Document:

EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

                                 by and between

                          Infinity Capital Group, Inc.,

                                       and

                              Joseph M. Chiappetta

                                      As of

                                 January 5, 2009

<PAGE>

                              EMPLOYMENT AGREEMENT

         This EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of  the  5th  day  of  January,  2009,  by  and  between  Joseph  M.  Chiappetta
("Employee")  and  Infinity  Capital  Group,  Inc. a Maryland  corporation  with
offices at 80 Broad Street, 5th Floor, New York, NY 10004 ("ICG" or "Employer"),

                                   BACKGROUND

         WHEREAS,  Employer  desires to employ Employee as the Vice President of
Corporate Development & Managing Director of Employer, and

         WHEREAS, Employee is willing to be employed as the Employee as the Vice
President of Corporate  Development & Managing  Director in the manner  provided
for  herein,  and to  perform  the  duties  of the  Employer  upon the terms and
conditions herein set forth;

         NOW,  THEREFORE,  in consideration of the promises and mutual covenants
herein set forth it is agreed as follows;

                                   AGREEMENTS

         In  consideration of the foregoing and of the mutual promises and other
agreements hereinafter set forth, the parties hereto hereby agree as follows:

1.       SCOPE OF EMPLOYMENT.

         (a) Employer  agrees that during the term of this  Agreement,  Employer
shall  employ  Employee to perform such duties and  exercise  such  authority as
assigned or delegated to Employer by Employer's  Board of  Directors,  and shall
serve  as Vice  President  of  Corporate  Development  &  Managing  Director  of
Employer.

         (b) Employee  hereby accepts such employment and agrees that during the
term of this Agreement that:

                  (i)  Employee  shall  perform  such  duties  in the  foregoing
         capacity;

                  (ii)  Employee  shall  devote time and  attention,  as well as
         necessary,  to the  performance  of  his  duties  hereunder  and to the
         affairs of Employer;

                  (iii)  Employee  shall comply with all lawful  policies  which
         from time to time may be in effect at  Employer  or adopted by Employer
         and conveyed to Employee.

<PAGE>

2.       COMPENSATION.  As  compensation  for the  services to be  performed  by
Employee hereunder,  Employer agrees to pay to Employee,  and Employee agrees to
accept, the following:

         (a) SALARY.  Employee or his assigns shall receive an initial Salary at
the rate of $60,000 per year, less  applicable  payroll  deductions  required by
law.  Such Salary shall be paid in  substantially  equal  periodic  installments
according to Employer's customary payroll practices, but no less frequently than
monthly.  Unless  otherwise  determined  at the sole  discretion of the Board of
Directors,  the initial  grant of Options in section 2(c) below shall be in lieu
of the  first  two  months  salary.  The  basic  compensation  provided  in this
Agreement  shall be  automatically  adjusted  on an annual  basis to reflect the
increase, if any, in the cost of living by adding to such basic salary an amount
obtained by multiplying the basic salary by the percentage by which the level of
the  Consumer  Price Index for all urban  consumers  for the United  States,  as
reported by the Bureau of Labor  Statistics of the United  States  Department of
Labor has increased  over its level as of the date of the  commencement  of this
Agreement.  The  adjustment  shall take place on January 1, of each year and the
Employer shall begin paying the adjusted  salary on January 5, of each year. The
Employee  shall  be paid  additional  compensation  from  the  Employer  for the
services rendered under this Agreement as may be determined,  from time to time,
in the sole  discretion  of the  Board of  Directors.  Employer  agrees  that if
additional  capital is raised and/ or Employee's scope of  responsibilities  are
increased  that Salary  will be revised  upward as agreed by the parties at that
time.

         (b) STOCK BONUS. None

         (c) INCENTIVE COMPENSATION.  Concurrent with signing this agreement the
Employee  shall  receive a grant of  196,000  options  ("Options")  to  purchase
Employer's common stock. 50,000 of the Options shall vest immediately, 73,000 of
the Options shall vest on the one year  anniversary of this agreement and 73,000
of the Options shall vest on the second anniversary of this agreement.  Employee
shall receive  future  incentive  compensation  as determined by the  Employer's
Board of Directors.

         (c) EMPLOYEE  BENEFITS.  In addition to Employee's Salary and Incentive
Compensation, Employer shall make available to Employee, during the term hereof:

                  (i)  Participation  in any plans  from time to time  generally
         offered to Employer's  employees  with respect to group  health,  life,
         accident and disability  insurance or payment plans or similar employee
         benefits, if any.

                  (ii) Three (3) weeks  paid  annual  vacation,  as well as paid
         holidays and other fringe benefits  regularly  provided to Employees of
         Employer; and

                  (iii)  Reimbursement  for  reasonable  and necessary  business
         expenses in accordance with Employer's policies.

<PAGE>

3.       TERM AND NATURE OF RELATIONSHIP.

         (a) EMPLOYMENT.  Employee's  employment hereunder shall commence on the
Closing  Date and continue for five years  through  January 5, 2014,  subject to
earlier termination as hereinafter provided in Sections 4(a)-4(e). Each 12 month
period  from the  commencement  date  forward  during the term  hereof  shall be
referred to as an "Annual Period."

         (b)  Subject  to  Section 4 below,  unless  the Board of  Directors  of
Employer  (the  "Board")  shall  determine  to the  contrary and shall so notify
Employee  in writing  on or before  the end of any  Annual  Period or unless the
Employee  notifies  Employer in writing on or before the end of the final Annual
Period of his desire not to renew this Agreement, then at the end of each Annual
Period,  the term of this Agreement shall be automatically  extended for one (1)
additional Annual Period to be added at the end of the then current term of this
Agreement.

4.       TERMINATION.

         (a)  TERMINATION  BY  EMPLOYER  WITH  CAUSE.   Employer  may  terminate
Employee's  employment  with "cause" as  hereafter  defined in this Section 4(a)
upon 5 days'  written  notice.  "Cause" for  purposes of Sections  4(a) and 4(b)
means Employee's:  (i) conviction of, or indictment for, criminal  negligence or
criminal  acts in the  work  place,  (ii)  violation  of  Employer  policies  or
procedures that have been made known to Employee provided Employee has not cured
such  violation  within 10  business  days  after  receiving  written  notice of
violation  from  Employer,  (iii)  material  breach  of the  covenants  of  this
Agreement, provided that Employee has not cured such breach within 10 days after
receiving  written notice from Employer,  (iv) the  appropriation  (or attempted
appropriation)  of  a  material  business  opportunity  of  Employer,  including
attempting to secure or securing any profit in connection  with any  transaction
entered  into on  behalf  of the  Employer,  and (v)  the  misappropriation  (or
attempted misappropriation) of any of Employer's funds or property. In the event
that Employee is terminated with "cause,"  Employee shall be entitled to (a) the
payment of Employee's  then-current accrued,  unpaid Salary and accrued,  unused
vacation which have accrued, each prorated through the date of termination.

         (b)  TERMINATION  BY EMPLOYER  WITHOUT  CAUSE.  Employer may  terminate
Employee's  employment  without "cause" as defined in Section 5(a) upon 30 days'
written  notice.  In the event that  Employee  is  terminated  without  "cause,"
Employee shall be provided with (i) payment of Employee's  then-current accrued,
unpaid Salary and accrued,  unused  vacation,  each prorated through the date of
termination,  and (ii)  providing  that Employee  complies with his  obligations
under Sections 6 and 7 herein,  payment of severance  compensation of a lump-sum
payment equal to 3 months' Salary.

         (c)  TERMINATION  BY EMPLOYEE  WITHOUT  CAUSE.  Employee may  terminate
Employee's  employment upon 30 days' written notice.  In the event that Employee
terminates his employment  without "cause" as defined in Section 4(d),  Employee
shall be paid his  then-current  accrued,  unpaid  Salary  and  accrued,  unused
vacation, prorated through the date of termination.

<PAGE>

         (d)  TERMINATION  BY EMPLOYEE  WITH CAUSE.  Employee may  terminate his
employment  upon 30 days'  written  notice with "cause" as hereafter  defined in
this Section 4(d). "Cause" for purposes of Section 4(c) and (d) means Employer's
material  breach  of the  covenants  of this  Agreement  or the  Stock  Purchase
Agreement,  provided  that  Employee does not cure any such breach upon 10 days'
written  notice  from  Employee.  In the  event  that  Employee  terminates  his
employment  with "cause,"  Employee shall be provided with payment of Employee's
then-current accrued,  unpaid Salary and accrued, unused vacation, each prorated
through the date of termination  and providing  that Employee  complies with his
obligations under Sections 6 and 7 herein,  payment of severance compensation of
a lump-sum payment equal to 3 months' Salary.

         (e)  TERMINATION  DUE TO EMPLOYEE'S  DEATH OR DISABILITY.  In the event
that this  Agreement and  Employee's  employment is terminated due to Employee's
death or disability,  Employee (or Employee's  legal  representatives)  shall be
paid (i) Employee's  then-current  unpaid Salary and accrued,  unused  vacation,
each  prorated  through the date of  termination,  (ii) an  additional 2 months'
Salary.  For purposes of this Agreement,  the term  "disability"  shall mean the
mental or  physical  inability  to  perform  satisfactorily  Employee's  regular
full-time duties, with or without a reasonable  accommodation,  as determined by
Employee's physician, for 120 days, whether or not consecutive,  in any 24-month
period.

         (f) INITIAL  EMPLOYMENT  PERIOD.  Employer and  Employee  agree that no
severance shall be due under any  circumstance if Employee is terminated  during
the  first  six  months  of  employment  as  the  result  of  an  unsatisfactory
performance review.

5.       REPRESENTATIONS AND WARRANTIES OF EMPLOYEE.  Employee hereby represents
and warrants to Employer  that  Employee is not now under any  obligation to any
person, firm or corporation, and has no other interest, which is inconsistent or
in conflict with this Agreement, or which would prevent, limit or impair, in any
way,  Employee's  performance  of any of  the  obligations  set  forth  in  this
Agreement.

6.        EMPLOYER COVENANTS

         (a) Directors & Officers  Insurance.  Employer shall maintain directors
and officers insurance in an amount typical for companies of its size and nature
of its business.

         (b)  Director  &  Officer  Indemnification.  Employer  shall  indemnify
Employee  for actions as an employee  except for any action of willful  fraud by
Employee.

7.       NON-DISCLOSURE COVENANT.

         (a) CONFIDENTIAL  INFORMATION DEFINED.  "Confidential  Information," as
used in this Agreement, shall mean any and all:

                  (i) trade  secrets  concerning  the  business  and  affairs of
         Employer,   product   specifications,    data,   know-how,    formulae,
         compositions,   processes,  designs,  sketches,  photographs,   graphs,
         drawings,  samples,  inventions  and ideas,  past,  current and planned
         research  and  development,   current  and  planned   manufacturing  or
         distribution  methods  and  processes,   customer  lists,  current  and
         anticipated  customer   requirements,   price  lists,  market  studies,

<PAGE>

         business plans,  computer software and programs  (including object code
         and source code), computer software and database technologies, systems,
         structures  and  architectures  (and  related  formulae,  compositions,
         processes,  improvements,  devices, know-how, inventions,  discoveries,
         concepts,  ideas,  designs,  methods  and  information),  and any other
         information,   however  documented,   that  is  a  trade  secret  under
         applicable state law;

                  (ii)  information  concerning  the  business  and  affairs  of
         Employer (which includes  historical  financial  statements,  financial
         projections  and  budgets,  historical  and  projected  sales,  capital
         spending budgets and plans, the names and backgrounds of key personnel,
         personnel training and techniques and materials),  however  documented;
         and

                  (iii) notes, analysis,  compilations,  studies,  summaries and
         other  material  prepared by or for Employer  containing  or based,  in
         whole or in part, on any information included in the foregoing.

         (b) ACKNOWLEDGMENTS BY EMPLOYEE. Employee acknowledges that (i) as part
of  Employee's  employment  with  Employer,  both  prior to  entering  into this
Agreement and during the term of this  Agreement,  Employee has been and will be
afforded  access to  Confidential  Information;  (ii) public  disclosure of such
Confidential  Information  could  have an  adverse  effect on  Employer  and its
business;  and  (iii)  the  provisions  of this  Section  7 are  reasonable  and
necessary to prevent the improper use or disclosure of Confidential  Information
and to provide Employer with exclusive ownership of all Employee Inventions.

         (c) AGREEMENTS OF EMPLOYEE.  In  consideration  of the compensation and
benefits to be paid or provided  to Employee by Employer  under this  Agreement,
Employee covenants as follows:

                  (i) During and following the Employment Period,  Employee will
         hold in confidence the  Confidential  Information and will not disclose
         it to any person  except with the  specific  prior  written  consent of
         Employer or except as  otherwise  expressly  permitted  by the terms of
         this Agreement.

                  (ii) Any trade  secrets  of  Employer  shall be  accorded  all
         protections and benefits  available under applicable state trade-secret
         law and any other applicable law.

                  (iii)  None  of the  foregoing  obligations  and  restrictions
         applies  to any  part of the  Confidential  Information  that  Employee
         demonstrates was or became generally available to the public other than
         as a result of a disclosure by Employee.

                  (iv) Employee will not remove from Employer's premises (except
         to the  extent  such  removal is for  purposes  of the  performance  of
         Employee's  duties at home or while  traveling,  or except as otherwise
         specifically  authorized by Employer) any document,  record,  notebook,
         plan, model,  component,  device, or computer software or code, whether
         embodied in a disk or in any other form (collectively, the "Proprietary

<PAGE>

         Items").  Employee  recognizes  that, as between Employer and Employee,
         all of the Proprietary Items, whether or not developed by Employee, are
         the exclusive property of Employer.  Upon termination of this Agreement
         by either party,  or upon the request of Employer during the Employment
         Period,  Employee will return to Employer all of the Proprietary  Items
         in Employee's possession or subject to Employee's control, and Employee
         shall not retain any copies,  abstracts,  sketches,  or other  physical
         embodiment of any of the Proprietary Items.

         (d)  DISPUTES  OR  CONTROVERSIES.  Employee  recognizes  that  should a
dispute or  controversy  arising from or relating to this Agreement be submitted
for  adjudication to any court,  arbitration  panel,  or other third party,  the
preservation of the secrecy of Confidential Information may be jeopardized.  All
pleadings,  documents,  testimony, and records relating to any such adjudication
will be maintained in secrecy and will be available for  inspection by Employer,
Employee, and their respective attorneys and experts, who will agree, in advance
and in writing, to receive and maintain all such information in secrecy,  except
as may be limited by them in writing.

8.       NON-INTERFERENCE.

         (a)  ACKNOWLEDGMENTS  BY  EMPLOYEE.  Employee  acknowledges  that:  the
provisions of this Section 8 are reasonable and necessary to protect  Employer's
business.

         (b) COVENANTS OF EMPLOYEE.  In consideration of the  acknowledgments by
Employee,  and in  consideration  of the compensation and benefits to be paid or
provided to Employee by Employer,  Employee covenants that he will not, directly
or indirectly:

                  (i) during the period of employment  under this Agreement (the
         "Employment Period"), except in the course of his employment hereunder,
         and  during the  2-year  period  following  termination  of  Employee's
         employment  under  this  Agreement  (the   "Post-Employment   Period"),
         interfere with existing investment activities of Employer;  (ii)whether
         for  Employee's  own account or the account of any other  person (A) at
         any time  during  the  Employment  Period  or  Post-Employment  Period,
         without consent of Employer, solicit, employ, or otherwise engage as an
         employee,  independent contractor,  or otherwise,  any person who is or
         was an employee of Employer at any time during the Employment Period or
         in any manner  induce or attempt to induce any  employee of Employer to
         terminate his employment  with Employer;  or (B) at any time during the
         Employment Period or Post-Employment Period,  interfere with Employer's
         relationship  with any  person,  including  any  person who at any time
         during the Employment Period was an employee, contractor,  supplier, or
         customer of Employer; or

                  (iii)  at any time  during  or after  the  Employment  Period,
         disparage  Employer or any of its  shareholders,  directors,  officers,
         employees or agents.

         (c)  BLUE-PENCILING.  If any  covenant  in  Section  8(b) is held to be
unreasonable,  arbitrary,  or  against  public  policy,  such  covenant  will be
considered to be divisible with respect to scope, time, and geographic area, and

<PAGE>

such lesser  scope,  time,  or  geographic  area,  or all of them, as a court of
competent  jurisdiction may determine to be reasonable,  not arbitrary,  and not
against public  policy,  will be effective,  binding,  and  enforceable  against
Employee.

         (d)  EXTENSION  OF  COVENANTS.  The  period of time  applicable  to any
covenant in Section  7(b) will be extended by the  duration of any  violation by
Employee of such covenant.

9.       REMEDIES.  Employee  acknowledges  and  agrees  that  the  business  of
Employer  is highly  competitive,  and that  violation  of any of the  covenants
provided for in Sections 7 and 8 of this Agreement would cause immediate,  harm,
loss and damage to Employer. Accordingly,  Employee agrees, without limiting any
of the  other  remedies  available  to  Employer,  that  any  violation  of said
covenants,  or any of  them,  may be  enjoined  or  restrained  by any  court of
competent  jurisdiction,  and that any temporary restraining order or emergency,
preliminary  or final  injunctions  may be  issued  by any  court  of  competent
jurisdiction.  In the event any  proceedings  are commenced by Employer  against
Employee for any actual or threatened  violation of any of said  covenants,  the
losing party in such proceedings shall be liable to the prevailing party for all
reasonable costs and expenses of any kind, including reasonable attorneys' fees,
which the prevailing party has incurred in connection with such proceedings.

10.      NOTICES.  Any  notices  or  communications  hereunder  will  be  deemed
sufficient  if made in writing and  hand-delivered  or sent by  facsimile  or by
registered or certified mail, postage prepaid,  return receipt requested, to the
following addresses:

         If to Employer:                    Infinity Capital Group, Inc.
                                            80 Broad Street
                                            5th Floor
                                            New York, NY 10004
                                            Attention: Pierce McNally
                                            Fax:  212-962-4400

         If to Employee:                    Joseph M. Chiappetta
                                            44 Mohawk Trail
                                            Stamford, CT 06903
                                            Fax: 203-322-7636

or to such other address as either party may designate for such party by written
notice to the other given from time to time in the manner herein provided.

11.      BINDING  EFFECT AND  BENEFIT.  The  provisions  hereof shall be binding
upon, and shall inure to the benefit of,  Employee,  his heirs,  executors,  and
administrators  as well as to Employer,  its successors,  and assigns;  however,
Employee's services under this personal services contract are not assignable.

12.      WAIVERS. No delay on the part of any party in the exercise of any right
or remedy shall operate as a waiver thereof,  and no single or partial  exercise
or  waiver  thereof  by any  party of any right or  remedy  shall  preclude  the
exercise  or further  exercise  thereof or the  exercise  of any other  right or
remedy.

13.      SEVERABILITY  AND  BLUE-PENCILING.  The illegality or invalidity of any
provision or provisions in this Agreement shall not impair, affect or invalidate
any other  provisions  contained in this Agreement.  If any provision or part of
this Agreement is held by a court of competent  jurisdiction to be unenforceable
because of the duration of such provision or the geographic  area or other scope
covered  thereby,  the court making such  determination  shall have the power to
modify such provision,  to reduce the duration, area or scope of such provision,
or to delete specific words or phrases therefrom  ("blue-penciling") and, in its
reduced or  blue-penciled  form,  such provision  shall then be enforceable  and
shall be enforced to the fullest extent permitted by law.

14.      ENTIRE AGREEMENT.  Any and all prior discussions,  understandings,  and
agreements,  whether written or oral,  express or implied,  held or made between
Employee and Employer are  superseded by and merged into this  Agreement,  which
alone fully and completely expresses the agreement of the parties with regard to
the matters addressed  herein,  and this Agreement is entered into with no party
relying on any statement or representation  made by any other party which is not
contained in this Agreement.

15.      AMENDMENTS.  This  Agreement may be modified,  amended or  supplemented
only by execution of a written instrument signed by both Employee and Employer.

16.      TERMINATION AND SURVIVAL OF PROVISIONS. Termination of employment under
this Agreement  shall not be interpreted  to terminate  other  provisions of the
Agreement,  including but not limited to the rights and obligations contained in
Sections 6-16.

                            (signature page follows)

<PAGE>

         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as
of the day and year first written above.

JOSEPH M. CHIAPPETTA                            INFINITY CAPITAL GROUP, INC.

/s/Joseph M. Chiappetta
_____________________________________           By: /s/Gregory H. Laborde
Name:Joseph M. Chiappetta                       Its: President
EMPLOYEE                                        EMPLOYERExhibit 10.21

INVESTMENT AGREEMENT

 

INVESTMENT AGREEMENT (this "AGREEMENT"), dated as of December 29, 2008 by and between Human Biosystems, Inc., a California corporation (the "Company"), and Dutchess Private Equities Fund, Ltd., a Cayman Islands exempted company (the "Investor"). 

WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Investor shall invest up to Ten Million dollars ($10,000,000) to purchase the Company's Common Stock, at no par value per share (the "Common Stock"); 

WHEREAS, such investments will be made in reliance upon the provisions of Section 4(2) under the Securities Act of 1933, as amended (the "1933 Act"), Rule 506 of Regulation D, and the rules and regulations promulgated thereunder, and/or upon such other exemption from the registration requirements of the 1933 Act as may be available with respect to any or all of the investments in Common Stock to be made hereunder; and 

WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement substantially in the form attached hereto (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. 

NOW THEREFORE, in consideration of the foregoing recitals, which shall be considered an integral part of this Agreement, the covenants and agreements set forth hereafter, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Investor hereby agree as follows: 

SECTION 1. DEFINITIONS. 

As used in this Agreement, the following terms shall have the following meanings specified or indicated below, and such meanings shall be equally applicable to the singular and plural forms of such defined terms.

“1933 Act” shall have the meaning set forth in the preamble of this agreement.

“1934 Act” shall mean the Securities Exchange Act of 1934, as it may be amended.

“Affiliate” shall have the meaning specified in Section 5(H), below.

1

                                                                                 

“Agreement” shall mean this Investment Agreement.

“Best Bid” shall mean the highest posted bid price of the Common Stock during a given period of time.

“

By-laws

” shall have the meaning specified in Section 4(C).

“

Certificate of Incorporation

” shall have the meaning specified in Section 4(C).

“Closing” shall have the meaning specified in Section 2(G).

“Closing Date” shall mean no more than seven (7) Trading Days following the Put Notice Date.

“Common Stock” shall have the meaning set forth in the preamble of this Agreement.

“Control” or “Controls” shall have the meaning specified in Section 5(H).

“Effective Date” shall mean the date the SEC declares effective under the 1933 Act the Registration Statement covering the Securities.

“Environmental Laws” shall have the meaning specified in Section 4(M).

“Equity Line Transaction Documents” shall mean this Agreement, the Registration Rights Agreement.

“Execution Date” shall mean the date indicated in the preamble to this Agreement.

“Indemnities” shall have the meaning specified in Section 11.

“Indemnified Liabilities” shall have the meaning specified in Section 11.

“Ineffective Period” shall mean any period of time that the Registration Statement or any Supplemental Registration Statement (as defined in the Registration Rights Agreement between the parties) becomes ineffective or unavailable for use for the sale or resale, as applicable, of any or all of the Registrable Securities (as defined in the Registration Rights Agreement) for any reason (or in the event the prospectus under either of the above is not current and deliverable) during any time period required under the Registration Rights Agreement.

“Investor” shall have the meaning indicated in the preamble of this Agreement.

2

                                                                                 

“Material Adverse Effect” shall have the meaning specified in Section 4(A).

“Maximum Common Stock Issuance” shall have the meaning specified in Section 2(H).

“Open Market Adjustment Amount” shall have the meaning specified in Section 2(I).

"Open Market Purchase" shall have the meaning specified in Section 2(I)

“Open Market Share Purchase” shall have the meaning specified in Section 2(I).

“Open Period” shall mean the period beginning on and including the Trading Day immediately following the Effective Date and ending on the earlier to occur of (i) the date which is sixty months (60) months from the Effective Date; or (ii) termination of the Agreement in accordance with Section 9, below.

“Pricing Period” shall mean the period beginning on the Put Notice Date and ending on and including the date that is five (5) Trading Days after such Put Notice Date.

“Principal Market” shall mean the American Stock Exchange, Inc., the National Association of Securities Dealers, Inc. Over-the-Counter Bulletin Board, the NASDAQ National Market System or the NASDAQ SmallCap Market, whichever is the principal market on which the Common Stock is listed.

“Prospectus” shall mean the prospectus, preliminary prospectus and supplemental prospectus used in connection with the Registration Statement.

“Purchase Amount” shall mean the total amount being paid by the Investor on a particular Closing Date to purchase the Securities.

“Purchase Price” shall mean ninety-three percent (95%) of the lowest closing Best Bid price of the Common Stock during the Pricing Period. 

“

Put

” shall have the meaning set forth in Section 2(B)(1) hereof.  

“Put Amount” shall have the meaning set forth in Section 2(B)(1) hereof.  

“Put Notice” shall mean a written notice sent to the Investor by the Company stating the Put Amount in U.S. dollars the Company intends to sell to the Investor pursuant to the terms of the Agreement and stating the current number of Shares issued and outstanding on such date.

“Put Notice Date” shall mean the Trading Day, as set forth below, immediately following the day on which the Investor receives a Put Notice,however a Put Notice shall be deemed delivered on (a) the Trading Day it is received by facsimile or otherwise by the Investor if such notice is received prior to 9:00 am Eastern Time, or (b) the immediately succeeding Trading Day if it is received by facsimile or otherwise after 9:00 am Eastern Time on a Trading Day.  No Put Notice may be deemed delivered on a day that is not a Trading Day. 

3

                                                                                 

 

“Put Restriction” shall mean the days between the beginning of the Pricing Period and Closing Date.  During this time, the Company shall not be entitled to deliver another Put Notice.

“Put Shares Due” shall have the meaning specified in Section 2(I).

“Registration Period” shall have the meaning specified in Section 5(C), below.

“Registration Rights Agreement” shall have the meaning set forth in the recitals, above.

“Registration Statement” means the registration statement of the Company filed under the 1933 Act covering the Common Stock issuable hereunder.

“Related Party” shall have the meaning specified in Section 5(H).

“Resolution” shall have the meaning specified in Section 8(E).

“SEC” shall mean the U.S. Securities & Exchange Commission.

“SEC Documents” shall have the meaning specified in Section 4(F).

“Securities” shall mean the shares of Common Stock issued pursuant to the terms of the Agreement.

“Shares” shall mean the shares of the Company’s Common Stock.

“Subsidiaries” shall have the meaning specified in Section 4(A).

“Trading Day” shall mean any day on which the Principal Market for the Common Stock is open for trading, from the hours of 9:30 am until 4:00 pm.

SECTION 2. PURCHASE AND SALE OF COMMON STOCK. 

(A) PURCHASE AND SALE OF COMMON STOCK. Subject to the terms and conditions set forth herein, the Company shall issue and sell to the Investor, and the Investor shall purchase from the Company, up to that number of Shares having an aggregate Purchase Price of Ten Million dollars ($10,000,000).

4

                                                                                 

(B) DELIVERY OF PUT NOTICES. 

(I) Subject to the terms and conditions of the Equity Line Transaction Documents, and from time to time during the Open Period, the Company may, in its sole discretion, deliver a Put Notice to the Investor which states the dollar amount (designated in U.S. Dollars) (the "Put Amount"), which the Company intends to sell to the Investor on a Closing Date (the "Put"). The Put Notice shall be in the form attached hereto as Exhibit C and incorporated herein by reference. The amount that the Company shall be entitled to Put to the Investor (the "Put Amount") shall be equal to, at the Company's election, either: (A) Two Hundred percent (200%) of the average daily volume (U.S. market only) of the Common Stock for the Ten (10) Trading Days prior to the applicable Put Notice Date, multiplied by the average of the three (3) daily closing bid prices immediately preceding the Put Date, or (B) two hundred fifty thousand dollars ($250,000). During the Open Period, the Company shall not be entitled to submit a Put Notice until after the previous Closing has been completed. The Purchase Price for the Common Stock identified in the Put Notice shall be equal to ninety-three percent (95%) of the lowest closing Best Bid price of the Common Stock during the Pricing Period. 

(C) COMPANY’S RIGHT TO WITHDRAWAL. The Company shall reserve the right, but not the obligation, to withdraw that portion of the Put that is below the Minimum Acceptable Price, by submitting to the Investor, in writing, a notice to cancel that portion of the Put.  Any shares above the Minimum Acceptable price due to the Investor shall be carried out by the Company under the terms of this Agreement.

(D) INTENTIONALLY OMITTED

(E) CONDITIONS TO INVESTOR'S OBLIGATION TO PURCHASE SHARES. Notwithstanding anything to the contrary in this Agreement, the Company shall not be entitled to deliver a Put Notice and the Investor shall not be obligated to purchase any Shares at a Closing (as defined in Section 2(G)) unless each of the following conditions are satisfied: 

(I) a Registration Statement shall have been declared effective and shall remain effective and available for the resale of all the Registrable Securities (as defined in the Registration Rights Agreement) at all times until the Closing with respect to the subject Put Notice; 

(II) at all times during the period beginning on the related Put Notice Date and ending on and including the related Closing Date, the Common Stock shall have been listed on the Principal Market and shall not have been suspended from trading thereon for a period of two (2) consecutive Trading Days during the Open Period and the Company shall not have been notified of any pending or threatened proceeding or other action to suspend the trading of the Common Stock; 

5

                                                                                 

(III) the Company has complied with its obligations and is otherwise not in breach of or in default under, this Agreement, the Registration Rights Agreement or any other agreement executed in connection herewith which has not been cured prior to delivery of the Investor’s Put Notice Date; 

(IV) no injunction shall have been issued and remain in force, or action commenced by a governmental authority which has not been stayed or abandoned, prohibiting the purchase or the issuance of the Securities; and 

(V) the issuance of the Securities will not violate any shareholder approval requirements of the Principal Market. 

If any of the events described in clauses (I) through (V) above occurs during a Pricing Period, then the Investor shall have no obligation to purchase the Put Amount of Common Stock set forth in the applicable Put Notice. 

(F) RESERVED

(G) MECHANICS OF PURCHASE OF SHARES BY INVESTOR. Subject to the satisfaction of the conditions set forth in Sections 2(E), 7 and 8, the closing of the purchase by the Investor of Shares (a "Closing") shall occur on the date which is no later than seven (7) Trading Days following the applicable Put Notice Date (each a "Closing Date"). Prior to each Closing Date, (I) the Company shall deliver to the Investor pursuant to this Agreement, certificates representing the Shares to be issued to the Investor on such date and registered in the name of the Investor; and (II) the Investor shall deliver to the Company the Purchase Price to be paid for such Shares, determined as set forth in Section 2(B). In lieu of delivering physical certificates representing the Securities and provided that the Company's transfer agent then is participating in The Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the Investor, the Company shall use all commercially reasonable efforts to cause its transfer agent to electronically transmit the Securities by crediting the account of the Investor's prime broker (as specified by the Investor within a reasonably in advance of the Investor's notice) with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. 

The Company understands that a delay in the issuance of Securities beyond the Closing Date could result in economic damage to the Investor. After the Effective Date, as compensation to the Investor for such loss, the Company agrees to make late payments to the Investor for late issuance of Securities (delivery of Securities after the applicable Closing Date) in accordance with the following schedule (where "No. of Days Late" is defined as the number of trading days beyond the Closing Date, with the Amounts being cumulative.): 

6

                                                                                 

	
	LATE  PAYMENT  FOR  EACH

NO.  OF  DAYS  LATE               $10,000 WORTH OF COMMON  STOCK

          1                                           $100

          2                                           $200

          3                                           $300

          4                                           $400

          5                                           $500

          6                                           $600

          7                                           $700

          8                                           $800

          9                                           $900

          10                                       $1,000

          Over  10                               $1,000  +  $200  for  each

                                                      Business  Day  late  beyond  10  days

The Company shall make any payments incurred under this Section in immediately available funds upon demand by the Investor. Nothing herein shall limit the Investor's right to pursue actual damages for the Company's failure to issue and deliver the Securities to the Investor, except that such late payments shall offset any such actual damages incurred by the Investor, and any Open Market Adjustment Amount, as set forth below. 

 (H) OVERALL LIMIT ON COMMON STOCK ISSUABLE. Notwithstanding anything contained herein to the contrary, if during the Open Period the Company becomes listed on an exchange that limits the number of shares of Common Stock that may be issued without shareholder approval, then the number of Shares issuable by the Company and purchasable by the Investor, shall not exceed that number of the shares of Common Stock that may be issuable without shareholder approval (the "Maximum Common Stock Issuance").  If such issuance of shares of Common Stock could cause a delisting on the Principal Market, then the Maximum Common Stock Issuance shall first be approved by the Company's shareholders in accordance with applicable law and the By-laws and Amended and Restated Certificate of Incorporation of the Company, if such issuance of shares of Common Stock could cause a delisting on the Principal Market. The parties understand and agree that the Company's failure to seek or obtain such shareholder approval shall in no way adversely affect the validity and due authorization of the issuance and sale of Securities or the Investor's obligation in accordance with the terms and conditions hereof to purchase a number of Shares in the aggregate up to the Maximum Common Stock Issuance limitation, and that such approval pertains only to the applicability of the Maximum Common Stock Issuance limitation provided in this Section 2(H). 

 

7

                                                                                 

(I)  If, by the third (3rd) business day after the Closing Date, the Company fails to deliver any portion of the shares of the Put to the Investor (the "Put Shares Due") and the Investor purchases, in an open market transaction or otherwise, shares of Common Stock necessary to make delivery of shares which would have been delivered if the full amount of the shares to be delivered to the Investor by the Company (the "Open Market Share Purchase") , then the Company shall pay to the Investor, in addition to any other amounts due to Investor pursuant to the Put, and not in lieu thereof, the Open Market Adjustment Amount (as defined below).  The "Open Market Adjustment Amount" is the amount equal to the excess, if any, of (x) the Investor's total purchase price (including brokerage commissions, if any) for the Open Market Share Purchase minus (y) the net proceeds (after brokerage commissions, if any) received by the Investor from the sale of the Put Shares Due.  The Company shall pay the Open Market Adjustment Amount to the Investor in immediately available funds within five (5) business days of written demand by the Investor.  By way of illustration and not in limitation of the foregoing, if the Investor purchases shares of Common Stock having a total purchase price (including brokerage commissions) of $11,000 to cover an Open Market Purchase with respect to shares of Common Stock it sold for net proceeds of $10,000, the Open Market Purchase Adjustment Amount which the Company will be required to pay to the Investor will be $1,000.

(J)  LIMITATION ON AMOUNT OF OWNERSHIP. Notwithstanding anything to the contrary in this Agreement, in no event shall the Investor be entitled to purchase that number of Shares, which when added to the sum of the number of shares of Common Stock beneficially owned (as such term is defined under Section 13(d) and Rule 13d-3 of the 1934 Act), by the Investor, would exceed 4.99% of the number of shares of Common Stock outstanding on the Closing Date, as determined in accordance with Rule 13d-1(j) of the 1934 Act. 

SECTION 3. INVESTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS. 

The Investor represents and warrants to the Company, and covenants, that: 

(A) SOPHISTICATED INVESTOR. The Investor has, by reason of its business and financial experience, such knowledge, sophistication and experience in financial and business matters and in making investment decisions of this type that it is capable of (I) evaluating the merits and risks of an investment in the Securities and making an informed investment decision; (II) protecting its own interest; and (III) bearing the economic risk of such investment for an indefinite period of time. 

(B) AUTHORIZATION; ENFORCEMENT. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Investor and is a valid and binding agreement of the Investor enforceable against the Investor in accordance with its terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies. 

(C) SECTION 9 OF THE 1934 ACT. During the term of this Agreement, the Investor will comply with the provisions of Section 9 of the 1934 Act, and the rules promulgated thereunder, with respect to transactions involving the Common Stock. The Investor agrees not to sell the Company's stock short, either directly or indirectly through its affiliates, principals or advisors, the Company's common stock during the term of this Agreement. 

8

                                                                                 

 

(D) ACCREDITED INVESTOR. Investor is an "Accredited Investor" as that term is defined in Rule 501(a) of Regulation D of the 1933 Act. 

(E) NO CONFLICTS. The execution, delivery and performance of the Transaction Documents by the Investor and the consummation by the Investor of the transactions contemplated hereby and thereby will not result in a violation of Partnership Agreement or other organizational documents of the Investor. 

(F) OPPORTUNITY TO DISCUSS. The Investor has received all materials relating to the Company's business, finance and operations which it has requested. The Investor has had an opportunity to discuss the business, management and financial affairs of the Company with the Company's management. 

(G) INVESTMENT PURPOSES. The Investor is purchasing the Securities for its own account for investment purposes and not with a view towards distribution and agrees to resell or otherwise dispose of the Securities solely in accordance with the registration provisions of the 1933 Act (or pursuant to an exemption from such registration provisions). 

(H) NO REGISTRATION AS A DEALER. The Investor is not and will not be required to be registered as a "dealer" under the 1934 Act, either as a result of its execution and performance of its obligations under this Agreement or otherwise. 

(I)  GOOD STANDING.  The Investor is a Limited Partnership, duly organized, validly existing and in good standing in the Cayman Islands.

(J)  TAX LIABILITIES.  The Investor understands that it is liable for its own tax liabilities.

(K) REGULATION M.  The Investor will comply with Regulation M under the 1934 Act, if applicable.  

SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. 

Except as set forth in the Schedules attached hereto, or as disclosed on the Company's SEC Documents, the Company represents and warrants to the Investor that: 

(A) ORGANIZATION AND QUALIFICATION. The Company is a corporation duly organized and validly existing in good standing under the laws of the State of Nevada, USA and has the requisite corporate power and authorization to own its properties and to carry on its business as now being conducted. Both the Company and the companies it owns or controls (“Subsidiaries”) are duly qualified to do business and are in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. As used in this Agreement, "Material Adverse Effect" means any material adverse effect on the business, properties, assets, operations, results of operations, financial condition or prospects of the Company and its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements and instruments to be entered into in connection herewith, or on the authority or ability of the Company to perform its obligations under the Equity Line Transaction Documents (as defined in Section 1 and 4(B), below). 

9

                                                                                 

 

(B) AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS. 

(I) The Company has the requisite corporate power and authority to enter into and perform this Investment Agreement and the Registration Rights Agreement (collectively, the "Equity Line Transaction Documents"), and to issue the Securities in accordance with the terms hereof and thereof. 

(II) The execution and delivery of the Equity Line Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby, including without limitation the reservation for issuance and the issuance of the Securities pursuant to this Agreement, have been duly and validly authorized by the Company's Board of Directors and no further consent or authorization is required by the Company, its Board of Directors, or its shareholders. 

(III) The Equity Line Transaction Documents have been duly and validly executed and delivered by the Company. 

(IV) The Equity Line Transaction Documents constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights and remedies. 

(C) CAPITALIZATION. As of the date hereof, the authorized capital stock of the Company consists of 300,000,000 shares of Common Stock with no par value per share, of which as of the date hereof, _________ shares are issued and outstanding.

Except as disclosed in the Company's publicly available filings with the SEC:

10

                                                                                 

 (I) no shares of the Company's capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company; (II) there are no outstanding debt securities; (III) there are no outstanding shares of capital stock, options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries; (IV) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act (except the Registration Rights Agreement); (V) there are no outstanding securities of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (VI) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities as described in this Agreement; (VII) the Company does not have any stock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement; and (VIII) there is no dispute as to the classification of any shares of the Company's capital stock. 

The Company has furnished to the Investor, or the Investor has had access through EDGAR to, true and correct copies of the Company's Amended and Restated Certificate of Incorporation, as in effect on the date hereof (the "Certificate of Incorporation"), and 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 and the material rights of the holders thereof in respect thereto. 

(D) ISSUANCE OF SHARES. The Company has reserved

________

 Shares for issuance pursuant to this Agreement, which have been duly authorized and reserved those Shares for issuance (subject to adjustment pursuant to the Company's covenant set forth in Section 5(F) below) pursuant to this Agreement. Upon issuance in accordance with this Agreement, the Securities will be validly issued, fully paid for and non-assessable and free from all taxes, liens and charges with respect to the issue thereof. In the event the Company cannot register a sufficient number of Shares for issuance pursuant to this Agreement, the Company will use its best efforts to authorize and reserve for issuance the number of Shares required for the Company to perform its obligations hereunder as soon as reasonably practicable. 

11

                                                                                 

(E) NO CONFLICTS. The execution, delivery and performance of the Equity Line Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not (I) result in a violation of the Certificate of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the By-laws; or (II) conflict with, or constitute a material default (or an event which with notice or lapse of time or both would become a material default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, contract, indenture mortgage, indebtedness or instrument to which the Company or any of its Subsidiaries is a party, or to the Company's knowledge result in a violation of any law, rule, regulation, order, judgment or decree (including United States federal and state securities laws and regulations and the rules and regulations of the Principal Market or principal securities exchange or trading market on which the Common Stock is traded or listed) 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 as disclosed in Schedule 4(e), neither the Company nor its Subsidiaries is in violation of any term of, or in default under, the Certificate of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the By-laws or their organizational charter or by-laws, respectively, or any contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its Subsidiaries, except for possible conflicts, defaults, terminations, amendments, accelerations, cancellations and violations that would not individually or in the aggregate have or constitute a Material Adverse Effect. The business of the Company and its Subsidiaries is not being conducted, and shall not be conducted, in violation of any law, statute, ordinance, rule, order or regulation of any governmental authority or agency, regulatory or self-regulatory agency, or court, except for possible violations the sanctions for which either individually or in the aggregate would not have a Material Adverse Effect. Except as specifically contemplated by this Agreement and as required under the 1933 Act or any securities laws of any states, to the Company's knowledge, the Company is not required to obtain any consent, authorization, permit or order of, or make any filing or registration (except the filing of a registration statement as outlined in the Registration Rights Agreement between the Parties) with, any court, governmental authority or agency, regulatory or self-regulatory agency or other third party in order for it to execute, deliver or perform any of its obligations under, or contemplated by, the Equity Line Transaction Documents in accordance with the terms hereof or thereof. All consents, authorizations, permits, 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 and are in full force and effect as of the date hereof. Except as disclosed in Schedule 4(e), the Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. The Company is not, and will not be, in violation of the listing requirements of the Principal Market as in effect on the date hereof and on each of the Closing Dates and is not aware of any facts which would reasonably lead to delisting of the Common Stock by the Principal Market in the foreseeable future. 

12

                                                                                 

 

(F) SEC DOCUMENTS; FINANCIAL STATEMENTS. As of the date hereof, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the "SEC Documents"). The Company has delivered to the Investor or its representatives, or they have had access through EDGAR to, true and complete copies of the SEC Documents. As of their respective filing 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 to make the statements therein, in light of the circumstances under which they were made, not misleading. 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 generally accepted accounting principles, by a firm that is a member of the Public Companies Accounting Oversight Board ("PCAOB") consistently applied, during the periods involved (except (I) as may be otherwise indicated in such financial statements or the notes thereto, or (II) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other written information provided by or on behalf of the Company to the Investor which is not included in the SEC Documents, including, without limitation, information referred to in Section 4(D) of this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstance under which they are or were made, not misleading. Neither the Company nor any of its Subsidiaries or any of their officers, directors, employees or agents have provided the Investor with any material, nonpublic information which was not publicly disclosed prior to the date hereof and any material, nonpublic information provided to the Investor by the Company or its Subsidiaries or any of their officers, directors, employees or agents prior to any Closing Date shall be publicly disclosed by the Company prior to such Closing Date. 

(G) ABSENCE OF CERTAIN CHANGES. Except as otherwise set forth in the SEC Documents, the Company does not intend to change the business operations of the Company in any material way. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy law nor does the Company or its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings. 

13

                                                                                 

 

(H) ABSENCE OF LITIGATION AND/OR REGULATORY PROCEEDINGS. Except as set forth in the SEC Documents, there is no action, suit, 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 executive officers of Company or any of its Subsidiaries, threatened against or affecting the Company, the Common Stock or any of the Company's Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or directors in their capacities as such, in which an adverse decision could have a Material Adverse Effect.

(I) ACKNOWLEDGMENT REGARDING INVESTOR'S PURCHASE OF SHARES. The Company acknowledges and agrees that the Investor is acting solely in the capacity of an arm's length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Equity Line Transaction Documents and the transactions contemplated hereby and thereby and any advice given by the Investor or any of its respective representatives or agents in connection with the Equity Line Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Investor's purchase of the Securities, and is not being relied on by the Company. The Company further represents to the Investor that the Company's decision to enter into the Equity Line Transaction Documents has been based solely on the independent evaluation by the Company and its representatives. 

(J) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES. Except as set forth in the SEC Documents, as of the date hereof, no event, liability, development or circumstance has occurred or exists, or to the Company's knowledge is contemplated to occur, with respect to the Company or its Subsidiaries or their respective business, properties, assets, prospects, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws on a registration statement filed with the SEC relating to an issuance and sale by the Company of its Common Stock and which has not been publicly announced. 

(K) EMPLOYEE RELATIONS. Neither the Company nor any of its Subsidiaries is involved in any union labor dispute nor, to the knowledge of the Company or any of its Subsidiaries, is any such dispute threatened. Neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that relations with their employees are good. No executive officer (as defined in Rule 501(f) of the 1933 Act) has notified the Company that such officer intends to leave the Company's employ or otherwise terminate such officer's employment with the Company. 

14

                                                                                 

 

(L) INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. Except as set forth in the SEC Documents, none of the Company's trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights necessary to conduct its business as now or as proposed to be conducted have expired or terminated, or are expected to expire or terminate within two (2) years from the date of this Agreement. The Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others and, except as set forth in the SEC Documents, there is no claim, action or proceeding being made or brought against, or to the Company's knowledge, being threatened against, the Company or its Subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement; and the Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and its Subsidiaries have taken commercially reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties. 

(M) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (I) are, to the knowledge of the management and directors of the Company and its Subsidiaries, in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"); (II) have, to the knowledge of the management and directors of the Company, received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (III) are in compliance, to the knowledge of the  management and directors of the Company, with all terms and conditions of any such permit, license or approval where, in each of the three (3) foregoing cases, the failure to so comply would have, individually or in the aggregate, a Material Adverse Effect. 

(N) TITLE. The Company and its Subsidiaries have 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 the SEC Documents or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or any of its Subsidiaries. Any real property and facilities held under lease by the Company or any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries.

15

                                                                                 

 

(O) INSURANCE. Each of the Company's Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company reasonably believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any of its Subsidiaries has been refused any insurance coverage sought or applied for and neither the Company nor its Subsidiaries 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. 

(P) REGULATORY PERMITS. The Company and its Subsidiaries have in full force and effect all certificates, approvals, authorizations and permits from the appropriate federal, state, local or foreign regulatory authorities and comparable foreign regulatory agencies, necessary to own, lease or operate their respective properties and assets and conduct their respective businesses, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, approval, authorization or permit, except for such certificates, approvals, authorizations or permits which if not obtained, or such revocations or modifications which, would not have a Material Adverse Effect. 

(Q) INTERNAL ACCOUNTING CONTROLS. The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient 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 by a firm with membership to the PCAOB 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. 

(R) 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. 

16

                                                                                 

 

(S) TAX STATUS. The Company and each of its Subsidiaries has made or filed all United States federal and state 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 provision 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. 

(T) CERTAIN TRANSACTIONS. Except as set forth in the SEC Documents filed at least ten (10) days prior to the date hereof and except for arm's length transactions pursuant to which the Company makes payments in the ordinary course of business upon terms no less favorable than the Company could obtain from disinterested third parties and other than the grant of stock options disclosed in the SEC Documents, 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. 

(U) DILUTIVE EFFECT. The Company understands and acknowledges that the number of shares of Common Stock issuable upon purchases pursuant to this Agreement will increase in certain circumstances including, but not necessarily limited to, the circumstance wherein the trading price of the Common Stock declines during the period between the Effective Date and the end of the Open Period. The Company's executive officers and directors have studied and fully understand the nature of the transactions contemplated by this Agreement and recognize that they have a potential dilutive effect on the shareholders of the Company. The Board of Directors of the Company has concluded, in its good faith business judgment, and with full understanding of the implications, that such issuance is in the best interests of the Company. The Company specifically acknowledges that, subject to such limitations as are expressly set forth in the Equity Line Transaction Documents, its obligation to issue shares of Common Stock upon purchases pursuant to this Agreement is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company. 

17

                                                                                 

 

(V) LOCK-UP. The Company shall cause its officers, insiders, directors, and affiliates or other related parties under control of the Company, to refrain from selling Common Stock during each Pricing Period. 

(W) NO GENERAL SOLICITATION. Neither the Company, nor any of its affiliates, nor any person acting on its behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Common Stock to be offered as set forth in this Agreement. 

(X) NO BROKERS, FINDERS OR FINANCIAL ADVISORY FEES OR COMMISSIONS.  No brokers, finders or financial advisory fees or commissions will be payable by the Company, its agents or Subsidiaries, with respect to the transactions contemplated by this Agreement, except as otherwise disclosed in this Agreement. 

SECTION 5. COVENANTS OF THE COMPANY 

(A) BEST EFFORTS. The Company shall use all commercially reasonable efforts to timely satisfy each of the conditions set forth in Section 7 of this Agreement. 

(B) BLUE SKY. The Company shall, at its sole cost and expense, on or before each of the Closing Dates, take such action as the Company shall reasonably determine is necessary to qualify the Securities for, or obtain exemption for the Securities for, sale to the Investor at each of the Closings pursuant to this Agreement under applicable securities or "Blue Sky" laws of such states of the United States, as reasonably specified by the Investor, and shall provide evidence of any such action so taken to the Investor on or prior to the Closing Date. 

(C) REPORTING STATUS. Until one of the following occurs, the Company shall file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status, or take an action or fail to take any action, which would terminate its status as a reporting company under the 1934 Act: (i) this Agreement terminates pursuant to Section 9 and the Investor has the right to sell all of the Securities without restrictions pursuant to Rule 144(k) promulgated under the 1933 Act, or such other exemption (ii) the date on which the Investor has sold all the Securities and this Agreement has been terminated pursuant to Section 9.

(D) USE OF PROCEEDS. The Company will use the proceeds from the sale of the Shares (excluding amounts paid by the Company for fees as set forth in the Equity Line Transaction Documents) for general corporate and working capital purposes and acquisitions or assets, businesses or operations or for other purposes that the Board of Directors, in its good faith deem to be in the best interest of the Company. 

18

                                                                                 

 

(E) FINANCIAL INFORMATION. During the Open Period, the Company agrees to make available to the Investor via EDGAR or other electronic means the following documents and information on the forms set forth: (I) within five (5) Trading Days after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-KSB, its Quarterly Reports on Form 10-QSB, any Current Reports on Form 8-K and any Registration Statements or amendments filed pursuant to the 1933 Act; (II) copies of any notices and other information made available or given to the shareholders of the Company generally, contemporaneously with the making available or giving thereof to the shareholders; and (III) within two (2) calendar days of filing or delivery thereof, copies of all documents filed with, and all correspondence sent to, the Principal Market, any securities exchange or market, or the National Association of Securities Dealers, Inc., unless such information is material nonpublic information. 

(F) RESERVATION OF SHARES. The Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, a sufficient number of shares of Common Stock to provide for the issuance of the Securities to the Investor as required hereunder. In the event that the Company determines that it does not have a sufficient number of authorized shares of Common Stock to reserve and keep available for issuance as described in this Section 5(F), the Company shall use all commercially reasonable efforts to increase the number of authorized shares of Common Stock by seeking shareholder approval for the authorization of such additional shares. 

(G) LISTING. The Company shall promptly secure and maintain the listing of all of the Registrable Securities (as defined in the Registration Rights Agreement) on the Principal Market and each other national securities exchange and automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and shall maintain, such listing of all Registrable Securities from time to time issuable under the terms of the Equity Line Transaction Documents. Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on the Principal Market (excluding suspensions of not more than one (1) trading day resulting from business announcements by the Company). The Company shall promptly provide to the Investor copies of any notices it receives from the Principal Market regarding the continued eligibility of the Common Stock for listing on such automated quotation system or securities exchange. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 5(G). 

(H) TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall cause each of its Subsidiaries not to, enter into, amend, modify or supplement, or permit any Subsidiary to enter into, amend, modify or supplement, any agreement, transaction, commitment or arrangement with any of its or any Subsidiary's officers, directors, persons who were officers or directors at any time during the previous two (2) years, shareholders who beneficially own 5% or more of the Common Stock, or Affiliates or with any individual related by blood, marriage or adoption to any such individual or with any entity in which any such entity or individual owns a 5% or more beneficial interest (each a "Related Party"), except for (I) customary employment arrangements and benefit programs on reasonable terms, (II) any agreement, transaction, commitment or arrangement on an arms-length basis on terms no less favorable than terms which would have been obtainable from a disinterested third party other than such Related Party, or (III) any agreement, transaction, commitment or arrangement which is approved by a majority of the disinterested directors of the Company. For purposes hereof, any director who is also an officer of the Company or any Subsidiary of the Company shall not be a disinterested director with respect to any such agreement, transaction, commitment or arrangement. "Affiliate" for purposes hereof means, with respect to any person or entity, another person or entity that, directly or indirectly, (I) has a 5% or more equity interest in that person or entity, (II) has 5% or more common ownership with that person or entity, (III) controls that person or entity, or (IV) is under common control with that person or entity. "Control" or "Controls" for purposes hereof means that a person or entity has the power, directly or indirectly, to conduct or govern the policies of another person or entity. 

19

                                                                                 

 

(I) FILING OF FORM 8-K. On or before the date which is four (4) Trading Days after the Execution Date, the Company shall file a Current Report on Form 8-K with the SEC describing the terms of the transaction contemplated by the Equity Line Transaction Documents in the form required by the 1934 Act, if such filing is required. 

(J) CORPORATE EXISTENCE. The Company shall use all commercially reasonable efforts to preserve and continue the corporate existence of the Company. 

(K) NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE A PUT. The Company shall promptly notify the Investor upon the occurrence of any of the following events in respect of a Registration Statement or related prospectus in respect of an offering of the Securities: (I) receipt of any request for additional information by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to the Registration Statement or related prospectus; (II) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose;  (III) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Securities for sale in any jurisdiction or the initiation or notice of any proceeding for such purpose; (IV) the happening of any event that makes any statement made in such Registration Statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related prospectus or documents so that, in the case of a Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (V) the Company's reasonable determination that a post-effective amendment to the Registration Statement would be appropriate, and the Company shall promptly make available to Investor any such supplement or amendment to the related prospectus. The Company shall not deliver to Investor any Put Notice during the continuation of any of the foregoing events in this Section 5(K). 

20

                                                                                 

 

(L)  REIMBURSEMENT.  If (I) the Investor becomes involved in any capacity in any action, proceeding or investigation brought by any shareholder of the Company, in connection with or as a result of the consummation of the transactions contemplated by the Equity Line Transaction Documents, or if the Investor is impleaded in any such action, proceeding or investigation by any person (other than as a result of a breach of the Investor’s representations and warranties set forth in this Agreement); or (II) the Investor becomes involved in any capacity in any action, proceeding or investigation brought by the SEC against or involving the Company or in connection with or as a result of the consummation of the transactions contemplated by the Equity Line Transaction Documents (other than as a result of a breach of the Investor’s representations and warranties set forth in this Agreement), or if this Investor is impleaded in any such action, proceeding or investigation by any person, then in any such case, the Company will reimburse the Investor for its reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith, as such expenses are incurred. In addition, other than with respect to any matter in which the Investor is a named party, the Company will pay to the Investor the charges, as reasonably determined by the Investor, for the time of any officers or employees of the Investor devoted to appearing and preparing to appear as witnesses, assisting in preparation for hearings, trials or pretrial matters, or otherwise with respect to inquiries, hearing, trials, and other proceedings relating to the subject matter of this Agreement. The reimbursement obligations of the Company under this section shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any affiliates of the Investor that are actually named in such action, proceeding or investigation, and partners, directors, agents, employees, attorneys, accountants, auditors and controlling persons (if any), as the case may be, of Investor and any such affiliate, and shall be binding upon and inure to the benefit of any successors of the Company, the Investor and any such affiliate and any such person.

21

                                                                                 

(M) TRANSFER AGENT.  Upon effectiveness of the Registration Statement, and for so long as the Registration Statement is effective,  the Company shall deliver instructions to its transfer agent to issue Shares to the Investor that are covered for resale by the Registration Statement free of restrictive legends.

(N) ACKNOWLEDGEMENT OF TERMS.  The Company hereby represents and warrants to the Investor that: (i) it is voluntarily entering into this Agreement of its own freewill, (ii) it is not entering this Agreement under economic duress, (iii) the terms of this Agreement are reasonable and fair to the Company, and (iv) the Company has had independent legal counsel of its own choosing review this Agreement, advise the Company with respect to this Agreement, and represent the Company in connection with this Agreement.

SECTION 6. INTENTIONALLY OMITTED

SECTION 7. CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL. 

The obligation hereunder of the Company to issue and sell the Securities to the Investor is further subject to the satisfaction, at or before each Closing Date, of each of the following conditions set forth below. These conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion. 

(A) The Investor shall have executed this Agreement and the Registration Rights Agreement and delivered the same to the Company. 

(B) The Investor shall have delivered to the Company the Purchase Price for the Securities being purchased by the Investor between the end of the Pricing Period and the Closing Date via a Put Settlement Sheet (hereto attached as Exhibit D). After receipt of confirmation of delivery of such Securities to the Investor, the Investor, by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company will disburse the funds constituting the Purchase Amount. 

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

SECTION 8. FURTHER CONDITIONS OF THE INVESTOR'S OBLIGATION TO PURCHASE. 

The obligation of the Investor hereunder to purchase Shares is subject to the satisfaction, on or before each Closing Date, of each of the following conditions set forth below. 

22

                                                                                 

(A) The Company shall have executed the Equity Line Transaction Documents and delivered the same to the Investor.

(B) The Common Stock shall be authorized for quotation on the Principal Market and trading in the Common Stock shall not have been suspended by the Principal Market or the SEC, at any time beginning on the date hereof and through and including the respective Closing Date (excluding suspensions of not more than one (1) Trading Day resulting from business announcements by the Company, provided that such suspensions occur prior to the Company's delivery of the Put Notice related to such Closing). 

(C) The representations and warranties of the Company shall be true and correct as of the date when made and as of the applicable Closing Date as though made at that time and the Company shall have performed, satisfied and complied with the covenants, agreements and conditions required by the Equity Line Transaction Documents to be performed, satisfied or complied with by the Company on or before such Closing Date. The Investor may request an update as of such Closing Date regarding the representation contained in Section 4(C) above. 

(D) The Company shall have executed and delivered to the Investor the certificates representing, or have executed electronic book-entry transfer of, the Securities (in such denominations as the Investor shall request) being purchased by the Investor at such Closing. 

(E) The Board of Directors of the Company shall have adopted resolutions consistent with Section 4(B)(II) above (the "Resolutions") and such Resolutions shall not have been amended or rescinded prior to such Closing Date. 

(F) Reserved 

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

(H) The Registration Statement shall be effective on each Closing Date and no stop order suspending the effectiveness of the Registration statement shall be in effect or to the Company's knowledge shall be pending or threatened. Furthermore, on each Closing Date (I) neither the Company nor the Investor shall have received notice that the SEC has issued or intends to issue a stop order with respect to such Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of such Registration Statement, either temporarily or permanently, or intends or has threatened to do so (unless the SEC's concerns have been addressed and Investor is reasonably satisfied that the SEC no longer is considering or intends to take such action), and (II) no other suspension of the use or withdrawal of the effectiveness of such Registration Statement or related prospectus shall exist. 

23

                                                                                 

 

(I) At the time of each Closing, the Registration Statement (including information or documents incorporated by reference therein) and any amendments or supplements thereto shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading or which would require public disclosure or an update supplement to the prospectus. 

(J) If applicable, the shareholders of the Company shall have approved the issuance of any Shares in excess of the Maximum Common Stock Issuance in accordance with Section 2(H) or the Company shall have obtained appropriate approval pursuant to the requirements of British Columbia, Canada law and the Company’s Articles of Incorporation and By-laws.

(K) The conditions to such Closing set forth in Section 2(E) shall have been satisfied on or before such Closing Date.

(L)  The Company shall have certified to the Investor the number of Shares of Common Stock outstanding when a Put Notice is given to the Investor.  The Company's delivery of a Put Notice to the Investor constitutes the Company's certification of the existence of the necessary number of shares of Common Stock reserved for issuance.

SECTION 9. TERMINATION. This Agreement shall terminate upon any of the following events: 

(I) when the Investor has purchased an aggregate of Ten Million dollars ($10,000,000) in the Common Stock of the Company pursuant to this Agreement; or,

(II) on the date which is sixty (60) months after the Effective Date; or,

(III) upon written notice of the Company to the Investor.  Any and all shares, or penalties, if any, due under this Agreement shall be immediately payable and due upon termination of the Line. 

SECTION 10.  SUSPENSION

This Agreement shall be suspended upon any of the following events, and shall remain suspended until such event is rectified:

(I)  the trading of the Common Stock is suspended by the SEC, the Principal Market or the NASD for a period of two (2) consecutive Trading Days during the Open Period; or,

24

                                                                                 

(II) The Common Stock ceases to be registered under the 1934 Act or listed or traded on the Principal Market.  Immediately upon the occurrence of one of the above-described events, the Company shall send written notice of such event to the Investor.

SECTION 11. INDEMNIFICATION. 

In consideration of the parties mutual obligations set forth in the Transaction Documents, each of the parties (in such capacity, an "Indemnitor") shall defend, protect, indemnify and hold harmless the other and all of the other party's shareholders, officers, directors, employees, counsel, and direct or indirect investors and any of the foregoing person's agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "Indemnitees") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and reasonable expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or arising out of, or relating to (I) any misrepresentation or breach of any representation or warranty made by the Indemnitor or any other certificate, instrument or document contemplated hereby or thereby; (II) any breach of any covenant, agreement or obligation of the Indemnitor contained in the Equity Line Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby; or (III) any cause of action, suit or claim brought or made against such Indemnitee by a third party and arising out of or resulting from the execution, delivery, performance or enforcement of the Equity Line Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, except insofar as any such misrepresentation, breach or any untrue statement, alleged untrue statement, omission or alleged omission is made in reliance upon and in conformity with information furnished to Indemnitor which is specifically intended for use in the preparation of any such Registration Statement, preliminary prospectus, prospectus or amendments to the prospectus. To the extent that the foregoing undertaking by the Indemnitor may be unenforceable for any reason, the Indemnitor shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. The indemnity provisions contained herein shall be in addition to any cause of action or similar rights Indemnitor may have, and any liabilities the Indemnitor or the Indemnitees may be subject to. 

SECTION 12. GOVERNING LAW; DISPUTES SUBMITTED TO ARBITRATION. 

All disputes arising under this agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts, without regard to principles of conflict of laws.  The parties to this agreement will submit all disputes arising under this agreement to arbitration in Boston, Massachusetts before a single arbitrator of the American Arbitration Association (“AAA”).  The arbitrator shall be selected by application of the rules of the AAA, or by mutual agreement of the parties, except that such arbitrator shall be an attorney admitted to practice law in the Commonwealth of Massachusetts.  No party to this agreement will challenge the jurisdiction or venue provisions as provided in this section.  No party to this agreement will challenge the jurisdiction or venue provisions as provided in this section.  Nothing contained herein shall prevent the party from obtaining an injunction.

25

                                                                                 

 

(B) LEGAL FEES; AND MISCELLANEOUS FEES. Except as otherwise set forth in the Equity Line Transaction Documents, each party shall pay the fees and expenses of its advisers, counsel, the accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. Any attorneys' fees and expenses incurred by either the Company or the Investor in connection with the preparation, negotiation, execution and delivery of any amendments to this Agreement or relating to the enforcement of the rights of any party, after the occurrence of any breach of the terms of this Agreement by another party or any default by another party in respect of the transactions contemplated hereunder, shall be paid on demand by the party which breached the Agreement and/or defaulted, as the case may be. The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of any Securities. 

(C) COUNTERPARTS. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original signature. 

(D) HEADINGS; SINGULAR/PLURAL. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. Whenever required by the context of this Agreement, the singular shall include the plural and masculine shall include the feminine. 

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

(F) ENTIRE AGREEMENT; AMENDMENTS. This Agreement is the FINAL AGREEMENT between the Company and the Investor with respect to the terms and conditions set forth herein, and, the terms of this Agreement may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the Parties.  No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Investor, and no provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought. The execution and delivery of the Equity Line Transaction Documents shall not alter the force and effect of any other agreements between the Parties, and the obligations under those agreements.

26

                                                                                 

 

(G) NOTICES. Any notices or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (I) upon receipt, when delivered personally; (II) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (III) one (1) day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: 

If to the Company:

Human Biosystems, Inc. 

1127 Harker Avenue

Palo Alto, CA 94301

Telephone: (650) 323-0943

Facsimile: 

If to the Investor:

Dutchess Private Equities Fund, Ltd.,  

50 Commonwealth Avenue, Suite 2

Boston, MA 02116 

Telephone: 617-301-4700 

Facsimile: 617-249-0947

Each party shall provide five (5) days prior written notice to the other party of any change in address or facsimile number. 

(H) NO ASSIGNMENT. This Agreement may not be assigned. 

(I) NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of the parties hereto and is not for the benefit of, nor may any provision hereof be enforced by, any other person, except that the Company acknowledges that the rights of the Investor may be enforced by its general partner. 

(J) SURVIVAL. The representations and warranties of the Company and the Investor contained in Sections 2 and 3, the agreements and covenants set forth in Sections 4 and 5, and the indemnification provisions set forth in Section 11, shall survive each of the Closings and the termination of this Agreement. 

27

                                                                                 

 

 (K) PUBLICITY. The Company and the Investor shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and no party shall issue any such press release or otherwise make any such public statement without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other party with prior notice of such public statement. Notwithstanding the foregoing, the Company shall not publicly disclose the name of the Investor without the prior consent of the Investor, except to the extent required by law. The Investor acknowledges that this Agreement and all or part of the Equity Line Transaction Documents may be deemed to be "material contracts" as that term is defined by Item 601(b)(10) of Regulation S-B, and that the Company may therefore be required to file such documents as exhibits to reports or registration statements filed under the 1933 Act or the 1934 Act.  The Investor further agrees that the status of such documents and materials as material contracts shall be determined solely by the Company, in consultation with its counsel. 

(L) 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. 

(M) PLACEMENT AGENT. The Company agrees to pay a registered broker dealer, to act as placement agent, a percentage of the Put Amount on each draw toward the fee as outlined in the Placement Agent Agreement.  The Investor shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other persons or entities for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Equity Line Transaction Documents. The Company shall indemnify and hold harmless the Investor, their employees, officers, directors, agents, and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorney's fees) and expenses incurred in respect of any such claimed or existing fees, as such fees and expenses are incurred. 

(N) 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, as the parties mutually agree that each has had a full and fair opportunity to review this Agreement and seek the advice of counsel on it. 

28

                                                                                 

(O) REMEDIES. The Investor shall have all rights and remedies set forth in this Agreement and the Registration Rights Agreement and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which the Investor has by law. Any person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any default or breach of any provision of this Agreement, including the recovery of reasonable attorneys fees and costs, and to exercise all other rights granted by law. 

(P) PAYMENT SET ASIDE. To the extent that the Company makes a payment or payments to the Investor hereunder or under the Registration Rights Agreement or the Investor enforces or exercises its rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. 

(Q) PRICING OF COMMON STOCK. For purposes of this Agreement, the bid price of the Common Stock shall be as reported on Bloomberg. 

SECTION 13. NON-DISCLOSURE OF NON-PUBLIC INFORMATION.

(a) The Company shall not disclose non-public information to the Investor, its advisors, or its representatives.

(b) Nothing herein shall require the Company to disclose non-public information to the Investor or its advisors or representatives, and the Company represents that it does not disseminate non-public information to any investors who purchase stock in the Company in a public offering, to money managers or to securities analysts, provided, however, that notwithstanding anything herein to the contrary, the Company will, as hereinabove provided, immediately notify the advisors and representatives of the Investor and, if any, underwriters, of any event or the existence of any circumstance (without any obligation to disclose the specific event or circumstance) of which it becomes aware, constituting non-public information (whether or not requested of the Company specifically or generally during the course of due diligence by such persons or entities), which, if not disclosed in the prospectus included in the Registration Statement would cause such prospectus to include a material misstatement or to omit a material fact required to be stated therein in order to make the statements, therein, in light of the circumstances in which they were made, not misleading. Nothing contained in this Section 13 shall be construed to mean that such persons or entities other than the Investor (without the written consent of the Investor prior to disclosure of such information) may not obtain non-public information in the course of conducting due diligence in accordance with the terms of this Agreement and nothing herein shall prevent any such persons or entities from notifying the Company of their opinion that based on such due diligence by such persons or entities, that the Registration Statement contains an untrue statement of material fact or omits a material fact required to be stated in the Registration Statement or necessary to make the statements contained therein, in light of the circumstances in which they were made, not misleading. 

29

                                                                                 

 

ARTICLE 14  ACKNOWLEDGEMENTS OF THE PARTIES.

Notwithstanding anything in this Agreement to the contrary, the parties hereto hereby acknowledge and agree to the following: (i) the Investor makes no representations or covenants that it will not engage in trading in the securities of the Company, other than the Investor will not sell short the Company's common stock at any time during this Agreement; (ii) the Company shall, by 8:30 a.m. Boston Time on the trading day following the date hereof, file a current report on Form 8-K disclosing the material terms of the transactions contemplated hereby and in the other Equity Line Transaction Documents; (iii) the Company has not and shall not provide material non-public information to the Investor unless prior thereto the Investor shall have executed a written agreement regarding the confidentiality and use of such information; and (iv) the Company understands and confirms that the Investor will be relying on the acknowledgements set forth in clauses (i) through (iii) above if the Investor effects any transactions in the securities of the Company.  

30

                                                                                 

SIGNATURE PAGE OF INVESTMENT AGREEMENT 

Your signature on this Signature Page evidences your agreement to be bound by the terms and conditions of the Investment Agreement and the Registration Rights Agreement as of the date first written above. 

The undersigned signatory hereby certifies that he has read and understands the Investment Agreement, and the representations made by the undersigned in this Investment Agreement are true and accurate, and agrees to be bound by its terms. 

DUTCHESS PRIVATE EQUITIES FUND, LTD. 

By:____________________________ 

     Douglas H. Leighton, Director

Human Biosystems, INC.

By:__________________________________  

     Harry Masuda, CEO  

  

31

                                                                                 

LIST OF EXHIBITS 

	
	EXHIBIT  A               Registration  Rights  Agreement

EXHIBIT  B               Opinion  of  Company's  Counsel

EXHIBIT  C               Put  Notice

EXHIBIT  D               Put  Settlement  Sheet

32

                                                                                 

LIST OF SCHEDULES 

Schedule 4(a) Subsidiaries 

33

                                                                                 

EXHIBIT A 

34

                                                                                 

EXHIBIT B 

FORM OF NOTICE OF EFFECTIVENESS 

OF REGISTRATION STATEMENT

Date: __________

[TRANSFER AGENT]

Re:

Human Biosystems, Inc.

Ladies and Gentlemen:

We are counsel to Human Biosystems, Inc., a California corporation (the "Company"), and have represented the Company in connection with that certain Investment Agreement (the "Investment Agreement") entered into by and among the Company and _________________________ (the "Investor") pursuant to which the Company has agreed to issue to the Investor shares of the Company's common stock, without par value per share (the "Common Stock") on the terms and conditions set forth in the Investment Agreement. Pursuant to the Investment Agreement, the Company also has entered into a Registration Rights Agreement with the Investor (the "Registration Rights Agreement") pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Registration Rights Agreement), including the shares of Common Stock issued or issuable under the Investment Agreement under the Securities Act of 1933, as amended (the "1933 Act"). In connection with the Company's obligations under the Registration Rights Agreement, on _________, 200_ the Company filed a Registration Statement on Form S- ___ (File No. 333-________) (the "Registration Statement") with the Securities and Exchange Commission (the "SEC") relating to the Registrable Securities which names the Investor as a selling shareholder thereunder.

In connection with the foregoing, we advise you that 

[

a member of the SEC's staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective

] [the Registration Statement has become effective]

 under the 1933 Act at [enter the time of effectiveness] on [enter the date of effectiveness] and to the best of our knowledge, after telephonic inquiry of a member of the SEC’s staff, no stop order suspending its effectiveness has been issued and no proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the 1933 Act pursuant to the Registration Statement.

Very truly yours,

[Company Counsel]

35

                                                                                 

EXHIBIT C

Date: 

RE: Put Notice Number __ 

Dear Mr. Leighton, 

This is to inform you that as of today, Human Biosystems, Inc., a California corporation (the "Company"), hereby elects to exercise its right pursuant to the Investment Agreement to require Dutchess Private Equities Fund, Ltd. to purchase shares of its common stock. The Company hereby certifies that: 

The amount of this put is $__________. 

The Pricing Period runs from ________ until _______. 

The current number of shares issued and outstanding as of the Company are: 

The number of shares currently available for issuance on the SB-2 for the Equity Line are: 

_________________________

Regards, 

_____________

Human Biosystems, Inc. 

Harry Masuda, CEO

36

                                                                                 

EXHIBIT D

PUT SETTLEMENT SHEET 

Date: 

Dear Mr. Jensen, 

Pursuant to the Put given by Human Biosystems, Inc., to Dutchess Private Equities Fund, Ltd. on _________________ 200_, we are now submitting the amount of common shares for you to issue to Dutchess. 

Please have a certificate bearing no restrictive legend totaling __________ shares issued to Dutchess Private Equities Fund, Ltd. immediately and send via DWAC to the following account: 

XXXXXX 

If not DWAC eligible, please send FedEx Priority Overnight to: 

XXXXXX 

Once these shares are received by us, we will have the funds wired to the Company. 

Regards, 

Douglas H. Leighton 

37

                                                                                 

	
	

DATE. . . . . . . . . . . . . . . . . . . . .  PRICE

Date of Day 1 . . . . . . . . . . . . . . . .  Closing Bid of Day 1

Date of Day 2 . . . . . . . . . . . . . . . .  Closing Bid of Day 2

Date of Day 3 . . . . . . . . . . . . . . . .  Closing Bid of Day 3

Date of Day 4 . . . . . . . . . . . . . . . .  Closing Bid of Day 4

Date of Day 5 . . . . . . . . . . . . . . . .  Closing Bid of Day 5

LOWEST 1 (ONE) CLOSING BID IN PRICING PERIOD

                                             ------------

PUT AMOUNT

                                             ------------

AMOUNT WIRED TO COMPANY

                                             ------------

PURCHASE PRICE (95)% (NINETY-FIVE PERCENT))

                                             ------------

AMOUNT OF SHARES DUE

                                             ------------

The undersigned has completed this Put as of this ___th day of _________, 200_. 

Human Biosystems, INC.

______________________________

Harry Masuda, CEO 

38

                                                                                 

SCHEDULE 4(c) CAPITALIZATION 

39

                                                                                 

SCHEDULE 4(e) CONFLICTS 

40

                                                                                 

SCHEDULE 4(g) MATERIAL CHANGES 

41

                                                                                 

SCHEDULE 4(h) LITIGATION 

42

                                                                                 

SCHEDULE 4(l) INTELLECTUAL PROPERTY 

43

                                                                                 

SCHEDULE 4(n) LIENS 

44

                                                                                 

SCHEDULE 4(t) CERTAIN TRANSACTIONS 

45

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00151-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00151-of-00352.parquet"}]]