EXHIBIT 10.18

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (the "Agreement") is dated as of May 31, 2015
and effective as of December 24, 2015 (the "Effective Date"), by and between
ARTEC GLOBAL MEDIA, INC., a corporation incorporated under the laws of the State
of Nevada (the "Company"), and TCA GLOBAL CREDIT MASTER FUND, LP, a limited
partnership organized and existing under the laws of the Cayman Islands (the
"Buyer").

 

WHEREAS, Buyer desires to purchase from Company, and the Company desires to sell
and issue to Buyer, upon the terms and subject to the conditions contained
herein, a senior secured convertible, redeemable debenture in the principal
amount of One Hundred Thousand and No/100 United States Dollars ($100,000) ( in
the form attached hereto as Exhibit A, the "Debenture") for the total purchase
price of One Hundred Thousand and No/100 United States Dollars ($100,000) (the
"Purchase Price") on the date hereof (the "Closing");

 

WHEREAS, the Company has agreed to secure all of the Company's Obligations to
Buyer under the Debenture, the Fee Debenture (as defined below), this Agreement
and all other Transaction Documents by granting to the Buyer an unconditional
and continuing security interest in all of the assets and properties of the
Company, whether now existing or hereafter acquired, pursuant to that certain
Security Agreement, dated as of the date hereof (in the form attached hereto as
Exhibit B, the "Security Agreement");

 

NOW, THEREFORE, in consideration of the promises and the mutual covenants of the
parties hereinafter expressed and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto,
each intending to be legally bound, agree as follows:

 

ARTICLE I

RECITALS, EXHIBITS, SCHEDULES

 

The foregoing recitals are true and correct and, together with the Schedules and

  

Exhibits referred to hereafter, are hereby incorporated into this Agreement by
this reference.

 

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ARTICLE II

DEFINITIONS

 

For purposes of this Agreement, except as otherwise expressly provided or
otherwise defined elsewhere in this Agreement, or unless the context otherwise
requires, the capitalized terms in this Agreement shall have the meanings
assigned to them in this Article as follows:

 

2.1 "Affiliate" means, with respect to a Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, such Person
at any time during the period for which the determination of affiliation is
being made. For purposes of this definition, the term "control," "controlling,"
"controlled" and words of similar import, when used in this context, means, with
respect to any Person, the possession, directly or indirectly, of the power to
direct, or cause the direction of, management policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.

 

2.2 "Assets" means all of the properties and assets of the Person in question,
as the context may so require, whether real, personal or mixed, tangible or
intangible, wherever located, whether now owned or hereafter acquired.

 

2.3 "Business Day" shall mean any day other than a Saturday, Sunday or a legal
holiday on which federal banks are authorized or required to be closed for the
conduct of commercial banking business.

 

2.4 "Claims" means any Proceedings, Judgments, Obligations, threats, losses,
damages, deficiencies, settlements, assessments, charges, costs and expenses of
any nature or kind.

 

2.5 "Common Stock" means the common stock of the Company, par value $0.001 per
share.

 

2.6 "Compliance Certificate" means that certain compliance certificate executed
by an officer of the Company in the form attached hereto as Exhibit C.

 

2.7 "Consent" means any consent, approval, order or authorization of, or any
declaration, filing or registration with, or any application or report to, or
any waiver by, or any other action (whether similar or dissimilar to any of the
foregoing) of, by or with, any Person, which is necessary in order to take a
specified action or actions, in a specified manner and/or to achieve a specific
result.

 

2.8 "Contract" means any written or oral contract, agreement, order or
commitment of any nature whatsoever, including, any sales order, purchase order,
lease, sublease, license agreement, services agreement, loan agreement,
mortgage, security agreement, guarantee, management contract, employment
agreement, consulting agreement, partnership agreement, shareholders agreement,
buy-sell agreement, option, warrant, debenture, subscription, call or put.

 

2.9 "Collateral" shall have the meaning given to it in the Security Agreement.

 

2.10 "Debenture" shall have the meaning given to it in the recitals hereof.

 

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2.11 "Effective Date" means the date so defined in the introductory paragraph of
this Agreement.

 

2.12 "Encumbrance" means any lien, security interest, pledge, mortgage,
easement, leasehold, assessment, tax, covenant, restriction, reservation,
conditional sale, prior assignment, or any other encumbrance, claim, burden or
charge of any nature whatsoever.

 

2.13 "Environmental Requirements" means all Laws and requirements relating to
human, health, safety or protection of the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants, or
Hazardous Materials in the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface strata), or
otherwise relating to the treatment, storage, disposal, transport or handling of
any Hazardous Materials.

 

2.14 "Fee Debenture(s)" shall mean those three (3) certain convertible
debentures, or any replacement, substitution or amended and restated form
thereof, each in the principal amount of Thirty-Three Thousand Three Hundred
Thirty-Three and 33/100 United States Dollars (US$33,333.33), made by the
Company in favor of the Buyer, the form of which is attached hereto as Exhibit
D.

 

2.15 "GAAP" means generally accepted accounting principles, methods and
practices set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants, and
statements and pronouncements of the Financial Accounting Standards Board, or of
such other Person as may be approved by a significant segment of the U.S.
accounting profession, in each case as of the date or period at issue, and as
applied in the U.S. to U.S. companies.

 

2.16 "Governmental Authority" means any foreign, federal, state or local
government, or any political subdivision thereof, or any court, agency or other
body, organization, group, stock market or exchange exercising any executive,
legislative, judicial, quasi-judicial, regulatory or administrative function of
government.

 

2.17 "Hazardous Materials" means: (i) any chemicals, materials, substances or
wastes which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants" or words of similar import, under any Law; and (iii) any
other chemical, material, substance, or waste, exposure to which is now or
hereafter prohibited, limited or regulated by any Governmental Authority.

 

2.18 "Irrevocable Transfer Agent Instructions" shall mean the Irrevocable
Transfer Agent Instructions to be entered into by and among the Buyer, the
Company and the Company's transfer agent, in the form attached hereto as Exhibit
E.

 

2.19 "Judgment" means any order, writ, injunction, fine, citation, award,
decree, or any other judgment of any nature whatsoever of any Governmental
Authority.

 

2.20 "Law" means any provision of any law, statute, ordinance, code,
constitution, charter, treaty, rule or regulation of any Governmental Authority.

  

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2.21 "Leases" means all leases for real or personal property.

 

2.22 "Material Adverse Effect" shall mean: (i) a material adverse change in, or
a material adverse effect upon, the Assets, business, prospects, properties,
financial condition or results of operations of the Company; (ii) a material
impairment of the ability of the Company to perform any of its Obligations under
any of the Transaction Documents; or (iii) a material adverse effect on: (A) any
material portion of the "Collateral" (as such term is defined in the Security
Agreement); (B) the legality, validity, binding effect or enforceability against
the Company of any of the Transaction Documents; (C) the perfection or priority
of any Encumbrance granted to Buyer under any Transaction Documents; (D) the
rights or remedies of the Buyer under any of the Transaction Documents; or (E) a
material adverse effect or impairment on the Buyer's ability to sell the shares
of the Company's Common Stock issuable to Buyer under any Transaction Documents
without limitation or restriction. For purposes of determining whether any of
the foregoing changes, effects, impairments, or other events have occurred, such
determination shall be made by Buyer, in its sole, but reasonably exercised,
discretion.

 

2.23 "Material Contract" shall mean any Contract to which the Company is a party
or by which the Company or any of its Assets are bound and which: (i) must be
disclosed to any Governmental Authority or any other laws, rules or regulations
of any Governmental Authority; (ii) involves aggregate payments of Twenty-Five
Thousand Dollars ($25,000) or more to or from the Company; (iii) involves
delivery, purchase, licensing or provision, by or to the Company, of any goods,
services, assets or other items having a value (or potential value) over the
term of such Contract of Twenty-Five Thousand Dollars ($25,000) or more or is
otherwise material to the conduct of the Company's business as now conducted and
as contemplated to be conducted in the future; (iii) involves a Company Lease;
(iv) imposes any guaranty, surety or indemnification obligations on the Company;
or (v) prohibits the Company from engaging in any business or competing anywhere
in the world.

 

2.24 "Obligation" means, now existing or in the future, any debt, liability or
obligation of any nature whatsoever (including any required performance of any
covenants or agreements), whether secured, unsecured, recourse, nonrecourse,
liquidated, unliquidated, accrued, voluntary or involuntary, direct or indirect,
absolute, fixed, contingent, ascertained, unascertained, known, unknown, whether
or not jointly owed with others, whether or not from time to time decreased or
extinguished and later decreased, created or incurred, or obligations existing
or incurred under this Agreement, the Debenture, the Fee Debentures or any other
Transaction Documents, or any other agreement between the Company and the Buyer,
as such obligations may be amended, supplemented, converted, extended or
modified from time to time.

 

2.25 "Ordinary Course of Business" means the ordinary course of business of the
Person in question, consistent with past custom and practice (including with
respect to quantity, quality and frequency).

 

2.26 "OTC Markets" means the OTC Markets Group, Inc.

 

2.27 "Permit" means any license, permit, approval, waiver, order, authorization,
right or privilege of any nature whatsoever, granted, issued, approved or
allowed by any Governmental Authority.

 

2.28 "Person" means any individual, sole proprietorship, joint venture,
partnership, company, corporation, association, cooperation, trust, estate,
Governmental Authority, or any other entity of any nature whatsoever.

 

2.29 "Principal Trading Market" shall mean the Nasdaq Global Select Market, the
Nasdaq Global Market, the Nasdaq Capital Market, the OTC Bulletin Board, the OTC
Markets, the so-called OTC Pink Sheets, the NYSE Euronext or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.

 

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2.30 "Proceeding" means any demand, claim, suit, action, litigation,
investigation, audit, study, arbitration, administrative hearing, or any other
proceeding of any nature whatsoever.

 

2.31 "Real Property" means any real estate, land, building, structure,
improvement, fixture or other real property of any nature whatsoever, including,
but not limited to, fee and leasehold interests.

 

2.32 "Rule 144" shall mean Rule 144 or Rule 144A promulgated under the
Securities Act (or a successor rule thereto).

 

2.33 "SEC" shall mean the United States Securities and Exchange Commission.

 

2.34 "Securities" means, collectively, the Debenture, the Fee Debentures, and
any additional shares of Common Stock issuable in connection with a conversion
of the Debenture or the Fee Debentures, or the terms of this Agreement or any
other Transaction Documents.

 

2.35 "Securities Act" shall mean the Securities Act of 1933, as amended.

 

2.36 "Security Agreement" shall have the meaning given to it in the recitals
hereof.

 

2.37 "Tax" means (i) any foreign, federal, state or local income, profits, gross
receipts, franchise, sales, use, occupancy, general property, real property,
personal property, intangible property, transfer, fuel, excise, accumulated
earnings, personal holding company, unemployment compensation, social security,
withholding taxes, payroll taxes, or any other tax of any nature whatsoever,
(ii) any foreign, federal, state or local organization fee, qualification fee,
annual report fee, filing fee, occupation fee, assessment, rent, or any other
fee or charge of any nature whatsoever, or (iii) any deficiency, interest or
penalty imposed with respect to any of the foregoing.

 

2.38 "Tax Return" means any tax return, filing, declaration, information
statement or other form or document required to be filed in connection with or
with respect to any Tax.

 

2.39 "Transaction Documents" means this Agreement any and all documents or
instruments executed or to be executed by the Company in connection with this
Agreement, including the Debenture, the Security Agreement, the Fee Debentures,
the Use of Proceeds Confirmation, the Irrevocable Transfer Agent Instructions,
the and the Validity Guaranties, together with all modifications, amendments,
extensions, future advances, renewals, and substitutions thereof.

 

2.40 "Use of Proceeds Confirmation" means that certain use of proceeds
confirmation executed by an officer of the Company in the form attached hereto
as Exhibit F.

 

2.41 "Validity Guaranties" shall mean those certain validity guaranties executed
by such officers and directors of the Company as the Buyer shall require, in the
Buyer's sole discretion, the form of which is attached hereto as Exhibit G.

 

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ARTICLE III

INTERPRETATION

 

In this Agreement, unless the express context otherwise requires: (i) the words
"herein," "hereof" and "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular provision of this Agreement; (ii)
references to the words "Article" or "Section" refer to the respective Articles
and Sections of this Agreement, and references to "Exhibit" or "Schedule" refer
to the respective Exhibits and Schedules annexed hereto; (iii) references to a
"party" mean a party to this Agreement and include references to such party's
permitted successors and permitted assigns; (iv) references to a "third party"
mean a Person not a party to this Agreement; (v) references to the words "share"
or "shareholder", if in reference to the Company, shall refer to "units" or
"unitholder" respectively and (v) the terms "dollars" and "$" means U.S.
dollars; (vi) wherever the word "include," "includes" or "including" is used in
this Agreement, it will be deemed to be followed by the words "without
limitation".

 

ARTICLE IV

PURCHASE AND SALE OF DEBENTURE

 

4.1 Purchase and Sale of Debenture. Subject to the satisfaction (or waiver) of
the terms and conditions of this Agreement, Buyer agrees to purchase, at the
Closing, and Company agrees to sell and issue to Buyer, at the Closing, a
Debenture in the amount of the Purchase Price.

 

4.2 Closing Date. The Closing of the purchase and sale of the Debenture shall be
for One Hundred Thousand and No/100 United States Dollars ($100,000), and shall
take place on the Effective Date, subject to satisfaction of the conditions set
forth in this Agreement (the "Closing Date"). The Closing shall occur on the
Closing Date through the use of overnight mails and subject to customary escrow
instructions from Buyer and its counsel, or in such other manner as is mutually
agreed to by the Company and the Buyer.

 

4.3 Form of Payment. Subject to the satisfaction of the terms and conditions of
this Agreement, on the Closing Date: (i) the Buyer shall deliver to the Company,
to a Company account designated by the Company, the Purchase Price for the
Debenture to be issued and sold to Buyer at Closing, minus the fees to be paid
directly from the proceeds of the Closing as set forth in this Agreement, in the
form of wire transfers of immediately available U.S. dollars; and (ii) the
Company shall deliver to Buyer the Securities which Buyer is purchasing
hereunder at the Closing, duly executed on behalf of the Company, together with
any other documents required to be delivered pursuant to this Agreement.

 

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ARTICLE V

BUYER'S REPRESENTATIONS AND WARRANTIES

 

Buyer represents and warrants to the Company, that:

 

5.1 Investment Purpose. Buyer is acquiring the Securities for its own account
for investment only and not with a view towards, or for resale in connection
with, the public sale or distribution thereof.

 

5.2 Accredited Buyer Status. Buyer is an "accredited investor" as that term is
defined in Rule 501 of Regulation D, as promulgated under the Securities Act of
1933.

 

5.3 Reliance on Exemptions. Buyer understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of Buyer to acquire the
Securities.

 

5.4 Information. Buyer and its advisors, if any, have been furnished with all
materials they have requested relating to the business, finances and operations
of the Company and information Buyer deemed material to making an informed
investment decision regarding its purchase of the Securities. Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and its management. Neither such inquiries, nor any materials provided
to Buyer, nor any other due diligence investigations conducted by Buyer or its
advisors, if any, or its representatives, shall modify, amend or affect Buyer's
right to fully rely on the Company's representations and warranties contained in
Article VI below. Buyer understands that its investment in the Securities
involves a high degree of risk. Buyer is in a position regarding the Company,
which, based upon economic bargaining power, enabled and enables Buyer to obtain
information from the Company in order to evaluate the merits and risks of this
investment. Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.

 

5.5 No Governmental Review. Buyer understands that no United States federal or
state Governmental Authority has passed on or made any recommendation or
endorsement of the Securities, or the fairness or suitability of the investment
in the Securities, nor have such Governmental Authorities passed upon or
endorsed the merits of the offering of the Securities.

 

5.6 Authorization, Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of Buyer and is a valid and binding
agreement of Buyer, enforceable in accordance with its terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.

 

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ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

To induce the Buyer to purchase the Securities, the Company makes the following
representations and warranties to Buyer, each of which shall be true and correct
in all respects as of the date of the execution and delivery of this Agreement,
and which shall survive the execution and delivery of this Agreement:

 

6.1 Subsidiaries. A list of all of the Company's Subsidiaries is set forth in
Schedule

 

6.1 hereto.

 

6.2 Organization. The Company is a corporation, duly incorporated, validly
existing and in good standing under the Laws of the jurisdiction in which it is
incorporated. The Company has the full power and authority and all necessary
certificates, licenses, approvals and Permits to: (i) enter into and execute
this Agreement and the Transaction Documents and to perform all of its
Obligations hereunder and thereunder; and (ii) own and operate its Assets and
properties and to conduct and carry on its business as and to the extent now
conducted. The Company is duly qualified to transact business and is in good
standing as a foreign corporation in each jurisdiction where the character of
its business or the ownership or use and operation of its Assets or properties
requires such qualification. The exact legal name of the Company is as set forth
in the preamble to this Agreement, and the Company does not currently conduct,
nor has the Company, during the last five (5) years conducted, business under
any other name or trade name, except for Artec Consulting Corp.

 

6.3 Authority and Approval of Agreement; Binding Effect. The execution and
delivery by Company of this Agreement and the Transaction Documents, and the
performance by Company of all of its Obligations hereunder and thereunder,
including the issuance of the Securities, have been duly and validly authorized
and approved by the Company and its board of directors pursuant to all
applicable Laws and no other action or Consent on the part of Company, its board
of directors, shareholders or any other Person is necessary or required by the
Company to execute this Agreement and the Transaction Documents, consummate the
transactions contemplated herein and therein, perform all of Company's
Obligations hereunder and thereunder, or to issue the Securities. This Agreement
and each of the Transaction Documents have been duly and validly executed by
Company (and the officer executing this Agreement and all such other Transaction
Documents is duly authorized to act and execute same on behalf of Company) and
constitute the valid and legally binding agreements of Company, enforceable
against Company in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.

 

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6.4 Capitalization. The authorized capital stock of the Company consists of
seven hundred fifty million (750,000,000) shares of Common Stock, of which
10,255,626 shares of Common Stock are issued and outstanding as of September 10,
2015, and ten million (10,000,000) shares of preferred stock, par value $0.001
per share, of which no shares are issued and outstanding as of the date hereof.
All of such outstanding shares have been validly issued and are fully paid and
nonassessable, have been issued in compliance with all foreign, federal and
state securities laws and none of such outstanding shares were issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. As of the Effective Date, no shares of the Company's
capital stock are subject to preemptive rights or any other similar rights or
any Claims or Encumbrances suffered or permitted by the Company. The Common
Stock is currently quoted on the OTC Markets under the trading symbol "ACTL".
The Company has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for quotation on the Principal Trading
Market, and the Company has maintained all requirements on its part for the
continuation of such quotation. Except as set forth in Schedule 6.4 attached
hereto and except for the Securities to be issued pursuant to this Agreement, as
of the date hereof: (i) there are no outstanding 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; (ii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other Contracts or
instruments evidencing indebtedness of the Company or any of its Subsidiaries,
or by which the Company or any of its Subsidiaries is or may become bound; (iii)
there are no outstanding registration statements with respect to the Company or
any of its securities; (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 Securities Act (except pursuant to this
Agreement); (v) there are no financing statements securing obligations filed in
connection with the Company or any of its Assets; (vi) there are no securities
or instruments containing anti-dilution or similar provisions that will be
triggered by this Agreement or any related agreement or the consummation of the
transactions described herein or therein; and (vii) there are no outstanding
securities or instruments of the Company which contain any redemption or similar
provisions, and there are no Contracts by which the Company is or may become
bound to redeem a security of the Company. The Company has furnished to the
Buyer true, complete and correct copies of: (I) the Company's Articles of
Incorporation, as amended and as in effect on the date hereof; and (II) the
Company's Bylaws, as in effect on the date hereof (together, the "Organizational
Documents"). Except for the Organizational Documents or as disclosed in the
Public Documents, there are no other shareholder agreements, voting agreements
or other Contracts of any nature or kind that restrict, limit or in any manner
impose Obligations on the governance of the Company.

 

6.5 No Conflicts; Consents and Approvals. The execution, delivery and
performance of this Agreement and the Transaction Documents, and the
consummation of the transactions contemplated hereby and thereby, including the
issuance of any of the Securities, will not: (i) constitute a violation of or
conflict with the Organizational Documents of the Company; (ii) constitute a
violation of, or a default or breach under (either immediately, upon notice,
upon lapse of time, or both), or conflicts with, or gives to any other Person
any rights of termination, amendment, acceleration or cancellation of, any
provision of any Contract to which Company is a party or by which any of its
Assets or properties may be bound; (iii) constitute a violation of, or a default
or breach under (either immediately, upon notice, upon lapse of time, or both),
or conflicts with, any Judgment; (iv) constitute a violation of, or conflict
with, any Law (including United States federal and state securities Laws); or
(v) result in the loss or adverse modification of, or the imposition of any
fine, penalty or other Encumbrance with respect to, any Permit granted or issued
to, or otherwise held by or for the use of, Company or any of Company's Assets.
The Company is not in violation of its Organizational Documents and the Company
is not in default or breach (and no event has occurred which with notice or
lapse of time or both could put the Company in default or breach) under, and the
Company has not taken any action or failed to take any action that would give to
any other Person any rights of termination, amendment, acceleration or
cancellation of, any Contract to which the Company is a party or by which any
property or Assets of the Company are bound or affected. The businesses of the
Company are not being conducted, and shall not be conducted so long as Buyer
owns any of the Securities, in violation of any Law. Except as specifically
contemplated by this Agreement, the Company is not required to obtain any
Consent of, from, or with any Governmental Authority, or any other Person, in
order for it to execute, deliver or perform any of its Obligations under this
Agreement or the Transaction Documents in accordance with the terms hereof or
thereof, or to issue and sell the Securities in accordance with the terms
hereof. All Consents which the Company is required to obtain pursuant to the
immediately preceding sentence have been obtained or effected on or prior to the
date hereof. The Company is not aware of any facts or circumstances which might
give rise to any of the foregoing.

 

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6.6 Issuance of Securities. The Securities are duly authorized and, upon
issuance in accordance with the terms hereof, shall be duly issued, fully paid
and non-assessable, and free from all Encumbrances with respect to the issue
thereof, and will be issued in compliance with all applicable United States
federal and state securities Laws.

 

6.7 Financial Statements. The Company has delivered to the Buyer an unaudited
consolidated Balance Sheet and Statement of Income for fiscal year ending
January 31, 2015, and an unaudited consolidated Balance Sheet and Statement of
Income as of and for the three month and six month periods ended July 31, 2015
(collectively, together with any financial statements filed by the Company with
the SEC, any Principal Trading Market, or any other Governmental Authority, if
applicable, the "Financial Statements"). The Financial Statements have been
prepared in accordance with GAAP, 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 and accurately present in all material respects the
consolidated financial position of the Company and its Subsidiaries, if
applicable, as of the dates thereof and the consolidated 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). To the best
knowledge of the Company, no other information provided by or on behalf of the
Company and its Subsidiaries, if applicable, to the Buyer, either as a
disclosure schedule to this Agreement, or otherwise in connection with Buyer's
due diligence investigation of the Company and its Subsidiaries, if applicable,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading. 

 

6.8 Public Documents. The Common Stock of the Company is registered pursuant to
Section 12 of the Exchange Act and the Company is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act. The Company has timely
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC, the OTC Markets, or any other Governmental
Authority, as applicable (all of the foregoing filed within the two (2) years
preceding the date hereof or amended after 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 "Public
Documents"). The Company is current with its filing obligations with the SEC,
the OTC Markets, or any other Governmental Authority, as applicable, and all
Public Documents have been filed on a timely basis by the Company. The Company
represents and warrants that true and complete copies of the Public Documents
are available on the SEC website or the OTC Markets website, as applicable
(www.sec.gov, or www.otcmarkets.com) at no charge to Buyer, and Buyer
acknowledges that it may retrieve all Public Documents from such websites and
Buyer's access to such Public Documents through such website shall constitute
delivery of the Public Documents to Buyer; provided, however, that if Buyer is
unable to obtain any of such Public Documents from such websites at no charge,
as result of such websites not being available or any other reason beyond
Buyer's control, then upon request from Buyer, the Company shall deliver to
Buyer true and complete copies of such Public Documents. The Company shall also
deliver to Buyer true and complete copies of all draft filings, reports,
schedules, statements and other documents required to be filed with the
requirements of the OTC Markets that have been prepared but not filed with the
OTC Markets as of the date hereof. None of the Public Documents, at the time
they were filed with the SEC, the OTC Markets, or other Governmental Authority,
as applicable, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the statements made in any such Public Documents
is, or has been, required to be amended or updated under applicable law (except
for such statements as have been amended or updated in subsequent filings prior
the date hereof, which amendments or updates are also part of the Public
Documents). As of their respective dates, the consolidated financial statements
of the Company and its Subsidiaries included in the Public Documents complied in
all material respects with applicable accounting requirements and any published
rules and regulations of the SEC and OTC Markets with respect thereto.

 

 10

 

 

6.9 Absence of Certain Changes. Since the date of the most recent of the
Financial Statements, none of the following have occurred:

 

(a) There has been no event or circumstance of any nature whatsoever that has
resulted in, or could reasonably be expected to result in, a Material Adverse
Effect; or

 

(b) Any transaction, event, action, development, payment, or any other matter of
any nature whatsoever entered into by the Company other than in the Company's
Ordinary Course of Business.

 

6.10 Absence of Litigation or Adverse Matters. No condition, circumstance,
event, agreement, document, instrument, restriction, litigation or Proceeding
(or threatened litigation or Proceeding or basis therefor) exists which: (i)
could adversely affect the validity or priority of the Encumbrances granted to
the Buyer under the Transaction Documents; (ii) could adversely affect the
ability of the Company to perform its Obligations under the Transaction
Documents; (iii) would constitute a default under any of the Transaction
Documents; (iv) would constitute such a default with the giving of notice or
lapse of time or both; or (v) would constitute or give rise to a Material
Adverse Effect. In addition: (vi) there is no Proceeding before or by any
Governmental Authority or any other Person, pending, or the best of Company's
knowledge, threatened or contemplated by, against or affecting the Company, its
business or Assets; (vii) there is no outstanding Judgments against or affecting
the Company, its business or Assets; (viii) the Company is not in breach or
violation of any Contract; and (ix) the Company has not received any material
complaint from any customer, supplier, vendor or employee.

 

6.11 Liabilities and Indebtedness of the Company. The Company does not have any
Obligations of any nature whatsoever, except: (i) as disclosed in the Financial
Statements and/or Schedule 6.4 attached hereto; or (iii) Obligations incurred in
the Ordinary Course of Business since the date of the most recent Financial
Statements which do not or would not, individually or in the aggregate, exceed
Ten Thousand Dollars ($10,000) or otherwise have a Material Adverse Effect.

 

6.12 Title to Assets. The Company has good and marketable title to, or a valid
leasehold interest in, all of its Assets which are material to the business and
operations of the Company as presently conducted, free and clear of all
Encumbrances or restrictions on the transfer or use of same. Except as would not
have a Material Adverse Effect, the Company's Assets are in good operating
condition and repair, ordinary wear and tear excepted, and are free of any
latent or patent defects which might impair their usefulness, and are suitable
for the purposes for which they are currently used and for the purposes for
which they are proposed to be used.

 

6.13 Real Estate.

 

(a) Real Property Ownership. Except for the Company Leases and as set forth on
Schedule 6.13, the Company does not own any Real Property.

 

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(b) Real Property Leases. Except for ordinary office Leases disclosed to the
Buyer in writing prior to the date hereof (the "Company Leases"), the Company
does not lease any other Real Property. With respect to each of the Company
Leases: (i) the Company has been in peaceful possession of the property leased
thereunder and neither the Company nor the landlord is in default thereunder;
(ii) no waiver, indulgence or postponement of any of the Obligations thereunder
has been granted by the Company or landlord thereunder; and (iii) there exists
no event, occurrence, condition or act known to the Company which, upon notice
or lapse of time or both, would be or could become a default thereunder or which
could result in the termination of the Company Leases, or any of them, or have a
Material Adverse Effect on the business of the Company, its Assets or its
operations or financial results. The Company has not violated nor breached any
provision of any such Company Leases, and all Obligations required to be
performed by the Company under any of such Company Leases have been fully,
timely and properly performed. The Company has delivered to the Buyer true,
correct and complete copies of all Company Leases, including all modifications
and amendments thereto, whether in writing or otherwise. The Company has not
received any written or oral notice to the effect that any of the Company Leases
will not be renewed at the termination of the term of such Company Leases, or
that any of such Company Leases will be renewed only at higher rents.

 

6.14 Material Contracts. An accurate, current and complete copy of each of the
Material Contracts has been furnished to Buyer, and each of the Material
Contracts constitutes the entire agreement of the respective parties thereto
relating to the subject matter thereof. There are no outstanding offers, bids,
proposals or quotations made by Company which, if accepted, would create a
Material Contract with Company. Each of the Material Contracts is in full force
and effect and is a valid and binding Obligation of the parties thereto in
accordance with the terms and conditions thereof. To the knowledge of the
Company and its officers, all Obligations required to be performed under the
terms of each of the Material Contracts by any party thereto have been fully
performed by all parties thereto, and no party to any Material Contracts is in
default with respect to any term or condition thereof, nor has any event
occurred which , through the passage of time or the giving of notice, or both,
would constitute a default thereunder or would cause the acceleration or
modification of any Obligation of any party thereto or the creation of any
Encumbrance upon any of the Assets of the Company. Further, the Company has
received no notice, nor does the Company have any knowledge, of any pending or
contemplated termination of any of the Material Contracts and, no such
termination is proposed or has been threatened, whether in writing or orally.

 

6.15 Compliance with Laws. To the knowledge of the Company and its officers, the
Company is and at all times has been in full compliance with all Laws. The
Company has not received any notice that it is in violation of, has violated, or
is under investigation with respect to, or has been threatened to be charged
with, any violation of any Law.

 

6.16 Intellectual Property. The Company owns or possesses adequate and legally
enforceable 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 all other intellectual property rights necessary to conduct its
business as now conducted. The Company does not have any knowledge of any
infringement by the Company of trademark, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks, service
mark registrations, trade secret or other intellectual property rights of
others, and, to the knowledge of the Company, there is no Claim being made or
brought against, or to the Company's knowledge, being threatened against, the
Company regarding trademark, trade name, patents, patent rights, invention,
copyright, license, service names, service marks, service mark registrations,
trade secret or other intellectual property infringement; and the Company is
unaware of any facts or circumstances which might give rise to any of the
foregoing.

 

6.17 Labor and Employment Matters. The Company is not involved in any labor
dispute or, to the knowledge of the Company, is any such dispute threatened. To
the knowledge of the Company and its officers, none of the Company's employees
is a member of a union and the Company believes that its relations with its
employees are good. To the knowledge of the Company and its officers, the
Company has complied in all material respects with all Laws relating to
employment matters, civil rights and equal employment opportunities.

 

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6.18 Employee Benefit Plans. Except as disclosed to the Buyer in writing prior
to the date hereof, the Company does not have and has not ever maintained, and
has no Obligations with respect to any employee benefit plans or arrangements,
including employee pension benefit plans, as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
multiemployer plans, as defined in Section 3(37) of ERISA, employee welfare
benefit plans, as defined in Section 3(1) of ERISA, deferred compensation plans,
stock option plans, bonus plans, stock purchase plans, hospitalization,
disability and other insurance plans, severance or termination pay plans and
policies, whether or not described in Section 3(3) of ERISA, in which employees,
their spouses or dependents of the Company participate (collectively, the
"Employee BenefitPlans"). To the Company's knowledge, all Employee Benefit Plans
meet the minimum funding standards of Section 302 of ERISA, where applicable,
and each such Employee Benefit Plan that is intended to be qualified within the
meaning of Section 401 of the Internal Revenue Code of 1986 is qualified. No
withdrawal liability has been incurred under any such Employee Benefit Plans and
no "Reportable Event" or "Prohibited Transaction" (as such terms are defined in
ERISA), has occurred with respect to any such Employee Benefit Plans, unless
approved by the appropriate Governmental Authority. To the Company's knowledge,
the Company has promptly paid and discharged all Obligations arising under ERISA
of a character which if unpaid or unperformed might result in the imposition of
an Encumbrance against any of its Assets or otherwise have a Material Adverse
Effect.

 

6.19 Tax Matters. The Company has made and timely filed all Tax Returns required
by any jurisdiction to which it is subject, and each such Tax Return has been
prepared in compliance with all applicable Laws, and all such Tax Returns are
true and accurate in all respects. Except and only to the extent that the
Company has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported Taxes, the Company has timely paid all
Taxes shown or determined to be due on such Tax Returns, except those being
contested in good faith, and the Company has set aside on its books provision
reasonably adequate for the payment of all Taxes for periods subsequent to the
periods to which such Tax Returns apply. There are no unpaid Taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim. The Company
has withheld and paid all Taxes to the appropriate Governmental Authority
required to have been withheld and paid in connection with amounts paid or owing
to any Person. There is no Proceeding or Claim for refund now in progress,
pending or threatened against or with respect to the Company regarding Taxes.

 

6.20 Insurance. The Company is covered by valid, outstanding and enforceable
policies of insurance which were issued to it by reputable insurers of
recognized financial responsibility, covering its properties, Assets and
businesses against losses and risks normally insured against by other
corporations or entities in the same or similar lines of businesses as the
Company is engaged and in coverage amounts which are prudent and typically and
reasonably carried by such other corporations or entities (the "Insurance
Policies"). Such Insurance Policies are in full force and effect, and all
premiums due thereon have been paid. None of the Insurance Policies will lapse
or terminate as a result of the transactions contemplated by this Agreement. The
Company has complied with the provisions of such Insurance Policies. The Company
has not been refused any insurance coverage sought or applied for and the
Company does not have any reason to believe that it will not be able to renew
its existing Insurance Policies as and when such Insurance Policies expire or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business or operations of
the Company.

 

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6.21 Permits. The Company possesses all Permits necessary to conduct its
business, and the Company has not received any notice of, or is otherwise
involved in any Proceedings relating to, the revocation or modification of any
such Permits. All such Permits are valid and in full force and effect and the
Company is in full compliance with the respective requirements of all such
Permits.

 

6.22 Bank Accounts; Business Location.Schedule 6.22 sets forth, with respect to
each account of the Company with any bank, broker or other depository
institution: (i) the name and account number of such account; (ii) the name and
address of the institution where such account is held; (iii) the name of any
Person(s) holding a power of attorney with respect to such account, if any; and
(iv) the names of all authorized signatories and other Persons authorized to
withdraw funds from each such account. The Company has no office or place of
business other than as identified on Schedule 6.22 and the Company's principal
places of business and chief executive offices are indicated on Schedule 6.22.
All books and records of the Company and other material Assets of the Company
are held or located at the principal offices of the Company indicated on
Schedule 6.22.

 

6.23 Environmental Laws. Except as are used in such amounts as are customary in
the Company's Ordinary Course of Business and in compliance with all applicable
Environmental Laws, the Company represents and warrants to Buyer that: (i) the
Company has not generated, used, stored, treated, transported, manufactured,
handled, produced or disposed of any Hazardous Materials, on or off any of the
premises of the Company (whether or not owned by the Company) in any manner
which at any time violates any Environmental Law or any Permit, certificate,
approval or similar authorization thereunder; (ii) the operations of the Company
comply in all material respects with all Environmental Laws and all Permits
certificates, approvals and similar authorizations thereunder; (iii) there has
been no investigation, Proceeding, complaint, order, directive, Claim, citation
or notice by any Governmental Authority or any other Person, nor is any pending
or, to the Company's knowledge, threatened; and (iv) the Company does not have
any liability, contingent or otherwise, in connection with a release, spill or
discharge, threatened or actual, of any Hazardous Materials or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Material.

 

6.24 Illegal Payments. Neither the Company, nor any director, officer, agent,
employee or other Person acting on behalf of the Company has, in the course of
his actions for, or on behalf of, the Company: (i) used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.

 

6.25 Related Party Transactions. 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 third parties, none
of the officers, directors or employees of the Company, nor any stockholders who
own, legally or beneficially, five percent (5%) or more of the issued and
outstanding shares of any class of the Company's capital stock (each a "Material
Shareholder"), is presently a party to any transaction with the Company (other
than for services as employees, officers and directors), including any Contract
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 Material Shareholder or, to the best
knowledge of the Company, any other Person in which any officer, director, or
any such employee or Material Shareholder has a substantial or material interest
in or of which any officer, director or employee of the Company or Material
Shareholder is an officer, director, trustee or partner. There are no Claims or
disputes of any nature or kind between the Company and any officer, director or
employee of the Company or any Material Shareholder, or between any of them,
relating to the Company and its business.

 

 14

 

 

6.26 Internal Accounting Controls. The Company maintains 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 GAAP and to maintain
asset accountability; (iii) access to Assets is permitted only in accordance
with management's general or specific authorization; and (iv) the recorded
accountability for Assets is compared with the existing Assets at reasonable
intervals and appropriate action is taken with respect to any differences.

 

6.27 Acknowledgment Regarding Buyer's Purchase of the Securities. The Company
acknowledges and agrees that Buyer is acting solely in the capacity of an arm's
length purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that Buyer is not acting
as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereby and any
advice given by Buyer or any of its representatives or agents in connection with
this Agreement and the transactions contemplated hereby is merely incidental to
Buyer's purchase of the Securities. The Company further represents to Buyer that
the Company's decision to enter into this Agreement has been based solely on the
independent evaluation by the Company and its representatives.

 

6.28 Seniority. No indebtedness or other equity or security of the Company is
senior to the Debenture or the Fee Debentures in right of payment, whether with
respect to interest or upon liquidation or dissolution, or otherwise, except
only purchase money security interests (which are senior only as to underlying
Assets covered thereby).

 

6.29 Brokerage Fees. There is no Person acting on behalf of the Company who is
entitled to or has any claim for any brokerage or finder's fee or commission in
connection with the execution of this Agreement or the consummation of the
transactions contemplated hereby.

 

6.30 No General Solicitation. Neither the Company, nor any of its Affiliates,
nor any Person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) in connection with the offer or issuance of the Securities.

 

6.31 No Integrated Offering. Neither the Company, nor any of its Affiliates, nor
any Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of the Securities under the
Securities Act or cause this offering of such securities to be integrated with
prior offerings by the Company for purposes of the Securities Act.

 

 15

 

 

6.32 Private Placement. No registration under the Securities Act or the laws,
rules or regulation of any other governmental authority is required for the
issuance of the Securities.

 

6.33 Full Disclosure. All the representations and warranties made by Company
herein or in the Schedules hereto, and all of the financial statements,
schedules, certificates, confirmations, agreements, contracts, and other
materials submitted to the Buyer in connection with or in furtherance of this
Agreement or pertaining to the transaction contemplated herein, whether made or
given by Company, its agents or representatives, are complete and accurate, and
do not omit any information required to make the statements and information
provided, in light of the transaction contemplated herein and in light of the
circumstances under which they were made, not misleading, accurate and
meaningful.

 

ARTICLE VII

COVENANTS

 

7.1 Negative Covenants.

 

(a) Indebtedness. So long as Buyer owns, legally or beneficially, any of the
Debenture or the Fee Debentures, the Company shall not, either directly or
indirectly, create, assume, incur or have outstanding any indebtedness for
borrowed money of any nature or kind (including purchase money indebtedness), or
become liable, whether as endorser, guarantor, surety or otherwise, for any
Obligation of any other Person, except for: (i) the Debenture; (ii) the Fee
Debentures; (iii) other Obligations owed or otherwise due to Buyer; (iv)
Obligations disclosed in the financial statements provided to the Buyer as of
the Effective Date; and (v) Obligations for accounts payable, other than for
money borrowed, incurred in the Company's Ordinary Course of Business; provided
that, any management or similar fees payable by the Company shall be fully
subordinated in right of payment to the prior payment in full of the Debenture
and the Fee Debentures.

 

(b) Encumbrances. So long as Buyer owns, legally or beneficially, any of the
Debenture, the Company shall not, either directly or indirectly, create, assume,
incur or suffer or permit to exist any Encumbrance upon any Asset of the
Company, whether owned at the date hereof or hereafter acquired, other than an
Encumbrance granted to Buyer.

 

(c) Investments. So long as Buyer owns, legally or beneficially, any of the
Debenture or the Fee Debentures, the Company shall not, either directly or
indirectly, make or have outstanding any new investments (whether through
purchase of stocks, obligations or otherwise) in, or loans or advances to, any
other Person, or acquire all or any substantial part of the assets, business,
stock or other evidence of beneficial ownership of any other Person, except
following: (i) investments in direct obligations of the United States or any
state in the United States; (ii) trade credit extended by the Company in the
Company's Ordinary Course of Business; (iii) investments existing on the
Effective Date and set forth in the financial statements provided to the Buyer;
(iv) capital expenditures first approved by the Buyer in writing, which approval
shall not be unreasonably withheld; and (v) any other investment that is
permitted by the Buyer in writing in advance.

 

 16

 

  

(d) Issuances. So long as Buyer owns, legally or beneficially, any of the
Debentures or the Fee Debentures, the Company shall not, either directly or
indirectly, issue any equity, debt or convertible or derivative instruments or
securities whatsoever, except upon obtaining Buyer's prior written consent,
which consent may be withheld in Buyer's sole discretion; provided, however,
notwithstanding anything to the contrary, the Company shall be permitted to
issue and distribute additional capital stock and other securities without the
consent of the Buyer if such issuance and/or distribution does not result in a
Change of Control.

 

(e) Transfer; Merger. So long as Buyer owns, legally or beneficially, any of the
Debenture or the Fee Debentures, the Company shall not, either directly or
indirectly, permit or enter into any transaction involving a "Change of Control"
(as hereinafter defined), or any other merger, consolidation, sale, transfer,
license, Lease, Encumbrance or other disposition of all or substantially all of
its properties or business or all or substantially all of its Assets, except for
the sale, lease or licensing of property or Assets of the Company in the
Company's Ordinary Course of Business. For purposes of this Agreement, the term
"Change of Control" shall mean any sale, conveyance, assignment or other
transfer, directly or indirectly, of any ownership interest of the Company which
results in any change in the identity of the individuals or entities previously
having the power to direct, or cause the direction of, the management and
policies of the Company, or the grant of a security interest in any ownership
interest of any Person directly or indirectly controlling the Company, which
could result in a change in the identity of the individuals or entities
previously having the power to direct, or cause the direction of, the management
and policies of the Company.

 

(f) Distributions; Restricted Payments; Change in Management. So long as Buyer
owns, legally or beneficially, any of the Debenture or the Fee Debentures, the
Company shall not, either directly or indirectly: (i) purchase or redeem any
shares of its capital stock; (ii) declare or pay any dividends or distributions,
whether in cash or otherwise, or set aside any funds for any such purpose; (iii)
make any distribution to its shareholders, make any distribution of its property
or Assets or make any loans, advances or extensions of credit to, or investments
in, any Person, including, without limitation, any Affiliates of the Company, or
the Company's officers, directors, employees or Material Shareholder; (iv) pay
any outstanding indebtedness of the Company, except for indebtedness and other
Obligations permitted hereunder (and any other indebtedness to Buyer); (v)
increase the annual salary paid to any officers or directors of the Company as
of the Effective Date, unless any such increase is part of a written employment
contract with any such officers entered into prior to the Effective Date, a copy
of which has been delivered to and approved by the Buyer; or (vi) add, replace,
remove, or otherwise change any officers or other senior management positions of
the Company from the officers and other senior management positions existing as
of the Effective Date, unless first approved by Buyer in writing, which approval
may be granted or withheld or conditioned by Buyer in its sole and absolute
discretion. The Company shall not pay any brokerage or finder's fee or
commission in connection with the execution of this Agreement or the
consummation of the transactions contemplated hereby

 

(g) Use of Proceeds. The Company shall not use any portion of the proceeds of
the Debenture, either directly or indirectly, for any of the following purposes:
(i) to make any payment towards any indebtedness or other Obligations of the
Company; (ii) to pay any Taxes of any nature or kind that may be due by the
Company; or (iii) to pay any Obligations of any nature or kind due or owing to
any officers, directors, employees, or Material Shareholders of the Company,
other than salaries payable in the Company's Ordinary Course of Business. The
Company covenants and agrees to only use any portion of the proceeds of the
purchase and sale of the Debenture for the purposes set forth in the Use of
Proceeds Confirmation to be executed by the Company on the Effective Date,
unless the Company obtains the prior written consent of the Buyer to use such
proceeds for any other purpose, which consent may be granted or withheld or
conditioned by Buyer in its sole and absolute discretion.

  

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(h) Business Activities; Change of Legal Status and Organizational Documents.
The Company shall not: (i) engage in any line of business other than the
businesses engaged in as of the Effective Date and business reasonably related
thereto; (ii) change its name, organizational identification number (if
applicable), its type of organization, its jurisdiction of organization or other
legal structure; or (iii) permit its Organizational Documents to be amended or
modified in any way which could reasonably be expected to have a Material
Adverse Effect.

 

(i) Transactions with Affiliates. The Company shall not enter into any
transaction with any of its Affiliates, officers, directors, employees, Material
Shareholders or other insiders, except in the Company's Ordinary Course of
Business and upon fair and reasonable terms that are no less favorable to the
Company than it would obtain in a comparable arm's length transaction with a
Person not an Affiliate of the Company.

 

(j) Bank Accounts. The Company shall not maintain any bank, deposit, credit card
payment processing accounts, or other accounts with any financial institution,
or any other Person, other than the Company's accounts listed in the attached
Schedule 6.22. Specifically, the Company may not change, modify, close or
otherwise affect any of the accounts listed in Schedule 6.22 without Buyer's
prior written approval, which approval may be withheld or conditioned in Buyer's
sole and absolute discretion.

 

7.2 Affirmative Covenants.

 

(a) Corporate Existence. The Company shall at all times preserve and maintain
its: (i) existence and good standing in the jurisdiction of its organization;
and (ii) its qualification to do business and good standing in each jurisdiction
where the nature of its business makes such qualification necessary, and shall
at all times continue as a going concern in the business which the Company is
presently conducting.

 

(b) Tax Liabilities. The Company shall at all times pay and discharge all Taxes
upon, and all Claims (including claims for labor, materials and supplies)
against the Company or any of its properties or Assets, before the same shall
become delinquent and before penalties accrue thereon, unless and to the extent
that the same are being contested in good faith by appropriate proceedings and
for which adequate reserves in accordance with GAAP are being maintained.

 

(c) Notice of Proceedings. The Company shall, promptly, but not more than five
(5) days after knowledge thereof shall have come to the attention of any officer
of the Company, give written notice to the Buyer of all threatened or pending
Proceedings before any Governmental Authority or otherwise affecting the Company
or any of its Assets.

 

(d) Material Adverse Effect. The Company shall, promptly, but not more than five
(5) days after knowledge thereof shall have come to the attention of any officer
of the Company, give written notice to the Buyer of any event, circumstance,
fact or other matter that could in any way have or be reasonably expected to
have a Material Adverse Effect.

 

 18

 

  

(e) Notice of Default. The Company shall, promptly, but not more than five (5)
days after the commencement thereof, give notice to the Buyer in writing of the
occurrence of any "Event of Default" (as such term is defined in any of the
Transaction Documents) or of any event which, with the lapse of time, the giving
of notice or both, would constitute an Event of Default hereunder or under any
other Transaction Documents.

 

(f) Maintain Property. The Company shall at all times maintain, preserve and
keep all of its Assets in good repair, working order and condition, normal wear
and tear excepted, and shall from time to time, as the Company deems appropriate
in its reasonable judgment, make all needful and proper repairs, renewals,
replacements, and additions thereto so that at all times the efficiency thereof
shall be fully preserved and maintained. The Company shall permit Buyer to
examine and inspect such Assets at all reasonable times upon reasonable notice
during business hours. During the continuance of any Event of Default hereunder
or under any Transaction Documents, the Buyer shall, at the Company's expense,
have the right to make additional inspections without providing advance notice.

 

(g) Maintain Insurance. The Company shall at all times insure and keep insured
with insurance companies acceptable to Buyer, all insurable property owned by
the Company which is of a character usually insured by companies similarly
situated and operating like properties, against loss or damage from
environmental, fire and such other hazards or risks as are customarily insured
against by companies similarly situated and operating like properties; and shall
similarly insure employers', public and professional liability risks. Prior to
the Effective Date, the Company shall deliver to the Buyer a certificate setting
forth in summary form the nature and extent of the insurance maintained pursuant
to this Section. All such policies of insurance must be satisfactory to Buyer in
relation to the amount and term of the Debenture and the Fee Debentures and type
and value of the Assets of the Company, shall identify Buyer as sole/lender's
loss payee and as an additional insured. In the event the Company fails to
provide Buyer with evidence of the insurance coverage required by this Section
or at any time hereafter shall fail to obtain or maintain any of the policies of
insurance required above, or to pay any premium in whole or in part relating
thereto, then the Buyer, without waiving or releasing any obligation or default
by the Company hereunder, may at any time (but shall be under no obligation to
so act), obtain and maintain such policies of insurance and pay such premium and
take any other action with respect thereto, which Buyer deems advisable. This
insurance coverage: (i) may, but need not, protect the Company's interest in
such property; and (ii) may not pay any claim made by, or against, the Company
in connection with such property. The Company may later request that the Buyer
cancel any such insurance purchased by Buyer, but only after providing Buyer
with evidence that the insurance coverage required by this Section is in force.
The costs of such insurance obtained by Buyer, through and including the
effective date such insurance coverage is canceled or expires, shall be payable
on demand by the Company to Buyer, together with interest at the highest
non-usurious rate permitted by law on such amounts until repaid and any other
charges by Buyer in connection with the placement of such insurance. The costs
of such insurance, which may be greater than the cost of insurance which the
Company may be able to obtain on its own, together with interest thereon at the
highest non-usurious rate permitted by Law and any other charges incurred by
Buyer in connection with the placement of such insurance may be added to the
total Obligations due and owing by the Company hereunder and under the Debenture
and the Fee Debentures to the extent not paid by the Company.

 

 19

 

  

(h) ERISA Liabilities; Employee Plans. The Company shall: (i) keep in full force
and effect any and all Employee Plans which are presently in existence or may,
from time to time, come into existence under ERISA, and not withdraw from any
such Employee Plans, unless such withdrawal can be effected or such Employee
Plans can be terminated without liability to the Company; (ii) make
contributions to all of such Employee Plans in a timely manner and in a
sufficient amount to comply with the standards of ERISA, including the minimum
funding standards of ERISA; (iii) comply with all material requirements of ERISA
which relate to such Employee Plans; (iv) notify Buyer immediately upon receipt
by the Company of any notice concerning the imposition of any withdrawal
liability or of the institution of any Proceeding or other action which may
result in the termination of any such Employee Plans or the appointment of a
trustee to administer such Employee Plans; (v) promptly advise Buyer of the
occurrence of any "Reportable Event" or "Prohibited Transaction" (as such terms
are defined in ERISA), with respect to any such Employee Plans; and (vi) amend
any Employee Plan that is intended to be qualified within the meaning of Section
401 of the Internal Revenue Code of 1986 to the extent necessary to keep the
Employee Plan qualified, and to cause the Employee Plan to be administered and
operated in a manner that does not cause the Employee Plan to lose its qualified
status.

 

(i) Reporting Status; Listing. So long as Buyer owns, legally or beneficially,
any of the Securities, the Company shall: (i) file in a timely manner all
reports required to be filed under the Securities Act, the Exchange Act or any
securities Laws and regulations thereof applicable to the Company of any state
of the United States, or by the rules and regulations of the Principal Trading
Market, and, to provide a copy thereof to the Buyer promptly after such filing;
(ii) not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would otherwise permit such termination; (iii) if required by the rules and
regulations of the Principal Trading Market, promptly secure the listing of any
shares of Common Stock issuable to Buyer under any of the Transaction Documents
upon the Principal Trading Market (subject to official notice of issuance) and,
take all reasonable action under its control to maintain the continued listing,
quotation and trading of its Common Stock (including, without limitation, any
shares of Common Stock issuable to Buyer under any of the Transaction Documents)
on the Principal Trading Market, and the Company shall comply in all respects
with the Company's reporting, filing and other Obligations under the bylaws or
rules of the Principal Trading Market, the Financial Industry Regulatory
Authority, Inc. and such other Governmental Authorities, as applicable. The
Company shall promptly provide to Buyer copies of any notices it receives from
the SEC or any Principal Trading Market, to the extent any such notices could in
any way have or be reasonably expected to have a Material Adverse Effect.

 

(j) Rule 144. With a view to making available to Buyer the benefits of Rule 144
under the Securities Act ("Rule 144"), or any similar rule or regulation of the
SEC that may at any time permit Buyer to sell shares of Common Stock issuable to
Buyer under any Transaction Documents to the public without registration, the
Company represents and warrants that:

 

(i) the Company is, and has been for a period of at least ninety (90) days
immediately preceding the date hereof, subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act; (ii) the Company has filed all required
reports under Section 13 or 15(d) of the Exchange Act, as applicable, during the
twelve (12) months preceding the Closing Date (or for such shorter period that
the Company was required to file such reports); and (iii) the Company is not
currently an issuer defined as a "Shell Company" (as hereinafter defined). For
the purposes hereof, the term "Shell Company" shall mean an issuer that meets
such a description as defined under Rule 144. In addition, so long as Buyer
owns, legally or beneficially, any securities of the Company, the Company shall,
at its sole expense:

 

(ii) Make, keep and ensure that adequate current public information with respect
to the Company, as required in accordance with Rule 144, is publicly available;

 

 20

 

  

(iii) furnish to the Buyer, promptly upon reasonable request: (A) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act; and (b) such other
information as may be reasonably requested by Buyer to permit the Buyer to sell
any of the shares of Common Stock acquired hereunder or under any other
Transaction Documents pursuant to Rule 144 without limitation or restriction;
and

 

(iv) promptly at the request of Buyer, give the Company's transfer agent (the
"Transfer Agent") instructions to the effect that, upon the Transfer Agent's
receipt from Buyer of a certificate (a "Rule 144 Certificate") certifying that
Buyer's holding period (as determined in accordance with the provisions of Rule
144) for any portion of the shares of Common Stock issuable under any
Transaction Document which Buyer proposes to sell (or any portion of such shares
which Buyer is not presently selling, but for which Buyer desires to remove any
restrictive legends applicable thereto) (the "Securities Being Sold") is not
less than six (6) months, and receipt by the Transfer Agent of the "Rule 144
Opinion" (as hereinafter defined) from the Company or its counsel (or from Buyer
and its counsel as permitted below), the Transfer Agent is to effect the
transfer (or issuance of a new certificate without restrictive legends, if
applicable) of the Securities Being Sold and issue to Buyer or transferee(s)
thereof one or more stock certificates representing the transferred (or re-
issued) Securities Being Sold without any restrictive legend and without
recording any restrictions on the transferability of such shares on the Transfer
Agent's books and records. In this regard, upon Buyer's request, the Company
shall have an affirmative obligation to cause its counsel to promptly issue to
the Transfer Agent a legal opinion providing that, based on the Rule 144
Certificate, the Securities Being Sold may be sold pursuant to the provisions of
Rule 144, even in the absence of an effective registration statement (the "Rule
144 Opinion"). If the Transfer Agent requires any additional documentation in
connection with any proposed transfer (or re-issuance) by Buyer of any
Securities Being Sold, the Company shall promptly deliver or cause to be
delivered to the Transfer Agent or to any other Person, all such additional
documentation as may be necessary to effectuate the transfer (or re- issuance)
of the Securities Being Sold and the issuance of an unlegended certificate to
any such Buyer or any transferee thereof, all at the Company's expense. Any and
all fees, charges or expenses, including, without limitation, attorneys' fees
and costs, incurred by Buyer in connection with issuance of any such shares, or
the removal of any restrictive legends thereon, or the transfer of any such
shares to any assignee of Buyer, shall be paid by the Company, and if not paid
by the Company, the Buyer may, but shall not be required to, pay any such fees,
charges or expenses, and the amount thereof, together with interest thereon at
the highest non-usurious rate permitted by law, from the date of outlay, until
paid in full, shall be due and payable by the Company to Buyer immediately upon
demand therefor, and all such amounts shall be additional Obligations of the
company to Buyer secured under the Transaction Documents. In the event that the
Company and/or its counsel refuses or fails for any reason to render the Rule
144 Opinion or any other documents, certificates or instructions required to
effectuate the transfer (or re-issuance) of the Securities Being Sold and the
issuance of an unlegended certificate to any such Buyer or any transferee
thereof, then: (A) to the extent the Securities Being Sold could be lawfully
transferred (or re-issued) without restrictions under applicable laws, Company's
failure to promptly provide the Rule 144 Opinion or any other documents,
certificates or instructions required to effectuate the transfer (or
re-issuance)of the Securities Being Sold and the issuance of an unlegended
certificate to any such Buyer or any transferee thereof shall be an immediate
Event of Default under this Agreement and all other Transaction Documents; and
(B) the Company hereby agrees and acknowledges that Buyer is hereby irrevocably
and expressly authorized to have counsel to Buyer render any and all opinions
and other certificates or instruments which may be required for purposes of
effectuating the transfer (or re-issuance) of the Securities Being Sold and the
issuance of an unlegended certificate to any such Buyer or any transferee
thereof, and the Company hereby irrevocably authorizes and directs the Transfer
Agent to, without any further confirmation or instructions from the Company,
transfer or re-issue any such Securities Being Sold as instructed by Buyer and
its counsel.

 

 21

 

  

(k) Matters With Respect to Securities.

 

(i) Issuance of Conversion Shares. The parties hereto acknowledge that pursuant
to the terms of the Debenture and the Fee Debentures, Buyer has the right, at
its discretion following an Event of Default, to convert amounts due under the
Debenture and the Fee Debentures into Common Stock in accordance with the terms
of the Debenture and the Fee Debentures. In the event, for any reason, the
Company fails to issue, or cause its Transfer Agent to issue, any portion of the
Common Stock issuable upon conversion of the Debenture or the Fee Debentures
(the "Conversion Shares") to Buyer in connection with the exercise by Buyer of
any of its conversion rights under the Debenture and the Fee Debentures, then
the parties hereto acknowledge that Buyer shall irrevocably be entitled to
deliver to the Transfer Agent, on behalf of itself and the Company, a
"Conversion Notice" (as defined in the Debenture and the Fee Debentures)
requesting the issuance of the Conversion Shares then issuable in accordance
with the terms of the Debenture and the Fee Debentures, and the Transfer Agent,
provided they are the acting transfer agent for the Company at the time, shall,
and the Company hereby irrevocably authorizes and directs the Transfer Agent to,
without any further confirmation or instructions from the Company, issue the
Conversion Shares applicable to the Conversion Notice then being exercised, and
surrender to a nationally recognized overnight courier for delivery to Buyer at
the address specified in the Conversion Notice, a certificate of the Common
Stock of the Company, registered in the name of Buyer or its nominee, for the
number of Conversion Shares to which Buyer shall be then entitled under the
Debenture and the Fee Debentures, as set forth in the Conversion Notice.

 

(ii) Removal of Restrictive Legends. In the event that Buyer has any shares of
the Company's Common Stock bearing any restrictive legends, and Buyer, through
its counsel or other representatives, submits to the Transfer Agent any such
shares for the removal of the restrictive legends thereon, whether in connection
with a sale of such shares pursuant to any exemption to the registration
requirements under the Securities Act, or otherwise, and the Company and or its
counsel refuses or fails for any reason to render an opinion of counsel or any
other documents or certificates required for the removal of the restrictive
legends, then the Company hereby agrees and acknowledges that Buyer is hereby
irrevocably and expressly authorized to have counsel to Buyer render any and all
opinions and other certificates or instruments which may be required for
purposes of removing such restrictive legends, and the Company hereby
irrevocably authorizes and directs the Transfer Agent to, without any further
confirmation or instructions from the Company, issue any such shares without
restrictive legends as instructed by Buyer, and surrender to a common carrier
for overnight delivery to the address as specified by Buyer, certificates,
registered in the name of Buyer or its designees or nominees, representing the
shares of Common Stock to which Buyer is entitled, without any restrictive
legends and otherwise freely transferable on the books and records of the
Company.

 

 22

 

  

(iii) Authorized Agent of the Company. The Company hereby irrevocably appoints
the Buyer and its counsel and its representatives, each as the Company's duly
authorized agent and attorney-in-fact for the Company for the purposes of
authorizing and instructing the Transfer Agent to process issuances, transfers
and legend removals upon instructions from Buyer, or any counsel or
representatives of Buyer, as specifically contemplated herein. The authorization
and power of attorney granted hereby is coupled with an interest and is
irrevocable so long as any obligations of the Company under Debenture and the
Fee Debentures remain outstanding, and so long as the Buyer owns or has the
right to receive, any shares of the Company's Common Stock hereunder or under
any Transaction Documents. In this regard, the Company hereby confirms to the
Transfer Agent and the Buyer that it can NOT and will NOT give instructions,
including stop orders or otherwise, inconsistent with the terms of this
Agreement with regard to the matters contemplated herein, and that the Buyer
shall have the absolute right to provide a copy of this Agreement to the
Transfer Agent as evidence of the Company's irrevocable authority for Buyer and
Transfer Agent to process issuances, transfers and legend removals upon
instructions from Buyer, or any counsel or representatives of Buyer, as
specifically contemplated herein, without any further instructions, orders or
confirmations from the Company.

 

(iv) Injunction and Specific Performance. The Company specifically acknowledges
and agrees that in the event of a breach or threatened breach by the Company of
any provision of this Section 7.2(k), the Buyer will be irreparably damaged and
that damages at law would be an inadequate remedy if this Agreement were not
specifically enforced. Therefore, in the event of a breach or threatened breach
of any provision of this Section 7.2(k) by the Company, the Buyer shall be
entitled to obtain, in addition to all other rights or remedies Buyer may have,
at law or in equity, an injunction restraining such breach, without being
required to show any actual damage or to post any bond or other security, and/or
to a decree for specific performance of the provisions of this Section 7.2(k)

 

7.3 Reporting Requirements. The Company agrees as follows:

 

(a) Financial Statements. The Company shall at all times maintain a system of
accounting capable of producing its individual and consolidated (if applicable)
financial statements in compliance with GAAP (provided that monthly financial
statements shall not be required to have footnote disclosure, are subject to
normal year-end adjustments and need not be consolidated), and shall furnish to
the Buyer or its authorized representatives such information regarding the
business affairs, operations and financial condition of the Company as Buyer may
from time to time request or require, including:

 

(i) As soon as available, and in any event, within ninety (90) days after the
close of each fiscal year, a copy of the annual audited financial statements of
the Company, including balance sheet, statement of income and retained earnings,
statement of cash flows for the fiscal year then ended, in reasonable detail,
prepared and reviewed by an independent certified public accountant reasonably
acceptable to Buyer, containing an unqualified opinion of such accountant;

 

 23

 

  

(ii) as soon as available, and in any event, within sixty (60) days after the
close of each fiscal quarter, a copy of the quarterly financial statements of
the Company, including balance sheet, statement of income and retained earnings,
statement of cash flows for the fiscal year then ended, in reasonable detail,
prepared and certified as accurate in all material respects by the President,
CEO or CFO of the Company;

 

(iii) as soon as available, and in any event, within thirty (30) days following
the end of each calendar month, a copy of the financial statements of the
Company regarding such month, including balance sheet, statement of income and
retained earnings, statement of cash flows for the month then ended, in
reasonable detail, prepared and certified as accurate in all material respects
by the President, CEO or CFO of the Company.

 

No change with respect to the Company's accounting principles shall be made by
the Company without giving prior notification to Buyer. The Company represents
and warrants to Buyer that the financial statements delivered to Buyer at or
prior to the execution and delivery of this Agreement and to be delivered at all
times thereafter accurately reflect and will accurately reflect the financial
condition of the Company in all material respects. Buyer shall have the right at
all times (and on reasonable notice so long as there then does not exist any
Event of Default) during business hours to inspect the books and records of the
Company and make extracts therefrom.

 

(b) Additional Reporting Requirements. The Company shall provide the following
reports and statements to Buyer as follows:

 

(i) Income Projections; Variance. On the Effective Date, the Company shall
provide to Buyer an income statement projection showing, in reasonable detail,
the Company's income statement projections for the twelve (12) calendar months
following October 2015 (the "Income Projections"). In addition, within ten (10)
days after the end of every calendar month after the Effective Date, the Company
shall provide to Buyer a report comparing the Income Projections to actual
results. Any variance in the Income Projections to actual results that is more
than ten percent (10%) (either above or below) will require the Company to
submit to Buyer written explanations as to the nature and circumstances for the
variance.

 

(ii) Use of Proceeds; Variance. Within ten (10) days after the end of every
calendar month after the Effective Date, the Company shall provide to Buyer a
report comparing the use of the proceeds from the sale of Debenture set forth in
the Use of Proceeds Confirmation, with the actual use of such proceeds. Any
variance in the actual use of such proceeds from the amounts set forth in the
approved Use of Proceeds Confirmation will require the Company to submit to
Buyer written explanations as to the nature and circumstances for the variance.

 

(iii) Bank Statements. The Company shall submit to Buyer true and correct copies
of all bank statements received by the Company within five (5) days after the
Company's receipt thereof from its bank.

 

(iv) Interim Reports. Promptly upon receipt thereof, the Company shall provide
to Buyer copies of interim and supplemental reports, if any, submitted to the
Company by independent accountants in connection with any interim audit or
review of the books of the Company.

 

 

24

 

 

(v) Aged Accounts/Payables Schedules. The Company sh) all within ten (10) days
of the end of each and every calendar month, deliver to Buyer an aged schedule
of the accounts receivable of the Company, listing the name and amount due from
each Person and showing the aggregate amounts due from: (i) 0-30 days; (ii)
31-60 days; (iii) 61-90 days; (iv) 91-120 days; and (v) more than 120 days, and
certified as accurate by the President, CEO or CFO of the Company. The Company
shall, within ten (10) days of the end of each and every calendar month, deliver
to Buyer an aged schedule of the accounts payable of the Company, listing the
name and amount due to each creditor and showing the aggregate amounts due from:
(v) 0-30 days; (w) 31-60 days; (x) 61-90 days; (y) 91-120 days; and (z) more
than 120 days, and certified as accurate by the President, CEO or CFO of the
Company.

 

 

(c) Covenant Compliance. The Company shall, within thirty (30) days after the
end of each calendar month, deliver to Buyer a Compliance Certificate,
confirming compliance by the Company with the covenants therein, and certified
as accurate by an officer of the Company.

 

7.4 Fees and Expenses.

 

(a) Due Diligence Fees. The Company agrees to pay to the Buyer a due diligence
fee equal to Zero and No/100 United States Dollars ($0.00), which shall be due
and payable in full on the Effective Date, or any remaining portion thereof
shall be due and payable on the Effective Date if a portion of such fee was paid
upon the execution of any term sheet related to this Agreement.

 

(b) Document Review and Legal Fees. The Company agrees to pay to the Buyer or
its counsel a document review and legal fee equal to Fifteen Thousand and No/100
United States Dollars ($15,000.00), which shall be due and payable in full on
the Effective Date, or any remaining portion thereof shall be due and payable on
the Effective Date if a portion of such fee was paid upon the execution of any
term sheet related to this Agreement. The Company also agrees to be responsible
for the prompt payment of all legal fees and expenses of the Company and its own
counsel and other professionals incurred by the Company in connection with the
negotiation and execution of this Agreement and the Transaction Documents.

 

(c) Other Fees. The Company also agrees to pay to the Buyer (or any designee of
the Buyer), upon demand, or to otherwise be responsible for the payment of, any
and all other costs, fees and expenses, including the reasonable fees, costs,
expenses and disbursements of counsel for the Buyer and of any experts and
agents, which the Buyer may incur or which may otherwise be due and payable in
connection with: (i) the preparation, negotiation, execution, delivery,
recordation, administration, amendment, subordination, waiver or other
modification or termination of this Agreement or any other Transaction
Documents; (ii) any documentary stamp taxes, intangibles taxes, recording fees,
filing fees, or other similar taxes, fees or charges imposed by or due to any
Governmental Authority in connection with this Agreement or any other
Transaction Documents; (iii) the exercise or enforcement of any of the rights of
the Buyer under this Agreement or the Transaction Documents; or (iv) the failure
by the Company to perform or observe any of the provisions of this Agreement or
any of the Transaction Documents. Included in the foregoing shall be the amount
of all expenses paid or incurred by Buyer in consulting with counsel concerning
any of its rights under this Agreement or any other Transaction Document or
under applicable law. To the extent any such costs, fees, charges, taxes or
expenses are incurred prior to the funding of proceeds from the Closing, same
shall be paid directly from the proceeds of the Closing. All such costs and
expenses, if not so immediately paid when due or upon demand thereof, shall bear
interest from the date of outlay until paid, at the highest rate set forth in
the Debenture, or if none is so stated, the highest rate allowed by law. All of
such costs and expenses shall be additional Obligations of the Company to Buyer
secured under the Transaction Documents. The provisions of this Subsection shall
survive the termination of this Agreement.

 

 25

 

  

7.5 Advisory Fee. The Company shall pay to the Buyer, in consideration of
investment banking and advisory services rendered by the Buyer to the Company
prior to the date hereof, which such services the Company hereby acknowledges
and agrees that the Buyer has fully rendered to its satisfaction, an advisory
fee in the amount of One Hundred Thousand and No/100 United States Dollars
(US$100,000) (the "Advisory Fee"). The Advisory Fee shall be paid in the form of
three (3) Fee Debentures, each in the amount of Thirty-Three Thousand Three
Hundred Thirty-Three and 33/100 United States Dollars (US33,333.34). The Fee
Debentures shall be issued on the Effective Date and shall bear maturity dates
of six (6), and nine (9) and twelve (12) months respectively. The principal
amount of the Fee Debentures outstanding from time to time shall bear zero (0)
interest, provided that no default or Event of Default has occurred or is
continuing. Any amount of principal on the Fee Debentures which is not paid when
due, whether at stated maturity, by acceleration or otherwise, shall at Buyer's
option bear interest payable on demand at the Default Rate.

 

7.6 Share Reserve. The Company shall take all action necessary to at all times
have authorized, and reserved for the purpose of issuance, five (5) times such
number of shares of Common Stock as shall be necessary to effect the issuance of
the Conversion Shares under this Agreement or any other Transaction Documents
(collectively, the "Share Reserve"). The Company represents that it has
sufficient authorized and unissued shares of Common Stock available to create
the Share Reserve after considering all other commitments that may require the
issuance of Common Stock. The Company shall take all action reasonably necessary
to at all times have authorized, and reserved for the purpose of issuance, such
number of shares of Common Stock as shall be necessary to effect the full
conversion of the Debenture and the Fee Debentures that may be issuable
hereunder. If upon receipt of a conversion notice from the Buyer, the Share
Reserve is insufficient to effect the full conversion of the Debenture and the
Fee Debentures that may be issuable hereunder, the Company shall take all
required measures to implement an increase of the Share Reserve accordingly. If
the Company does not have sufficient authorized and unissued shares of Common
Stock available to increase the Share Reserve, the Company shall cause its
authorized and unissued shares to be increased within forty-five (45) days to an
amount of shares equal to three (3) times the Conversion Shares.

 

7.7 Subsidiaries. Any Subsidiary which is formed or acquired or otherwise
becomes a Subsidiary of the Company following the date hereof, within ten (10)
Business Days of such event, shall become an additional party hereto and
guarantor of the Company's Obligation hereunder, and the Company shall take any
and all actions necessary or advisable to cause said Subsidiary to execute a
counterpart to this Agreement and any and all other documents which the Buyer
shall require. "Subsidiary" shall mean, respectively, each and all such
corporations, partnerships, limited partnerships, limited liability companies,
limited liability partnerships or other entities of which or in which a Person
owns, directly or indirectly, fifty percent (50%) or more of: (i) the combined
voting power of all classes of stock/units having general voting power under
ordinary circumstances to elect a majority of the board of directors of such
entity if a corporation; (ii) the management authority and capital interest or
profits interest of such entity, if a partnership, limited partnership, limited
liability company, limited liability partnership, joint venture or similar
entity; or (iii) the beneficial interest of such entity, if a trust, association
or other unincorporated organization.

 

 26

 

  

ARTICLE VIII

CONDITIONS PRECEDENT TO THE COMPANY' S OBLIGATIONS TO SELL

 

The obligation of the Company hereunder to issue and sell the Securities to the
Buyer at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion:

 

8.1 Buyer shall have executed the Transaction Documents and delivered them to
the Company.

 

8.2 The representations and warranties of the Buyer shall be true and correct in
all material respects as of Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and the Buyer
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Buyer at or prior to the Closing Date.

 

8.3 The Company shall have received such certificates, confirmations,
resolutions, acknowledgements or other documentation necessary or advisable from
all applicable Governmental Authorities, including, but not limited to, those
located in the State of Nevada, as the Company may require in order to evidence
such Governmental Authorities' approval of this Agreement, the Transaction
Documents and the purchase of the Debenture, issuance of the Fee Debentures and
the issuance of the Conversion Shares contemplated hereby.

 

 27

 

  

ARTICLE IX

CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS TO PURCHASE

 

The obligation of the Buyer hereunder to purchase the Debenture at the Closing
is subject to the satisfaction, of each of the following conditions (in addition
to any other conditions precedent elsewhere in this Agreement), provided that
these conditions are for the Buyer's sole benefit and may be waived by the Buyer
at any time in its sole discretion:

 

9.1 Closing. The obligation of the Buyer hereunder to purchase the Debenture at
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions (in addition to any other conditions precedent
elsewhere in this Agreement), provided that these conditions are for the Buyer's
sole benefit and may be waived by the Buyer at any time in its sole discretion:

 

(a) The Company and/or the President or Chief Executive Officer (as applicable)
shall have executed and delivered the Transaction Documents and delivered the
same to the Buyer.

 

(b) The representations and warranties of the Company shall be true and correct
in all material respects (except to the extent that any of such representations
and warranties are already qualified as to materiality in Article VI above, in
which case, such representations and warranties shall be true and correct in all
respects without further qualification) as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date.

 

(c) The Buyer shall have received an opinion of counsel from counsel to the
Company in a form satisfactory to the Buyer and its counsel.

 

(d) The Buyer shall have received evidence in a form satisfactory to the Buyer
that the Company has authorized the Buyer to publish such press releases with
respect to this Agreement and the instant transaction, including, but not
limited to, a copy of an email delivered to Marketwire.com by the Company
whereby the Company authorizes the Buyer to use its name and, if applicable,
stock symbol, in connection with current or future press releases.

 

(e) The Company shall have executed and delivered to Buyer a closing
certificate, certified as true, complete and correct by an officer of the
Company, in substance and form required by Buyer, which closing certificate
shall include and attach as exhibits: (i) a true copy of a certificate of good
standing evidencing the formation and good standing of the Company from the
secretary of state (or comparable office) from the jurisdiction in which the
Company is formed; (ii) the Company's Organizational Documents; and (iii) copies
of the resolutions of the board of directors of the Company as adopted by the
Company's board of directors, in a form acceptable to Buyer, approving and
authorizing the execution, delivery and performance of the Transaction Documents
to which it is party and the transactions contemplated thereby, in a form
acceptable to the Buyer.

 

 28

 

  

(f) No event shall have occurred which could reasonably be expected to have a
Material Adverse Effect.

 

(g) The Buyer shall have received copies of UCC search reports, issued by the
Secretary of State of the state of incorporation or residency, as applicable, of
the Company, dated such a date as is reasonably acceptable to Buyer, listing all
effective financing statements which name the Company, under their present name
and any previous names, as debtors, together with copies of such financing
statements.

 

(h) The Company shall have executed such other agreements, certificates,
confirmations or resolutions as the Buyer may require to consummate the
transactions contemplated by this Agreement and the Transaction Documents,
including a closing statement and joint disbursement instructions as may be
required by Buyer.

 

ARTICLE X

INDEMNIFICATION

 

10.1 Company's Obligation to Indemnify. In consideration of the Buyer's
execution and delivery of this Agreement and acquiring the Securities hereunder,
and in addition to all of the Company's other obligations under this Agreement,
the Company hereby agrees to defend and indemnify Buyer and its Affiliates and
subsidiaries and their respective directors, officers, employees, agents and
representatives, and the successors and assigns of each of them (collectively,
the "Buyer Indemnified Parties") and Company does hereby agree to hold the Buyer
Indemnified Parties forever harmless, from and against any and all Claims made,
brought or asserted against the Buyer Indemnified Parties, or any one of them,
and Company hereby agrees to pay or reimburse the Buyer Indemnified Parties for
any and all Claims payable by any of the Buyer Indemnified Parties to any
Person, including reasonable attorneys' and paralegals' fees and expenses, court
costs, settlement amounts, costs of investigation and interest thereon from the
time such amounts are due at the highest non- usurious rate of interest
permitted by applicable Law, through all negotiations, mediations, arbitrations,
trial and appellate levels, as a result of, or arising out of, or relating to:
(i) any misrepresentation or breach of any representation or warranty made by
the Company in this Agreement, the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby; (ii) any
breach of any covenant, agreement or Obligation of the Company contained in this
Agreement, the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby; or (iii) any Claims brought or made
against the Buyer Indemnified Parties, or any one of them, by a third party and
arising out of or resulting from the execution, delivery, performance or
enforcement of this Agreement, the Transaction Documents or any other
instrument, document or agreement executed pursuant hereto or thereto, any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Debenture, or the status of
the Buyer or holder of any of the Securities, as a buyer and holder of such
Securities in the Company. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Claims covered
hereby, which is permissible under applicable Law.

  

 29

 

  

ARTICLE XI

MISCELLANEOUS

 

11.1 Notices. All notices of request, demand and other communications hereunder
shall be addressed to the parties as follows:

 

If to the Company:

Artec Global Media, Inc.

249 South Highway 101, #324

Solana Beach, CA 92075

Attn: Caleb W. Wickman

E-Mail: wolf@artecglobalmedia.com

 

With a copy to:

(which shall not constitute notice)

Westerman Ball Ederer Miller Zucker & Sharfstein LLP

1201 RXR Plaza

Uniondale, NY 11556 

Attn: Alan C. Ederer, Esq. 

Email: aederer@westermanllp.com

 If to the Buyer:

TCA Global Credit Master Fund, LP

3960 Howard Hughes Parkway, Suite 500

Las Vegas, NV 89169

Attn: Mr. Robert Press

E-Mail: bpress@tcaglobalfund.com

 

With a copy to:

(which shall not constitute notice) Lucosky Brookman LLP

101 Wood Avenue South, 5th Floor

Woodbridge, NJ 08830

Attn: Seth A. Brookman, Esq.

E-Mail: sbrookman@lucbro.com

    

unless the address is changed by the party by like notice given to the other
parties. Notice shall be in writing and shall be deemed delivered: (i) if mailed
by certified mail, return receipt requested, postage prepaid and properly
addressed to the address below, then three (3) business days after deposit of
same in a regularly maintained U.S. Mail receptacle; or (ii) if mailed by
Federal Express, UPS or other nationally recognized overnight courier service,
next business morning delivery, then one (1) business day after deposit of same
in a regularly maintained receptacle of such overnight courier; or (iii) if hand
delivered, then upon hand delivery thereof to the address indicated on or prior
to 5:00 p.m., EST, on a business day. Any notice hand delivered after 5:00 p.m.,
EST, shall be deemed delivered on the following business day. Notwithstanding
the foregoing, notice, consents, waivers or other communications referred to in
this Agreement may be sent by facsimile, e-mail, or other method of delivery,
but shall be deemed to have been delivered only when the sending party has
confirmed (by reply e-mail or some other form of written confirmation from the
receiving party) that the notice has been received by the other party.

 

 30

 

  

11.2 Obligations Absolute. None of the following shall affect the Obligations of
the Company to Buyer under this Agreement, Buyer's rights with respect to the
Collateral or any other Transaction Documents:

 

(a) acceptance or retention by Buyer of other property or any interest in
property as security for the Obligations;

 

(b) release by Buyer of all or any part of the Collateral or of any party liable
with respect to the Obligations (other than Company);

 

(c) release, extension, renewal, modification or substitution by Buyer of the
Debenture, the Fee Debentures, or any other Transaction Documents; or

 

(d) failure of Buyer to resort to any other security or to pursue the Company or
any other obligor liable for any of the Obligations of the Company hereunder
before resorting to remedies against the Collateral.

 

11.3 Entire Agreement. This Agreement and the other Transaction Documents: (i)
are valid, binding and enforceable against the Company and Buyer in accordance
with its provisions and no conditions exist as to their legal effectiveness;
(ii) constitute the entire agreement between the parties; and (iii) are the
final expression of the intentions of the Company and Buyer. No promises, either
expressed or implied, exist between the Company and Buyer, unless contained
herein or in the Transaction Documents. This Agreement and the Transaction
Documents supersede all negotiations, representations, warranties, commitments,
offers, contracts (of any kind or nature, whether oral or written) prior to or
contemporaneous with the execution hereof.

 

11.4 Amendments; Waivers. No amendment, modification, termination, discharge or
waiver of any provision of this Agreement or of the Transaction Documents, or
consent to any departure by the Company therefrom, shall in any event be
effective unless the same shall be in writing and signed by Buyer, and then such
waiver or consent shall be effective only for the specific purpose for which
given. Notwithstanding anything to the contrary herein, no amendment or
modification of this Agreement or of the Transaction Documents shall be
effective unless set forth in a written document executed by Buyer and the
Company.

 

11.5 WAIVER OF JURY TRIAL. BUYER, THE COMPANY, AFTER CONSULTING OR HAVING HAD
THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES, IRREVOCABLY, THE RIGHT TO TRIAL BY JURY WITH RESPECT TO
ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT, ANY TRANSACTION DOCUMENT OR ANY OF THE OBLIGATIONS
HEREUNDER, THE COLLATERAL, OR ANY OTHER AGREEMENT EXECUTED OR CONTEMPLATED TO BE
EXECUTED IN CONJUNCTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT OR COURSE
OF DEALING IN WHICH BUYER AND THE COMPANY AND/OR THE GUARNATORS ARE ADVERSE
PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BUYER PURCHASING THE
DEBENTURE AND AGEEING TO ACCEPT THE FEE DEBENTURES AS EVIDENCE OF THE ADVISORY
FEE. 

  

 31

 

 

11.6 MANDATORY FORUM SELECTION. TO INDUCE BUYER TO PURCHASE THE DEBENTURE AND
ACCEPT THE FEE DEBENTURES AS EVIDENCE OF THE ADVISORY FEE, THE COMPANY
IRREVOCABLY AGREE THAT ANY DISPUTE ARISING UNDER, RELATING TO, OR IN CONNECTION
WITH, DIRECTLY OR INDIRECTLY, THIS AGREEMENT OR RELATED TO ANY MATTER WHICH IS
THE SUBJECT OF OR INCIDENTAL TO THIS AGREEMENT ANY OTHER TRANSACTION DOCUMENT
(WHETHER OR NOT SUCH CLAIM IS BASED UPON BREACH OF CONTRACT OR TORT) SHALL BE
SUBJECT TO THE EXCLUSIVE JURISDICTION AND VENUE OF THE STATE AND/OR FEDERAL
COURTS LOCATED IN BROW ARD COUNTY, FLORIDA. THIS PROVISION IS INTENDED TO BE A
"MANDATORY" FORUM SELECTION CLAUSE AND GOVERNED BY AND INTERPRETED CONSISTENT
WITH FLORIDA LAW. EACH CREDIT PARTY HEREBY CONSENTS TO THE EXCLUSIVE
JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT HAVING ITS SITUS IN SAID
COUNTY, AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS. EACH CREDIT
PARTY HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND CONSENT THAT ALL
SUCH SERVICE OF PROCESS MAY BE MADE BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED,
DIRECTED TO THE COMPANY AS SET FORTH HEREIN IN THE MANNER PROVIDED BY APPLICABLE
STATUTE, LAW, RULE OF COURT OR OTHERWISE.

 

11.7 Assignability. Buyer may at any time assign Buyer's rights in this
Agreement, the Debenture, the Fee Debentures, any Transaction Document, or any
part thereof and transfer Buyer's rights in any or all of the Collateral, and
Buyer thereafter shall be relieved from all liability with respect to such
Collateral. In addition, Buyer may at any time sell one or more participations
in the Debenture or the Fee Debentures. The Company may not sell or assign this
Agreement, any Transaction Document or any other agreement with Buyer, or any
portion thereof, either voluntarily or by operation of law, nor delegate any of
its duties of obligations hereunder or thereunder, without the prior written
consent of Buyer, which consent may be withheld or conditioned in Buyer's sole
and absolute discretion. This Agreement shall be binding upon Buyer and the
Company and their respective legal representatives, successors and permitted
assigns. All references herein to a Company shall be deemed to include any
successors, whether immediate or remote. In the case of a joint venture or
partnership, the term "Company" shall be deemed to include all joint venturers
or partners thereof, who shall be jointly and severally liable hereunder.

 

11.8 Publicity. Buyer shall have the right to approve, before issuance, any
press release or any other public statement with respect to the transactions
contemplated hereby made by the Company; provided, however, that the Company
shall be entitled, without the prior approval of Buyer, to issue any press
release or other public disclosure with respect to such transactions required
under applicable securities or other laws or regulations. Notwithstanding the
foregoing, the Company shall use its best efforts to consult Buyer in connection
with any such press release or other public disclosure prior to its release and
Buyer shall be provided with a copy thereof upon release thereof. Buyer shall
have the right to make any press release with respect to the transactions
contemplated hereby without Company's approval. In addition, with respect to any
press release to be made by Buyer, the Company hereby authorizes and grants
blanket permission to Buyer to include the Company's stock symbol, if any, in
any press releases. The Company shall, promptly upon request, execute any
additional documents of authority or permission as may be requested by Buyer in
connection with any such press releases.

 

 32

 

 

11.9 Binding Effect. This Agreement shall become effective upon execution by the
Company and Buyer. 

  

11.10 Governing Law. Except in the case of the Mandatory Forum Selection Clause
in Section 11.6 above, which clause shall be governed and interpreted in
accordance with Florida law, this Agreement and all other Transaction Documents
shall be delivered and accepted in and shall be deemed to be contracts made
under and governed by the internal laws of the State of Nevada, and for all
purposes shall be construed in accordance with the laws of such State, without
giving effect to the choice of law provisions of such State.

 

11.11 Enforceability. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by, unenforceable or
invalid under any jurisdiction, such provision shall as to such jurisdiction, be
severable and be ineffective to the extent of such prohibition or invalidity,
without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.

 

11.11 Survival of Company's Representations. All covenants, agreements,
representations and warranties made by the Company and the herein shall,
notwithstanding any investigation by Buyer, be deemed material and relied upon
by Buyer and shall survive the making and execution of this Agreement and the
Transaction Documents and the sale and purchase of the Debenture or the Fee
Debentures, and shall be deemed to be continuing representations and warranties
until such time as the Company have fulfilled all of its Obligations to Buyer
hereunder and under all other Transaction Documents, and Buyer has been
indefeasibly paid in full.

 

11.12 Time of Essence. Time is of the essence in making payments of all amounts
due Buyer under this Agreement and the other Transaction Documents and in the
performance and observance by the Company of each covenant, agreement, provision
and term of this Agreement and the other Transaction Documents. The parties
agree that in the event that any date on which performance is to occur falls on
a day other than a Business Day, then the time for such performance shall be
extended until the next Business Day thereafter occurring.

 

 33

 

  

11.13 Release. In consideration of the mutual promises and covenants made
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, and intending to be legally bound hereby, the
Company hereby agree to fully, finally and forever release and forever discharge
and covenant not to sue Buyer, and/or any other Buyer Indemnified Parties from
any and all Claims, debts, fees, attorneys' fees, liens, costs, expenses,
damages, sums of money, accounts, bonds, bills, covenants, promises, judgments,
charges, demands, causes of action, suits, Proceedings, liabilities, expenses,
Obligations or Contracts of any kind whatsoever, whether in law or in equity,
whether asserted or unasserted, whether known or unknown, fixed or contingent,
under statute or otherwise, from the beginning of time through the Effective
Date, including, without limiting the generality of the foregoing, any and all
Claims relating to or arising out of any financing transactions, credit
facilities, debentures, security agreements, and other agreements including each
of the Transaction Documents, entered into by the Company with Buyer and any and
all Claims that the Company does not know or suspect to exist, whether through
ignorance, oversight, error, negligence, or otherwise, and which, if known,
would materially affect their decision to enter into this Agreement or the
related Transaction Documents.   

 

11.15 Interpretation. If any provision in this Agreement requires judicial or
similar interpretation, the judicial or other such body interpreting or
construing such provision shall not apply the assumption that the terms hereof
shall be more strictly construed against one party because of the rule that an
instrument must be construed more strictly against the party which itself or
through its agents prepared the same. The parties hereby agree that all parties
and their agents have participated in the preparation hereof equally.

 

11.16 Compliance with Federal Law. The Company shall: (i) ensure that no Person
who owns a controlling interest in or otherwise controls the Company is or shall
be listed on the Specially Designated Nationals and Blocked Person List or other
similar lists maintained by the Office of Foreign Assets Control ("OFAC"), the
Department of the Treasury, included in any Executive Orders or any other
similar lists from any Governmental Authority, foreign or national; (ii) not use
or permit the use of the proceeds of the Debenture to violate any of the foreign
asset control regulations of OFAC or any enabling statute or Executive Order
relating thereto, or any other similar national or foreign governmental
regulations; and (iii) comply with all applicable Lender Secrecy Act laws and
regulations, as amended. As required by federal law and Buyer's policies and
practices, Buyer may need to obtain, verify and record certain customer
identification information and documentation in connection with opening or
maintaining accounts or establishing or continuing to provide services.

 

 11.17 Termination. Upon payment in full of all outstanding Debenture and Fee
Debentures purchased hereunder, together with all other charges, fees and costs
due and payable under this Agreement or under any of the Transaction Documents,
the Company shall have the right to terminate this Agreement upon written notice
to the Buyer.

 

 34

 

 

11.18 Gender and Use of Singular and Plural. All pronouns shall be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the identity of
the party or parties or their personal representatives, successors and assigns
may require.

 

11.19 Execution. This Agreement may be executed in one or more counterparts, all
of which taken together shall be deemed and considered one and the same
Agreement, and same shall become effective when counterparts have been signed by
each party and each party has delivered its signed counterpart to the other
party. In the event that any signature is delivered by facsimile transmission or
by e-mail delivery of a ".pdf' format file or other similar format file, such
signature shall be deemed an original for all purposes and shall create a valid
and binding obligation of the party executing same with the same force and
effect as if such facsimile or ".pdf' signature page was an original thereof.

 

11.20 Headings. The article and section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of the Agreement.

 

11.21 Further Assurances. The Company will execute and deliver such further
instruments and do such further acts and things as may be reasonably required by
Buyer to carry out the intent and purposes of this Agreement.

 

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

 

[signature pages follow]

 

 35

 

  

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date and year set forth above.

 

COMPANY:

ARTEC GLOBAL MEDIA, INC.

 

   By:

 

Name:

Caleb W. Wickman

 

Title:

President

 

STATE OF ____________________ )

                      ____________________) SS.

COUNTY OF ___________________)

 

The undersigned, a Notary Public in and for the said County, in the State
aforesaid, DO HEREBY CERTIFY that Caleb W. Wickman, President of Artec Global
Media, Inc., a Nevada corporation, who is personally known to me to be the same
person whose name is subscribed to the foregoing, appeared before me this day in
person and acknowledged that he/she signed and delivered the said instrument as
his/her own free and voluntary act and as the free and voluntary act of said
corporation, for the uses and purposes therein set forth.

 

GIVEN under my hand and notarial seal this _______ day of _________, 20___.

 

 

 

 

 

Notary Public

 

 

 

 

My Commission Expires:

 

 

 

 

 

 

 

 

 36

 

   

BUYER:

TCA GLOBAL CREDIT MASTER FUND, LP

 

   By:TCA Global Credit Master Fund GP, Ltd.

 

Its:General Partner

 

 

By:Name:Robert PressTitle:Managing Director

 

 37

 

 

EXHIBIT A

 

 

FORM OF DEBENTURE

 

 

 

 38

 

 

EXHIBIT B

 

 

FORM OF SECURITY AGREEMENT

 

 

 

 39

 

 

EXHIBIT C

 

FORM OF COMPLIANCE CERTIFICATE

 

  

 40

 

 

EXHIBIT D

 

 

FORM OF FEE DEBENTURE

 

 

 41

 

  

EXHIBIT E

 

 

FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTION LETTER

   

 42

 

 

EXHIBIT F

 

 

FORM OF USE OF PROCEEDS CONFIRMATION

  

 43

 

 

EXHIBIT G

 

 

FORM OF VALIDITY GUARANTY

  

 44

 

 

SCHEDULE 6.1

 

SUBSIDIARIES

 

None

 

 45

 

 

SCHEDULE 6.4

  

Capitalization

 

(i)

 

Secured Convertible Promissory Note (in the original principal amount of
$225,000.00), dated January 7, 2015, issued by Artec Global Media, Inc.
("Artec") to Typenex Co-Investment, LLC ("Typenex"), provides Typenex with
certain rights, as set forth therein, to convert the outstanding balance of this
Secured Convertible Promissory Note into Common Stock of Artec

 

Warrant #1 to Purchase Shares of Common Stock, issued by Artec to Typenex on
January 7, 2015, provides Typenex with certain rights to purchase Common Stock
of Artec

 

Warrant #2 to Purchase Shares of Common Stock, issued by Artec to Typenex on
January 7, 2015, provides Typenex with certain rights to purchase Common Stock
of Artec

 

Warrant #3 to Purchase Shares of Common Stock, issued by Artec to Typenex on
January 7, 2015, provides Typenex with certain rights to purchase Common Stock
of Artec

 

Warrant #4 to Purchase Shares of Common Stock, issued by Artec to Typenex on
January 7, 2015, provides Typenex with certain rights to purchase Common Stock
of Artec

 

Warrant #5 to Purchase Shares of Common Stock, issued by Artec to Typenex on
January 7, 2015, provides Typenex with certain rights to purchase Common Stock
of Artec

 

Warrant #6 to Purchase Shares of Common Stock, issued by Artec to Typenex on
January 7, 2015, provides Typenex with certain rights to purchase Common Stock
of Artec

 

Convertible Note (in the original principal amount of $250,000.00), dated
December 4, 2014, issued by Artec to Vista Capital Investments, LLC ("Vista"),
provides Vista with certain rights, as set forth therein, to convert the
outstanding balance of this Convertible Note into Common Stock of Artec

 

Convertible Redeemable Note (in the original principal amount of $52,500.00),
dated October 30, 2014, issued by Artec to Adar Bays, LLC ("Adar"), provides
Adar with certain rights, as set forth therein, to convert the outstanding
balance of this Convertible Redeemable Note into Common Stock of Artec

 

 46

 

  

Convertible Redeemable Note (in the original principal amount of $55,125.00),
dated October 30, 2014, issued by Artec to LG Capital Funding, LLC ("LG"),
provides LG with certain rights, as set forth therein, to convert the
outstanding balance of this Convertible Redeemable Note into Common Stock of
Artec    

Convertible Redeemable Note (in the original principal amount of $55,125.00),
dated January 30, 2015, issued by Artec to LG, provides LG with certain rights,
as set forth therein, to convert the outstanding balance of this Convertible
Redeemable Note into Common Stock of Artec

 

Convertible Note (in the original principal amount of $250,000.00), dated
November 12, 2014, issued by Artec to JMJ Financial ("JMJ"), provides JMJ with
certain rights, as set forth therein, to convert the outstanding balance of this
Convertible Note into Common Stock of Artec

 

Convertible Promissory Note (in the original principal amount of $69,000.00),
dated June 8, 2015, issued by Artec to Vis Vires Group, Inc. ("Vis Vires"),
provides Vis Vires with certain rights, as set forth therein, to convert the
outstanding balance of this Convertible Promissory Note into Common Stock of
Artec

 

(ii)

 

Secured Convertible Promissory Note (in the original principal amount of
$225,000.00), dated January 7, 2015, issued by Artec to Typenex

 

Convertible Note (in the original principal amount of $250,000.00), dated
December 4, 2014, issued by Artec to Vista

 

Convertible Redeemable Note (in the original principal amount of $52,500.00),
dated October 30, 2014, issued by Artec to Adar

 

Convertible Redeemable Note (in the original principal amount of $55,125.00),
dated October 30, 2014, issued by Artec to LG

 

Convertible Redeemable Note (in the original principal amount of $55,125.00),
dated January 30, 2015, issued by Artec to LG

 

Convertible Note (in the original principal amount of $250,000.00), dated
November 12, 2014, issued by Artec to JMJ

 

Convertible Promissory Note (in the original principal amount of $69,000.00),
dated June 8, 2015, issued by Artec to Vis Vires

 

 47

 

  

(iv)

 

Each of the following notes contains a piggyback registration rights provision
that applies with respect to the shares issuable upon conversion of such note:

 

Convertible Note (in the original principal amount of $250,000.00), dated
December 4, 2014, issued by Artec to Vista (see Section 5 of the Convertible
Note)

 

Convertible Note (in the original principal amount of $250,000.00), dated
November 12, 2014, issued by Artec to JMJ (see Section 5 of the Convertible
Note)

 

Each of the following agreements contain a provision requiring Artec to promptly
secure the listing of the shares issuable upon conversion of the related note(s)
upon each national securities exchange or automated quotation system, if any,
upon which shares of common stock of Artec are then listed:

 

Securities Purchase Agreement, dated as of October 30, 2014, between Artec and
Adar (see Section 4.b of the Securities Purchase Agreement)

 

Securities Purchase Agreement, dated as of October 30, 2014, between Artec and
LG (see Section 4.b. of the Securities Purchase Agreement)

 

Securities Purchase Agreement, dated as of June 8, 2015, between Artec and Vis
Vires (see Section 4.h)    

 

(vi)

 

The following instruments contain anti-dilution or similar provisions that may
be triggered by the consummation of transactions contemplated by this Agreement
or related agreements:

 

Secured Convertible Promissory Note (in the original principal amount of
$225,000.00), dated January 7, 2015, issued by Artec to Typenex

 

Warrant #1 to Purchase Shares of Common Stock, issued by Artec to Typenex on
January 7, 2015

 

Warrant #2 to Purchase Shares of Common Stock, issued by Artec to Typenex on
January 7, 2015

 

Warrant #3 to Purchase Shares of Common Stock, issued by Artec to Typenex on
January 7, 2015

 

 48

 

  

Warrant #4 to Purchase Shares of Common Stock, issued by Artec to Typenex on
January 7, 2015

 

Warrant #5 to Purchase Shares of Common Stock, issued by Artec to Typenex on
January 7, 2015

 

Warrant #6 to Purchase Shares of Common Stock, issued by Artec to Typenex on
January 7, 2015 

 

Convertible Note (in the original principal amount of $250,000.00), dated
December 4, 2014, issued by Artec to Vista

 

Convertible Promissory Note (in the original principal amount of $69,000.00),
dated June 8, 2015, issued by Artec to Vis Vires

 

(vii)

 

The following instruments contain redemption provisions:

 

Convertible Redeemable Note (in the original principal amount of $52,500.00),
dated October 30, 2014, issued by Artec to Adar

 

Convertible Redeemable Note (in the original principal amount of $55,125.00),
dated October 30, 2014, issued by Artec to LG

 

Convertible Redeemable Note (in the original principal amount of $55,125.00),
dated January 30, 2015, issued by Artec to LG

 

In addition, each note referenced in this schedule contains provisions that
provide for acceleration upon an event of default.

 

 49

 

 

SCHEDULE 6.13

 

REAL PROPERTY

 

None

 

 50

 

 

SCHEDULE 6.22

 

BANK ACCOUNTS; BUSINESS LOCATIONS

 

Name of Bank: Bank of America

 

Name of Account: Artec Global Media, Inc.

 

Routing Number: 026009593

 

Account Number: 3250 3552 3596

 

Authorized Signatories: A. Stone Douglass and Caleb W. Wickman

 

Business Location(s):

 

249 South Highway 101, #324

Solana Beach, CA 92075

 

  

51

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