Unassociated Document


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.


 




  





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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.


 




  





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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.


 




  





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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.


 




  





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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.


 




  





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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.


 




  





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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.


 




  





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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


 




  





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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


 




  





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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.


 




  





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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.


 




  





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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.


 




  





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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}


 




  





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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.


 

 




  





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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.


 




  





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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