exhibit 10.12

 

                         SECURITIES PURCHASE AGREEMENT

 

SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of November 29, 2005,

by and among INFE-Human Resources, Inc., a Nevada corporation, with headquarters

located at 67 Wall Street, 22nd Floor, New York, NY 10005 (the "Company"), and

each of the purchasers set forth on the signature pages hereto (the "Buyers").

 

WHEREAS:  

 

A.

The Company and the Buyers are executing and delivering this Agreement

in reliance upon the exemption from securities registration afforded by the

rules and regulations as promulgated by the United States Securities and

Exchange Commission (the "SEC") under the Securities Act of 1933, as amended

(the "1933 Act");

 

B.

Buyers desire to purchase and the Company desires to issue and sell,

upon the terms and conditions set forth in this Agreement (i) 8% secured

convertible notes of the Company, in the form attached hereto as Exhibit "A", in

the aggregate principal amount of Three Million Dollars ($3,000,000) (together

with any note(s) issued in replacement thereof or as a dividend thereon or

otherwise with respect thereto in accordance with the terms thereof, the

"Notes"), convertible into shares of  common stock, par value $.001 per share,

of the Company (the "Common Stock"), upon the terms and subject to the

limitations and conditions set forth in such Notes and (ii) warrants, in the

form attached hereto as Exhibit "B", to purchase 1,400,000 shares of Common

Stock (the "Warrants").

 

C.

Each Buyer wishes to purchase, upon the terms and conditions stated in

this Agreement, such principal amount of Notes and number of Warrants as is set

forth immediately below its name on the signature pages hereto; and

 

D.

Contemporaneous with the execution and delivery of this Agreement, the

parties hereto are executing and delivering a Registration Rights Agreement, in

the form attached hereto as Exhibit "C" (the "Registration Rights Agreement"),

pursuant to which the Company has agreed to provide certain registration rights

under the 1933 Act and the rules and regulations promulgated thereunder, and

applicable state securities laws.

 

                                    -1-

 

NOW THEREFORE, the Company and each of the Buyers severally (and not jointly)

hereby agree as follows:

 

1.

PURCHASE AND SALE OF NOTES AND WARRANTS.

 

a.

Purchase of Notes and Warrants.  On the Closing Date (as defined below),

the Company shall issue and sell to each Buyer and each Buyer severally agrees

to purchase from the Company such principal amount of Notes and number of

Warrants as is set forth immediately below such Buyer's name on the signature

pages hereto.

 

b.

Form of Payment.  On the Closing Date (as defined below), (i)each Buyer

shall pay the purchase price for the Notes and the Warrants to be issued and

sold to it at the Closing (as defined below) (the "Purchase Price") by wire

transfer of immediately available funds to the Company, in accordance with the

Company's written wiring instructions, against delivery of the Notes in the

principal amount equal to the Purchase Price and the number of Warrants as is

set forth immediately below such Buyer's name on the signature pages hereto, and

(ii) the Company shall deliver such Notes and Warrants duly executed on behalf

of the Company, to such Buyer, against delivery of such Purchase Price.

 

c.

Closing Date.  Subject to the satisfaction (or written waiver) of the

conditions thereto set forth in Section 6 and Section 7 below, the date and time

of the issuance and sale of the Notes and the Warrants pursuant to this

Agreement (the "Closing Date") shall be 12:00 noon, Eastern Standard Time on

November 29, 2005, or such other mutually agreed upon time.  The closing of the

transactions contemplated by this Agreement (the "Closing") shall occur on the

Closing Date at such location as may be agreed to by the parties.

 

2.

BUYERS' REPRESENTATIONS AND WARRANTIES.  Each Buyer severally (and not

jointly) represents and warrants to the Company solely as to such Buyer that:

 

a.

Investment Purpose.  As of the date hereof, the Buyer is purchasing the

Notes and the shares of Common Stock issuable upon conversion of or otherwise

pursuant to the Notes (including, without limitation, such additional shares of

Common Stock, if any, as are issuable (i) on account of interest on the Notes,

(ii) as a result of the events described in Sections 1.3 and 1.4(g) of the Notes

and Section 2(c) of the Registration Rights Agreement or (iii) in payment of the

Standard Liquidated Damages Amount (as defined in Section 2(f) below) pursuant

to this Agreement, such shares of Common Stock being collectively referred to

herein as the "Conversion Shares") and the Warrants and the shares of Common

Stock issuable upon exercise thereof (the "Warrant Shares" and, collectively

with the Notes, Warrants and Conversion Shares, the "Securities") for its own

account and not with a present view towards the public sale or distribution

thereof, except pursuant to sales registered or exempted from registration under

the 1933 Act; provided, however, that by making the representations herein, the

Buyer does not agree to hold any of the Securities for any minimum or other

specific term and reserves the right to dispose of the Securities at any time in

accordance with or pursuant to a registration statement or an exemption under

the 1933 Act.

 

                                    -2-

 

b.

Accredited Investor Status.  The Buyer is an "accredited investor" as

that term is defined in Rule 501(a) of Regulation D promulgated under the 1933

Act (an "Accredited Investor").

 

c.

Reliance on Exemptions.  The Buyer understands that the Securities are

being offered and sold to it in reliance upon specific exemptions from the

registration requirements of United States federal and state securities laws and

that the Company is relying upon the truth and accuracy of, and the Buyer's

compliance with, the representations, warranties, agreements, acknowledgments

and understandings of the Buyer set forth herein in order to determine the

availability of such exemptions and the eligibility of the Buyer to acquire the

Securities.

 

d.

Information.  The Buyer and its advisors, if any, have been, and for so

long as the Notes and Warrants remain outstanding will continue to be, furnished

with all materials relating to the business, finances and operations of the

Company and materials relating to the offer and sale of the Securities which

have been requested by the Buyer or its advisors.  The Buyer and its advisors,

if any, have been, and for so long as the Notes and Warrants remain outstanding

will continue to be, afforded the opportunity to ask questions of the Company.

Notwithstanding the foregoing, the Company has not disclosed to the Buyer any

material nonpublic information and will not disclose such information unless

such information is disclosed to the public prior to or promptly following such

disclosure to the Buyer.  Neither such inquiries nor any other due diligence

investigation conducted by Buyer or any of its advisors or representatives shall

modify, amend or affect Buyer's right to rely on the Company's representations

and warranties contained in Section 3 below.  The Buyer understands that its

investment in the Securities involves a significant degree of risk.

 

e.

Governmental Review.  The Buyer understands that no United States

federal or state agency or any other government or governmental agency has

passed upon or made any recommendation or endorsement of the Securities.

 

 

                                    -3-

 

f.

Transfer or Re-sale.  The Buyer understands that (i) except as provided

in the Registration Rights Agreement, the sale or re-sale of the Securities has

not been and is not being registered under the 1933 Act or any applicable state

securities laws, and the Securities may not be transferred unless (a) the

Securities are sold pursuant to an effective registration statement under the

1933 Act, (b) the Buyer shall have delivered to the Company an opinion of

counsel that shall be in form, substance and scope customary for opinions of

counsel in comparable transactions to the effect that the Securities to be sold

or transferred may be sold or transferred pursuant to an exemption from such

registration, which opinion shall be accepted by the Company, (c) the Securities

are sold or transferred to an "affiliate" (as defined in Rule 144 promulgated

under the 1933 Act (or a successor rule) ("Rule 144")) of the Buyer who agrees

to sell or otherwise transfer the Securities only in accordance with this

Section 2(f) and who is an Accredited Investor, (d) the Securities are sold

pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S

under the 1933 Act (or a successor rule) ("Regulation S"), and the Buyer shall

have delivered to the Company an opinion of counsel that shall be in form,

substance and scope customary for opinions of counsel in corporate transactions,

which opinion shall be accepted by the Company; (ii) any sale of such Securities

made in reliance on Rule 144 may be made only in accordance with the terms of

said Rule and further, if said Rule is not applicable, any re-sale of such

Securities under circumstances in which the seller (or the person through whom

the sale is made) may be deemed to be an underwriter (as that term is defined in

the 1933 Act) may require compliance with some other exemption under the 1933

Act or the rules and regulations of the SEC thereunder; and (iii) neither the

Company nor any other person is under any obligation to register such Securities

under the 1933 Act or any state securities laws or to comply with the terms and

conditions of any exemption thereunder (in each case, other than pursuant to the

Registration Rights Agreement).  Notwithstanding the foregoing or anything else

contained herein to the contrary, the Securities may be pledged as collateral in

connection with a bona fide margin account or other lending arrangement.  In the

event that the Company does not accept the opinion of counsel provided by the

Buyer with respect to the transfer of Securities pursuant to an exemption from

registration, such as Rule 144 or Regulation S, within three (3) business days

of delivery of the opinion to the Company, the Company shall pay to the Buyer

liquidated damages of three percent (3%) of the outstanding amount of the Notes

per month plus accrued and unpaid interest on the Notes, prorated for partial

months, in cash or shares at the option of the Company ("Standard Liquidated

Damages Amount").  If the Company elects to be pay the Standard Liquidated

Damages Amount in shares of Common Stock, such shares shall be issued at the

Conversion Price at the time of payment.

 

                                    -4-

 

g.

Legends.  The Buyer understands that the Notes and the Warrants and,

until such time as the Conversion Shares and Warrant Shares have been registered

under the 1933 Act as contemplated by the Registration Rights Agreement or

otherwise may be sold pursuant to Rule 144 or Regulation S without any

restriction as to the number of securities as of a particular date that can then

be immediately sold, the Conversion Shares and Warrant Shares may bear a

restrictive legend in substantially the following form (and a stop-transfer

order may be placed against transfer of the certificates for such Securities):

 

"The securities represented by this certificate have not been registered under

the Securities Act of 1933, as amended.  The securities may not be sold,

transferred or assigned in the absence of an effective registration statement

for the securities under said Act, or an opinion of counsel, in form, substance

and scope customary for opinions of counsel in comparable transactions, that

registration is not required under said Act or unless sold pursuant to Rule 144

or Regulation S under said Act."

 

The legend set forth above shall be removed and the Company shall issue a

certificate without such legend to the holder of any Security upon which it is

stamped, if, unless otherwise required by applicable state securities laws, (a)

such Security is registered for sale under an effective registration statement

filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or

Regulation S without any restriction as to the number of securities as of a

particular date that can then be immediately sold, or (b) such holder provides

the Company with an opinion of counsel, in form, substance and scope customary

for opinions of counsel in comparable transactions, to the effect that a public

sale or transfer of such Security may be made without registration under the

1933 Act, which opinion shall be accepted by the Company so that the sale or

transfer is effected or (c) such holder provides the Company with reasonable

assurances that such Security can be sold pursuant to Rule 144 or Regulation S.

The Buyer agrees to sell all Securities, including those represented by a

certificate(s) from which the legend has been removed, in compliance with

applicable prospectus delivery requirements, if any.

 

h.

Authorization; Enforcement. This Agreement and the Registration Rights

Agreement have been duly and validly authorized.  This Agreement has been duly

executed and delivered on behalf of the Buyer, and this Agreement constitutes,

and upon execution and delivery by the Buyer of the Registration Rights

Agreement, such agreement will constitute, valid and binding agreements of the

Buyer enforceable in accordance with their terms.

 

                                    -5-

 

i.

Residency.  The Buyer is a resident of the jurisdiction set forth

immediately below such Buyer's name on the signature pages hereto.

 

3.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  The Company represents

and warrants to each Buyer that:

 

a.

Organization and Qualification.  The Company and each of its

Subsidiaries (as defined below), if any, is a corporation duly organized,

validly existing and in good standing under the laws of the jurisdiction in

which it is incorporated, with full power and authority (corporate and other) to

own, lease, use and operate its properties and to carry on its business as and

where now owned, leased, used, operated and conducted.  Schedule 3(a) sets forth

a list of all of the Subsidiaries of the Company and the jurisdiction in which

each is incorporated.  The Company and each of its Subsidiaries is duly

qualified as a foreign corporation to do business and is in good standing in

every jurisdiction in which its ownership or use of property or the nature of

the business conducted by it makes such qualification necessary except where the

failure to be so qualified or in good standing would not have a Material Adverse

Effect.  "Material Adverse Effect" means any of (i) a material and adverse

effect on the legality, validity or enforceability of any document executed in

connection with this financing, (ii) a material and adverse effect on the

results of operations, assets, prospects, business or condition (financial or

otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) an

adverse impairment to the Company's ability to perform under any of the

documents executed in connection with this financing.  "Subsidiaries" means any

corporation or other organization, whether incorporated or unincorporated, in

which the Company owns, directly or indirectly, any equity or other ownership

interest.

 

b.

Authorization; Enforcement.  (i) The Company has all requisite corporate

power and authority to enter into and perform this Agreement, the Registration

Rights Agreement, the Notes and the Warrants and to consummate the transactions

contemplated hereby and thereby and to issue the Securities, in accordance with

the terms hereof and thereof, (ii) the execution and delivery of this Agreement,

the Registration Rights Agreement, the Notes and the Warrants by the Company and

the consummation by it of the transactions contemplated hereby and thereby

(including without limitation, the issuance of the Notes and the Warrants and

the issuance and reservation for issuance of the Conversion Shares and Warrant

Shares issuable upon conversion or exercise thereof) have been duly authorized

by the Company's Board of Directors and no further consent or authorization of

the Company, its Board of Directors, or its shareholders is required, (iii) this

Agreement has been duly executed and delivered by the Company by its authorized

representative, and such authorized representative is the true and official

representative with authority to sign this Agreement and the other documents

executed in connection herewith and bind the Company accordingly, and (iv) this

Agreement constitutes, and upon execution and delivery by the Company of the

Registration Rights Agreement, the Notes and the Warrants, each of such

instruments will constitute, a legal, valid and binding obligation of the

Company enforceable against the Company in accordance with its terms.

 

                                    -6-

 

c.

Capitalization.  As of the date hereof, the authorized capital stock of

the Company consists of (i) 100,000,000 shares of Common Stock, of which {

} shares are issued and outstanding, {                 } shares are reserved for

issuance pursuant to the Company's stock option plans, {             } shares

are reserved for issuance pursuant to securities (other than the Notes and the

Warrants) exercisable for, or convertible into or exchangeable for shares of

Common Stock and, 24,476,923 shares are reserved for issuance upon conversion of

the Notes and exercise of the Warrants (subject to adjustment pursuant to the

Company's covenant set forth in Section 4(h) below); and (ii) {     }  shares of

preferred stock of which {        } shares are issued and outstanding.  All of

such outstanding shares of capital stock are, or upon issuance will be, duly

authorized, validly issued, fully paid and nonassessable.  No shares of capital

stock of the Company are subject to preemptive rights or any other similar

rights of the shareholders of the Company or any liens or encumbrances imposed

through the actions or failure to act of the Company.  Except as disclosed in

Schedule 3(c), as of the effective date of this Agreement, (i) there are no

outstanding options, warrants, scrip, rights to subscribe for, puts, calls,

rights of first refusal, agreements, understandings, claims or other commitments

or rights of any character whatsoever relating to, or securities or rights

convertible into or exchangeable for any shares of capital stock of the Company

or any of its Subsidiaries, or arrangements by which the Company or any of its

Subsidiaries is or may become bound to issue additional shares of capital stock

of the Company or any of its Subsidiaries, (ii) there are no agreements or

arrangements under which the Company or any of its Subsidiaries is obligated to

register the sale of any of its or their securities under the 1933 Act (except

the Registration Rights Agreement) and (iii) there are no anti-dilution or price

adjustment provisions contained in any security issued by the Company (or in any

agreement providing rights to security holders) that will be triggered by the

issuance of the Notes, the Warrants, the Conversion Shares or Warrant Shares.

The Company has furnished to the Buyer true and correct copies of the Company's

Certificate of Incorporation as in effect on the date hereof ("Certificate of

Incorporation"), the Company's By-laws, as in effect on the date hereof (the

"By-laws"), and the terms of all securities convertible into or exercisable for

Common Stock of the Company and the material rights of the holders thereof in

respect thereto.  The Company shall provide the Buyer with a written update of

this representation signed by the Company's Chief Executive or Chief Financial

Officer on behalf of the Company as of the Closing Date.

 

                                    -7-

 

d.

Issuance of Shares.  The Conversion Shares and Warrant Shares are duly

authorized and reserved for issuance and, upon conversion of the Notes and

exercise of the Warrants in accordance with their respective terms, will be

validly issued, fully paid and non-assessable, and free from all taxes, liens,

claims and encumbrances with respect to the issue thereof and shall not be

subject to preemptive rights or other similar rights of shareholders of the

Company and will not impose personal liability upon the holder thereof.

 

e.

Acknowledgment of Dilution.  The Company understands and acknowledges

the potentially dilutive effect to the Common Stock upon the issuance of the

Conversion Shares and Warrant Shares upon conversion of the Note or exercise of

the Warrants.  The Company further acknowledges that its obligation to issue

Conversion Shares and Warrant Shares upon conversion of the Notes or exercise of

the Warrants in accordance with this Agreement, the Notes and the Warrants is

absolute and unconditional regardless of the dilutive effect that such issuance

may have on the ownership interests of other shareholders of the Company.

 

f.

No Conflicts.  The execution, delivery and performance of this

Agreement, the Registration Rights Agreement, the Notes and the Warrants by the

Company and the consummation by the Company of the transactions contemplated

hereby and thereby (including, without limitation, the issuance and reservation

for issuance of the Conversion Shares and Warrant Shares) will not (i) conflict

with or result in a violation of any provision of the Certificate of

Incorporation or By-laws or (ii) violate or conflict with, or result in a breach

of any provision of, or constitute a default (or an event which with notice or

lapse of time or both could become a default) under, or give to others any

rights of termination, amendment, acceleration or cancellation of, any

agreement, indenture, patent, patent license or instrument to which the Company

or any of its Subsidiaries is a party, or (iii)  result in a violation of any

law, rule, regulation, order, judgment or decree (including federal and state

securities laws and regulations and regulations of any self-regulatory

organizations to which the Company or its securities are subject) applicable to

the Company or any of its Subsidiaries or by which any property or asset of the

Company or any of its Subsidiaries is bound or affected (except for such

conflicts, defaults, terminations, amendments, accelerations, cancellations and

violations as would not, individually or in the aggregate, have a Material

Adverse Effect).  Neither the Company nor any of its Subsidiaries is in

violation of its Certificate of Incorporation, By-laws or other organizational

documents and neither the Company nor any of its Subsidiaries is in default (and

no event has occurred which with notice or lapse of time or both could put the

Company or any of its Subsidiaries in default) under, and neither the Company

nor any of its Subsidiaries has taken any action or failed to take any action

that would give to others any rights of termination, amendment, acceleration or

cancellation of, any agreement, indenture or instrument to which the Company or

any of its Subsidiaries is a party or by which any property or assets of the

Company or any of its Subsidiaries is bound or affected, except for possible

defaults as would not, individually or in the aggregate, have a Material Adverse

Effect. The businesses of the Company and its Subsidiaries, if any, are not

being conducted, and shall not be conducted so long as a Buyer owns any of the

 

                                    -8-

 

Securities, in violation of any law, ordinance or regulation of any governmental

entity.  Except as specifically contemplated by this Agreement and as required

under the 1933 Act and any applicable state securities laws, the Company is not

required to obtain any consent, authorization or order of, or make any filing or

registration with, any court, governmental agency, regulatory agency, self

regulatory organization or stock market or any third party in order for it to

execute, deliver or perform any of its obligations under this Agreement, the

Registration Rights Agreement, the Notes or the Warrants in accordance with the

terms hereof or thereof or to issue and sell the Notes and Warrants in

accordance with the terms hereof and to issue the Conversion Shares upon

conversion of the Notes and the Warrant Shares upon exercise of the Warrants.

Except as disclosed in Schedule 3(f), all consents, authorizations, orders,

filings and registrations which the Company is required to obtain pursuant to

the preceding sentence have been obtained or effected on or prior to the date

hereof.  The Company is not in violation of the quotation requirements of the

Over-the-Counter Bulletin Board (the "OTCBB") and does not reasonably anticipate

that the Common Stock will be delisted by the OTCBB in the foreseeable future.

The Company and its Subsidiaries are unaware of any facts or circumstances which

might give rise to any of the foregoing.

 

g.

SEC Documents; Financial Statements.  Except as disclosed in Schedule

3(g), the Company has timely filed all reports, schedules, forms, statements and

other documents required to be filed by it with the SEC pursuant to the

reporting requirements of the Securities Exchange Act of 1934, as amended (the

"1934 Act") (all of the foregoing filed prior to the date hereof and all

exhibits included therein and financial statements and schedules thereto and

documents (other than exhibits to such documents) incorporated by reference

therein, being hereinafter referred to herein as the "SEC Documents").  The

Company has delivered to each Buyer true and complete copies of the SEC

Documents, except for such exhibits and incorporated documents.  As of their

respective dates, the SEC Documents complied in all material respects with the

requirements of the 1934 Act and the rules and regulations of the SEC

promulgated thereunder applicable to the SEC Documents, and none of the SEC

Documents, at the time they were filed with the SEC, contained any untrue

statement of a material fact or omitted to state a material fact required to be

stated therein or necessary in order to make the statements therein, in light of

the circumstances under which they were made, not misleading.  None of the

statements made in any such SEC Documents is, or has been, required to be

amended or updated under applicable law (except for such statements as have been

amended or updated in subsequent filings prior the date hereof).  As of their

respective dates, the financial statements of the Company included in the SEC

Documents complied as to form in all material respects with applicable

accounting requirements and the published rules and regulations of the SEC with

respect thereto.  Such financial statements have been prepared in accordance

with United States generally accepted accounting principles, consistently

applied, during the periods involved (except (i) as may be otherwise indicated

in such financial statements or the notes thereto, or (ii) in the case of

unaudited interim statements, to the extent they may not include footnotes or

may be condensed or summary statements) and fairly present in all material

respects the consolidated financial position of the Company and its consolidated

 

                                    -9-

 

Subsidiaries as of the dates thereof and the consolidated results of their

operations and cash flows for the periods then ended (subject, in the case of

unaudited statements, to normal year-end audit adjustments).  Except as set

forth in the financial statements of the Company included in the SEC Documents,

the Company has no liabilities, contingent or otherwise, other than (i)

liabilities incurred in the ordinary course of business subsequent to June 30,

2004 and (ii) obligations under contracts and commitments incurred in the

ordinary course of business and not required under generally accepted accounting

principles to be reflected in such financial statements, which, individually or

in the aggregate, are not material to the financial condition or operating

results of the Company.

 

h.

Absence of Certain Changes.  Since June 30, 2005, there has been no

material adverse change and no material adverse development in the assets,

liabilities, business, properties, operations, financial condition, results of

operations or prospects of the Company or any of its Subsidiaries.

 

i.

Absence of Litigation.  There is no action, suit, claim, proceeding,

inquiry or investigation before or by any court, public board, government

agency, self-regulatory organization or body pending or, to the knowledge of the

Company or any of its Subsidiaries, threatened against or affecting the Company

or any of its Subsidiaries, or their officers or directors in their capacity as

such, that could have a Material Adverse Effect.  Schedule 3(i) contains a

complete list and summary description of any pending or threatened proceeding

against or affecting the Company or any of its Subsidiaries, without regard to

whether it would have a Material Adverse Effect.  The Company and its

Subsidiaries are unaware of any facts or circumstances which might give rise to

any of the foregoing.

 

j.

Patents, Copyrights, etc.  The Company and each of its Subsidiaries owns

or possesses the requisite licenses or rights to use all patents, patent

applications, patent rights, inventions, know-how, trade secrets, trademarks,

trademark applications, service marks, service names, trade names and copyrights

("Intellectual Property") necessary to enable it to conduct its business as now

operated (and, except as set forth in Schedule 3(j) hereof, to the best of the

Company's knowledge, as presently contemplated to be operated in the future);

there is no claim or action by any person pertaining to, or proceeding pending,

or to the Company's knowledge threatened, which challenges the right of the

Company or of a Subsidiary with respect to any Intellectual Property necessary

to enable it to conduct its business as now operated (and, except as set forth

in Schedule 3(j) hereof, to the best of the Company's knowledge, as presently

contemplated to be operated in the future); to the best of the Company's

knowledge, the Company's or its Subsidiaries' current and intended products,

services and processes do not infringe on any Intellectual Property or other

rights held by any person; and the Company is unaware of any facts or

circumstances which might give rise to any of the foregoing.  The Company and

each of its Subsidiaries have taken reasonable security measures to protect the

secrecy, confidentiality and value of their Intellectual Property.

 

                                    -10-

 

k.

No Materially Adverse Contracts, Etc.  Neither the Company nor any of

its Subsidiaries is subject to any charter, corporate or other legal

restriction, or any judgment, decree, order, rule or regulation which in the

judgment of the Company's officers has or is expected in the future to have a

Material Adverse Effect.  Neither the Company nor any of its Subsidiaries is a

party to any contract or agreement which in the judgment of the Company's

officers has or is expected to have a Material Adverse Effect.

 

l.

Tax Status.  Except as set forth on Schedule 3(l), the Company and each

of its Subsidiaries has made or filed all federal, state and foreign income and

all other tax returns, reports and declarations required by any jurisdiction to

which it is subject (unless and only to the extent that the Company and each of

its Subsidiaries has set aside on its books provisions reasonably adequate for

the payment of all unpaid and unreported taxes) and has paid all taxes and other

governmental assessments and charges that are material in amount, shown or

determined to be due on such returns, reports and declarations, except those

being contested in good faith and has set aside on its books provisions

reasonably adequate for the payment of all taxes for periods subsequent to the

periods to which such returns, reports or declarations apply.  There are no

unpaid taxes in any material amount claimed to be due by the taxing authority of

any jurisdiction, and the officers of the Company know of no basis for any such

claim.  The Company has not executed a waiver with respect to the statute of

limitations relating to the assessment or collection of any foreign, federal,

state or local tax.  Except as set forth on Schedule 3(l), none of the Company's

tax returns is presently being audited by any taxing authority.

 

m.

Certain Transactions.  Except as set forth on Schedule 3(m) and except

for arm's length transactions pursuant to which the Company or any of its

Subsidiaries makes payments in the ordinary course of business upon terms no

less favorable than the Company or any of its Subsidiaries could obtain from

third parties and other than the grant of stock options disclosed on Schedule

3(c), none of the officers, directors, or employees of the Company is presently

a party to any transaction with the Company or any of its Subsidiaries (other

than for services as employees, officers and directors), including any contract,

agreement or other arrangement providing for the furnishing of services to or

by, providing for rental of real or personal property to or from, or otherwise

requiring payments to or from any officer, director or such employee or, to the

knowledge of the Company, any corporation, partnership, trust or other entity in

which any officer, director, or any such employee has a substantial interest or

is an officer, director, trustee or partner.

 

                                    -11-

 

n.

Disclosure.  All information relating to or concerning the Company or

any of its Subsidiaries set forth in this Agreement and provided to the Buyers

pursuant to Section 2(d) hereof and otherwise in connection with the

transactions contemplated hereby is true and correct in all material respects

and the Company has not omitted to state any material fact necessary in order to

make the statements made herein or therein, in light of the circumstances under

which they were made, not misleading.  No event or circumstance has occurred or

exists with respect to the Company or any of its Subsidiaries or its or their

business, properties, prospects, operations or financial conditions, 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 (assuming for this purpose that the Company's reports filed under the

1934 Act are being incorporated into an effective registration statement filed

by the Company under the 1933 Act).

 

o.

Acknowledgment Regarding Buyers' Purchase of Securities.  The Company

acknowledges and agrees that the Buyers are acting solely in the capacity of

arm's length purchasers with respect to this Agreement and the transactions

contemplated hereby.  The Company further acknowledges that no Buyer is acting

as a financial advisor or fiduciary of the Company (or in any similar capacity)

with respect to this Agreement and the transactions contemplated hereby and any

statement made by any Buyer or any of their respective representatives or agents

in connection with this Agreement and the transactions contemplated hereby is

not advice or a recommendation and is merely incidental to the Buyers' purchase

of the Securities.  The Company further represents to each Buyer that the

Company's decision to enter into this Agreement has been based solely on the

independent evaluation of the Company and its representatives.

 

p.

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 in any security or solicited any offers to buy any security

under circumstances that would require registration under the 1933 Act of the

issuance of the Securities to the Buyers.  The issuance of the Securities to the

Buyers will not be integrated with any other issuance of the Company's

securities (past, current or future) for purposes of any shareholder approval

provisions applicable to the Company or its securities.

 

q.

No Brokers.  Except as set forth in Schedule 3(q), the Company has taken

no action which would give rise to any claim by any person for brokerage

commissions, transaction fees or similar payments relating to this Agreement or

the transactions contemplated hereby.

 

                                    -12-

 

r.

Permits; Compliance.  The Company and each of its Subsidiaries is in

possession of all franchises, grants, authorizations, licenses, permits,

easements, variances, exemptions, consents, certificates, approvals and orders

necessary to own, lease and operate its properties and to carry on its business

as it is now being conducted (collectively, the "Company Permits"), and there is

no action pending or, to the knowledge of the Company, threatened regarding

suspension or cancellation of any of the Company Permits.  Neither the Company

nor any of its Subsidiaries is in conflict with, or in default or violation of,

any of the Company Permits, except for any such conflicts, defaults or

violations which, individually or in the aggregate, would not reasonably be

expected to have a Material Adverse Effect.  Since June 30, 2004, neither the

Company nor any of its Subsidiaries has received any notification with respect

to possible conflicts, defaults or violations of applicable laws, except for

notices relating to possible conflicts, defaults or violations, which conflicts,

defaults or violations would not have a Material Adverse Effect.

 

s.

Environmental Matters.

    

   (i)

Except as set forth in Schedule 3(s), there are, to the Company's

   knowledge, with respect to the Company or any of its Subsidiaries or any

   predecessor of the Company, no past or present violations of Environmental

   Laws (as defined below), releases of any material into the environment,

   actions, activities, circumstances, conditions, events, incidents, or

   contractual obligations which may give rise to any common law environmental

   liability or any liability under the Comprehensive Environmental Response,

   Compensation and Liability Act of 1980 or similar federal, state, local or

   foreign laws and neither the Company nor any of its Subsidiaries has received

   any notice with respect to any of the foregoing, nor is any action pending

   or, to the Company's knowledge, threatened in connection with any of the

   foregoing.  The term "Environmental Laws" means all federal, state, local or

   foreign laws relating to pollution or protection of human health or the

   environment (including, without limitation, ambient air, surface water,

   groundwater, land surface or subsurface strata), including, without

   limitation, laws relating to emissions, discharges, releases or threatened

   releases of chemicals, pollutants contaminants, or toxic or hazardous

   substances or wastes (collectively, "Hazardous Materials") into the

   environment, or otherwise relating to the manufacture, processing,

   distribution, use, treatment, storage, disposal, transport or handling of

   Hazardous Materials, as well as all authorizations, codes, decrees, demands

   or demand letters, injunctions, judgments, licenses, notices or notice

   letters, orders, permits, plans or regulations issued, entered, promulgated

   or approved thereunder.

 

                                    -13-

 

  (ii)

Other than those that are or were stored, used or disposed of in

  compliance with applicable law, no Hazardous Materials are contained on or

  about any real property currently owned, leased or used by the Company or any

  of its Subsidiaries, and no Hazardous Materials were released on or about any

  real property previously owned, leased or used by the Company or any of its

  Subsidiaries during the period the property was owned, leased or used by the

  Company or any of its Subsidiaries, except in the normal course of the

  Company's or any of its Subsidiaries' business.

  

 (iii)

Except as set forth in Schedule 3(s), there are no underground storage

 tanks on or under any real property owned, leased or used by the Company or any

 of its Subsidiaries that are not in compliance with applicable law.

t.

Title to Property.  The Company and its Subsidiaries have good and

marketable title in fee simple to all real property and good and marketable

title to all personal property owned by them which is material to the business

of the Company and its Subsidiaries, in each case free and clear of all liens,

encumbrances and defects except such as are described in Schedule 3(t) or such

as would not have a Material Adverse Effect.  Any real property and facilities

held under lease by the Company and its Subsidiaries are held by them under

valid, subsisting and enforceable leases with such exceptions as would not have

a Material Adverse Effect.

 

u.

Insurance.  The Company and each of its Subsidiaries are insured by

insurers of recognized financial responsibility against such losses and risks

and in such amounts as management of the Company believes to be prudent and

customary in the businesses in which the Company and its Subsidiaries are

engaged.  Neither the Company nor any such Subsidiary has any reason to believe

that it will not be able to renew its existing insurance coverage as and when

such coverage expires or to obtain similar coverage from similar insurers as may

be necessary to continue its business at a cost that would not have a Material

Adverse Effect.  The Company has provided to Buyer true and correct copies of

all policies relating to directors' and officers' liability coverage, errors and

omissions coverage, and commercial general liability coverage.

 

v.

Internal Accounting Controls.  The Company and each of its Subsidiaries

maintain a system of internal accounting controls sufficient, in the judgment of

the Company's board of directors, 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 generally accepted

accounting principles 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 action is taken with

respect to any differences.

 

                                    -14-

 

w.

Foreign Corrupt Practices.  Neither the Company, nor any of its

Subsidiaries, nor any director, officer, agent, employee or other person acting

on behalf of the Company or any Subsidiary has, in the course of his actions

for, or on behalf of, the Company, used any corporate funds for any unlawful

contribution, gift, entertainment or other unlawful expenses relating to

political activity; made any direct or indirect unlawful payment to any foreign

or domestic government official or employee from corporate funds; violated or is

in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,

as amended, or made any bribe, rebate, payoff, influence payment, kickback or

other unlawful payment to any foreign or domestic government official or

employee.

 

x.

Solvency.  The Company (after giving effect to the transactions

contemplated by this Agreement) is solvent (i.e., its assets have a fair market

value in excess of the amount required to pay its probable liabilities on its

existing debts as they become absolute and matured) and currently the Company

has no information that would lead it to reasonably conclude that the Company

would not, after giving effect to the transaction contemplated by this

Agreement, have the ability to, nor does it intend to take any action that would

impair its ability to, pay its debts from time to time incurred in connection

therewith as such debts mature.  The Company did not {YES IT DID!!!!!-SEE 10k

FOR NOVEMBER 30, 2004 FILED FEBRUARY 28, 2005} receive a qualified opinion from

its auditors with respect to its most recent fiscal year end and, after giving

effect to the transactions contemplated by this Agreement, does not anticipate

or know of any basis upon which its auditors might issue a qualified opinion in

respect of its current fiscal year.

 

y.

No Investment Company.  The Company is not, and upon the issuance and

sale of the Securities as contemplated by this Agreement will not be an

"investment company" required to be registered under the Investment Company Act

of 1940 (an "Investment Company").  The Company is not controlled by an

Investment Company.

 

z.

Breach of Representations and Warranties by the Company.  If the Company

breaches any of the representations or warranties set forth in this Section 3,

and in addition to any other remedies available to the Buyers pursuant to this

Agreement, the Company shall pay to the Buyer the Standard Liquidated Damages

Amount in cash or in shares of Common Stock at the option of the Company, until

such breach is cured.  If the Company elects to pay the Standard Liquidated

Damages Amounts in shares of Common Stock, such shares shall be issued at the

Conversion Price at the time of payment.

 

                                    -15-

 

4.

COVENANTS.

 

a.

Best Efforts.  The parties shall use their best efforts to satisfy

timely each of the conditions described in Section 6 and 7 of this Agreement.

 

b.

Form D; Blue Sky Laws.  The Company agrees to file a Form D with respect

to the Securities as required under Regulation D and to provide a copy thereof

to each Buyer promptly after such filing.  The Company shall, on or before the

Closing Date, take such action as the Company shall reasonably determine is

necessary to qualify the Securities for sale to the Buyers at the applicable

closing pursuant to this Agreement under applicable securities or "blue sky"

laws of the states of the United States (or to obtain an exemption from such

qualification), and shall provide evidence of any such action so taken to each

Buyer on or prior to the Closing Date.

 

c.

Reporting Status; Eligibility to Use Form S-3, SB-2 or Form  

 

S-1.  The Company's Common Stock is registered under Section 12(g) of the 1934

Act. The Company represents and warrants that it meets the requirements for the

use of Form S-3 (or if the Company is not eligible for the use of Form S-3 as of

the Filing Date (as defined in the Registration Rights Agreement), the Company

may use the form of registration for which it is eligible at that time) for

registration of the sale by the Buyer of the Registrable Securities (as defined

in the Registration Rights Agreement).  So long as the Buyer beneficially owns

any of the Securities, the Company shall timely file all reports required to be

filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate

its status as an issuer required to file reports under the 1934 Act even if the

1934 Act or the rules and regulations thereunder would permit such termination.

The Company further agrees to file all reports required to be filed by the

Company with the SEC in a timely manner so as to become eligible, and thereafter

to maintain its eligibility, for the use of Form S-3.  The Company shall issue a

press release describing the material terms of the transaction contemplated

hereby as soon as practicable following the Closing Date but in no event more

than two (2) business days of the Closing Date, which press release shall be

subject to prior review by the Buyers.  The Company agrees that such press

release shall not disclose the name of the Buyers unless expressly consented to

in writing by the Buyers or unless required by applicable law or regulation, and

then only to the extent of such requirement.

 

d.

Use of Proceeds.  The Company shall use the net proceeds from the sale

of the Notes and the Warrants in the manner set forth in Schedule 4(d) attached

hereto and made a part hereof and shall not, directly or indirectly, use such

proceeds for (i) any loan to or investment in any other corporation,

partnership, enterprise or other person (except in connection with its currently

existing direct or indirect Subsidiaries); (ii) the satisfaction of any portion

of the Company's debt (other than payment of trade payables and accrued expenses

in the ordinary course of the Company's business and consistent with prior past

practices), or (iii) the redemption of any Common Stock (other than the

Securities).

 

                                    -16-

e.

Future Offerings.  Subject to the exceptions described below, the

Company will not, without the prior written consent of a majority-in-interest of

the Buyers, negotiate or contract with any party to obtain additional equity

financing (including debt financing with an equity component) that involves (A)

the issuance of Common Stock at a discount to the market price of the Common

Stock on the date of issuance (taking into account the value of any warrants or

options to acquire Common Stock issued in connection therewith) or (B) the

issuance of convertible securities that are convertible into an indeterminate

number of shares of Common Stock or (C) the issuance of warrants during the

period (the "Lock-up Period") beginning on the Closing Date and ending on the

later of (i) two hundred seventy (270) days from the Closing Date and (ii) one

hundred eighty (180) days from the date the Registration Statement (as defined

in the Registration Rights Agreement) is declared effective (plus any days in

which sales cannot be made thereunder).  In addition, subject to the exceptions

described below, the Company will not conduct any equity financing (including

debt with an equity component) ("Future Offerings") during the period beginning

on the Closing Date and ending two (2) years after the end of the Lock-up Period

unless it shall have first delivered to each Buyer, at least twenty (20)

business days prior to the closing of such Future Offering, written notice

describing the proposed Future Offering, including the terms and conditions

thereof and proposed definitive documentation to be entered into in connection

therewith, and providing each Buyer an option during the fifteen (15) day period

following delivery of such notice to purchase its pro rata share (based on the

ratio that the aggregate principal amount of Notes purchased by it hereunder

bears to the aggregate principal amount of Notes purchased hereunder) of the

securities being offered in the Future Offering on the same terms as

contemplated by such Future Offering (the limitations referred to in this

sentence and the preceding sentence are collectively referred to as the "Capital

Raising Limitations").  In the event the terms and conditions of a proposed

Future Offering are amended in any respect after delivery of the notice to the

Buyers concerning the proposed Future Offering, the Company shall deliver a new

notice to each Buyer describing the amended terms and conditions of the proposed

Future Offering and each Buyer thereafter shall have an option during the

fifteen (15) day period following delivery of such new notice to purchase its

pro rata share of the securities being offered on the same terms as contemplated

by such proposed Future Offering, as amended.  The foregoing sentence shall

apply to successive amendments to the terms and conditions of any proposed

Future Offering.  The Capital Raising Limitations shall not apply to any

transaction involving (i) issuances of securities in a firm commitment

underwritten public offering (excluding a continuous offering pursuant to Rule

415 under the 1933 Act, an equity line of credit or similar financing

arrangement) resulting in net proceeds to the Company of in excess of

$15,000,000, or (ii) issuances of securities as consideration for a merger,

consolidation or purchase of assets, or in connection with any strategic

partnership or joint venture (the primary purpose of which is not to raise

equity capital), or in connection with the disposition or acquisition of a

business, product or license by the Company.  The Capital Raising Limitations

also shall not apply to the issuance of securities upon exercise or conversion

of the Company's options, warrants or other convertible securities outstanding

as of the date hereof or to the grant of additional options or warrants, or the

issuance of additional securities, under any Company stock option or restricted

stock plan approved by the shareholders of the Company.  Notwithstanding

anything in  this section 4(e) to the contrary, in the event the Company's Board

of Directors decides, in good faith, to enter into a transaction or relationship

in which the Company issues shares of Common Stock or other securities of the

Company to a person or any entity which is, itself or through its subsidiaries,

an operating company in a business synergistic with the business of the Company

and in which the Company received benefits in addition to the investment of

funds, but shall not include a transaction in which the Company is issuing

securities primarily for the purpose of raising capital or to an entity whose

business is investing in securities, the Company shall be permitted to do so.

 

                                    -17-

 

 

f.

Expenses.  At the Closing, the Company shall reimburse Buyers for all

reasonable expenses incurred by them in connection with the negotiation,

preparation, execution, delivery and performance of this Agreement and the other

agreements to be executed in connection herewith ("Documents"), including,

without limitation, attorneys' and consultants' fees and expenses, transfer

agent fees, fees for stock quotation services, fees relating to any amendments

or modifications of the Documents or any consents or waivers of provisions in

the Documents, fees for the preparation of opinions of counsel, escrow fees, and

costs of restructuring the transactions contemplated by the Documents.  When

possible, the Company must pay these fees directly, otherwise the Company must

make immediate payment for reimbursement to the Buyers for all reasonable fees

and expenses within ___ days upon written notice by the Buyer and the submission

of a detailed, line-item invoice by the Buyer  If the Company fails to reimburse

the Buyer in full within ten (10) business days of submission of said written

notice and invoice by the Buyer, the Company shall pay interest on the total

amount of fees to be reimbursed at a rate of 15% per annum.  {PLACE LIMIT ON

$$$$ AMOUNT OF REIMBURSEMENT}

 

g.

Financial Information.  The Company agrees to send the following reports

to each Buyer until such Buyer transfers, assigns, or sells all of the

Securities: (i) within ten (10) days after the filing with the SEC, a copy of

its Annual Report on Form 10-KSB, its Quarterly Reports on Form 10-QSB and any

Current Reports on Form 8-K; (ii) within one (1) day after release, copies of

all press releases issued by the Company or any of its Subsidiaries; and (iii)

contemporaneously with the making available or giving to the shareholders of the

Company, copies of any notices or other information the Company makes available

or gives to such shareholders.

 

h.

Authorization and Reservation of Shares.  Subject to Stockholder

Approval, the Company shall at all times have authorized, and reserved for the

purpose of issuance, a sufficient number of shares of Common Stock to provide

for the full conversion or exercise of the outstanding Notes and Warrants and

issuance of the Conversion Shares and Warrant Shares in connection therewith

(based on the Conversion Price of the Notes or Exercise Price of the Warrants in

effect from time to time) and as otherwise required by the Notes.  The Company

shall not reduce the number of shares of Common Stock reserved for issuance upon

conversion of Notes and exercise of the Warrants without the consent of each

Buyer.  The Company shall at all times maintain the number of shares of Common

Stock so reserved for issuance at an amount ("Reserved Amount") equal to no less

than two (2) times the number that is then actually issuable upon full

conversion of the Notes and Additional Notes and upon exercise of the Warrants

and the Additional Warrants (based on the Conversion Price of the Notes or the

Exercise Price of the Warrants in effect from time to time).  If at any time the

number of shares of Common Stock authorized and reserved for issuance

("Authorized and Reserved Shares") is below the Reserved Amount, the Company

will promptly take all corporate action necessary to authorize and reserve a

sufficient number of shares, including, without limitation, calling a special

meeting of shareholders to authorize additional shares to meet the Company's

obligations under this Section 4(h), in the case of an insufficient number of

authorized shares, obtain shareholder approval of an increase in such authorized

number of shares, and voting the management shares of the Company in favor of an

increase in the authorized shares of the Company to ensure that the number of

authorized shares is sufficient to meet the Reserved Amount.  If the Company

fails to obtain such shareholder approval within thirty (30) days following the

date on which the number of Reserved Amount exceeds the Authorized and Reserved

Shares, the Company shall pay to the Borrower the Standard Liquidated Damages

Amount, in cash or in shares of Common Stock at the option of the Buyer.  If the

Buyer elects to be paid the Standard Liquidated Damages Amount in shares of

 

                                    -18-

 

Common Stock, such shares shall be issued at the Conversion Price at the time of

payment.  In order to ensure that the Company has authorized a sufficient amount

of shares to meet the Reserved Amount at all times, the Company must deliver to

the Buyer at the end of every month a list detailing (1) the current amount of

shares authorized by the Company and reserved for the Buyer; and (2) amount of

shares issuable upon conversion of the Notes and upon exercise of the Warrants

and as payment of interest accrued on the Notes for one year.  If the Company

fails to provide such list within five (5) business days of the end of each

month, the Company shall pay the Standard Liquidated Damages Amount, in cash or

in shares of Common Stock at the option of the Buyer, until the list is

delivered.  If the Buyer elects to be paid the Standard Liquidated Damages

Amount in shares of Common Stock, such shares shall be issued at the Conversion

Price at the time of payment.

 

i.

Listing.  The Company shall promptly secure the listing or quotation

{HOW CAN COMPANY MAKE THIS REPRESENTATION FOR RESTRICTED STOCK???}, as the case

may be, of the Conversion Shares and Warrant Shares upon each national

securities exchange or automated quotation system, if any, upon which shares of

Common Stock are then listed or quoted, as the case may be, (subject to official

notice of issuance) and, so long as any Buyer owns any of the Securities, shall

maintain, so long as any other shares of Common Stock shall be so listed or

quoted, as the case may be, such listing or quotation, as the case may be, of

all Conversion Shares and Warrant Shares from time to time issuable upon

conversion of the Notes or exercise of the Warrants.  The Company will obtain

and, so long as any Buyer owns any of the Securities, maintain the listing or

quotation, as the case may be, and trading of its Common Stock on the OTCBB or

any equivalent replacement exchange, the Nasdaq National Market ("Nasdaq"), the

Nasdaq SmallCap Market ("Nasdaq SmallCap"), the New York Stock Exchange

("NYSE"), or the American Stock Exchange ("AMEX") and will comply in all

respects with the Company's reporting, filing and other obligations under the

bylaws or rules of the National Association of Securities Dealers ("NASD") and

such exchanges, as applicable.  The Company shall promptly provide to each Buyer

copies of any notices it receives from the OTCBB and any other exchanges or

quotation systems on which the Common Stock is then listed or quoted, as the

case may be, regarding the continued eligibility of the Common Stock for listing

or quotation, as the case may be, on such exchanges and quotation systems.

 

                                    -19-

 

j.

Corporate Existence.  So long as a Buyer beneficially owns any Notes or

Warrants, the Company shall maintain its corporate existence and shall not sell

{THIS IS A SUBSTANTIAL VETO RIGHT GIVEN TO BUYERS} all or substantially all of

the Company's assets, except in the event of a merger or consolidation or sale

of all or substantially all of the Company's assets, where the surviving or

successor entity in such transaction (i) assumes the Company's obligations

hereunder and under the agreements and instruments entered into in connection

herewith and (ii) is a publicly traded corporation whose Common Stock is listed

for trading on the OTCBB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.

 

k.

No Integration.  The Company shall not make any offers or sales of any

security (other than the Securities) under circumstances that would require

registration of the Securities being offered or sold hereunder under the 1933

Act or cause the offering of the Securities to be integrated with any other

offering of securities by the Company for the purpose of any stockholder

approval provision applicable to the Company or its securities.

 

l.

Subsequent Investment.  The Company and the Buyers agree that, upon the

filing by the Company of the Registration Statement to be filed pursuant to the

Registration Rights Agreement (the "Filing Date"), the Buyers shall purchase

additional Notes (the "Filing Notes") in the aggregate principal amount of Seven

Hundred and Fifty Thousand Dollars ($750,000) and additional warrants (the

"Filing Warrants") to purchase an aggregate of 350,000 shares of Common Stock,

for an aggregate purchase price of Seven Hundred and Fifty Thousand Dollars

($750,000), with the closing of such purchase to occur within five (5) days of

the Filing Date; provided, however, that the obligation of each Buyer to

purchase the Filing Notes and the Filing Warrants is subject to the

satisfaction, at or before the closing of such purchase and sale, of the

conditions set forth in Section 7.  The Company and the Buyers further agree

that, upon the declaration of effectiveness of the Registration Statement to be

filed pursuant to the Registration Rights Agreement (the "Effective Date"), the

Buyers shall purchase additional notes  (the "Effectiveness Notes" and,

collectively with the Filing Notes, the "Additional Notes") in the aggregate

principal amount of One Million Dollars ($1,000,000) and additional warrants

(the "Effectiveness Warrants" and, collectively with the Filing Warrants, the

"Additional Warrants") to purchase an aggregate of 466,620 shares of Common

Stock, for an aggregate purchase price of One Million Dollars ($1,000,000), with

the closing of such purchase to occur within five (5) days of the Effective

Date; provided, however, that the obligation of each Buyer to purchase the

Additional Notes and the Additional Warrants is subject to the satisfaction, at

or before the closing of such purchase and sale, of the conditions set forth in

Section 7; and, provided, further, that there shall not have been a Material

Adverse Effect as of such effective date.  The terms of the Additional Notes and

the Additional Warrants shall be identical to the terms of the Notes and

Warrants, as the case may be, to be issued on the Closing Date.  The Common

Stock underlying the Additional Notes and the Additional Warrants shall be

Registrable Securities (as defined in the Registration Rights Agreement) and

shall be included in the Registration Statement to be filed pursuant to the

Registration Rights Agreement.

 

                                    -20-

 

m.

Key Man Insurance.  The Company shall use its best efforts to obtain, on

or before five (5) business days from the date hereof, key man life insurance on

all key executive employees.

 

n.

Restriction on Short Sales. The Buyers agree that, so long as any of the

Notes remain outstanding, but in no event less than two (2) years from the date

hereof, the Buyers will not enter into or effect any "short sales" (as such term

is defined in Rule 3b-3 of the 1934 Act) of the Common Stock or hedging

transaction which establishes a net short position with respect to the Common

Stock.

 

o.

Breach of Covenants.  If the Company breaches any of the covenants set

forth in this Section 4, and in addition to any other remedies available to the

Buyers pursuant to this Agreement, the Company shall pay to the Buyers the

Standard Liquidated Damages Amount, in cash or in shares of Common Stock at the

option of the Company, until such breach is cured.  If the Company elects to pay

the Standard Liquidated Damages Amount in shares, such shares shall be issued at

the Conversion Price at the time of payment.

 

5.

TRANSFER AGENT INSTRUCTIONS.  The Company shall issue irrevocable

instructions to its transfer agent to issue certificates, registered in the name

of each Buyer or its nominee, for the Conversion Shares and Warrant Shares in

such amounts as specified from time to time by each Buyer to the Company upon

conversion of the Notes or exercise of the Warrants in accordance with the terms

thereof (the "Irrevocable Transfer Agent Instructions").  Prior to registration

of the Conversion Shares and Warrant Shares under the 1933 Act or the date on

which the Conversion Shares and Warrant Shares may be sold pursuant to Rule 144

without any restriction as to the number of Securities as of a particular date

that can then be immediately sold, all such certificates shall bear the

restrictive legend specified in Section 2(g) of this Agreement.  The Company

warrants that no instruction other than the Irrevocable Transfer Agent

Instructions referred to in this Section 5, and stop transfer instructions to

give effect to Section 2(f) hereof (in the case of the Conversion Shares and

Warrant Shares, prior to registration of the Conversion Shares and Warrant

Shares under the 1933 Act or the date on which the Conversion Shares and Warrant

Shares may be sold pursuant to Rule 144 without any restriction as to the number

of Securities as of a particular date that can then be immediately sold), will

be given by the Company to its transfer agent and that the Securities shall

otherwise be freely transferable on the books and records of the Company as and

to the extent provided in this Agreement and the Registration Rights Agreement.

Nothing in this Section shall affect in any way the Buyer's obligations and

agreement set forth in Section 2(g) hereof to comply with all applicable

prospectus delivery requirements, if any, upon re-sale of the Securities.  If a

Buyer provides the Company with (i) an opinion of counsel in form, substance and

scope customary for opinions in comparable transactions, to the effect that a

public sale or transfer of such Securities may be made without registration

under the 1933 Act and such sale or transfer is effected or (ii) the Buyer

provides reasonable assurances that the Securities can be sold pursuant to Rule

 

                                    -21-

 

144, the Company shall permit the transfer, and, in the case of the Conversion

Shares and Warrant Shares, promptly instruct its transfer agent to issue one or

more certificates, free from restrictive legend, in such name and in such

denominations as specified by such Buyer.  The Company acknowledges that a

breach by it of its obligations hereunder will cause irreparable harm to the

Buyers, by vitiating the intent and purpose of the transactions contemplated

hereby.  Accordingly, the Company acknowledges that the remedy at law for a

breach of its obligations under this Section 5 may be inadequate and agrees, in

the event of a breach or threatened breach by the Company of the provisions of

this Section, that the Buyers shall be entitled, in addition to all other

available remedies, to an injunction restraining any breach and requiring

immediate transfer, without the necessity of showing economic loss and without

any bond or other security being required.

 

6.

CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.  The obligation of the

Company hereunder to issue and sell the Notes and Warrants to a Buyer at the

Closing is subject to the satisfaction, at or before the Closing Date of each of

the following conditions thereto, provided that these conditions are for the

Company's sole benefit and may be waived by the Company at any time in its sole

discretion:

 

a.

The applicable Buyer shall have executed this Agreement and the

Registration Rights Agreement, and delivered the same to the Company.

 

b.

The applicable Buyer shall have delivered the Purchase Price in

accordance with Section 1(b) above.

 

c.

The representations and warranties of the applicable Buyer 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 speak as of a specific date), and the applicable Buyer shall

have performed, satisfied and complied in all material respects with the

covenants, agreements and conditions required by this Agreement to be performed,

satisfied or complied with by the applicable Buyer at or prior to the Closing

Date.

 

d.

No litigation, statute, rule, regulation, executive order, decree,

ruling or injunction shall have been enacted, entered, promulgated or endorsed

by or in any court or governmental authority of competent jurisdiction or any

self-regulatory organization having authority over the matters contemplated

hereby which prohibits the consummation of any of the transactions contemplated

by this Agreement.

 

                                    -22-

 

7.

CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.  The obligation of

each Buyer hereunder to purchase the Notes and Warrants at the Closing is

subject to the satisfaction, at or before the Closing Date of each of the

following conditions, provided that these conditions are for such Buyer's sole

benefit and may be waived by such Buyer at any time in its sole discretion:

 

a.

The Company shall have executed this Agreement and the Registration

Rights Agreement, and delivered the same to the Buyer.

 

b.

The Company shall have delivered to such Buyer duly executed Notes (in

such denominations as the Buyer shall request) and Warrants in accordance with

Section 1(b) above.

 

c.

The Irrevocable Transfer Agent Instructions, in form and substance

satisfactory to a majority-in-interest of the Buyers, shall have been delivered

to and acknowledged in writing by the Company's Transfer Agent.

 

d.

The representations and warranties of the Company 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 such time (except for representations and warranties that

speak as of a specific date) and the Company shall have performed, satisfied and

complied in all material respects with the covenants, agreements and conditions

required by this Agreement to be performed, satisfied or complied with by the

Company at or prior to the Closing Date.  The Buyer shall have received a

certificate or certificates, executed by the chief executive officer of the

Company, dated as of the Closing Date, to the foregoing effect and as to such

other matters as may be reasonably requested by such Buyer including, but not

limited to certificates with respect to the Company's Certificate of

Incorporation, By-laws and Board of Directors' resolutions relating to the

transactions contemplated hereby.

 

e.

No litigation, statute, rule, regulation, executive order, decree,

ruling or injunction shall have been enacted, entered, promulgated or endorsed

by or in any court or governmental authority of competent jurisdiction or any

self-regulatory organization having authority over the matters contemplated

hereby which prohibits the consummation of any of the transactions contemplated

by this Agreement.

 

f.

No event shall have occurred which could reasonably be expected to have

a Material Adverse Effect on the Company.

 

g.

The Conversion Shares and Warrant Shares shall have been authorized for

quotation on the OTCBB and trading in the Common Stock on the OTCBB  shall not

have been suspended by the SEC or the OTCBB. {THEY HAVE BEEN AUTHORIZED FOR

QUOTATION AND TRADING SEE i ABOVE}

 

                                    -23-

h.

The Buyer shall have received an opinion of the Company's counsel, dated

as of the Closing Date, in form, scope and substance reasonably satisfactory to

the Buyer and in substantially the same form as Exhibit "D" attached hereto.

 

i.

The Buyer shall have received an officer's certificate described in

Section 3(c) above, dated as of the Closing Date.

 

8.

GOVERNING LAW; MISCELLANEOUS.   

 

a.

Governing Law.  THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND

CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO

AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD

TO THE PRINCIPLES OF CONFLICT OF LAWS.  THE PARTIES HERETO HEREBY SUBMIT TO THE

EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,

NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE

AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED

HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT

FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.  BOTH PARTIES FURTHER AGREE

THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED

IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR

PROCEEDING.  NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS

IN ANY OTHER MANNER PERMITTED BY LAW.  BOTH PARTIES AGREE THAT A FINAL NON-

APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY

BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER

LAWFUL MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER

THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING

ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH

DISPUTE.

 

b.

Counterparts; Signatures by Facsimile.  This Agreement may be executed

in one or more counterparts, each of which shall be deemed an original but all

of which shall constitute one and the same agreement and shall become effective

when counterparts have been signed by each party and delivered to the other

party.  This Agreement, once executed by a party, may be delivered to the other

party hereto by facsimile transmission of a copy of this Agreement bearing the

signature of the party so delivering this Agreement.

 

c.

Headings.  The headings of this Agreement are for convenience of

reference only and shall not form part of, or affect the interpretation of, this

Agreement.

 

d.

Severability.  In the event that any provision of this Agreement is

invalid or unenforceable under any applicable statute or rule of law, then such

provision shall be deemed inoperative to the extent that it may conflict

therewith and shall be deemed modified to conform with such statute or rule of

law.  Any provision hereof which may prove invalid or unenforceable under any

law shall not affect the validity or enforceability of any other provision

hereof.

 

e.

Entire Agreement; Amendments.  This Agreement and the instruments

referenced herein contain the entire understanding of the parties with respect

to the matters covered herein and therein and, except as specifically set forth

herein or therein, neither the Company nor the Buyer makes any representation,

warranty, covenant or undertaking with respect to such matters.  No provision of

this Agreement may be waived or amended other than by an instrument in writing

signed by the party to be charged with enforcement.

 

                                    -24-

 

f.

Notices.  Any notices required or permitted to be given under the terms

of this Agreement shall be sent by certified or registered mail (return receipt

requested) or delivered personally or by courier (including a recognized

overnight delivery service) or by facsimile and shall be effective five days

after being placed in the mail, if mailed by regular United States mail, or upon

receipt, if delivered personally or by courier (including a recognized overnight

delivery service) or by facsimile, in each case addressed to a party.  The

addresses for such communications shall be:

 

If to the Company:

 

INFE- Human Resources, Inc.

67 Wall Street, 22nd Floor

New York, NY 10005

Attention: Chief Executive Officer  

Telephone:

(212) 859-3466

Facsimile:

 

With a copy to:

Laura Anthony, Esq.

330 Clemants Street, #217

West Palm Beach, FL 33401

Attention:  Laura Anthony, Esq.

Telephone:  (561) 514-0936

Facsimile:   (561) 514-0832

 

If to a Buyer:  To the address set forth immediately below such Buyer's name on

the signature pages hereto.

 

With copy to:

 

Ballard Spahr Andrews & Ingersoll, LLP

1735 Market Street

51st Floor

Philadelphia, Pennsylvania  19103

Attention:  Gerald J. Guarcini, Esq.

Telephone:  215-864-8625

Facsimile:  215-864-8999

 

Each party shall provide notice to the other party of any change in address.

 

                                    -25-

 

g.

Successors and Assigns.  This Agreement shall be binding upon and inure

to the benefit of the parties and their successors and assigns.  Neither the

Company nor any Buyer shall assign this Agreement or any rights or obligations

hereunder without the prior written consent of the other.  Notwithstanding the

foregoing, subject to Section 2(f), any Buyer may assign its rights hereunder to

any person that purchases Securities in a private transaction from a Buyer or to

any of its "affiliates," as that term is defined under the 1934 Act, without the

consent of the Company.

 

h.

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.

 

i.

Survival.  The representations and warranties of the Company and the

agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive the

closing hereunder notwithstanding any due diligence investigation conducted by

or on behalf of the Buyers.  The Company agrees to indemnify and hold harmless

each of the Buyers and all their officers, directors, employees and agents for

loss or damage arising as a result of or related to any breach or alleged breach

by the Company of any of its representations, warranties and covenants set forth

in Sections 3 and 4 hereof or any of its covenants and obligations under this

Agreement or the Registration Rights Agreement, including advancement of

expenses as they are incurred.

 

j.

Publicity.  The Company and each of the Buyers shall have the right to

review a reasonable period of time before issuance of any press releases, SEC,

OTCBB or NASD filings, or any other public statements with respect to the

transactions contemplated hereby; provided, however, that the Company shall be

entitled, without the prior approval of each of the Buyers, to make any press

release or SEC, OTCBB (or other applicable trading market) or NASD filings with

respect to such transactions as is required by applicable law and regulations

(although each of the Buyers shall be consulted by the Company in connection

with any such press release prior to its release and shall be provided with a

copy thereof and be given an opportunity to comment thereon).

 

k.

Further Assurances.  Each party shall do and perform, or cause to be

done and performed, all such further acts and things, and shall execute and

deliver all such other agreements, certificates, instruments and documents, as

the other party may reasonably request in order to carry out the intent and

accomplish the purposes of this Agreement and the consummation of the

transactions contemplated hereby.

 

l.

No Strict Construction.  The language used in this Agreement will be

deemed to be the language chosen by the parties to express their mutual intent,

and no rules of strict construction will be applied against any party.

 

 

                                    -26-

 

m.

Remedies.  The Company acknowledges that a breach by it of its

obligations hereunder will cause irreparable harm to the Buyers by vitiating the

intent and purpose of the transaction contemplated hereby.  Accordingly, the

Company acknowledges that the remedy at law for a breach of its obligations

under this Agreement will be inadequate and agrees, in the event of a breach or

threatened breach by the Company of the provisions of this Agreement, that the

Buyers shall be entitled, in addition to all other available remedies at law or

in equity, and in addition to the penalties assessable herein, to an injunction

or injunctions restraining, preventing or curing any breach of this Agreement

and to enforce specifically the terms and provisions hereof, without the

necessity of showing economic loss and without any bond or other security being

required.

  

IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused this

Agreement to be duly executed as of the date first above written.

 

 

INFE-HUMAN RESOURCES, INC.

 

________________________________

Arthur Viola

Chief Executive Officer  

 

 

AJW PARTNERS, LLC

By:  SMS Group, LLC

 

 

______________________________________

Corey S. Ribotsky

Manager

 

 

RESIDENCE:  Delaware

 

ADDRESS:

1044 Northern Boulevard

Suite 302

Roslyn, New York 11576

Facsimile:  (516) 739-7115

Telephone:  (516) 739-7110

 

AGGREGATE SUBSCRIPTION AMOUNT:

 

Aggregate Principal Amount of Notes:

$________

Number of Warrants:

                 ________

Aggregate Purchase Price:

        $________

  

 

                                    -27-

 

AJW OFFSHORE, LTD.

By:  First Street Manager II, LLC

 

 

______________________________________

Corey S. Ribotsky  

Manager

 

 

RESIDENCE:   Cayman Islands

 

ADDRESS:AJW Offshore, Ltd.

P.O. Box 32021 SMB

Grand Cayman, Cayman Island, B.W.I.  

 

AGGREGATE SUBSCRIPTION AMOUNT:

 

Aggregate Principal Amount of Notes:

$_______

Number of Warrants:

_______

Aggregate Purchase Price:

$_______

  

 

AJW QUALIFIED PARTNERS, LLC

By:  AJW Manager, LLC

____________________________________

Corey S. Ribotsky  

Manager

 

 

RESIDENCE:

    New York

 

ADDRESS:

1044 Northern Boulevard

Suite 302

Roslyn, New York 11576

Facsimile:

(516) 739-7115

Telephone:

(516) 739-7110

 

 

AGGREGATE SUBSCRIPTION AMOUNT:

 

Aggregate Principal Amount of Notes:

        $________

Number of Warrants:

________

Aggregate Purchase Price:

       $________

 

                                    -28-

  

 

NEW MILLENNIUM CAPITAL PARTNERS II, LLC  

By:  First Street Manager II, LLP

____________________________________

Corey S. Ribotsky  

Manager

 

 

RESIDENCE:

    New York

 

ADDRESS:

1044 Northern Boulevard

Suite 302

Roslyn, New York 11576

Facsimile:

(516) 739-7115

Telephone:

(516) 739-7110

 

 

AGGREGATE SUBSCRIPTION AMOUNT:

 

Aggregate Principal Amount of Notes:

$______

Number of Warrants:

  

 ______

Aggregate Purchase Price:

$______

 

 

 

 

                                    -29-