Exhibit 10.47


 


SECURITIES PURCHASE AGREEMENT


 


SECURITIES PURCHASE AGREEMENT
(the “Agreement”), dated as of October 31,
2007, by and among Averion International Corp., a Delaware corporation, with
principal offices located at 225 Turnpike Road, Southborough,
Massachusetts  01772 (the “Company”), and the investors listed on the Schedule of
Buyers attached hereto (each, a “Buyer” and,
collectively, the “Buyers”). Capitalized
terms used and not defined elsewhere in this Agreement have the respective
meanings assigned to such terms in the Appendix hereto.


 


WHEREAS:


 


A.                                   The
Company and the Buyers are executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by Rule 506 of
Regulation D (“Regulation D”)
as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”).


 


B.                                     The
Buyers, severally and not jointly, desire to purchase from the Company, and the
Company wishes to sell to the Buyers, upon the terms and conditions stated in
this Agreement:


 


(1)                                  Secured
senior notes, in the form attached as Exhibit A, in the
aggregate principal amount of $26,000,000 as follows: (a) $24,000,000 in
the aggregate principal amount of Notes (the “Initial Notes”)
shall be purchased by the Buyers on the Initial Closing Date (as defined
below); and (ii) $2,000,000 in the aggregate principal amount of Notes
(the “Additional Notes” and together with
the Initial Notes and with any promissory notes or other securities issued in
exchange or substitution therefor or replacement thereof, and as any of the
same may be amended, supplemented, restated or modified and in effect from
time to time, the “Notes”) shall
be purchased by the Buyers on the Additional Closing Date (as defined below)
for a total aggregate principal amount of Notes equal to $26,000,000; and


 


(2)                                  Shares
of Common Stock as set forth on the Schedule of Buyers (the “Shares”) which shall be issued at the Initial Closing and
the Additional Closing in proportion to the principal amount of Notes purchased
at the applicable Closing.


 


C.                                     Contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, in the form attached
as Exhibit B (as the same may be amended, supplemented,
restated or modified and in effect from time to time, the “Registration
Rights Agreement”), pursuant to which the Company agrees to provide
certain registration rights under the 1933 Act, with respect to the Shares.


 


D.                                    Contemporaneously
with the execution and delivery of this Agreement, the Company and its
Subsidiaries are executing and delivering a Security Agreement, in the form attached
as Exhibit C (as the same may be amended, supplemented,
restated or modified and in effect from time to time, the “Security
Agreement”), in favor of the Collateral Agent (as defined in the
Security Agreement), for the benefit of the Buyers, pursuant to which the
Company and its Subsidiaries will agree to provide the Collateral Agent (as
defined in the


 

















 


Security Agreement), as
agent for the Buyers, with security interests in substantially all of the
material assets of the Company and its Subsidiaries.


 


E.                                      Within
fifteen (15) Business Days after the Initial Closing, the Company will execute
and deliver one or more fully executed Deposit Account Control Agreements, in
the form requested by each applicable financial institution and reasonably
acceptable to the Collateral Agent (the “Account Control Agreements”),
pursuant to which the Company and each of its Subsidiaries that maintain bank,
brokerage or other similar accounts will agree to provide the Collateral Agent
with “control” of such accounts.


 


F.                                      Contemporaneously
with the Initial Closing, each of the Company’s Subsidiaries will execute and
deliver a Guaranty, in the form attached hereto as Exhibit D
(as the same may be amended, supplemented, restated or modified and in
effect from time to time, the “Guaranty”),
pursuant to which the Subsidiaries will agree to guaranty certain obligations
of the Company (the guarantees under the Guaranty, including any such
guarantees added after the Closing, being referred to herein as the “Guarantees”).


 


G.                                     Contemporaneously
with the Initial Closing, the Company and each of its Subsidiaries will each
execute and deliver a Pledge Agreement, substantially in the form attached
as Exhibit E (each, a “Pledge Agreement”),
pursuant to which the Company and each such Subsidiary will agree to pledge all
of the capital stock or other equity interests in the Subsidiaries and their
Affiliates that it directly owns to the Buyers as collateral for the Notes.


 


H.                                    Subject
to the full execution of this Agreement, the Company and the holder of all of
the issued and outstanding Capital Stock of Hesperion Ltd., a Swiss corporation
(“Hesperion”) shall, concurrently
therewith, enter into a Securities Purchase Agreement dated October 31,
2007 in substantially the form attached as Exhibit F hereto
(the “Hesperion Acquisition Agreement”),
pursuant to which, on the Acquisition Closing Date, the Company will acquire
all of the issued Capital Stock of Hesperion for an aggregate purchase price of
€25,000,000 (the “Hesperion Acquisition”).


 


NOW THEREFORE,
the Company and each of the Buyers, severally and not jointly, hereby agree as
follows:


 


1.                                       PURCHASE
AND SALE OF NOTES AND SHARES.


 


a.                                       Purchase
and Sale of Notes and Shares. Subject to the satisfaction (or waiver) of
the conditions set forth in Sections 7 and 8 below, the Company
shall issue and sell to each Buyer and each Buyer each Buyer severally agrees
to purchase from the Company the Notes in two (2) closings as follows:


 


(i)                                     On
the Initial Closing Date, each Buyer shall purchase (a) Initial Notes in
the respective principal amounts set forth opposite such Buyer’s name on the Schedule of
Buyers, which Initial Notes shall be issued to the Buyers on the Initial
Closing Date; and (b) the number of Shares next to such Buyer’s name on
the Schedule of Buyers, which shall be issued to such Buyer on the Initial
Closing Date. The purchase price (the “Initial Purchase Price”)
for the Initial Notes and the related Shares purchased by each Buyer shall be
as set forth opposite such Buyer’s name on the


 


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Schedule of Buyers (representing
an aggregate purchase price of $24,000,000 for the Initial Notes and Shares to
be purchased by the Buyers at the Initial Closing); and


 


(ii)                                  On
the Additional Closing Date, each Buyer shall purchase (a) Additional
Notes in the respective principal amounts set forth opposite such Buyer’s name
on the Schedule of Buyers, which Additional Notes shall be issued
to the Buyers on the Additional Closing Date, and (b) the number of Shares
next to such Buyer’s name on the Schedule of Buyers, which shall be issued
to such Buyer on the Additional Closing Date. The purchase price (the “Additional Purchase Price” and together with the Initial
Purchase Price, the “Purchase Price”)
for the Additional Notes purchased by each Buyer shall be as set forth opposite
such Buyer’s name on the Schedule of Buyers (representing an
aggregate purchase price of $2,000,000 for the Additional Notes to be purchased
by the Buyers at the Additional Closing.


 


b.                                      Closing
Dates.


 


(i)                                     The
date and time of the initial closing (the “Initial Closing”)
shall be 10:00 a.m., New York City time, on the Acquisition Closing Date,
subject to the satisfaction (or waiver) of all of the conditions to the Closing
set forth in Sections 7 and 8(a) (or such later or earlier
date as is mutually agreed to by the Company and the Buyers) (the “Initial Closing Date”). The Initial Closing shall occur at
the offices of Foley & Lardner LLP, 402 West Broadway, Suite 2100,
San Diego, California  92101, or at such
other place as the Company and Buyers may collectively designate in
writing.


 


(ii)                                  The
date and time of the additional closing (the “Additional
Closing”) shall be 10:00 a.m., New York City time, on the date
that is within thirty (30) calendar days from the Initial Closing Date, subject
to the satisfaction (or waiver) of all of the conditions to the Closing set
forth in Sections 7 and 8(a) (or such later date as is
mutually agreed to by the Company and the Buyers) (the “Additional
Closing Date,” each of the Initial Closing Date and the Additional
Closing Date being referred to herein as a “Closing Date”).
The Additional Closing shall occur at the offices of Foley & Lardner
LLP, 402 West Broadway, Suite 2100, San Diego, California  92101, or at such other place as the Company
and Buyers may collectively designate in writing.


 


For purposes of this
Agreement, each Buyer’s “Allocation Percentage” shall
be (i) with respect to each Closing Date, the quotient of (a) the
total original aggregate principal amount of Notes purchased by such Buyer at
such Closing, divided by (b) the total original aggregate principal
amount of all Notes purchased at such Closing; and (ii) with respect to
all Notes purchased pursuant to this Agreement, the quotient of (a) the
total original aggregate principal amount of all Notes purchased by such Buyer
pursuant to this Agreement, divided by (b) the total original
aggregate principal amount of all Notes purchased pursuant to this Agreement.


 


c.                                       Form of
Payment and Delivery of Shares. On each Closing Date, (i) each Buyer
shall pay to the Company an amount equal to the principal amount of the Notes
such Buyer is to purchase as of such Closing Date, by wire transfer of
immediately available funds in accordance with the Company’s written wire
instructions (less any amount deducted and paid in accordance with Section 4(h)),
and (ii) the Company shall deliver (or cause its transfer agent to


 


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deliver) to each Buyer (i) a Note (or Notes in
the principal amounts as such Buyer shall request) representing the original
principal amount of the Notes that such Buyer is purchasing hereunder on such
Closing Date, and (ii) Share Certificates for the Shares to be issued to
such Buyer on such Closing Date as provided on the Schedule of Buyers,
in each case duly executed on behalf of the Company and registered in the name
of such Buyer or its designee.


 


d.                                      Fractional
Shares. No fractional shares of Common Stock are to be issued pursuant to
this Section 1, but rather the number of shares of Common Stock to
be issued pursuant to this Section 1 shall be rounded up to the
nearest whole number.


 


e.                                       Currency;
Interest. All payments to a Buyer under this Agreement or any of the other
Transaction Documents shall be made in lawful money of the United States of
America, by wire transfer of immediately available funds to such accounts as
such Buyer may from time to time designate by written notice in accordance
with Section 10(f) of this Agreement. All references herein
and in each of the other Transaction Documents to “dollars” or “$” shall mean
the lawful money of the United States of America. Any amounts payable pursuant
to this Agreement that are not paid when due, after the expiration of all
notice and cure periods set forth herein, shall bear interest at the rate equal
to the lesser of (i) 2.0% per month, prorated for partial months, and (ii) the
highest lawful interest rate.


 


2.                                       BUYER’S
REPRESENTATIONS AND WARRANTIES.


 


Each Buyer represents and
warrants, as of the date of this Agreement and as of each Closing Date, with
respect to only itself, that:


 


a.                                       Investment
Purpose. Such Buyer is acquiring the Notes (together with the related
Guarantees) and the Shares purchased by such Buyer hereunder (the Notes, the
Guarantees and the Shares being collectively referred to herein as the “Securities”), for such Buyer’s own account and not with a
view towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered under, or exempted from the
registration requirements of, the 1933 Act; provided, however, that by
making the representations herein, such Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.


 


b.                                      Accredited
Investor Status. Such Buyer is an “accredited investor” as that term is
defined in Rule 501(a) of Regulation D.


 


c.                                       Reliance
on Exemptions. Such Buyer understands that the Securities are being offered
and sold to it in reliance on specific exemptions from the registration
requirements of the Securities Laws and that the Company is relying in part upon
the truth and accuracy of, and such Buyer’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of such Buyer to acquire the Securities.


 


d.                                      Information.
Such Buyer and its advisors, if any, have been furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Securities that have been requested by
such Buyer. Such


 


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Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer’s right to
rely on the Company’s representations and warranties contained in Sections 3
and 10(l) below or contained in any of the other Transaction Documents. Such
Buyer understands that its investment in the Securities involves a high degree
of risk and that it has reviewed the Company’s SEC Documents and the
disclosures contained therein, including, without limitation, that set forth
under the heading “Risk Factors.”  Such
Buyer has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Securities.


 


e.                                       No
Governmental Review. Such Buyer understands that no Governmental Entity has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of an investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.


 


f.                                         Transfer
or Resale. Such Buyer understands that, except as provided in the
Registration Rights Agreement: (i) the Securities have not been and are
not being registered under the 1933 Act or any other Securities Laws, and may not
be offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company
an opinion of counsel, in a generally acceptable form, to the effect that the
Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) such
Buyer provides the Company with reasonable assurance that the Securities can be
sold, assigned or transferred pursuant to Rule 144 promulgated under the
1933 Act, as amended (or a successor rule thereto) (“Rule 144”);
(ii) any sale of the Securities made in reliance on Rule 144 may be
made only in accordance with the terms of Rule 144, and further, if Rule 144
is not applicable, any resale of the Securities under circumstances in which
the seller (or the Person through whom the sale is made) may be deemed to
be an underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or any other Securities
Laws; and (iii) except as set forth in the Registration Rights Agreement,
neither the Company nor any other person is under any obligation to register
the Securities under the 1933 Act or any other Securities Laws. Notwithstanding
the foregoing provisions of this paragraph, the Securities may be pledged
in connection with a bona fide margin account or other loan or financing
arrangement secured by the Securities.


 


g.                                      Legends.
Such Buyer understands that, except as set forth below, the Share Certificates
and the certificates or other instruments representing the Notes shall bear a
restrictive legend in the following form (the “1933 Act
Legend”) (and a stop-transfer order may be placed against
transfer of such Share Certificates):


 


THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR


 


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APPLICABLE STATE
SECURITIES LAWS OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.


 


The legend set forth
above shall be removed and the Company shall issue a certificate without such
legend to the holder of the Securities, if (i) such Securities are
registered for resale under the 1933 Act, (ii) such holder provides the
Company with reasonable assurances that the Securities can be sold pursuant to Rule 144(k)
promulgated under the 1933 Act (or a successor rule thereto), or (iii) such
holder provides the Company reasonable assurances that the Securities have been
or are being sold pursuant to Rule 144.


 


h.                                      Authorization;
Enforcement; Validity. Such Buyer is a validly existing corporation,
partnership, limited liability company or other entity and has the requisite
corporate, partnership, limited liability or other organizational power and
authority to purchase the Securities pursuant to this Agreement. This Agreement
and the Registration Rights Agreement have been duly and validly authorized,
executed and delivered on behalf of such Buyer and are valid and binding
agreements of such Buyer enforceable against such Buyer in accordance with
their respective terms. The Security Agreement and each of the other agreements
entered into by such Buyer in connection with the transactions contemplated
hereby as of the applicable Closing will have been duly and validly authorized,
executed and delivered on behalf of such Buyer as of such Closing and will be
valid and binding agreements of such Buyer, enforceable against such Buyer in
accordance with their respective terms.


 


i.                                          Residency.
Such Buyer is a resident of that jurisdiction specified below its address on
the Schedule of Buyers.


 


j.                                          No
Other Agreements. As of the applicable Closing Date, such Buyer has not,
directly or indirectly, made any agreements with the Company relating to the
terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents.


 


3.                                       REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.


 


The Company represents
and warrants, as of the date of this Agreement as of each Closing Date, to each
Buyer, that except as set forth in the Schedules to this Agreement delivered by
the Company to Buyer:


 


a.                                       Organization
and Qualification; Subsidiaries. The Company was formed on April 22,
2002. Set forth in Schedule 3(a) is a true and correct list of
the Company’s Subsidiaries and the jurisdiction in which each is organized or
incorporated, together with their respective jurisdictions of organization and
the percentage of the outstanding capital stock or other equity interests of
each such entity that is held by the Company or any of its Subsidiaries. Other
than with respect to the entities listed on Schedule 3(a), the
Company does not directly


 


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own any security or beneficial ownership interest, in
any other Person (including through joint venture or partnership agreements) or
have any interest in any other Person. Each of the Company and its Subsidiaries
is a corporation, limited liability company, partnership or other entity and is
duly organized or formed and validly existing in good standing under the laws
of the jurisdiction in which it is incorporated or organized and has the
requisite corporate, partnership, limited liability company or other
organizational power and authority to own its properties and to carry on its
business as now being conducted and as proposed to be conducted by the Company
and its Subsidiaries. Each of the Company and its Subsidiaries is duly
qualified to do business and is in good standing in every jurisdiction in which
its ownership of property or the nature of the business conducted or proposed
to be conducted by the Company and its Subsidiaries will make such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing could not have and could not be, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect. Except
as set forth in Schedule 3(a), the Company holds all right, title
and interest in and to 100% of the capital stock, equity or similar interests
of each of its Subsidiaries, in each case, free and clear of any Liens (as
defined below), including any restriction on the use, voting, transfer, receipt
of income or other exercise of any attributes of free and clear ownership by a
current holder, and no such Subsidiary owns capital stock or holds an equity or
similar interest in any other Person.


 


b.                                      Authorization;
Enforcement; Validity. Each of the Company and its Subsidiaries has the
requisite corporate or other organizational power and authority to enter into
and perform its obligations under this Agreement and each of the other
Transaction Documents to which such Person is a party and to issue the
Securities in accordance with the terms hereof and thereof. The execution and
delivery of the Transaction Documents by the Company and each of its
Subsidiaries and the consummation by the Company and each of its Subsidiaries
of the transactions contemplated hereby and thereby, including the issuance of
the Notes, the Guarantees and the Shares to be issued at each Closing, have
been duly authorized by the respective boards of directors (or a committee
thereof), members, managers, trustees, stockholders, other equityholders or
holders of beneficial interests, as applicable, of the Company and each of its
Subsidiaries and no further consent or authorization is required by the
Company, any of its Subsidiaries or any of their respective boards of
directors, members, managers, trustees, stockholders, other equityholders or
holders of beneficial interests, as applicable. This Agreement and the other
Transaction Documents dated of even date herewith have been duly executed and
delivered by the Company and each of its Subsidiaries that is a party thereto,
and constitute the valid and binding obligations of the Company and each of its
Subsidiaries, enforceable against the Company and each of its Subsidiaries in
accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, fraudulent conveyance or similar laws affecting
creditors’ rights generally and general principles of equity. As of each
Closing, the Transaction Documents dated after the date of this Agreement shall
have been duly executed and delivered by the Company and each of its
Subsidiaries that is a party thereto and shall constitute the valid and binding
obligations of the Company and each of its Subsidiaries, enforceable against
the Company and each of its Subsidiaries in accordance with their respective
terms, except as may be limited by bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors’ rights generally and general
principles of equity.


 


c.                                       Capitalization.
The authorized Capital Stock of the Company consists of  750,000,000 shares of Common Stock, of which:


 


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(i)                                     498,754,329
shares are issued and outstanding; provided, however, that as of
the Initial Closing Date;


 


(ii)                                  100,000,000
shares are reserved for issuance pursuant to the Company’s stock option,
restricted stock and employee stock purchase plans described in the SEC Documents
(the “Equity Plans”), including 40,311,056
shares issuable pursuant to outstanding awards under the Equity Plans; and


 


(iii)                               3,290,666 shares are
reserved for issuance pursuant the Company’s outstanding warrants described on Schedule 3(c)(iii) (the
“Warrants”);


 


(iv)                              125,000
shares of Common Stock reserved for issuance to Lippert/Heilshorn & Associates on December 31, 2007
(subject to Lippert/Heilshorn &
Associates continuing to provide services to the Company as its investor
relations firm); and


 


(v)                                 4,285,714
shares of Common Stock reserved for issuance to Millennix, Inc. on January 1,
2009 (subject to Gene Resnick remaining an employee through such issuance date)
pursuant to that certain Asset Purchase Agreement dated November 9, 2005
(as amended on September 6, 2006), related to the purchase of the assets
of Millennix, Inc.


 


No shares of Common Stock
are reserved for issuance under any plan, agreement or arrangement, other than
shares of Common Stock reserved for issuance with respect to the Warrants and
under the Equity Plans; and except as described in the foregoing provisions of
this Section 3(c), there are no shares of Capital Stock, Options,
Convertible Securities or other equity securities of the Company authorized,
issued or outstanding, and the Company is not under any current or future
obligations to issue any such shares of Capital Stock, Options, Convertible
Securities or other equity securities of the Company. All of the outstanding
and issuable shares of Capital Stock have been, or upon issuance will be,
validly issued and are, or upon issuance will be, fully paid and nonassessable.


 


Except as set forth on Schedule 3(c):


 


(1)                                  no
shares of the Capital Stock of the Company or any of its Subsidiaries are
subject to preemptive rights or any other similar rights or any Liens suffered
or permitted by the Company or any of its Subsidiaries;


 


(2)                                  there
are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable for, any shares of Capital Stock of the Company
or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of Capital Stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable for, any shares of Capital Stock of the Company
or any of its Subsidiaries;


 


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(3)                                  to
the Knowledge of the Company, there are no voting trusts, proxies or other
agreements, commitments or understandings of any character with respect to the
voting of any shares of Capital Stock of the Company or any of its
Subsidiaries, and there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except the Registration Rights Agreement,
the registration rights set forth in the Company’s SEC Documents, including
registration rights agreements entered dated July 31, 2006, November 9,
2005 and the registration rights given to the investors in the Company’s October 17,
2006 financing or such other rights as shall have been waived or terminated
prior to the Closing);


 


(4)                                  other
than the Notes, there are no outstanding securities or instruments of the
Company or any of its Subsidiaries that contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries, and there
are no other stockholder agreements or similar agreements to which the Company,
any of its Subsidiaries or, to the Company’s Knowledge, any holder of the
Company’s Capital Stock is a party;


 


(5)                                  there
are no securities or instruments containing anti-dilution or similar provisions
that will or may be triggered by the issuance of the Securities;


 


(6)                                  the
Company does not have any stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement; and


 


(7)                                  to
the Company’s Knowledge, no officer or director of the Company or beneficial
owner of any of the Company’s outstanding Common Stock has pledged Common Stock
in connection with a margin account or other loan secured by such Common Stock.


 


The Company has
furnished to each Buyer, or, with respect to (Z) below, will furnish within
five (5) Business Days of the closing of the transaction contemplated in
the Hesperion Transaction Documents, true and correct copies of:


 


(X)                               The
Company’s Certificate of Incorporation, as amended and in effect (the “Certificate of Incorporation”);


 


(Y)                                The
Company’s Bylaws, as amended and in effect (the “Bylaws”);
and


 


(Z)                                The
Hesperion Transaction Documents, executed by all parties thereto, and all
amendments, modifications or supplements thereto.


 


All of the equity
interests of each of the Subsidiaries are certificated or otherwise represented
in tangible form.


 


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d.                                      Issuance
of Securities. The Notes are duly authorized and, upon issuance in
accordance with the terms of this Agreement, shall be free from all taxes and
Liens with respect to the issuance thereof and entitled to the rights set forth
therein. The Shares are duly authorized and, upon issuance in accordance with
the terms of this Agreement, will be validly issued, fully paid and
nonassessable and free from taxes and Liens with respect to the issuance
thereof, with the holders being entitled to all rights accorded to a holder of
Common Stock. The issuance by the Company of the Securities is exempt from
registration under the 1933 Act and any other applicable Securities Laws.


 


e.                                       No
Conflicts. Except as set forth on Schedule 3(e), the execution
and delivery of this Agreement and the other Transaction Documents by the
Company and each of its Subsidiaries, the performance by the Company and each
of its Subsidiaries of its obligations hereunder and thereunder and the
consummation by the Company and each of its Subsidiaries of the transactions
contemplated hereby and thereby (including the reservation for issuance and the
issuance of the Shares) will not:


 


(i)                                     result
in a violation of the certificate or articles of incorporation, certificate or
articles of organization, bylaws, operating agreement, partnership agreement or
any other governing documents, as applicable, of any such Person;


 


(ii)                                  conflict
with, or constitute a breach or default (or an event which, with the giving of
notice or passage of time or both, constitutes or would constitute a breach or
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or other remedy with respect to, any
agreement, indenture, instrument or other document to which any such Person is
a party or by which such Person is bound; or


 


(iii)                               result in a violation of
any Law, rule, regulation, order, judgment or decree (including Securities Laws
and the rules and regulations, if any, of the Principal Market) applicable
to any such Person or by which any property or asset of any such Person is
bound or affected.


 


Neither the Company nor
any of its Subsidiaries is in violation of any term of its certificate or
articles of incorporation, certificate or articles of organization, bylaws,
operating agreement, partnership agreement or any other governing document, as
applicable. Neither the Company nor any of its Subsidiaries is or has been in
violation of any term of or in default under (or with the giving of notice or
passage of time or both would be in violation of or default under) any
contract, agreement, mortgage, indebtedness, indenture, instrument, document,
judgment, decree or order or any Law applicable to the Company or its
Subsidiaries, except where such violation or default could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect or
to result in the acceleration of any Indebtedness or other obligation. The
business of the Company and its Subsidiaries has not been and is not being
conducted, in violation of any Law of any Governmental Entity except as could
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Except for the filings and listings expressly
contemplated by the Registration Rights Agreement, the filing of instruments to
perfect security interests and as set forth in Schedule 3(e),
neither the Company nor any of its Subsidiaries is, has been, or will be
required to obtain any consent, authorization or order of, or


 


10

















 


make any filing or
registration with, any court or Governmental Entity in order for it to execute,
deliver or perform any of its obligations under or contemplated by the
Transaction Documents in accordance with the terms hereof or thereof. All
consents, authorizations, orders, filings and registrations that the Company or
any of its Subsidiaries is or has been required to obtain as described in the
preceding sentence have been obtained or effected on or prior to the date of
this Agreement and prior to the date of the effectiveness of such requirement.


 


f.                                         SEC
Documents; Financial Statements.


 


(i)                                     Since
December 31, 2006, the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the 1934 Act (all of the foregoing filed prior
to the date this representation is made (including all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein) being referred to herein as the “SEC Documents” and the Company’s consolidated balance sheet
as of June 30, 2007, as included in the Company’s quarterly report on Form 10-QSB
for the period then ended, as filed with the SEC on August 14, 2007, being
referred to herein as the “Most Recent Balance Sheet”).
Each of the SEC Documents was filed with the SEC via the SEC’s EDGAR system
within the time frames prescribed by the SEC for the filing of such SEC
Documents such that each filing was timely filed with the SEC (with giving
effect to any extensions of time permitted by Rule 12b-25 under the 1934
Act). As of their respective dates, the SEC Documents complied in all material
respects with the Securities Laws. None of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Since the filing of each of the SEC Documents,
no event has occurred that would require an amendment or supplement to any such
SEC Document and as to which such an amendment or supplement has not been filed
and made publicly available on the SEC’s EDGAR system no less than five (5) Business
Days prior to the date this representation is made. Except as set forth on Schedule 3(f)(i),
the Company has not received any written comments from the SEC staff that have
not been resolved to the satisfaction of the SEC staff.


 


(ii)                                  As
of their respective dates, the consolidated financial statements of the Company
and its Subsidiaries included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the
Securities Laws with respect thereto. Such consolidated financial statements
have been prepared in accordance with GAAP, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may exclude footnotes)
and fairly present in all material respects the financial position of the
Company and its Subsidiaries as of the dates thereof and the results of their
operations and cash flows for the periods then ended in accordance with GAAP
(subject, in the case of unaudited statements, to normal year-end audit
adjustments that are not material individually or in the aggregate).


 


11

















 


(iii)                               Since December 31,
2006, none of the Company, its Subsidiaries and their respective officers,
directors and Affiliates or, to the Company’s Knowledge, any stockholder of the
Company has made any filing with the SEC or issued any press release on behalf
of the Company or any of its Subsidiaries or otherwise relating to the Company
or any of its Subsidiaries that contains any untrue statement of a material
fact or omits any statement of material fact necessary in order to make the
statements therein, in the light of the circumstances under which they are or
were made, not misleading or has provided any other information to any Buyer,
including information referred to in Section 2(d), that, considered
in the aggregate, contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they are or were made, not
misleading.


 


(iv)                              Except
as set forth in Schedule 3(f)(iv), the Company is not required to
file and will not be required to file any agreement, note, lease, mortgage,
deed or other instrument entered into prior to the date this representation is
made and in effect on the date this representation is made and to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
is bound that has not been previously filed as an exhibit (including by
way of incorporation by reference) to its reports filed or made with the SEC
under the 1934 Act.


 


(v)                                 The
accounting firm that has expressed its opinion with respect to the consolidated
financial statements included in the Company’s most recently filed annual
report on Form 10-KSB (the “Audit Opinion”)
is independent of the Company pursuant to the standards set forth in Rule 2-01
of Regulation S-X promulgated by the SEC and such firm was otherwise qualified
to render the Audit Opinion under applicable Securities Laws. Each accounting
firm that since such filing has conducted or will conduct a review or audit of
any of the Company’s consolidated financial statements is independent of the
Company pursuant to the standards set forth in Rule 2-01 of Regulation S-X
promulgated by the SEC and is otherwise qualified to conduct such review or
audit and render an audit opinion under applicable Securities Laws.


 


(vi)                              There
is no transaction, arrangement or other relationship between the Company and an
unconsolidated or other off-balance-sheet entity that is required to be
disclosed by the Company in its reports pursuant to the 1934 Act that has not
been so disclosed in the SEC Documents at least five (5) Business Days
prior to the date of this Agreement.


 


(vii)                           Since December 31,
2006, there have been no internal or SEC inquiries or investigations (formal or
informal) regarding accounting or revenue recognition discussed with, reviewed
by or initiated at the direction of any executive officer, board of directors
or any committee thereof of the Company or any of its Subsidiaries.


 


(viii)                        The Company is not a “shell
company” (as defined in Rule 12b-2 under the 1934 Act).


 


12

















 


(ix)                                A
pro forma consolidated balance sheet of the Company and its Subsidiaries and
the pro forma capitalization of the Company, in each case as of the Most Recent
Balance Sheet, and giving effect to the transactions contemplated by this
Agreement and each of the other Transaction Documents as if they occurred on
the Initial Closing Date will be filed with the SEC in an amendment to the
Announcing Form 8-K (defined below) within seventy five (75) days
following the Initial Closing Date, the applicable time period given by the SEC
to file such information (collectively, the “Pro Forma
Financial Information”). The Pro Forma Financial Information (i) will
be prepared based upon assumptions that provide a reasonable basis for
presenting the effects of such transactions, and the pro forma adjustments
shall give appropriate effect to such assumptions, (ii) will be based upon
financial information prepared in accordance with GAAP, (iii) will be
consistent with the books and records of the Company and its Subsidiaries
(which are true, accurate and complete), and (iv) will fairly present such
information as of the dates presented in accordance with GAAP.


 


g.                                      Sarbanes-Oxley
Compliance; Internal Accounting Controls; Disclosure Controls and Procedures;
Books and Records.


 


(i)                                     Except
for as set forth in the SEC Documents, the Company and its Subsidiaries are in
all material respects in compliance with the applicable provisions of the
Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations
thereunder (collectively, “Sarbanes-Oxley”).


 


(ii)                                  Since
December 31, 2006, except as set forth on Schedule 3(g)(ii),
neither the Company nor any of its Subsidiaries nor any director or officer, of
the Company or any of its Subsidiaries has received or otherwise had or
obtained Knowledge of any complaint, allegation, assertion or claim, whether
written or oral, regarding the accounting or auditing practices, procedures,
methodologies or methods of the Company or any of its Subsidiaries or its
internal accounting controls, including any complaint, allegation, assertion or
claim that the Company or any of its Subsidiaries has engaged in questionable
accounting or auditing practices.


 


(iii)                               No attorney representing
the Company or any of its Subsidiaries, whether or not employed by the Company
or any of its Subsidiaries, has reported evidence of a material violation of
Securities Laws, breach of fiduciary duty or similar violation by the Company
or any of its Subsidiaries or any of their respective officers, directors,
employees or agents to their respective boards of directors or any committee
thereof or pursuant to Section 307 of Sarbanes-Oxley.


 


(iv)                              Except
as set forth in the SEC Documents, the Company has, and has caused each of its
Subsidiaries to, at all times keep books, records and accounts with respect to
all of such Person’s business activities, in accordance with sound accounting
practices and GAAP consistently applied. Except as set forth in the SEC
Documents, The Company and each of its Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (A) transactions
are executed in accordance with management’s general or specific
authorizations, (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with


 


13

















 


generally accepted accounting principles and to maintain asset and
liability accountability, (C) access to assets or incurrence of liability
is permitted only in accordance with management’s general or specific
authorization and (D) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any differences.


 


(v)                                 The
Company has timely filed and made publicly available on the SEC’s EDGAR system
no less than five (5) Business Days prior to the date of this
representation, all certifications and statements required by (A) Rule 13a-14
or Rule 15d-14 under the 1934 Act and (B) Section 906 of
Sarbanes-Oxley with respect to any Company SEC Documents.


 


(vi)                              Except
as set forth in the SEC Documents, the Company maintains disclosure controls
and procedures required by Rule 13a-15 or Rule 15d-15 under the
1934 Act. Except as set forth in the SEC Documents, such disclosure
controls and procedures are effective to ensure that the information required
to be disclosed by the Company in the reports that it files with or submits to
the SEC (A) is recorded, processed, summarized and reported accurately
within the time periods specified in the SEC’s rules and forms and (B) is
accumulated and communicated to the Company’s management, including its
principal executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure.


 


(vii)                           Except as set forth in the
SEC Documents, the Company maintains internal control over financial reporting
required by Rule 13a-14 or Rule 15d-14 under the 1934 Act. As
set forth in the SEC Documents, such internal control over financial reporting
contains material weaknesses.


 


h.                                      Absence
of Certain Changes. Since December 31, 2006, neither the Company nor
any of its Subsidiaries has taken any steps, and neither the Company nor any of
its Subsidiaries currently expects to take any steps to seek protection
pursuant to any bankruptcy law nor does the Company or any of its Subsidiaries
have any Knowledge or reason to believe that the creditors of such Person
intend to initiate involuntary bankruptcy proceedings or any knowledge of any
fact that would reasonably lead a creditor to do so. Neither the Company nor
any of its Subsidiaries is as of the date this representation is made, nor
after giving effect to the transactions contemplated hereby or by any of the
other Transaction Documents will be, Insolvent. Except as set forth in the SEC
Documents, since December 31, 2006, neither the Company nor any of its
Subsidiaries has declared or paid any dividends or sold any assets outside of
the ordinary course of business. Except as set forth in the SEC Documents,
since December 31, 2006, neither the Company nor any of its Subsidiaries
has had any capital expenditures outside the ordinary course of its business.


 


i.                                          Absence
of Litigation. Except as set forth on Schedule 3(i), (i) there
has at no time been any action, suit, proceeding, inquiry or investigation (“Litigation”) before or by any court, public board,
Governmental Entity, self-regulatory organization or body pending or, to the
Company’s Knowledge, threatened against or affecting the Company or any of its
Subsidiaries or any of their assets, and (ii) to the Company’s Knowledge,
no director or officer of the Company or any of its Subsidiaries has been
involved in securities-related Litigation during


 


14

















 


the past five (5) years. No Litigation disclosed
on Schedule 3(i) has had or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.


 


j.                                          Full
Disclosure; No Undisclosed Events, Liabilities, Developments or Circumstances.
Since December 31, 2006, there has been no Material Adverse Effect and no
circumstances exist that, individually or in the aggregate, could reasonably be
expected to be, cause or have a Material Adverse Effect. Except (A) as and
to the extent disclosed or reserved against on the Most Recent Balance Sheet, (B) as
incurred since the date thereof in the ordinary course of business consistent
with past practice, (C) as incurred at the applicable Closing Date under
the Notes and the other Transaction Documents, or (D) as set forth on Schedule 3(j),
neither the Company, nor any of its Subsidiaries has any material liabilities
or obligations of any nature, whether fixed or unfixed, known or unknown,
secured or unsecured, absolute, accrued, contingent or otherwise and whether
due or to become due. No representation or warranty or other statement made by
the Company in this Agreement or any of the other Transaction Documents, the
Schedules hereto or any certificate or instrument delivered pursuant to this
Agreement contains any untrue statement or omits to state a material fact
necessary to make any such statement, in light of the circumstances in which it
was made, not misleading.


 


k.                                       Acknowledgment
Regarding Buyers’ Purchase of Notes and Shares. The Company acknowledges
and agrees that each Buyer is acting solely in the capacity of an arm’s length
purchaser with respect to the Company in connection with this Agreement and the
other Transaction Documents and the transactions contemplated hereby and
thereby. The Company further acknowledges that no Buyer is acting as a
financial advisor or fiduciary of any party to this Agreement or any of the
other Transaction Documents (or in any similar capacity) with respect to this
Agreement and the other Transaction Documents and the transactions contemplated
hereby and thereby, and any advice given by any Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to such Buyer’s
purchase of the Securities. The Company further represents to each Buyer that
the decision of the Company and each of its Subsidiaries to enter into the
Transaction Documents has been based solely on the independent evaluation by
such Person and its representatives.


 


l.                                          No
General Solicitation. Neither the Company nor any of its Affiliates, nor
any Person acting on the behalf of any of the foregoing, has engaged or will engage
in any form of general solicitation or general advertising (within the
meaning of Regulation D under the 1933 Act), including advertisements,
articles, notices, or other communications published in any newspaper, magazine
or similar media or broadcast over radio, television or internet or any seminar
or meeting whose attendees have been invited by general solicitation or general
advertising, in connection with the offer or sale of the Securities.


 


m.                                    No
Integrated Offering. Neither the Company nor any of its Affiliates, nor any
Person acting on the behalf of any of the foregoing, has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
purchase any security, under circumstances that would require registration of any
of the Securities under the 1933 Act or cause this offering of the Securities
to be integrated with prior offerings by the Company for purposes of the 1933
Act or any other regulatory or self-regulatory authority.


 


15

















 


n.                                      Employee
Relations. Except as set forth on Schedule 3(n), neither the
Company nor any of its Subsidiaries is involved in any labor union dispute nor,
to the Knowledge of the Company, is any such dispute threatened. To the
Knowledge of the Company, none of the employees of either the Company or any of
its Subsidiaries is or has been a member of a union that relates, or following
the Initial Closing will relate, to such employee’s relationship with the
Company and neither the Company nor any of its Subsidiaries is or following the
Initial Closing will be, a party to a collective bargaining agreement. No
executive officer (as defined in Rule 3b-7 under the 1934 Act), nor any
other individual whose termination would be required to be disclosed on a
Current Report on Form 8-K, has notified the Company that such individual
intends to leave the Company or otherwise terminate such individual’s
employment with the Company. Such individuals constitute all of the employees
necessary to conduct the Company’s business as presently conducted and as
proposed to be conducted (as described to Buyers prior to the date hereof). Except
as set forth on Schedule 3(n), to the Knowledge of the Company no
such individual is, has been, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement or non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the employment of each
such individual does not, has not and will not subject the Company or any of
its Subsidiaries to any liability with respect to any of the foregoing matters
that would, individually or in the aggregate, have a Material Adverse Effect. Except
as set forth in Schedule 3(n), to the Company’s Knowledge the
Company and each of its Subsidiaries is in compliance in all material respects
with all Laws relating to employment and employment practices, terms and
conditions of employment and wages and hours. Except as set forth in Schedule 3(n),
the Company and each of its Subsidiaries is in compliance in all material
respects with all Laws relating to employee benefits and employee benefit plans
(as such terms are defined in ERISA).


 


o.                                      Intellectual
Property Rights. Except as set forth on Schedule 3(o), the
Company and its Subsidiaries own or possess adequate rights or licenses to use
all trademarks, trademark applications and registrations, trade names, service
marks, service mark registrations, service names, patents, patent rights,
patent applications, copyrights (whether or not registered), inventions,
licenses, approvals, governmental authorizations, trade secrets and other
intellectual property rights (collectively, “Intellectual
Property”) necessary to conduct their respective businesses as
conducted as of the date this representation is made. Except as set forth in Schedule 3(o),
to the Company’s Knowledge (i) none of the rights of the Company or any of
its Subsidiaries in its Intellectual Property have expired or terminated, or
are expected to expire or terminate within five (5) years from the date of
this Agreement, except to the extent such termination could not and could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, (ii) there has been no infringement by the Company or any
of its Subsidiaries or any of the Company’s or any of its Subsidiaries’
licensors or licensees of any Intellectual Property rights of others, (iii) there
has been no infringement by any third parties of any Intellectual Property
owned or licensed by the Company or any of its Subsidiaries, or of any
development of similar or identical trade secrets or technical information by
others, (iv) there is no claim, action or proceeding against or being
threatened against, the Company, any of its Subsidiaries or any of their
respective licensors regarding their Intellectual Property or infringement of
other Intellectual Property rights and there is no claim, action or proceeding
against or being threatened against the Company, any of its Subsidiaries or any
of their respective licensors regarding their Intellectual Property or
infringement of other Intellectual 


 


16

















 


Property rights, (v) there are no facts or
circumstances that could reasonably be expected to give rise to any of the
foregoing, (vi) there is no patent or patent application which contains
claims that interfere with the issued or pending claims of any of the
Intellectual Property owned or licensed by the Company or any of its
Subsidiaries, and (vii) none of the technology employed by the Company or
any of its Subsidiaries has been obtained or is being used by the Company or
any of its Subsidiaries in violation of any material contractual obligation
binding on the Company or any of its Subsidiaries or is being used by any of
the officers, directors or employees of the Company or of its Subsidiaries on
behalf of the Company or any of its Subsidiaries in violation of the rights of
any Person or Persons. The Company and its Subsidiaries have taken commercially
reasonable security measures to protect the secrecy, confidentiality and the
value of all of their material Intellectual Property.


 


p.                                      Environmental
Laws. Except as set forth on Schedule 3(p), each of the Company
and its Subsidiaries (i) is, and has at all times been, in compliance in
all material respects with any and all, and has not violated any, Environmental
Laws (as defined below), (ii) has no, and has never had any, liability for
failure to comply with any Environmental Law, (iii) has received all
permits, licenses or other approvals required of it under applicable
Environmental Laws to conduct its business as presently conducted, and (iv) is
in compliance with all terms and conditions of any such permit, license or
approval.


 


q.                                      Insurance.
The Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
is prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. All of the Company’s insurance policies are in full
force and effect and are valid, outstanding and enforceable, and all premiums
with respect thereto are currently paid and no basis exists for early
termination of any of such insurance policies on the part of the insurer
thereunder. None of Company or its Subsidiaries has failed to give any notice
or present any claim under any such insurance policies in due and timely
fashion, and there are no outstanding unpaid claims under any such insurance
policies. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for, and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business at a cost that would not reasonably be expected to result in a
material increase in the Company’s current cost of such insurance.


 


r.                                         Regulatory
Permits. The Company and its Subsidiaries possess all certificates,
authorizations, approvals, licenses and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses as conducted at the time this representation is made (“Permits”), and neither the Company nor any such Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any such Permit. The Company and its Subsidiaries have no
Knowledge that they will not be able to obtain necessary Permits as and when
necessary to enable the Company and its Subsidiaries to conduct their
respective businesses.


 


s.                                       Principal
Market. The Company is not in violation of any of the rules, regulations or
requirements of the OTC Bulletin Board (the “Principal
Market;” provided however, that, if after the date of this
Agreement the Common Stock is listed on a national


 


17

















 


securities exchange or automated quotation system, the
“Principal Market” shall mean such
national securities exchange) and has no Knowledge of any facts or
circumstances which would reasonably lead to suspension or termination of the
trading of the Common Stock on the Principal Market in the foreseeable future. Since
December 31, 2006, (i) the Company’s Common Stock has been quoted on
the Principal Market, (ii) trading in the Common Stock has not been
suspended by the SEC or on the Principal Market and (iii) the Company has
received no communication, written or oral, from the SEC or the Principal
Market regarding the suspension or termination of the trading of the Common
Stock on the Principal Market.


 


t.                                         Tax
Status. The  Company and each of its
Subsidiaries (i) has made or filed all federal, state and foreign income
and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has paid all taxes and other
governmental assessments and charges shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and for which the Company has made appropriate reserves on its books, and (iii) has
set aside on its books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations (referred to in clause (i) above) apply. There are no unpaid
taxes claimed in writing to be due from the Company or any of its Subsidiaries
by the taxing authority of any jurisdiction which, individually or in the
aggregate, is expected to have a Material Adverse Effect, and there is no basis
for any such claim. Neither the Company nor any of its Subsidiaries is a “United
States real property holding corporation” (“USRPHC”)
as that term is defined in Section 897(c)(2) of the Internal Revenue
Code of 1986, as amended, and the Treasury Regulations promulgated thereunder.


 


u.                                      Transactions
With Affiliates. Except as set forth on Schedule 3(u) or in the
SEC Documents, no Related Party of the Company or any of its Subsidiaries, nor
any Affiliate thereof, is presently, has been within the past three years, or
will be as a result of the transactions contemplated by this Agreement and the
other Transaction Documents, a party to any transaction, contract, agreement,
instrument, commitment, understanding or other arrangement or relationship with
the Company or any of its Subsidiaries, whether for the furnishing of services
to or by, providing for rental of real or personal property to or from, or
otherwise requiring payments or consideration to or from any such Related Party.
No Related Party of the Company or any of its Subsidiaries, or any of their
respective Affiliates, has any direct or indirect ownership interest in any
Person (other than ownership of less than 2% of the outstanding common stock of
a publicly traded corporation) in which the Company or any of its Subsidiaries
has any direct or indirect ownership interest or with which the Company or any
of its Subsidiaries competes or has a business relationship.


 


v.                                      Application
of Takeover Protections; Rights Agreement. The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, or other
similar anti-takeover provision under the Certificate of Incorporation or any
certificates of designations or the laws of the State of Delaware to the
transactions contemplated by this Agreement, the Company’s issuance of the
Securities in accordance with the terms hereof and any Buyer’s ownership and
voting (in the case of the Shares) of the Securities. The Company has not
adopted a stockholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of Common Stock or a change in control of
the Company.


 


18

















 


w.                                    Foreign
Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor
any director, officer, agent, employee or other person acting on behalf of the
Company or any of its Subsidiaries has, in the course of its actions for, or on
behalf of, the Company, used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity;
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended; or made any unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.


 


x.                                        Outstanding
Indebtedness; Liens. Payments of principal and other payments due under the
Notes will, upon issuance at the Closings, rank senior to all other
Indebtedness of the Company or any of its Subsidiaries (in right of payment,
whether with respect of payment of redemptions, interest or damages or upon
liquidation or dissolution or otherwise) and, by virtue of their secured
position, to all trade account payables of the Company or any of its
Subsidiaries. Except as set forth on Schedule 3(x), (i) neither
the Company nor any of its Subsidiaries has, and upon consummation of the
transactions contemplated hereby and by the other Transaction Documents will
not have, any outstanding Indebtedness other than Permitted Indebtedness (as
defined below), (ii) there are no, and upon consummation of the
transactions contemplated hereby and by the other Transaction Documents there
will not be any, Liens on any of the assets of the Company and its Subsidiaries
other than the Permitted Liens and that created by the Security Agreement, and (iii) there
are no, and upon consummation of the transactions contemplated hereby and by
the other Transaction Documents there will not be any, financing statements
securing obligations of any amounts filed against the Company or any of its
Subsidiaries or any of their respective assets, other than under the Security
Agreement.


 


y.                                      Real
Property. Neither the Company nor any of its Subsidiaries owns any real
property. Schedule 3(y) contains a complete and correct list of all
the real property, facilities and fixtures that (i) are leased or, in the
case of fixtures, otherwise owned or possessed by the Company or any of its
Subsidiaries, (ii) in connection with which the Company or any of its
Subsidiaries has entered into an option agreement, participation agreement or
acquisition agreement or (iii) the Company or any of its Subsidiaries has
agreed to lease or otherwise acquire or may be obligated to lease or
otherwise acquire in connection with the conduct of its business (collectively,
including any of the foregoing acquired after the date of this Agreement, the “Real Property”), which list identifies all of the Real Property
and specifies which of the Company and its Subsidiaries leases, owns or
possesses each item of the Real Property. Schedule 3(y) also
contains a complete and correct list of all leases and other agreements with
respect to which the Company or any of its Subsidiaries is a party or otherwise
bound or affected with respect to the Real Property, except master leases
affiliated with any sub leases, easements, rights of way, access agreements,
surface damage agreements, surface use agreements or similar agreements that
pertain to Real Property that is contained wholly within the boundaries of any
leased Real Property otherwise described on Schedule 3(y) (the “Real Property Leases”). Except as set forth in Schedule 3(y),
all of the Real Property Leases are valid and in full force and effect and are
enforceable against all parties thereto. Except as set forth in Schedule 3(y),
neither the Company nor any of its Subsidiaries nor, to the Company’s
Knowledge, any other party thereto is in default in any material respect under
any of such Real Property Leases and no event has occurred which with the
giving of notice or the passage of time or both would constitute a


 


19

















 


default under, or otherwise give any party the right
to terminate, any of such Real Property Leases, or could adversely affect the
Company’s or any of its Subsidiaries’ interest in and title to the Real
Property subject to any of such Real Property Leases. No Real Property Lease is
subject to termination, modification or acceleration as a result of the
transactions contemplated hereby.


 


z.                                        Tangible
Assets. The Company and its Subsidiaries have good and marketable title to
all of the tangible assets that are material to their businesses (the “Assets”), in each case free and clear of any Lien, other
than Permitted Liens. The Assets include all tangible assets necessary for the
conduct of the Company’s and its Subsidiaries businesses as presently proposed
to be conducted. The Assets that are facilities, fixtures, equipment, and other
personal property have been maintained in accordance with normal industry
practice, and are in good operating condition and repair (subject to normal
wear and tear), and are suitable for the purposes for which they are now used
and proposed to be used. There are no existing agreements, options, commitments
or rights with, of or to any Person to acquire any such Assets, or any
interests therein.


 


aa.                                 No
Materially Adverse Contracts, Etc. The Company is not subject to any
charter, contract, agreement, instrument, corporate or other legal restriction,
or any judgment, decree, order, rule, regulation or other Law that has, has
had, or could reasonably be expected in the future to have, a Material Adverse
Effect.


 


bb.                               Investment
Company. The Company is not, and upon each Closing will not be, an “investment
company,” a company controlled by an “investment company,” or an “affiliated
person” of, or “promoter” or “principal underwriter” for, an “investment
company,” as such terms are defined in the Investment Company Act.


 


cc.                                 Stock
Options. Except as set forth on Schedule 3(cc), every Option
issued by the Company pursuant to the Equity Plans (i) has (or, if no
longer outstanding, had), with respect to each share of Common Stock into which
it is convertible or for which it is exercisable or exchangeable, an exercise
price equal to or greater than the fair market value per share of Common Stock
on the date of grant of such Option, (ii) was issued in compliance with
the terms of the plan under which it was issued and in compliance with
applicable Laws, rules and regulations, including the rules and
regulations of the Principal Market, and (iii) has been accounted for in
accordance with GAAP and otherwise been disclosed accurately and completely and
in accordance with the requirements of the Securities Laws, including Rule 402
of Regulation S-K promulgated by the SEC, and the Company has paid, or properly
reserved for, all taxes payable with respect to each such Option (including
with respect to the issuance and exercise thereof), and has not deducted any
amounts from its taxable income that it is not entitled to deduct with respect
to any such stock option (including the issuance and exercise thereof).


 


dd.                               Clinical
Services. The contract research services provided by each of the Company
and its Subsidiaries is provided in compliance in all material respects with
all applicable Laws, including, without limitation, all applicable FDA rules,
regulations and requirements and all rules, regulations and requirements of
comparable foreign Governmental Entities.


 


20

















 


4.                                       AFFIRMATIVE
COVENANTS.


 


a.                                       Best
Efforts. Each party shall use its reasonable best efforts to timely satisfy
each of the conditions to be satisfied by it as provided in Sections 7
and 8 of this Agreement.


 


b.                                      Form D
and Blue Sky. The Company agrees to timely file a Form D with respect
to the Securities as required under Regulation D. The Company shall, on or
before each Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to qualify the
Securities for, sale to the Buyers at the Closing to occur on such Closing Date
pursuant to this Agreement under applicable Securities Laws of the states of
the United States, and shall provide to each Buyer evidence of any such action
so taken on or prior to the applicable Closing Date. The Company shall make all
filings and reports relating to the offer and sale of the Securities required
under applicable Securities Laws of the states of the United States.


 


c.                                       Reporting
Status. During the period commencing on the date of this Agreement and
ending on the first date after the Initial Closing Date that is the latest of (i) the
date that is two years after the date as of which the Investors (as that term
is defined in the Registration Rights Agreement) may sell all of the
Shares without restriction pursuant to Rule 144(k) promulgated under the
1933 Act (or successor thereto), and (ii) the date on which no Notes
remain outstanding, (iii) the date that is the last day on which any
Shares may be issued hereunder, and (iv) the date on which the
Security Agreement has been terminated (the period ending on such latest date,
the “Reporting Period”), the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the Securities Laws otherwise would
permit such termination.


 


d.                                      Use
of Proceeds. The Company will use the proceeds from the sale of the Notes
and the Shares first, to pay expenses and commissions related to the sale of
the Securities, second, to fund the Hesperion Acquisition, and third, for
general working capital needs.


 


e.                                       Financial
Information. The Company agrees to send the following to each Investor (as
defined in the Registration Rights Agreement) during the Reporting Period (i) unless
the following are filed with the SEC through EDGAR and are immediately
available to the public through the EDGAR system, within one Business Day after
the filing thereof with the SEC, a copy of each of its quarterly reports on Form 10-QSB
or 10-Q and annual reports on Form 10-KSB or 10-K, as the case may be
(each, a “Periodic Report”), Current Reports on Form 8-K,
registration statements (other than on Form S-8) and amendments and
supplements to each of the foregoing, (ii) unless immediately available
through Bloomberg or other nationally recognized media outlet, facsimile copies
of all press releases issued by the Company or any of its Subsidiaries,
contemporaneously with the issuance thereof, and (iii) copies of any
notices and other information made available or given to the stockholders of
the Company generally, contemporaneously with the making available or giving
thereof to the stockholders.


 


f.                                         Internal
Accounting Controls. During the Reporting Period, the Company shall, and,
shall cause each of its Subsidiaries to:


 


21

















 


(i)                                     at
all times keep books, records and accounts with respect to all of such Person’s
business activities, in accordance with sound accounting practices and GAAP
consistently applied;


 


(ii)                                  continue
to undertake the remediation activities disclosed in the SEC Documents so that
the Company is ultimately able to maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (A) transactions
are executed in accordance with management’s general or specific
authorizations, (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset and liability accountability, (C) access to assets or incurrence of
liability is permitted only in accordance with management’s general or specific
authorization and (D) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any differences;


 


(iii)                               timely file and make
publicly available on the SEC’s EDGAR system, all certifications and statements
required by (A) Rule 13a-14 or Rule 15d-14 under the 1934 Act
and (B) Section 906 of Sarbanes Oxley with respect to any Periodic
Reports;


 


(iv)                              continue
to undertake the remediation activities disclosed in the SEC Documents so that
the Company is ultimately able to maintain disclosure controls and procedures
required by Rule 13a-15 or Rule 15d-15 under the 1934 Act, and to
cause such disclosure controls and procedures to be effective at all times to
ensure that the information required to be disclosed by the Company in the
reports that it files with or submits to the SEC (A) is recorded,
processed, summarized and reported accurately within the time periods specified
in the SEC’s rules and forms and (B) is accumulated and communicated
to the Company’s management, including its principal executive officer and
principal financial officer, as appropriate to allow timely decisions regarding
required disclosure; and


 


(v)                                 continue
to undertake the remediation activities disclosed in the SEC Documents so that
the Company is ultimately able to maintain internal control over financial
reporting required by Rule 13a-14 or Rule 15d-14 under the 1934 Act,
and to cause such internal control over financial reporting to be effective at
all times and not contain any material weaknesses.


 


g.                                      Listing.
During the Reporting Period, the Company shall use its commercially reasonable
efforts to promptly secure the listing of all of the Registrable Securities (as
defined in the Registration Rights Agreement) upon each national securities
exchange or automated quotation system, upon which shares of Common Stock are
then listed (subject to official notice of issuance) or quoted and, shall maintain,
so long as any other shares of Common Stock shall be so listed, such listing of
all Registrable Securities from time to time issuable under the terms of the
Transaction Documents. So long as any Securities are outstanding, the Company
shall maintain the Common Stock’s listing on the Principal Market and shall not
take any action that would reasonably be expected to result in the suspension
or termination of trading of the


 


22

















 


Common Stock on the Principal Market. The Company
shall pay all fees and expenses in connection with satisfying its obligations
under this Section 4(g).


 


h.                                      Expenses.
The Company shall reimburse each Buyer an amount equal to the amount of all of
such Buyer’s reasonable legal, due diligence and other expenses incurred in
connection with the Transaction Documents. In addition, in the event any Buyer’s
Note is outstanding on the first anniversary of the Closing Date, the Company
shall pay such Buyer a transaction fee in an amount equal to 2.0% of the
Purchase Price of such outstanding Note.


 


i.                                          Disclosure
of Transactions and Other Material Information.


 


(i)                                     By
the fourth (4th) Business Day following the Initial Closing Date,
the Company shall file a Form 8-K (the “Announcing Form 8-K”)
with the SEC. The  Announcing Form 8-K,
shall comply fully with the applicable 8-K rules and shall describe the
terms of the transactions contemplated by the Transaction Documents, including
the purchase of the Notes and Shares. The Company shall file all exhibits
relating to this Agreement required to be filed by the SEC and Securities Laws
or other Laws as exhibits to the Company’s Quarterly Report on Form 10-QSB
to be filed with the SEC on or around November 15, 2007.


 


(ii)                                  Subject
to the agreements and covenants set forth in this Section 4(i), the
Company shall not issue any press releases or any other public statements with
respect to the transactions contemplated hereby or disclosing the name of any
Buyer; provided, however, that a Company shall be entitled, without the prior
approval of any Buyer, to make any press release with respect to such
transactions (A) in substantial conformity with the Announcing Form 8-K
and contemporaneously therewith or prior thereto and (B) as is required by
applicable Law.


 


(iii)                               Notwithstanding any
provision herein to the contrary, the Company shall not, and shall cause each
of its Subsidiaries and its and each of their respective Affiliates, officers,
directors, employees and agents not to, provide any Buyer with any material
nonpublic information regarding the Company or any of its Subsidiaries from and
after the filing of the Announcing Form 8-K with the SEC, without the
express prior written consent of such Buyer, other than notices required under
the Transaction Documents which may constitute material non-public
information. Notwithstanding anything to the contrary herein, in the event that
the Company believes that a notice or communication to any Buyer or Investor
(as defined in Section 4(j)) contains material, nonpublic
information relating to the Company or any of its Subsidiaries, the Company so
shall indicate to the such Buyer or Investor contemporaneously with delivery of
such notice or communication, and such indication shall provide such Buyer or
Investor the means to refuse to receive such notice or communication other than
notices required under the Transaction Documents which may constitute
material non-public information; and in the absence of any such indication, the
holders of the Securities shall be allowed to presume that all matters relating
to such notice or communication do not constitute material, nonpublic
information relating to the Company or any of its Subsidiaries.


 


23

















 


j.                                          Pledge
of Securities. The Company acknowledges and agrees that the Securities of a
Buyer may be pledged by such Buyer or its transferees (each, including
each Buyer, an “Investor”) in connection with a
bona fide margin agreement or other loan secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Investor effecting any such pledge of Securities
shall be required to provide the Company with any notice thereof or otherwise
make any delivery to the Company pursuant to this Agreement or any other
Transaction Document. The Company hereby agrees to execute and deliver such
documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by an Investor.


 


k.                                       Notices.
From the date of this Agreement until the first date following the Initial
Closing Date on which no Notes are outstanding and the Security Agreement has
terminated, the Company shall and shall cause each of its Subsidiaries to
notify the Collateral Agent in writing (A) at least 30 days in advance of
any change in such Person’s legal name and (B) within 10 days of the
change of the use of any trade name, assumed name, fictitious name or division
name not previously disclosed to the Collateral Agent in writing. All of the
foregoing notices also shall be provided by the Company or the applicable
Subsidiary to each Buyer in writing.


 


l.                                          Compliance
with Laws and Maintenance of Permits. During the Reporting Period, the
Company shall, and shall cause each of its Subsidiaries to, maintain all
governmental consents, franchises, certificates, licenses, authorizations,
approvals and permits, the lack of which would reasonably be expected to have a
Material Adverse Effect, and the Company and each of its Subsidiaries shall
remain in compliance with all Laws (including Environmental Laws and Laws
relating to healthcare, HIPAA, taxes, employer and employee contributions and
similar items, securities, ERISA or employee health and safety and all applicable
U.S. Food and Drug Administration (“FDA”) rules,
regulations and requirements and the rules, regulations and requirements of
comparable foreign Governmental Entities) the failure with which to comply
would have a Material Adverse Effect on such Person.


 


m.                                    Inspection
and Audits. From the date of this Agreement until the first date following
the Initial Closing Date on which no Notes are outstanding and the Security
Agreement has been terminated:


 


(i)                                     The
Company shall, and shall cause each of its Subsidiaries to, permit each Buyer
(and each Buyer’s designees), to call at the Company’s and each of its
Subsidiaries’ places of business upon reasonable advance notice, and, without
hindrance or delay, to inspect, examine and audit the Collateral and to
inspect, audit, check and make extracts from such Person’s books, records,
journals, orders, receipts and any correspondence and other data relating to
the Collateral or any transactions between the parties hereto, and each Buyer
(and each Buyer’s designees) shall have the right to make such verification
concerning the Collateral as such Buyer may consider reasonable under the
circumstances; and


 


(ii)                                  Notwithstanding
anything to the contrary herein, upon written request to the Company by any
Buyer, the Company shall promptly provide such Buyer with any financial,
operating or other type of information reasonably requested by such


 


24

















 


Buyer, subject to a mutually agreeable confidentiality agreement, which
request shall constitute a waiver, with respect to any material non-public
information regarding the Company and the Subsidiaries provided to such Buyer
directly in response to such written request, of the restriction herein on the
Company’s disclosure to such Buyer of material nonpublic information.


 


n.                                      Collateral.
From the date of this Agreement until the first date following the Initial
Closing Date on which the Notes are no longer outstanding and the Security
Agreement is terminated, the Company shall, and shall cause each of its
Subsidiaries to, maintain and preserve the Collateral and the value thereof.


 


o.                                      Insurance.
From the date of this Agreement until the first date following the Initial
Closing Date on which no Notes are outstanding and the Security Agreement has
terminated, the Company shall, and shall cause each of its Subsidiaries to:


 


(i)                                     Keep
the Collateral properly housed (to the extent possible) and insured for the
full insurable value thereof against loss or damage with companies that
regularly insure Persons engaged in businesses similar to that of the Company
or the applicable Subsidiary, such coverage and the premiums payable in respect
thereof to be acceptable in scope and amount to the Collateral Agent. Such
endorsement, or an independent instrument furnished to the Collateral Agent,
shall provide that the insurance company shall give the Collateral Agent at
least 30 days’ written notice before any such policy of insurance is altered or
canceled and that no act, whether willful or negligent, or default of such
Company or the applicable Subsidiary or any other Person shall affect the right
of the Collateral Agent to recover under such policy of insurance in case of
loss or damage. In addition, the Company or applicable Subsidiary shall cause to
be executed and delivered to the Collateral Agent an assignment of proceeds of
its business interruption insurance policies (if any).


 


(ii)                                  Maintain,
at its expense, such insurance policies (including, but not limited to, general
liability, directors’ and officers,’ public liability and third party property
damage insurance) with companies that regularly insure Persons engaged in
businesses similar to that of the Company or the applicable Subsidiary, such
coverage and the premiums payable in respect thereof to be reasonably
acceptable in scope and amount to the Collateral Agent, such acceptance not to
be unreasonably withheld. Original (or certified) copies of such policies have
been delivered to each Buyer, together with evidence of payment of all premiums
therefor; each such policy shall contain an endorsement showing the Collateral
Agent as an additional insured thereunder and providing that the insurance
company shall give Collateral Agent at least 30 days’ written notice before any
such policy shall be altered or canceled.


 


If the Company or any of
its Subsidiaries at any time or times hereafter shall fail to obtain or
maintain any of the policies of insurance required above or to pay any premium
relating thereto and fails to cure such failures within ten (10) days of
written notice from Buyer, each Buyer, without waiving or releasing any
obligation or default by the Company hereunder, may (but shall be under no
obligation to) obtain and maintain such policies of insurance and pay such
premiums and take such other actions with respect thereto as such Buyer deems
advisable. Such


 


25

















 


insurance, if
obtained by such Buyer, may, but need not, protect the Company’s and its
Subsidiaries’ interests or pay any claim made by or against the Company and its
Subsidiaries with respect to the Collateral. Such insurance may be more
expensive than the cost of insurance the Company and its Subsidiaries may be
able to obtain on their own and may be cancelled only upon the Company and
its Subsidiaries’ providing evidence that they has obtained the insurance as
required above. All sums disbursed by a Buyer in connection with any such
actions, including court costs, expenses, other charges relating thereto and
reasonable attorneys’ fees, shall constitute Indebtedness under the Notes,
shall be payable on demand by the Company to such Buyer and, until paid, shall
bear interest at the highest rate then applicable to principal under the Notes.


 


p.                                      Taxes.
During the Reporting Period, the Company shall and shall cause each of its
Subsidiaries to file all required tax returns and pay all of its taxes when
due, subject to any extensions granted by the applicable taxing authority,
including taxes imposed by federal, state or municipal agencies, and shall
cause any Liens for taxes to be promptly released; provided, however,
that the Company and its Subsidiaries shall have the right to contest the
payment of such taxes in good faith by appropriate proceedings so long as (i) the
amount so contested is shown on such Person’s financial statements; and (ii) the
contesting of any such payment does not give rise to a Lien for taxes. If the
Company or the applicable Subsidiary fails to pay any such taxes (other than
taxes not yet due, subject to an extension or subject to a contest) and in the
absence of any such contest by such Person and fails to cure such failure
within ten (10) days of written notice from Buyer, each Buyer may (but
shall be under no obligation to) advance and pay any sums required to pay any
such taxes and/or to secure the release of any Lien therefor, and any sums so
advanced by such Buyer shall constitute Indebtedness under the Notes, shall be
payable by the Company to each Buyer on demand, and, until paid, shall bear
interest at the highest rate then applicable to principal under the Notes.


 


q.                                      Intellectual
Property. From the date of this Agreement until the first date following
the Initial Closing Date on which the Notes are no longer outstanding and the
Security Agreement has terminated, the Company shall and shall cause each of
its Subsidiaries to maintain adequate Intellectual Property to continue its
business as presently proposed to be conducted by it or as hereafter conducted
by it.


 


r.                                         Patriot
Act, Investor Secrecy Act and Office of Foreign Assets Control. As required
by federal law and such Buyer’s policies and practices, each Buyer may need
to obtain, verify and record certain customer identification information and
documentation in connection with opening or maintaining accounts, or
establishing or continuing to provide services, and, during the Reporting
Period, the Company agrees to, and shall cause each of its Subsidiaries to,
provide such information to the extent it is in possession of such information
and can provide the same without violating an obligation of confidentiality to
a third party with respect thereto.


 


s.                                       Security
Covenants. From the date of this Agreement until the first date following
the Initial Closing Date on which no Notes are outstanding and the Security
Agreement has terminated, the Company shall, and shall cause each of its
Subsidiaries to, at its own cost and expense, cause to be promptly and duly
taken, executed, acknowledged and delivered all such further acts, documents
and assurances as may from time to time be necessary


 


26

















 


or as a Buyer or the Collateral Agent may from
time to time reasonably request in order to carry out the intent and purposes
of this Agreement, the Security Documents and the other Transaction Documents
and the transactions contemplated hereby and thereby, to the extent feasible be
local law, including all such actions to establish, create, preserve, protect
and perfect a first priority Lien in favor of the Collateral Agent for the
benefit of such Buyer in the Collateral (as each term is defined in the
Security Agreement).


 


t.                                         Right
to Participate in Future Financing. Subject to the exceptions described
below, each of the Company and its Subsidiaries agrees that during the period
beginning on the date hereof and ending on the first date following the Initial
Closing on which no Note remains outstanding, neither the Company nor its
Subsidiaries will (x) contract with any party for any debt or equity financing
(including any debt financing with an equity component), or (y) issue any debt
or equity securities of the Company or any Subsidiary or securities
convertible, exchangeable or exercisable into or for debt or equity securities
of the Company or any Subsidiary (including debt securities with an equity
component) (each, a “Future Offering”),
unless, after it has received an offer regarding a Future Offering that it has
a bona fide intention to accept, it shall have first delivered to each Buyer
(or the designee appointed by such Buyer) written notice (the “Future Offering Notice”) describing the Future Offering in
reasonable detail and providing each Buyer an option (the “Buyer
Purchase Option”) to purchase up to 25% of such Buyer’s Allocation
Percentage (such 25% of such Buyer’s Allocation Percentage being referred to
herein as such Buyer’s “Participation Percentage”)
of the total amount of securities to be issued in such Future Offering (the
limitations referred to in this and the preceding sentence are collectively
referred to as the “Capital Raising
Limitations”) and on the same terms as offered to the other
investors and participants in such Future Offering. Upon the written request of
any Buyer made within five (5) Business Days after its receipt of a Future
Offering Notice (an “Additional Information
Request”), the Company shall provide the Buyers with such additional
information regarding the proposed Future Offering, including terms and
conditions and use of proceeds thereof, as any Buyer shall reasonably request. A
Buyer may exercise its Buyer Purchase Option by delivering written notice
to the Company within five (5) Business Days after the later of (i) such
Buyer’s receipt of a Future Offering Notice or (ii) such Buyer’s receipt
of all of the information reasonably requested by the Buyer in an Additional
Information Request (the “Buyer Purchase Notice Date”),
which notice shall state the quantity or percentage of securities being offered
in the Future Offering that such Buyer will purchase, up to its Participation
Percentage, and that quantity or percentage of securities (if any) it is
willing to purchase in excess of its Allocation Percentage (such Buyer’s “Over-allotment Amount”). In the event that one or more
Buyers fail to elect to purchase up to each such Buyer’s Allocation Percentage,
then each of the Buyers that have indicated a willingness to purchase a Buyer
Over-allotment Amount shall be entitled to purchase an amount of the securities
subject to the Buyer Purchase Option that such Buyer or Buyers have failed to elect
to purchase (the “Unpurchased Securities”)
equal to the lesser of (x) the Buyer Over-allotment Amount of such Buyer, and
(y) the product of (I) such Buyer’s Allocation Percentage, and (II) the
aggregate amount of such Unpurchased Securities subject to the Buyer Purchase
Option. The Company shall have sixty (60) days following the Buyer Purchase
Notice Date to sell the securities of the Future Offering (other than the
securities to be purchased by the Buyers pursuant to this Section 4(t)),
upon terms and conditions no more favorable to the purchasers thereof than
specified in the Future Offering Notice. The exercise of the Buyer Purchase
Option shall be contingent upon, and contemporaneous with, the


 


27

















 


consummation of such Future Offering. In connection
with such consummation, each Buyer that exercises the Buyer Purchase Option
shall deliver to the Company duly and properly executed originals of any
documents reasonably required by the Company to effectuate such Future Offering
together with payment of the purchase price for the securities being purchased
by such Buyer in such Future Offering, and the Company shall promptly issue to
such Buyer the securities purchased thereby. In the event the Company has not
sold such securities of the Future Offering within such sixty (60) day period,
the Company shall not thereafter issue or sell such securities or any other
securities subject to this Section 4(t) without first offering such
securities to the Buyers in the manner provided in this Section 4(t).
Any Buyer that fails to exercise its full Participation Percentage with respect
to a particular Future Offering shall lose its right of participation with
respect to later Future Offerings. The Capital Raising Limitations shall not
apply to (i) any transaction involving the Company’s issuances of
securities (A) as consideration in a merger or consolidation (the primary
purpose or material result of which is not to raise or obtain equity capital or
cash), (B) in connection with any strategic partnership or joint venture
(the primary purpose or material result of which is not to raise or obtain
equity capital or cash), or (C) as consideration for the acquisition of a
business, product, license or other assets by the Company (the primary purpose
or material result of which is not to raise or obtain equity capital or cash), (ii) the
issuance of securities upon exercise or conversion of the Company’s Options or
Convertible Securities outstanding as of the date hereof, provided that
such securities are not amended or modified on or after the date hereof and provided,
further, that the conversion price, exchange price, exercise price or
other purchase price is not reduced, adjusted or otherwise modified and the
number of shares issued or issuable is not increased (whether by operation of
law or in accordance with the relevant governing documents or otherwise) on or
after the date hereof, and (iii) the grant of additional options, or the
issuance of other securities, under any Company Equity Plan.


 


u.                                      Board
Observer Rights. From the date of this Agreement until the first date
following the Initial Closing Date on which no Notes are outstanding, Cumulus
Investors, LLC shall have the right to appoint one (1) person to attend
and observe meetings and correspondence of the Company’s Board of Directors
(including any and all executive sessions); provided, however that such person
shall not have the right to vote on any matters at hand; provided, further,
however, that such rights shall not be transferable to any third party or
assignee. In connection with such observer role, such appointee shall be
provided with copies of all information and documentation provided to members
of the Company’s Board of Directors at, or in connection with such meetings,
provided that the Company shall have the right to exclude such observer from
any meeting if the Company reasonably believes such exclusion is required by
the Board of Directors’ fiduciary duties or not to disclose any information it
deems to be confidential or that may jeopardize the attorney/client
privilege.


 


v.                                      Quarterly
Compliance Certificate. From the date of this Agreement until the first
date following the Initial Closing Date on which no Notes are outstanding, the
Company shall provide the Buyers, no later than 30 days following the end of
each fiscal quarter, a certificate executed by the chief executive officer and
chief financial officer of the Company certifying that the Company and its
Subsidiaries were, as of the end of such preceding quarter, and at all times
during such preceding quarter, in full compliance with the terms of this
Agreement.


 


28






 












 


5.                                       NEGATIVE
COVENANTS.


 


a.                                       Prohibition
Against Variable Priced Securities. From the date of this Agreement until
the first date following the Initial Closing Date on which no Buyer holds any
Securities, the Company shall not in any manner issue or sell any Options or
Convertible Securities that are convertible into or exchangeable or exercisable
for shares of Common Stock at a price that varies or may vary with the
market price of shares of Common Stock, including by way of one or more resets
to a fixed price or increases in the number of shares of Common Stock issued or
issuable, or at a price that upon the passage of time or the occurrence of
certain events automatically is reduced or is adjusted or at the option of any
Person may be reduced or adjusted, whether or not based on a formulation
of the then-current market price of the Common Stock.


 


b.                                      Status.
From the date of this Agreement until the first date following the Initial
Closing Date on which no Notes are outstanding, the Company shall not become a
USRPHC; and upon any Buyer’s request, the Company shall inform such Buyer
whether any of the Securities then held by Buyer constitute a U.S. real
property interest pursuant to Treasury Regulation Section 1.897-2(h) without
regard to Treasury Regulation Section 1.897-2(h)(3).


 


c.                                       Stay,
Extension and Usury Laws. The Company covenants (to the extent that it may lawfully
do so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law or other law that would prohibit or forgive it from paying all or any
portion of any principal of, or interest or premium on any of the Notes or from
issuing the Shares as contemplated herein or therein, wherever enacted, now or
at any time hereafter in force, or which may affect the covenants under,
or the performance of, any of the Transaction Documents; and the Company (to
the extent it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not, by resort to any
such law, hinder, delay or impede the execution of any power granted to any
Buyer herein or in any of the other Transaction Documents, but will suffer and
permit the execution of every such power as though no such law has been
enacted.


 


d.                                      Restriction
on Purchases or Payments. From the date of this Agreement until the first
date following the Initial Closing Date on which the Notes are no longer
outstanding and the Security Agreement has terminated, the Company shall not,
and shall not permit any of it Subsidiaries to, (i) declare, set aside or
pay any dividends on or make any other distributions (whether in cash, stock,
equity securities or property) in respect of any the Company’s or any
Subsidiary’s Capital Stock, or issue or authorize the issuance of any other
securities in respect or, in lieu of, or in substitution for any Capital Stock
of the Company or any of its Subsidiaries, or establish or set any record date
with respect to any of the foregoing; provided, however, that any
Subsidiary may declare, set aside or pay dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any of its Capital Stock that is held solely by the Company or a
wholly-owned domestic Subsidiary, provided that all of the equity of
such Subsidiary is directly or indirectly owned by the Company, such Subsidiary
is controlled by the Company, and such Subsidiary is a party to the Guaranty,
or (ii) purchase, redeem or otherwise acquire, directly or indirectly, any
shares of the Company’s or any of its Subsidiaries’ Capital Stock, except
repurchases of unvested shares at cost in connection with the termination of
employment of an employee pursuant to options or 


 


29

















 


agreements in effect on the date of this Agreement, or
cashless (i.e., net issue) exercise of options by employees under existing
options.


 


e.                                       Payment
and Lien Restrictions. From the date of this Agreement until the first date
following the Initial Closing Date on which the Notes are no longer outstanding
and the Security Agreement has terminated, (i) the Company shall not, nor
will it permit any of its Subsidiaries to, enter into or assume any agreement
prohibiting or otherwise restricting the creation or assumption of any Lien
upon its properties or assets, whether now owned or hereafter acquired, or
requiring the grant of any security for an obligation, except to the extent any
such agreement provides for Permitted Liens; and (ii) except as provided
herein, the Company shall not and shall not cause or permit its Subsidiaries to
directly or indirectly create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or consensual restriction of any kind on the
ability of any such Subsidiary to:  (1) pay
dividends or make any other distribution on any of such Subsidiary’s Capital
Stock owned by the Company or any other Subsidiary; (2) pay any
Indebtedness owed to the Company or any other Subsidiary; (3) make loans
or advances to the Company or any other Subsidiary; or (4) transfer any of
its property or assets to the Company or any other Subsidiary.


 


f.                                         Prepayments.
Except for intercompany indebtedness among the Company and its Subsidiaries,
from the date of this Agreement until the first date following the Initial
Closing Date on which the Notes are no longer outstanding and the Security
Agreement has terminated, the Company shall not, nor will it permit any of its
Subsidiaries to, prepay any Indebtedness that is in parity with or subordinate
to the Notes by structure or contract; provided, however, that
any Subsidiary may prepay any Indebtedness to the Company or a
wholly-owned domestic Subsidiary of the Company and may make (i) scheduled
payments of interest and principal on the Hesperion Notes; (ii) amortization
payments on the Millennix Notes and (iii) scheduled payments of interest
and principal on the Lavin Notes, in each case if no Event of Default has
occurred or is continuing during the forty-five (45) days prior to the
applicable scheduled payment date.


 


g.                                      Indebtedness.
From the date of this Agreement until the first date following the Initial
Closing Date on which the Notes are no longer outstanding and the Security
Agreement has terminated, the Company shall not, and shall cause each of its
Subsidiaries not to, create, incur, assume, extend the term of, become
obligated on or suffer to exist (directly or indirectly), any Indebtedness
other than under the Notes issued pursuant to this Agreement, except that the
Company and its Subsidiaries may incur or enter into the following
(collectively, “Permitted Indebtedness”):


 


(i)                                     Indebtedness
listed on Schedule 3(x);


 


(ii)                                  non-convertible
Indebtedness for borrowed money, but only to the extent (A) a subordination
agreement in favor of and in form and substance satisfactory to, each
Buyer in its reasonable discretion is executed and delivered to such Buyer with
respect thereto (which subordination agreement shall prohibit unscheduled
payments in respect of such subordinated Indebtedness for so long as the Notes
are outstanding), (B) the terms of such subordinated Indebtedness does not
require or permit payment of principal thereon until full payment of any
outstanding Notes, and (C) such subordinated 


 


 


30





















 


Indebtedness is not secured by any of the assets of the Company or any
of its Subsidiaries;


 


(iii)                               unsecured intercompany
Indebtedness amongst the Company and one or more of its wholly-owned domestic
Subsidiaries that is a party to, and in compliance with, the Guaranty;


 


(iv)                              Indebtedness
of the Company and its Subsidiaries for taxes, assessments, municipal or
governmental charges not yet due;


 


(v)                                 obligations
of the Company and its Subsidiaries for collection or deposit in the ordinary
course of business; and


 


(vi)                              unsecured
account trade payables that are (A) entered into or incurred in the
ordinary course of the Company’s and its Subsidiaries’ business, (B) on
terms that require full payment within ninety (90) days from the date entered
into or incurred, (C) not unpaid in excess of sixty (60) days from the
receipt of invoice, or are being contested in good faith and as to which such
reserve as is required by GAAP has been made and (D) not exceeding at any
one time an aggregate amount among the Company and its Subsidiaries of
$3,200,000 at any time.


 


(vii)                           capital or equipment lease
financing arrangements in the ordinary course of business.


 


h.                                      Liens.
From the date of this Agreement until the first date following the Initial
Closing Date on which none of the Notes are outstanding and the Security
Agreement has terminated, the Company shall not, and shall cause each of its
Subsidiaries not to, grant or suffer to exist (voluntarily or involuntarily)
any Lien, claim, security interest or other encumbrance whatsoever on any of
its assets, other than Permitted Liens.


 


i.                                          Sale
of Collateral. Until the first date on which the Notes are no longer
outstanding and the Security Agreement has terminated, neither the Company nor
any of the Subsidiaries shall directly or indirectly sell, transfer, assign or
dispose of any Collateral, other than in the ordinary course of business. Without
limiting the generality of the foregoing, the Company shall not directly or
indirectly sell, transfer, assign or otherwise dispose of any receivables of
the Company or any of its Subsidiaries without the prior written consent of the
Collateral Agent. The Company shall not, and shall cause each of its
Subsidiaries not to, directly or indirectly, merge with or consolidate with any
Person or permit any other Person to merge with or into or consolidate with it
except that any wholly owned Subsidiary may merge with or into any other
wholly owned Subsidiary of the Company if the Company has provided at least ten
(10) Business Days prior notice to the Collateral Agent and no Event of
Default shall exist or shall exist upon the consummation of such transaction.


 


j.                                          Corporate
Existence. During the Reporting Period, the Company shall, and shall cause
each of its Subsidiaries to, maintain its corporate existence and shall not
sell all or substantially all of the Company’s assets (including, for the
avoidance of any doubt, all or substantially all of the assets of the
Subsidiaries in the aggregate), except in the event of a merger or
consolidation or sale or transfer of all or substantially all of the Company’s
assets (including, 


 


31

















 


for the avoidance of any doubt, all or substantially
all of the assets of the Subsidiaries in the aggregate) where (i) the
surviving or successor entity in such transaction (A) assumes the Company’s
obligations hereunder and under the other Transaction Documents (other than the
Hesperion Transaction Documents) and (B) is a publicly traded corporation
the common stock of which is listed on a national securities exchange or quoted
on the over-the-counter bulletin board, and (ii) immediately before and
immediately after giving effect to such transaction, no Event of Default (as
defined in the Notes) shall have occurred and be continuing. The Company shall
not, and shall cause each of its Subsidiaries not to, engage in any business
other than the business engaged in on the date hereof.


 


k.                                       Affiliate
Transactions. From the date of this Agreement until the first date
following the Initial Closing Date on which no Notes are outstanding and the
Security Agreement has terminated, the Company shall not, and shall cause each
of its Subsidiaries not to, enter into, amend, modify or supplement any transaction,
contract, agreement, instrument, commitment, understanding or other arrangement
with any Related Party, except for customary employment arrangements, benefit
programs and intecompany arrangements, on reasonable terms, that are not
otherwise prohibited by this Agreement.


 


l.                                          Restriction
on Loans; Investments; Subsidiary Equity. From the date of this Agreement
until the first date following the Initial Closing Date on which no Notes are
outstanding and the Security Agreement has terminated, the Company shall not,
and shall not permit any of its Subsidiaries to:


 


(i)                                     Make
any loans or advances to, or investments in, any other Person (other than to or
in any Subsidiary), including through lending money, deferring the purchase
price of property or services (other than trade accounts receivable on terms of
ninety (90) days or less), purchasing any note, bond, debenture or similar
instrument, entering into any letter of credit, guaranteeing (or taking any
action that has the effect of guaranteeing) any obligations of any other
Person, or acquiring any equity securities of, or other ownership interest in,
or making any capital contribution to any other entity; provided, however, that
the Company may create new subsidiaries; or


 


(ii)                                  Issue,
transfer or pledge any capital stock or equity interest in any Subsidiary to
any Person other than the Company.


 


m.                                    Investment
Company. From the date of this Agreement until the first date following the
Initial Closing Date on which no Notes are outstanding and no Buyer holds any
Securities, the Company shall not become an “investment company,” a company
controlled by an “investment company,” or an “affiliated person” of, or “promoter”
or “principal underwriter” for, an “investment company,” as such terms are
defined in the Investment Company Act.


 


n.                                      No
Avoidance of Obligations. During the Reporting Period, the Company shall
not, and shall cause each of its Subsidiaries not to, enter into any agreement
which would limit or restrict the Company’s or any of its Subsidiaries’ ability
to perform under, or take any other voluntary action to avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed by it under, this Agreement, the Notes and the other Transaction
Documents.


 


32

















 


o.                                      Regulation
M. Neither the Company, nor any of its Subsidiaries nor any of their
respective Affiliates will take any action prohibited by Regulation M under the
1934 Act in connection with the offer, sale and delivery of the Securities
contemplated hereby.


 


p.                                      No
Integrated Offering. Neither the Company, nor any of its Subsidiaries, nor
any of their respective Affiliates, nor any Person acting on behalf of any of
the foregoing shall, directly or indirectly, make any offers or sales of any
security or solicit any offer to purchase any security, under any circumstances
that would require registration of any of the Securities under the 1933 Act.


 


q.                                      Exceptions.
Notwithstanding anything to the contrary set forth in this Agreement or in any
of the Transaction Documents, the Company is not precluded from and no consent
is required from any party prior to the taking of any of the following actions:


 


(i)                                     An
equity or debt financing, the proceeds of which are used in whole or in part to
repay all outstanding principal and interest underlying the Notes; provided,
however, that the Company must comply with the provisions of Section 4(t)
hereof;


 


(ii)                                  A
reverse stock split duly approved by the board of directors and stockholders of
the Company;


 


(iii)                               Any transfers between
Affiliates or intercompany loans;


 


(iv)                              Create
any new wholly owned subsidiary, subject to the terms of this Agreement and the
Transaction Documents; or


 


(v)                                 Dissolve
any wholly owned Subsidiary; provided, however, that the assets of such
Subsidiary are transferred to the Company or an Affiliate.


 


6.                                       TRANSFER
AGENT INSTRUCTIONS. The Company shall issue instructions to its transfer
agent and any subsequent transfer agent, to issue certificates or credit shares
to the applicable balance accounts at the Depository Trust Company (“DTC”), registered in the name of each Buyer or its
respective nominee(s), for the Shares in such amounts as specified from time to
time by such Buyer to the Company. Prior to registration of the Shares under
the 1933 Act, all such certificates shall bear the restrictive legend specified
in Section 2(g). The Company warrants that no instruction other
than the transfer agent instructions referred to in this Section 6
and stop transfer instructions to give effect to Section 2(f) (in
the case of the Shares prior to registration thereof under the 1933 Act) will
be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
If a Buyer provides the Company with an opinion of counsel, in a generally
acceptable form, to the effect that a public sale, assignment or transfer of
the Securities may be made without registration under the 1933 Act or the
Buyer provides the Company with reasonable assurance that the Securities can be
sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold,
the Company shall permit the transfer and, in the case of the Shares, promptly
instruct its transfer agent to issue one or more Share Certificates or credit
shares to the applicable balance accounts 


 


33

















 


at DTC in such name and
in such denominations as specified by such Buyer and without any restrictive
legend. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyers by vitiating the intent and
purpose of the transactions contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this Section 6
will be inadequate and agrees, in the event of a breach or threatened breach by
the Company of the provisions of this Section 6, that each Buyer shall be
entitled, in addition to all other available remedies, to an injunctive order
and/or injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without any bond
or other security being required.


 


7.                                       CONDITIONS
TO THE OBLIGATIONS OF THE COMPANY TO SELL. The obligation of the Company to
issue and sell the Notes and Shares to each Buyer at the applicable Closing is
subject to the satisfaction, at or before the applicable Closing Date (unless
otherwise specifically provided in this Section 7), of each of the
following conditions, provided that these conditions are for the Company’s sole
benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with prior written notice thereof:


 


a.                                       Such
Buyer and the Collateral Agent shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.


 


b.                                      Such
Buyer shall have delivered to the Company such Buyer’s Allocation Percentage of
the Purchase Price (less the amount withheld by such Buyer pursuant to Section 4(h))
for the Notes and Shares being purchased by such Buyer at such Closing by wire
transfer of immediately available funds pursuant to the wire instructions
provided by the Company.


 


c.                                       The
representations and warranties of such Buyer herein shall be true and correct
as of the date when made and as of such Closing Date as though made at that
time (except for representations and warranties that speak as of a specific
date, which shall be true and correct as of such date), and such Buyer shall
have performed, satisfied and complied with the covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or
complied with by such Buyer at or prior to such Closing Date.


 


d.                                      The
Company shall have consummated the Hesperion Acquisition pursuant to the
Hesperion Acquisition Agreement and the other Hesperion Transaction Documents.


 


8.                                       CONDITIONS
TO BUYERS’ OBLIGATIONS TO PURCHASE.


 


a.                                       Initial
Closing Date. The obligation of each Buyer hereunder to purchase the
Initial Notes and the Initial Shares from the Company at the Initial Closing is
subject to the satisfaction, at or before the Initial Closing Date, of each of
the following conditions, provided that these conditions are for each
Buyer’s sole benefit and may be waived only by such Buyer at any time in
its sole discretion by providing the Company with prior written notice thereof;
and:


 


(i)                                     Each
of the Company and its Subsidiaries shall have executed each of the Transaction
Documents to which it is a party (other than any Additional Notes) and
delivered the same to such Buyer.


 


34

















 


(ii)                                  The
representations and warranties of the Company herein shall be true and correct
as of the date when made and as of the Initial Closing Date as though made at
that time (except for representations and warranties that speak as of a
specific date, which shall be true and correct as of such date) and the Company
and its Subsidiaries shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction Documents to
be performed, satisfied or complied with by the Company at or prior to the
Initial Closing Date. Such Buyer shall have received a certificate, executed by
the Chief Executive Officer or Chief Financial Officer of the Company, dated as
of the Initial Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by such Buyer, including an update
as of a date as close to the Initial Closing Date as practicable of the
representations contained in Sections 3(c) and 3(y) above.


 


(iii)                               Such Buyer shall have
received the opinion of Foley & Lardner LLP, dated as of the Initial
Closing Date, which opinion will address, among other things, laws of the
States of Delaware and New York applicable to the transactions contemplated
hereby, in form, scope and substance reasonably satisfactory to such Buyer and
applicable to the security interest provided pursuant to the Security
Agreement, in the form of Exhibit G hereto, and otherwise in
form, scope and substance reasonably satisfactory to such Buyer.


 


(iv)                              The
Company shall have executed and delivered to such Buyer the Notes and the Share
Certificates (in such denominations as such Buyer shall request) for the
Initial Notes and the Shares to be issued to such Buyer at the Initial Closing.


 


(v)                                 The
Boards of Directors (or a committee thereof) of the Company and its
Subsidiaries shall have adopted resolutions consistent with Section 3(b) above
and in a form reasonably acceptable to such Buyer (the “Resolutions”).


 


(vi)                              The
transfer agent instructions shall have been delivered to and acknowledged in
writing by the Company’s transfer agent, and the Company shall have delivered a
copy thereof to such Buyer.


 


(vii)                           The Company shall have
delivered to such Buyer a certificate evidencing the incorporation and good
standing of the Company and each Subsidiary in such entity’s state or other
jurisdiction of incorporation or organization issued by the Secretary of State
(or other applicable authority) of such state or jurisdiction of incorporation
or organization as of a date within ten (10) days of the Initial Closing
Date.


 


(viii)                        The Company shall have
delivered to such Buyer a secretary’s certificate, dated as of the Initial
Closing Date, certifying as to (A) the Resolutions, and (B) the
Bylaws, each as in effect at the Initial Closing.


 


(ix)                                The
Company shall have consummated the Hesperion Acquisition pursuant to the
Hesperion Acquisition Agreement and the other Hesperion Transaction Documents.


 


35





















 


(x)                                   The
Company shall have made all filings under all applicable Securities Laws
necessary to consummate the issuance of the Securities pursuant to this
Agreement in compliance with such laws.


 


(xi)                                The
Company shall have delivered to such Buyer a letter from the Company’s transfer
agent certifying the number of shares of Common Stock outstanding as of a date
within five days of such Closing Date.


 


(xii)                             The Company shall have
delivered fully executed subordination agreements for the Millennix Notes and
the Lavin Notes, each substantially in the form of Exhibit H,
in favor of each Buyer.


 


(xiii)                          The Company shall have made
all filings under all applicable federal, state, provincial, territorial and
foreign securities laws necessary to consummate the issuance of the Securities
pursuant to this Agreement in compliance with such laws.


 


(xiv)                         The Company and its
Subsidiaries shall have delivered and pledged to such Buyer any and all
Instruments, Negotiable Documents, Chattel Paper (each of the foregoing terms,
as defined in the Security Agreement) and certificated securities (accompanied
by stock powers executed in blank), duly endorsed and/or accompanied by such
instruments of assignment and transfer executed by the Company and its
Subsidiaries, in such form and substance as such Buyer may reasonably
request.


 


(xv)                            The
Company and its Subsidiaries shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as such
Buyer or its counsel may reasonably request.


 


b.                                      Additional
Closing Date. The obligation of each Buyer hereunder to purchase Additional
Notes and the Shares from the Company at any Additional Closing is subject to
the satisfaction, at or before the Additional Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer’s
sole benefit and may be waived only by such Buyer at any time in its sole
discretion by providing the Company with prior written notice thereof:


 


(i)                                     The
Initial Closing shall have occurred.


 


(ii)                                  The
representations and warranties of the Company herein (including any exceptions
thereto contained in the schedules hereto) shall be true and correct as of the
date when made and as of such Additional Closing Date as though made at that
time (except for representations and warranties that speak as of a specific
date, which shall be true and correct as of such date), provided that
such representations shall be true and correct as of such Additional Closing
Date giving effect to the updates required by the last sentence of this
paragraph (iii) so long as there is nothing disclosed in any such updates
that could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect as determined by such Buyer, in good faith, in its sole
discretion, and the Company and its Subsidiaries shall have performed,
satisfied and complied with the covenants, agreements and conditions required
by the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to 


 


36





















 


such Additional Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as
of such Additional Closing Date, to the foregoing effect (including with
respect to the satisfaction of the conditions set forth in Section (b)(ii))
and as to such other matters as may be reasonably requested by such Buyer,
including an update as of such Additional Closing Date of the representations
and related schedule contained in Section 3(c) above and an
update of Schedules 3(a), 3(f), 3(h), 3(i), 3(o),
3(s), 3(t), 3(v), 3(y) and 3(aa) hereto.


 


(iii)                               The Company shall have
executed and delivered to such Buyer the Notes and the Share Certificates (in
such denominations as such Buyer shall request) for the Additional Notes and
the Shares to be issued to such Buyer at such Additional Closing.


 


(iv)                              The
Company shall have delivered to such Buyer a certificate evidencing the
incorporation and good standing of the Company and each Subsidiary in such
entity’s state or other jurisdiction of incorporation or organization issued by
the Secretary of State (or other applicable authority) of such state or
jurisdiction of incorporation or organization as of a date within ten (10) days
of the Additional Closing Date.


 


(v)                                 The
Company shall have made all filings under all applicable U.S. federal and state
securities laws necessary to consummate the issuance of the Securities pursuant
to this Agreement in compliance with such laws.


 


(vi)                              The
Company and its Subsidiaries shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as such
Buyer or its counsel may reasonably request.


 


9.                                       INDEMNIFICATION.
In consideration of each Buyer’s execution and delivery of this Agreement and
the other Transaction Documents to be executed by such Buyer and acquiring the
Securities hereunder and thereunder and in addition to all of the Company’s and
its Subsidiaries’ other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless such Buyer and each
other holder of the Securities and all of their stockholders, partners,
officers, directors, members, managers, employees and direct or indirect
investors and any of the foregoing Persons’ agents or other representatives
(including those retained in connection with the transactions contemplated by
this Agreement) (collectively, the “Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and reasonable expenses in
connection therewith (irrespective of whether any such Indemnitees is a party
to the action for which indemnification hereunder is sought), and including
reasonable attorneys’ fees and disbursements (collectively, the “Indemnified Liabilities”), incurred by any Indemnitees as a
result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company or any of its
Subsidiaries in any of the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby, (b) any breach of
any covenant, agreement or obligation of the Company or any of its Subsidiaries
contained in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (c) any cause of action, suit or
claim brought or made against such Indemnitees and arising out of or 


 


37

















 


resulting from the
execution, delivery, performance or enforcement of the Transaction Documents in
accordance with the terms thereof or any other certificate, instrument or
document contemplated hereby or thereby in accordance with the terms thereof
(other than a cause of action, suit or claim brought or made against an
Indemnitee by such Indemnitee’s owners, investors or Affiliates), (d) any
other transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, or (e) the
status of such Buyer or holder of the Securities as an investor in the Company.
To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities that is
permissible under applicable law. Except as otherwise set forth herein, the
mechanics and procedures with respect to the rights and obligations under this Section 9
shall be the same as those set forth in Sections 6(c) and 6(d) of the
Registration Rights Agreement, including those procedures with respect to the
settlement of claims and the Company’s rights to assume the defense of claims.


 


10.                                 CROSS-DEFAULT.
Notwithstanding anything in this Agreement, any breach by the Company and/or
any of its Subsidiaries of any term or provision of this Agreement shall
constitute an “Event of Default” under the Notes which, if not cured in
accordance with the terms thereof, shall provide the Buyers with all of the
rights and remedies contemplated thereunder and under the Transaction
Documents.


 


11.                                 GOVERNING
LAW; MISCELLANEOUS.


 


a.                                       Governing
Law; Jurisdiction; Jury Trial. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the New York City, borough of Manhattan, for the adjudication
of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. The parties acknowledge that each Buyer
has an office in the State of New York and will have made the payment of the
Purchase Price from its bank account located in the State of New York. EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.


 


 


38

















 


b.                                      Counterparts.
This Agreement and any amendments hereto may be executed and delivered in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original,
but all of which taken together shall constitute one and the same agreement,
and shall become effective when counterparts have been signed by each party
hereto and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. In the event that any signature to
this Agreement or any amendment hereto is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file, such signature shall create
a valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof. At the request of any party each
other party shall promptly re-execute an original form of this Agreement
or any amendment hereto and deliver the same to the other party. No party
hereto shall raise the use of a facsimile machine or e-mail delivery of a “.pdf”
format data file to deliver a signature to this Agreement or any amendment
hereto or the fact that such signature was transmitted or communicated through
the use of a facsimile machine or e-mail delivery of a “.pdf” format data file
as a defense to the formation or enforceability of a contract, and each party
hereto forever waives any such defense.


 


c.                                       Headings.
The headings of this Agreement are for convenience of reference and shall not form part of,
or affect the interpretation of, this Agreement.


 


d.                                      Severability.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the validity or enforceability of any provision of this Agreement in any other
jurisdiction.


 


e.                                       Entire
Agreement; Amendments. This Agreement supersedes all other prior oral or
written agreements between each Buyer, the Company, its Subsidiaries, their
Affiliates and Persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended, modified or supplemented other than by an
instrument in writing signed by the Company and the Buyers that purchased more
than sixty six and two thirds percent (66 2/3%) of the aggregate original
principal amount of the Notes on the Initial Closing Date, or if prior to the
Initial Closing, by the Buyers listed on the Schedule of Buyers as
being obligated to purchase more than sixty six and two thirds percent (66
2/3%) of the aggregate original principal amount of the Notes. Any such
amendment shall bind all holders of the Notes and the Shares. No such amendment
shall be effective to the extent that it applies to less than all of the
holders of the Notes or Shares then outstanding.


 


f.                                         Notices.
Any notices, consents, waivers or other communications required or permitted to
be given under the terms of this Agreement must be in writing and will be
deemed to have been delivered:  (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
Business Day after deposit with a 


 


 


39

















 


nationally recognized overnight delivery service, in
each case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:


 


If to the Company:


 


Averion International Corp.

225 Turnpike Road

Southborough, MA  01772

Attention:                                         Chief
Executive Officer

Facsimile:                                            (508)  597-5836


 


With a copy to:


 


Foley & Lardner LLP

402 West Broadway

Suite 2100

San Diego, CA  92101

Attention:                                         Adam
C. Lenain Esq.

Facsimile:                                            (619)  234-3510


 


If to a Buyer, to it at
the address and facsimile number set forth on the Schedule of Buyers, with
copies to such Buyer’s representatives as set forth on the Schedule of
Buyers, or, in the case of a Buyer or any party named above, at such other
address and/or facsimile number and/or to the attention of such other person as
the recipient party has specified by written notice given to each other party
five days prior to the effectiveness of such change. Written confirmation of
receipt (A) given by the recipient of such notice, consent, waiver or
other communication, (B) mechanically or electronically generated by the
sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided
by a nationally recognized overnight delivery service shall be rebuttable
evidence of personal service, receipt by facsimile or deposit with a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.


 


g.                                      Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit
of the parties and their respective successors and assigns, including any
purchasers of the Securities. The Company shall not assign this Agreement or
any rights or obligations hereunder without the prior written consent of the
holders of at least two thirds (2/3) of the aggregate principal of the Notes
then outstanding, including by merger or consolidation, such consent not to be
unreasonably withheld. Subject to compliance with all applicable Securities
Laws, a Buyer may assign some or all of its rights hereunder upon written
notice to the Company; provided, however, that any such
assignment shall not release such Buyer from its obligations hereunder unless
such obligations are assumed by such assignee (as evidenced in writing) and the
Company has consented to such assignment and assumption, which consent shall
not be unreasonably withheld. Notwithstanding anything to the contrary
contained in the Transaction Documents, a Buyer shall be entitled to pledge the
Securities in connection with a bona fide margin account or other loan or
financing arrangement secured by the Securities.


 


 


40

















 


h.                                      No
Third Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns and,
to the extent provided in Section 9 hereof, each Indemnitee, and is
not for the benefit of, nor may any provision hereof be enforced by, any
other Person.


 


i.                                          Survival.
Unless this Agreement is terminated under Section 10(k), the
representations and warranties of each Buyer and the Company contained in Sections
2 and 3, the agreements and covenants set forth in Sections 4,
5, 6 and 10, and the indemnification and contribution
provisions set forth in Section 9, shall survive the Closings in
accordance with their terms. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder. The Company
acknowledges and agrees that the provisions of Section 16 of the Notes
shall survive the redemption, repayment or surrender of such Note.


 


j.                                          Further
Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.


 


k.                                       Termination.


 


(i)                                     In
the event that the Initial Closing shall not have occurred with respect to a
Buyer on or before the third (3rd) Business Day following the date
of this Agreement due to the Company’s or such Buyer’s failure to satisfy the
conditions set forth in Sections 7 and 8(a) above (and the
nonbreaching party’s failure to waive such unsatisfied condition(s)), the
nonbreaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date without
liability of any party to any other party.


 


(ii)                                  In
the event that an Additional Closing shall not have occurred on or before the
thirtieth (30th) day following the Initial Closing Date due to the
Company’s or such Buyer’s failure to satisfy the conditions set forth in Sections
7 and 8(b) above (and the nonbreaching party’s failure to waive
such unsatisfied condition(s)), the nonbreaching party shall have the option to
terminate the obligations with respect to such Additional Closing at the close
of business on such date without liability of any party to any other party with
respect thereto (and without affecting any other rights or obligations under
this Agreement).


 


l.                                          Placement
Agent. The Company acknowledges that it has engaged Collins Stewart LLC as
lead placement agent in connection with the sale of the Notes and the Shares. The
Company shall be responsible for the payment of any placement agent’s fees or
broker’s commissions relating to or arising out of the transactions
contemplated hereby. The Company shall pay, and hold each Buyer harmless
against, any liability, loss or expense (including attorneys’ fees and
out-of-pocket expenses) arising in connection with any claim for any such
payment. The Company represents and warrants to each Buyer that it has not
engaged any other placement agent, broker or financial advisor in connection
with the transactions 


 


 


41

















 


contemplated hereby; provided, however, that as lead
placement agent, Collins Stewart LLC may engage other placement agents.


 


m.                                    No
Strict Construction. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.


 


n.                                      Remedies.
Each Buyer and each holder of the Securities shall have all rights and remedies
set forth in the Transaction Documents and all rights and remedies that such
Buyer and holders have been granted at any time under any other agreement or
contract and all of the rights that such Buyer and holders have under any law. Any
Person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security or proving actual damages), to recover damages by reason of any breach
of any provision of this Agreement and to exercise all other rights granted by
law, or in equity.


 


o.                                      Rescission
and Withdrawal Right. Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) the Transaction Documents,
whenever any Buyer exercises a right, election, demand or option under a
Transaction Document and the Company or any of its Subsidiaries does not timely
perform its related obligations within the periods therein provided, then
such Buyer may rescind or withdraw, in its sole discretion from time to
time upon written notice to the Company, any relevant notice, demand or
election in whole or in part without prejudice to its future actions and
rights.


 


p.                                      Payment
Set Aside. To the extent that the Company or any of its Subsidiaries makes
a payment or payments to a Buyer pursuant to this Agreement, the Registration
Rights Agreement, the Notes, the Shares, the Guaranty or any other Transaction
Document or a Buyer enforces or exercises its rights hereunder or thereunder,
and such payment or payments or the proceeds of such enforcement or exercise or
any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to the Company or any of its
Subsidiaries, by a trustee, receiver or any other Person under any law
(including any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full
force and effect as if such payment had not been made or such enforcement or
setoff had not occurred.


 


q.                                      Independent
Nature of Buyers. The obligations of each Buyer hereunder are several and
not joint with the obligations of any other Buyer, and no Buyer shall be
responsible in any way for the performance of the obligations of any other
Buyer hereunder. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder. The decision
of each Buyer to purchase the Securities pursuant to this Agreement has been
made by such Buyer independently of any other Buyer and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or any of its Subsidiaries
which may have been made or given by any other Buyer or 


 


42

















 


by any agent or employee of any other Buyer, and no
Buyer or any of its agents or employees shall have any liability to any other
Buyer (or any other Person or entity) relating to or arising from any such
information, materials, statements or opinions. Nothing contained herein, and
no action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated hereby. Each Buyer shall be entitled to independently
protect and enforce its rights, including the rights arising out of this Agreement,
the Notes, the Shares, and the other Transaction Documents, and it shall not be
necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose.


 


r.                                         Interpretative
Matters. Unless the context otherwise requires, (i) all references to
Sections, Schedules, Appendices or Exhibits are to Sections, Schedules,
Appendices or Exhibits contained in or attached to this Agreement, (b) each
accounting term not otherwise defined in this Agreement has the meaning
assigned to it in accordance with GAAP, (c) words in the singular or
plural include the singular and plural and pronouns stated in either the
masculine, the feminine or neuter gender shall include the masculine, feminine
and neuter, (d) the words “hereof,” “herein” and words of similar effect
shall reference this Agreement in its entirety, and (e) the use of the
word “including” in this Agreement shall be by way of example rather than
limitation.


 


*  * 
*  *  *  *


 


43

















 


IN WITNESS WHEREOF,
Buyer and the Company have caused this Securities Purchase Agreement to be duly
executed as of the date first written above.


 


	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AVERION INTERNATIONAL CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Christopher G. Codeanne

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Christopher G. Codeanne

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
							



 


 


[Company Signature Page to Securities Purchase Agreement]


 

















 


	
   

  	
  BUYER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMVEST INVESTMENT PARTNERS II,

  LLC, a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  ComVest
  II Partners LLC

  	
   

  
	
   

  	
  Its:

  	
  Managing
  Member

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Cecilio M. Rodriguez

  	
   

  
	
   

  	
  Name:
  Cecilio M. Rodriguez

  
	
   

  	
  Title:
  CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CUMULUS INVESTORS, LLC, a
  Nevada

  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Nader C. Kazeminy

  	
   

  
	
   

  	
  Name:
  Nader C. Kazeminy

  
	
   

  	
  Title:
  Chairman and President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Philip T. Lavin, Ph.D.

  	
   

  
	
   

  	
  PHILIP T. LAVIN, PH.D., in his
  individual

  capacity

  



 


 


[Buyer Signature Page to Securities Purchase Agreement]


 

















 


SCHEDULE OF BUYERS


 


	
  Buyer’s Name

  	
   

  	
  Buyer Address

  and Contact Info

  	
   

  	
  Principal

  Amount

  of Initial Notes

  	
   

  	
  Initial

  Allocation

  Percentage

  	
   

  	
  Principal

  Amount

  of Add’l Notes

  	
   

  	
  Additional

  Closing

  Allocation

  Percentage

  	
   

  	
  Aggregate Total

  Principal

  Amount

  of all Notes

  	
   

  	
  Number of

  Shares

  to be Delivered

  at Initial Closing

  	
   

  	
  Number of

  Shares

  to be Delivered

  at Additional

  Closing

  	
   

  	
  Total Buyer

  Allocation

  Percentage

  	
   

  	
  Buyer’s Representative’s

  Address and Facsimile

  Number (to receive copies

  of notices)

  	
   

  
	
  ComVest
  Investment

  Partners II LLC

  	
   

  	
  One North
  Clematis St.,

  Suite 300

  West Palm Beach, FL 33409

  Attn: Michael Falk

  Tel: [        ]

  Fax: [        ]

  	
   

  	
  $

  	
  11,000,000

  	
   

  	
  45.83

  	
  %

  	
  $

  	
  2,000,000

  	
   

  	
  100

  	
  %

  	
  $

  	
  13,000,000

  	
   

  	
  52,800,000

  	
   

  	
  9,600,000

  	
   

  	
  50

  	
  %

  	
  Akerman
  Senterfitt

  Attn: Jose Gordo

  One S.E. Third Avenue

  Miami, Florida 33131

  Attn: Carl Roston, Esq.

  Tel: 305-374-5600

  Fax: 305-374-5095

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cumulus Investors, LLC

  	
   

  	
  8500 Normandale
  Lake Boulevard

  Suite 650

  Bloomington MN 55437

  Attn: [        ]

  Tel: [        ]

  Fax: [        ]

  	
   

  	
  $

  	
  11,000,000

  	
   

  	
  45.83

  	
  %

  	
  $

  	
  0

  	
   

  	
  0

  	
  %

  	
  $

  	
  11,000,000

  	
   

  	
  52,800,000

  	
   

  	
  0

  	
   

  	
  42.31

  	
  %

  	
  [            ]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dr. Philip T. Lavin

  	
   

  	
  c/o Averion
  International Corp.

  225 Turnpike Road

  Southborough, MA 01772 U.S.

  Tel: 508-597-6216

  Fax: 508-597-6061

  	
   

  	
  $

  	
  2,000,000

  	
   

  	
  8.34

  	
  %

  	
  $

  	
  0

  	
   

  	
  0

  	
  %

  	
  $

  	
  2,000,000

  	
   

  	
  9,600,000

  	
   

  	
  0

  	
   

  	
  7.69

  	
  %

  	
  [            ]

  	
   

  



 

















 


APPENDIX


 


CERTAIN DEFINED TERMS


 


For purposes of this
Agreement, the following terms shall have the following meanings:


 


“Acquisition
Closing Date” means the date and time of the Closing of the
Hesperion Acquisition, which shall be contemporaneous with the Closing Date.


 


“Affiliate”
means, with respect to any Person, another Person that, directly or indirectly,
(i) has a 5% equity interest in that Person, (ii) has a common
ownership with that Person, (iii) controls that Person, (iv) is
controlled by that Person or (v) shares common control with that Person;
and “control” or “controls” means that a Person has the power, direct or
indirect, to conduct or govern the policies of another Person.


 


“Bloomberg”
means Bloomberg Financial Markets (or any successor thereto).


 


“Business Day”
means any day other than Saturday, Sunday or other day on which commercial
banks in the New York City are authorized or required by law to remain closed.


 


“Capital
Lease Obligation” means, as to any Person, any obligation that is
required to be classified and accounted for as a capital lease on a balance
sheet of such Person prepared in accordance with GAAP, and the amount of such
obligation shall be the capitalized amount thereof, determined in accordance
with GAAP.


 


“Capital
Stock” means any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, and any and
all equivalent ownership interests in a Person (other than a corporation).


 


“Collateral”
has the meaning assigned to such term in the Security Agreement.


 


“Common Stock”
means the Company’s common stock, par value $0.001 per share.


 


“Contingent
Obligation” means, as to any Person, any direct or indirect
liability, contingent or otherwise, of such Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if a
primary purpose or intent of the Person incurring such liability, or a primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto.


 


“Convertible
Securities” means any stock or securities (other than Options)
directly or indirectly convertible into or exchangeable or exercisable for
shares of Common Stock.


 


“Environmental
Laws” means all Laws relating to any matter arising out of or
relating to public health and safety, or pollution or protection of the
environment (including  ambient air,
surface water, groundwater, land surface or subsurface strata) or workplace,
including any of the foregoing relating to the presence, use, production,
generation, handling, transport, treatment,


 


1

















 


storage, disposal,
distribution, discharge, emission, release, threatened release, control or
cleanup of any Hazardous Materials.


 


“ERISA”
means the Employee Retirement Security Act of 1974, as amended.


 


“GAAP”
means U.S. generally accepted accounting principles.


 


“Governmental
Entity” means the government of the United States or any other
nation, or any political subdivision thereof, whether state, provincial or
local, or any agency (including any self-regulatory agency or organization), authority,
instrumentality, regulatory body, court, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administration powers or functions of or pertaining to government.


 


“Hazardous
Materials” means any hazardous, toxic or dangerous substance,
materials and wastes, including hydrocarbons (including naturally occurring or
man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea
formaldehyde insulation, radioactive materials, biological substances, polychlorinated
biphenyls, pesticides, herbicides and any other kind and/or type of pollutants
or contaminants (including materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including any that
are or become classified as hazardous or toxic under any Environmental Law).


 


“Hesperion
Note” means that certain promissory note originally issued by the
Company in accordance with Section 1.1(b) of the Hesperion
Acquisition Agreement.


 


“Hesperion
Sellers” means the parties to the Hesperion Acquisition Agreement
other than the Company.


 


“Hesperion
Transaction Documents” means the Hesperion Acquisition Agreement and
each of the other agreements or instruments to which the Company, Hesperion or
any of the Hesperion Sellers is a party or by which the Company, Hesperion or
any of the Hesperion Sellers is bound and which is entered into by the Company,
Hesperion and/or any of the Hesperion Sellers in connection with the Hesperion
Acquisition.


 


“Indebtedness”
of any Person means, without duplication:


 


(i)                                     All
indebtedness for borrowed money;


 


(ii)                                  All
obligations issued, undertaken or assumed as the deferred purchase price of
property or services.


 


(iii)                               All reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments;


 


(iv)                              All
obligations evidenced by notes, bonds, debentures, redeemable capital stock or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses;


 


2

















 


(v)                                 All
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller, bank or other financing source
under such agreement in the event of default are limited to repossession or
sale of such property);


 


(vi)                              All
Capital Lease Obligations;


 


(vii)                           All indebtedness referred to
in clauses (i) through (vi) above secured by (or for which the holder
of such indebtedness has an existing right, contingent or otherwise, to be
secured by) any mortgage, lien, pledge, charge, security interest or other
encumbrance upon or in any property or assets (including accounts and contract
rights) owned by any Person, even though the Person that owns such assets or
property has not assumed or become liable for the payment of such indebtedness;
and


 


(viii)                        All Contingent Obligations in
respect of indebtedness or obligations of others of the kinds referred to in
clauses (i) through (vii) above.


 


“Insolvent”
means, with respect to any Person as of any date, (i) the present fair
saleable value of such Person’s assets is less than the amount required to pay
such Person’s total indebtedness, contingent or otherwise, (ii) such
Person is unable to pay its debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured, (iii) such
Person intends to incur, prior to the second anniversary of such date, or believes
that it will incur, prior to the second anniversary of such date, debts that
would be beyond its ability to pay as such debts mature, or (iv) such
Person has unreasonably small capital with which to conduct the business in
which it is engaged as such business is then conducted and is then proposed to
be conducted.


 


“Investment
Company Act” means the Investment Company Act of 1940, as amended.


 


“Knowledge,”
“Knowledge of the Company,” “to the Company’s Knowledge” and similar language means the
actual knowledge of any “officer” (as such term is defined in Rule 16a-1
under the 1934 Act) of the Company or of any Subsidiary after a reasonable
inquiry.


 


“Lavin Notes”  shall mean those certain promissory notes originally issued
by IT&E International Group, Inc., a Delaware corporation and
predecessor to the Company, dated July 31, 2006, as follows: (i) promissory
notes with a repayment term of two (2) years in the original aggregate
principal amount of $700,000 (of which $566,242 in principal amount was issued directly
to Dr. Philip T. Lavin); and (ii) promissory notes with a repayment
term of five (5) years in the original aggregate principal amount of
$5,700,000 (of which $4,610,828 in principal amount was issued directly to Dr. Philip
T. Lavin).


 


“Laws”
means all present or future federal, state local or foreign laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative or judicial orders, judgments, decrees, rulings, consent
agreements, directed duties, requests, licenses, authorizations and permits of,
and agreements with, any Governmental Entity.


 


3

















 


“Lien”
means with respect to any asset or property, any mortgage, lien, pledge,
hypothecation, charge, security interest, encumbrance or adverse claim of
any kind and any restrictive covenant, condition, restriction or exception of
any kind that has the practical effect of creating a mortgage, lien, pledge,
hypothecation, charge, security interest, encumbrance or adverse claim of
any kind (including any of the foregoing created by, arising under or evidenced
by any conditional sale or other title retention agreement, the interest of a
lessor with respect to a Capital Lease Obligation, or any financing lease having
substantially the same economic effect as any of the foregoing).


 


“Material
Adverse Effect” means any changes, circumstances, effects,
occurrences or events that, individually or in the aggregate, have or could
reasonably be expected to have, a material adverse effect on (i) the
business, properties, assets, operations, results of operations, condition
(financial or otherwise), credit worthiness or prospects of the Company and its
Subsidiaries, taken as a whole, (ii) any of the transactions contemplated
by the Transaction Documents, or (iii) the authority or ability of the
Company or any of its Subsidiaries to enter into the Transaction Documents and
perform its obligations thereunder.


 


“Millennix
Notes” means those certain subordinated promissory notes originally
issued and still outstanding by IT&E International Group, Inc., a
Delaware corporation and predecessor to the Company, dated November 9,
2005, in the original aggregate principal amount of $980,820.58 (all of which
was issued directly to Dr. Gene Resnick).


 


“Options”
means any rights, warrants or options to subscribe for or purchase shares of
Common Stock or Convertible Securities.


 


“Organic
Change” means any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of
the Company’s assets to another Person or other transaction that is effected in
such a way that holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets with
respect to, or in exchange for, Common Stock.


 


“Permitted
Lien” means:


 


(i)                                     Liens
created by the Security Documents;


 


(ii)                                  Liens
for taxes or other governmental charges not at the time due and payable, or
which are being contested in good faith by appropriate proceedings diligently
prosecuted, so long as foreclosure, distraint, sale or other similar
proceedings have not been initiated, and in each case for which the Company and
its Subsidiaries maintain adequate reserves in accordance with GAAP in respect
of such taxes and charges;


 


(iii)                               Liens
arising in the ordinary course of business in favor of carriers, warehousemen,
mechanics and materialmen, or other similar Liens imposed by law, which remain
payable without penalty or which are being contested in good faith by appropriate
proceedings diligently prosecuted, which proceedings have the effect of
preventing the forfeiture or sale of the property subject thereto, and in each
case for which adequate reserves in accordance with GAAP are being maintained;


 


4

















 


(iv)                              Liens
arising in the ordinary course of business in connection with worker’s
compensation, unemployment compensation and other types of social security
(excluding Liens arising under ERISA);


 


(v)                                 Attachments,
appeal bonds (and cash collateral securing such bonds), judgments and other
similar Liens, for sums not exceeding One Hundred Thousand Dollars ($100,000)
in the aggregate for the Company and its Subsidiaries, arising in connection
with court proceedings, provided that the execution or other enforcement
of such Liens is effectively stayed;


 


(vi)                              Easements,
rights of way, restrictions, minor defects or irregularities in title and other
similar Liens arising in the ordinary course of business and not materially
detracting from the value of the property subject thereto and not interfering
in any material respect with the ordinary conduct of the business of the
Company or any of its Subsidiaries;


 


(vii)                           Liens
arising solely by virtue of any statutory or common law provision relating to
banker’s liens, rights of set-off or similar rights and remedies and burdening
only deposit accounts or other funds maintained with a creditor depository
institution, provided that no such deposit account is a dedicated cash
collateral account or is subject to restrictions against access by the
depositor in excess of those set forth by regulations promulgated by the Board
of Governors of the U.S. Federal Reserve System and that no such deposit
account is intended by the Company or any of its Subsidiaries to provide
collateral to the depository institution.


 


“Person”
means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, a Governmental
Entity or any other legal entity.


 


“Public
Disclosure” or “Publicly Disclose”
means the Company’s public dissemination of information through the filing via
the Electronic Data Gathering, Analysis, and Retrieval system of the SEC of a
Periodic Report or Current Report disclosing such information pursuant to the
requirements of the 1934 Act.


 


“Related
Party” means a Person’s or any of its subsidiary’s officers,
directors, persons who were officers or directors at any time during the
previous two years, stockholders (other than any holder of less than 5% of the
outstanding shares of such Person), or Affiliates of such Person or any of its
subsidiaries, or any individual related by blood, marriage or adoption to any
such individual or any entity in which any such entity or individual owns a
beneficial interest.


 


“Securities
Laws” means the securities laws (including “Blue Sky” laws),
legislation and regulations of, and the instruments, policies, rules, orders,
codes, notices and interpretation notes of, the securities regulatory authorities
(including the SEC) of the United States and any applicable states and other
jurisdictions.


 


“Security
Documents” means the Security Agreement, the Guarantees and any
other agreements, documents and instruments executed concurrently herewith or
at any time hereafter pursuant to which the Company, its Subsidiaries, or any
other Person either (i) guarantees payment or performance of all or any
portion of the obligations hereunder or under any other instruments delivered
in connection with the transactions contemplated hereby and by the other


 


5

















 


Transaction
Documents, and/or (ii) provides, as security for all or any portion of
such obligations, a Lien on any of its assets in favor of a Buyer, as any or
all of the same may be amended, supplemented, restated or otherwise
modified from time to time.


 


“Subsidiary”
means IT&E
International, a California corporation and Averion Inc., a Delaware
corporation.


 


“Transaction
Documents” means this Agreement, the Registration Rights Agreement,
the Notes, the Security Agreement, the Guaranty, the Account Control
Agreements, the Pledge Agreement and each of the other agreements or
instruments to which the Company or any of its Subsidiaries is a party or by
which it is bound and which is entered into by the parties hereto or thereto in
connection with the transactions contemplated hereby and thereby, or which is
otherwise delivered by the Buyers, the Company or any of its Subsidiaries in
connection with the transactions contemplated hereby and thereby.


 


6

















 


EXHIBIT A



FORM OF NOTES


 


A-1

















 


EXHIBIT B



REGISTRATION RIGHTS AGREEMENT


 


B-1

















 


EXHIBIT C



SECURITY AGREEMENT


 


C-1

















 


EXHIBIT D



GUARANTY


 


D-1

















 


EXHIBIT E



PLEDGE AGREEMENT


 


E-1

















 


EXHIBIT F



HESPERION ACQUISITION AGREEMENT


 


F-1