transaction
Documents as Penson has requested  Borrower to deliver prior to the Closing Date
as were required to have been  delivered in  connection  with the closing of the
Master Subordination Agreement.

                                       12
<PAGE>

                                   ARTICLE VI

                     CONDITIONS TO THE SELLERS` OBLIGATIONS

     6. CONDITION TO THE SELLER`S  OBLIGATIONS.  The Sellers` obligation to sell
the Assets and take the other actions required to be taken by the Sellers at the
Closing is  conditional  upon receipt by the Sellers of the Purchase  Price,  in
accordance  with SECTION  1.3,  receipt of all of the  documents  required to be
delivered by the  Purchaser  pursuant to this ARTICLE VI and  compliance  by the
Purchaser  with all of the terms of this ARTICLE VI,  unless any such  condition
shall have been waived by the Sellers in their sole discretion in writing.

     6.1. INTENTIONALLY OMITTED.

     6.2. TRUTH OF  REPRESENTATIONS  AND  WARRANTIES.  The  representations  and
warranties  of the  Purchaser  contained  in this  Agreement  shall  be true and
correct in all material  respects as of the date of this Agreement and as of the
Closing  Date,  as though  made on and as of the Closing  Date and an  executive
officer of the  Purchaser  shall have  delivered  to the Sellers a  certificate,
dated the Closing Date, to such effect.

     6.3.  PERFORMANCE  OF  AGREEMENTS.  Each and all of the  agreements  of the
Purchaser to be  performed  on or before the Closing Date  pursuant to the terms
hereof shall have been duly performed in all material respects, and an executive
officer of the  Purchaser  shall have  delivered  to the Sellers a  certificate,
dated the Closing Date, to such effect.

     6.2. NO  LITIGATION  THREATENED.  No action or  proceeding  shall have been
instituted or, to the  Purchaser`s  best  knowledge,  shall have been threatened
before a court or other  government body or by any public  authority to restrain
or prohibit any of the transactions contemplated hereby. An executive officer of
the  Purchaser  shall have  delivered  to the Sellers a  certificate,  dated the
Closing Date, to such effect.

     6.3. CONSENTS AND APPROVALS. The Purchaser shall have received all consents
and approvals  necessary for the consummation of the  transactions  contemplated
hereby (including,  without limitation, the consents of SDS Merchant Fund, L.P.,
DMG Legacy  International  Ltd., DMG Legacy  Institutional  Fund LLC, DMG Legacy
Fund  LLC,  International,  Institutional  Fund  LLC,  and  New  York  Community
Investment  Company  L.L.C.),  all in form  and  substance  satisfactory  to the
Purchaser.

     6.4. LICENSE AGREEMENT.  Purchaser shall have entered into and delivered to
the Sellers the License  Agreement in substantially  the form attached hereto as
EXHIBIT  B for  the  use of  the  Licensed  Software.  6.7.  CLEARING  AGREEMENT
AMENDMENT.  Penson shall have entered into and delivered to Inc. an Amendment to
the Clearing Agreement in form and substance satisfactory to Inc.

     6.8.  AMENDMENT TO NOTE; RELIEF UNDER OTHER PROMISSORY NOTES.  Penson shall
have entered into and  delivered an Amended and Restated  Note in  substantially
the form attached hereto as EXHIBIT F and shall relieve ABW`s  obligations under
the  Notes  referred  to in  SECTIONs  1.3(A)  and  (B)  in a  form  and  manner
satisfactory to Sellers.

     6.9. LEGAL OPINION.  Sellers shall have received a legal opinion of Morris,
Nichols,  Arsht & Tunnel in form and  substance  satisfactory  to  Sellers  that
Sellers are not required to obtain shareholder  consent under Section 271 of the

                                       13
<PAGE>

Delaware  General  Corporation  Law in connection with the sale of the Assets to
Purchaser.

     6.10. FAIRNESS OPINION. Sellers shall have received a fairness opinion from
Appleby Capital, Inc. in form and substance satisfactory to Sellers.

     6.11 SECURITY DOCUMENTS. Penson and the relevant DMG Entities identified in
SECTION  6.5 shall have  entered  into and  delivered  a side letter in form and
substance satisfactory to the Sellers in respect of the Security Documents.

                                  ARTICLE VII

                                   TERMINATION

     7.1. TERMINATION BY EITHER PARTY. If the Closing has not occurred hereunder
(i) because all of the  conditions to Closing have not occurred (or been waived)
on or  before  July 31,  2002 (the  "TERMINATION  Date")  or (ii)  because  of a
material  breach of any provision of this  Agreement or any Related  Document by
any party thereto,  which breach is not cured within three days after receipt of
written  notice  thereof,  then this  Agreement  may be terminated by either the
Purchaser or the Sellers at any time prior to the Closing upon written notice to
the other parties; provided, that the party or parties exercising such right are
not then in breach of any  provision of this  Agreement.  A  termination  by any
nonbreaching  party or parties  under  this  SECTION  7.1 will not  operate as a
waiver by such  party or  parties  of any  rights to seek  damages  or any other
remedy for a breach of this Agreement by the other party or parties.

     7.2.  EFFECT OF  TERMINATION.  In the event this  Agreement  is  terminated
pursuant to SECTION  7.1  hereof,  this  Agreement  shall  become void and of no
effect  and  there  shall be no  liability  on the part of the  parties  hereto;
PROVIDED,  HOWEVER,  that  SECTIONS  7.3,  8.2,  9.3, and ARTICLE X hereof shall
survive any termination and provided, further, that nothing herein shall relieve
a party  hereto  from  liability  for a  breach  of any of its  representations,
warranties, agreements and covenants contained in this Agreement.

     7.3.  TERMINATION  FEE. In the event this Agreement is terminated by any of
the Sellers for any reason  (including  a decision by the Board of  Directors of
ABW prior to the Closing Date to accept a financially  more  advantageous  offer
for the  Assets  (valuing  as well  the  cost to ABW of  payment  of  additional
applicable  default  fees and interest  that may be owing to  Purchaser  and its
affiliates under all Related  Documents) from a third party based on a fiduciary
legal obligation to do so , to which Purchaser shall not object to the extent it
has been given a reasonable prior  opportunity to counter such more advantageous
offer) other than (i) the  nonfulfillment  by the  Purchaser  of the  conditions
precedent to the obligations of the Sellers as set forth in ARTICLE VI hereof or
(ii) the failure of the parties to close by the Termination Date due to no fault
of their own after the  exercise  of their  respective  best  efforts,  then the
Sellers  shall  be  jointly  and  severally  liable  to pay to the  Purchaser  a
termination fee, in cash, equal to One Hundred Thousand Dollars ($100,000). Such
fee shall be paid within five (5) business days  following the occurrence of the
event giving rise to such payment.

                                  ARTICLE VIII

           SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

     8.1.   SURVIVAL  OF   REPRESENTATIONS   AND   WARRANTIES.   The  respective
representations  and  warranties of the Sellers and the  Purchaser  contained in
this  Agreement or in any exhibit or schedule  delivered  pursuant  hereto shall

                                       14
<PAGE>

survive  the  Closing  Date for a period of two (2)  years;  PROVIDED,  that the
representations  and  warranties  contained in SECTION 2.9 shall survive for the
applicable  statute of limitations  periods.  In the event written notice of any
claim for  indemnification  shall have been given within the applicable survival
period,  the  representations  and  warranties  that  are  the  subject  of such
indemnification  claim  shall  survive  until such time as such claim is finally
resolved.

     8.2. INDEMNIFICATION.

          (a) The Sellers agree to jointly and severally  indemnify,  defend and
hold harmless the Purchaser and its officers,  directors,  employees, agents and
"affiliates" (as such term is defined in Rule 405 of the Securities Act of 1933)
from and against any claim,  liability,  obligation,  loss, damage,  assessment,
judgment, cost and expense (including, without limitation, reasonable attorney`s
and   accountant`s   fees  and  costs  and  expenses   reasonably   incurred  in
investigating,  preparing,  defending  against or prosecuting  any litigation or
claim, action,  suit,  proceeding or demand) of any kind or character ("LOSSES")
arising out of or in any manner  incident,  relating or  attributable to (i) any
inaccuracy  in any  representation  or breach of any  warranty of either  Seller
contained  in  this  Agreement  or in  any  exhibit  or  schedule,  certificate,
instrument or other document or agreement executed or delivered by any Seller in
accordance with this Agreement;  (ii) any failure by either Seller to perform or
observe any  covenant,  agreement or condition to be performed or observed by it
under this  Agreement or under any  schedule,  certificate,  instrument or other
document or agreement executed by it in accordance with this Agreement; or (iii)
any and all liabilities of the Sellers, other than such Assumed Liabilities that
Purchaser  expressly  accepts  as its  obligations  after  the  Closing  Date in
accordance with SECTION 1.2 of this Agreement. The obligations of the Sellers to
indemnify the Purchaser as herein stated shall survive the  consummation  of the
transactions  herein  described.  The Sellers  will also  jointly and  severally
indemnify,  defend and hold  Purchaser and its officers,  directors,  employees,
agents  and  affiliates,  and  its  and  their  employees,  agents,  independent
contractors and licensees harmless from and against any and all claims, actions,
suits,  proceedings,  losses or damages (including  reasonable  attorneys` fees)
brought  against such person or entity based on an allegation  that the Licensed
Software or Watley Marks,  as transferred to Purchaser on the Closing Date or as
existing on or prior to such date, violate any Intellectual  Property Right of a
third party to the extent  Purchaser or its affiliates are not  responsible  for
causing  such  allegation  or  violation.   As  used  in  this  SECTION  8.2(A),
"INTELLECTUAL  PROPERTY  RIGHTS"  means  any U.S.  or  foreign  patents,  patent
applications,  trademarks,  trade names,  service marks,  brand names, logos and
other trade designations (including unregistered names and marks), trademark and
service  mark   registrations   and   applications,   copyrights  and  copyright
registrations and applications, moral rights, inventions, invention disclosures,
formulae,  formulations,  processes,  methods, trade secrets,  computer software
(including  the  architecture  thereof),  computer  programs  and source  codes,
manufacturing research and similar technical information,  engineering know-how,
assembly and test data,  drawings and royalty  rights,  and "WATLEY MARKS" means
all existing  trademarks,  service  marks,  logos and trade names of ABW and its
affiliates, including all current and future registrations and other rights with
respect thereto.

          (b) The Purchaser  agrees to  indemnify,  defend and hold harmless the
Sellers and the Sellers` officers,  directors,  employees, agents and affiliates
from and against any Losses arising out of or in any manner  incident,  relating
or  attributable  to (i) any inaccuracy in any  representation  or breach of any
warranty  of the  Purchaser  contained  in  this  Agreement,  in  any  schedule,
certificate,  instrument or other document or agreement executed or delivered by
the  Purchaser  in  accordance  with this  Agreement;  (ii) any  failure  by the
Purchaser  to perform or observe any  covenant,  agreement  or  condition  to be
performed or observed by it under this Agreement or under any exhibit, schedule,
certificate,  instrument  or  other  document  or  agreement  executed  by it in
accordance with this Agreement or (iii) such Assumed  Liabilities that Purchaser
expressly  accepts as its obligation  after the Closing Date in accordance  with
SECTION 1.2 of this Agreement.  The obligation of the Purchaser to indemnify the
Sellers as herein  stated shall  survive the  consummation  of the  transactions
herein described.

                                       15
<PAGE>

          (c) If the Purchaser believes that a matter has occurred that entitles
it to  indemnification  under  SECTION  8.2(A)  (other than  matters  covered by
subsection (d) below) or either Seller  believes that a matter has occurred that
entitles it to indemnification  under SECTION 8.2(B) (other than matters covered
by subsection  (d) below),  the Purchaser or either  Seller,  as the case may be
(the "INDEMNIFIED PARTY"), shall give prompt written notice to any party against
whom  indemnification  is  sought  (each of whom is  referred  to  herein  as an
"INDEMNIFYING   PARTY")   describing  such  matter  in  reasonable  detail.  The
Indemnified   Party  shall  be  entitled  to  give  such  notice  prior  to  the
establishment  of the amount of its Losses and to supplement its claim from time
to time thereafter by further notices as they are established.  The Indemnifying
Party  shall send a written  response to such claim for  indemnification  within
thirty (30) days after receipt of the claim stating its  acceptance or objection
to the  indemnification  claim, and explaining its position with respect thereto
in reasonable  detail. If such  Indemnifying  Party does not respond within such
thirty  (30) day  period,  it will be deemed to have  accepted  the  Indemnified
Party`s   indemnification  claim  as  specified  in  the  notice  given  by  the
Indemnified  Party. If the Indemnifying  Party gives a timely objection  notice,
then the parties will negotiate in good faith to attempt to resolve the dispute.
Upon the expiration of an additional thirty (30) day period from the date of the
objection  notice  or  such  longer  period  as to  which  the  Indemnified  and
Indemnifying  Parties  may  agree,  any  such  dispute  shall  be  submitted  to
arbitration  in  Dallas,  Texas  to a panel  of three  members  of the  American
Arbitration  Association  selected in accordance  with the rules of the American
Arbitration Association, who shall promptly arbitrate such dispute in accordance
with the rules of such  Association and report to the parties upon such disputed
items,  and such report shall be final,  binding and  conclusive on the parties.
Judgment upon the award by the  arbitrator(s) may be entered in any court having
jurisdiction.  The prevailing party in any such arbitration shall be entitled to
recover  from,  and  have  paid  by,  the  other  party  hereto  to all fees and
disbursements of such arbitrator or arbitrators and reasonable  attorney`s fees,
costs and expenses incurred by the prevailing party in such arbitration.

          (d) If a third person asserts a claim against an Indemnified  Party in
connection with a matter giving rise to  indemnification  rights hereunder,  the
Indemnified Party shall promptly (but in no event later than ten (10) days prior
to the time at which an  answer or other  responsive  pleading  or  notice  with
respect to the claim is required)  notify the  Indemnifying  Party in writing of
such claim.  The  Indemnifying  Party shall have the right, at its election,  to
pursue the defense or settlement of such claim by giving prompt  written  notice
to the Indemnified Party that it will do so, such election to be made and notice
given in any event at least  five (5) days  prior to the time at which an answer
or other responsive pleading or notice with respect thereto is required.  If the
Indemnifying  Party makes such election,  the Indemnifying Party may conduct the
defense of such claim through  counsel of its choosing,  will be responsible for
the expenses of such defense, may take all steps to defeat, settle or compromise
such claim and shall be bound by the results of its defense or settlement of the
claim to the extent it produces  damage or loss to the  Indemnified  Party.  The
Indemnifying  Party shall not settle such claims without prior written notice to
and  consultation  with the  Indemnified  Party,  and no such  settlement by the
Indemnifying  Party  involving any  injunction or material and adverse effect on
the  Indemnified  Party may be agreed to without the  Indemnified  Party`s prior
written consent.  As long as the Indemnifying Party is diligently  contesting or
seeking to settle any such claim in good faith, the Indemnified  Party shall not
pay  or  settle  any  such  claim  without  the  prior  written  consent  of the
Indemnifying  Party,  such  consent  not  to be  unreasonably  withheld.  If the
Indemnifying  Party does not make such  election,  or having made such  election
does not proceed  diligently to defend or settle such claim prior to the time at
which an answer or other  responsive  pleading or notice with respect thereto is
required,  or does not  continue  diligently  to contest or seek to settle  such
claim,  then the Indemnified Party may conduct the defense and proceed with such
claim in its exclusive discretion,  and the Indemnifying Party shall be bound by
any defense or settlement that the Indemnified Party may make in good faith with
respect to such claim.  The parties  agree to cooperate in defending  such third

                                       16
<PAGE>

party claims,  and the defending party shall have reasonable  access to records,
information  and  personnel in control of the other party which are pertinent to
the defense thereof.

          (e) The right to  indemnification,  payment  of  damages  or any other
remedy based on the  representations,  warranties,  covenants and  agreements in
this Agreement shall not be affected by (i) any investigation conducted, whether
before or after the execution of this Agreement, with respect to the accuracy or
inaccuracy of or compliance with, any such representation, warranty, covenant or
agreement,  except  to the  extent  that  a  party  has  knowledge  of any  such
inaccuracy  or  noncompliance  prior  to the  Closing  Date or (ii)  subject  to
applicable  law,  any  actual  knowledge  of a party  that  any  representation,
warranty  or  covenant  in this  Agreement  is  inaccurate  has or has not  been
complied  with  except as  disclosed  in  writing  herein  or in the  Disclosure
Schedules. The parties acknowledge and agree that the indemnification provisions
set forth in this  ARTICLE  VIII  shall be their sole and  exclusive  remedy and
recourse  for the  recovery of money  damages with respect to any and all claims
relating to or arising out of this ARTICLE VIII; PROVIDED;  HOWEVER, the parties
may seek any remedy  available to them, in equity or at law, for any other cause
of action including, but not limited to, any cause of action based on fraud.

                                   ARTICLE IX

                             POST-CLOSING COVENANTS

     9.1.  NON-SOLICITATION.  The Sellers  agrees that they shall not,  and they
shall cause their directors,  officers, employees, agents and affiliates not to,
directly or  indirectly,  contact or solicit any person or entity with regard to
licensing or purchasing the Assets other than with the prior written  consent of
an authorized officer of the Purchaser or to the extent such person or entity is
referenced  in SECTIONS  1.3(D)(I),  (II) and (IV) (but only during the nine (9)
month period referenced  therein in which ABW would be permitted to contact such
person or entity in order to obtain royalties from Purchaser).

     9.2.  NON-COMPETITION.  Until the later of five (5) years from the  Closing
Date,  the last date on which  Purchaser  makes a  royalty  payment  to  Sellers
pursuant to SECTION 1.3(D),  and the date on which Penson and/or Purchaser is no
longer providing services to Sellers or their affiliates, the Sellers agree that
they  shall  not,  and shall  cause  each of their  affiliates  and  their  then
currently  employed  or engaged  officers  and  directors  not to,  directly  or
indirectly, anywhere in the United States of America, own more than five percent
(5%) of,  manage,  operate,  control,  be  employed  by or act as agent  for,  a
business   which  licenses  or  sells  to  third  parties   software   providing
substantially  similar  functionality to the Licensed Software.  Notwithstanding
the foregoing, no violation of the foregoing sentence shall occur as a result of
Sellers or their  affiliates  selling,  licensing,  or otherwise  providing  the
Licensed  Software to their customers in connection with their trading  business
(but  solely as  permitted  in  accordance  with the express  provisions  of the
License  Agreement  referred  to in  SECTION  5.4).  Within ten (10) days of the
Closing Date the Sellers  shall file with the Secretary of State of Delaware and
the  Secretary  of State  of New York a  termination  of their  fictitious  name
filings, if any,  pertaining to the name  "UltimateTrader" or "WatleyTrader" and
shall  provide a copy thereof to the  Purchaser and shall take any other actions
which may be necessary to transfer all of its trade names, trademarks or service
names included in the Assets to the Purchaser.

     9.3. COMPLIANCE WITH  AGREEMENT/RELATED  DOCUMENTS;  CLAWBACK. In the event
that any party  hereto  commits a  non-material  breach of this  Agreement  with
respect to any of its  obligations  which it is  required  to perform  after the
Closing  Date,  the other party hereto may send written  notice to the breaching
party,  setting forth in reasonable  detail the breach which has been committed.
The  breaching  party  shall have  thirty  (30) days  after its  receipt of such
written notice to cure such breach,  provided that if such breach is not capable
of being cured  within such thirty (30) day period,  the  breaching  party shall
have an additional  thirty (30) days to cure such breach.  In the event that any
party  hereto  commits a material  breach (for  purposes of this  SECTION 9.3, a
"material breach" shall be deemed to include,  without  limitation,  any conduct

                                       17
<PAGE>

which  constitutes a breach of a provision of this  Agreement by any Seller that
adversely  impairs the  unrestricted  ownership and use by Purchaser  and/or its
affiliates  of the  Assets  and  any  breach  of a  payment  or  indemnification
obligation by any Seller in this  Agreement) of this  Agreement  with respect to
any of its  obligations  which it is required to perform after the Closing Date,
the other party hereto may send written notice to the breaching  party,  setting
forth in reasonable  detail the breach which has been  committed.  The breaching
party shall have fifteen  (15) days after its receipt of such written  notice to
cure such breach. If, at the end of such respective cure periods, the applicable
breach  has not been  cured,  the  non-breaching  party may  terminate  (i) this
Agreement,  but only with respect to the  performance of any future  obligations
hereunder, and (ii) any Related Document.

In the event of any claim or  challenge  by any  person  or  entity  other  than
Purchaser  and its  affiliates  to the  validity  and/or  enforceability  of the
transactions  contemplated  by this Agreement  ("CHALLENGE"),  the parties agree
that to the  extent  such  Challenge  does not result in the  impairment  of the
rights of Purchaser and its affiliates  under the terms of this Agreement and/or
any Related Document  ("IMPAIRMENT"),  Purchaser and its affiliates may elect to
offset at any time the costs of  Purchaser  and/or its  affiliates  in defending
against such Challenge  against any  consideration  payable or debt  forgiveness
required to occur as part of the Purchase  Price  referred to in SECTION 1.3, in
Purchaser`s and its affiliates sole discretion. In the event a Challenge results
in any Impairment as determined by Purchaser and its  affiliates,  Purchaser and
its affiliates may deem this Agreement and the documents  executed in connection
therewith to be void and of no effect ab initio and any such  Related  Documents
(and the rights and  remedies of  Purchaser  and its  affiliates  in  connection
therewith)  shall be  deemed  to exist as if this  Agreement  and the  documents
executed in connection therewith had not been executed;  provided, however, that
Purchaser and its affiliates shall be entitled to demand immediate (i) repayment
of all  principal,  interest,  fees and expenses in connection  with any and all
advances and any and all debt forgiven  pursuant to SECTION 1.3 (it being agreed
that, notwithstanding the forgoing, the debt forgiven pursuant to SECTION 1.3(A)
shall be  reinstated  in  accordance  with its terms  and  shall  only be due in
accordance with its terms), (ii) payment of a $100,000 termination fee (it being
acknowledged  and agreed by Sellers that payment of such fee here and in Section
7.3 shall not be deemed a "penalty"  under  applicable law given the significant
cost to  Purchaser  and its  affiliates  of the  conduct  that  gave rise to the
obligation to pay such fee), and (iii) damages with respect to such other rights
and remedies as Purchaser and its  affiliates  may have, all of which are hereby
reserved.  Among other things, the practical effect of a Challenge  resulting in
Impairment may be an immediate  requirement for the repayment of all outstanding
obligations by the Sellers under the terms of the applicable  Related Documents.
In such event  Purchaser  shall,  upon the reasonable  request of Sellers and at
their  expense,  execute  such  documents  and take such actions to evidence the
Sellers`  ownership  of the  Assets.  Any  breach  by a party  hereto  or  their
affiliates of a Related Document after the Closing that results in a termination
by the  non-breaching  party of such  Related  Document  shall  give  rise to an
immediate  termination  event  with  respect  to the  performance  of its future
obligations  hereunder (without any requirement for any additional grace or cure
period as set forth herein) and/or a claim for Impairment.

     9.4.  FURTHER  ASSURANCES.  From time to time after the Closing and without
further  consideration  from any  other  party,  each of the  Purchaser  and the
Sellers, at their sole cost and expense,  shall execute and deliver, or cause to
be  executed  and  delivered,  to  the  other  party  or  parties  such  further
instruments  of sale,  assignment,  transfer  and  delivery  and take such other
action as the  requesting  party or parties may  reasonably  request in order to
more effectively convey the Assets to the Purchaser and consummate and afford to
the Purchaser and Sellers the benefit of the transactions  contemplated  hereby.
Following the Closing,  at the request of any party,  the other party or parties
shall  cooperate in the  preparation of any financial  statements or tax returns
and  participate as witnesses in any lawsuit,  investigation  or  administrative
hearing  involving the Assets or any of the Assets, at no cost or expense to the
requesting party or parties, other than reimbursement of the cooperating party`s
or  parties`  out of pocket  expenses  incurred as a result  thereof.  Within 15
business days after the Closing Date,  Purchaser agrees to deliver to Sellers an

                                       18
<PAGE>

amendment to that certain Master Equipment Lease relating to equipment  provided
by Penson that  eliminates  from the  applicable  lease  schedule the  equipment
delivered  by  Sellers  to ABW`s  Texas  office  from and  after  the date  such
equipment was received in such office.

                                   ARTICLE X

                                  MISCELLANEOUS

     10.1.  KNOWLEDGE.  Where any  representation or warranty  contained in this
Agreement  is expressly  qualified  by  reference  to the best  knowledge of any
party,  it shall mean the actual  knowledge  of the  executive  officers of such
party in each  instance  after they have made such due and  diligent  inquiry as
they deem  necessary and  appropriate  as to the matters that are the subject of
such representations and warranties.

     10.2.  PROFESSIONAL  EXPENSES.  The  Sellers,  on the  one  hand,  and  the
Purchaser,  on the other  hand,  shall  each pay all of their  own  professional
expenses  relating  to  negotiating,   drafting  and  closing  the  transactions
contemplated  by this Agreement,  including,  without  limitation,  the fees and
expenses of its respective counsel,  financial advisers,  investment bankers and
accountants,   whether  or  not  the   transactions   contemplated   hereby  are
consummated.

     10.3.  GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Texas without giving effect
to conflicts of laws principles.

     10.4.  JURISDICTION.  Any judicial  proceeding  brought  against any of the
parties to this  Agreement on any dispute  arising out of this  Agreement or any
matter  related  hereto  shall be  brought  solely in the  appropriate  state or
Federal   courts   located   in  Dallas,   Texas   (PROVIDED   that   Purchaser,
notwithstanding  the  foregoing,  may elect to pursue its rights and remedies in
another  forum if it so desires).  Each of the parties  hereby  irrevocably  and
unconditionally  submits,  for  itself  and  its  property,  to the in  personam
jurisdiction of the state and Federal courts sitting in Dallas County, Texas, in
each case with respect to any action or proceeding arising out of or relating to
this Agreement. Each party hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and  effectively do so, any objection which it may
now or hereafter  have to the laying of venue of any suit,  action or proceeding
arising  out of or  relating to this  Agreement  in any such  court.  Each party
hereby  irrevocably  waives, to the fullest extent permitted by law, the defense
of an inconvenient  forum to the maintenance of such action or proceeding in any
such court.

     10.5.  CAPTIONS.  The  Article  and  Section  captions  used herein are for
reference  purposes  only,  and  shall  not in any way  affect  the  meaning  or
interpretation of this Agreement.

     10.6.  NOTICES.  Any notice or other  communications  required or permitted
hereunder  shall  be  sufficiently  given  if  delivered  in  person  or sent by
telecopy,  overnight courier service, express mail or by registered or certified
mail, postage prepaid, addressed as follows:

                                (i) If to the Purchaser:

                                    Integrated Trading Solutions, Inc.
                                    1700 Pacific Ave, Suite 1400
                                    Dallas, Texas 75201
                                    Attention:  CEO

                                    Telecopy: (214) 765-1164

                                       19
<PAGE>

                                    If to Penson:

                                    Penson Financial Services, Inc.
                                    1700 Pacific Ave, Suite 1400
                                    Dallas, Texas 75201
                                    Attention: President and COO

                                    Telecopy: (214) 765-1164

                               (ii) If to the Sellers:

                                    A.B. Watley Group Inc.
                                    40 Wall Street
                                    New York, New York 10005
                                    Attention:  CEO

                                    Telecopy: (212) 422-1724

                                    A.B. Watley, Inc.
                                    40 Wall Street
                                    New York, New York 10005
                                    Attention:  CEO

                                    Telecopy: (212) 422-1724

or such  other  address  as shall be  furnished  in writing by any such party in
accordance  with this SECTION 10.6,  and such notice or  communication  shall be
deemed to have been given as of the date so personally  delivered or telecopied,
one business day after delivery by express mail or overnight courier service and
three business days after deposit in the U.S. mail.

     10.7. PARTIES IN INTEREST. Subject to the effect of the other provisions of
this  Section,  this  Agreement  shall be  binding  upon and shall  inure to the
benefit of the successors  and assigns of the parties.  Purchaser may assign its
rights,  interests and  obligations  under this Agreement.  Notwithstanding  any
other  provision of this  Agreement,  neither this Agreement nor any interest in
this Agreement or any rights hereunder shall be sold,  transferred,  or assigned
by  Sellers,  by  operation  of  law  or  otherwise,  including  the  merger  or
consolidation  of any Seller with or into another  entity.  For purposes of this
Section,  any change in "control" of any Seller shall  constitute an assignment.
Control means the direct or indirect  power to direct or cause  direction of the
management  and  policies of an entity,  whether  through the exercise of voting
power,  by  contract  or  otherwise,  as  determined  by  Purchaser  in its sole
discretion,  and provided  further  that a  transaction  shall not  constitute a
change in control  if (i) the  Sellers  shall have  notified  the  Purchaser  in
writing  (sent  by  telecopy  marked  conspicuously  on  the  cover  sheet  with
"Urgent-Immediate  Reply  Needed" to each of  Purchaser`s  CEO and COO,  each of
Penson`s CEO,  COO, CFO,  General  Counsel and Chief  Compliance  Officer and to
Andrew Koslow  (208-275-3940))  in  reasonable  detail of the general terms of a
proposed transaction and identity of the applicable investor(s) and/or acquirer,
and the Purchaser  either confirms that such  transaction  does not constitute a
change in control or does not notify the Sellers  within six business days after
the day on which it  receives  the notice from the  Sellers  that the  Purchaser
deems the  transaction  to be a change in  control  and the  Sellers  complete a
transaction on terms no less favorable to the Sellers than those provided in the
notice or (ii) it involves  the issuance by the Sellers of common stock or other
equivalent  equity  securities (A) in connection with the conversion of existing
indebtedness  on the date  hereof of the Sellers or (B) upon the  conversion  or
exercise of warrants,  preferred stock or other securities  existing on the date

                                       20
<PAGE>

hereof or issued  pursuant to clause (A) above into common stock of the Sellers.
Any attempted  assignment,  transfer,  sale, or other delegation in violation of
this  Section  shall be void.  For purposes of this  Agreement,  Penson shall be
considered  to be an  affiliate  of  Purchaser.  In the  event  of  any  merger,
consolidation, acquisition or similar transaction involving all or substantially
all of Purchaser`s right, title and interest in the Assets, or the transfer of a
controlling  voting or equity  interest in Purchaser,  with or to a third party,
notwithstanding anything to the contrary in this Agreement, Sellers shall not be
entitled to any  payment of any kind  (including  pursuant to SECTION  1.3(D) of
this Agreement) from the purchase price  consideration  received by Purchaser or
its stakeholders  (i.e.,  there shall be no "deemed royalties" or attempt to pro
rate purchase  price  consideration  as a royalty  payment  notwithstanding  the
identity  of any  third  party),  it being  agreed  that the  operation  of this
sentence  shall not obviate a third party  acquiror`s  obligation  to pay actual
royalties  with respect to such license  contracts  with parties  identified  in
SECTION 1.3 hereof as it may elect to assume.

     10.8.  COUNTERPARTS.  This  Agreement  may  be  executed  in  one  or  more
counterparts, each of which shall be an original and all of which taken together
shall constitute one instrument.

     10.9. ENTIRE AGREEMENT. This Agreement,  including the exhibits, schedules,
certificates  and other  documents  referred to herein which form a part hereof,
contains  the entire  understanding  of the parties  hereto with  respect to the
subject matter contained herein and therein. This Agreement supersedes all prior
agreements and understandings (oral or written) between the parties with respect
to such subject matter, provided that Penson`s obligations under SECTION 4(B) of
the License  Agreement  dated as of June 1, 2002 between Penson and Sellers,  as
amended  pursuant  to SECTION  5.14 and  subject  to the  effect of SECTION  1.2
hereof,  shall not be  superseded  but shall  remain  in full  force and  effect
subject to the effect of the Amendment referenced in such SECTION 5.14.

     10.10.  AMENDMENTS;  WAIVERS.  This  Agreement  may only be  amended  by an
agreement  in writing  signed by the  Purchaser  and the  Sellers.  Neither  the
failure  nor any  delay by any party in  exercising  any  right  hereunder  will
operate as a waiver of such right, and no single or partial exercise of any such
right will preclude any other or further  exercise of such right or the exercise
of any other right.

     10.11. SEVERABILITY.  In case any provision in this Agreement shall be held
invalid, illegal or unenforceable,  the validity, legality and enforceability of
the  remaining  provisions  hereof  will not in any way be  affected or impaired
thereby.  Any provision  held  invalid,  illegal or  unenforceable  in part will
remain in full  force and  effect to the  extent  not held  invalid,  illegal or
unenforceable.

     10.12.  RULES OF  CONSTRUCTION.  The  normal  rules of  construction  which
require the terms of an  agreement  to be construed  most  strictly  against the
drafter  of  such  agreement  are  hereby  waived  since  each  party  has  been
represented by counsel in the drafting and negotiation of this Agreement.

     10.13.  JOINT AND SEVERAL  OBLIGATIONS.  The  provisions of this  Agreement
shall be broadly  construed  such that the  obligations  of the Sellers shall be
joint and several obligations of each Seller.

     10.14  AUDIT  RIGHTS.  During  the  periods  for  which  Purchaser  has  an
obligation to pay royalties pursuant to SECTION 1.3(D), Purchaser shall maintain
books and records  concerning  such  royalties.  Such books and records shall be
complete  and  accurate in all  material  respects and ABW shall have the right,
through its representatives or auditors,  to reasonable  inspection of the books
and records of  Purchaser  relating to such  royalties,  PROVIDED  that any such
inspection  shall only occur (i) upon fifteen (15) days` prior written notice to
Purchaser,  (ii) with minimum  disruption to  Purchaser`s  business  operations,
(iii) subject to the  confidentiality  provisions  set forth in SECTION 8 of the
License Agreement and the other existing confidentiality  agreements between the
parties,  and (iv) at ABW`s expense except to the extent any audit identifies an

                                       21
<PAGE>

error on the part of Purchaser  that misstates the amounts due to ABW by 7.5% or
more.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       22
<PAGE>

     IN WITNESS WHEREOF,  each of the parties hereto has executed this Agreement
as of the date and year first above written.

                               INTEGRATED TRADING SOLUTIONS, INC.
                               By: _______________________________________
                                     Name:
                                     Title:

                               A.B. WATLEY GROUP INC.
                               By: _______________________________________
                                     Name:
                                     Title:

                               By: _______________________________________
                                     Name:
                                     Title:

                               A.B. WATLEY, INC.
                               By: _______________________________________
                                     Name:
                                     Title:

[*] Confidential information has been omitted and has been separately filed
with the Securities and Exchanges Commission.

                                       23
<PAGE><PAGE>
Exhibit 10.40A

                           SOFTWARE LICENSE AGREEMENT

         This Software License  Agreement (this  "AGREEMENT"),  dated as of July
31, 2002 (the  "EFFECTIVE  DATE"),  is by and among A.B.  Watley  Group Inc.,  a
Delaware  corporation  ("WATLEY"),  A.B.  Watley,  Inc., a New York  corporation
("ABWI"),  and  Integrated  Trading  Solutions,  Inc.,  a  Delaware  corporation
("INTEGRATED").  Watley,  ABWI and Integrated are each sometimes  referred to in
this Agreement as a "PARTY" and are  collectively  referred to in this Agreement
as the "PARTIES."

                                   BACKGROUND

         WHEREAS,  the Parties have entered  into that  certain  Asset  Purchase
Agreement,  dated as of even date  herewith  (the "ASSET  PURCHASE  AGREEMENT"),
pursuant to which Watley and ABWI  transferred to Integrated all of Watley`s and
ABWI`s  right,  title and interest in and to the  Licensed  Software (as defined
below); and

         WHEREAS,  Watley and ABWI  desire to obtain a license  to the  Licensed
Software  for use in their  businesses.  Integrated  desires to grant Watley and
ABWI a license for such purposes in accordance  with the terms and conditions of
this Agreement.

                                    AGREEMENT

         NOW, THEREFORE, the Parties agree as follows:

1. DEFINITIONS.

         As used in this Agreement,  the following terms will have the following
meanings.

         "AFFILIATE" means, with respect to any Person, any corporation or other
entity of which at least a majority of the outstanding  shares of stock or other
ownership interests having by the terms thereof ordinary voting power to elect a
majority of the board of directors (or Persons  performing similar functions) of
such  corporation or entity  (irrespective of whether or not at the time, in the
case of a corporation,  stock of any other class or classes of such  corporation
will  have or  might  have  voting  power  by  reason  of the  happening  of any
contingency) is, at the time, directly or indirectly owned or controlled by such
Person.

         "AUTHORIZED USERS" means (i) Watley, but solely for the benefit of ABWI
or any other  Affiliate of Watley or ABWI that is wholly owned by Watley  and/or
ABWI  provided  that (A) the  Affiliate  is  conducting  a  business  or line of
business  that ABWI is  currently  engaged  in or could be engaged in within the
scope of this  Agreement,  (B) the Affiliate  becomes a party to Fully Disclosed
Clearing  Agreement  dated as of  October,  3,  1996,  between  ABWI and  Penson
Financial  Services,  Inc., as amended (the  "Clearing  Agreement") on identical
terms as set forth therein,  as applicable,  (C) the Affiliate  becomes bound by
the terms of this  Agreement and the Related  Documents,  as applicable on terms
satisfactory to Integrated and the other parties to such Related Documents,  (D)
such  Affiliate  does not benefit from the Licensed  Software as a result of any
transaction  involving a transaction  prohibited by Section  13(h),  and (E) the
Affiliate executes such other  documentation as Integrated and/or its affiliates
reasonably  request and provides to Penson a business  plan and other  financial
information acceptable to Penson (each an "Authorized Affiliate"),  (ii) ABWI or
any  Authorized  Affiliate , but solely at those  locations  of ABWI or any such
Authorized  Affiliate  within the United  States (it being  agreed that ABWI and
each such Authorized  Affiliate may use the Licensed Software to service trading
customers of ABWI or any such Authorized Affiliate located outside of the United
States  solely to the extent they execute  trades with ABWI in the United States
in full compliance with all applicable laws,  rules and  regulations,  and (iii)

<PAGE>

ABWI`s or any  Authorized  Affiliates`  customers  (e.g.,  retail or proprietary
traders registered with ABWI). The parties acknowledge and agree that Authorized
Users shall exclude all brokerage  and/or dealer firms trading in securities and
any  current or  prospective  customers  of  Integrated  and/or its  affiliates.
Notwithstanding  anything in the immediately  preceding sentence to the contrary
or any other provision of Section 3 hereof, but solely with respect to customers
noted in such  sentence  that are not  brokerage  and/or  dealer  firms  (each a
"NON-BD"),  if any such  Non-BD  customer  of Watley  or ABWI or any  Authorized
Affiliate that is an Authorized User is also a customer of Integrated`s software
solutions and/or other Integrated  products and services or a potential customer
that has been  solicited by or on behalf of  Integrated  and has entered into or
has  agreed to enter  into good  faith  negotiations  to  become a  customer  of
Integrated,  then Watley shall pay Integrated its then current  standard license
fees  for  each  such  customer;  provided,  however,  that  Watley,  ABWI,  any
Authorized  Affiliate and other Authorized Users shall,  under no circumstances,
market the  Licensed  Software in a manner that  purposefully  or  intentionally
adversely effects marketing opportunities of Integrated as reasonably determined
by Integrated; provided, further, that, any determination by Integrated that any
of Watley,  ABWI, any Authorized Affiliate or other Authorized User has marketed
or is marketing the Licensed Software in a manner that deprives  Integrated of a
licensing   opportunity   (whether  or  not  such  marketing  is  purposeful  or
intentional) shall result in an obligation, as determined by Integrated, for the
recipient or  beneficiary  of the Licensed  Software to pay  Integrated its then
current standard licensing fees and/or to cease using the Licensed  Software.  A
transaction  with a Non-BD  that is  otherwise  permitted  by the  terms of this
Agreement and the Related  Documents  shall not  constitute a  transaction  that
deprives Integrated of a marketing opportunity if (i) Watley shall have notified
Integrated in writing (sent by telecopy marked  conspicuously on the cover sheet
with  "Urgent-Immediate  Reply Needed" to each of Integrated`s CEO and COO, each
of Penson`s CEO, COO, CFO, General Counsel and Chief  Compliance  Officer and to
Andrew Koslow  (208-275-3940))  in  reasonable  detail of the general terms of a
proposed  transaction  with the  Non-BD  and the  identity  of the  Non-BD,  and
Integrated   either  confirms  that  such  transaction  does  not  constitute  a
transaction  that  deprives  Integrated of a marketing  opportunity  or does not
notify  Watley  within six business  days after the day on which it receives the
notice from Watley that  Integrated  deems the  transaction  to be a transaction
that deprives Integrated of a marketing  opportunity and Watley, ABWI and/or its
applicable  Authorized  Affiliate  completes  a  transaction  on  terms  no less
favorable to Watley, ABWI and/or its applicable  Authorized  Affiliate than that
provided in the notice.  Existing  brokerage  customers  of ABWI with active and
funded  accounts  that trade  securities  through ABWI as of the date hereof and
that are  Non-BDs  are not  deemed by  Integrated  to  deprive  Integrated  of a
marketing  opportunity  to the extent ABWI  engages in a  transaction  with such
party that is otherwise permitted by the terms of this Agreement and the Related
Documents.

         "CONFIDENTIAL   INFORMATION"   means   any   and  all   technical   and
non-technical  information  (including  trade secrets,  know-how and proprietary
information,  firmware,  designs,  schematics,  techniques,  plans or any  other
information  relating  to  any  research  project,   work  in  process,   future
development, scientific, engineering, manufacturing, marketing or business plans
or financial or personnel  matters) relating to a Party or its present or future
products,  sales,  suppliers,   customers,   licensors,   licensees,  employees,
investors  or  Affiliates  and  disclosed  or  otherwise  supplied by a Party to
another Party pursuant to this Agreement.

         "ERROR" means any defect in the code of an Integrated  Enhancement that
prevents the Licensed Software from properly  performing its intended  functions
to the extent  such code is written by or on behalf of  Integrated  (all uses of
the phrase "on behalf of  Integrated"  in this  Agreement used in the context of
the  creation of software  code shall  refer to the case when  Integrated  hires
third  parties  to  create  software  for it but  shall  exclude  the case  when
Integrated  licenses or  purchases  third party  software  for  inclusion in the
Licensed Software).

                                       2
<PAGE>

         "EVENT OF DEFAULT" means the occurrence of any of the following:  (i) a
party  fails to  perform  any of its  obligations  under this  Agreement  in any
material  respect;  (ii) a material  breach (as  determined in  accordance  with
Section  9.3 of the Asset  Purchase  Agreement)  by a party or its  affiliate(s)
under  the  Asset  Purchase  Agreement  or any other  material  breach  (without
reference  to  any  determination  under  Section  9.3  of  the  Asset  Purchase
Agreement) under any agreement or instrument  contemplated by the Asset Purchase
Agreement or under any of the Related  Documents;  (iii) any breach of a payment
obligation with respect to any debt owed by Watley or its Affiliates that is not
a part of the debt evidenced by the Related Documents;  or (iv) a breach by ABWI
or Penson of any  obligation  under the Clearing  Agreement;  PROVIDED  that the
non-breaching  party has given the  breaching  party  written  notice of default
setting  forth in  reasonable  detail the breach  that has  occurred;  PROVIDED,
FURTHER,  that the breaching  party shall have,  with respect to a  non-material
breach,  thirty (30) days after its receipt of such  written  notice to cure the
breach,  but if the breach is not capable of being cured within such thirty (30)
day period the breaching  party shall have an additional  thirty (30) day period
to cure the breach; and, PROVIDED, FURTHER, that the breaching party shall have,
with respect to a material  breach only fifteen (15) days (or such longer period
as set forth in the Asset  Purchase  Agreement,  the  Clearing  Agreement or the
applicable  Related Document relative to a breach arising  thereunder) after its
receipt of such written notice to cure the breach. In addition,  any breach by a
party  hereto  or their  affiliates  of a Related  Document  that  results  in a
termination by the non-breaching  party of such Related Document shall give rise
to an immediate  termination  event  hereunder  (without any requirement for any
additional grace or cure period as set forth herein).

         "INTEGRATED CORRECTIONS" means all bug fixes, patches,  corrections and
similar  modifications to the Licensed Software by or on behalf of Integrated in
the event of any Error in the Licensed Software.

         "INTEGRATED  ENHANCEMENTS" means all updates,  upgrades,  new versions,
additional functionality, and other similar modifications or improvements to the
Licensed  Software  (including  all new extensions or components of the Licensed
Software  and all  derivative  works of the  Licensed  Software),  made by or on
behalf of Integrated and generally made available to other licensees,  but shall
exclude any and all customized work for hire and any proprietary  development by
or on  behalf  of  Integrated  that is not  generally  made  available  to other
licensees  and all other  changes  for which  Integrated  generally  receives  a
designated  payment that an Authorized User has not accepted or for which it has
not paid.

         "INTELLECTUAL  PROPERTY  RIGHTS"  means any U.S.  or  foreign  patents,
patent applications,  trademarks, trade names, service marks, brand names, logos
and other trade designations (including unregistered names and marks), trademark
and service  mark  registrations  and  applications,  copyrights  and  copyright
registrations and applications, moral rights, inventions, invention disclosures,
formulae,  formulations,  processes,  methods, trade secrets,  computer software
(including  the  architecture  thereof),  computer  programs  and source  codes,
manufacturing research and similar technical information,  engineering know-how,
assembly and test data, drawings and royalty rights.

         "LICENSED   SOFTWARE"  means  the  object  (or   executable)   code  of
Integrated`s proprietary computer software, as described on Exhibit A, including
all Integrated  Enhancements and Integrated Corrections adopted by Watley to the
extent required and as otherwise permitted by this Agreement.

         "PENSON"  means  Penson  Financial  Services,  Inc.,  a North  Carolina
corporation.

         "PERSON"  means and includes  natural  persons,  corporations,  limited
partnerships,  limited liability companies,  general  partnerships,  joint stock
companies,  joint  ventures,  associations,   companies,  trusts,  banks,  trust
companies, land trusts, business trusts and other organizations,  whether or not
legal entities, and governmental authorities.

                                       3
<PAGE>

         "RELATED  DOCUMENTS"  has the meaning  set forth in the Asset  Purchase
Agreement.

         "SYSTEM" will mean any of Watley`s,  ABWI`s, or any of their respective
Affiliates` (but solely to the extent Affiliates are Authorized Users) software,
firmware,  hardware,  computer systems or devices,  or networks,  whether owned,
leased or rented, or otherwise  provided for the benefit,  or under the control,
of any of the  foregoing  (but  solely  to the  extent  such  "System"  has been
recommended  for use in writing by Integrated  in  connection  with the Licensed
Software).

2. LICENSES.

         (a) LICENSE TO SOFTWARE.

                  (i) Subject to the terms of this Agreement,  Integrated hereby
grants  to  Watley  a  perpetual,  non-exclusive,  license  to use the  Licensed
Software,  including the right to sublicense the Licensed Software to Authorized
Users so long as each Authorized  User takes such action as Integrated  requests
(at Integrated`s expense,  except to the extent any Authorized User is creating,
involved in or  responsible  for the problem for which  Integrated is requesting
protective  action) with respect to the protection of its Intellectual  Property
Rights.

                  (ii)   Integrated   will  deliver  to  Watley  all  Integrated
Enhancements  in  accordance  with  Integrated`s  normal and  customary  release
schedule.  Watley will have no obligation to install any Integrated Enhancements
unless  the same are  provided  without  charge and  Watley  will be  provided a
reasonable  period to install  such  Integrated  Enhancements.  Integrated  will
deliver all Integrated Corrections to Watley promptly upon written notice of any
Error or potential Error to a duly authorized representative of Integrated. Upon
the installation of any Integrated  Enhancement or Integrated  Correction,  such
Integrated Enhancement or Integrated Enhancement,  as applicable, will thereupon
be deemed to be part of the Licensed Software.

         (b)  LICENSE  RESTRICTIONS.  Neither  Watley  nor  ABWI  or  any  other
Authorized User shall: (i) provide,  lease, lend, use or allow others to use the
Licensed  Software  to or for  the  benefit  of  third  parties,  other  than as
permitted by this  Agreement;  or (ii) use the Licensed  Software in  connection
with the execution of trades of securities  outside of the U.S. (subject to such
limited use for Authorized Users located outside of the U.S. as is expressly set
forth in the  definition of "Authorized  User" in Section 1 for such  Authorized
Users to execute  securities  trades within the U.S) or in violation of any law,
rule or regulation.

         (c) ADDITIONAL  SOFTWARE.  Watley will be responsible for obtaining any
third party software  licenses for the operating  system it determines is needed
to operate the Licensed Software.

3. FEES AND ROYALTIES.

          (a) ROYALTY PAYMENTS. For [*], Watley may use the Licensed Software in
accordance  with  this  Agreement  [*].  Upon  the expiration of the [*], and in
consideration for the license granted to Watley hereunder, Watley shall pay, and
shall  cause  all  Authorized Users to pay, to Integrated a royalty equal to [*]
per  month  for  each  user  of  the Licensed Software (the "ROYALTY"). [*], and
thereafter  on  each  anniversary  of  the  Effective Date, the Royalty shall be
adjusted  by  the  percentage  change in the "CPI" for the immediately preceding
calendar year. CPI means the monthly index of the Consumer Price Index for Urban
Wage  Earners  and  Clerical  Workers  (all  items; 1982-84 = 100) issued by the

                                       4
<PAGE>

"BUREAU." Bureau means the U.S. Department of Labor, Bureau of Labor Statistics,
or if it ceases to publish the CPI, any  successor  agency of the United  States
that shall  publish the CPI or the data  necessary to determine  the CPI. If the
Bureau ceases to use the 1982-84 reference base, or a substantial change is made
in  determining  the CPI,  or the CPI  shall  be  discontinued  for any  reason,
Integrated shall designate an alternative index comparable to the CPI.

         (b) INTEGRATED  ENHANCEMENTS  AND  CORRECTIONS.  In  consideration  for
Integrated making all Integrated Enhancements available to Watley and installing
Integrated  Enhancements if and as directed by Watley, Watley, on its own behalf
and on  behalf of all  other  Authorized  Users,  shall  pay to  Integrated  the
then-current  fee that  Integrated  charges  all its  other  customers  for such
Integrated Enhancements (except as set forth in Section 2(a)(ii)).  Watley shall
remit  payment to  Integrated  within  thirty (30) days after receipt of invoice
therefor.  Integrated  shall make available to Watley and install all Integrated
Corrections at no additional cost.

         (c) OTHER COSTS.  From the Effective Date and so long as this Agreement
is in  effect,  Watley  shall,  on its own  behalf  and on  behalf  of all other
Authorized Users, pay all exchange fees and bandwidth  (provided that Watley may
select its bandwidth  provider in its sole discretion as long as the cost of any
change from the existing bandwidth provider is paid for at Watley`s sole expense
(including,  without  limitation,  the cost of any Integrated  personnel) and so
long as Integrated  is provided a reasonable  period of time to make such change
and so long as such changes of providers  occur no more  frequently than once in
any three year period) related to providing the Licensed Software as well as any
fees and costs associated with providing service to Authorized Users not located
at the current 40 Wall Street,  New York,  New York address of Watley other than
via the Internet.  Watley shall remit  payment to Integrated  within thirty (30)
days after receipt of invoice therefor.

         (d)  SOFTWARE  DEVELOPMENT.  In the event Watley  requests  software or
product  development,  Integrated  shall charge Watley its then  standard  rates
charged to similarly  situated  clients for similar  projects,  as determined by
Integrated in its sole discretion.

         (e)  PAYMENTS.  Watley shall remit  payment,  and shall cause all other
Authorized  Users to remit  payment,  due to Integrated  within thirty (30) days
after the last day of each  calendar  month for any  Royalty  earned  during the
immediately  preceding  month.  During the period that  Royalties are payable in
accordance  with this  Section 3, Watley  shall  render to  Integrated a monthly
report in such form as is  reasonably  satisfactory  to  Integrated.  The report
shall set forth the total number  users of the  Licensed  Software and any other
information reasonably requested by Integrated.  Watley shall maintain books and
records concerning the use of Licensed Software. Such books and records shall be
complete  and  accurate  and  Integrated  shall  have  the  right,  through  its
representatives or auditors,  to reasonable  inspection of the books and records
of Watley relating to the use of the Licensed  Software,  PROVIDED that any such
inspection  shall only occur (i) upon fifteen (15) days` prior written notice to
Watley,  (ii) with minimum  disruption to Watley`s  business  operations,  (iii)
subject to the  confidentiality  provisions  set forth in Section 8, and (iv) at
Integrated`s  expense except to the extent any audit  identifies an error on the
part of ABWI,  Watley or another  Authorized User that misstates the amounts due
to Integrated by 7.5% or more.

4.  SUPPORT  OBLIGATIONS.  Subject  to the  effect  Integrated`s  acceptance  or
non-acceptance  (for which  Integrated shall not have or incur any liability for
any  consequential  effect with  respect to the  performance,  functionality  or
specifications  of the Licensed  Software or related support  obligations  under
this  Agreement) of the Assumed  Liabilities  (as defined in the Asset  Purchase
Agreement) in accordance  with the provisions of the Asset  Purchase  Agreement,
Integrated  will  use  reasonable   business  efforts  to  provide  Watley  with
maintenance and support of the Licensed Software (including, without limitation,
provision of Integrated  Corrections)  reasonably appropriate for how Authorized
Users use the Licensed  Software as of the date of this  Agreement  (and use the

                                       5
<PAGE>

Licensed  Software after the date of this Agreement solely to the extent changed
by  any  Integrated  Enhancement  or  Integrated  Correction).   Notwithstanding
anything to the contrary  herein,  Integrated  shall not be obligated to provide
co-location   facilities  or  redundant  server/data  feed  facilities  and  may
eliminate and/or substitute  services/products as it deems necessary in its sole
discretion. Integrated shall not be required to provide user support services in
connection  with the use of the  Licensed  Software by Watley or any  Authorized
Users, other than by telephone to Watley`s corporate representatives  designated
in writing to  Integrated  from time to time (but not  directly to  customers of
ABWI or Watley or any  Affiliate)  to address  network  related  issues.  To the
extent Watley,  ABWI or an Affiliate request  non-telephonic  support such as an
on-site visit,  Integrated may provide the same at its then prevailing rates for
such  service.  Integrated  will also use  commercially  reasonable  efforts  to
telephone third party vendors whose products have evidenced a failure to perform
their  intended  functions in order to request  that such vendors  repair such a
failure.

5. THIRD PARTY DATA AGREEMENTS.  Watley and ABWI understand and acknowledge that
Integrated,  in its sole discretion and without  liability,  may terminate,  not
renew,  replace or  otherwise  modify  agreements  currently in place with third
parties  (collectively,  "DATA  AGREEMENTS")  pursuant  to which  data,  orders,
confirmations  and other  information  are  provided  through or by the Licensed
Software, PROVIDED that Integrated provides Watley with substantially equivalent
information  and  functionality  (but  solely  to  the  extent  such  equivalent
information and functionality  exist at comparable prices and to the extent that
installing such information and functionality  does not impose significant extra
cost on Integrated).

6. TERM;  EVENT OF DEFAULT.  This  Agreement  shall commence as of the Effective
Date and may be terminated by any non-defaulting Party upon an Event of Default.

7. EXPENSES AND TAXES.

         (a)  EXPENSES.  Except as expressly set forth in this  Agreement,  each
Party will bear all costs and  expenses of the  performance  of its  obligations
under this Agreement.

         (b) TAXES. Each Party will bear all current and future local, state and
federal taxes and duties imposed upon the payments  received by that Party under
this Agreement, including all sales, use, services and income taxes.

8. PROPRIETARY RIGHTS; INDEMNIFICATION.

         (a)  RIGHTS.  Integrated  retains  ownership  of all  right,  title and
interest in the Licensed Software and Integrated`s other  Intellectual  Property
Rights.  Watley has no rights in the Licensed  Software  except those  expressly
granted by this Agreement.

         (b)  COPYRIGHT AND OTHER  NOTICES.  Watley will not remove or otherwise
change any of  Integrated`s  copyright,  trademark or other  proprietary  rights
notices  contained in the Licensed Software without the prior written consent of
Integrated.

         (c) INDEMNIFICATION.

                  (i) Integrated,  at its expense, will defend and/or handle any
claim or  action  threatened  or  brought  against  Watley,  ABWI,  any of their
Affiliates or any of their respective officers,  directors,  employees,  agents,
consultants or other representatives,  or any third parties permitted to use the
Licensed   Software  in  accordance   with  the  provisions  of  this  Agreement
(collectively,  the "INDEMNIFIED  PARTIES") based on or arising out of any claim
that  the  Licensed  Software  as  modified  by any  Integrated  Enhancement  or
Integrated  Correction:  (a) constitutes an infringement,  violation,  trespass,
contravention or breach of any patent,  copyright,  trademark,  license or other

                                       6
<PAGE>

property  or  proprietary   right  of  any  third  party,   or  constitutes  the
unauthorized use or  misappropriation of any trade secret of any third party; or
(b) is not in compliance with any applicable law, rule, regulation, order of any
governmental (including, without limitation, any regulatory or quasi-regulatory)
agency or contract,  including without limitation,  any financial  disclosure or
encryption law;  provided that, in each such case, the claim could not have been
made  but for an  Integrated  Enhancement  or an  Integrated  Correction  to the
Licensed  Software.   Integrated  further  agrees  to  indemnify  and  hold  the
Indemnified  Parties harmless from and against any and all  liabilities,  costs,
losses,  damages and expenses (including reasonable attorneys` and experts` fees
and expenses)  associated  with (x) any claim described in the first sentence of
this paragraph and (y) any breach of this  Agreement by Integrated.  Watley will
promptly  notify  Integrated  of any such  claim or action  and will  reasonably
cooperate  with  Integrated  in  the  defense  of  such  claim  or  action,   at
Integrated`s expense.

                  (ii)  Integrated  will  have the sole  right  to  conduct  the
defense of any such claim or action and all  negotiations  for its settlement or
compromise; PROVIDED, HOWEVER, that Watley may participate in the defense of any
such claim or action at Watley`s expense.

                  (iii) If the Licensed Software becomes the subject of any such
claim or action,  then Watley may terminate  this Agreement  unless  Integrated,
promptly after receiving written notice of any such claim or action, either: (a)
procures  for  Watley  the right to  continue  using the  Licensed  Software  as
contemplated  hereunder;  (b)  modifies  the  Licensed  Software  to render same
non-infringing or to correct such  non-compliance,  as the case may be (provided
such modification  does not materially  adversely affect the use of the Licensed
Software);  or  (c)  replaces  same  with  an  equally  suitable,   functionally
equivalent,  compatible,  non-infringing  (or  compliant,  as the  case  may be)
software  program.  If none of the  foregoing  is possible  and if the  Licensed
Software is found to infringe or to not comply,  Integrated  or Watley will have
the right to terminate this  Agreement and Integrated  will refund to Watley all
amounts  paid by Watley  hereunder  subject,  however,  to the effect of Section
12(b).

                  (iv) Each of Watley, ABWI and any Affiliate permitted to be an
Authorized User (each a "WATLEY INDEMNITOR"), at its expense, will indemnify and
hold  harmless  from  any  breach  of  this  Agreement  by an  Authorized  User,
Integrated,  any  of  its  affiliates  or  any  of  their  respective  officers,
directors,    employees,    agents,   consultants   or   other   representatives
(collectively,  the "INTEGRATED  INDEMNIFIED  PARTIES").  The Watley Indemnitors
further agrees to indemnify and hold the Integrated Indemnified Parties harmless
from and against any and all liabilities,  costs,  losses,  damages and expenses
(including reasonable attorneys` and experts` fees and expenses) associated with
such claim or action.  Integrated will promptly  notify the  appropriate  Watley
Indemnitor(s)  of any such claim or action and will  reasonably  cooperate  with
such Watley Indemnitor(s) in the defense of such claim or action, at such Watley
Indemnitors` expense. Integrated will have the right to terminate this Agreement
in the event of a breach of the provisions of this clause (iv).

9. CONFIDENTIALITY.

         (a)  CONFIDENTIAL  INFORMATION.  No Party will disclose another Party`s
Confidential  Information  to any Person except its Affiliates and its and their
employees,  agents  and  independent  contractors  to  whom it is  necessary  to
disclose  the  Confidential   Information  for  purposes  permitted  under  this
Agreement and who have agreed to receive it under terms at least as  restrictive
as those  specified  in this  Agreement.  Each  Party  will use best  efforts to
maintain the confidentiality of Confidential Information received from the other
Parties.  Each Party will use another Party`s Confidential  Information only for
the purposes of performing this Agreement.

                                       7
<PAGE>

         (b) EXCEPTIONS TO CONFIDENTIAL  INFORMATION.  Confidential  Information
will not include  information  to the extent that:  (i) such  information  is or
becomes publicly  available other than through any act or omission of a Party in
breach of this Agreement;  (ii) such information was rightfully  received by the
receiving Party, other than under an obligation of confidentiality, from a third
party who had no  obligation  to the Party  that  owns such  information  not to
disclose such  information to others;  (iii) such  information was rightfully in
the  possession  of the  receiving  Party at the time of the  disclosure  or was
independently  developed by the receiving  Party;  or (iv) any  applicable  law,
rule,  regulation or court order  requires the  disclosure of such  information,
provided that prior to such  disclosure  the Party  subject to such  requirement
will give notice to the Party that owns such  information so that such Party may
take reasonable  steps to oppose or limit such  disclosure.  The burden of proof
that  Confidential  Information  falls into any of the above  exemptions will be
borne by the Party claiming such exemption.

10. REPRESENTATIONS AND WARRANTIES.

         (a) Each  Party  represents,  and  warrants  to the other that each has
obtained all  authorizations,  approvals  and  consents  of, made all  necessary
filings and registrations  with, and given all necessary notices to, all Persons
necessary for their execution, delivery and performance of this Agreement.

         (b) Integrated represents,  warrants and covenants to the other Parties
that all maintenance and support services provided  hereunder shall be performed
in a workmanlike and professional manner.

         (c) Integrated represents,  warrants and covenants to the other Parties
that it will continue to license and support the Licensed  Software for a period
of no less than  three (3)  years  from the  Effective  Date  (but  without  any
limitation on its  assignment  rights set forth in Section  13(h)).  Thereafter,
Integrated  shall provide Watley with no less than nine (9) months prior written
notice if  Integrated  intends to cease  licensing  or  supporting  the Licensed
Software.

         (d) Integrated represents,  warrants and covenants to the other Parties
that  modifications  of the Licensed  Software by any Integrated  Enhancement or
Integrated  Correction  will not contain  any  computer  code  designed by or on
behalf of Integrated (i) to disrupt,  disable,  harm, or otherwise impede in any
manner,  including aesthetical disruptions or distortions,  the operation of the
Licensed Software or any System (sometimes referred to as "viruses" or "worms");
(ii) that would disable the Licensed Software or any System or impair in any way
their  operation  based on the elapsing of a period of time, the exceeding of an
authorized  number of copies,  or the  advancement to a particular date or other
numeral  (sometimes  referred to as "time bombs",  "time locks",  or "drop dead"
devices);  or (iii) that would  contain any other  harmful,  malicious or hidden
procedures,  routines  or  mechanisms  that cause the  Licensed  Software or any
System to cease  functioning  or to  damage  or  corrupt  data,  storage  media,
programs,  equipment or  communications,  or otherwise  interfere with Watley`s,
ABWI`s, or their respective Affiliates` operations.

         (e) Integrated represents,  warrants and covenants to the other Parties
that,  with  respect to all  date-related  data and  functions  provided  by the
Licensed Software,  a modificaton to the Licensed Software and by any Integrated
Enhancement  or  Integrated  Correction  will  operate  in  a  manner  which  is
consistent  with the use of the  Licensed  Software by ABWI and Watley as of the
date of this Agreement.

11. OTHER AGREEMENTS.

         (a) The Parties  acknowledge  and agree that Integrated does not assume
any responsibility  whatsoever for Watley`s,  or ABWI`s performance of Watley`s,
or ABWI`s obligations under any agreement  regarding or relating to the Licensed
Software  between  Watley,  ABWI or any of their  Affiliates and any third party
that was not an Assumed  Liability  accepted by Integrated  under Section 1.2 of
the  Asset  Purchase  Agreement,   and  Integrated  hereby  disclaims  any  such
responsibility.

                                       8
<PAGE>

         (b) Notwithstanding  anything to the contrary herein,  Integrated shall
have no liability  for (i) any fee or expense  (including,  without  limitation,
late  charges  and  penalties)  incurred  prior to the  Effective  Date that was
incurred  by  Watley  or  ABWI  related  to  the  Licensed  Software,  the  Data
Agreements,  employment agreements or any product, equipment or services related
thereto and (ii) any fee or expense for  equipment  leased or owned by Watley or
ABWI prior to the Effective  Date;  PROVIDED that such fees or expenses were not
Assumed  Liabilities  expressly  accepted  in  writing by  Integrated  under the
Section 1.2 of the Asset Purchase Agreement.

12. DISCLAIMERS AND LIMITATIONS OF LIABILITY.

         (a)  DISCLAIMER  OF  WARRANTIES.  EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT:  INTEGRATED  EXPRESSLY DISCLAIMS ALL WARRANTIES,  EXPRESS OR IMPLIED,
WITH RESPECT TO THE LICENSED  SOFTWARE OR ITS QUALITY,  INCLUDING ANY WARRANTIES
OF  MERCHANTABILITY  OR FITNESS FOR A PARTICULAR  PURPOSE;  INTEGRATED  MAKES NO
REPRESENTATION  CONCERNING  THE  LIKELIHOOD  OF  PROFITABLE  TRADING  USING  THE
LICENSED  SOFTWARE;  AND THE LICENSED SOFTWARE IS LICENSED "AS-IS" AND "WITH ALL
FAULTS." NOTWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT,  INTEGRATED DOES
NOT WARRANT  THAT THE USE OF THE  LICENSED  SOFTWARE  WILL BE  UNINTERRUPTED  OR
ERROR-FREE OR THAT ALL  DEFICIENCIES  OR ERRORS ARE CAPABLE OF BEING  CORRECTED.
NEITHER  WATLEY  NOR  ABWI  WILL  EXTEND  ANY  WARRANTIES  FOR OR ON  BEHALF  OF
INTEGRATED  NOT SPECIFIED IN THIS AGREEMENT AND WILL MAKE NO  REPRESENTATION  OR
WARRANTY  REGARDING THE  LIKELIHOOD OF PROFITABLE  TRADING BASED ON THE LICENSED
SOFTWARE.  IN NO EVENT  WILL  INTEGRATED  INCUR ANY  LIABILITY  TO WATLEY OR ANY
AUTHORIZED  USER ARISING OUT OF (I) ANY CONTRACT OR  ARRANGEMENT  BETWEEN WATLEY
AND ANY  AUTHORIZED  USER UNLESS  EXPRESSLY  AGREED TO IN  WRITING,  OR (II) ANY
COMMUNICATIONS,  INTERNET AND/OR OTHER FAILURE  AFFECTING THE LICENSED  SOFTWARE
ARISING IN  CONNECTION  WITH ACTS OF GOD OR THIRD  PARTY  ACTIONS OR  OMISSIONS.
INTEGRATED WILL, HOWEVER, USE COMMERCIALLY REASONABLE EFFORTS TO TELEPHONE THIRD
PARTIES WHOSE SYSTEMS FAIL IN ORDER TO REQUEST THEY REPAIR SUCH FAILURES.

         (b)  LIMITATIONS  OF  LIABILITY.  THE  LIABILITY  OF EACH PARTY AND ITS
EMPLOYEES,  AGENTS AND  AFFILIATES  TO THE OTHER  PARTIES  AND THEIR  RESPECTIVE
EMPLOYEES,  AGENTS AND AFFILIATES WILL BE LIMITED TO DIRECT DAMAGES. IN NO EVENT
WILL ANY PARTY OR ITS EMPLOYEES,  AGENTS OR AFFILIATES BE LIABLE FOR INCIDENTAL,
SPECIAL,  INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS) SUFFERED BY
ANOTHER PARTY OR ITS EMPLOYEES, AGENTS OR AFFILIATES, EVEN IF PREVIOUSLY ADVISED
OF THE  POSSIBILITY  OF SUCH  DAMAGES.  NOTWITHSTANDING  ANYTHING  HEREIN TO THE
CONTRARY,  INTEGRATED`S  MAXIMUM LIABILITY UNDER THIS AGREEMENT SHALL NOT EXCEED
THE GREATER OF (A) THE SUM OF ALL  AMOUNTS  RECEIVED  BY  INTEGRATED  DURING THE
TWELVE MONTH PERIOD  IMMEDIATELY  PRECEDING  THE RELEVANT  CLAIM OR (B) $100,000
DOLLARS.

13. GENERAL.

         (a) GOVERNING  LAW.  This  Agreement is to be governed and construed in
accordance  with the laws of the State of Texas,  without regard to its conflict
of law provisions.

                                       9
<PAGE>

         (b) JURISDICTION.  Any judicial  proceeding  brought against any of the
Parties to this  Agreement on any dispute  arising out of this  Agreement or any
matter  related  hereto  shall be  brought  solely in the  appropriate  state or
Federal   courts   located  in  Dallas,   Texas   (provided   that   Integrated,
notwithstanding  the  foregoing,  may elect to pursue its rights and remedies in
another  forum if it so desires).  Each of the Parties  hereby  irrevocably  and
unconditionally  submits,  for  itself  and  its  property,  to the in  personam
jurisdiction of the state and Federal courts sitting in Dallas County, Texas, in
each case with respect to any action or proceeding arising out of or relating to
this Agreement. Each Party hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and  effectively do so, any objection which it may
now or hereafter  have to the laying of venue of any suit,  action or proceeding
arising  out of or  relating to this  Agreement  in any such  court.  Each Party
hereby  irrevocably  waives, to the fullest extent permitted by law, the defense
of an inconvenient  forum to the maintenance of such action or proceeding in any
such court.

         (c) ENTIRE  AGREEMENT.  This  Agreement,  which  includes  the Exhibits
described in this Agreement, embodies the entire understanding among the Parties
with respect to its subject matter and  supersedes all previous  communications,
representations or understandings, either oral or written, regarding the subject
matter of this Agreement.

         (d) AMENDMENT.  No amendment or modification of this Agreement shall be
valid  or  binding  unless  signed  by all the  Parties  to this  Agreement.  No
amendment or modification of this Agreement shall be valid or binding if made by
electronic means.

         (e) WAIVER.  No provision of this  Agreement  can be waived except by a
written  document  signed by the Party  waiving  the  provision.  The failure to
insist,  in any  one or more  instances,  upon  the  strict  performance  of any
provision or to exercise any right of this Agreement shall not be deemed to be a
waiver or relinquishment of the future  performance of any such provision or the
future exercise of such right, but the obligations of each Party with respect to
such future performance shall continue in full force and effect.

         (f) NOTICES. Any notice, demand, consent,  approval,  request, or other
communication  or document to be provided under this  Agreement  shall be (a) in
writing  and (b) deemed to have been  provided  (i) 48 hours after being sent by
certified or registered mail in the U.S. mails, postage prepaid,  return receipt
requested, to the address of the recipient set forth below or such other address
in the United States as such Party may designate  from time to time by notice to
the  other  Parties,  or (ii)  upon  giving  by hand or  other  actual  delivery
(including delivery by a nationally recognized overnight courier) at the address
of the  recipient  set forth below or such other address in the United States as
such Party may designate  from time to time by notice to the other  Parties.  No
notice, amendment or waiver with respect to this Agreement shall be effective if
given by  electronic  means.  For purposes of this  Agreement,  Penson`s  notice
address is Penson  Financial  Services,  Inc., 1700 Pacific Avenue,  Suite 1400,
Dallas TX 75201, attn: President and Chief Operating Officer.

         (g) SEVERABILITY. In the event any provision of this Agreement is found
to be invalid,  voidable  or  unenforceable,  the  Parties  agree that unless it
materially  affects  the entire  intent  and  purpose  of this  Agreement,  such
invalidity, voidability or unenforceability shall affect neither the validity of
this Agreement nor the remaining provisions in this Agreement, and the provision
in  question  shall  be  deemed  to be  replaced  with a valid  and  enforceable
provision  most  closely  reflecting  the  intent and  purpose  of the  original
provision.

         (h)  SUCCESSORS;  ASSIGNMENT.  Subject  to  the  effect  of  the  other
provisions  of this  Section,  this  Agreeement  shall be binding upon and shall
inure to the benefit of the  successors  and assigns of the Parties.  Integrated
may freely  assign any and all of its rights,  interests and  obligations  under
this Agreement,  PROVIDED that,  solely in the case of an "asset sale" (the sale

                                       10
<PAGE>

of assets by Integrated  pursuant to operation of law, merger,  consolidation or
other similar  transaction  shall not be deemed to be an "asset sale" subject to
the effect of the proviso in this sentence) when Integrated transfers all of its
right,  title and interest in the Licensed  Software to a purchaser but does not
assign or delegate  to such  purchaser  its  obligations  under this  Agreement,
Integrated  will cause such  purchaser in such asset sale by  Integrated to such
purchaser to provide a license to Integrated to enable Integrated to continue to
license the Licensed  Software to the  Authorized  Users in accordance  with the
provisions  of this  Agreement.  Notwithstanding  any  other  provision  of this
Agreement,  neither this  Agreement  nor any  interest in this  Agreement or any
rights hereunder shall be sold,  transferred,  or assigned by Watley or ABWI, by
operation of law or otherwise,  including the merger or  consolidation of Watley
or ABWI with or into another entity. For purposes of this Section, any change in
"control" of Watley or ABWI shall  constitute an  assignment.  Control means the
direct or indirect  power to direct or cause  direction  of the  management  and
policies of an entity,  whether through the ability to exercise voting power, by
contract or otherwise, as determined by Integrated;  and provided further that a
transaction  shall not  constitute  a change in control if (i) Watley shall have
notified  Integrated in writing (sent by telecopy  marked  conspicuously  on the
cover sheet with "Urgent-Immediate Reply Needed" to each of Integrated`s CEO and
COO,  each of Penson`s  CEO,  COO,  CFO,  General  Counsel and Chief  Compliance
Officer and to Andrew Koslow (208-275-3940)) in reasonable detail of the general
terms of a proposed  transaction  and  identity  of the  applicable  investor(s)
and/or acquirer , and Integrated  either confirms that such transaction does not
constitute  a change in control or does not notify  Watley  within six  business
days after the day on which it receives  the notice from Watley that  Integrated
deems the transaction to be a change in control and Watley and/or its applicable
subsidiary  completes a transaction  on terms no less favorable to Watley and/or
its applicable  subsidiary  than that provided in the notice or (ii) it involves
the  issuance  by Watley or a  subsidiary  of common  stock or other  equivalent
equity securities (A) in connection with the conversion of existing indebtedness
on the date  hereof  of  Watley  or the  applicable  subsidiary  or (B) upon the
conversion or exercise of warrants, preferred stock or other securities existing
on the date hereof or issued  pursuant to clause (A) above into common  stock of
Watley or the applicable subsidiary.  Any attempted assignment,  transfer, sale,
or other delegation in violation of this Section shall be void.

         (i) JOINT AND SEVERAL OBLIGATIONS.  Watley, ABWI and any Affiliate that
becomes an Authorized  User shall have joint and several  liability with respect
to the duties and obligations of each under this  Agreement.  Each of Watley and
ABWI  acknowledge  and agree  that any liens or  security  interests  granted by
Watley or ABWI in favor of  Integrated  or  Penson,  whether  through  the Fully
Disclosed  Clearing  Agreement or other agreements or arrangements  currently in
place,  shall serve to secure the joint and several  obligations  and Watley and
ABWI owing to Integrated under this Agreement.

         (j) COUNTERPARTS.  The Parties may execute more than one counterpart of
this Agreement, and each fully executed counterpart shall be deemed an original.

         (k) FORCE MAJEURE.  Each Party will be excused from  performance  under
this  Agreement  for any  period  and to the extent  that it is  prevented  from
performing  any action  pursuant to this  Agreement,  in whole or in part,  as a
result of delays beyond its reasonable  control caused by another Party or by an
act of God, war, civil  disturbance,  court order,  labor  dispute,  third party
nonperformance or other cause beyond its reasonable control,  including failures
or fluctuations in power,  heat,  light, air conditioning or  telecommunications
equipment. Integrated will also be excused from performance under this Agreement
to the extent the  Licensed  Software  cannot  function  without  the benefit of
software  currently licensed to Watley or ABWI prior to the date hereof and such
software  vendors have not granted a license to provide their  software that not
only enables  Integrated to provide their software to Authorized  Users but also
on such other terms as shall be acceptable to Integrated in its sole discretion.
Integrated  may at its  option,  notwithstanding  any  provision  in any Related
Document to the contrary,  determine to continue providing  technical support to

                                       11
<PAGE>

Authorized Users  previously  provided by Penson under the terms of the Software
License Agreement dated as of June 1, 2002 among Penson, ABWI and Watley.

         (l)  FURTHER  ASSURANCES.  Each Party will  execute  and  deliver  such
further  agreements,  documents and  instruments and take such further action as
may be reasonably  requested by any other Party to carry out the  provisions and
purposes of this Agreement.

         (m)   RELATIONSHIP  OF  THE  PARTIES.   Each  Party  will  perform  its
obligations under this Agreement as an independent  contractor.  Nothing in this
Agreement  or in the  performance  of this  Agreement  is intended to create:  a
partnership, joint venture or other joint business arrangement among the Parties
or any of their  Affiliates;  any  fiduciary  duty owed by one Party to  another
Party or any of its Affiliates; or a relationship of employer and employee among
the Parties or any of their Affiliates.

         (n)  HEADINGS.  The headings used for the sections and  subsections  in
this Agreement are for  convenience  and reference  purposes only and will in no
way affect the meaning or  interpretation  of this  Agreement.  All Exhibits and
other attachments  referenced in this Agreement (if any) are hereby incorporated
for all purposes.  In the event of any conflict  between this  Agreement and any
Exhibits  or  other  attachments  to  this  Agreement,  the  provisions  of this
Agreement will control.

         (o)  SURVIVAL.  Sections  8, 9, 10,  12 and 13 of this  Agreement  will
survive any such termination of this Agreement.

                                       12
<PAGE>

         IN WITNESS  WHEREOF,  the  Parties  have caused  this  Agreement  to be
executed by their respective duly authorized officers.

INTEGRATED TRADING SOLUTIONS, INC.      A.B. WATLEY GROUP INC.

By:                                     By:
    -------------------------------       --------------------------------
     Name:                                   Name:
     Title:                                  Title:

Address:                                Address:
1700 Pacific Avenue                     40 Wall Street
Suite 1400                              New York, New York 10005
Dallas, Texas 75201                     Attention:  Leon Ferguson
Attention:  CEO

[*] Confidential information has been omitted and has been separately filed
with the Securities and Exchange Commission.

                 [SIGNATURE PAGE FOR SOFTWARE LICENSE AGREEMENT]

                                       13
<PAGE>

                                    EXHIBIT A
                                    ---------

                                LICENSED SOFTWARE

The Licensed Software  includes the software  programs known as  "UltimateTrader
II" and "Watley Trader."

                                       14
<PAGE>

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