Document:

Exhibit
10.31

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made
effective as of January 11, 2007 (“Effective Date”), by and between Averion
International Corp. (“Company”) and Christopher Codeanne (“Employee”).

RECITALS

A.            Company desires to
retain the services of Employee, and Employee is willing to provide such
services to the Company.

B.            Company and Employee
desire to enter into this Agreement to provide for Employee’s employment by the
Company, upon the terms and conditions set forth herein.

The parties hereby agree as follows:

1.             Duties.

1.1.          Position.  Employee shall serve as Chief Financial
Officer of the Company and shall have the duties and responsibilities incident
to such position.  Employee shall perform
faithfully, cooperatively and diligently all of his job duties and
responsibilities.  Employee agrees to and
shall devote his full time, attention and effort to the business of the
Company, its subsidiaries and affiliates, and other assignments as directed by the
Company’s Chief Executive Officer or Board of Directors.  Employee shall report directly to the Company’s
Chief Executive Officer.

1.2.          Best Efforts.  Employee will expend his best efforts on
behalf of Company in connection with his employment and will abide by all policies
and decisions made by Company, as well as all applicable federal, state and
local laws, regulations or ordinances.

2.             Employment.  Employee’s employment under this Agreement
will continue until such time as the Company or Employee terminate this Agreement
in accordance with the provisions of Section 11 and Section 16.8, subject to
Employee’s right to receive the Severance Package as set forth in Section 8.

3.             Compensation.

3.1.          Base Salary.  As compensation for Employee’s performance of
his duties hereunder, Company shall pay to Employee an initial base salary of Nine
Thousand Forty Dollars ($9,040.00) per each two week pay period, starting on
the date hereof, which if annualized, would represent Two Hundred Thirty-Five
Thousand Dollars ($235,040) per year (“Annual Base Salary”), payable in
accordance with the normal payroll practices of Company, less required
deductions for state and federal withholding tax, social security and all other
employment taxes and payroll deductions.  The Board of Directors, or the compensation
committee thereof, may increase the Annual Base Salary, at its sole discretion,
from time to time.

 

3.2.          Bonus. 
In addition to the Annual Base Salary, Employee shall be eligible to
receive, in the sole discretion of the Board of Directors or the compensation
committee thereof, an annual cash bonus of up to twenty-five percent (25%) of
the then in effect Annual Base Salary, in accordance with, and based upon,
overall Company and individual performance standards to be established by the
Board of Directors or the compensation committee thereof on an annual basis.

3.3.          Stock Options.  Employee, at the sole discretion of, and upon
approval by, the Company’s Board of Directors or the compensation committee
thereof, shall be eligible to receive an option to purchase up to 4,000,000
shares of the Company’s common stock pursuant to an option agreement issued in
accordance with the terms of the Company’s 2005 Equity Incentive Plan.  Such option would have an exercise price
equal to the fair market value of a share of the Company’s common stock on the
date of grant and would vest at the rate of twenty-five percent (25%) per completed
year.  Employee shall also be eligible to
receive additional stock options, restricted stock or other equity incentive
grants pursuant to one or more equity incentive plans offered by the Company
from time to time, subject to the approval of the Board of Directors or the
compensation committee thereof.

4.             Health and Welfare
Benefit Plans.  The Employee and/or
the Employee’s family, as the case may be, shall be eligible for participation
in and shall receive all benefits under health and welfare benefit plans,
practices, policies and programs provided by the Company (including, without
limitation, medical prescription, dental disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) to the extent generally applicable to employees of the Company.

5.             Other Benefits.

(a)           Employee shall be eligible
to receive all customary and usual fringe benefits and shall be entitled to
participate in all savings and retirement plans, practices, policies and
programs generally applicable to employees of the Company that are in effect
during Employee’s employment with the Company, subject to the terms and
conditions of Company’s benefit plan documents, as applicable.  Company reserves the right to change or
eliminate the fringe benefits or plans, practices and programs on a
company-wide, prospective basis, at any time;

(b)           Employee shall be paid
a car allowance of $500 per month; and

(c)           Subject to Section 1
above and advance approval from the Company for specific authorization of each
instance, Employee shall be entitled to work from a home office, at no cost to
the Company, as is reasonably necessary to perform Employee’s duties hereunder.

6.             Business Expenses.  Employee shall be entitled to receive prompt
reimbursement for all reasonable, pre-approved, out-of-pocket business expenses
incurred in the performance of his duties on behalf of Company, including,
without limitation, cell phone (which shall not require pre-approval) use and reimbursement
for lodging at or near the Company’s headquarters

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in Southborough,
Massachusetts.  To obtain reimbursement,
expenses must be submitted promptly with appropriate supporting documentation
in accordance with Company’s policies.

7.             Vacation.  Employee shall be entitled to an aggregate of
thirty (30) days of paid vacation, personal and sick days each calendar year,
in accordance with the Company’s plans, policies and programs then in effect.

8.             Severance Package.  If (i) the Company terminates Employee’s
employment without Cause and the Company elects not to provide Employee with
six (6) months advance notice in accordance with Section 11, or (ii) a Change of
Control occurs and, as a result of the Change of Control and within six (6)
months thereafter Employee is terminated by the Company (or the surviving
entity) (other than for Cause) or Employee resigns because (a) Employee is no
longer reporting directly to the Chief Executive Officer of the Company (or the
surviving entity), (b) Employee suffers a reduction in Annual Base Salary, (c) Employee
suffers a substantial diminution in the position, authority, duties or
responsibilities contemplated by Section 1 above, or (c) the principal
executive office of the Company (or the surviving entity) is moved to a
location at least ten (10) miles further away from Employee’s residence on the
date of this Agreement, then, in either case, the Company agrees to provide Employee
with the applicable Severance Package described in Section 8.1 below in
accordance with the payment schedule set forth in Section 8.2 below, provided Employee
agrees to comply with all of the conditions set forth in Section 8.3 below.  No Severance Package shall be due or
payable:   if the Employee resigns other than as set
forth above, if Employee is terminated for Cause as set forth in Section 10.2,
or if Employee is terminated without Cause but the Company provides Employee six
(6) months advance notice of the effective Date of Termination in accordance
with Section 11 below.

8.1.          Description of
Severance Package.  The “Severance
Package” will consist of:

(a)           all Accrued Obligations
(defined below);

(b)           a “Severance Payment”
equal to:  (i) six (6) months of base
salary calculated with respect to Employee’s then in effect Annual Base Salary
if Employee’s employment terminates under the circumstances described in
Section 8(i) above, OR (ii) six (6) months of base salary calculated with
respect to Employee’s then in effect Annual Base Salary (the “Change of Control
Severance Amount”), plus an additional amount equal to twenty-five percent
(25%) of the Change of Control Severance Amount if Employee’s employment
terminates under the circumstances described in Section 8(ii) above; and

(c)           Employee will also be
allowed to continue in the Company’s group health insurance plan at the Employee’s
own expense for up to eighteen (18) months, in accordance with applicable law
(COBRA).  If the Employee elects COBRA
coverage, the Company will pay the first six (6) months of COBRA coverage;
provided that the Employee shall pay any such premiums himself during the six
(6) month period following the Employee’s “separation from service” as defined
in Section 409A(a)(2)(A)(i) of the U.S. Internal Revenue Code (the “Code”) and
the Company shall reimburse the Employee for payment of such premiums in a
single lump sum payment on the first day of the seventh (7th) month following the

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Employee “separation from service,” if (1) Section
8.1 of this Agreement shall apply and (2) no exemption from Section 409A of the
Code, as mutually determined by the Company, Company’s tax counsel, Employee
and Employee’s tax counsel, shall otherwise apply to the Company’s payments for
COBRA coverage during such six (6) month period.

8.2.          Payments.

(a)           The Severance Package
will be paid less required deductions for state and federal withholding tax,
social security and all other employment taxes as required by law.  The Accrued Obligations will be paid in a
single lump sum payment on the date that is thirty (30) days after the Date of
Termination, unless otherwise required by law; provided that the conditions to
receive the Severance Package (set forth in Section 8.3 of this Agreement) are
then satisfied.  The applicable Severance
Payment described in Section 8.1(b) will be paid in equal monthly installments
for a period of six (6) months (the “Severance Period”), with the first such
installment to be paid on the first day of the month that coincides with or
follows the date that is thirty (30) days after the Date of Termination.

(b)           Employee shall
designate a beneficiary to receive any payments due him in the event of his
death by filing a written designation with the Company in the form attached
hereto as Exhibit C.  However, any such designation will only be
effective if signed by Employee and received by the Company during Employee’s
lifetime.  Employee’s beneficiary
designation shall be deemed automatically revoked if the beneficiary
predeceases Employee or if Employee names a spouse as a beneficiary and the
marriage is subsequently dissolved before Employee dies.  If Employee dies without a valid beneficiary
designation, all payments shall be made to Employee’s estate.

(c)           If a payment under this
Agreement is payable to a minor, to a person declared incompetent, or to a
person incapable of handling the disposition of his or her property, the
Company may pay such benefit to the guardian, legal representative or person
having the care or custody of such minor, incompetent person or incapable
person.  The Company may require proof of
incompetence, minority or guardianship as it may deem appropriate prior to
distribution of the benefit.  Such
distribution shall completely discharge the Company from all liability with
respect to such benefit.

8.3.          Conditions to Receive
Severance Package.  Employee will
receive the Severance Package described above only if he additionally complies
with all of the following conditions and continues to comply with the following
for the duration of the Severance Period:

(a)           Employee executes a
full general release in favor of the Company (the “General Release”) substantially
in the form attached hereto as Exhibit A;

(b)           Employee complies with
the Company’s then in effect trade secrets policies and the Employee
Proprietary Information and Inventions Agreement (the “Information and
Inventions Agreement”), attached hereto as Exhibit
B, or any future version of an inventions and proprietary
information agreement between Employee and the Company in accordance with the
terms thereof.

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The Company’s obligation to make payments
under this Section 8 shall be suspended if at any time Employee is not in
compliance with any of the foregoing agreements, provided that Employee shall
be entitled to be paid all Accrued Obligations. 
In any event, all payments
shall cease at the conclusion of the “Severance Period.”

9.             Section 409A of
the U.S. Internal Revenue Code.

9.1.          The Specified
Employee Rule.  To the extent any
amount payable under this Agreement represents a payment under a “nonqualified
deferred compensation plan” (as defined in Section 409A of the Code following a
termination of employment or any “separation from service” as defined in
Section 409A(a)(2)(A)(i) of the Code), then, notwithstanding any other
provision of this Agreement to the contrary, such payment shall be delayed and
made on the first day of the seventh (7th) month following Employee’s “separation from service,”
but only if the Employee is deemed to be a “specified employee” within the
meaning of Section 409A(a)(2)(B)(i) of the Code.

9.2.          Good Faith Intention.  The Company and Employee intend in good faith
that this Agreement comply with the applicable requirements of Section 409A of
the Code and that this Agreement be construed, interpreted and administered in
accordance with such intent.  If the
Company or Employee believes, at any time, that this Agreement does not comply
with Section 409A of the Code, it will promptly advise the other party and will
negotiate reasonably and in good faith to amend the terms of this Agreement,
with the most limited possible economic effect on Company and Employee, such
that it complies with Section 409A of the Code.

10.           Definitions.

10.1.        Accrued Obligations.  For purposes of this Agreement, “Accrued
Obligations” shall mean:  (i) payment of Employee’s
Annual Base Salary through the Date of Termination to the extent not
theretofore paid; and (ii) payment of any accrued vacation pay not yet paid by
Company.

10.2.        Cause.  For purposes of this Agreement, “Cause” shall
mean: (i) any willful, material violation of any law or regulation applicable
to the business of the Company or any subsidiary of the Company; (ii)
conviction for, or guilty plea to, a felony or a crime involving moral
turpitude, or any willful perpetration of a common law fraud; (iii) commission
of an act of personal dishonesty which involves personal profit in connection
with the Company or any subsidiary of the Company, or any other entity having a
business relationship with the Company or any subsidiary of the Company; (iv)
any material breach of any provision of any agreement or understanding between
the Company or any subsidiary of the Company and Employee regarding the terms
of Employee’s service as an employee, officer, director or consultant to the
Company or any subsidiary of the Company, including without limitation, the
willful and continued failure or refusal to perform the material duties
required of Employee as an employee, officer, director or consultant of the
Company or any subsidiary of the Company (other than as a result of disability)
or a material breach of any applicable creative works assignment and
confidentiality agreement or similar agreement between the Company or any
subsidiary of the Company and Employee and such is not cured within fifteen
(15) days after notice of such breach from the Company to Employee; or (v)
disregard of the policies of the

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Company or any subsidiary of the Company, so
as to cause material loss, damage or injury to the property, reputation or
employees of the Company or any subsidiary of the Company if Employee has been
given a reasonable opportunity to comply with such policy or cure his failure
to comply.

10.3.        “Change of Control” means
the occurrence, in a single transaction or in a series of related transactions,
of any one or more of the following events:

(a)           there
is consummated a merger, consolidation or similar transaction involving
(directly or indirectly) the Company if, immediately after the consummation of
such merger, consolidation or similar transaction, the stockholders of the
Company immediately prior thereto do not own, directly or indirectly, either:
(i) outstanding voting securities representing more than fifty percent
(50%) of the combined outstanding voting power of the surviving entity in such
merger, consolidation or similar transaction; or (ii) more than fifty
percent (50%) of the combined outstanding voting power of the parent of the
surviving entity in such merger, consolidation or similar transaction;

(b)           the stockholders of the Company approve or the Board
of Directors approves a plan of complete dissolution or liquidation of the
Company, or a complete dissolution or liquidation of the Company shall
otherwise occur; or

(c)           there
is consummated a sale of all or substantially all of the consolidated assets of
the Company and its subsidiaries, other than a sale of all or substantially all
of the consolidated assets of the Company and its Subsidiaries to an entity
more than fifty percent (50%) of
the combined voting power of the voting securities of which entity is owned by
stockholders of the Company in substantially the same proportion as their
ownership of the Company immediately prior to such sale.

Notwithstanding the
foregoing, the term “Change of Control” shall not include a sale of assets, merger or other transaction
effected exclusively for the purpose of raising capital for the Company or
changing the domicile of the Company.

11.           Notice of
Termination.  If the Company desires
to terminate employee for Cause, such termination shall be communicated to Employee
by a “Notice of Termination” which shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for such termination and
which shall be effective to terminate Employee’s employment on the date of such
“Notice of Termination.”  If the Company
desires to terminate Employee without Cause, the Company shall communicate such
termination to Employee by a “Notice of Termination” which shall indicate that
such termination is effective on the date that is six (6) months after the date
of such “Notice of Termination” or effective immediately, in which case
Employee shall be eligible to receive the Severance Package in accordance with
Section 8(i).  If the Company (or the
surviving entity) desires to terminate Employee’s employment for any reason
(other than for Cause which shall be governed by the first sentence of this
Section 11) within six (6) months after a Change of Control, the Company (or
the surviving entity) shall communicate such termination to Employee by a “Notice
of Termination” which shall indicate the effective date of such termination
which shall be a date within fifteen (15) days after the date of such “Notice
of Termination” after which Employee shall be eligible to receive the Severance
Package in

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accordance with Section 8(ii).  If Employee desires to terminate Employee’s
employment with the Company for any reason (other than under the circumstances
set forth in the following sentence), Employee shall communicate such
termination to the Company by a “Notice of Termination” which shall indicate
that such termination is effective on a date that is at least six (6) months
after the date of termination.  If
Employee desires to terminate Employee’s employment with the Company (or the
surviving entity) within six (6) months after a Change of Control due to one or
more of the circumstances enumerated in Section 8(ii) above, such termination
shall be communicated to the Company by a “Notice of Termination” which shall
set forth in reasonable detail the facts and circumstances claimed to provide a
basis for such termination and which shall set forth the effective date of such
termination which shall be a date within fifteen (15) days after the date of
such “Notice of Termination” after which Employee will be eligible to receive
the Severance Package in accordance with Section 8.  The failure by Company or the Employee to set
forth in a Notice of Termination any fact or circumstance substantiating the
basis for the termination of employment shall not waive any right of Company or
Employee hereunder or preclude Company or Employee from asserting such fact or
circumstance in enforcing Company’s or Employee’s rights hereunder.

12.           Date of Termination.  “Date of Termination” means the date of death
of Employee or the date of delivery of the Notice of Termination or any later
date specified therein as the effective date of termination of Employee’s
employment, as the case may be.  The Date
of Termination shall be the effective termination date of this Agreement.

13.           Confidentiality and
Proprietary Rights.  Employee agrees
to continue to abide by the Information and Inventions Agreement, which is
attached to this Agreement as Exhibit B.

14.           Nondisparagement.  Employee agrees not to disparage, defame or
make any negative or critical public statements, whether verbally or in
writing, regarding the personal or business reputation, technology, products,
practices or conduct of Company or any of Company’s officers or directors.  In addition, except as required by law, Employee
shall not make any public statements regarding Company without the prior
written approval of the Board of Directors. 
Additionally, the Company agrees not to disparage, defame or make any
negative or critical public statements, whether verbally or in writing,
regarding the personal or business reputation of Employee.

15.           Injunctive Relief.  Employee acknowledges that Employee’s breach
of the covenants contained in Sections 13 and 14 of this Agreement would cause
irreparable injury to Company and agrees that in the event of any such breach,
Company shall be entitled to seek temporary, preliminary and permanent
injunctive relief without the necessity of proving actual damages or posting
any bond or other security.

16.           General Provisions.

16.1.        Successors and Assigns.  The rights and obligations of Company under
this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of Company.  Employee
shall not be entitled to assign any of Employee’s rights or obligations under
this Agreement.

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16.2.        Waiver.  The rights and remedies of the parties to
this Agreement are cumulative and not alternative.  Neither the failure nor any delay by any
party in exercising any right, power or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege; and no single or partial exercise of any such right, power
or privilege will preclude any other or further exercise of such right, power
or privilege or the exercise of any other right, power or privilege.  To the maximum extent permitted by applicable
law, (i) no claim or right arising out of this Agreement or the documents
referred to in this Agreement can be discharged by one party, in whole or in
part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (ii) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(iii) no notice to or demand on one party will be deemed to be a waiver of
any obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.

16.3.        Severability.  In the event any provision of this Agreement
is found to be unenforceable, invalid or illegal by an arbitrator or court of
competent jurisdiction, such provision shall be deemed modified to the extent
necessary to allow enforceability of the provision as so limited, it being
intended that the parties shall receive the benefit contemplated herein to the
fullest extent permitted by law.  If a
deemed modification is not satisfactory in the judgment of such arbitrator or
court, the unenforceable, invalid or illegal provision shall be deemed deleted,
and the legality, validity and enforceability of the remaining provisions shall
not be affected thereby.

16.4.        Interpretation;
Construction.  The headings set forth
in this Agreement are for convenience only and shall not be used in
interpreting this Agreement.  This
Agreement has been drafted by legal counsel representing the Company, but Employee
has participated in the negotiation of its terms.  Furthermore, Employee acknowledges that Employee
has had an opportunity to review the Agreement and has had it reviewed and
negotiated by legal counsel acting on his behalf, and, therefore, the normal
rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement.

16.5.        Governing Law.  This Agreement will be governed by and
construed in accordance with the laws of the United States and the Commonwealth
of Massachusetts, without reference to its conflicts of laws principles.

The Employee hereby agrees to submit to binding
arbitration before the American Arbitration Association (“AAA”), in accordance
with AAA’s Commercial Arbitration Rules (which means A WAIVER OF THE EMPLOYEE’S
RIGHT TO SUE IN COURT AND PROCEED BY A JUDGE OR JURY TRIAL) all disputes and
claims arising out of this Agreement.

16.6.        Notices.  All notices, consents, waivers and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (i) delivered by hand (with written confirmation of
receipt); (ii) sent by facsimile (with written confirmation of receipt); or
(iii) when received by the addressee, if sent by a nationally recognized
overnight delivery service, return receipt requested, in each case to the
appropriate

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addresses and facsimile numbers set forth
below or on the signature pages hereto (or to such other address as a party may
designate by notice to the other parties):

	
  If to AVERION:

  	
   

  	
  Averion International Corp.

  Attention: Philip Lavin, Ph.D., CEO

  225 Turnpike Road

  Southborough, MA 01772

  Telephone: (508) 597-6000

  Facsimile: (508) 597-5765

  
	
   

  	
   

  	
   

  
	
  with a required
  copy to:

  	
   

  	
  Foley & Lardner LLP

  Attention: Adam Lenain, Esq.

  402 West Broadway, Suite 2100

  San Diego, California 92101

  Telephone: (619) 234-6655

  Facsimile: (619) 234-3510

  
	
   

  	
   

  	
   

  
	
  If to Employee:

  	
   

  	
  Christopher Codeanne

  240 Back Lane

  Wethersfield, CT 06109

  Telephone: (860) 563-0815

  
	
   

  	
   

  	
  Facsimile:

  
	
   

  	
   

  	
   

  
	
  With a required
  copy to:

  	
   

  	
  Mr. David Sturgess

  Updike, Kelly & Spellacy

  One State Street

  PO Box 231277

  Telephone: (860) 548-2651

  Facsimile: (860) 548-6067

  

 

or to such other address as either party shall have
furnished to the other in writing in accordance herewith.

16.7.        Counterparts; Facsimile.  This Agreement may be executed in one or more
counterparts, all of which when fully executed and delivered by all parties
hereto and taken together shall constitute a single agreement, binding against
each of the parties.  To the maximum
extent permitted by law or by any applicable governmental authority, any
document may be signed and transmitted by facsimile with the same validity as
if it were an ink-signed document.  Each
signatory below represents and warrants by his or her signature that he or she
is duly authorized (on behalf of the respective entity for which such signatory
has acted) to execute and deliver this instrument and any other document
related to this transaction, thereby fully binding each such respective entity.

16.8.        Survival.  Sections 8 (“Severance Package”), 10 (“Definitions”),
13 (“Confidentiality and Proprietary Rights”), 14 (“Nondisparagement”), 15 (“Injunctive
Relief”),

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16 (“General Provisions”) and 17 (“Entire
Agreement”) of this Agreement shall survive Employee’s employment by Company.

17.           Entire Agreement.  This Agreement, including the Information and
Inventions Agreement attached as Exhibit B, and the
Beneficiary Designation form attached hereto as Exhibit C
constitute the entire agreement between the parties relating to this subject
matter and supersede all prior or simultaneous representations, discussions,
negotiations, and agreements, whether written or oral.  This Agreement may be amended or modified
only with the written consent of Employee and the Company.  No oral waiver, amendment or modification
will be effective under any circumstances whatsoever.

[Remainder
of Page Intentionally Left Blank]

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THE PARTIES TO THIS
AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY
PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT
ON THE DATES SHOWN BELOW.

	
  Dated:

  	
  January 11, 2007

  	
   

  	
  EMPLOYEE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Christopher Codeanne

  
	
   

  	
   

  	
  Christopher Codeanne

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
  January 11, 2007

  	
   

  	
  AVERION INTERNATIONAL CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Philip T. Lavin

  
	
   

  	
   

  	
   

  	
  Name: Philip Lavin, Ph.D.

  
	
   

  	
   

  	
   

  	
  Title: Chief Executive Officer

  

 

[Signature
Page to Codeanne Employment Agreement]

 

EXHIBIT A

FORM OF GENERAL RELEASE

GENERAL RELEASE OF CLAIMS

By signing this General
Release of Claims (“Agreement”), I, Christopher Codeanne, acknowledge that Averion
International Corp. (“Averion”) and I have reached a final binding agreement as
to the circumstances surrounding my separation from employment with Averion.  Specifically, I acknowledge that we have
agreed on the following agreement and that this document contains the entire
agreement with respect to the subject matter hereof:

1.             Termination.  My employment status with Averion
will terminate effective                   
    , 20    .

2.             Severance.  In exchange for my entering
into this Agreement and in the event of a Change in Control, Averion will pay
me the applicable Severance Amount as defined in Section 8 of that certain
Employment Agreement dated January 11, 2007 between me and the Company (the “Employment
Agreement”) in accordance with the terms thereof.

3.             Release.  In return for the promises in
Section 2 above, and contingent upon Averion’s ongoing fulfillment of its
obligation to:  (i) make timely severance
payments to me pursuant to and in accordance with Section 8 of the Employment
Agreement, (ii) pay me all amounts due pursuant to Section 3 of the Employment
Agreement, and (iii) abide by its obligations under any equity incentive option
agreements between me and Averion, I on my own behalf, and on behalf of my
grantees, agents, representatives, heirs, devisees, trustees, assigns,
assignors, attorneys, or any other entities in which I have an interest
(collectively “Releasors”), hereby release and forever discharge by this
Agreement, Averion, and each of its past and present agents, employees,
representatives, officers, directors, shareholders, attorneys, accountants,
insurers, advisors, consultants, affiliates, assigns, successors, heirs,
predecessors in interest, joint ventures, and subsidiary, affiliate and
commonly-controlled entities (collectively “Releasees”), from all liabilities,
causes of actions, charges, complaints, suits, claims, obligations, costs,
losses, damages, rights, judgments, attorneys’ fees, expenses, bonds, bills,
penalties, fines, and all other legal responsibilities of any form whatsoever,
whether known or unknown, whether suspected or unsuspected, whether fixed or
contingent, liquidated or unliquidated, including but not limited to those
arising from or related to (i) my employment with, compensation by and/or
separation from Averion; and (ii) any acts or omissions occurring prior to the
date of this Agreement by any and all Releasees, including those arising under
any theory of law, whether common, constitutional, statutory or other of any
jurisdiction, foreign or domestic, whether known or unknown, whether in law or
in equity, which they had or may claim to have against any of the
Releasees.  Releasors specifically
release claims under all applicable state and federal laws, based on age, sex,
pregnancy, race, color, national origin, marital status, religion, veteran
status, disability, sexual orientation, medical condition, or other
anti-discrimination laws, including, without limitation, Title VII of the Civil
Rights Act of 1964 as amended, the Age Discrimination in Employment Act (Title
29, United States Code, Sections 621, et seq.)
(“ADEA”), the Americans with Disabilities Act, the Fair Labor Standards Act, and
the Family Medical Leave Act, as well as all common law claims, whether arising
in tort or contract (collectively referred to as “Released Matters”).  If any governmental agency should assume
jurisdiction over any claim, charge or complaint concerning alleged
discrimination arising out of my employment with Averion, Releasors also waive
the right to recover damages or any other remedy as a result of such claim,
charge or complaint.  I acknowledge and
agree that, following the payment of the Severance Amount in accordance with Section
8 of the Employment Agreement, Averion and Releasees have no other liabilities
or obligations, of any

 A-1
 

 

kind
or nature, owed to me in connection with or relating to my employment with the
same.  I further agree and promise that I
will not file any lawsuit or administrative claim or charge asserting any of
the foregoing Released Matters.

4.             Release of Age Discrimination Claims.  I
understand that the general release in Section 3 above includes a waiver of
rights and claims which I may have arising under the ADEA.  I hereby represent that I have been advised
to consult with an attorney of my choosing regarding the waiver of rights and
claims under the ADEA.  I understand that
by signing this Agreement, I waive my rights or claims under the ADEA.  I further understand that I am not waiving
rights or claims under the ADEA that may arise after the effective date of this
fully executed Agreement.

5.             Waiver. 
I understand that even if I should eventually suffer some damage arising
out of my employment and/or separation from employment with Averion, that I
will not be able to make any claims for those damages, even as to claims which
may now exist, but which I do not know exist, and which if known would have
affected my decision to sign this Agreement.

6.             No Wrongdoing.  I
understand that, by signing this Agreement Averion does not admit any
wrongdoing.  I am also admitting no
wrongdoing by signing this Agreement.  We
agree that no use of this Agreement or any comments made by either party during
our settlement discussions will be used by us or any of our representatives in
connection with any subsequent legal action except for an action to enforce
this Agreement.

7.             Confidential Information.  I
understand that during my employment with Averion I had access to Averion
confidential information, including but not limited to, client and vendor
lists, financial data, marketing plans and sales techniques, that has or could
have value to Averion, which if disclosed could be detrimental to Averion, and
which Averion has taken reasonable steps to prevent from disclosure to the
general public.  In addition to any other
obligation of confidentiality to which I may be bound with respect to any
confidential information of Averion:

7.1.          I
agree that I will not use, disclose or reveal to any third party any Averion
confidential information, regardless of whether or not such information is
marked as “confidential”.

7.2.          I
agree that I have returned all Averion confidential or proprietary information,
documents, materials, apparatus, equipment, other physical property or the
reproduction of any such property to Averion that is in my possession.

7.3.          I
recognize that the unauthorized use or disclosure of Averion’s confidential
information is unlawful and that Averion may obtain damages against me for any
willful misappropriation, including damages and attorney fees.

8.             Confidentiality of Agreement.  I
agree that the terms and conditions of this Agreement are confidential and
shall not be discussed, disclosed or revealed by me to any third party, except
to my attorneys, tax advisors and spouse, and except insofar as I am compelled
by law to disclose it.

9.             Non-Disparagement.  In
addition to any other non-disparagement agreement to which I may be bound, I
expressly agree that I will not in any way disparage or otherwise cause to be
published or disseminated any negative statements, remarks, comments or
information regarding Averion or any Releasee.

10.           General.  I acknowledge that I have
carefully read and fully understand the nature of this Agreement, that I have
been advised to consult with an attorney of my choosing before executing this

 A-2
 

 

Agreement,
that I have had the opportunity to consider this Agreement, and that all of my
questions concerning this Agreement have been answered to my satisfaction.  I also agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party will
not apply in the interpretation of this Agreement.  The provisions of this Agreement together
with the applicable provisions of the Employment Agreement and exhibits
thereto, set forth the entire agreement between me and Employer concerning my
employment with the same, my severance pay and benefits and my termination of
employment.  Any other promises, written
or oral, are replaced by provision of this Agreement, and are no longer
effective unless they are contained in this document or are expressly deemed to
survive the termination of my employment with Averion in accordance with the
terms of the written document in which they are contained.  I acknowledge that I have received all
compensation to which I am currently entitled through my separation date,
including, without limitation, salary, bonuses and vacation pay.

11.           Attorneys Fees.  If
any proceeding or action is brought by either party to enforce or interpret the
terms of this Agreement, the prevailing party in such proceeding or action
shall be entitled to recover from the other its costs of suit, including,
without limitation, reasonable attorneys’ fees.

12.           Governing Law.  This
Agreement will be governed by and construed in accordance with the laws of the
United States and the Commonwealth of Massachusetts, without reference to its
conflicts of laws principles.

I hereby agree to submit to
binding arbitration before the American Arbitration Association (which means A
WAIVER OF THE EMPLOYEE’S RIGHT TO SUE IN COURT AND PROCEED BY A JUDGE OR JURY
TRIAL) all disputes and claims arising out of this Agreement.  I further and understand and agree that I
shall execute Averion’s standard agreement to arbitrate, which is separate from
this Agreement and may be contained in Averion’s Employee Handbook.  This Agreement will be the exclusive method
to resolve all disputes or controversies that I or the Company may have,
whether or not arising out of my employment or termination of that employment
with the Company.  THE AGREEMENT TO
ARBITRATE CONSTITUTES A WAIVER OF ANY RIGHT THAT I OR THE COMPANY MAY HAVE TO LITIGATE
ANY CLAIM IN COURT IN A JUDGE OR JURY TRIAL.

* * * * IMPORTANT NOTICE * * * *

This Agreement includes a waiver of rights and claims that I may have
arising under the Age Discrimination in Employment Act of 1967 (Title 29,
United States Code, 621 et seq.).  This
waiver is in exchange for the consideration described in paragraph 2
above.  Pursuant to the Older Workers
Benefit Protection Act (Public) law 101-433; 1990 S. 1551), I acknowledge that
this Agreement is intended to apply as a waiver of rights and claims arising
under the Age Discrimination in Employment Act of 1967.  However, by executing this Agreement, I do
not waive rights and claims under the Age Discrimination in Employment Act that
may arise after the date of this Agreement is executed.                   
(Initials)

I ACKNOWLEDGE THAT I HAVE THE OPPORTUNITY TO CONSIDER THIS AGREEMENT
FOR 21 DAYS.  SHOULD I DECIDE NOT TO USE
THE FULL 21 DAYS, I KNOWINGLY AND VOLUNTARILY WAIVE ANY CLAIMS THAT I WAS NOT
IN FACT GIVEN THAT PERIOD OF TIME OR DID NOT USE THE ENTIRE 21 DAYS TO CONSULT
AN ATTORNEY AND/OR CONSIDER THIS AGREEMENT. 
I ACKNOWLEDGE AND UNDERSTAND THAT FOR A PERIOD OF SEVEN (7) DAYS
FOLLOWING MY EXECUTION OF THIS AGREEMENT, I MAY REVOKE THIS AGREEMENT AND
RELEASE, AND THE RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THIS
SEVEN (7) DAY

 A-3
 

 

REVOCATION
PERIOD HAS EXPIRED.  IF I DO NOT REVOKE
THIS AGREEMENT AND THE RELEASE IN THE TIME FRAME SPECIFIED, THIS AGREEMENT AND
RELEASE SHALL BE DEEMED TO BE EFFECTIVE AT 12:01 A.M. ON THE EIGHTH DAY AFTER I
EXECUTE THE SAME.              
(Initials)

In exchange for the mutual
promises contained in this Agreement, the parties execute this Agreement as of
the date set forth below.

	
  

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:                ,
  20  

  	
   

  	
  Christopher Codeanne

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Averion International Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:               ,
  20  

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
							

 

 A-4

EXHIBIT B

EMPLOYEE
PROPRIETARY INFORMATION

AND INVENTIONS AGREEMENT

AVERION
INTERNATIONAL CORP.

EMPLOYEE
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

 

 

In consideration of my employment or continued
employment by Averion International Corp. (the “Company”), and the compensation now and
hereafter paid to me, I hereby agree as follows:

1.             Nondisclosure.

1.1          Recognition of Company’s
Rights; Nondisclosure.  At all times
during my employment and thereafter, I will hold in strictest confidence and
will not disclose, use, lecture upon or publish any of the Company’s
Proprietary Information (defined below), except as such disclosure, use or
publication may be required in connection with my work for the Company, or
unless an officer of the Company expressly authorizes such in writing.  I will obtain Company’s written approval
before publishing or submitting for publication any material (written, verbal,
or otherwise) that relates to my work at Company and/or incorporates any
Proprietary Information.  I hereby assign
to the Company any rights I may have or acquire in such Proprietary Information
and recognize that all Proprietary Information shall be the sole property of
the Company and its assigns.

1.2          Proprietary Information.  The term “Proprietary
Information” shall mean any and all confidential and/or proprietary
knowledge, data or information of the Company. 
By way of illustration but not
limitation, the term “Proprietary
Information” includes
(a) products, ideas, processes, know-how, inventions, developments,
designs, techniques, formulas, works of authorship, methods, developmental or
experimental work, clinical data, test data, improvements, discoveries and
trade secrets (hereinafter collectively referred to as “Inventions”); and (b) the Company’s customer relationship
management database and all information contained therein; the salaries and
terms of compensation of other employees and consultants; information about
current, former, and potential clients and projects and tasks performed for
them by the Company; information about current, former, and potential
consultants and the work they have performed or may perform for the Company;
and any other information concerning the Company’s business plans, marketing
and selling information, budgets, financial data, licenses, prices, costs,
suppliers, and vendors.

1.3          Third Party Information.  I
understand, in addition, that the Company has received and in the future will
receive from third parties confidential or proprietary information (“Third Party Information”)
subject to a duty on the Company’s part to maintain the confidentiality of such
information and to use it only for certain limited purposes.  During the term of my employment and
thereafter, I will hold Third Party Information in the strictest confidence and
will not disclose to anyone (other than Company personnel who need to know such
information in connection with their work for the Company) or use, except in
connection with my work for the Company, Third Party Information unless
expressly authorized in writing by an officer of the Company.

1.4          No Improper Use of
Information of Prior Employers and Others. 
During my employment by the Company I will not improperly use or
disclose any confidential information or trade secrets, if any, of any former
employer or any other person to whom I have an obligation of confidentiality,
and I will not bring onto the premises of the Company any unpublished documents
or any property belonging to any former employer or any other person to whom I
have an obligation of confidentiality unless consented to in writing by that
former employer or person.  I will use in
the performance of my duties only information which is generally known and used
by persons with training and experience comparable to my own, which is common
knowledge in the industry or otherwise legally in the public domain, or which
is otherwise provided or developed by the Company.

2.             Assignment Of Inventions.

2.1          Proprietary Rights.  The term “Proprietary Rights” shall mean all trade
secret, patent, copyright, mask work and other intellectual property rights
throughout the world.

2.2          Prior Inventions.  Inventions, if any, patented or unpatented,
which I made prior to the commencement of my employment with the Company are
excluded from the scope of this Agreement.  To preclude any possible uncertainty, I have
set forth on Schedule 1 (Previous Inventions)
attached hereto a complete list of all Inventions that I have, alone or jointly
with others, conceived, developed or reduced to practice or caused to be
conceived, developed or reduced to practice prior to the commencement of my
employment with the Company, that I consider to be my property or the property
of third parties and that I wish to have excluded from the scope of this
Agreement (collectively referred to as “Prior Inventions”).  If disclosure of any such Prior Invention
would cause me to

 B-1

violate any prior
confidentiality agreement, I understand that I am not to list such Prior
Inventions in Schedule 1 but am only to
disclose a cursory name for each such invention, a listing of the party(ies) to
whom it belongs and the fact that full disclosure as to such inventions has not
been made for that reason. A space is provided on Schedule 1
for such purpose.  If no such disclosure
is attached, I represent that there are no Prior Inventions.  If, in the course of my employment with the Company,
I incorporate a Prior Invention into a Company product, process or machine, the
Company is hereby granted and shall have a nonexclusive, royalty-free,
irrevocable, perpetual, worldwide license (with rights to sublicense through
multiple tiers of sublicensees) to make, have made, modify, use and sell such
Prior Invention.  Notwithstanding the
foregoing, I agree that I will not incorporate, or permit to be incorporated,
Prior Inventions in any Company Inventions without the Company’s prior written
consent.

2.3          Assignment of
Inventions. Except as provided in Section 2.5 below, I hereby assign and
agree to assign in the future (when any such Inventions or Proprietary Rights
are first reduced to practice or first fixed in a tangible medium, as
applicable) to the Company all my right, title and interest in and to any and
all Inventions (and all Proprietary Rights with respect thereto) whether or not
patentable or registrable under copyright or similar statutes, made or
conceived or reduced to practice or learned by me, either alone or jointly with
others, during the period of my employment with the Company.  Inventions assigned to the Company, or to a
third party as directed by the Company pursuant to this Section 2, are
hereinafter referred to as “Company
Inventions”.

2.4          Obligation to Keep
Company Informed.  During the period
of my employment and for six (6) months after termination of my employment with
the Company, I will promptly disclose to the Company fully and in writing all
Inventions authored, conceived or reduced to practice by me, either alone or
jointly with others.  In addition, I will
promptly disclose to the Company all patent applications filed by me or on my
behalf within a year after termination of employment.

2.5          Government or Third
Party.  I also agree to assign all my
right, title and interest in and to any particular Company Invention to a third
party, including without limitation the United States, as directed by the
Company.

2.6          Works for Hire.  I acknowledge that all original works of
authorship which are made by me (solely or jointly with others) within the
scope of my employment and which are protectable by copyright are “works made
for hire,” pursuant to United States Copyright Act (17 U.S.C., Section 101).

2.7          Enforcement of Proprietary
Rights.  I will assist the Company in
every proper way to obtain, and from time to time enforce, United States and
foreign Proprietary Rights relating to Company Inventions in any and all
countries.  To that end I will execute,
verify and deliver such documents and perform such other acts (including
appearances as a witness) as the Company may reasonably request for use in
applying for, obtaining, perfecting, evidencing, sustaining and enforcing such
Proprietary Rights and the assignment thereof. 
In addition, I will execute, verify and deliver assignments of such
Proprietary Rights to the Company or its designee.  My obligation to assist the Company with
respect to Proprietary Rights relating to such Company Inventions in any and
all countries shall continue beyond the termination of my employment, but the
Company shall compensate me at a reasonable rate after my termination for the
time actually spent by me at the Company’s request on such assistance.

In the event the Company is unable for any reason,
after reasonable effort, to secure my signature on any document needed in
connection with the actions specified in the preceding paragraph, I hereby
irrevocably designate and appoint the Company and its duly authorized officers
and agents as my agent and attorney in fact, which appointment is coupled with
an interest, to act for and in my behalf to execute, verify and file any such
documents and to do all other lawfully permitted acts to further the purposes
of the preceding paragraph with the same legal force and effect as if executed
by me.  I hereby waive and quitclaim to
the Company any and all claims, of any nature whatsoever, which I now or may
hereafter have for infringement of any Proprietary Rights assigned hereunder to
the Company.

3.             Records.  I agree to keep and maintain adequate and
current records (in the form of notes, sketches, drawings and in any other form
that may be required by the Company) of all Proprietary Information developed
by me and all Inventions made by me during the period of my employment at the
Company, which records shall be available to and remain the sole property of
the Company at all times.

4.             No Conflicting Obligation.  I represent that my performance of all the
terms of this Agreement and as an employee of the Company does not and will not
breach any agreement to keep in confidence information acquired by me in
confidence or in trust prior to my employment by the Company.  I have not entered into, and I agree I will
not enter into, any agreement either written or oral in conflict herewith.

5.             Return Of Company Documents.  When I leave the employ of the Company, I will
deliver to the Company any and all drawings, notes, memoranda, specifications,
devices, formulas, and documents, together

 B-2
 

 

with all copies
thereof, and any other material containing or disclosing any Company
Inventions, Third Party Information or Proprietary Information of the
Company.  I further agree that any
property situated on the Company’s premises and owned by the Company, including
disks and other storage media, filing cabinets or other work areas, is subject
to inspection by Company personnel at any time with or without notice.  Prior to leaving, I will cooperate with the
Company in completing and signing the Company’s termination statement.

6.             Legal And Equitable Remedies.  Because my services are personal and unique
and because I may have access to and become acquainted with the Proprietary
Information of the Company, the Company shall have the right to enforce this
Agreement and any of its provisions by injunction, specific performance or
other equitable relief, without bond and without prejudice to any other rights
and remedies that the Company may have for a breach of this Agreement.

7.             Notices.  Any notices
required or permitted hereunder shall be given to the appropriate party at the
address specified below or at such other address as the party shall specify in
writing.  Such notice shall be deemed
given upon personal delivery to the appropriate address or if sent by certified
or registered mail, three (3) days after the date of mailing.

8.             Notification Of New Employer.  In the event that I leave the employ of the
Company, I hereby consent to the notification of my new employer of my rights
and obligations under this Agreement.

9.             General Provisions.

9.1          Governing Law; Consent
to Personal Jurisdiction.  This
Agreement will be governed by and construed according to the laws of the
Commonwealth of Massachusetts.  I hereby
expressly consent to the personal jurisdiction of the state and federal courts
located in Massachusetts for any lawsuit filed there against me by Company
arising from or related to this Agreement.

9.2          Severability.  In case any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect the other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. 
If moreover, any one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to duration,
geographical scope, activity or subject, it shall be construed by limiting and
reducing it, so as to be enforceable to the extent compatible with the
applicable law as it shall then appear.

9.3          Successors and Assigns.  This Agreement will be binding upon my heirs,
executors, administrators and other legal representatives and will be for the
benefit of the Company, its successors, and its assigns.

9.4          Survival.  The provisions of this Agreement shall
survive the termination of my employment and the assignment of this Agreement
by the Company to any successor in interest or other assignee.

9.5          Employment. I agree
and understand that nothing in this Agreement shall confer any right with
respect to continuation of employment by the Company, nor shall it interfere in
any way with my right or the Company’s right to terminate my employment at any
time, with or without cause.

9.6          Waiver. No waiver by
the Company of any breach of this Agreement shall be a waiver of any preceding
or succeeding breach.  No waiver by the
Company of any right under this Agreement shall be construed as a waiver of any
other right.  The Company shall not be
required to give notice to enforce strict adherence to all terms of this
Agreement.

9.7          Entire Agreement.  The obligations pursuant to Sections 1 and 2
of this Agreement shall apply to any time during which I was previously
employed, or am in the future employed, by the Company as a consultant if no
other agreement governs nondisclosure and assignment of inventions during such
period.  This Agreement is the final,
complete and exclusive agreement of the parties with respect to the subject
matter hereof and supersedes and merges all prior discussions between us.  No modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, will be effective
unless in writing and signed by the party to be charged.  Any subsequent change or changes in my
duties, salary or compensation will not affect the validity or scope of this
Agreement.

This Agreement
shall be effective as of the first day of my employment with the Company,
namely:

 B-3
 

 

I have read this agreement carefully and understand its terms.  I have completely filled out Schedule 1 to
this agreement.

	
  Dated:

  	
  December 11,
  2006

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/ Christopher Codeanne

  	
   

  	
   

  
	
  (Signature)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Christopher Codeanne

  	
   

  	
   

  
	
  (Printed Name)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  240 Back Lane, Wethersfield, CT 06109

  	
   

  	
   

  
	
  (Address)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Accepted And Agreed
  To:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Averion International
  corp.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Philip T.
  Lavin

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Philip T. Lavin

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  CEO

  	
   

  	
   

  
								

 

 B-4

 

Schedule 1

	
  TO:

  	
  Averion International Corp.

  
	
   

  	
   

  
	
  FROM:

  	
   

  	
   

  
	
   

  	
   

  
	
  DATE:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SUBJECT:

  	
  Previous Inventions

  	
   

  

 

1.             Except as listed in Section 2 below, the
following is a complete list of all inventions or improvements relevant to the
subject matter of my employment by Averion International Corp. (the “Company”) that have
been made or conceived or first reduced to practice by me alone or jointly with
others prior to my engagement by the Company:

o            No inventions or
improvements.

o            See below:

o            Additional sheets
attached.

2.             Due to a prior confidentiality agreement,
I cannot complete the disclosure above with respect to inventions or
improvements generally listed below, the proprietary rights and duty of
confidentiality with respect to which I owe to the following party(ies):

	
  Invention or Improvement

  	
   

  	
  Party(ies)

  	
   

  	
  Relationship

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

o            Additional sheets
attached.

 B-5

 

Exhibit c

beneficiary designation for employment agreement

I designate the following
as beneficiary of any payment or other benefits payable following my death
under the EMPLOYMENT AGREEMENT made effective as of January 11, 2007, by and
between Averion International Corp. (“Company”) and Christopher Codeanne
(“Employee”):

Primary: Katherine L.
Codeanne, 240 Back Lane, Wethersfield, CT 06109

Contingent:                                                               

Note: To name a trust as
beneficiary, please provide the name of the trustee(s) and the exact name and
date of the trust agreement.

I understand that I may
change these beneficiary designations by filing a new written designation with
the Company.  I further understand that
the designations will be automatically revoked if the beneficiary predeceases
me, or, if I have named my spouse as beneficiary and our marriage is
subsequently dissolved.

	
  Signature:

  	
  /s/ Christopher
  Codeanne

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  Printed Name:

  	
  Christopher
  Codeanne

  	
   

  
	
   

  	
   

  	
   

  	 

	
  Date:

  	
  January 11, 2007

  	
   

  	 

	
   

  	 

	
  Received by the
  Company this                       day
  of                                        ,
                              .

  	 

	
   

  	 

	
  By: 

  	
   

  	
   

  	 

	
   

  	
   

  	 

	
  Name:

  	
   

  	
   

  	 

	
   

  	
   

  	 

	
  Title:

  	
   

  	
   

  	 

									

 

 C-1Edgewater Foods International, Inc. Exhibit 10.1  1/17/2007

SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE

AGREEMENT

 

Dated as of January 16, 2007

among

EDGEWATER FOODS INTERNATIONAL, INC.

and

THE PURCHASERS LISTED ON EXHIBIT A

­

TABLE
                    OF CONTENTS

	PAGE

	ARTICLE
                                        I Purchase and Sale of Preferred Stock
	1

	 	Section
                                        1.1
	Purchase
                                        and Sale of Stock
	1

	 	Section
                                        1.2
	Warrants
	1

	 	Section
                                        1.3
	Conversion
                                        Shares
	1

	 	Section
                                        1.4
	Purchase
                                        Price and Closing
	2

	ARTICLE
                                        II Representations and Warranties
	3

	ARTICLE
                                        III Covenants
	16

	 	Section
                                        3.1
	Securities
                                        Compliance
	16

	 	Section
                                        3.2
	Registration
                                        and Listing
	16

	 	Section
                                        3.3
	Inspection
                                        Rights
	16

	 	Section
                                        3.4
	Compliance
                                        with Laws
	17

	 	Section
                                        3.5
	Keeping
                                        of Records and Books of Account
	17

	 	Section
                                        3.6
	Reporting
                                        Requirements
	17

	 	Section
                                        3.7
	Amendments
	17

	 	Section
                                        3.8
	Other
                                        Agreement
	17

	 	Section
                                        3.9
	Distributions
	17

	 	Section
                                        3.10
	Status
                                        of Dividends
	17

	 	Section
                                        3.11
	Use
                                        of Proceeds
	18

	 	Section
                                        3.12
	Reservation
                                        of Shares
	18

	 	Section
                                        3.13
	Transfer
                                        Agent Instructions
	19

	 	Section
                                        3.14
	Disposition
                                        of Assets
	19

	 	Section
                                        3.15
	Reporting
                                        Status
	19

	 	Section
                                        3.16
	Disclosure
                                        of Transaction
	19

	 	Section
                                        3.17
	Disclosure
                                        of Material Information
	19

	 	Section
                                        3.18
	Pledge
                                        of Securities
	19

	 	Section
                                        3.19
	Form
                                        SB-2 Eligibility
	20

	 	Section
                                        3.20
	Lock-Up
                                        Agreement
	20

	 	Section
                                        3.21
	Subsequent
                                        Financings
	20

	ARTICLE
                                        IV Conditions
	23

	 	Section
                                        4.1
	Conditions
                                        Precedent to the Obligation of the Company
                                        to Sell the Shares
	

                              

                                        23

	 	Section
                                        4.2
	Conditions
                                        Precedent to the Obligation of the Purchases
                                        to Purchase the Shares
	

                              

                                        23

	ARTICLE
                                        V Stock Certificate Legend
	26

	 	Section
                                        5.1
	Legend
	26

	ARTICLE
                                        VI Indemnification
	27

	 	Section
                                        6.1
	Company
                                        Indemnity
	27

	 	Section
                                        6.2
	Indemnification
                                        Procedure
	27

	ARTICLE
                                        VII Miscellaneous
	28

	 	Section
                                        7.1
	Fees
                                        and Expenses
	28

	 	Section
                                        7.2
	Specific
                                        Enforcement, Consent to Jurisdiction
	28

	 	Section
                                        7.3
	Entire
                                        Agreement; Amendment
	29

	 	Section
                                        7.4
	Notices
	29

	 	Section
                                        7.5
	Waivers
	30

	 	Section
                                        7.6
	Headings
	30

	 	Section
                                        7.7
	Successors
                                        and Assigns
	30

	 	Section
                                        7.8
	No
                                        Third Party Beneficiaries
	30

	 	Section
                                        7.9
	Governing
                                        Law
	31

	 	Section
                                        7.10
	Survival
	31

	 	Section
                                        7.11
	Counterparts
	31

	 	Section
                                        7.12
	Publicity
	31

	 	Section
                                        7.13
	Severability
	31

	 	Section
                                        7.14
	Further
                                        Assurances
	31

 

­

SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT 

This SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the “Agreement”) is dated as of January 16, 2007 by and among Edgewater Foods International, Inc., a Nevada corporation (the “Company”), and each of the Purchasers of shares of Series B Convertible Preferred Stock of the Company whose names are set forth on Exhibit A hereto (individually, a “Purchaser” and collectively, the “Purchasers”).

The parties hereto agree as follows:

ARTICLE I

Purchase and Sale of Preferred Stock

Section 1.1

Purchase and Sale of Stock.  Upon the following terms and conditions, the Company shall issue and sell to the Purchasers and each of the Purchasers shall purchase from the Company, the number of shares of the Company’s Series B Convertible Preferred Stock, par value $0.001 per share and stated value of $10,000 per share (the “Preferred Shares”), convertible into shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), in the amounts set forth opposite such Purchaser’s name on Exhibit A hereto.  The designation, rights, preferences and other terms and provisions of the Series B Convertible Preferred Stock are set forth in the Certificate of Designation of the Relative Rights and Preferences of the Series B Convertible Preferred Stock attached hereto as Exhibit B (the “Certificate of Designation”).  The Company and the Purchasers are executing and delivering this Agreement in accordance with and 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 “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”) or Section 4(2) of the Securities Act.  

Section 1.2

Warrants.  Upon the following terms and conditions and for no additional consideration, each of the Purchasers shall be issued (i) Series A Warrants, in substantially the form attached hereto as Exhibit C-1 (the “Series A Warrants”), to purchase the number of shares of Common Stock equal to fifty percent (50%) of the number of Preferred Shares purchased by each Purchaser pursuant to the terms of this Agreement, as set forth opposite such Purchaser’s name on Exhibit A hereto, (ii) Series B Warrants, in substantially the form attached hereto as Exhibit C-2 (the “Series B Warrants”), to purchase the number of shares of Common Stock equal to fifty percent (50%) of the number of Preferred Shares purchased by each Purchaser pursuant to the terms of this Agreement, as set forth opposite such Purchaser’s name on Exhibit A hereto, (iii) Series C Warrants, in substantially the form attached hereto as Exhibit C-3 (the “Series C Warrants”), to purchase the number of shares of Common Stock equal to fifty percent (50%) of the number of Preferred Shares purchased by each Purchaser pursuant to the terms of this Agreement, as set forth opposite such Purchaser’s name on Exhibit A hereto, (iv) Series J Warrants, in substantially the form attached hereto as Exhibit C-4 (the “Series J Warrants”), to purchase the number of shares of Common Stock equal to one hundred percent (100%) of the number of Preferred Shares purchased by each Purchaser, as set forth opposite such Purchaser’s name on Exhibit A hereto, (v) Series D Warrants, in substantially the form 

­

attached hereto as Exhibit C-5 (the “Series D Warrants”), to purchase the number of shares of Common Stock equal to fifty percent (50%) of the number of Preferred Shares purchased by each Purchaser pursuant to the terms of this Agreement, as set forth opposite such Purchaser’s name on Exhibit A hereto, and (vi) Series E Warrants, in substantially the form attached hereto as Exhibit C-6 (the “Series E Warrants”), to purchase the number of shares of Common Stock equal to fifty percent (50%) of the number of Preferred Shares purchased by each Purchaser pursuant to the terms of this Agreement, as set forth opposite such Purchaser’s name on Exhibit A hereto, and (vii) Series F Warrants, in substantially the form attached hereto as Exhibit C-7 (the “Series F Warrants” and, together with the Series A Warrants, the Series B Warrants, the Series C Warrants, the Series J Warrants, the Series D Warrants and the Series E Warrants, the “Warrants”), to purchase the number of shares of Common Stock equal to fifty percent (50%) of the number of Preferred Shares purchased by each Purchaser pursuant to the terms of this Agreement, as set forth opposite such Purchaser’s name on Exhibit A hereto.  Notwithstanding the foregoing to the contrary, each of the Purchasers shall be issued Series J Warrants, Series D Warrants, Series E Warrants and Series F Warrants only if such Purchaser’s investment amount for the purchase of Preferred Shares pursuant to this Agreement is equal to or greater than $250,000.  The Warrants shall expire six (6) years following the Closing Date, except for the Series J Warrants, which shall expire one (1) year following the Closing Date.  Each of the Warrants shall have an exercise price per share equal to the Warrant Price (as defined in the applicable Warrant).

Section 1.3

Conversion Shares. The Company has authorized and has reserved and covenants to continue to reserve, free of preemptive rights and other similar contractual rights of stockholders, a number of shares of Common Stock equal to one hundred twenty percent (120%) of the number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of all of the Preferred Shares and exercise of the Warrants then outstanding.  Any shares of Common Stock issuable upon conversion of the Preferred Shares and exercise of the Warrants (and such shares when issued) are herein referred to as the “Conversion Shares” and the "Warrant Shares", respectively.  The Preferred Shares, the Conversion Shares and the Warrant Shares are sometimes collectively referred to as the “Shares”.

Section 1.4

Purchase Price and Closing.  Subject to the terms and conditions hereof, the Company agrees to issue and sell to the Purchasers and, in consideration of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, the Purchasers, severally but not jointly, agree to purchase the Preferred Shares and the Warrants for an aggregate purchase price of up to $[2,070,000] (the “Purchase Price”).  The closing of the purchase and sale of the Preferred Shares and the Warrants to be acquired by the Purchasers from the Company under this Agreement shall take place at the offices of Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York, New York 10036 (the “Closing”) at 10:00 a.m., New York time (i) on or before January 16, 2007; provided, that all of the conditions set forth in Article IV hereof and applicable to the Closing shall have been fulfilled or waived in accordance herewith, or (ii) at such other time and place or on such date as the Purchasers and the Company may agree upon (the "Closing Date").  Subject to the terms and conditions of this Agreement, at the Closing the Company shall deliver or cause to be delivered to each Purchaser (x) a certificate for the number of Preferred Shares set forth opposite the name of such Purchaser on Exhibit A hereto, (y) its Warrants to purchase such number of shares of 

2

­

Common Stock as is set forth opposite the name of such Purchaser on Exhibit A attached hereto and (z) any other documents required to be delivered pursuant to Article IV hereof.  At the Closing, each Purchaser shall deliver its Purchase Price by wire transfer to an escrow account designated by the escrow agent. 

ARTICLE II

Representations and Warranties

Section 2.1

Representations and Warranties of the Company.  The Company hereby represents and warrants to the Purchasers, as of the date hereof and the Closing Date (except as set forth on the Schedule of Exceptions attached hereto with each numbered Schedule corresponding to the section number herein), as follows:

(a)

Organization, Good Standing and Power.  The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Nevada and has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted.  The Company does not have any subsidiaries except as set forth in the Company’s Form 10-KSB for the year ended August 31, 2006, including the accompanying financial statements (the “Form 10-KSB”), or in the Company’s Form 10-QSB for the fiscal quarter ended November 30, 2006 (the “Form 10-QSB”), or on Schedule 2.1(g) hereto.  The Company and each such subsidiary is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary except for any jurisdiction(s) (alone or in the aggregate) in which the failure to be so qualified will not have a Material Adverse Effect (as defined in Section 2.1(c) hereof) on the Company’s financial condition.

(b)

Authorization; Enforcement.  The Company has the requisite corporate power and authority to enter into and perform this Agreement, the Registration Rights Agreement in the form attached hereto as Exhibit D (the “Registration Rights Agreement”), the Lock-Up Agreement (as defined in Section 3.20 hereof) in the form attached hereto as Exhibit E, the Escrow Agreement by and among the Company, the Purchasers and the escrow agent, dated as of the date hereof, substantially in the form of Exhibit F attached hereto (the “Escrow Agreement”), the Irrevocable Transfer Agent Instructions (as defined in Section 3.13), the Certificate of Designation, and the Warrants (collectively, the “Transaction Documents”) and to issue and sell the Shares and the Warrants in accordance with the terms hereof.  The execution, delivery and performance of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action, and no further consent or authorization of the Company or its Board of Directors or stockholders is required.  This Agreement has been duly executed and delivered by the Company.  The other Transaction Documents will have been duly executed and delivered by the Company at the Closing.  Each of the Transaction Documents constitutes, or shall constitute when executed and delivered, a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, 

3

­

conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application. 

(c)

Capitalization.  The authorized capital stock of the Company and the shares thereof currently issued and outstanding as of the date hereof are set forth on Schedule 2.1(c) hereto.  All of the outstanding shares of the Common Stock and the Preferred Shares have been duly and validly authorized.  Except as set forth on Schedule 2.1(c) hereto, no shares of Common Stock are entitled to preemptive rights or registration rights and there are no outstanding options, warrants, scrip, rights to subscribe to, call or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company.  There are no contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue additional shares of the capital stock of the Company or options, securities or rights convertible into shares of capital stock of the Company.  The Company is not a party to any agreement granting registration or anti-dilution rights to any person with respect to any of its equity or debt securities.  The Company is not a party to, and it has no knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of the Company.  The offer and sale of all capital stock, convertible securities, rights, warrants, or options of the Company issued prior to the Closing complied with all applicable Federal and state securities laws, and no stockholder has a right of rescission or claim for damages with respect thereto which would have a Material Adverse Effect (as defined below).  The Company has furnished or made available to the Purchasers true and correct copies of the Company’s Articles of Incorporation as in effect on the date hereof (the “Articles”), and the Company’s Bylaws as in effect on the date hereof (the “Bylaws”).  For the purposes of this Agreement, “Material Adverse Effect” means any material adverse effect on the business, operations, properties, prospects, or financial condition of the Company and its subsidiaries and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company to perform any of its obligations under this Agreement in any material respect.

(d)

Issuance of Shares.  The Preferred Shares and the Warrants to be issued at the Closing have been duly authorized by all necessary corporate action and the Preferred Shares, when paid for or issued in accordance with the terms hereof, shall be validly issued and outstanding, fully paid and nonassessable and entitled to the rights and preferences set forth in the Certificate of Designation.  When the Conversion Shares and the Warrant Shares are issued in accordance with the terms of the Certificate of Designation and the Warrants, respectively, such shares will be duly authorized by all necessary corporate action and validly issued and outstanding, fully paid and nonassessable, and the holders shall be entitled to all rights accorded to a holder of Common Stock. 

(e)

No Conflicts.  The execution, delivery and performance of the Transaction Documents by the Company, the performance by the Company of its obligations under the Certificate of Designation and the consummation by the Company of the transactions contemplated herein and therein do not and will not (i) violate any provision of the Company’s Articles or Bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, 

4

­

note, bond, license, lease agreement, instrument or obligation to which the Company is a party or by which it or its properties or assets are bound, (iii) create or impose a lien, mortgage, security interest, charge or encumbrance of any nature on any property of the Company under any agreement or any commitment to which the Company is a party or by which the Company is bound or by which any of its respective properties or assets are bound, or (iv) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including Federal and state securities laws and regulations) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries are bound or affected, except, in all cases other than violations pursuant to clauses (i) and (iv) above, for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect.  The business of the Company and its subsidiaries is not being conducted in violation of any laws, ordinances or regulations of any governmental entity, except for possible violations which singularly or in the aggregate do not and will not have a Material Adverse Effect.  The Company is not required under Federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under the Transaction Documents, or issue and sell the Preferred Shares, the Warrants, the Conversion Shares and the Warrant Shares in accordance with the terms hereof or thereof (other than any filings which may be required to be made by the Company with the Commission or state securities administrators subsequent to the Closing, any registration statement which may be filed pursuant hereto, and the Certificate of Designation); provided that, for purposes of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of the Purchasers herein.

(f)

Commission Documents, Financial Statements.  The Common Stock of the Company is registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the Commission pursuant to the reporting requirements of the Exchange Act, including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all of the foregoing including filings incorporated by reference therein being referred to herein as the “Commission Documents”).  The Company has delivered or made available to each of the Purchasers true and complete copies of the Commission Documents.  The Company has not provided to the Purchasers any material non-public information or other information which, according to applicable law, rule or regulation, was required to have been disclosed publicly by the Company but which has not been so disclosed, other than with respect to the transactions contemplated by this Agreement.  At the times of their respective filings, the Form 10-KSB and the Form 10-QSB complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such documents, and, as of their respective dates, none of the Form 10-KSB and the Form 10-QSB 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.  The financial statements of the Company included in the Commission Documents comply as to form in all material respects with applicable accounting requirements and the published rules and 

5

­

regulations of the Commission or other applicable rules and regulations with respect thereto.  Such financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis 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 not include footnotes or may be condensed or summary statements), and fairly present in all material respects the financial position of the Company and its subsidiaries as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

(g)

Subsidiaries.  Schedule 2.1(g) hereto sets forth each subsidiary of the Company, showing the jurisdiction of its incorporation or organization and showing the percentage of each person’s ownership.  For the purposes of this Agreement, “subsidiary” shall mean any corporation or other entity of which at least a majority of the securities or other ownership interest having ordinary voting power (absolutely or contingently) for the election of directors or other persons performing similar functions are at the time owned directly or indirectly by the Company and/or any of its other subsidiaries.  All of the outstanding shares of capital stock of each subsidiary have been duly authorized and validly issued, and are fully paid and nonassessable.  There are no outstanding preemptive, conversion or other rights, options, warrants or agreements granted or issued by or binding upon any subsidiary for the purchase or acquisition of any shares of capital stock of any subsidiary or any other securities convertible into, exchangeable for or evidencing the rights to subscribe for any shares of such capital stock.  Neither the Company nor any subsidiary is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of the capital stock of any subsidiary or any convertible securities, rights, warrants or options of the type described in the preceding sentence.  Neither the Company nor any subsidiary is party to, nor has any knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of any subsidiary.

(h)

No Material Adverse Change.  Since August 31, 2006, the Company has not experienced or suffered any Material Adverse Effect.

(i)

No Undisclosed Liabilities.  Neither the Company nor any of its subsidiaries has any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) other than those incurred in the ordinary course of the Company’s or its subsidiaries respective businesses since August 31, 2006 and which, individually or in the aggregate, do not or would not have a Material Adverse Effect on the Company or its subsidiaries.

(j)

No Undisclosed Events or Circumstances.  No event or circumstance has occurred or exists with respect to the Company or its subsidiaries or their respective businesses, properties, prospects, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed.

(k)

Indebtedness.  The Form 10-KSB, Form 10-QSB or Schedule 2.1(k) hereto sets forth as of a recent date all outstanding secured and unsecured Indebtedness of the 

6

­

Company or any subsidiary, or for which the Company or any subsidiary has commitments.  For the purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed money or amounts owed in excess of $100,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of $25,000 due under leases required to be capitalized in accordance with GAAP.  Except as set forth on Schedule 2.1(k), neither the Company nor any subsidiary is in default with respect to any Indebtedness.

(l)

Title to Assets.  Each of the Company and the subsidiaries has good and marketable title to all of its real and personal property reflected in the Form 10-KSB, free and clear of any mortgages, pledges, charges, liens, security interests or other encumbrances, except for those disclosed in the Form 10-KSB or such that, individually or in the aggregate, do not cause a Material Adverse Effect.  All leases of the Company and each of its subsidiaries are valid and subsisting and in full force and effect.

(m)

Actions Pending.  There is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or any other proceeding pending or, to the knowledge of the Company, threatened against the Company or any subsidiary which questions the validity of this Agreement or any of the other Transaction Documents or the transactions contemplated hereby or thereby or any action taken or to be taken pursuant hereto or thereto.  Except as set forth in the Form 10-KSB or Form 10-QSB, there is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or any other proceeding pending or, to the knowledge of the Company, threatened, against or involving the Company, any subsidiary or any of their respective properties or assets.  There are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company or any subsidiary or any officers or directors of the Company or subsidiary in their capacities as such.

(n)

Compliance with Law.  The business of the Company and the subsidiaries has been and is presently being conducted in accordance with all applicable federal, state and local governmental laws, rules, regulations and ordinances, except for such noncompliance that, individually or in the aggregate, would not cause a Material Adverse Effect.  The Company and each of its subsidiaries have all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being conducted by it unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

(o)

Taxes.  The Company and each of the subsidiaries has accurately prepared and filed all federal, state and other tax returns required by law to be filed by it, has paid or made provisions for the payment of all taxes shown to be due and all additional assessments, and adequate provisions have been and are reflected in the financial statements of the Company and the subsidiaries for all current taxes and other charges to which the Company or any subsidiary is 

7

­

subject and which are not currently due and payable.  None of the federal income tax returns of the Company or any subsidiary have been audited by the Internal Revenue Service.  The Company has no knowledge of any additional assessments, adjustments or contingent tax liability (whether federal or state) of any nature whatsoever, whether pending or threatened against the Company or any subsidiary for any period, nor of any basis for any such assessment, adjustment or contingency.

(p)

Certain Fees.  Except as set forth on Schedule 2.1(p) hereto, no brokers, finders or financial advisory fees or commissions will be payable by the Company or any subsidiary or any Purchaser with respect to the transactions contemplated by this Agreement.

(q)

Disclosure.  Neither this Agreement or the Schedules hereto nor any other documents, certificates or instruments furnished to the Purchasers by or on behalf of the Company or any subsidiary in connection with the transactions contemplated by this Agreement contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading.

(r)

Operation of Business.  The Company and each of the subsidiaries owns or possesses all patents, trademarks, domain names (whether or not registered) and any patentable improvements or copyrightable derivative works thereof, websites and intellectual property rights relating thereto, service marks, trade names, copyrights, licenses and authorizations as set forth in the Form 10-KSB, and all rights with respect to the foregoing, which are necessary for the conduct of its business as now conducted without any conflict with the rights of others.

(s)

Environmental Compliance.  The Company and each of its subsidiaries have obtained all material approvals, authorization, certificates, consents, licenses, orders and permits or other similar authorizations of all governmental authorities, or from any other person, that are required under any  Environmental Laws.  The Form 10-KSB or Form 10-QSB describes all material permits, licenses and other authorizations issued under any Environmental Laws to the Company or its subsidiaries.  “Environmental Laws” shall mean all applicable laws relating to the protection of the environment including, without limitation, all requirements pertaining to reporting, licensing, permitting, controlling, investigating or remediating emissions, discharges, releases or threatened releases of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, materials or wastes, whether solid, liquid or gaseous in nature, into the air, surface water, groundwater or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, material or wastes, whether solid, liquid or gaseous in nature.  The Company has all necessary governmental approvals required under all Environmental Laws and used in its business or in the business of any of its subsidiaries.  The Company and each of its subsidiaries are also in compliance with all other limitations, restrictions, conditions, standards, requirements, schedules and timetables required or imposed under all Environmental Laws.  Except for such instances as would not individually or in the aggregate have a Material Adverse Effect, there are no past or present events, conditions, circumstances, incidents, actions or omissions relating to or in any way affecting the Company or 

8

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its subsidiaries that violate or may violate any Environmental Law after the Closing Date or that may give rise to any environmental liability, or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, study or investigation (i) under any Environmental Law, or (ii) based on or related to the manufacture, processing, distribution, use, treatment, storage (including without limitation underground storage tanks), disposal, transport or handling, or the emission, discharge, release or threatened release of any hazardous substance.  

(t)

Books and Record Internal Accounting Controls.  The books and records of the Company and its subsidiaries accurately reflect in all material respects the information relating to the business of the Company and the subsidiaries, the location and collection of their assets, and the nature of all transactions giving rise to the obligations or accounts receivable of the Company or any subsidiary.  The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate actions is taken with respect to any differences.

(u)

Material Agreements.  Neither the Company nor any subsidiary is a party to any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, a copy of which would be required to be filed with the Commission as an exhibit to a registration statement on Form S-3 or applicable form (collectively, “Material Agreements”) if the Company or any subsidiary were registering securities under the Securities Act.  The Company and each of its subsidiaries has in all material respects performed all the obligations required to be performed by them to date under the foregoing agreements, have received no notice of default and are not in default under any Material Agreement now in effect, the result of which could cause a Material Adverse Effect.  No written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement of the Company or of any subsidiary limits or shall limit the payment of dividends on the Company’s Preferred Shares, other preferred stock, if any, or its Common Stock.

(v)

Transactions with Affiliates.  Except as set forth in the Commission Documents, there are no loans, leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing transactions between (a) the Company or any subsidiary on the one hand, and (b) on the other hand, any officer, employee, consultant or director of the Company, or any of its subsidiaries, or any person owning any capital stock of the Company or any subsidiary or any member of the immediate family of such officer, employee, consultant, director or stockholder or any corporation or other entity controlled by such officer, employee, consultant, director or stockholder, or a member of the immediate family of such officer, employee, consultant, director or stockholder.

(w)

Securities Act of 1933.  Based in material part upon the representations herein of the Purchasers, the Company has complied and will comply with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Shares and the 

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Warrants hereunder.  Neither the Company nor anyone acting on its behalf, directly or indirectly, has or will sell, offer to sell or solicit offers to buy any of the Shares, the Warrants or similar securities to, or solicit offers with respect thereto from, or enter into any preliminary conversations or negotiations relating thereto with, any person, or has taken or will take any action so as to bring the issuance and sale of any of the Shares and the Warrants under the registration provisions of the Securities Act and applicable state securities laws, and neither the Company nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of any of the Shares and the Warrants.

(x)

Governmental Approvals.  Except for the filing of any notice prior or subsequent to the Closing Date that may be required under applicable state and/or Federal securities laws (which if required, shall be filed on a timely basis), including the filing of a Form D and a registration statement or statements pursuant to the Registration Rights Agreement, and the filing of the Certificate of Designation with the Secretary of State for the State of Nevada, no authorization, consent, approval, license, exemption of, filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is or will be necessary for, or in connection with, the execution or delivery of the Preferred Shares and the Warrants, or for the performance by the Company of its obligations under the Transaction Documents.

(y)

Employees.  Neither the Company nor any subsidiary has any collective bargaining arrangements or agreements covering any of its employees.  Neither the Company nor any subsidiary has any employment contract, agreement regarding proprietary information, non-competition agreement, non-solicitation agreement, confidentiality agreement, or any other similar contract or restrictive covenant, relating to the right of any officer, employee or consultant to be employed or engaged by the Company or such subsidiary.  No officer, consultant or key employee of the Company or any subsidiary whose termination, either individually or in the aggregate, could have a Material Adverse Effect, has terminated or, to the knowledge of the Company, has any present intention of terminating his or her employment or engagement with the Company or any subsidiary.

(z)

Absence of Certain Developments.  Except as set forth in the Form 10-KSB, the Form 10-QSB or on Schedule 2.1(c) hereto, since August 31, 2006, neither the Company nor any subsidiary has:

(i)

issued any stock, bonds or other corporate securities or any rights, options or warrants with respect thereto;

(ii)

borrowed any amount or incurred or become subject to any liabilities (absolute or contingent) except current liabilities incurred in the ordinary course of business which are comparable in nature and amount to the current liabilities incurred in the ordinary course of business during the comparable portion of its prior fiscal year, as adjusted to reflect the current nature and volume of the Company’s or such subsidiary’s business;

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(iii)

discharged or satisfied any lien or encumbrance or paid any obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of business;

(iv)

declared or made any payment or distribution of cash or other property to stockholders with respect to its stock, or purchased or redeemed, or made any agreements so to purchase or redeem, any shares of its capital stock;

(v)

sold, assigned or transferred any other tangible assets, or canceled any debts or claims, except in the ordinary course of business;

(vi)

sold, assigned or transferred any patent rights, trademarks, trade names, copyrights, trade secrets or other intangible assets or intellectual property rights, or disclosed any proprietary confidential information to any person except to customers in the ordinary course of business or to the Purchasers or their representatives;

(vii)

suffered any substantial losses or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of prospective business;

(viii)

made any changes in employee compensation except in the ordinary course of business and consistent with past practices;

(ix)

made capital expenditures or commitments therefor that aggregate in excess of $100,000;

(x)

entered into any other transaction other than in the ordinary course of business, or entered into any other material transaction, whether or not in the ordinary course of business;

(xi)

made charitable contributions or pledges in excess of $25,000;

(xii)

suffered any material damage, destruction or casualty loss, whether or not covered by insurance;

(xiii)

experienced any material problems with labor or management in connection with the terms and conditions of their employment;

(xiv)

effected any two or more events of the foregoing kind which in the aggregate would be material to the Company or its subsidiaries; or

(xv)

entered into an agreement, written or otherwise, to take any of the foregoing actions.

(aa)

Public Utility Holding Company Act and Investment Company Act Status.  The Company is not a “holding company” or a “public utility company” as such terms are defined in the Public Utility Holding Company Act of 1935, as amended.  The Company is not, and as a result of and immediately upon the Closing will not be, an “investment company” or a 

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company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

(bb)

ERISA.  No liability to the Pension Benefit Guaranty Corporation has been incurred with respect to any Plan (as defined below) by the Company or any of its subsidiaries which is or would be materially adverse to the Company and its subsidiaries.  The execution and delivery of this Agreement and the issuance and sale of the Preferred Shares will not involve any transaction which is subject to the prohibitions of Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended, provided that, if any of the Purchasers, or any person or entity that owns a beneficial interest in any of the Purchasers, is an “employee pension benefit plan” (within the meaning of Section 3(2) of ERISA) with respect to which the Company is a “party in interest” (within the meaning of Section 3(14) of ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met.  As used in this Section 2.1(ac), the term “Plan” shall mean an “employee pension benefit plan” (as defined in Section 3 of ERISA) which is or has been established or maintained, or to which contributions are or have been made, by the Company or any subsidiary or by any trade or business, whether or not incorporated, which, together with the Company or any subsidiary, is under common control, as described in Section 414(b) or (c) of the Code.

(cc)

Dilutive Effect.  The Company understands and acknowledges that its obligation to issue Conversion Shares upon conversion of the Preferred Shares in accordance with this Agreement and the Certificate of Designation and its obligations to issue the Warrant Shares upon the exercise of the Warrants in accordance with this Agreement and the Warrants, is, in each case, absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interest of other stockholders of the Company.

(dd)

No Integrated Offering.  Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the offering of the Shares pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the Securities Act which would prevent the Company from selling the Shares pursuant to Rule 506 under the Securities Act, or any applicable exchange-related stockholder approval provisions, nor will the Company or any of its affiliates or subsidiaries take any action or steps that would cause the offering of the Shares to be integrated with other offerings.  The Company does not have any registration statement pending before the Commission or currently under the Commission’s review and since July 11, 2006, the Company has not offered or sold any of its equity securities or debt securities convertible into shares of Common Stock.

(ee)

Sarbanes-Oxley Act.  The Company is in compliance with the applicable provisions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), and the rules and regulations promulgated thereunder, that are effective, and intends to comply with other applicable provisions of the Sarbanes-Oxley Act, and the rules and regulations promulgated thereunder, upon the effectiveness of such provisions.

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(ff)

Independent Nature of Purchasers.  The Company acknowledges that the obligations of each Purchaser under the Transaction Documents are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under the Transaction Documents.  The Company acknowledges that the decision of each Purchaser to purchase securities pursuant to this Agreement has been made by such Purchaser independently of any other purchase 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 of its Subsidiaries which may have made or given by any other Purchaser or by any agent or employee of any other Purchaser, and no Purchaser or any of its agents or employees shall have any liability to any Purchaser (or any other person) relating to or arising from any such information, materials, statements or opinions.  The Company acknowledges that nothing contained herein, or in any Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  The Company acknowledges that each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.  The Company acknowledges that for reasons of administrative convenience only, the Transaction Documents have been prepared by counsel for one of the Purchasers and such counsel does not represent all of the Purchasers but only such Purchaser and the other Purchasers have retained their own individual counsel with respect to the transactions contemplated hereby.  The Company acknowledges that it has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by the Purchasers.  The Company acknowledges that such procedure with respect to the Transaction Documents in no way creates a presumption that the Purchasers are in any way acting in concert or as a group with respect to the Transaction Documents or the transactions contemplated hereby or thereby. 

(gg)

DTC Status.  The Company’s current transfer agent is a participant in and the Common Stock is eligible for transfer pursuant to the Depository Trust Company Automated Securities Transfer Program.  The name, address, telephone number, fax number, contact person and email address of the Company’s transfer agent is set forth on Schedule 2.1(ff) hereto.

Section 2.2

Representations and Warranties of the Purchasers.  Each of the Purchasers hereby makes the following representations and warranties to the Company with respect solely to itself and not with respect to any other Purchaser:

(a)

Organization and Standing of the Purchasers.  If the Purchaser is an entity, such Purchaser is a corporation or partnership duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization.

(b)

Authorization and Power.  Each Purchaser has the requisite power and authority to enter into and perform this Agreement and to purchase the Preferred Shares and 

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Warrants being sold to it hereunder.  The execution, delivery and performance of this Agreement and the Registration Rights Agreement by such Purchaser and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate or partnership action, and no further consent or authorization of such Purchaser or its Board of Directors, stockholders, or partners, as the case may be, is required.  Each of this Agreement and the Registration Rights Agreement has been duly authorized, executed and delivered by such Purchaser and constitutes, or shall constitute when executed and delivered, a valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with the terms thereof.

(c)

No Conflicts.  The execution, delivery and performance of this Agreement and the Registration Rights Agreement and the consummation by such Purchaser of the transactions contemplated hereby and thereby or relating hereto do not and will not (i) result in a violation of such Purchaser’s charter documents or bylaws or other organizational documents or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of any agreement, indenture or instrument or obligation to which such Purchaser is a party or by which its properties or assets are bound, or result in a violation of any law, rule, or regulation, or any order, judgment or decree of any court or governmental agency applicable to such Purchaser or its properties (except for such conflicts, defaults and violations as would not, individually or in the aggregate, have a material adverse effect on such Purchaser).  Such Purchaser is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or the Registration Rights Agreement or to purchase the Preferred Shares or acquire the Warrants in accordance with the terms hereof, provided that for purposes of the representation made in this sentence, such Purchaser is assuming and relying upon the accuracy of the relevant representations and agreements of the Company herein.

(d)

Acquisition for Investment.  Each Purchaser is acquiring the Preferred Shares and the Warrants solely for its own account for the purpose of investment and not with a view to or for sale in connection with distribution.  Each Purchaser does not have a present intention to sell the Preferred Shares or the Warrants, nor a present arrangement (whether or not legally binding) or intention to effect any distribution of the Preferred Shares or the Warrants to or through any person or entity; provided, however, that by making the representations herein and subject to Section 2.2(h) below, such Purchaser does not agree to hold the Shares or the Warrants for any minimum or other specific term and reserves the right to dispose of the Shares or the Warrants at any time in accordance with Federal and state securities laws applicable to such disposition.  Each Purchaser acknowledges that it is able to bear the financial risks associated with an investment in the Preferred Shares and the Warrants and that it has been given full access to such records of the Company and the subsidiaries and to the officers of the Company and the subsidiaries and received such information as it has deemed necessary or appropriate to conduct its due diligence investigation and has sufficient knowledge and experience in investing in companies similar to the Company in terms of the Company’s stage of development so as to be able to evaluate the risks and merits of its investment in the Company.

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(e)

Status of Purchasers.  Such Purchaser is an “accredited investor” as defined in Regulation D promulgated under the Securities Act.  Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act and such Purchaser is not a broker-dealer.

(f)

Opportunities for Additional Information.  Each Purchaser acknowledges that such Purchaser has had the opportunity to ask questions of and receive answers from, or obtain additional information from, the executive officers of the Company concerning the financial and other affairs of the Company, and to the extent deemed necessary in light of such Purchaser’s personal knowledge of the Company’s affairs, such Purchaser has asked such questions and received answers to the full satisfaction of such Purchaser, and such Purchaser desires to invest in the Company.

(g)

No General Solicitation.  Each Purchaser acknowledges that the Preferred Shares and the Warrants were not offered to such Purchaser by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media, or broadcast over television or radio, or (ii) any seminar or meeting to which such Purchaser was invited by any of the foregoing means of communications.

(h)

Rule 144.  Such Purchaser understands that the Shares must be held indefinitely unless such Shares are registered under the Securities Act or an exemption from registration is available.  Such Purchaser acknowledges that such Purchaser is familiar with Rule 144 of the rules and regulations of the Commission, as amended, promulgated pursuant to the Securities Act (“Rule 144”), and that such person has been advised that Rule 144 permits resales only under certain circumstances.  Such Purchaser understands that to the extent that Rule 144 is not available, such Purchaser will be unable to sell any Shares without either registration under the Securities Act or the existence of another exemption from such registration requirement.

(i)

General.  Such Purchaser understands that the Shares are being offered and sold in reliance on a transactional exemption from the registration requirement of Federal and state securities laws and the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in order to determine the applicability of such exemptions and the suitability of such Purchaser to acquire the Shares.

(j)

Independent Investment.  Except as may be disclosed in any filings with the Commission by the Purchasers under Section 13 and/or Section 16 of the Exchange Act, no Purchaser has agreed to act with any other Purchaser for the purpose of acquiring, holding, voting or disposing of the Shares purchased hereunder for purposes of Section 13(d) under the Exchange Act, and each Purchaser is acting independently with respect to its investment in the Shares.

(k)

Trading Activities.  Each Purchaser’s trading activities with respect to the Shares shall be in compliance with all applicable federal and state securities laws.  No Purchaser 

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nor any of its affiliates has an open short position in the Common Stock, each Purchaser agrees that it shall not, and that it will cause its affiliates not to, engage in any short sales with respect to the Common Stock. 

ARTICLE III

Covenants

The Company covenants with each of the Purchasers as follows, which covenants are for the benefit of the Purchasers and their permitted assignees (as defined herein).

Section 3.1

Securities Compliance.  The Company shall notify the Commission in accordance with their rules and regulations, of the transactions contemplated by any of the Transaction Documents, including filing a Form D with respect to the Preferred Shares, Warrants, Conversion Shares and Warrant Shares as required under Regulation D, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Preferred Shares, the Warrants, the Conversion Shares and the Warrant Shares to the Purchasers or subsequent holders. 

Section 3.2

Registration and Listing.  The Company shall cause its Common Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange Act, to comply in all respects with its reporting and filing obligations under the Exchange Act, to comply with all requirements related to any registration statement filed pursuant to this Agreement, and to not take any action or file any document (whether or not permitted by the Securities Act or the rules promulgated thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under the Exchange Act or Securities Act, except as permitted herein.  The Company will take all action necessary to continue the listing or trading of its Common Stock on the OTC Bulletin Board or other exchange or market on which the Common Stock is trading.  Subject to the terms of the Transaction Documents, the Company further covenants that it will take such further action as the Purchasers may reasonably request, all to the extent required from time to time to enable the Purchasers to sell the Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act.  Upon the request of the Purchasers, the Company shall deliver to the Purchasers a written certification of a duly authorized officer as to whether it has complied with such requirements.

Section 3.3

Inspection Rights.  The Company shall permit, during normal business hours and upon reasonable request and reasonable notice, each Purchaser or any employees, agents or representatives thereof, so long as such Purchaser shall be obligated hereunder to purchase the Preferred Shares or shall beneficially own any Preferred Shares, or shall own Conversion Shares which, in the aggregate, represent more than 2% of the total combined voting power of all voting securities then outstanding, for purposes reasonably related to such Purchaser’s interests as a stockholder to examine and make reasonable copies of and extracts from the records and books of account of, and visit and inspect the properties, assets, operations and business of the Company and any subsidiary, and to discuss the affairs, finances 

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and accounts of the Company and any subsidiary with any of its officers, consultants, directors, and key employees.  

Section 3.4

Compliance with Laws.  The Company shall comply, and cause each subsidiary to comply, with all applicable laws, rules, regulations and orders, noncompliance with which could have a Material Adverse Effect.

Section 3.5

Keeping of Records and Books of Account.  The Company shall keep and cause each subsidiary to keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied, reflecting all financial transactions of the Company and its subsidiaries, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made.

Section 3.6

Reporting Requirements.  If the Commission ceases making periodic reports filed under the Exchange Act available via the Internet, then at a Purchaser’s request the Company shall furnish the following to such Purchaser so long as such Purchaser shall be obligated hereunder to purchase the Preferred Shares or shall beneficially own any Shares:

(a)

Quarterly Reports filed with the Commission on Form 10-QSB as soon as practical after the document is filed with the Commission, and in any event within five (5) days after the document is filed with the Commission;

(b)

Annual Reports filed with the Commission on Form 10-KSB as soon as practical after the document is filed with the Commission, and in any event within five (5) days after the document is filed with the Commission; and

(c)

Copies of all notices and information, including without limitation notices and proxy statements in connection with any meetings, that are provided to holders of shares of Common Stock, contemporaneously with the delivery of such notices or information to such holders of Common Stock.

Section 3.7

Amendments.  The Company shall not amend or waive any provision of the Articles or Bylaws of the Company in any way that would adversely affect the liquidation preferences, dividends rights, conversion rights, voting rights or redemption rights of the Preferred Shares; provided, however, that any creation and issuance of another series of Junior Stock (as defined in the Certificate of Designation) or any other class or series of equity securities which by its terms shall rank on parity with the Preferred Shares shall not be deemed to materially and adversely affect such rights, preferences or privileges.

Section 3.8

Other Agreements.  The Company shall not enter into any agreement in which the terms of such agreement would restrict or impair the right or ability to perform of the Company or any subsidiary under any Transaction Document.

Section 3.9

Distributions.  So long as any Preferred Shares or Warrants remain outstanding, the Company agrees that it shall not (i) declare or pay any dividends or make any 

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distributions to any holder(s) of Common Stock or (ii) purchase or otherwise acquire for value, directly or indirectly, any Common Stock or other equity security of the Company.

Section 3.10

Status of Dividends.  The Company covenants and agrees that (i) no Federal income tax return or claim for refund of Federal income tax or other submission to the Internal Revenue Service (the “Service”) will adversely affect the Preferred Shares, any other series of its Preferred Stock, or the Common Stock, and no deduction shall operate to jeopardize the availability to Purchasers of the dividends received deduction provided by Section 243(a)(1) of the Code or any successor provision, (ii) in no report to shareholders or to any governmental body having jurisdiction over the Company or otherwise will it treat the Preferred Shares other than as equity capital or the dividends paid thereon other than as dividends paid on equity capital unless required to do so by a governmental body having jurisdiction over the accounts of the Company or by a change in generally accepted accounting principles required as a result of action by an authoritative accounting standards setting body, and (iii) it will take no action which would result in the dividends paid by the Company on the Preferred Shares out of the Company’s current or accumulated earnings and profits being ineligible for the dividends received deduction provided by Section 243(a)(1) of the Code.  The preceding sentence shall not be deemed to prevent the Company from designating the Preferred Stock as “Convertible Preferred Stock” in its annual and quarterly financial statements in accordance with its prior practice concerning other series of preferred stock of the Company.  In the event that the Purchasers have reasonable cause to believe that dividends paid by the Company on the Preferred Shares out of the Company’s current or accumulated earnings and profits will not be treated as eligible for the dividends received deduction provided by Section 243(a)(1) of the Code, or any successor provision, the Company will, at the reasonable request of the Purchasers of 51% of the outstanding Preferred Shares, join with the Purchasers in the submission to the Service of a request for a ruling that dividends paid on the Shares will be so eligible for Federal income tax purposes, at the Purchasers expense.  In addition, the Company will reasonably cooperate with the Purchasers (at Purchasers’ expense) in any litigation, appeal or other proceeding challenging or contesting any ruling, technical advice, finding or determination that earnings and profits are not eligible for the dividends received deduction provided by Section 243(a)(1) of the Code, or any successor provision to the extent that the position to be taken in any such litigation, appeal, or other proceeding is not contrary to any provision of the Code.  Notwithstanding the foregoing, nothing herein contained shall be deemed to preclude the Company from claiming a deduction with respect to such dividends if (i) the Code shall hereafter be amended, or final Treasury regulations thereunder are issued or modified, to provide that dividends on the Preferred Shares or Conversion Shares should not be treated as dividends for Federal income tax purposes or that a deduction with respect to all or a portion of the dividends on the Shares is allowable for Federal income tax purposes, or (ii) in the absence of such an amendment, issuance or modification and after a submission of a request for ruling or technical advice, the Service shall issue a published ruling or advise that dividends on the Shares should not be treated as dividends for Federal income tax purposes.  If the Service specifically determines that the Preferred Shares or Conversion Shares constitute debt, the Company may file protective claims for refund.

Section 3.11

Use of Proceeds.  The net proceeds from the sale of the Shares hereunder shall be used by the Company for capital expenditures necessary to expand the Company’s operations into clam farming in Morocco (and any remaining proceeds may be used 

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for working capital and general corporate purposes), and not to redeem any Common Stock or securities convertible, exercisable or exchangeable into Common Stock or to settle any outstanding litigation.  

Section 3.12

Reservation of Shares.  So long as any of the Preferred Shares or Warrants remain outstanding, the Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, no less than one hundred twenty percent (120%) the aggregate number of shares of Common Stock needed to provide for the issuance of the Conversion Shares and the Warrant Shares.

Section 3.13

Transfer Agent Instructions.  The Company shall issue irrevocable instructions to its transfer agent, and any subsequent transfer agent, to issue certificates, registered in the name of each Purchaser or its respective nominee(s), for the Conversion Shares and the Warrant Shares in such amounts as specified from time to time by each Purchaser to the Company upon conversion of the Preferred Shares or exercise of the Warrants in the form of Exhibit G attached hereto (the “Irrevocable Transfer Agent Instructions”).  Prior to registration of the Conversion Shares and the Warrant Shares under the Securities Act, all such certificates shall bear the restrictive legend specified in Section 5.1 of this Agreement.  The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 3.13 will be given by the Company to its transfer agent and that the Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Registration Rights Agreement.  If a Purchaser 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 Shares may be made without registration under the Securities Act or the Purchaser provides the Company with reasonable assurances that the Shares 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 Conversion Shares and the Warrant Shares, promptly instruct its transfer agent to issue one or more certificates in such name and in such denominations as specified by such Purchaser and without any restrictive legend.  The Company acknowledges that a breach by it of its obligations under this Section 3.13 will cause irreparable harm to the Purchasers by vitiating the intent and purpose of the transaction contemplated hereby.  Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 3.13 will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 3.13, that the Purchasers shall be entitled, in addition to all other available remedies, to an 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.

Section 3.14

Disposition of Assets.  So long as the Preferred Shares remain outstanding, neither the Company nor any Subsidiary shall sell, transfer or otherwise dispose of any of its properties, assets and rights including, without limitation, its software and intellectual property, to any person except for sales to customers in the ordinary course of business or with the prior written consent of the holders of a majority of the Preferred Shares then outstanding.

Section 3.15

Reporting Status.  So long as a Purchaser beneficially owns any of the Shares, the Company shall timely file all reports required to be filed with the Commission 

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pursuant to the Exchange Act, and the Company shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination.  

Section 3.16

Disclosure of Transaction.  The Company shall issue a press release describing the material terms of the transactions contemplated hereby (the “Press Release”) as soon as practicable after the Closing but in no event later than 9:00 A.M. Eastern Time on the first Trading Day following the Closing Date.  The Company shall also file with the Commission a Current Report on Form 8-K (the “Form 8-K”) describing the material terms of the transactions contemplated hereby (and attaching as exhibits thereto this Agreement, the Registration Rights Agreement, the Certificate of Designation, the Lock-Up Agreement, the form of each series of Warrant and the Press Release) as soon as practicable following the Closing Date but in no event more than two (2) Trading Days following the Closing Date, which Press Release and Form 8-K shall be subject to prior review and comment by the Purchasers.  "Trading Day" means any day during which the OTC Bulletin Board (or other principal exchange on which the Common Stock is traded) shall be open for trading.  

Section 3.17

Disclosure of Material Information.  The Company covenants and agrees that neither it nor any other person acting on its behalf has provided or will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have executed a written agreement regarding the confidentiality and use of such information.  The Company understands and confirms that each Purchaser shall be relying on the foregoing representations in effecting transactions in securities of the Company.

Section 3.18

Pledge of Securities.  The Company acknowledges and agrees that the Shares may be pledged by a Purchaser in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Common Stock.  The pledge of Common Stock shall not be deemed to be a transfer, sale or assignment of the Common Stock hereunder, and no Purchaser effecting a pledge of Common Stock 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; provided that a Purchaser and its pledgee shall be required to comply with the provisions of Article V hereof in order to effect a sale, transfer or assignment of Common Stock to such pledgee. At the Purchasers' expense, the Company hereby agrees to execute and deliver such documentation as a pledgee of the Common Stock may reasonably request in connection with a pledge of the Common Stock to such pledgee by a Purchaser.

Section 3.19

Form SB-2 Eligibility.  The Company currently meets the "registrant eligibility" and transaction requirements set forth in the general instructions to Form SB-2 applicable to "resale" registrations on Form SB-2 and the Company shall file all reports required to be filed by the Company with the Commission in a timely manner.

Section 3.20

Lock-Up Agreement.  The persons listed on Schedule 3.20 attached hereto shall be subject to the terms and provisions of a lock-up agreement in substantially the form as Exhibit E hereto (the “Lock-Up Agreement”), which shall provide the manner in which such persons will sell, transfer or dispose of their shares of Common Stock.  

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Section 3.21

Subsequent Financings.  

(a) 

For a period of one (1) year following the following the effective date of the registration statement providing for the resale of the Conversion Shares and the Warrant Shares, the Company covenants and agrees to promptly notify (in no event later than five (5) days after making or receiving an applicable offer) in writing (a "Rights Notice") each Purchaser who has purchased at least $1,700,000 of Preferred Shares pursuant to this Agreement (an “Eligible Purchaser”) of the terms and conditions of any proposed offer or sale to, or exchange with (or other type of distribution to) any third party (a “Subsequent Financing”), of Common Stock or any debt or equity securities convertible, exercisable or exchangeable into Common Stock; provided, however, prior to delivering a Rights Notice to each Eligible Purchaser, the Company shall first deliver to each Eligible Purchaser a written notice of the Company’s intention to effect a Subsequent Financing (“Pre-Notice”) within three (3) Trading Days of receiving an applicable offer, which Pre-Notice shall ask such Eligible Purchaser if it wants to review the details of such financing.  Each Eligible Purchaser must notify the Company within three (3) Trading Days of receipt of the Pre-Notice that such Eligible Purchaser elects to review the details of such financing (“Pre-Notice Acceptance”).  Upon the Company’s receipt of a Pre-Notice Acceptance, and only upon the Company’s receipt of a Pre-Notice Acceptance, the Company shall promptly, but no later than two (2) Trading Days after such receipt, deliver a Rights Notice to such Eligible Purchaser.  The Rights Notice shall describe, in reasonable detail, the proposed Subsequent Financing, the names and investment amounts of all investors participating in the Subsequent Financing, the proposed closing date of the Subsequent Financing, which shall be within twenty (20) calendar days from the date of the Rights Notice, and all of the terms and conditions thereof and proposed definitive documentation to be entered into in connection therewith.  The Rights Notice shall provide each Eligible Purchaser an option (the “Rights Option”) during the seven (7) Trading Days following delivery of the Rights Notice (the “Option Period”) to inform the Company whether such Eligible Purchaser will purchase up to its pro rata portion of all or a portion of the securities being offered in such Subsequent Financing on the same, absolute terms and conditions as contemplated by such Subsequent Financing.  If any Eligible Purchaser elects not to participate in such Subsequent Financing, the other Eligible Purchasers may participate on a pro-rata basis so long as such participation in the aggregate does not exceed the aggregate Purchase Price of all Eligible Purchasers hereunder.  For purposes of this Section, all references to “pro rata” means, for any Eligible Purchaser electing to participate in such Subsequent Financing, the percentage obtained by dividing (x) the number of Preferred Shares purchased by such Eligible Purchaser at the Closing by (y) the total number of all of the Preferred Shares purchased by all of the participating Eligible Purchasers at the Closing.  Delivery of any Rights Notice constitutes a representation and warranty by the Company that there are no other material terms and conditions, arrangements, agreements or otherwise except for those disclosed in the Rights Notice, to provide additional compensation to any party participating in any proposed Subsequent Financing, including, but not limited to, additional compensation based on changes in the Purchase Price or any type of reset or adjustment of a purchase or conversion price or to issue additional securities at any time after the closing date of a Subsequent Financing.  If the Company does not receive notice of exercise of the Rights Option from the Eligible Purchasers within the Option Period, the Company shall have the right to close the Subsequent Financing on the scheduled closing date with a third party; 

21

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provided that all of the material terms and conditions of the closing are the same as those provided to the Eligible Purchasers in the Rights Notice.  If the closing of the proposed Subsequent Financing does not occur on that date, any closing of the contemplated Subsequent Financing or any other Subsequent Financing shall be subject to all of the provisions of this Section 3.21(a), including, without limitation, the delivery of a new Rights Notice.  The provisions of this Section 3.21(a) shall not apply to issuances of securities in a Permitted Financing. 

(b)  For purposes of this Agreement, a Permitted Financing (as defined hereinafter) shall not be considered a Subsequent Financing.  A "Permitted Financing" shall mean (i) securities issued (other than for cash) in connection with a merger, acquisition, or consolidation, (ii) securities issued pursuant to the conversion or exercise of convertible or exercisable securities issued or outstanding on or prior to the date of this Agreement or issued pursuant to this Agreement (so long as the conversion or exercise price in such securities are not amended to lower such price and/or adversely affect the Purchasers), (iii) securities issued in connection with bona fide strategic license agreements or other partnering arrangements so long as such issuances are not for the purpose of raising capital, (iv) Common Stock issued or the issuance or grants of options to purchase Common Stock pursuant to the Company’s stock option plans and employee stock purchase plans outstanding as they exist on the date of this Agreement, (v) the payment of dividends on the Preferred Shares, or other preferred stock issued and outstanding on or prior to the date of this Agreement, in shares of Common Stock, (vi) the issuance of up to 500,000 shares of Common Stock relating to investor relations or public relations activities, and (vi) any warrants issued to the placement agent and its designees for the transactions contemplated by the Purchase Agreement.

(c)

For a period of two (2) years following the Closing Date, the Company shall be prohibited from effecting or entering into an agreement to effect any Subsequent Financing involving a “Variable Rate Transaction”.  The term “Variable Rate Transaction” shall mean a transaction in which the Company issues or sells (i) any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of Common Stock either (A) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby the Company may sell securities at a future determined price.  Notwithstanding the foregoing, except for any equity line of credit or similar agreement referred to in subclause (ii) of this Section 3.21(c), the prohibition against Variable Rate Transactions shall not apply in connection with a transaction that contains a definite minimum price of $1.00 upon conversion or issuance below which such securities cannot be converted or issued. 

(d)

For the period commencing on the Closing Date and ending on the date that is one hundred eighty (180) days following the effective date of the Registration Statement (as defined in the Registration Rights Agreement), the Company shall not file any registration 

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statement under the Securities Act without the prior written consent of the Purchasers.

ARTICLE IV

CONDITIONS

Section 4.1

Conditions Precedent to the Obligation of the Company to Sell the Shares.  The obligation hereunder of the Company to issue and sell the Preferred Shares and the Warrants to the Purchasers is subject to the satisfaction or waiver, at or before the Closing, of each of the conditions set forth below.  These conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion.

(a)

Accuracy of Each Purchaser’s Representations and Warranties.  The representations and warranties of each Purchaser shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time, except for representations and warranties that are expressly made as of a particular date, which shall be true and correct in all material respects as of such date.

(b)

Performance by the Purchasers.  Each Purchaser shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Purchaser at or prior to the Closing.

(c)

No Injunction.  No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. 

(d)

Delivery of Purchase Price.  The Purchase Price for the Preferred Shares and Warrants has been delivered to the Company at the Closing Date.

(e)

Delivery of Transaction Documents.  The Transaction Documents shall have been duly executed and delivered by the Purchasers and, with respect to the Escrow Agreement, the escrow agent, to the Company. 

Section 4.2

Conditions Precedent to the Obligation of the Purchasers to Purchase the Shares.  The obligation hereunder of each Purchaser to acquire and pay for the Preferred Shares and the Warrants is subject to the satisfaction or waiver, at or before the Closing, of each of the conditions set forth below.  These conditions are for each Purchaser’s sole benefit and may be waived by such Purchaser at any time in its sole discretion.

(a)

Accuracy of the Company’s Representations and Warranties.  Each of the representations and warranties of the Company in this Agreement and the Registration Rights Agreement shall be true and correct in all respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that are expressly made as of a particular date), which shall be true and correct in all respects as of such 

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date.

(b)

Performance by the Company.  The Company shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing.

(c)

No Suspension, Etc.  Trading in the Company’s Common Stock shall not have been suspended by the Commission or the OTC Bulletin Board (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the applicable Closing), and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg Financial Markets (“Bloomberg”) shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by Bloomberg, or on the New York Stock Exchange, nor shall a banking moratorium have been declared either by the United States or New York State authorities, nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity or crisis of such magnitude in its effect on, or any material adverse change in any financial market which, in each case, in the judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Preferred Shares.

(d)

No Injunction.  No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.

(e)

No Proceedings or Litigation.  No action, suit or proceeding before any arbitrator or any governmental authority shall have been commenced, and no investigation by any governmental authority shall have been threatened, against the Company or any subsidiary, or any of the officers, directors or affiliates of the Company or any subsidiary seeking to restrain, prevent or change the transactions contemplated by this Agreement, or seeking damages in connection with such transactions.

(f)

Certificate of Designation of Rights and Preferences.  Prior to the Closing, the Certificate of Designation in the form of Exhibit B attached hereto shall have been filed with the Secretary of State of Nevada.

(g)

Opinion of Counsel, Etc. At the Closing, the Purchasers shall have received an opinion of counsel to the Company, dated the date of the Closing, in the form of Exhibit H hereto, and such other certificates and documents as the Purchasers or its counsel shall reasonably require incident to the Closing.

(h)

Registration Rights Agreement.  At the Closing, the Company shall have executed and delivered the Registration Rights Agreement to each Purchaser.

(i)

Certificates.  The Company shall have executed and delivered to the 

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Purchasers the certificates (in such denominations as such Purchaser shall request) for the Preferred Shares and the Warrants being acquired by such Purchaser at the Closing (in such denominations as such Purchaser shall request).

(j)

Resolutions.  The Board of Directors of the Company shall have adopted resolutions consistent with Section 2.1(b) hereof in a form reasonably acceptable to such Purchaser (the "Resolutions").

(k)

Reservation of Shares.  As of the Closing Date, the Company shall have reserved out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Preferred Shares and the exercise of the Warrants, a number of shares of Common Stock equal to one hundred twenty percent (120%) of the aggregate number of Conversion Shares issuable upon conversion of the Preferred Shares outstanding on the Closing Date and the number of Warrant Shares issuable upon exercise of the number of Warrants assuming such Warrants were granted on the Closing Date.

(l)

Transfer Agent Instructions.  The Irrevocable Transfer Agent Instructions, in the form of Exhibit G attached hereto, shall have been delivered to and acknowledged in writing by the Company’s transfer agent.

(m)

Lock-Up Agreement.  As of the Closing Date, the persons listed on Schedule 3.20 hereto shall have delivered to the Purchasers a fully executed Lock-Up Agreement in the form of Exhibit E attached hereto. 

(n)

Escrow Agreement.  At the Closing, the Company and the escrow agent shall have executed and delivered the Escrow Agreement to each Purchaser.

(o)

Secretary’s Certificate.  The Company shall have delivered to such Purchaser a secretary’s certificate, dated as of the Closing Date, as to (i) the Resolutions, (ii) the Articles, (iii) the Bylaws, (iv) the Certificate of Designation, each as in effect at the Closing, and (iv) the authority and incumbency of the officers of the Company executing the Transaction Documents and any other documents required to be executed or delivered in connection therewith.

(p)

Officer’s Certificate.  The Company shall have delivered to the Purchasers a certificate of an executive officer of the Company, dated as of the Closing Date, confirming the accuracy of the Company’s representations, warranties and covenants as of such Closing Date and confirming the compliance by the Company with the conditions precedent set forth in this Section 4.2 as of the Closing Date.

(q)

Material Adverse Effect.  No Material Adverse Effect shall have occurred at or before the Closing Date. 

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ARTICLE V

Stock Certificate Legend

Section 5.1

Legend.  Each certificate representing the Preferred Shares and the Warrants, and, if appropriate, securities issued upon conversion thereof, shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required by applicable state securities or “blue sky” laws):

THESE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR EDGEWATER FOODS INTERNATIONAL, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

The Company agrees to reissue certificates representing any of the Conversion Shares and the Warrant Shares, without the legend set forth above if at such time, prior to making any transfer of any such securities, such holder thereof shall give written notice to the Company describing the manner and terms of such transfer and removal as the Company may reasonably request.  Such proposed transfer and removal will not be effected until: (a) either (i) the Company has received an opinion of counsel reasonably satisfactory to the Company, to the effect that the registration of the Conversion Shares or the Warrant Shares under the Securities Act is not required in connection with such proposed transfer, (ii) a registration statement under the Securities Act covering such proposed disposition has been filed by the Company with the Commission and has become effective under the Securities Act, (iii) the Company has received other evidence reasonably satisfactory to the Company that such registration and qualification under the Securities Act and state securities laws are not required, or (iv) the holder provides the Company with reasonable assurances that such security can be sold pursuant to Rule 144 under the Securities Act; and (b) either (i) the Company has received an opinion of counsel reasonably satisfactory to the Company, to the effect that registration or qualification under the securities or "blue sky" laws of any state is not required in connection with such proposed disposition, or (ii) compliance with applicable state securities or "blue sky" laws has been effected or a valid exemption exists with respect thereto.  The Company will respond to any such notice from a holder within five (5) business days.  In the case of any proposed transfer under this Section 5.1, the Company will use reasonable efforts to comply with any such applicable state securities or "blue sky" laws, but shall in no event be required, (x) to qualify to do business in any state where it is not then qualified, (y) to take any action that would subject it to tax or to the general service of process in any state where it is not then subject, or (z) to comply with state securities or “blue sky” laws of any state for which registration by coordination is unavailable to the Company.  The restrictions on transfer contained in this Section 5.1 shall be in addition to, and not by way of 

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limitation of, any other restrictions on transfer contained in any other section of this Agreement.  Whenever a certificate representing the Conversion Shares or Warrant Shares is required to be issued to a Purchaser without a legend, in lieu of delivering physical certificates representing the Conversion Shares or Warrant Shares (provided that a registration statement under the Securities Act providing for the resale of the Warrant Shares and Conversion Shares is then in effect and such request is in connection with a sale), the Company shall cause its transfer agent to electronically transmit the Conversion Shares or Warrant Shares to a Purchaser by crediting the account of such Purchaser's Prime Broker with the Depository Trust Company (“DTC”) through its Deposit Withdrawal Agent Commission (“DWAC”) system (to the extent not inconsistent with any provisions of this Agreement) provided that the Company and the Company’s transfer agent are participating in DTC through the DWAC system.

ARTICLE VI

Indemnification

Section 6.1

Company Indemnity.  The Company agrees to indemnify and hold harmless the Purchasers (and their respective directors, officers, managers, partners, members, shareholders, affiliates, agents, successors and assigns) from and against any and all losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred by the Purchasers as a result of any inaccuracy in or breach of the representations, warranties or covenants made by the Company herein.   

Section 6.2

Indemnification Procedure.  Any party entitled to indemnification under this Article VI (an “indemnified party”) will give written notice to the indemnifying party of any matters giving rise to a claim for indemnification; provided, that the failure of any party entitled to indemnification hereunder to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Article VI except to the extent that the indemnifying party is actually prejudiced by such failure to give notice.  In case any action, proceeding or claim is brought against an indemnified party in respect of which indemnification is sought hereunder, the indemnifying party shall be entitled to participate in and, unless in the reasonable judgment of the indemnified party a conflict of interest between it and the indemnifying party may exist with respect of such action, proceeding or claim, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party.  In the event that the indemnifying party advises an indemnified party that it will contest such a claim for indemnification hereunder, or fails, within thirty (30) days of receipt of any indemnification notice to notify, in writing, such person of its election to defend, settle or compromise, at its sole cost and expense, any action, proceeding or claim (or discontinues its defense at any time after it commences such defense), then the indemnified party may, at its option, defend, settle or otherwise compromise or pay such action or claim.  In any event, unless and until the indemnifying party elects in writing to assume and does so assume the defense of any such claim, proceeding or action, the indemnified party’s costs and expenses arising out of the defense, settlement or compromise of any such action, claim or proceeding shall be losses subject to indemnification hereunder.  The indemnified party shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by 

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the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the indemnified party which relates to such action or claim.  The indemnifying party shall keep the indemnified party fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto.  If the indemnifying party elects to defend any such action or claim, then the indemnified party shall be entitled to participate in such defense with counsel of its choice at its sole cost and expense.  The indemnifying party shall not be liable for any settlement of any action, claim or proceeding effected without its prior written consent.  Notwithstanding anything in this Article VI to the contrary, the indemnifying party shall not, without the indemnified party’s prior written consent, settle or compromise any claim or consent to entry of any judgment in respect thereof which imposes any future obligation on the indemnified party or which does not include, as an unconditional term thereof, the giving by the claimant or the plaintiff to the indemnified party of a release from all liability in respect of such claim.  The indemnification required by this Article VI shall be made by periodic payments of the amount thereof during the course of investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred, so long as the indemnified party irrevocably agrees to refund such moneys if it is ultimately determined by a court of competent jurisdiction that such party was not entitled to indemnification.  The indemnity agreements contained herein shall be in addition to (a) any cause of action or similar rights of the indemnified party against the indemnifying party or others, and (b) any liabilities the indemnifying party may be subject to pursuant to the law.

ARTICLE VII

Miscellaneous

Section 7.1

Fees and Expenses.  Except as otherwise set forth in this Agreement and the other Transaction Documents, each party shall pay the fees and expenses of its advisors, counsel, accountants and other experts, if any, and all other expenses, incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement, provided that the Company shall pay all actual attorneys' fees and expenses (including disbursements and out-of-pocket expenses) incurred by the Purchasers in connection with (i) the preparation, negotiation, execution and delivery of this Agreement and the other Transaction Documents and the transactions contemplated thereunder, which payment shall be made at Closing and shall not exceed $20,000, (ii) the filing and declaration of effectiveness by the Commission of the Registration Statement (as defined in the Registration Rights Agreement) and (iii) any amendments, modifications or waivers of this Agreement or any of the other Transaction Documents.  The Company shall also pay up to $20,000 to Vision Opportunity Capital Management, LLC at the Closing in connection with all due diligence expenses incurred by Vision Opportunity Capital Management, LLC, and all reasonable fees and expenses incurred by the Purchasers in connection with the enforcement of this Agreement or any of the other Transaction Documents, including, without limitation, all reasonable attorneys' fees and expenses.  

Section 7.2

Specific Enforcement, Consent to Jurisdiction.  

(a)

The Company and the Purchasers acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement or the other 

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Transaction Documents were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement or the Registration Rights Agreement and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.

(b)

Each of the Company and the Purchasers (i) hereby irrevocably submits to the jurisdiction of the United States District Court sitting in the Southern District of New York and the courts of the State of New York located in New York county for the purposes of any suit, action or proceeding arising out of or relating to this Agreement or any of the other Transaction Documents or the transactions contemplated hereby or thereby and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper.  Each of the Company and the Purchasers consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing in this Section 7.2 shall affect or limit any right to serve process in any other manner permitted by law.

Section 7.3

Entire Agreement; Amendment.  This Agreement and the Transaction Documents contains the entire understanding and agreement of the parties with respect to the matters covered hereby and, except as specifically set forth herein or in the Transaction Documents, neither the Company nor any of the Purchasers makes any representations, warranty, covenant or undertaking with respect to such matters and they supersede all prior understandings and agreements with respect to said subject matter, all of which are merged herein.  No provision of this Agreement may be waived or amended other than by a written instrument signed by the Company and the holders of at least seventy-five percent (75%) of the Preferred Shares then outstanding, and no provision hereof may be waived other than by an a written instrument signed by the party against whom enforcement of any such amendment or waiver is sought.  No such amendment shall be effective to the extent that it applies to less than all of the holders of the Preferred Shares then outstanding.  No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents or holders of Preferred Shares, as the case may be.

Section 7.4

Notices.  Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telex (with correct answer back received), telecopy, e-mail or facsimile at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be:

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	If to the Company:

	Edgewater Foods International, Inc. 

400 Professional Drive, Suite 310 

Gaithersburg, Maryland 20879

Attention: Michael Boswell

Tel. No.: (240) 864-0449

Fax No.:  (240) 864-0450

	 	 
	with copies to:

	Law Offices of Louis E. Taubman, P.C.

17 State Street, Suite 1610

New York, New York  10004

Attention:  Louis E. Taubman

Tel. No.:  (212) 732-7184

Fax No.:  (212) 202-6380

	 	 
	If to any Purchaser:

	At the address of such Purchaser set forth on Exhibit A to this Agreement, with copies to Purchaser’s counsel as set forth on Exhibit A or as specified in writing by such Purchaser with copies to:

	 	 
	 	Kramer Levin Naftalis & Frankel LLP

1177 Avenue of the Americas

New York, New York 10036

Attention: Christopher S. Auguste

Tel No.: (212) 715-9100

Fax No.: (212) 715-8000

Any party hereto may from time to time change its address for notices by giving at least ten (10) days written notice of such changed address to the other party hereto.

Section 7.5

Waivers.  No waiver by either party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provisions, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.

Section 7.6

Headings.  The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof.

Section 7.7

Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.  

Section 7.8

No Third Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

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Section 7.9

Governing Law.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction.  This Agreement shall not be interpreted or construed with any presumption against the party causing this Agreement to be drafted.

Section 7.10

Survival.  The representations and warranties of the Company and the Purchasers shall survive the execution and delivery hereof and the Closing until the second anniversary of the Closing Date, except the agreements and covenants set forth in Articles I, III, V, VI and VII of this Agreement shall survive the execution and delivery hereof and the Closing hereunder.

Section 7.11

Counterparts.  This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement and shall become effective when counterparts have been signed by each party 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 is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof.

Section 7.12

Publicity.  The Company agrees that it will not disclose, and will not include in any public announcement, the name of the Purchasers without the consent of the Purchasers unless and until such disclosure is required by law or applicable regulation, and then only to the extent of such requirement.

Section 7.13

Severability.  The provisions of this Agreement and the Transaction Documents are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement or the Transaction Documents shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement or the Transaction Documents and such provision shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible.

Section 7.14

Further Assurances.  From and after the date of this Agreement, upon the request of any Purchaser or the Company, each of the Company and the Purchasers shall execute and deliver such instrument, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement, the Preferred Shares, the Conversion Shares, the Warrants, the Warrant Shares, the Certificate of Designation, and the Registration Rights Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officer as of the date first above written.

	 	EDGEWATER FOODS INTERNATIONAL, INC. 

	 	 
	 	 
	By:

	 
	 	Name: Michael Boswell

 Title:   Acting Chief Financial Officer 

	 	PURCHASER

	 	 
	 	 
	By:

	 
	 	Name: 

Title:   

	

	 
	 	 
	 	 
	 	 
	 	 
	 	 
	

	 
	 	 
	 	 
	 	 
	 	 

EXHIBIT A to the

SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 

EDGEWATER FOODS INTERNATIONAL, INC.

  

	Names and Addresses

of Purchasers

	Number of Preferred Shares

& Warrants Purchased

	Dollar Amount of

Investment

 

­

EXHIBIT B to the 

SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 

EDGEWATER FOODS INTERNATIONAL, INC.

FORM OF CERTIFICATE OF DESIGNATION

­

EXHIBIT C-1 to the 

SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 

EDGEWATER FOODS INTERNATIONAL, INC.

FORM OF SERIES A WARRANT

­

EXHIBIT C-2 to the 

SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 

EDGEWATER FOODS INTERNATIONAL, INC.

FORM OF SERIES B WARRANT 

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EXHIBIT C-3 to the 

SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 

EDGEWATER FOODS INTERNATIONAL, INC.

FORM OF SERIES C WARRANT 

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EXHIBIT C-4 to the 

SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 

EDGEWATER FOODS INTERNATIONAL, INC.

FORM OF SERIES J WARRANT 

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EXHIBIT C-5 to the 

SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 

EDGEWATER FOODS INTERNATIONAL, INC.

FORM OF SERIES D WARRANT 

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EXHIBIT C-6 to the 

SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 

EDGEWATER FOODS INTERNATIONAL, INC.

FORM OF SERIES E WARRANT 

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EXHIBIT C-7 to the 

SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 

EDGEWATER FOODS INTERNATIONAL, INC.

FORM OF SERIES F WARRANT 

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EXHIBIT D to the 

SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 

EDGEWATER FOODS INTERNATIONAL, INC.

FORM OF REGISTRATION RIGHTS AGREEMENT

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EXHIBIT E to the 

SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 

EDGEWATER FOODS INTERNATIONAL, INC.

FORM OF LOCK-UP AGREEMENT

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EXHIBIT F to the 

SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 

EDGEWATER FOODS INTERNATIONAL, INC.

FORM OF ESCROW AGREEMENT

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EXHIBIT G to the 

SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 

EDGEWATER FOODS INTERNATIONAL, INC.

FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS

EDGEWATER FOODS INTERNATIONAL, INC.

as of January 16, 2007

[Name and address of Transfer Agent]

Attn:  _____________

Ladies and Gentlemen:

Reference is made to that certain Series B Convertible Preferred Stock Purchase Agreement (the “Purchase Agreement”), dated as of January 16, 2007, by and among Edgewater Foods International, Inc., a Nevada corporation (the “Company”), and the purchasers named therein (collectively, the “Purchasers”) pursuant to which the Company is issuing to the Purchasers shares of its Series B Convertible Preferred Stock, par value $0.001 per share, (the “Preferred Shares”) and warrants (the “Warrants”) to purchase shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”).  This letter shall serve as our irrevocable authorization and direction to you provided that you are the transfer agent of the Company at such time) to issue shares of Common Stock upon conversion of the Preferred Shares (the “Conversion Shares”) and exercise of the Warrants (the “Warrant Shares”) to or upon the order of a Purchaser from time to time upon (i) surrender to you of a properly completed and duly executed Conversion Notice or Exercise Notice, as the case may be, in the form attached hereto as Exhibit I and Exhibit II, respectively, (ii) in the case of the conversion of Preferred Shares, a copy of the certificates (with the original certificates delivered to the Company) representing Preferred Shares being converted or, in the case of Warrants being exercised, a copy of the Warrants (with  the original Warrants delivered to the Company) being exercised (or, in each case, an indemnification undertaking with respect to such share certificates or the warrants in the case of their loss, theft or destruction), and (iii) delivery of a treasury order or other appropriate order duly executed by a duly authorized officer of the Company.  So long as you have previously received (x) written confirmation from counsel to the Company that a registration statement covering resales of the Conversion Shares or Warrant Shares, as applicable, has been declared effective by the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”), and no subsequent notice by the Company or its counsel of the suspension or termination of its effectiveness and (y) a copy of such registration statement, and if the Purchaser represents in writing that the Conversion Shares or the Warrant Shares, as the case may be, were sold pursuant to the Registration Statement, then certificates representing the Conversion Shares and the Warrant Shares, as the case may be, shall not bear any legend restricting transfer of the Conversion Shares and the Warrant Shares, as the case may be, thereby and should not be subject to any stop-transfer restriction.  Provided, however, that if you have not previously received those items and representations listed above, then the certificates for the Conversion Shares and the Warrant Shares shall bear the following legend:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT 

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OF 1933, AS AMENDED (THE SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS, OR EDGEWATER FOODS INTERNATIONAL, INC. SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.”

and, provided further, that the Company may from time to time notify you to place stop-transfer restrictions on the certificates for the Conversion Shares and the Warrant Shares in the event a registration statement covering the Conversion Shares and the Warrant Shares is subject to amendment for events then current.

A form of written confirmation from counsel to the Company that a registration statement covering resales of the Conversion Shares and the Warrant Shares has been declared effective by the SEC under the 1933 Act is attached hereto as Exhibit III.

Please be advised that the Purchasers are relying upon this letter as an inducement to enter into the Purchase Agreement and, accordingly, each Purchaser is a third party beneficiary to these instructions.

Please execute this letter in the space indicated to acknowledge your agreement to act in accordance with these instructions.  Should you have any questions concerning this matter, please contact me at ___________.

Very truly yours,

EDGEWATER FOODS INTERNATIONAL, INC.

By:

Name: 

Title:  

ACKNOWLEDGED AND AGREED:

[TRANSFER AGENT]

By: 

Name:

Title:

Date:

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EXHIBIT I

EDGEWATER FOODS INTERNATIONAL, INC.

CONVERSION NOTICE

Reference is made to the Certificate of Designation of the Relative Rights and Preferences of the Series B Preferred Stock of Edgewater Foods International, Inc. (the “Certificate of Designation”).  In accordance with and pursuant to the Certificate of Designation, the undersigned hereby elects to convert the number of shares of Series B Preferred Stock, par value $0.001 per share (the “Preferred Shares”), of Edgewater Foods International, Inc., a Nevada corporation (the “Company”), indicated below into shares of Common Stock, par value $0.001 per share (the “Common Stock”), of the Company, by tendering the stock certificate(s) representing the share(s) of Preferred Shares specified below as of the date specified below.

Date of Conversion:

Number of Preferred Shares to be converted:

Stock certificate no(s). of Preferred Shares to be converted:

The Common Stock have been sold pursuant to the Registration Statement (as defined in the Registration Rights Agreement): YES ____NO____

Please confirm the following information:

Conversion Price:

Number of shares of Common Stock

to be issued:

Number of shares of Common Stock beneficially owned or deemed beneficially owned by the Holder on the Date of Conversion: _________________________

Please issue the Common Stock into which the Preferred Shares are being converted and, if applicable, any check drawn on an account of the Company in the following name and to the following address:

Issue to:

Facsimile Number:

Authorization:

By:  

Title:  

Dated:

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EXHIBIT II

FORM OF EXERCISE NOTICE

EXERCISE FORM

EDGEWATER FOODS INTERNATIONAL, INC.

The undersigned _______________, pursuant to the provisions of the within Warrant, hereby elects to purchase _____ shares of Common Stock of Edgewater Foods International, Inc. covered by the within Warrant.

Dated: _________________

Signature

___________________________

Address

_____________________

_____________________

Number of shares of Common Stock beneficially owned or deemed beneficially owned by the Holder on the date of Exercise: _________________________

ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto __________________ the within Warrant and all rights evidenced thereby and does irrevocably constitute and appoint _____________, attorney, to transfer the said Warrant on the books of the within named corporation.

Dated: _________________

Signature

___________________________

Address

_____________________

_____________________

PARTIAL ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto __________________ the right to purchase _________ shares of Warrant Stock evidenced by the within Warrant together with all rights therein, and does irrevocably constitute and appoint ___________________, attorney, to transfer that part of the said Warrant on the books of the within named corporation.

Dated: _________________

Signature

___________________________

Address

_____________________

_____________________

FOR USE BY THE ISSUER ONLY:

This Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day of ___________, _____, shares of Common Stock issued therefor in the name of _______________, Warrant No. W-_____ issued for ____ shares of Common Stock in the name of _______________.

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EXHIBIT III

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

[Name and address of Transfer Agent]

Attn:  _____________

Re:

Edgewater Foods International, Inc.  

Ladies and Gentlemen:

We are counsel to Edgewater Foods International, Inc., a Nevada corporation (the “Company”), and have represented the Company in connection with that certain Series B Convertible Preferred Stock Purchase Agreement (the “Purchase Agreement”), dated as of January 16, 2007, by and among the Company and the purchasers named therein (collectively, the “Purchasers”) pursuant to which the Company issued to the Purchasers shares of its Series B Convertible Preferred Stock, par value $0.001 per share, (the “Preferred Shares”) and warrants (the “Warrants”) to purchase shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”).  Pursuant to the Purchase Agreement, the Company has also entered into a Registration Rights Agreement with the Purchasers (the “Registration Rights Agreement”), dated as of January 16, 2007, pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Registration Rights Agreement), including the shares of Common Stock issuable upon conversion of the Preferred Shares and exercise of the Warrants, under the Securities Act of 1933, as amended (the “1933 Act”).  In connection with the Company’s obligations under the Registration Rights Agreement, on ________________, 2007, the Company filed a Registration Statement on Form SB-2 (File No. 333-________) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the resale of the Registrable Securities which names each of the present Purchasers as a selling stockholder thereunder.

In connection with the foregoing, we advise you that a member of the SEC’s staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and accordingly, the Registrable Securities are available for resale under the 1933 Act pursuant to the Registration Statement.

Very truly yours,

[COMPANY COUNSEL]

By:

 

cc:

[LIST NAMES OF PURCHASERS]

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EXHIBIT H to the 

SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 

EDGEWATER FOODS INTERNATIONAL, INC.

FORM OF OPINION OF COUNSEL

1.

The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the state of Nevada and has the requisite corporate power to own, lease and operate its properties and assets, and to carry on its business as presently conducted.  The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary.

2.

The Company has the requisite corporate power and authority to enter into and perform its obligations under the Transaction Documents and to issue the Preferred Stock, the Warrants and the Common Stock issuable upon conversion of the Preferred Stock and exercise of the Warrants.  The execution, delivery and performance of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action and no further consent or authorization of the Company or its Board of Directors or stockholders is required.  Each of the Transaction Documents have been duly executed and delivered, and the Preferred Stock and the Warrants have been duly executed, issued and delivered by the Company and each of the Transaction Documents constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its respective terms.  The Common Stock issuable upon conversion of the Preferred Stock and exercise of the Warrants are not subject to any preemptive rights under the Articles of Incorporation or the Bylaws.

3.

The Preferred Stock and the Warrants have been duly authorized and, when delivered against payment in full as provided in the Purchase Agreement, will be validly issued, fully paid and nonassessable.  The shares of Common Stock issuable upon conversion of the Preferred Stock and exercise of the Warrants, have been duly authorized and reserved for issuance,  and, when delivered upon conversion or against payment in full as provided in the Certificate of Designation and the Warrants, as applicable, will be validly issued, fully paid and nonassessable.

4.

The execution, delivery and performance of and compliance with the terms of the Transaction Documents and the issuance of the Preferred Stock, the Warrants and the Common Stock issuable upon conversion of the Preferred Stock and exercise of the Warrants do not (i) violate any provision of the Articles of Incorporation or Bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party, (iii) create or impose a lien, charge or encumbrance on any property of the Company under any agreement or any commitment to which the Company is a party or by which the Company is bound or by which any of its respective properties or assets are bound, or (iv) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment, injunction or decree (including Federal and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected, except, in all cases other than violations pursuant to clauses (i) and (iv) above, for such conflicts, default, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect.

5.

No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of the Company is required under Federal, state or local law, rule 

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or regulation in connection with the valid execution and delivery of the Transaction Documents, or the offer, sale or issuance of the Preferred Stock, the Warrants or the Common Stock issuable upon conversion of the Preferred Stock and exercise of the Warrants other than the Certificate of Designation and the Registration Statement.

6.

There is no action, suit, claim, investigation or proceeding pending or threatened against the Company which questions the validity of this Agreement or the transactions contemplated hereby or any action taken or to be taken pursuant hereto or thereto.  There is no action, suit, claim, investigation or proceeding pending, or to our knowledge, threatened, against or involving the Company or any of its properties or assets and which, if adversely determined, is reasonably likely to result in a Material Adverse Effect.  There are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company or any officers or directors of the Company in their capacities as such.

7.

The offer, issuance and sale of the Preferred Stock and the Warrants and the offer, issuance and sale of the shares of Common Stock issuable upon conversion of the Preferred Stock and exercise of the Warrants pursuant to the Purchase Agreement, the Certificate of Designation and the Warrants, as applicable, are exempt from the registration requirements of the Securities Act.

8.

The Company is not, and as a result of and immediately upon Closing will not be, an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended.

  Very truly yours,

 

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