THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”). THE SECURITIES MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN
OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR
OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 OR
REGULATION S UNDER SAID ACT.
CALLABLE SECURED CONVERTIBLE
NOTE
New York, New York
November 29, 2005
$148,750
FOR VALUE RECEIVED
, INFE, HUMAN RESOURCES, INC. , a
Nevada corporation (hereinafter called the “ Borrower
”), hereby promises to pay to the order of AJW PARTNERS, LLC
or registered assigns (the “ Holder ”) the sum
of $148,750, on November 29, 2008 (the “Maturity Date
”), and to pay interest on the unpaid principal balance
hereof at the rate of eight percent (8%) (the “ Interest
Rate ”) per annum from November 29, 2005 (the “
Issue Date ”) until the same becomes due and payable,
whether at maturity or upon acceleration or by prepayment or
otherwise. Any amount of principal or interest on this Note
which is not paid when due shall bear interest at the rate of
fifteen percent (15%) per annum from the due date thereof until the
same is paid (“ Default Interest ”).
Interest shall commence accruing on the Issue Date, shall be
computed on the basis of a 365-day year and the actual number of
days elapsed and shall be payable quarterly provided that no
interest shall be due and payable for any month in which the
Trading Price (as such term is defined below) is greater than
$.6375 for each Trading Day (as such term is defined below) of the
month. All payments due hereunder (to the extent not converted into
common stock, $.001 par value per share (the “Common
Stock” ) in accordance with the terms hereof) shall be
made in lawful money of the United States of America. All
payments shall be made at such address as the Holder shall
hereafter give to the Borrower by written notice made in accordance
with the provisions of this Note. Whenever any amount
expressed to be due by the terms of this Note is due on any day
which is not a business day, the same shall instead be due on the
next succeeding day which is a business day and, in the case of any
interest payment date which is not the date on which this Note is
paid in full, the extension of the due date thereof shall not be
taken into account for purposes of determining the amount of
interest due on such date. As used in this Note, the term
“business day” shall mean any day other than a
Saturday, Sunday or a day on which commercial banks in the city of
New York, New York are authorized or required by law or executive
order to remain closed. Each capitalized term used herein,
and not otherwise defined, shall have the meaning ascribed thereto
in that certain Securities Purchase Agreement, dated November 29,
2005, pursuant to which this Note was originally issued (the
“ Purchase Agreement ”).
This Note is free from all taxes, liens,
claims and encumbrances with respect to the issue thereof and shall
not be subject to preemptive rights or other similar rights of
shareholders of the Borrower and will not impose personal liability
upon the holder thereof. The obligations of the Borrower
under this Note shall be secured by that certain Security Agreement
and Intellectual Property Security Agreement, each dated November
29, 2005 by and between the Borrower and the Holder.
The following terms shall apply to this
Note:
ARTICLE I.
CONVERSION RIGHTS
1.1
Conversion Right
. The Holder shall have the right from time to
time, and at any time on or prior to the earlier of (i) the
Maturity Date and (ii) the date of payment of the Default Amount
(as defined in Article III) pursuant to Section 1.6(a) or Article
III, the Optional Prepayment Amount (as defined in Section 5.1 or
any payments pursuant to Section 1.7, each in respect of the
remaining outstanding principal amount of this Note to convert all
or any part of the outstanding and unpaid principal amount of this
Note into fully paid and non-assessable shares of Common Stock, as
such Common Stock exists on the Issue Date, or any shares of
capital stock or other securities of the Borrower into which such
Common Stock shall hereafter be changed or reclassified at the
conversion price (the “ Conversion Price
”) determined as provided herein (a “ Conversion
”); provided , however , that in no event shall
the Holder be entitled to convert any portion of this Note in
excess of that portion of this Note upon conversion of which the
sum of (1) the number of shares of Common Stock beneficially owned
by the Holder and its affiliates (other than shares of Common Stock
which may be deemed beneficially owned through the ownership of the
unconverted portion of the Notes or the unexercised or unconverted
portion of any other security of the Borrower (including, without
limitation, the warrants issued by the Borrower pursuant to the
Purchase Agreement) subject to a limitation on conversion or
exercise analogous to the limitations contained herein) and (2) the
number of shares of Common Stock issuable upon the conversion of
the portion of this Note with respect to which the determination of
this proviso is being made, would result in beneficial ownership by
the Holder and its affiliates of more than 4.99% of the outstanding
shares of Common Stock and provided further that the
Holder shall not be entitled to convert any portion of this Note
during any month immediately succeeding a Determination Date on
which the Borrower exercises its prepayment option pursuant to
Section 5.2 of this Note. For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulations 13D-G thereunder,
except as otherwise provided in clause (1) of such proviso.
The number of shares of Common Stock to be issued upon each
conversion of this Note shall be determined by dividing the
Conversion Amount (as defined below) by the applicable Conversion
Price then in effect on the date specified in the notice of
conversion, in the form attached hereto as Exhibit A (the “
Notice of Conversion ”), delivered to the Borrower by
the Holder in accordance with Section 1.4 below; provided that the
Notice of Conversion is submitted by facsimile (or by other means
resulting in, or reasonably expected to result in, notice) to the
Borrower before 6:00 p.m., New York, New York time on such
conversion date (the “ Conversion Date ”).
The term “ Conversion Amount ” means, with
respect to any conversion of this Note, the sum of (1) the
principal amount of this Note to be converted in such conversion
plus (2) accrued and unpaid interest, if any, on such
principal amount at the interest rates provided in this Note to the
Conversion Date, provided, however, that the Company shall have the
right to pay any or all interest in cash plus (3) Default
Interest, if any, on the amounts referred to in the immediately
preceding clauses (1) and/or (2) plus (4) at the
Holder’s option, any amounts owed to the Holder pursuant to
Sections 1.3 and 1.4(g) hereof or pursuant to Section 2(c) of that
certain Registration Rights Agreement, dated as of November 29,
2005, executed in connection with the initial issuance of this Note
and the other Notes issued on the Issue Date (the “
Registration Rights Agreement ”). The term
“Determination Date” means the last business day
of each month after the Issue Date.
2
1.2
Conversion Price
.
(a)
Calculation of Conversion
Price .
The Conversion Price shall be the
Variable Conversion Price (as defined herein) (subject, in each
case, to equitable adjustments for stock splits, stock dividends or
rights offerings by the Borrower relating to the Borrower’s
securities or the securities of any subsidiary of the Borrower,
combinations, recapitalization, reclassifications, extraordinary
distributions and similar events). The “ Variable
Conversion Price ” shall mean the Applicable Percentage
(as defined herein) multiplied by the Market Price (as defined
herein). “ Market Price ” means the
average of the lowest three (3) Trading Prices (as defined below)
for the Common Stock during the twenty (20) Trading Day period
ending one Trading Day prior to the date the Conversion Notice is
sent by the Holder to the Borrower via facsimile (the “
Conversion Date ”). “ Trading Price
” means, for any security as of any date, the intraday
trading price on the Over-the-Counter Bulletin Board (the “
OTCBB ”) as reported by a reliable reporting service (
“Reporting Service” ) mutually acceptable to
Borrower and Holder and hereafter designated by Holders of a
majority in interest of the Notes and the Borrower or, if the OTCBB
is not the principal trading market for such security, the intraday
trading price of such security on the principal securities exchange
or trading market where such security is listed or traded or, if no
intraday trading price of such security is available in any of the
foregoing manners, the average of the intraday trading prices of
any market makers for such security that are listed in the
“pink sheets” by the National Quotation Bureau, Inc.
If the Trading Price cannot be calculated for such security
on such date in the manner provided above, the Trading Price shall
be the fair market value as mutually determined by the Borrower and
the holders of a majority in interest of the Notes being converted
for which the calculation of the Trading Price is required in order
to determine the Conversion Price of such Notes. “
Trading Day ” shall mean any day on which the Common
Stock is traded for any period on the OTCBB, or on the principal
securities exchange or other securities market on which the Common
Stock is then being traded. “ Applicable
Percentage ” shall mean 50.0%.
3
(b)
Conversion Price During Major
Announcements .
Notwithstanding
anything contained in Section 1.2(a) to the contrary, in the event
the Borrower (i) makes a public announcement that it intends to
consolidate or merge with any other corporation (other than a
merger in which the Borrower is the surviving or continuing
corporation and its capital stock is unchanged) or sell or transfer
all or substantially all of the assets of the Borrower or (ii) any
person, group or entity (including the Borrower) publicly announces
a tender offer to purchase 50% or more of the Borrower’s
Common Stock (or any other takeover scheme) (the date of the
announcement referred to in clause (i) or (ii) is hereinafter
referred to as the “ Announcement Date ”),
then the Conversion Price shall, effective upon the Announcement
Date and continuing through the Adjusted Conversion Price
Termination Date (as defined below), be equal to the lower of (x)
the Conversion Price which would have been applicable for a
Conversion occurring on the Announcement Date and (y) the
Conversion Price that would otherwise be in effect. From and after
the Adjusted Conversion Price Termination Date, the Conversion
Price shall be determined as set forth in this Section 1.2(a).
For purposes hereof, “ Adjusted Conversion
Price Termination Date ” shall mean, with respect to any
proposed transaction or tender offer (or takeover scheme) for which
a public announcement as contemplated by this Section 1.2(b) has
been made, the date upon which the Borrower (in the case of clause
(i) above) or the person, group or entity (in the case of clause
(ii) above) consummates or publicly announces the termination or
abandonment of the proposed transaction or tender offer (or
takeover scheme) which caused this Section 1.2(b) to become
operative.
1.3
Authorized Shares
. The Borrower covenants that during the period
the conversion right exists, the Borrower will reserve from its
authorized and unissued Common Stock a sufficient number of shares,
free from preemptive rights, to provide for the issuance of Common
Stock upon the full conversion of this Note and the other Notes
issued pursuant to the Purchase Agreement. The Borrower is
required at all times to have authorized and reserved two times the
number of shares that is actually issuable upon full conversion of
the Notes (based on the Conversion Price of the Notes or the
Exercise Price of the Warrants in effect from time to time) (the
“ Reserved Amount ”). The Reserved Amount
shall be increased from time to time in accordance with the
Borrower’s obligations pursuant to Section 4(h) of the
Purchase Agreement. The Borrower represents that upon
issuance, such shares will be duly and validly issued, fully paid
and non-assessable. In addition, if the Borrower shall issue
any securities or make any change to its capital structure which
would change the number of shares of Common Stock into which the
Notes shall be convertible at the then current Conversion Price,
the Borrower shall at the same time make proper provision so that
thereafter there shall be a sufficient number of shares of Common
Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Notes. The Borrower (i)
acknowledges that it has irrevocably instructed its transfer agent
to issue certificates for the Common Stock issuable upon conversion
of this Note, and (ii) agrees that its issuance of this Note
shall constitute full authority to its officers and agents who are
charged with the duty of executing stock certificates to execute
and issue the necessary certificates for shares of Common Stock in
accordance with the terms and conditions of this Note.
4
If, at any time a Holder of this Note
submits a Notice of Conversion, and the Borrower does not have
sufficient authorized but unissued shares of Common Stock available
to effect such conversion in accordance with the provisions of this
Article I (a “ Conversion Default ”), subject to
Section 4.8, the Borrower shall issue to the Holder all of the
shares of Common Stock which are then available to effect such
conversion. The portion of this Note which the Holder
included in its Conversion Notice and which exceeds the amount
which is then convertible into available shares of Common Stock
(the “ Excess Amount ”) shall, notwithstanding
anything to the contrary contained herein, not be convertible into
Common Stock in accordance with the terms hereof until (and at the
Holder’s option at any time after) the date additional shares
of Common Stock are authorized by the Borrower to permit such
conversion, at which time the Conversion Price in respect thereof
shall be the lesser of (i) the Conversion Price on the Conversion
Default Date (as defined below) and (ii) the Conversion Price on
the Conversion Date thereafter elected by the Holder in respect
thereof. In addition, the Borrower shall pay to the Holder
payments (“ Conversion Default Payments ”) for a
Conversion Default in the amount of (x) the sum of (1) the
then outstanding principal amount of this Note plus (2)
accrued and unpaid interest on the unpaid principal amount of this
Note through the Authorization Date (as defined below) plus
(3) Default Interest, if any, on the amounts referred to in clauses
(1) and/or (2), multiplied by (y) .24, multiplied by
(z) (N/365), where N = the number of days from the day the holder
submits a Notice of Conversion giving rise to a Conversion Default
(the “ Conversion Default Date ”) to the date
(the “ Authorization Date ”) that the Borrower
authorizes a sufficient number of shares of Common Stock to effect
conversion of the full outstanding principal balance of this Note.
The Borrower shall use its best efforts to authorize a
sufficient number of shares of Common Stock as soon as practicable
following the earlier of (i) such time that the Holder notifies the
Borrower or that the Borrower otherwise becomes aware that there
are or likely will be insufficient authorized and unissued shares
to allow full conversion thereof and (ii) a Conversion Default.
The Borrower shall send notice to the Holder of the
authorization of additional shares of Common Stock, the
Authorization Date and the amount of Holder’s accrued
Conversion Default Payments. The accrued Conversion Default
Payments for each calendar month shall be paid in cash or shall be
convertible into Common Stock (at such time as there are sufficient
authorized shares of Common Stock) at the applicable Conversion
Price, at the Borrower’s option, as follows:
(a)
In the event Holder elects to take such
payment in cash, cash payment shall be made to Holder by the fifth
(5 th ) day of the month following the month in which it
has accrued; and
(b)
In the event Holder elects to take such
payment in Common Stock, the Holder may convert such payment amount
into Common Stock at the Conversion Price (as in effect at the time
of conversion) at any time after the fifth day of the month
following the month in which it has accrued in accordance with the
terms of this Article I (so long as there is then a sufficient
number of authorized shares of Common Stock).
5
The Holder’s election shall be made
in writing to the Borrower at any time prior to 6:00 p.m., New
York, New York time, on the third day of the month following the
month in which Conversion Default payments have accrued. If
no election is made, the Holder shall be deemed to have elected to
receive cash. Nothing herein shall limit the Holder’s
right to pursue actual damages (to the extent in excess of the
Conversion Default Payments) for the Borrower’s failure to
maintain a sufficient number of authorized shares of Common Stock,
and each holder shall have the right to pursue all remedies
available at law or in equity (including degree of specific
performance and/or injunctive relief).
1.4
Method of Conversion
.
(a)
Mechanics of Conversion
. Subject to Section 1.1, this Note may be converted by
the Holder in whole or in part at any time from time to time after
the Issue Date, by (A) submitting to the Borrower a Notice of
Conversion (by facsimile or other reasonable means of communication
dispatched on the Conversion Date prior to 6:00 p.m., New York, New
York time) and (B) subject to Section 1.4(b), surrendering
this Note at the principal office of the Borrower.
(b)
Surrender of Note Upon
Conversion .
Notwithstanding anything to the contrary
set forth herein, upon conversion of this Note in accordance with
the terms hereof, the Holder shall not be required to physically
surrender this Note to the Borrower unless the entire unpaid
principal amount of this Note is so converted. The Holder and
the Borrower shall maintain records showing the principal amount so
converted and the dates of such conversions or shall use such other
method, reasonably satisfactory to the Holder and the Borrower, so
as not to require physical surrender of this Note upon each such
conversion. In the event of any dispute or discrepancy, such
records of the Borrower shall be controlling and determinative in
the absence of manifest error. Notwithstanding the foregoing,
if any portion of this Note is converted as aforesaid, the Holder
may not transfer this Note unless the Holder first physically
surrenders this Note to the Borrower, whereupon the Borrower will
forthwith issue and deliver upon the order of the Holder a new Note
of like tenor, registered as the Holder (upon payment by the Holder
of any applicable transfer taxes) may request, representing in the
aggregate the remaining unpaid principal amount of this Note.
The Holder and any assignee, by acceptance of this Note,
acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of a portion of this Note, the
unpaid and unconverted principal amount of this Note represented by
this Note may be less than the amount stated on the face
hereof.
(c)
Payment of Taxes
. The Borrower shall not be required to pay any tax
which may be payable in respect of any transfer involved in the
issue and delivery of shares of Common Stock or other securities or
property on conversion of this Note in a name other than that of
the Holder (or in street name), and the Borrower shall not be
required to issue or deliver any such shares or other securities or
property unless and until the person or persons (other than the
Holder or the custodian in whose street name such shares are to be
held for the Holder’s account) requesting the issuance
thereof shall have paid to the Borrower the amount of any such tax
or shall have established to the satisfaction of the Borrower that
such tax has been paid.
6
(d)
Delivery of Common Stock Upon
Conversion .
Upon receipt by the Borrower from the
Holder of a facsimile transmission (or other reasonable means of
communication) of a Notice of Conversion meeting the requirements
for conversion as provided in this Section 1.4, the Borrower shall
issue and deliver or cause to be issued and delivered to or upon
the order of the Holder certificates for the Common Stock issuable
upon such conversion within three (3) business days after such
receipt (and, solely in the case of conversion of the entire unpaid
principal amount hereof, surrender of this Note) (such third
business day being hereinafter referred to as the “
Deadline ”) in accordance with the terms hereof and
the Purchase Agreement (including, without limitation, in
accordance with the requirements of Section 2(g) of the Purchase
Agreement that certificates for shares of Common Stock issued on or
after the effective date of the Registration Statement upon
conversion of this Note shall not bear any restrictive
legend).
(e)
Obligation of Borrower to Deliver
Common Stock .
Upon receipt by the Borrower of a
Notice of Conversion, the Holder shall be deemed to be the holder
of record of the Common Stock issuable upon such conversion, the
outstanding principal amount and the amount of accrued and unpaid
interest on this Note shall be reduced to reflect such conversion,
and, unless the Borrower defaults on its obligations under this
Article I, all rights with respect to the portion of this Note
being so converted shall forthwith terminate except the right to
receive the Common Stock or other securities, cash or other assets,
as herein provided, on such conversion. If the Holder shall
have given a Notice of Conversion as provided herein, the
Borrower’s obligation to issue and deliver the certificates
for Common Stock shall be absolute and unconditional, irrespective
of the absence of any action by the Holder to enforce the same, any
waiver or consent with respect to any provision thereof, the
recovery of any judgment against any person or any action to
enforce the same, any failure or delay in the enforcement of any
other obligation of the Borrower to the holder of record, or any
setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder of any obligation to the
Borrower, and irrespective of any other circumstance which might
otherwise limit such obligation of the Borrower to the Holder in
connection with such conversion. The Conversion Date
specified in the Notice of Conversion shall be the Conversion Date
so long as the Notice of Conversion is received by the Borrower
before 6:00 p.m., New York, New York time, on such date.
(f)
Delivery of Common Stock by
Electronic Transfer .
In lieu of delivering
physical certificates representing the Common Stock issuable upon
conversion, provided the Borrower’s transfer agent is
participating in the Depository Trust Company (“ DTC
”) Fast Automated Securities Transfer (“ FAST
”) program, upon request of the Holder and its compliance
with the provisions contained in Section 1.1 and in this Section
1.4, the Borrower shall use its best efforts to cause its transfer
agent to electronically transmit the Common Stock issuable upon
conversion to the Holder by crediting the account of Holder’s
Prime Broker with DTC through its Deposit Withdrawal Agent
Commission (“ DWAC ”) system.
7
(g)
Failure to Deliver Common Stock
Prior to Deadline .
Without in any way
limiting the Holder’s right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree
that if delivery of the Common Stock issuable upon conversion of
this Note is more than two (2) business days after the Deadline
(other than a failure due to the circumstances described in Section
1.3 above, which failure shall be governed by such Section) the
Borrower shall pay to the Holder $2,000 per day in cash, for each
day beyond the Deadline that the Borrower fails to deliver such
Common Stock. Such cash amount shall be paid to Holder by the
fifth day of the month following the month in which it has accrued
or, at the option of the Holder (by written notice to the Borrower
by the first day of the month following the month in which it has
accrued), shall be added to the principal amount of this Note, in
which event interest shall accrue thereon in accordance with the
terms of this Note and such additional principal amount shall be
convertible into Common Stock in accordance with the terms of this
Note.
1.5
Concerning the Shares
. The shares of Common Stock issuable upon
conversion of this Note may not be sold or transferred unless
(i) such shares are sold pursuant to an effective
registration statement under the Act or (ii) the Borrower or its
transfer agent shall have been furnished with an opinion of
counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to
the effect that the shares to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration or
(iii) such shares are sold or transferred pursuant to Rule 144
under the Act (or a successor rule) (“ Rule 144
”) or (iv) such shares are transferred to an
“affiliate” (as defined in Rule 144) of the Borrower
who agrees to sell or otherwise transfer the shares only in
accordance with this Section 1.5 and who is an Accredited Investor
(as defined in the Purchase Agreement). Except as otherwise
provided in the Purchase Agreement (and subject to the removal
provisions set forth below), until such time as the shares of
Common Stock issuable upon conversion of this Note have been
registered under the Act as contemplated by the Registration Rights
Agreement or otherwise may be sold pursuant to Rule 144 without any
restriction as to the number of securities as of a particular date
that can then be immediately sold, each certificate for shares of
Common Stock issuable upon conversion of this Note that has not
been so included in an effective registration statement or that has
not been sold pursuant to an effective registration statement or an
exemption that permits removal of the legend, shall bear a legend
substantially in the following form, as appropriate:
“THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN
FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN
COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION S UNDER
SAID ACT.”
8
The legend set forth above shall be
removed and the Borrower shall issue to the Holder a new
certificate therefor free of any transfer legend if (i) the
Borrower or its transfer agent shall have received an opinion of
counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public
sale or transfer of such Common Stock may be made without
registration under the Act and the shares are so sold or
transferred, (ii) such Holder provides the Borrower or its transfer
agent with reasonable assurances that the Common Stock issuable
upon conversion of this Note (to the extent such securities are
deemed to have been acquired on the same date) can be sold pursuant
to Rule 144 or (iii) in the case of the Common Stock issuable upon
conversion of this Note, such security is registered for sale by
the Holder under an effective registration statement filed under
the Act or otherwise may be sold pursuant to Rule 144 without any
restriction as to the number of securities as of a particular date
that can then be immediately sold. Nothing in this Note shall
(i) limit the Borrower’s obligation under the Registration
Rights Agreement or (ii) affect in any way the Holder’s
obligations to comply with applicable prospectus delivery
requirements upon the resale of the securities referred to
herein.
1.6
Effect of Certain Events
.
(a)
Effect of Merger, Consolidation,
Etc . At the option of the Holder, the sale,
conveyance or disposition of all or
