Exhibit
10.1


SECURITIES
PURCHASE AGREEMENT


 


This
SECURITIES PURCHASE AGREEMENT
(the “Agreement”)
is dated as of June 30, 2015 and effective
as of October 14, 2015 (the “Effective
Date”), by
and between PERVASIP
CORP., a corporation incorporated under the laws of the State of New York
(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, up to
Five Million and No/100 United States Dollars ($5,000,000) of senior secured convertible,
redeemable debentures (in the form attached hereto as Exhibit A, the “Debenture(s)”),
of which Five Hundred Thousand and No/100 United States Dollars ($500,000) shall be purchased on the date hereof (the “First
Closing”) for the total purchase price
of Five Hundred Thousand and No/100 United States Dollars ($500,000) (the “Purchase Price”),
and up to Four Million Five Hundred Thousand and No/100 United States Dollars ($4,500,000) may be purchased in additional closings
as set forth in Section 4.2
below (the “Additional Closings”) (each of the First Closing
and the Additional Closings are sometimes hereinafter individually referred to as
a “Closing” and
collectively as the “Closings”), all subject to the terms and
provisions hereinafter set forth; 


 


WHEREAS,
the Company, TelcoSoftware.com Corp., a corporation incorporated under the laws of the State of Delaware, Plaid Canary Corporation,
a corporation incorporated under the laws of the State of Delaware, AVI Holding Corp., a corporation incorporated under the laws
of the State of Texas, Canalytix LLC, a limited liability company organized and existing under the laws of the State of Delaware,
and Grow Big Supply, LLC, a limited liability company organized and existing under the laws of the State of Colorado (together,
jointly and severally, the “Guarantors), have each agreed to secure
all of the Company’s Obligations to Buyer under the Debentures, 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 and the Guarantor,
whether now existing or hereafter
acquired, pursuant to
those certain Security Agreements, each dated as of the date hereof
(in the forms attached hereto as Exhibit B, the “Security
Agreements”);


 


WHEREAS,
the Guarantors will receive a substantial benefit from the Buyer’s purchase of the Debenture and, as such, have agreed to
guarantee all of the Obligations of the Buyer under the Debentures, this Agreement and all other Transactions Documents pursuant
to those certain Guarantee Agreements, each dated as of the date hereof (in the form attached hereto as Exhibit C,
the “Guarantee Agreements”); and


 


WHEREAS,
as security for the payment and performance of any and all of the Company’s Obligations to Buyer under the Debentures, this
Agreement and all other Transaction Agreements, the Company has agreed to execute those certain Pledge Agreements in favor of Buyer,
whereby the Company shall pledge to the Buyer all of its right, title and interest in and to, and provide a first priority lien
and security interest on, certain issued and outstanding shares of common stock or units of membership interests of the Guarantors,
as applicable, each dated as of the date hereof (in the form attached hereto as Exhibit D,
the “Pledge Agreements”).


 


NOW,
THEREFORE, in consideration of the premises 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.


 


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                  
“Collateral” shall have
the meaning given to it in the Security Agreements.


 


2.6                  
“Common Stock” means the
common stock of the Company, par value $0.00001 per share.


 


2.7                  
“Compliance Certificate”
means that certain compliance certificate executed by an officer of the Company in the form attached hereto as Exhibit
E.


 


2.8                  
“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.


 


2.9                   
“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.


 


2.10               
“Debenture(s)” shall have
the meaning given to it in the preamble hereof.


 


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                
“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.


 


2.15                 
“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.


 


2.16                
“Guarantee Agreements”
shall have the meaning given to it in the recitals hereof.


 


2.17                
“Guarantors” shall have
the meaning given to it in the recitals hereof.


 


2.18                
“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.


 


2.19                
“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 F. 


 


2.20                
“Judgment” means any order,
writ, injunction, fine, citation, award, decree, or any other judgment of any nature
whatsoever of any Governmental Authority.


 


2.21                
“Law” means any provision
of any law, statute, ordinance, code, constitution, charter, treaty, rule or regulation
of any Governmental Authority.


 


		2.22	“Leases”
means all leases for real or personal property.



 


2.23                 
“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 Agreements); (B) the legality, validity, binding effect
or enforceability against the Company and the Guarantors 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 Advisory Fee Shares or other 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.


 


2.24               
“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.


 


2.25               
“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 Debentures or any other Transaction Documents,
or any other agreement between the Company, the Guarantors and the Buyer, as such obligations may be amended, supplemented, converted,
extended or modified from time to time.


 


2.26                
“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).


 


2.27               
“OTC Markets” means the
OTC Markets Group, Inc.


 


2.28               
“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.


 


2.29                
“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.


 


2.30                
“Pledge Agreements” shall
have the meaning given to it in the recitals hereof.


 


2.31                
“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.


 


2.32                
“Proceeding” means
any demand, claim, suit, action, litigation, investigation,
audit, study, arbitration, administrative hearing, or any other proceeding of any nature
whatsoever.


 


2.33                
“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.


 


2.34               
“Rule 144” shall mean Rule
144 or Rule 144A promulgated under the Securities Act (or a successor rule thereto.


 


2.35               
“SEC” shall mean the United
States Securities and Exchange Commission. 


 


2.36               
“Securities” means,
collectively, the Debentures, the Advisory Fee Shares (as defined herein), and any additional shares of Common Stock issuable in
connection with a conversion of the Debentures, or the terms
of this Agreement or any other
Transaction Documents..


 


2.37               
“Security Agreements” shall
have the meaning given to it in the recitals hereof.


 


2.38                
“Subordination Agreement(s)”
shall mean the Subordination Agreements executed by each of the Subordinated Creditors, the Company and the Guarantors in favor
of the Buyer, in the form attached hereto as Exhibit G.


 


2.39                
“Subordinated Creditor(s)”
shall mean Flux Carbon Starter Fund LLC, a Delaware limited liability company, and EXO Opportunity Fund LLC, a Delaware limited
liability company, respectively.


 


2.40                
“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.


 


2.41               
“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.


 


2.42               
“Transaction Documents”
means this Agreement any and all documents or instruments executed or to be executed by the Company and/or the Guarantors in connection
with this Agreement, including the Debentures, the Control Agreements, the Security Agreements, the Guarantee Agreements, the Use
of Proceeds Confirmation, the Irrevocable Transfer Agent Instructions, the Pledge Agreements, the Subordination Agerements, and
the Validity Certificates, together with all modifications, amendments, extensions,
future advances, renewals, and substitutions thereof.


 


2.43               
“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
H.


 


2.44               
“Validity Certificate(s)”
shall mean those certain validity certificates 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 I.


 


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
DEBENTURES


 


4.1                   
Purchase and Sale of Debentures.
Subject to the satisfaction (or waiver) of the terms and conditions of this Agreement,
Buyer agrees to purchase, at each Closing,
and Company agrees to sell and issue to Buyer, at each Closing, Debentures in the amount
of the Purchase Price applicable to each Closing as more specifically set
forth below.


 


4.2                   
Closing Dates. The First Closing of
the purchase and sale of the Debentures shall be for Five Hundred Thousand and No/100 United States Dollars ($500,000),
and shall take place on the Effective Date, subject to satisfaction of the conditions to the First Closing set forth in this Agreement
(the “First Closing Date”). Additional
Closings of the purchase and sale of the Debentures shall be at such times and
for such amounts as determined in accordance with Section 4.4 below, subject
to satisfaction of the conditions to the Additional Closings set
forth in this Agreement (the “Additional Closing Dates”)
(collectively referred to as the “Closing Dates”).
The Closings shall occur on the respective Closing Dates 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 each Closing Date: (i) the Buyer
shall deliver to the Company, to a Company account designated by the Company, the aggregate proceeds for the Debentures to be issued
and sold to Buyer at each such Closing, minus the fees to be paid directly from the
proceeds of each such 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 each Closing, duly executed on behalf of the
Company, together with any other documents required to be delivered pursuant to this
Agreement.


 


4.4Additional
Closings. At any time after the First Closing but prior to the maturity date of any of the Debentures
issued in the First Closing, the
Company may request that Buyer purchase additional Debentures hereunder in Additional
Closings by written notice to Buyer, and, subject to the conditions below, Buyer shall purchase
such additional Debentures in such amounts and at
such times as Buyer and the Company may mutually agree, so long as the following
conditions have been satisfied, in Buyer’s sole and absolute discretion: (i)
no default or “Event of Default” (as such term is defined in any of the
Transaction Documents) shall have occurred or be continuing under this Agreement or
any other Transaction Documents, and no event shall have occurred that, with the passage of time, the giving of notice,
or both, would constitute a default or an Event of Default hereunder or thereunder;
and (ii) any additional purchase of Debentures
beyond the purchase of Debentures at the First Closing shall have been approved by
Buyer, which approval may be given or withheld
in Buyer’s sole and absolute discretion.


 


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.


 


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 as of the date of each Closing hereunder, 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. The Guarantors
have no Subsidiaries. 


 


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.


 


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.


 


6.4                   
Capitalization. The authorized capital
stock of the Company consists of eight billion nine hundred seventy-eight million nine hundred ninety-nine thousand nine
hundred ninety (8,978,999,990) shares of Common Stock and twenty-one million ten (21,000,010) shares of preferred
stock, par value $0.00001 per share (the “Preferred Stock”),
of which three billion five hundred sixty-three million one hundred six thousand two hundred nine (3,563,106,209) shares of
Common Stock are issued and outstanding as of the date hereof, and twenty million
six hundred thousand sixty-one (20,600,061) shares of Preferred Stock 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 on the Pink Sheets under the trading symbol “PVSP”. 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 disclosed in the “Public
Documents” (as hereinafter defined) 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
Certificate 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.


 


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 audited consolidated Balance Sheet and Statement of Income for fiscal year ending November 30, 2014,
and an unaudited consolidated Balance Sheet and Statement of Income as of February 28, 2015 and May 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 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
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, 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 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”). Except for an amendment to a Current Report
on Form 8-K, 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 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. 


 


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, except as disclosed to the
Buyer in writing prior to the date hereof: (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; 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
and the Guarantors do not own any Real Property. 


 


(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.


 


6.18               
Employee Benefit Plans. Except as disclosed
in the Public Documents 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 Benefit Plans”). 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 and each Guarantor
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
and each Guarantor 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.


 


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 and each Guarantor 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 and Guarantors have no office or place of business other than as identified on
Schedule 6.22 and the Company’s
and each Guarantor’s principal places of business and chief executive offices are indicated on Schedule 6.22.
All books and records of the Company, the Guarantors and other material Assets of the
Company and the Guarantors 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.


 


6.26                
Internal Accounting Controls. Except
as disclosed in the Company’s Public Documents, 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 and each Guarantor 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
and each Guarantor 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 and each Guarantor’s decision to enter
into this Agreement has been based solely on the independent evaluation by the
Company, each Guarantor and its representatives.


 


6.28               
Seniority. No indebtedness or other
equity or security of the Company and the Guarantors is senior to the 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. Except for Meyers Associates,
L.P., there is no Person acting on behalf of the Company and the Guarantors 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.


 


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 and the Guarantors 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 and the Guarantors, 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 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 Debentures;
(ii) Obligations disclosed in the financial statements provided to the Buyer as of the Effective Date; and (iii)
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 Debentures.


 


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


 


(c)                  
Investments.So long as Buyer owns,
legally or beneficially, any of the 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; and (iv) capital expenditures first approved
by the Buyer in writing, which approval shall not
be unreasonably withheld.


 


(d)                  
Issuances. So long as Buyer owns, legally
or beneficially, any of the 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.


 


(e)                  
Transfer; Merger. So long as Buyer
owns, legally or beneficially, any of the Debentures,
the Company shall not, either directly or indirectly, permit or enter into any transaction involving
a “Change in 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 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; (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 Debentures, 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 Debentures 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.


 


(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 Certificate of Incorporation,
Bylaws or other 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 and the
Guarantors 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.


 


(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 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 Debentures to the extent not paid by the
Company.


 


(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 First 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; 


 


(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.


 


(k)                  
Matters With Respect to Securities.


 


(i)              
Issuance of Conversion Shares.The
parties hereto acknowledge that pursuant to the terms of the Debentures, Buyer has the right, at its discretion following an Event
of Default, to convert amounts due under the Debentures into Common Stock in accordance with the
terms of the 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 Debentures (the “Conversion
Shares”) to Buyer in connection with the exercise by Buyer of any of
its conversion rights under the 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 Debentures) requesting the issuance of the Conversion Shares
then issuable in accordance with the terms of the 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 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.


 


(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 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, except for the Company confirming the amount of shares to be issued by the Transfer Agent, 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)


 


(l)                   
Continued Due Diligence/Field Audits.
The Company acknowledges that during the
term of this Agreement, Buyer and its agents and representatives undertake ongoing and continuing due diligence reviews of the
Company and its business and operations.
Such ongoing due diligence reviews may include, and the Company does hereby agree to
allow Buyer, to conduct site visits and
field examinations of the office locations
of the Company, and the Assets and records of each of them,
the results of which must be satisfactory to Buyer
in Buyer’s sole and absolute
discretion. In this regard, in order to cover Buyer’s expenses of the ongoing
due diligence reviews and any site visits or field examinations which Buyer may undertake
from time to time while this Agreement is in effect, the Company shall pay to Buyer, within five (5) Business Days after receipt
of an invoice or demand therefor from Buyer, a
fee of up to $10,000 per year (based on four (4) expected filed audits and ongoing due diligence of $2,500 per visit or
audit) to cover such ongoing
expenses. Failure to pay such fee
as and when required shall be deemed an Event of
Default under this Agreement and all other Transaction Documents. The foregoing
notwithstanding, from and after the occurrence of an Event of Default or any event which
with notice, lapse of time or both, would become an Event of Default, Buyer may conduct
site visits, field examinations and other ongoing reviews of
the Company’s records, Assets and operations at any
time, in its sole discretion, without any limitations in terms of number of
site visits or examinations and without being limited to the fee hereby contemplated,
all at the sole expense of the Company.


 


(m)                
Control Agreement. Within fourteen
(14) days from the First Closing Date, the Company and each Guarantor shall deliver a Control Agreement(s) as required by the Buyer
in a form and substance acceptable to the Buyer in its sole and absolute discretion.


 


(n)                  
Cancelation of Pledged Shares. Within
fourteen (14) days from the First Closing Date, the Company shall deliver evidence acceptable to the Buyer in its sole and absolute
discretion of the cancelation of the shares of common stock of TelcoSoftware.com Corp. and AVI Holding Corp. (formerly known as
Airline Ventures, Inc.) owned by the Company and previously pledged to Laurus Master Fund, Ltd. and/or any of its related parties.


 


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 one hundred five (105) 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
(a going concern exception is allowable);


 


(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
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 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 the Effective
Date (the “Income Projections”). In addition, on the
tenth (10th) day 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. On the
tenth (10th) day 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 Debentures 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. The Company and each Guarantor
shall provide Buyer view only access to any and all accounts listed on the attached Schedule 6.22.


 


(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.


 


(v)                 
Aged Accounts/Payables Schedules. The
Company shall, on the tenth (10th) day 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 CEO or
CFO of the
Company. The Company shall,
on the tenth
(10th) day 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 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.


 


(d)                  
Failure to Provide Reports. So long
as Buyer owns, legally or beneficially, any of the Securities, if the Company shall
fail to timely provide any reports required to be provided by the Company and/or Guarantors to the Buyer under this Agreement or
any other Transaction Document, in addition to all other rights and remedies that Buyer may have under this Agreement and the other
Transaction Documents, Buyer shall have the right to require, at each instance of any such failure, that the Company redeem two
and one half percent (2.5%) of the aggregate amount of the Advisory Fee then outstanding, which cash redemption payment shall be
due and payable by wire transfer of Dollars to an account designated by Buyer within five (5) Business Days from the date the Buyer
delivers such redemption notice to the Company. 


 


7.4                  
Fees and Expenses.


 


(a)                  
Transaction Fees. The
Company agrees to pay to Buyer a transaction
advisory fee equal to four percent (4%) of the amount
of the Debentures purchased by Buyer at
the First Closing, which fee shall be due and payable on the Effective Date
and withheld from the
gross purchase price paid by Buyer for the Debentures. In the event of any Additional Closings, the Company shall pay
to Buyer a transaction advisory fee equal to two percent (2%)
of the amount of the Debentures purchased by Buyer at any such Additional Closings,
which fee shall be due and payable
upon such Additional Closing and withheld from the gross purchase price paid
by Buyer for the Debentures at such Additional Closing.


 


(b)                 
Due Diligence Fees.
The Company agrees to pay to the Buyer a due diligence 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.


 


(c)                  
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.


 


(d)                 
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.


 


7.5              
Advisory Fee.


 


(i)             
Share Issuance. In consideration of
advisory services provided by Buyer to the Company prior to the Effective Date, the
Company shall pay to the Buyer a fee by issuing to Buyer that number of shares of the Company’s Series I Preferred Stock
(the “Series I Preferred”) equal to, when converted into Common
Stock, a dollar amount of One Hundred Seventy-Five Thousand and No/100 United States Dollars (US$175,000) (the “Share
Value”). It is agreed that the number of shares of Series I Preferred issuable
to Buyer under this Section 7.5 shall be 17,500 (including any Common Stock
into which the Series I Preferred is convertible, the “Advisory Fee Shares”).
The Company shall issue a certificate representing the Series I Preferred issuable to the Buyer immediately upon the Company’s
execution of this Agreement, and shall deliver such certificates to Buyer within three (3) Business Days from the First Closing
Date. Upon conversion of the share of Series I Preferred, the Buyer shall never be in possession of an amount of Common Stock greater
than 4.99% of the issued and outstanding Common Stock of the Company provided, however that this ownership restriction described
in this Section may be waived by the Buyer, in whole or in part, upon 61 days’ prior written notice. In the event such certificates
representing the Series I Preferred issuable hereunder shall not be delivered to the Buyer within said three (3) Business Day period,
same shall be an immediate default under this Agreement and the other Transaction Documents. The Series I Preferred, when issued,
shall be deemed to be validly issued, fully paid, and non-assessable shares of the Company’s Series I Preferred. The Advisory
Fee Shares shall be deemed fully earned as of the First Closing Date, regardless of the amount or number of Debentures purchased
hereunder.


 


(ii)           
Adjustments. It is the intention of
the Company and Buyer that the Buyer shall generate net proceeds from the sale of the Advisory Fee Shares equal to the Share Value.
The Buyer shall have the right to sell the Advisory Fee Shares in the Principal Trading Market or otherwise, at any time in accordance
with applicable securities laws. At any time the Buyer may elect, the Buyer may deliver to the Company a reconciliation statement
showing the net proceeds actually received by the Buyer from the sale of the Advisory Fee Shares (the “Sale Reconciliation”).
If, as of the date of the delivery by Buyer of the Sale Reconciliation, the Buyer has not realized net proceeds from the sale of
such Advisory Fee Shares equal to at least the Share Value, as shown on the Sale Reconciliation, then the Company shall immediately
take all required action necessary or required in order to cause the issuance of additional shares of Common Stock or Series I
Preferred to the Buyer in an amount sufficient such that, when sold and the net proceeds thereof are added to the net proceeds
from the sale of any of the previously issued and sold Advisory Fee Shares, the Buyer shall have received total net funds equal
to the Share Value. If additional shares of Common Stock or Series I Preferred are issued pursuant to the immediately preceding
sentence, and after the sale of such additional issued shares of Common Stock or Series I Preferred, the Buyer still has not received
net proceeds equal to at least the Share Value, then the Company shall again be required to immediately take all required action
necessary or required in order to cause the issuance of additional shares of Common Stock or Series I Preferred to the Buyer as
contemplated above, and such additional issuances shall continue until the Buyer has received net proceeds from the sale of such
Common Stock or Series I Preferred equal to the Share Value. In the event the Buyer receives net proceeds from the sale of Advisory
Fee Shares equal to the Share Value, and the Buyer still has Advisory Fee Shares remaining to be sold, the Buyer shall return all
such remaining Advisory Fee Shares to the Company. In the event additional Common Stock or Series I Preferred is required to be
issued as outlined above, the Company shall issue or shall instruct its Transfer Agent to issue, as applicable, certificates representing
such additional shares of Common Stock or Series I Preferred to the Buyer immediately subsequent to the Buyer’s notification
to the Company that additional shares of Common Stock or Series I Preferred are issuable hereunder, and the Company shall in any
event deliver or cause its Transfer Agent to deliver such certificates to Buyer, as applicable, within three (3) Business Days
following the date Buyer notifies the Company that additional shares of Common Stock or Series I Preferred are to be issued hereunder.
In the event such certificates representing such additional shares of Common Stock or Series I Preferred issuable hereunder shall
not be delivered to the Buyer within said three (3) Business Day period, same shall be an immediate default under this Agreement
and the Transaction Documents. Notwithstanding anything contained in this Section 7.5 to the contrary, the Company shall have the
right to redeem any Advisory Fee Shares then in the Buyer’s possession for an amount payable by the Company to Buyer in cash
equal to the Share Value, less any net cash proceeds received by the Buyer from any previous sales of Advisory Fee Shares. Upon
Buyer’s receipt of such cash payment in accordance with the immediately preceding sentence, the Buyer shall return any then
remaining Advisory Fee Shares in its possession back to the Company and otherwise undertake any required actions reasonably requested
by Company to have such then remaining Advisory Fee Shares returned to Company.


 


(iii)         
Mandatory Redemption. Notwithstanding
anything contained in this Agreement to the contrary, in the event the Buyer has not realized net proceeds from the sale of Advisory
Fee Shares equal to at least the Share Value by the earlier of an Event of Default or the twelve month anniversary of the Closing
Date, then at any time thereafter, the Buyer shall have the right, upon written notice to the Company, to require that the Company
redeem all Advisory Fee Shares then in Buyer’s possession for cash equal to the Share Value, less any cash proceeds received
by the Buyer from any previous sales of Advisory Fee Shares, if any. In the event such redemption notice is given by the Buyer,
the Company shall redeem the then remaining Advisory Fee Shares in Buyer’s possession for an amount of Dollars equal to the
Share Value, less any cash proceeds received by the Buyer from any previous sales of Advisory Fee Shares, if any, payable by wire
transfer to an account designated by Buyer within five (5) Business Days from the date the Buyer delivers such redemption notice
to the Company.


 


7.6              
Share Reserve. Beginning on the ninetieth
(90th) day following the First Closing Date, the Company shall take all action necessary to at all times have authorized,
and reserved for the purpose of issuance, three (3) 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 voting control 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 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 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.


 


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 Closings
is subject to the satisfaction, at or before the respective Closing Dates, 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 the date when made and as of the Closing Dates 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
Dates.


 


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 Debentures contemplated hereby.


 


ARTICLE
IX


CONDITIONS
PRECEDENT TO THE BUYER’S OBLIGATIONS TO PURCHASE


 


The
obligation of the Buyer hereunder to purchase the Debentures at the Closings is subject to
the satisfaction, at or before each applicable 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:


 


9.1                  
First Closing. The obligation of the
Buyer hereunder to purchase the Debentures at the First Closing is subject to
the satisfaction, at or before the First 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, each Guarantor and/or the Chief Executive Officer (as applicable) shall
have executed and delivered the Transaction Documents applicable to the First Closing 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 First Closing Date as though made at that time (except for representations and warranties that speak as of
a specific date) and the Company and each Guarantor 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 and each
Guarantor at or prior to the First Closing Date.


 


(c)                  
The Buyer shall have issued an irrevocable
issuance instruction letter and board resolution, authorizing the issuance of the Advisory
Fee Shares and irrevocably directing its Transfer Agent to issue and deliver the Advisory
Fee Shares to Buyer or its designee.


 


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


 


(e)                  
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.


 


(f)                   
The Company and each Guarantor shall have executed and
delivered to Buyer a closing certificate, certified as true, complete and correct by an officer of the Company or Guarantor,
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 or Guarantor from the secretary of state
(or comparable office) from the jurisdiction in which
the Company is formed; (ii) the Company’s or Guarantor’s Organizational
Documents; (iii) copies of the resolutions
of the board of directors of the Company or Guarantor as adopted by the Company’s or Guarantor’s board of directors,
in a form acceptable to Buyer; and (iv)
resolution of the Guarantor’s shareholders, 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.


 


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


 


(h)
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 and each Guarantor, dated such a date as is reasonably acceptable to Buyer, listing all effective
financing statements which name the Company and each Guarantor, under their present name and any previous names, as debtors, together
with copies of such financing statements.


 


(i)
The Company shall have delivered to the Buyer the filed Certificate of Designation of Series I Preferred Stock and the original
certificate evidencing the issuance of such shares to the Buyer.


 


(j)
The Company and each Guarantor 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.


 


9.2                   
Additional Closing. Provided the Buyer
is to purchase additional Debentures in accordance with Section 4.4
at an Additional Closing, the obligation of the
Buyer hereunder to accept and purchase the Debentures at any Additional Closing
is subject to the satisfaction, at or before the Additional
Closing Date, of each of the following conditions:


 


(a)                   
The Company and each Guarantor shall have executed the Transaction Documents applicable
to the Additional Closing 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 Additional 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 Additional Closing Date.


 


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


 


(d)                 
No default or Event of Default shall have occurred and
be continuing under this Agreement or any other Transaction Documents, and no
event shall have occurred that, with the
passage of time, the giving of notice, or both, would
constitute a default or an Event of Default under this Agreement or any other
Transaction Documents.


 


(e)                  
The Company and each Guarantor 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


 


10.1Company’s
and the Guarantors’ 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 and
the Guarantors’ other obligations under this Agreement, the Company and each
Guarantor 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 and each Guarantor 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 and each Guarantor 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 and the Guarantors 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 and the Guarantors 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 Debentures,
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 and the Guarantors may be
unenforceable for any reason, the Company and the Guarantors shall make the maximum
contribution to the payment and satisfaction of each of
the Claims covered hereby, which is permissible under applicable Law.


 


ARTICLE
XI


MISCELLANEOUS


 


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


 





	If to the Company:	Pervasip Corp.
	 	430 North Street
	 	White Plains, NY 10605
	 	Attention:  Paul H. Riss
	 	E-Mail: paul@growbigsupply.com
	 	 
	With a copy to:	Kevin Kreisler, Esq.
	(which shall not constitute notice)	5950 Shiloh Road East, Suite N
	 	Alpharetta, GA 33305
	 	E-Mail: kkreisler@gmail.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:	Lucosky Brookman LLP
	(which shall not constitute notice)	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.


 


11.2             
Obligations Absolute.
None of the following shall affect the Obligations of the
Company and the Guarantors 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 and the Guarantors);


 


(c)                   
release, extension, renewal, modification or substitution by Buyer of the 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 and the Guarantors 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, the Guarantors 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, the Guarantors and
Buyer. No promises, either expressed or implied, exist between the
Company, the Guarantors 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 or the Guarantors
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.


 


11.5             
WAIVER OF JURY TRIAL. BUYER, THE COMPANY
AND THE GUARANTORS, 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 DEBENTURES.


 


11.6             
MANDATORY FORUM SELECTION. TO
INDUCE BUYER TO PURCHASE THE DEBENTURES, THE COMPANY AND GUARANTORS 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 BROWARD 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 AND GUARANTORS 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 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
Debentures. The Company and the Guarantors 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, the Guarantors and the Company and their respective legal representatives, successors
and permitted assigns. All references herein to a Company or the Guarantor shall be deemed to include any successors, whether immediate
or remote. In the case of a joint venture or partnership, the term “Company”,
or “Guarantor” 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.


 


11.9              
Binding Effect. This Agreement shall
become effective upon execution by the Company, the Guarantors 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 and the Guarantors’
Representations. All covenants,
agreements, representations and warranties made by the Company and the Guarantors 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 Debentures, and shall be deemed to be continuing
representations and warranties until such time as the
Company and the Guarantors 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 and the Guarantors 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.


 


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 and the Guarantors 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 and the Guarantors with Buyer and any and all Claims that the Company and the Guarantors do 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 Debentures 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 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,
provided, however, that if such termination occurs within the ninety (90) days after
the First Closing Date, then the Company shall pay to
Buyer as liquidated damages and compensation for the costs of being prepared
to make funds available hereunder, an amount
equal to five percent (5%) of the amount of Debentures purchased hereunder. The parties
agree that the amount payable to pursuant to this Section 11.17 is a reasonable
calculation of Buyer’s lost profits in view of the difficulties and impracticality
of determining actual damages resulting from an early termination of this Agreement.


 


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 and the Guarantors 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]






     

     

    





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


 


COMPANY:


 


PERVASIP CORP.


 


 


 


By: /s/ Paul H. Riss


Name: Paul H. Riss


Title: Chief Executive Officer


 


 


STATE OF ________________)


) SS.


COUNTY OF ______________)


 


 


The undersigned, a Notary
Public in and for the said County, in the State aforesaid, DO HEREBY CERTIFY that Paul H. Riss, the Chief Executive Officer of
Pervasip Corp., a New York corporation, who is personally known to me to be the same person whose name is subscribed to the foregoing
instrument, 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:


 


______________________________________


 


 


BUYER:


 


TCA GLOBAL CREDIT MASTER FUND, LP


 


By: TCA Global Credit Master Fund GP, Ltd.


Its: General Partner


 


 


By: /s/ Robert Press


Name: Robert Press


Title:Managing Director


 


 


 


 



     

     

    

 


 


CONSENT AND AGREEMENT


 


The undersigned, referred to in the foregoing
securities purchase agreement as a guarantor, hereby consents and agrees to said securities purchase agreement and to the payment
of the amounts contemplated therein, documents contemplated thereby and to the provisions contained therein relating to conditions
to be fulfilled and obligations to be performed by it pursuant to or in connection with said securities purchase agreement to the
same extent as if the undersigned were a party to said securities purchase agreement.


 


GUARANTOR:


 


TELCOSOFTWARE.COM CORP.


 


 


By: /s/ Paul H. Riss


Name: Paul H. Riss


Title: Chief Executive Officer


 


STATE OF ________________)


) SS.


COUNTY OF ______________)


 


 


The undersigned, a Notary
Public in and for the said County, in the State aforesaid, DO HEREBY CERTIFY that Paul H. Riss, the Chief Executive Officer of
TelcoSoftware.com, a Delaware corporation, who is personally known to me to be the same person whose name is subscribed to the
foregoing instrument, 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:


 


______________________________________


 


 



     

     

    

CONSENT AND AGREEMENT


 


The undersigned, referred to in the foregoing
securities purchase agreement as a guarantor, hereby consents and agrees to said securities purchase agreement and to the payment
of the amounts contemplated therein, documents contemplated thereby and to the provisions contained therein relating to conditions
to be fulfilled and obligations to be performed by it pursuant to or in connection with said securities purchase agreement to the
same extent as if the undersigned were a party to said securities purchase agreement.


 


GUARANTOR:


 


PLAID CANARY CORPORATION 


 


 


By: /s/ Paul H. Riss


Name: Paul H. Riss


Title: Chief Executive Officer


 


STATE OF ________________)


) SS.


COUNTY OF ______________)


 


 


The undersigned, a Notary
Public in and for the said County, in the State aforesaid, DO HEREBY CERTIFY that Paul H. Riss, the Chief Executive Officer of
Plaid Canary Corporation, a Delaware corporation, who is personally known to me to be the same person whose name is subscribed
to the foregoing instrument, 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:


 


______________________________________


 



     

     

    

CONSENT AND AGREEMENT


 


The undersigned, referred to in the foregoing
securities purchase agreement as a guarantor, hereby consents and agrees to said securities purchase agreement and to the payment
of the amounts contemplated therein, documents contemplated thereby and to the provisions contained therein relating to conditions
to be fulfilled and obligations to be performed by it pursuant to or in connection with said securities purchase agreement to the
same extent as if the undersigned were a party to said securities purchase agreement.


 


GUARANTOR:


 


AVI HOLDING CORP. 


 


 


By: /s/ Paul H. Riss


Name: Paul H. Riss


Title: Chief Executive Officer


 


STATE OF ________________)


) SS.


COUNTY OF ______________)


 


 


The undersigned, a Notary
Public in and for the said County, in the State aforesaid, DO HEREBY CERTIFY that Paul H. Riss, the Chief Executive Officer of
AVI Holding Corp., a Texas corporation, who is personally known to me to be the same person whose name is subscribed to the foregoing
instrument, 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:


 


______________________________________



     

     

    

 


CONSENT AND AGREEMENT


 


The undersigned, referred to in the foregoing
securities purchase agreement as a guarantor, hereby consents and agrees to said securities purchase agreement and to the payment
of the amounts contemplated therein, documents contemplated thereby and to the provisions contained therein relating to conditions
to be fulfilled and obligations to be performed by it pursuant to or in connection with said securities purchase agreement to the
same extent as if the undersigned were a party to said securities purchase agreement.


 


GUARANTOR:


 


CANALYTIX LLC


 


 


By: /s/ Paul H. Riss


Name: Paul H. Riss


Title: Manager


 


STATE OF ________________)


) SS.


COUNTY OF ______________)


 


 


The undersigned, a Notary
Public in and for the said County, in the State aforesaid, DO HEREBY CERTIFY that Paul H. Riss, the Manager of Canalytix LLC, a
Delaware limited liability company, who is personally known to me to be the same person whose name is subscribed to the foregoing
instrument, 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:


 


______________________________________



     

     

    

 


CONSENT AND AGREEMENT


 


The undersigned, referred to in the foregoing
securities purchase agreement as a guarantor, hereby consents and agrees to said securities purchase agreement and to the payment
of the amounts contemplated therein, documents contemplated thereby and to the provisions contained therein relating to conditions
to be fulfilled and obligations to be performed by it pursuant to or in connection with said securities purchase agreement to the
same extent as if the undersigned were a party to said securities purchase agreement.


 


GUARANTOR:


 


GROW BIG SUPPLY, LLC 


 


 


By: /s/ Steve Beebe


Name: Steve Beebe


Title:Manager


 


STATE OF ________________)


) SS.


COUNTY OF ______________)


 


 


The undersigned, a Notary
Public in and for the said County, in the State aforesaid, DO HEREBY CERTIFY that Steve Beebe, the Manager of Grow Big Supply,
LLC, a Colorado limited liability company, who is personally known to me to be the same person whose name is subscribed to the
foregoing instrument, 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:


 


______________________________________