Exhibit
10.62


 


SECURITIES
PURCHASE AGREEMENT


 


SECURITIES PURCHASE AGREEMENT
(the “Agreement”), dated as of June 27,
2008, 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 $2,000,000 (together 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 Closing Date (as defined below) for a total
aggregate principal amount of Notes equal to $2,000,000; and


 


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


 


C.                                     Contemporaneously
with the execution and delivery of this Agreement, the Company and Hesperion US, Inc.,
a Maryland corporation (“Hesperion US”),
are executing and delivering an Amendment No. 2 to Security 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 “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 Hesperion US will agree to provide the Collateral Agent,
as agent for the Buyers, with security interests in substantially all of the
material assets of the Company and Hesperion US.


 


D.                                    Contemporaneously
with the Closing, Hesperion US will execute and deliver an Amendment No. 1
to Guaranty, in the form attached hereto as Exhibit C (as the same
may be amended, supplemented, restated or modified and in effect from time to
time, the “Guaranty”), pursuant to which
Hesperion US 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”).


 

















 


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 severally agrees to purchase from the Company the Notes. On the
Closing Date, each Buyer shall purchase (a) Notes in the respective
principal amounts set forth opposite such Buyer’s name on the Schedule of
Buyers, which Notes shall be issued to the Buyers on the 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 Closing Date.  The purchase price (the “Purchase
Price”) for the Notes and the related Shares 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 Notes and
Shares to be purchased by the Buyers at the Closing).


 


b.                                      Closing
Date.  The date and time of the
closing (the “Closing”) shall be 10:00 a.m.,
New York City time, on the date that is one (1) day after the satisfaction
(or waiver) of all of the conditions to the Closing set forth in Sections 7
and 8 (or such later or earlier date as is mutually agreed to by the
Company and the Buyers) (the “Closing Date”).  The Closing shall occur at the offices of
Akerman Senterfitt, One Southeast Third Avenue, 25th Floor, Miami, FL 33131, 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 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
the 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 the
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 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 the Closing Date, and (ii) Share Certificates for the Shares
to be issued to such Buyer on the 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 


 


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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 the 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 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
11(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.


 


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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: (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) 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 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 without restriction pursuant to Rule 144
promulgated under the 1933 Act 


 


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(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 has been duly
and validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable against such Buyer in
accordance with its 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 Closing will
have been duly and validly authorized, executed and delivered on behalf of such
Buyer as of the 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 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 the 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 Foreign Subsidiaries and the jurisdiction in which
each is organized or incorporated, together with their respective jurisdictions
of organization.  Other than with respect
to the entities listed on Schedule 3(a), the Company does not directly
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 and, to the Company’s Knowledge, Foreign
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
(other than the Subsidiary) 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 and, to the
Company’s Knowledge, its Foreign Subsidiaries. 
Each of the Company and its Subsidiaries, and, to the Company’s
Knowledge, its Foreign 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, and, to the Company’s Knowledge, its Foreign 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 


 


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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, and, to the Company’s Knowledge
and to the extent applicable, its Foreign Subsidiaries 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 or, to the Company’s
Knowledge, Foreign 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 the 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 the 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:


 


(i)                                     625,632,455
shares are issued and outstanding; provided, however, that as of
the 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
71,510,000 shares issuable pursuant to outstanding awards under the Equity
Plans;


 


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


 


(iv)                              4,285,714
shares of Common Stock are 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 obligation 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)                                  except
as set forth in the Securities Purchase Agreement, dated as of October 31,
2007, as amended, among the Company and the investors listed on the Schedule of
Buyers attached thereto, 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, to the Company’s Knowledge, any of its Foreign
Subsidiaries, or contracts, commitments, understandings or arrangements by
which the Company or any of its Subsidiaries or, to the Company’s Knowledge,
any of its Foreign Subsidiaries is or may become bound to issue additional
shares of Capital Stock of the Company or any of its Subsidiaries or Foreign
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 or Foreign Subsidiaries;


 


(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
or Foreign Subsidiaries, and there are no agreements or arrangements under
which the Company or any of its Subsidiaries or Foreign Subsidiaries is
obligated to register the sale of any of their securities under the 1933 Act
(except the registration rights set forth in the Company’s SEC Documents,
including registration rights agreements entered dated July 31, 2006 and November 9,
2005 and the registration rights 


 


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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 and the Prior Notes, there are no outstanding securities or
instruments of the Company or any of its Subsidiaries or, to the Company’s
Knowledge, any of its Foreign 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 or, to the Company’s
Knowledge, any of its Foreign Subsidiaries is or may become bound to redeem a
security of the Company or any of its Subsidiaries or Foreign 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 Foreign
Subsidiary or 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 true and correct copies of:


 


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


 


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


 


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


 


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 


 


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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 nor,
to the Company’s Knowledge, any of its Foreign 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 nor, to the Company’s
Knowledge, any of its Foreign 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 or Foreign 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 and, to the Company’s Knowledge, its Foreign 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 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 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)                                     Except
as set forth on Schedule 3(f), since December 31, 2007, the Company
has filed all reports, schedules, forms, statements and other documents
required 


 


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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 March 31, 2008, as included in the Company’s quarterly report on Form 10-Q
for the period then ended, as filed with the SEC on May 15, 2008, 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 and Foreign 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 and Foreign 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).


 


(iii)                               Since December 31,
2007, 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 


 


10

















 


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 or, to the Company’s Knowledge, any Foreign Subsidiary is a
party or by which the Company or any Subsidiary or Foreign 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,
2007, 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 or, to the
Company’s Knowledge, Foreign Subsidiaries.


 


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


 


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 and, to
the Company’s Knowledge, its Foreign 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”).


 


11














 


(ii)                                  Since
December 31, 2007, neither the Company nor any of its Subsidiaries or, to
the Company’s Knowledge, its Foreign Subsidiaries nor any director or officer
of the Company or any of its Subsidiaries or, to the Company’s Knowledge, its
Foreign 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 Foreign Subsidiaries or its internal
accounting controls, including any complaint, allegation, assertion or claim
that the Company or any of its Subsidiaries or Foreign 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 on Schedule 3(g) and in the SEC Documents, the Company
has, and has caused each of its Subsidiaries and, to the Company’s Knowledge,
its Foreign Subsidiaries, if applicable, 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, or with respect to the
Foreign Subsidiaries, the applicable accounting standards, consistently
applied.  Except as set forth in the SEC
Documents, the Company and each of its Subsidiaries and, to the Company’s
Knowledge, its Foreign Subsidiaries, if applicable, 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 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 


 


12





















 


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 on Schedule 3(g) and 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, prior to January 1, 2008, such
internal control over financial reporting contained material weaknesses.


 


h.                                      Absence
of Certain Changes.  Since December 31,
2007, neither the Company nor any of its Subsidiaries or, to the Company’s
Knowledge, Foreign Subsidiaries has taken any steps, and neither the Company
nor any of its Subsidiaries or, to the Company’s Knowledge, Foreign
Subsidiaries currently expects to take any steps to seek protection pursuant to
any bankruptcy law nor does the Company or any of its Subsidiaries or Foreign
Subsidiaries, to the Company’s Knowledge, 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 or, to the Company’s Knowledge, any Foreign
Subsidiary 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, 2007,
neither the Company nor any of its Subsidiaries or, to the Company’s Knowledge,
any of its Foreign 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, 2007, 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 Foreign 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 or Foreign Subsidiaries has
been involved in securities-related Litigation during 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, 2007, 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 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 or, to the Company’s
Knowledge, any of its Foreign 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 


 


13

















 


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
Registration.  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.


 


n.                                      Employee
Relations.  Except as set forth on Schedule
3(n), neither the Company nor any of its Subsidiaries, nor, to the Company’s
Knowledge, any of its Foreign 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
or Foreign Subsidiaries is or has been a member of a union that relates, or
following the Closing will relate, to such employee’s relationship with the
Company and neither the Company nor any of its Subsidiaries or, to the Company’s
Knowledge, any of its Foreign Subsidiaries is or following the 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, 


 


14

















 


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, or, to the Company’s Knowledge, any of its Foreign
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 and, to the
Company’s Knowledge, each of its Foreign Subsidiaries, as applicable, 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 and, to the Company’s Knowledge, each
of its Foreign Subsidiaries, as applicable, 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 and, to the Company’s
Knowledge, its Foreign Subsidiaries, if applicable, 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 or Foreign 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 Foreign Subsidiaries or any of the
Company’s or any of its Subsidiaries’ or Foreign 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 Foreign 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
Foreign 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 Foreign Subsidiaries or any of their
respective licensors regarding their Intellectual Property or infringement of
other Intellectual 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 or Foreign Subsidiaries, and (vii) none of the technology
employed by the Company or any of its Subsidiaries or Foreign Subsidiaries has
been obtained or is being used by the Company or any of its Subsidiaries or
Foreign Subsidiaries in violation of any material contractual obligation
binding on the Company or any of its Subsidiaries or Foreign Subsidiaries or is
being used by any of the officers, directors or employees of the Company or of
its Subsidiaries or Foreign 


 


15

















 


Subsidiaries on behalf of the Company or any of its
Subsidiaries or Foreign Subsidiaries in violation of the rights of any Person
or Persons.  The Company and its
Subsidiaries and, to the Company’s Knowledge, its Foreign Subsidiaries, as
applicable, 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 and, to the Company’s
Knowledge, its Foreign 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,
and, to the Company’s Knowledge, each of its Foreign Subsidiaries, if and as
applicable, 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 and its Foreign
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 or, to
the Company’s Knowledge, its Foreign Subsidiaries, if applicable, 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, or, to the Company’s Knowledge, any Foreign Subsidiary
has been refused any insurance coverage sought or applied for, and neither the
Company nor any such Subsidiary, or, to the Company’s Knowledge, any such
Foreign 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 and, to the Company’s Knowledge, its Foreign Subsidiaries, if
applicable, 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 or, to the Company’s Knowledge, any
such Foreign Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such Permit. 
The Company and its Subsidiaries and Foreign 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 and Foreign 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



 


16

















 


however, that, if after the date of
this Agreement the Common Stock is listed on a national 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, 2007, (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 and, to
the Company’s Knowledge, each of its Foreign Subsidiaries, as applicable, (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 or, to the
Company’s Knowledge, any of its Foreign 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, or, to the Company’s Knowledge, any of its
Foreign 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
or, to the Company’s Knowledge, any of its Foreign 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, to the Company’s
Knowledge, any of its Foreign 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 or, to the Company’s
Knowledge, any of its Foreign Subsidiaries has any direct or indirect ownership
interest or with which the Company or any of its Subsidiaries or, to the
Company’s Knowledge, any of its Foreign 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 


 


17

















 


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.


 


w.                                    Foreign
Corrupt Practices.  Neither the
Company, nor any of its Subsidiaries, nor, to the Company’s Knowledge, any of
its Foreign Subsidiaries, nor any director, officer, agent, employee or other
person acting on behalf of the Company or any of its Subsidiaries, nor, to the
Company’s Knowledge, any of its Foreign 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. Except for the Prior Notes and as set forth on Schedule
3(x), payments of principal and other payments due under the Notes will,
upon issuance at the Closing, rank senior to all other Indebtedness of the
Company or any of its Subsidiaries, or, to the Company’s Knowledge, any of its
Foreign 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, or, to the Company’s
Knowledge, any of its Foreign Subsidiaries. 
The Notes will, upon issuance at the Closing, rank pari passu with the
Prior Notes in right of payment, whether with respect of payment of
redemptions, interest or damages or upon liquidation or dissolution or
otherwise.  Except for the Prior Notes
and as set forth on Schedule 3(x), (i) neither the Company nor any
of its Subsidiaries, nor, to the Company’s Knowledge, any of its Foreign
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, to the Company’s Knowledge, any of its Foreign Subsidiaries
or any of their respective assets, other than under the Security Agreement.


 


y.                                      Real
Property.  Neither the Company nor
any of its Subsidiaries, nor, to the Company’s Knowledge, any of its Foreign
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, or, to the
Company’s Knowledge, any of its Foreign Subsidiaries, (ii) in connection
with which the Company or any of its Subsidiaries, or, to the Company’s
Knowledge, any of its Foreign Subsidiaries has entered into an option
agreement, participation agreement or acquisition 


 


18

















 


agreement or (iii) the Company or any of its
Subsidiaries, or, to the Company’s Knowledge, any of its Foreign 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, and, to the
Company’s Knowledge, its Foreign 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, or, to the Company’s
Knowledge, any of its Foreign 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 of its Foreign 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 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’, or, to the
Company’s Knowledge, any of its Foreign 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 and, to the Company’s Knowledge, its Foreign 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’ and, to the Company’s Knowledge, its Foreign 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 the 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.


 


19

















 


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 and, to the
Company’s Knowledge, its Foreign 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.


 


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 the 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 the 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 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 Closing
Date that is the latest of (i) the date that is one year after the date as
of which the Investors (as that term is defined in Section 4(j))
may sell all of the Shares without restriction pursuant to Rule 144
promulgated under the 1933 Act (or successor thereto), (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.


 


20

















 


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, and second, for general
working capital needs.


 


e.                                       Financial
Information.  The Company agrees to
send the following to each Investor (as defined in Section 4(j))
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 or Foreign 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
and Foreign Subsidiaries to:


 


(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, or
with respect to the Foreign Subsidiaries, the applicable accounting standards,
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 


 


21

















 


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 Shares 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 Shares 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 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 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-Q to be
filed with the SEC on or around August 14, 2008.


 


(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 the 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.


 


22














 


(iii)                               Notwithstanding
any provision herein to the contrary, the Company shall not, and shall cause
each of its Subsidiaries and Foreign 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 or Foreign 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 or Foreign 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 or Foreign Subsidiaries.


 


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 Closing Date on which no Notes are outstanding and the
Security Agreement has terminated, the Company shall and shall cause each of
its Subsidiaries and Foreign 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 or Foreign 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 and Foreign Subsidiaries, as applicable, 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 and
Foreign Subsidiaries, as applicable, 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 


 


23

















 


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 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 and Foreign Subsidiaries
to, permit each Buyer (and each Buyer’s designees), to call at the Company’s
and each of its Subsidiaries’ and Foreign 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 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 and Foreign 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 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 and Foreign 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 Closing Date on which no Notes are outstanding and the
Security Agreement has terminated, the Company shall, and shall cause each of
its Subsidiaries and, if applicable, its Foreign Subsidiaries, to:


 


(i)                                     Keep
the Collateral properly housed (to the extent possible) and, with respect to
tangible property, 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 or Foreign
Subsidiary, such coverage and the premiums payable in respect thereof to be
acceptable in scope and amount to the Collateral Agent.  The Company shall obtain an endorsement, or
an independent instrument furnished to the Collateral Agent, which provides
that the insurance company shall give the Collateral Agent at least 30 days’
written notice before any such policy of insurance is canceled or the coverage
under such policy is reduced and that no act, whether willful or negligent, or
default of such Company or the applicable Subsidiary or 


 


24

















 


Foreign 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 or Foreign Subsidiary shall, upon request of the Collateral Agent,
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 or
Foreign 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. 
Any of such policies as may be requested by the Collateral Agent, with
the exception of directors’ and officers’ liability policies, 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 canceled or the
coverage under such policy is reduced.


 


If the Company or any of its Subsidiaries, or, to the
Company’s Knowledge, any of its Foreign Subsidiaries, if applicable, 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 insurance, if obtained by such Buyer, may, but need not, protect
the Company’s and its Subsidiaries’ and Foreign Subsidiaries’ interests or pay
any claim made by or against the Company and its Subsidiaries and its Foreign
Subsidiaries with respect to the Collateral. 
Such insurance may be more expensive than the cost of insurance the
Company and its Subsidiaries and its Foreign Subsidiaries may be able to obtain
on their own and may be cancelled only upon the Company and its Subsidiaries’
and its Foreign Subsidiaries’, if applicable, providing evidence that they have
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 and Foreign 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 and Foreign 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
or Foreign Subsidiary fails to pay any such taxes 


 


25

















 


(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 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 or Foreign 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 and Foreign 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 Closing Date on which no Notes are
outstanding and the Security Agreement has terminated, the Company shall, and
shall cause each of its Subsidiaries and Foreign 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 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 by 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.                                         Letter
Agreement.  The parties acknowledge
that the terms of the Letter Agreement, dated as of October 31, 2007,
relating to the Securities Purchase Agreement, dated as of October 31,
2007, as amended, shall be applicable to this Agreement as well as if this
Agreement was referred to therein.  In
addition, the Company acknowledges and agrees to use its best efforts to
finalize the pledging of shares of the capital stock or ownership interests of
Averion Europe GmbH and Averion
International (Switzerland) Ltd. within sixty (60) days following the
Closing Date.


 


u.                                      Board
Observer Rights.  From the first date
following the Closing Date on which no Prior Notes are outstanding, until the
first date following the 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 


 


26

















 


(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.                                      Subsidiary
Good Standing.  The Company
acknowledges and agrees that the Subsidiary shall be validly existing in good
standing under the laws of the state of Maryland within forty five (45) days
following the Closing Date.


 


w.                                    Quarterly
Compliance Certificate.  From the
date of this Agreement until the first date following the 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 and Foreign 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.


 


5.                                       NEGATIVE
COVENANTS.


 


a.                                       Prohibition
Against Variable Priced Securities. 
From the date of this Agreement until the first date following the
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 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 


 


27

















 


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 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 its Subsidiaries or Foreign
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 of the Company’s or any Subsidiary’s or Foreign 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 Foreign Subsidiaries, or establish or set any
record date with respect to any of the foregoing; provided, however,
that any Subsidiary or Foreign 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 Subsidiary or Foreign Subsidiary, provided
that all of the equity of such Subsidiary or Foreign Subsidiary is directly or
indirectly owned by the Company and such Subsidiary or Foreign Subsidiary is
controlled by the Company, 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 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 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 or Foreign
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 or Foreign 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 or Foreign Subsidiary to:  (1) pay dividends or make any other
distribution on any of such Subsidiary’s or Foreign Subsidiary’s Capital Stock
owned by the Company or any other Subsidiary or Foreign Subsidiary; (2) pay
any Indebtedness owed to the Company or any other Subsidiary or Foreign
Subsidiary; (3) make loans or advances to the Company or any other
Subsidiary or Foreign Subsidiary; or (4) transfer any of its property or
assets to the Company or any other Subsidiary or Foreign Subsidiary.


 


f.                                         Prepayments.  Except for intercompany indebtedness among
the Company and its Subsidiaries or Foreign Subsidiaries, from the date of this
Agreement until the first date following the 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 or Foreign
Subsidiaries to, prepay any Indebtedness that is in parity with or subordinate
to the Notes by structure or contract; provided, however, that
any Subsidiary or Foreign Subsidiary 


 


28

















 


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; (iii) scheduled payments of interest and
principal on the Lavin Notes; and (iv) scheduled payments of interest and
principal on the Prior 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 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 and Foreign 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
and Foreign Subsidiaries may incur or enter into the following (collectively, “Permitted Indebtedness”):


 


(i)                                     the
Prior Notes and 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 Indebtedness is not secured
by any of the assets of the Company or any of its Subsidiaries and Foreign
Subsidiaries;


 


(iii)                               unsecured
intercompany Indebtedness amongst the Company and one or more of its
Subsidiaries or Foreign Subsidiaries;


 


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


 


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


 


(vi)                              unsecured
account trade payables that are (A) entered into or incurred in the
ordinary course of the Company’s and its Subsidiaries’ and Foreign 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 and Foreign Subsidiaries of $5,000,000 at any time; and


 


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


 


29

















 


h.                                      Liens.  From the date of this Agreement until the
first date following the 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 or Foreign 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 or Foreign
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 or Foreign Subsidiaries without the prior written consent of the
Collateral Agent.  The Company shall not,
and shall cause each of its Subsidiaries and Foreign 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 or Foreign Subsidiary may merge with or into any other
wholly owned Subsidiary or Foreign 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 and direct
Foreign 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, for
the avoidance of any doubt, all or substantially all of the assets of the
Subsidiaries and direct Foreign 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 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, and to the Company’s Knowledge, its Foreign 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 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 and Foreign 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
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
or Foreign Subsidiaries to:


 


30

















 


(i)                                     Make
any loans or advances to, or investments in, any other Person (other than to or
in the Company or in any Subsidiary or Foreign 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 or
Foreign Subsidiary to any Person other than the Company.


 


m.                                    Investment
Company.  From the date of this
Agreement until the first date following the 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 and Foreign Subsidiaries not to, enter into any agreement which
would limit or restrict the Company’s or any of its Subsidiaries’ or Foreign
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.


 


o.                                      Regulation
M.  Neither the Company, nor any of
its Subsidiaries or Foreign 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 or Foreign 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) of
the Securities Purchase Agreement, dated as of October 31, 2007, as
amended;


 


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


 


31

















 


(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;


 


(v)                                 Dissolve
any Subsidiary or Foreign Subsidiary whose capital stock has been pledged to
the Buyers; provided however, that the Company obtain prior written consent
from the Buyers which consent is not unreasonably withheld; provided, further,
that the assets of such Subsidiary are transferred to the Company, the
Subsidiaries or a Foreign Subsidiary.


 


(vi)                              Dissolve
any Foreign Subsidiary; provided, however, that the assets of such Foreign
Subsidiary are transferred to the Company, the Subsidiaries or a Foreign
Subsidiary.


 


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.  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 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 Closing is subject to the satisfaction, at or before the
Closing Date (unless otherwise specifically provided in this Section 7),
of each of the following conditions, provided that these conditions are
for the


 


32














 


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 the 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 the Closing Date.


 


8.                                       CONDITIONS
TO BUYERS’ OBLIGATIONS TO PURCHASE.


 


a.                                       Closing
Date.                        The
obligation of each Buyer hereunder to purchase the Notes and the Shares from
the Company at the Closing is subject to the satisfaction, at or before the
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)                                     Each
of the Company and its Subsidiaries shall have executed each of the Transaction
Documents to which it is a party and delivered the same to such Buyer.


 


(ii)                                  The
representations and warranties of the Company herein shall be true and correct
as of the date when made and as of the 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 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 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 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 the general counsel of the Company,
dated as of the 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 


 


33





















 


form of Exhibit D
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 Notes
and the Shares to be issued to such Buyer at the 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 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 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 Closing Date.


 


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


 


(ix)                                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.


 


(x)                                   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.


 


(xi)                                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.


 


(xii)                             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’ and Foreign
Subsidiaries’ other obligations under the Transaction Documents, the 


 


34

















 


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 or Foreign 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 or Foreign 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 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.


 


10.                                 CROSS-DEFAULT.  Notwithstanding anything in this Agreement,
any breach by the Company and/or any of its Subsidiaries or Foreign
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 


 


35

















 


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.


 


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 


 


36

















 


original principal amount of the Notes on the Closing Date, or if prior
to the 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 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


 


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 


 


37

















 


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.


 


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 Closing 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.  In the event that the 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 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.


 


l.                                          Placement
Agent.  The Company represents and
warrants to each Buyer that it has not engaged any placement agent, broker or
financial advisor in connection with 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 payment by any placement agent, broker or
financial advisor.


 


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 


 


38

















 


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 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 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 


 


39

















 


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.


 


*  *  * 
*  *  *


 


40

















 


IN WITNESS WHEREOF, Buyers 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/ Lawrence R. Hoffman

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Lawrence R. Hoffman

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  



 


[Company
Signature Page to Securities Purchase Agreement]


 

















 


	
   

  	
  BUYER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMVEST INVESTMENT PARTNERS II,

  LLC, a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Cecilio M. Rodriguez

  
	
     

  	
  Name:

  	
  Cecilio M. Rodrigez

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CUMULUS INVESTORS, LLC, a
  Nevada

  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nader J. Kazeminy

  
	
   

  	
  Name:

  	
  Nader J. Kazeminy

  
	
   

  	
  Title:

  	
  Chairman and President

  



 


[Buyer
Signature Page to Securities Purchase Agreement]


 





















 


SCHEDULE OF BUYERS


 


	
  Buyer’s Name

  	
   

  	
  Buyer
  Address

  and Contact Info

  	
   

  	
  Principal

  Amount

  of Notes

  	
   

  	
  Allocation

  Percentage

  	
   

  	
  Number
  of

  Shares

  to be Delivered

  at Closing

  	
   

  	
  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: 561-868-6074

  Fax:

  	
   

  	
  $

  	
  1,00,000

  	
   

  	
  50

  	
  %

  	
  4,800,000

  	
   

  	
  Akerman
  Senterfitt

  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: Nader J. Kazeminy

  Tel: 952-831-7777

  Fax: 952-831-9072

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  50

  	
  %

  	
  4,800,000

  	
   

  	
   

  



 














 


APPENDIX


 


CERTAIN
DEFINED TERMS


 


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


 


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


 


1

















 


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


 


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


 


“Foreign Subsidiary”
means, as to any Person, any other Person organized or formed in any
jurisdiction outside of the United States of America of which fifty percent
(50%) or more of the outstanding voting securities or other equity interests
are owned, directly or indirectly, by such Person.


 


“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).


 


“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;


 


(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;


 


2





















 


(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.


 


“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).


 


3

















 


“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.


 


“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;


 


(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)           Liens
arising from lines of credit secured by restricted cash deposits for property
leases;


 


(vi)          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;


 


(vii)         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 


 


4





















 


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; and


 


(viii)        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.


 


“Prior Notes”
means the notes issued by the  Company
pursuant to the Securities Purchase Agreement, dated as of October 31,
2007, as amended.


 


“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 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.


 


“Subsidiaries”
shall only mean Hesperion US, Inc., a Maryland corporation.


 


“Transaction Documents”
means this Agreement, the Notes, the Security Agreement, the Guaranty, 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 


 


5

















 


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


 


(See Exhibit 4.14)


 


1

















 


EXHIBIT
B


 


SECURITY
AGREEMENT


 


(See Exhibit 10.63)


 


1

















 


EXHIBIT
C


 


GUARANTY


 


(See Exhibit 10.64)


 


1

















 


EXHIBIT
D


 


FORM OF
COMPANY COUNSEL’S OPINION


 


(Omitted)


 


1