Document:

Exhibit 10.1

Exhibit 10.1

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER is made as of the 12th day of January, 2005.

	
AMONG:

	 
	
 
	
TORCH EXECUTIVE SERVICES LTD., a corporation formed

	 	
pursuant to the laws of the State of Nevada and having an office for

	 	
business located at 124 Minikada Bay, Winnipeg, Manitoba, Canada

	 	
R2C 0G

	 
	
 
	
("Torch")

	 
	
AND:

	 
	
 
	
TORCH SUBSIDIARY, INC., a body corporate formed pursuant to the

	 	
laws of the State of Delaware and a wholly owned subsidiary of Torch

	 
	 	
(the "Acquirer")

	 
	
AND:

	 
	
 
	
TECH FULL INTERNATIONAL, INC., a body corporate formed pursuant to the laws

	 	
of the State of Delaware and having an office for business located at No. 9, Ha Ping Xi

	 	
Lu, Ha Ping Lu Ji Zhong Qu, Harbin Kai Fa Qu, Harbin, Postal Code: 150001, China

	 
	 	
("Tech Full")

	 
	
AND:

	 
	
 
	
The shareholders of Tech Full, all of whom are set forth on the signature

	 	
page of this Agreement

	 
	 	
(the "Tech Full Shareholders")

 

WHEREAS:

A.     The Tech Full Shareholders own 1,500 Tech Full Shares, being 100% of the presently issued and outstanding Tech Full Shares;

B.     Torch is a reporting company whose common stock is quoted on the NASD "Bulletin Board";

C.     The respective Boards of Directors of Torch, Tech Full and the Acquirer deem it advisable and in the best interests of Torch, Tech Full and the Acquirer that Tech Full merge with and into the Acquirer (the "Merger") pursuant to this Agreement and the Certificate of Merger, and the applicable provisions of the laws of the State of Delaware; and

D.     It is intended that the Merger shall qualify for United States federal income tax purposes as a reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended.

NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises and the mutual covenants, agreements, representations and warranties contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

 

 

ARTICLE 1

DEFINITIONS AND INTERPRETATION

Definitions

	
1.1 
	
In this Agreement the following terms will have the following meanings:

	 
	 	
(a)  
	
"Acquisition Shares" means the 8,000,000 Torch Common Shares to be issued to the Tech Full Shareholders at Closing pursuant to the terms of the Merger;

	 
	
 
	
(b) 
	
"Agreement" means this agreement and plan of merger among Torch, the Acquirer, Tech Full, and the Tech Full Shareholders;

	 
	
 
	
(c) 
	
"Tech Full Accounts Payable and Liabilities" means all accounts payable and liabilities of Tech Full, on a consolidated basis, due and owing or otherwise constituting a binding obligation of Tech Full and the Tech Full Subsidiary (other than a Tech Full Material Contract) as of September 30, 2004 as set forth in Schedule "B" hereto;

	 
	
 
	
(d) 
	
"Tech Full Accounts Receivable" means all accounts receivable and other debts owing to Tech Full and the Tech Full Subsidiary, on a consolidated basis, as of September 30, 2004 as set forth in Schedule "C" hereto;

	 
	
 
	
(e)
	
"Tech Full Assets" means the undertaking and all the property and assets of the Tech Full Business of every kind and description wheresoever situated including, without limitation, Tech Full Equipment, Tech Full Inventory, Tech Full Material Contracts, Tech Full Accounts Receivable, Tech Full Cash, Tech Full Intangible Assets and Tech Full Goodwill, and all credit cards, charge cards and banking cards issued to Tech Full;

	 
	
 
	
(f) 
	
"Tech Full Bank Accounts" means all of the bank accounts, lock boxes and safety deposit boxes of Tech Full and the Tech Full Subsidiary or relating to the Tech Full Business as set forth in Schedule "D" hereto; 

	 
	
 
	
(g)
	
"Tech Full Business" means all aspects of the business conducted by Tech Full and the Tech Full Subsidiary;

	 
	
 
	
(h) 
	
"Tech Full Cash" means all cash on hand or on deposit to the credit of Tech Full and the Tech Full Subsidiary on the Closing Date;

	 
	
 
	
(i) 
	
"Tech Full Debt to Related Parties" means the debts owed by Tech Full and its subsidiaries to the Tech Full Shareholders or to any family member thereof, or to any affiliate, director or officer of Tech Full or the Tech Full Shareholders as described in Schedule "E";

	 
	
 
	
(j) 
	
"Tech Full Equipment" means all machinery, equipment, furniture, and furnishings used in the Tech Full Business, including, without limitation, the items more particularly described in Schedule "F" hereto;

	 
	
 
	
(k)
	
"Tech Full Financial Statements" means collectively, the audited consolidated financial statements of Tech Full for the period from inception through September 30, 2004 and for the Tech Full Subsidiary for the period from inception through September 30, 2004, prepared in accordance with Item 310 of Regulation SB, true copies of which are attached as Schedule "A" hereto;

 

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(l)
	
"Tech Full Goodwill" means the goodwill of the Tech Full Business together with the exclusive right of Torch to represent itself as carrying on the Tech Full Business in succession of Tech Full subject to the terms hereof, and the right to use any words indicating that the Tech Full Business is so carried on including the right to use the name "Tech Full" or "Tech Full International" or any variation thereof as part of the name of or in connection with the Tech Full Business or any part thereof carried on or to be carried on by Tech Full, the right to all corporate, operating and trade names associated with the Tech Full Business, or any variations of such names as part of or in connection with the Tech Full Business, all telephone listings and telephone advertising contracts, all lists of customers, books and records and other information relating to the Tech Full Business, all necessary licenses and authorizations and any other rights used in connection with the Tech Full Business;

	 
	
 
	
(m)
	
"Tech Full Insurance Policies" means the public liability insurance and insurance against loss or damage to Tech Full Assets and the Tech Full Business as described in Schedule "G" hereto;

	 
	
 
	
(n)
	
"Tech Full Intangible Assets" means all of the intangible assets of Tech Full and the Tech Full Subsidiary, including, without limitation, Tech Full Goodwill, all trademarks, logos, copyrights, designs, and other intellectual and industrial property of Tech Full and the Tech Full Subsidiary;

	 
	
 
	
(o)
	
"Tech Full Inventory" means all inventory and supplies of the Tech Full Business as of September 30, 2004 as set forth in Schedule "H" hereto;

	 
	
 
	
(p)
	
"Tech Full Material Contracts" means the burden and benefit of and the right, title and interest of Tech Full and the Tech Full Subsidiary in, to and under all trade and non-trade contracts, engagements or commitments, whether written or oral, to which Tech Full or the Tech Full Subsidiary is entitled in connection with the Tech Full Business whereunder Tech Full is obligated to pay or entitled to receive the sum of $10,000 or more including, without limitation, any pension plans, profit sharing plans, bonus plans, loan agreements, security agreements, indemnities and guarantees, any agreements with employees, lessees, licensees, managers, accountants, suppliers, agents, distributors, officers, directors, attorneys or others which cannot be terminated without liability on not more than one month's notice, and those contracts listed in Schedule "I" hereto; 

	 
	
 
	
(q)
	
"Tech Full Shares" means all of the issued and outstanding shares of Tech Full's equity stock;

	 
	
 
	
(r)
	
"Tech Full Subsidiary" means Harbin Tech Full Co., Ltd., a corporation formed pursuant to the laws of the People's Republic of China and a wholly-owned subsidiary of Tech Full;

	 
	
 
	
(s)
	
"Closing" means the completion, on the Closing Date, of the transactions contemplated hereby in accordance with Article 9 hereof;

	 
	
 
	
(t)
	
"Closing Date" means the day on which all conditions precedent to the completion of the transaction as contemplated hereby have been satisfied or waived;

	 
	
 
	
(u)
	
"Effective Time" means the date of the filing of an appropriate Certificate of Merger in the form required by the State of Delaware, which certificate shall provide that the Merger shall become effective upon such filing;

	 
	
 
	
(v)
	
"Merger" means the merger, at the Effective Time, of Tech Full and the Acquirer pursuant to this Agreement and Plan of Merger;

 

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(w)
	
"Merger Consideration" means the Acquisition Shares; 

	 
	
 
	
(x)
	
"Place of Closing" means the offices of Sichenzia Ross Friedman Ference LLP, or such other place as Torch and Tech Full may mutually agree upon;

	 
	 	
 (y)
	
"State Corporation Law" means the General Corporation Law of the State of Delaware; 

	 
	
 
	
(z)
	
"Torch Accounts Payable and Liabilities" means all accounts payable and liabilities of Torch, on a consolidated basis, due and owing or otherwise constituting a binding obligation of Torch and its subsidiaries (other than a Torch Material Contract) as of October 31, 2004 as set forth is Schedule "K" hereto;

	 
	
 
	
(aa)
	
"Torch Accounts Receivable" means all accounts receivable and other debts owing to Torch, on a consolidated basis, as of  October 31, 2004 as set forth in Schedule "L" hereto;

	 
	
 
	
(bb)
	
"Torch Assets" means the undertaking and all the property and assets of the Torch Business of every kind and description wheresoever situated including, without limitation, Torch Equipment, Torch Inventory, Torch Material Contracts, Torch Accounts Receivable, Torch Cash, Torch Intangible Assets and Torch Goodwill, and all credit cards, charge cards and banking cards issued to Torch;

	 
	
 
	
(cc)
	
"Torch Bank Accounts" means all of the bank accounts, lock boxes and safety deposit boxes of Torch and its subsidiaries or relating to the Torch Business as set forth in Schedule "M" hereto;

	 
	
 
	
(dd)
	
"Torch Business" means all aspects of any business conducted by Torch and its subsidiaries;

	 
	
 
	
(ee)
	
"Torch Cash" means all cash on hand or on deposit to the credit of Torch and its subsidiaries on the Closing Date;

	 
	 	
(ff)
	
"Torch Common Shares" means the shares of common stock in the capital of Torch;

	 
	
 
	
(gg)
	
"Torch Debt to Related Parties" means the debts owed by Torch to any affiliate, director or officer of Torch as described in Schedule "N" hereto;

	 
	
 
	
(hh)
	
"Torch Equipment" means all machinery, equipment, furniture, and furnishings used in the Torch Business, including, without limitation, the items more particularly described in Schedule "O" hereto;

	 
	
 
	
(ii)
	
"Torch Financial Statements" means, collectively, the audited consolidated financial statements of Torch for the fiscal years ended July 31, 2003 (23 days), and July 31, 2004 together with the unqualified auditors' report thereon, prepared in accordance with Item 310 of Regulation SB, true copies of which are attached as Schedule "J" hereto;

	 
	
 
	
(jj)
	
"Torch Goodwill" means the goodwill of the Torch Business including the right to all corporate, operating and trade names associated with the Torch Business, or any variations of such names as part of or in connection with the Torch Business, all books and records and other information relating to the Torch Business, all necessary licenses and authorizations and any other rights used in connection with the Torch Business;

	 
	
 
	
(kk)
	
"Torch Insurance Policies" means the public liability insurance and insurance against loss or damage to the Torch Assets and the Torch Business as described in Schedule "P" hereto;

 

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(ll)
	
"Torch Intangible Assets" means all of the intangible assets of Torch and its subsidiaries, including, without limitation, Torch Goodwill, all trademarks, logos, copyrights, designs, and other intellectual and industrial property of Torch and its subsidiaries;

	 
	
 
	
(mm)
	
"Torch Inventory" means all inventory and supplies of the Torch Business as of September 30, 2004, as set forth in Schedule "Q" hereto;

	 
	
 
	
(nn)
	
"Torch Material Contracts" means the burden and benefit of and the right, title and interest of Torch and its subsidiaries in, to and under all trade and non-trade contracts, engagements or commitments, whether written or oral, to which Torch or its subsidiaries are entitled whereunder Torch or its subsidiaries are obligated to pay or entitled to receive the sum of $10,000 or more including, without limitation, any pension plans, profit sharing plans, bonus plans, loan agreements, security agreements, indemnities and guarantees, any agreements with employees, lessees, licensees, managers, accountants, suppliers, agents, distributors, officers, directors, attorneys or others which cannot be terminated without liability on not more than one month's notice, and those contracts listed in Schedule "R" hereto; and

	 
	
 
	
(oo)
	
"Surviving Company" means Acquirer following the merger with the Tech Full.

Any other terms defined within the text of this Agreement will have the meanings so ascribed to them.

Captions and Section Numbers

1.2     The headings and section references in this Agreement are for convenience of reference only and do not form a part of this Agreement and are not intended to interpret, define or limit the scope, extent or intent of this Agreement or any provision thereof.

Section References and Schedules

1.3     Any reference to a particular "Article", "section", "paragraph", "clause" or other subdivision is to the particular Article, section, clause or other subdivision of this Agreement and any reference to a Schedule by letter will mean the appropriate Schedule attached to this Agreement and by such reference the appropriate Schedule is incorporated into and made part of this Agreement.  The Schedules to this Agreement are as follows:

Information concerning Tech Full

	 	
Schedule "A"
	
Tech Full Financial Statements

	 	
Schedule "B"
	
Tech Full Accounts Payable and Liabilities

	 	
Schedule "C"
	
Tech Full Accounts Receivable

	 	
Schedule "D"
	
Tech Full Bank Accounts

	 	
Schedule "E"
	
Tech Full Debts to Related Parties

	 	
Schedule "F"
	
Tech Full Equipment

	 	
Schedule "G"
	
Tech Full Insurance Policies

	 	
Schedule "H"
	
Tech Full Inventory

	 	
Schedule "I"
	
Tech Full Material Contracts

 

 

 

 

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Information concerning Torch

	 	
Schedule "J"
	
Torch Financial Statements

	 	
Schedule "K"
	
Torch Accounts Payable and Liabilities

	 	
Schedule "L"
	
Torch Accounts Receivable

	 	
Schedule "M"
	
Torch Bank Accounts

	 	
Schedule "N"
	
Torch Debts to Related Parties

	 	
Schedule "O"
	
Torch Equipment

	 	
Schedule "P"
	
Torch Insurance Policies

	 	
Schedule "Q"
	
Torch Inventory

	 	
Schedule "R"
	
Torch Material Contracts

Information concerning Tech Full Shareholders

	 	
Schedule "S"
	
Investor Questionnaire

Severability of Clauses

1.4     If any part of this Agreement is declared or held to be invalid for any reason, such invalidity will not affect the validity of the remainder which will continue in full force and effect and be construed as if this Agreement had been executed without the invalid portion, and it is hereby declared the intention of the parties that this Agreement would have been executed without reference to any portion which may, for any reason, be hereafter declared or held to be invalid.

ARTICLE 2

THE MERGER

The Merger

2.1     At Closing, Tech Full shall be merged with and into the Acquirer pursuant to this Agreement and Plan of Merger and the separate corporate existence of Tech Full shall cease and the Acquirer, as it exists from and after the Closing, shall be the Surviving Company.

Effect of the Merger

2.2     The Merger shall have the effect provided therefor by the State Corporation Law. Without limiting the generality of the foregoing, and subject thereto, at Closing (i) all the rights, privileges, immunities, powers and franchises, of a public as well as of a private nature, and all property, real, personal and mixed, and all debts due on whatever account, including without limitation subscriptions to shares, and all other choses in action, and all and every other interest of or belonging to or due to Tech Full or the Acquirer, as a group, subject to the terms hereof, shall be taken and deemed to be transferred to, and vested in, the Surviving Company without further act or deed; and all property, rights and privileges, immunities, powers and franchises and all and every other interest shall be thereafter as effectually the property of the Surviving Company, as they were of Tech Full and the Acquirer, as a group, and (ii) all debts, liabilities, duties and obligations of Tech Full and the Acquirer, as a group, subject to the terms hereof, shall become the debts, liabilities and duties of the Surviving Company and the Surviving Company shall thenceforth be responsible and liable for all debts, liabilities, duties and obligations of Tech Full and the Acquirer, as a group, and neither the rights of creditors nor any liens upon the property of Tech Full or the Acquirer, as a group, shall be impaired by the Merger, and may be enforced against the Surviving Company. 

 

 

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Certificate of Incorporation; Bylaws; Directors and Officers

2.3     The Certificate of Incorporation of the Surviving Company from and after the Closing shall be the Certificate of Incorporation of the Acquirer until thereafter amended in accordance with the provisions therein and as provided by the applicable provisions of the State Corporation Law.  The Bylaws of the Surviving Company from and after the Closing shall be the Bylaws of the Acquirer as in effect immediately prior to the Closing, continuing until thereafter amended in accordance with their terms, the Certificate of Incorporation of the Surviving Company and as provided by the State Corporation Law.  The Directors of Tech Full at the Effective Time shall continue to be the Directors of the Surviving Company after the Closing.

Conversion of Securities

2.4     At the Effective Time, by virtue of the Merger and without any action on the part of the Acquirer, Tech Full or the Tech Full Shareholders, the shares of capital stock of each of Tech Full and the Acquirer shall be converted as follows:

	 	
(a)
	
Capital Stock of the Acquirer. Each issued and outstanding share of the Acquirer's capital stock shall continue to be issued and outstanding and shall be converted into one share of validly issued, fully paid, and non-assessable common stock of the Surviving Company. Each stock certificate of the Acquirer evidencing ownership of any such shares shall continue to evidence ownership of such shares of capital stock of the Surviving Company.

	 
	
 
	
(b)
	
Conversion of Tech Full Shares. Each Tech Full Share that is issued and outstanding at the Effective Time shall automatically be cancelled and extinguished and converted, without any action on the part of the holder thereof, into the right to receive at the time and in the amounts described in this Agreement an amount of Acquisition Shares equal to the number of Acquisition Shares divided by the number of Tech Full Shares outstanding immediately prior to Closing. All such Tech Full Shares, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any rights with respect thereto, except the right to receive the Acquisition Shares paid in consideration therefor upon the surrender of such certificate in accordance with this Agreement.

Adherence with Applicable Securities Laws

2.5     The Tech Full Shareholders agree that they are acquiring the Acquisition Shares for investment purposes and will not offer, sell or otherwise transfer, pledge or hypothecate any of the Acquisition Shares issued to them (other than pursuant to an effective Registration Statement under the Securities Act of 1933, as amended) directly or indirectly unless:

	 	
(a)
	
the sale is to Torch;

	 
	
 
	
(b)
	
the sale is made pursuant to the exemption from registration under the Securities Act of 1933,as amended, provided by Rule 144 thereunder; or

	 
	
 
	
(c)
	
the Acquisition Shares are sold in a transaction that does not require registration under the Securities Act of 1933, as amended, or any applicable United States state laws and regulations governing the offer and sale of securities, and the vendor has furnished to Torch an opinion of counsel to that effect or such other written opinion as may be reasonably required by Torch.

The Tech Full Shareholders acknowledge that the certificates representing the Acquisition Shares shall bear the following legend:

 

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THESE COMMON SHARES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR THE SECURITIES LAWS OF ANY STATES OF THE UNITED STATES AND MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (i) TO THE COMPANY, (ii) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE 1933 ACT, IF AVAILABLE, AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS, (iii) IN COMPLIANCE WITH THE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PROVIDED BY RULE 144 THEREUNDER, IF APPLICABLE, AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS,  (iv) IN COMPLIANCE WITH ANOTHER EXEMPTION FROM REGISTRATION AND ANY APPLICABLE STATE SECURITIES LAWS, IN EACH CASE AFTER PROVIDING EVIDENCE SATISFACTORY TO THE CORPORATION THAT SUCH TRANSFER MAY BE MADE WITHOUT REGISTRATION UNDER THE 1933 ACT.  HEDGING TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

OF TORCH

Representations and Warranties

3.1     Torch hereby represents and warrants in all material respects to Tech Full and the Tech Full Shareholders, with the intent that Tech Full and the Tech Full Shareholders will rely thereon in entering into this Agreement and in approving and completing the transactions contemplated hereby, that:

Torch - Corporate Status and Capacity

	 	
(a)
	
Incorporation. Torch is a corporation duly incorporated and validly subsisting under the laws of the State of Nevada, and is in good standing with the office of the Secretary of State for the State of Nevada;

	 
	
 
	
(b)
	
Carrying on Business. Torch conducts the business described in its filings with the Securities and Exchange Commission and does not conduct any other business; 

	 
	 
	 	
(c)
	
Corporate Capacity. Torch has the corporate power, capacity and authority to own the Torch Assets and to enter into and complete this Agreement;

	 
	
 
	
(d)
	
Reporting Status; Listing. Torch is required to file current reports with the Securities and Exchange Commission pursuant to section 12(g) of the Securities Exchange Act of 1934, the Torch Common Shares are quoted on the NASD "Bulletin Board", and all reports required to be filed by Torch with the Securities and Exchange Commission or NASD have been timely filed; 

Acquirer - Corporate Status and Capacity

	 	
(e)
	
Incorporation. The Acquirer is a corporation duly incorporated and validly subsisting under the laws of the State of Delaware, and is in good standing with the office of the Secretary of State for the State of Delaware;

	 
	
 
	
(f)
	
Carrying on Business. Other than corporate formation and organization, the Acquirer has not carried on business activities to date;

	 
	
 
	
(g)
	
Corporate Capacity. The Acquirer has the corporate power, capacity and authority to enter into and complete this Agreement;

 

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Torch - Capitalization

	 	
(h)
	
Authorized Capital. The authorized capital of Torch consists of 100,000,000 Torch Common Shares, $0.00001 par value, of which 7,000,300 Torch Common Shares are presently issued and outstanding;

	 
	
 
	
(i)
	
No Option, Warrant or Other Right. No person, firm or corporation has any agreement, option, warrant, preemptive right or any other right capable of becoming an agreement, option, warrant or right for the acquisition of Torch Common Shares or for the purchase, subscription or issuance of any of the unissued shares in the capital of Torch;

Acquirer Capitalization

	 	
(j)
	
Authorized Capital. The authorized capital of the Acquirer consists of 200 shares of common stock, $0.0001 par value, of which 200 shares of common stock are presently issued and outstanding;

	 
	
 
	
(k)
	
No Option, Warrant or Other Right. No person, firm or corporation has any agreement, option, warrant, preemptive right or any other right capable of becoming an agreement,  option, warrant or right for the acquisition of any common or preferred shares in the Acquirer or for the purchase, subscription or issuance of any of the unissued shares in the capital of Acquirer;

Torch - Records and Financial Statements

	 	
(l)
	
Charter Documents. The charter documents of Torch and the Acquirer have not been altered since the incorporation of each, respectively, except as filed in the record books of Torch or the Acquirer, as the case may be;

	 
	
 
	
(m)
	
Corporate Minute Books. The corporate minute books of Torch and its subsidiaries are complete and each of the minutes contained therein accurately reflect the actions that were taken at a duly called and held meeting or by consent without a meeting. All actions by Torch and its subsidiaries which required director or shareholder approval are reflected on the corporate minute books of Torch and its subsidiaries. Torch and its subsidiaries are not in violation or breach of, or in default with respect to, any term of their respective Certificates of Incorporation (or other charter documents) or by-laws.

	 
	
 
	
(n)
	
Torch Financial Statements. The Torch Financial Statements present fairly, in all material respects, the assets and liabilities (whether accrued, absolute, contingent or otherwise) of Torch, on a consolidated basis, as of the respective dates thereof, and the sales and earnings of the Torch Business during the periods covered thereby, in all material respects and have been prepared in substantial accordance with generally accepted accounting principles consistently applied;

	 
	
 
	
(o)
	
Torch Accounts Payable and Liabilities. There are no material liabilities, contingent or otherwise, of Torch or its subsidiaries which are not disclosed in Schedule "K" hereto or reflected in the Torch Financial Statements except those incurred in the ordinary course of business since the date of the said schedule and the Torch Financial Statements, and neither Torch nor its subsidiaries have guaranteed or agreed to guarantee any debt, liability or other obligation of any person, firm or corporation. Without limiting the generality of the foregoing, all accounts payable and liabilities of Torch as of December 31, 2004, are described in Schedule "K" hereto;

 

 

-9-

	 	
(p)
	
Torch Accounts Receivable. All the Torch Accounts Receivable result from bona fide business transactions and services actually rendered without, to the knowledge and belief of Torch, any claim by the obligor for set-off or counterclaim. Without limiting the generality of the foregoing, all accounts receivable of Torch as of October 31, 2004, are described in Schedule "L" hereto;

	 
	
 
	
(q)
	
Torch Bank Accounts. All of the Torch Bank Accounts, their location, numbers and the authorized signatories thereto are as set forth in Schedule "M" hereto;

	 
	
 
	
(r)
	
No Debt to Related Parties. Except as disclosed in Schedule "N" hereto, neither Torch nor any of its subsidiaries is, and on Closing will not be, indebted to any affiliate, director or officer of Torch except accounts payable on account of bona fide business transactions of Torch incurred in normal course of the Torch Business, including employment agreements, none of which are more than 30 days in arrears;

	 
	
 
	
(s)
	
No Related Party Debt to Torch. No director or officer or affiliate of Torch is now indebted to or under any financial obligation to Torch or any subsidiary on any account whatsoever, except for advances on account of travel and other expenses not exceeding $1,000 in total;

	 
	
 
	
(t)
	
No Dividends. No dividends or other distributions on any shares in the capital of Torch have been made, declared or authorized since the date of Torch Financial Statements;

	 
	
 
	
(u)
	
No Payments. Except for the repayment of the loan to Frank Torchia and the redemption of the shares in Torch held by Frank Torchia, no payments of any kind have been made or authorized since the date of the Torch Financial Statements to or on behalf of officers, directors, shareholders or employees of Torch or its subsidiaries or under any management agreements with Torch or its subsidiaries, except payments made in the ordinary course of business and at the regular rates of salary or other remuneration payable to them;

	 
	
 
	
(v)
	
No Pension Plans. There are no pension, profit sharing, group insurance or similar plans or other deferred compensation plans affecting Torch;

	 
	
 
	
(w)
	
No Adverse Events. Since the date of the Torch Financial Statements

	 
	
 
	 	
(i)
	
there has not been any material adverse change in the consolidated financial position or condition of Torch, its subsidiaries, its liabilities or the Torch Assets or any damage, loss or other change in circumstances materially affecting Torch, the Torch Business or the Torch Assets or Torch' right to carry on the Torch Business, other than changes in the ordinary course of business,

	 
	
 
	 	
(ii)
	
there has not been any damage, destruction, loss or other event (whether or not covered by insurance) materially and adversely affecting Torch, its subsidiaries, the Torch Business or the Torch Assets,

	 
	
 
	 	
(iii)
	
there has not been any material increase in the compensation payable or to become payable by Torch to any of Torch' officers, employees or agents or any bonus, payment or arrangement made to or with any of them, except for the repayment of the loan to Frank Torchia and the redemption of the share of Torch held by Frank Torchia which will be repaid and redeemed, respectively, before Closing,

	 
	
 
	 	
(iv)
	
the Torch Business has been and continues to be carried on in the ordinary course,

 

 

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(v)
	
Torch has not waived or surrendered any right of material value,

	 
	
 
	 	
(vi)
	
neither Torch nor its subsidiaries have discharged or satisfied or paid any lien or encumbrance or obligation or liability other than current liabilities in the ordinary course of business, and

	 
	
 
	 	
(vii)
	
no capital expenditures in excess of $10,000 individually or $30,000 in total have been authorized or made.

	 
	
Torch - Income Tax Matters

	 
	
 
	
(x)
	
Tax Returns. All tax returns and reports of Torch and its subsidiaries required by law to be filed have been filed and are true, complete and correct, and any taxes payable in accordance with any return filed by Torch and its subsidiaries or in accordance with any notice of assessment or reassessment issued by any taxing authority have been so paid;

	 
	
 
	
(y)
	
Current Taxes. Adequate provisions have been made for taxes payable for the current period for which tax returns are not yet required to be filed and there are no agreements, waivers, or other arrangements providing for an extension of time with respect to the filing of any tax return by, or payment of, any tax, governmental charge or deficiency by Torch or its subsidiaries.  Torch is not aware of any contingent tax liabilities or any grounds which would prompt a reassessment including aggressive treatment of income and expenses in filing earlier tax returns;

	 
	
Torch - Applicable Laws and Legal Matters

	 
	
 
	
(z)
	
Licenses. Torch and its subsidiaries hold all licenses and permits as may be requisite for carrying on the Torch Business in the manner in which it has heretofore been carried on, which licenses and permits have been maintained and continue to be in good standing except where the failure to obtain or maintain such licenses or permits would not have a material adverse effect on the Torch Business;

	 
	
 
	
(aa)
	
Applicable Laws. Neither Torch nor its subsidiaries have been charged with or received notice of breach of any laws, ordinances, statutes, regulations, by-laws, orders or decrees to which they are subject or which apply to them the violation of which would have a material adverse effect on the Torch Business, and to Torch' knowledge, neither Torch nor its subsidiaries are in breach of any laws, ordinances, statutes, regulations, bylaws, orders or decrees the contravention of which would result in a material adverse impact on the Torch Business;

	 
	
 
	
(bb)
	
Pending or Threatened Litigation. There is no material litigation or administrative or governmental proceeding pending or threatened against or relating to Torch, its subsidiaries, the Torch Business, or any of the Torch Assets nor does Torch have any knowledge of any deliberate act or omission of Torch or its subsidiaries that would form any material basis for any such action or proceeding;

	 
	
 
	
(cc)
	
No Bankruptcy. Neither Torch nor its subsidiaries have made any voluntary assignment or proposal under applicable laws relating to insolvency and bankruptcy and no bankruptcy petition has been filed or presented against Torch or its subsidiaries and no order has been made or a resolution passed for the winding-up, dissolution or liquidation of Torch or its subsidiaries; 

	 
	
 
	
(dd)
	
Labor Matters. Neither Torch nor its subsidiaries are party to any collective agreement relating to the Torch Business with any labor union or other association of employees and no part of the Torch Business has been certified as a unit appropriate for collective bargaining or, to the knowledge of Torch, has made any attempt in that regard;

 

-11-

	 	
(ee)
	
Finder's Fees. Neither Torch nor its subsidiaries are party to any agreement which provides for the payment of finder's fees, brokerage fees, commissions or other fees or amounts which are or may become payable to any third party in connection with the execution and delivery of this Agreement and the transactions contemplated herein;

	 
	
Execution and Performance of Agreement

	 
	 	
(ff)
	
Authorization and Enforceability. The execution and delivery of this Agreement, and the completion of the transactions contemplated hereby, have been duly and validly authorized by all necessary corporate action on the part of Torch and the Acquirer;

	 
	
 
	
(gg)
	
No Violation or Breach. The execution and performance of this Agreement will not:

	 
	
 
	 	
(i)
	
violate the charter documents of Torch or the Acquirer or result in any breach of, or default under, any loan agreement, mortgage, deed of trust, or any other agreement to which Torch or its subsidiaries are party,

	 
	
 
	 	
(ii)
	
give any person any right to terminate or cancel any agreement including, without limitation, the Torch Material Contracts, or any right or rights enjoyed by Torch or its subsidiaries,

	 
	
 
	 	
(iii)
	
result in any alteration of Torch' or its subsidiaries' obligations under any agreement to which Torch or its subsidiaries are party including, without limitation, the Torch Material Contracts,

	 
	
 
	 	
(iv)
	
result in the creation or imposition of any lien, encumbrance or restriction of any nature whatsoever in favor of a third party upon or against the Torch Assets,

	 
	
 
	 	
(v)
	
result in the imposition of any tax liability to Torch or its subsidiaries relating to the Torch Assets, or

	 
	
 
	 	
(vi)
	
violate any court order or decree to which either Torch or its subsidiaries are subject;

	 
	
The Torch Assets - Ownership and Condition

	 
	
 
	
(hh)
	
Business Assets. The Torch Assets comprise all of the property and assets of the Torch Business, and no other person, firm or corporation owns any assets used by Torch or its subsidiaries in operating the Torch Business, whether under a lease, rental agreement or other arrangement, other than as disclosed in Schedules "O" or "R" hereto;

	 
	
 
	
(ii)
	
Title. Torch or its subsidiaries are the legal and beneficial owner of the Torch Assets, free and clear of all mortgages, liens, charges, pledges, security interests, encumbrances or other claims whatsoever, save and except as disclosed in Schedules "O" or "R" hereto;

	 
	
 
	
(jj)
	
No Option. No person, firm or corporation has any agreement or option or a right capable of becoming an agreement for the purchase of any of the Torch Assets;

	 
	
 
	
(kk)
	
Torch Insurance Policies. Torch and its subsidiaries maintain the public liability insurance and insurance against loss or damage to the Torch Assets and the Torch Business as described in Schedule "P" hereto;

 

 

-12-

	 	
(ll)
	
Torch Material Contracts. The Torch Material Contracts listed in Schedule "R" constitute all of the material contracts of Torch and its subsidiaries;

	 
	
 
	
(mm)
	
No Default. There has not been any default in any material obligation of Torch or any other party to be performed under any of the Torch Material Contracts, each of which is in good standing and in full force and effect and unamended (except as disclosed in Schedule "R" hereto), and Torch is not aware of any default in the obligations of any other party to any of the Torch Material Contracts;

	 
	
 
	
(nn)
	
No Compensation on Termination. There are no agreements, commitments or understandings relating to severance pay or separation allowances on termination of employment of any employee of Torch or its subsidiaries. Neither Torch nor its subsidiaries are obliged to pay benefits or share profits with any employee after termination of employment except as required by law;

	 
	
Torch Assets - Torch Equipment

	 
	
 
	
(oo)
	
Torch Equipment. The Torch Equipment has been maintained in a manner consistent with that of a reasonably prudent owner and such equipment is in good working condition;

	 
	
Torch Assets - Torch Goodwill and Other Assets

	 
	
 
	
(pp)
	
Torch Goodwill. Torch and its subsidiaries does not carry on the Torch Business under any other business or trade names. Torch does not have any knowledge of any infringement by Torch or its subsidiaries of any patent, trademarks, copyright or trade secret;

	 
	
The Torch Business

	 
	
 
	
(qq)
	
Maintenance of Business. Since the date of the Torch Financial Statements, Torch and its subsidiaries have not entered into any material agreement or commitment except in the ordinary course and except as disclosed herein;

	 
	
 
	
(rr)
	
Subsidiaries. Except for the Acquirer, Torch does not own any subsidiaries and does not otherwise own, directly or indirectly, any shares or interest in any other corporation, partnership, joint venture or firm; and

	 
	
Torch - Acquisition Shares

	 
	
 
	
(ss)
	
Acquisition Shares. The Acquisition Shares when delivered to the holders of Tech Full Shares pursuant to the Merger shall be validly issued and outstanding as fully paid and non-assessable shares and the Acquisition Shares shall be transferable upon the books of Torch, in all cases subject to the provisions and restrictions of all applicable securities laws.

	 
	
Non-Merger and Survival

3.2     The representations and warranties of Torch contained herein will be true at and as of Closing in all material respects as though such representations and warranties were made as of such time.  Notwithstanding the completion of the transactions contemplated hereby, the waiver of any condition contained herein (unless such waiver expressly releases a party from any such representation or warranty) or any investigation made by Tech Full or the Tech Full Shareholders, the representations and warranties of Torch shall survive the Closing. 

Indemnity

3.3     Torch agrees to indemnify and save harmless Tech Full and the Tech Full Shareholders from and against any and all claims, demands, actions, suits, proceedings, assessments, judgments, damages, costs, losses and expenses, including any payment made in good faith in settlement of any claim (subject to the right of Torch to defend any such claim), resulting from the breach by it of any representation or warranty made under this Agreement or from any misrepresentation in or omission from any certificate or other instrument furnished or to be furnished by Torch to Tech Full or the Tech Full Shareholders hereunder.

 

 

-13-

ARTICLE 4

COVENANTS OF TORCH

Covenants

4.1     Torch covenants and agrees with Tech Full and the Tech Full Shareholders that it will:

	 	
(a)
	
Conduct of Business. Until the Closing, conduct the Torch Business diligently and in the ordinary course consistent with the manner in which the Torch Business generally has been operated up to the date of execution of this Agreement; 

	 
	
 
	
(b)
	
Preservation of Business.  Until the Closing, use its best efforts to preserve the Torch Business and the Torch Assets and, without limitation, preserve for Tech Full Torch's and its subsidiaries' relationships with any third party having business relations with them;

	 
	
 
	
(c)
	
Access. Until the Closing, give Tech Full, the Tech Full Shareholders, and their representatives full access to all of the properties, books, contracts, commitments and records of Torch, and furnish to Tech Full, the Tech Full Shareholders and their representatives all such information as they may reasonably request;

	 
	
 
	
(d)
	
Procure Consents. Until the Closing, take all reasonable steps required to obtain, prior to Closing, any and all third party consents required to permit the Merger and to preserve and maintain the Torch Assets notwithstanding the change in control of Tech Full arising from the Merger; and,

	 
	
 
	
(e)
	
Redemption of Shares.  On or before the Closing, Torch shall redeem 5,000,000 Torch Common Shares held by Frank Torchia for an aggregate amount of $5,000 USD.     In addition, Torch shall pay Mr. Torchia all amounts due and owing to him as a shareholder loan, in the amount of $19,785.00.  Other than indebtedness of Tech Full, Torch shall have no indebtedness or other liability of any kind or nature upon the Closing, save and except for liabilities incurred in connection with the Merger related to stock issuances.

Authorization

4.2     Torch hereby agrees to authorize and direct any and all federal, state, municipal, foreign and international governments and regulatory authorities having jurisdiction respecting Torch and its subsidiaries to release any and all information in their possession respecting Torch and its subsidiaries to Tech Full. Torch shall promptly execute and deliver to Tech Full any and all consents to the release of information and specific authorizations which Tech Full reasonably requires to gain access to any and all such information.

Survival

4.3     The covenants set forth in this Article shall survive the Closing for the benefit of Tech Full and the Tech Full Shareholders.

 

-14-

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF

THE TECH FULL SHAREHOLDERS

Representations and Warranties

5.1     The Tech Full Shareholders hereby jointly and severally represent and warrant in all material respects to Torch, with the intent that it will rely thereon in entering into this Agreement and in approving and completing the transactions contemplated hereby, that: 

	

	
Tech Full - Corporate Status and Capacity

	 
	
 
	
(a)
	
Incorporation. Tech Full is a corporation duly incorporated and validly subsisting under the laws of the State of Delaware, and is in good standing with the office of the Secretary of State for the State of Delaware;

	 
	
 
	
(b)
	
Carrying on Business. Tech Full was formed in August 2004 for the sole purpose of holding all of the issued and outstanding shares of capital stock of the Tech Full Subsidiary.  Since the date of its inception, other than in connection with this Agreement, Tech Full has conducted no business or operations other than its ownership of the Tech Full Subsidiary. The nature of the Tech Full Business does not require Tech Full to register or otherwise be qualified to carry on business in any other jurisdiction;

	 
	
 
	
(c)
	
Corporate Capacity. Tech Full has the corporate power, capacity and authority to own the Tech Full Subsidiary and to enter into and complete this Agreement;

	 
	
The Tech Full Subsidiary - Corporate Status and Capacity

	 
	
 
	
(d)
	
Incorporation. The Tech Full Subsidiary is a corporation duly incorporated, validly subsisting and in good standing under the laws of the People's Republic of China;

	 
	
 
	
(e)
	
Carrying on Business. The Tech Full Subsidiary carries on the Tech Full Business primarily in the People's Republic of China and does not carry on any material business activity in any other jurisdiction. The Tech Full Subsidairy is duly authorized to carry on Tech Full Business in the People's Republic of China.  The nature of the Tech Full Business does not require the Tech Full Subsidiary to register or otherwise be qualified to carry on business in any other jurisdiction;

	 
	
 
	
(f)
	
Corporate Capacity. The Tech Full Subsidiary has the corporate power, capacity and authority to own Tech Full Assets and to carry on the Business of Tech Full;

	 
	
Tech Full - Capitalization

	 
	
 
	
(g)
	
Authorized Capital. The authorized capital of Tech Full consists of 1,500 shares of common stock, $.0001 par value per share;

	 
	
 
	
(h)
	
Ownership of Tech Full Shares. The issued and outstanding share capital of Tech Full will on Closing consist of 1,500 common shares (being the Tech Full Shares), which shares on Closing shall be validly issued and outstanding as fully paid and non-assessable shares. The Tech Full Shareholders will be at Closing the registered and beneficial owners of the 1,500 Tech Full Shares. The Tech Full Shares owned by the Tech Full Shareholders will on Closing be free and clear of any and all liens, charges, pledges, encumbrances, restrictions on transfer and adverse claims whatsoever;

 

-15-

	 	
(i)
	
No Option, Warrant or Other Right. No person, firm or corporation has any agreement, option, warrant, preemptive right or any other right capable of becoming an agreement, option, warrant or right for the acquisition of Tech Full Shares held by the Tech Full Shareholders or for the purchase, subscription or issuance of any of the unissued shares in the capital of Tech Full;

	 
	
 
	
(j)
	
No Restrictions. There are no restrictions on the transfer, sale or other disposition of Tech Full Shares contained in the charter documents of Tech Full or under any agreement;

	 
	
The Tech Full Subsidiary - Capitalization

	 
	
 
	
(k)
	
Ownership of Shares of the Tech Full Subsidiary. The issued and outstanding share capital of the Tech Full Subsidiary will on Closing consist of 53,000,000 common shares, which shares on Closing shall be validly issued and outstanding as fully paid and non-assessable shares. Tech Full will be at Closing the registered and beneficial owner of all  of the shares of the Tech Full Subsidiary, and such shares will on Closing be free and clear of any and all liens, charges, pledges, encumbrances, restrictions on transfer and adverse claims whatsoever;

	 
	
 
	
(l)
	
No Option, Warrant or Other Right. No person, firm or corporation has any agreement, option, warrant, preemptive right or any other right capable of becoming an agreement, option, warrant or right for the acquisition of shares of the Tech Full Subsidiary held by Tech Full or for the purchase, subscription or issuance of any of the unissued shares in the capital of the Tech Full Subsidiary;

	 
	
Tech Full - Records and Financial Statements

	 
	
 
	
(m)
	
Charter Documents. The charter documents of Tech Full have not been altered since its incorporation date, except as filed in the record books of Tech Full;

	 
	
 
	
(n)
	
Corporate Minute Books. The corporate minute books of Tech Full and the Tech Full Subsidiary are complete and each of the minutes contained therein accurately reflect the actions that were taken at a duly called and held meeting or by consent without a meeting. All actions by Tech Full and the Tech Full Subsidiary which required director or shareholder approval are reflected on the corporate minute books of Tech Full and the Tech Full Subsidiary. Neither Tech Full or and the Tech Full Subsidiary are in violation or breach of, or in default with respect to, any term of their respective Certificates of Incorporation (or other charter documents) or by-laws.

	 
	
 
	
(o)
	
Tech Full Financial Statements. The Tech Full Financial Statements present fairly, in all material respects, the assets and liabilities (whether accrued, absolute, contingent or otherwise) of Tech Full and the Tech Full Subsidiary, on consolidated basis, as of the respective dates thereof, and the sales and earnings of the Tech Full Business during the periods covered thereby, in all material respects, and have been prepared in substantial accordance with generally accepted accounting principles consistently applied;

	 
	
 
	
(p)
	
Tech Full Accounts Payable and Liabilities. There are no material liabilities, contingent or otherwise, of Tech Full or the Tech Full Subsidiary which are not disclosed in Schedule "B" hereto or reflected in the Tech Full Financial Statements except those incurred in the ordinary course of business since the date of the said schedule and the Tech Full Financial Statements, and neither Tech Full nor the Tech Full Subsidiary have guaranteed or agreed to guarantee any debt, liability or other obligation of any person, firm or corporation. Without limiting the generality of the foregoing, all accounts payable and liabilities of Tech Full as of September 30, 2004 are described in Schedule "B" hereto;

 

 

-16-

	 	
(q)
	
Tech Full Accounts Receivable. All the Tech Full Accounts Receivable result from bona fide business transactions and services actually rendered without, to the knowledge and belief of the Tech Full Shareholders, any claim by the obligor for set-off or counterclaim.  Without limiting the generality of the foregoing, all accounts receivable of Tech Full as of September 30, 2004, are described in Schedule "C" hereto;

	 
	
 
	
(r)
	
Tech Full Bank Accounts. All of the Tech Full Bank Accounts, their location, numbers and the authorized signatories thereto are as set forth in Schedule "D" hereto;

	 
	
 
	
(s)
	
No Debt to Related Parties. Except as disclosed in Schedule "E" hereto, Neither Tech Full nor the Tech Full Subsidiary is, and on Closing will not be, indebted to the Tech Full Shareholders nor to any family member thereof, nor to any affiliate, director or officer of Tech Full or the Tech Full Shareholders except accounts payable on account of bona fide business transactions of Tech Full incurred in normal course of Tech Full Business, including employment agreements with the Tech Full Shareholders, none of which are more than 30 days in arrears;

	 
	
 
	
(t)
	
No Related Party Debt to Tech Full. No Tech Full Shareholder nor any director, officer or affiliate of Tech Full are now indebted to or under any financial obligation to Tech Full or the Tech Full Subsidiary on any account whatsoever, except for advances on account of travel and other expenses not exceeding $5,000 in total;

	 
	
 
	
(u)
	
No Dividends. No dividends or other distributions on any shares in the capital of Tech Full have been made, declared or authorized since the date of the Tech Full Financial Statements;

	 
	
 
	
(v)
	
No Payments. No payments of any kind have been made or authorized since the date of the Tech Full Financial Statements to or on behalf of the Tech Full Shareholders or to or on behalf of officers, directors, shareholders or employees of Tech Full or the Tech Full Subsidiary or under any management agreements with Tech Full or the Tech Full Subsidiary, except payments made in the ordinary course of business and at the regular rates of salary or other remuneration payable to them;

	 
	
 
	
(w)
	
No Pension Plans. There are no pension, profit sharing, group insurance or similar plans or other deferred compensation plans affecting Tech Full, other than any such plans disclosed in the Tech Full Financial Statements;

	 
	
 
	
(x)
	
No Adverse Events. Since the date of the Tech Full Financial Statements:

	 
	
 
	 	
(i)
	
there has not been any material adverse change in the consolidated financial position or condition of Tech Full, the Tech Full Subsidiary, its liabilities or the Tech Full Assets or any damage, loss or other change in circumstances materially affecting Tech Full, the Tech Full Business or the Tech Full Assets or Tech Full's right to carry on the Tech Full Business, other than changes in the ordinary course of business, 

	 
	
 
	 	
(ii)
	
there has not been any damage, destruction, loss or other event (whether or not covered by insurance) materially and adversely affecting Tech Full, the Tech Full Subsidiary, the Tech Full Business or the Tech Full Assets,

	 
	
 
	 	
(iii)
	
there has not been any material increase in the compensation payable or to become payable by Tech Full to the Tech Full Shareholders or to any of Tech Full's officers, employees or agents or any bonus, payment or arrangement made to or with any of them,

 

 

-17-

	 	 	
(iv)
	
the Tech Full Business has been and continues to be carried on in the ordinary course,

	 
	
 
	 	
(v)
	
Tech Full has not waived or surrendered any right of material value,

	 
	
 
	 	
(vi)
	
neither Tech Full nor the Tech Full Subsidiary haves discharged or satisfied or paid any lien or encumbrance or obligation or liability other than current liabilities in the ordinary course of business, and 

	 
	
 
	 	
(vii)
	
no capital expenditures in excess of $10,000 individually or $30,000 in total have been authorized or made;

	 
	
Tech Full - Income Tax Matters

	 
	
 
	
(y)
	
Tax Returns. All tax returns and reports of Tech Full and the Tech Full Subsidiary required by law to be filed have been filed and are true, complete and correct, and any taxes payable in accordance with any return filed by Tech Full and the Tech Full Subsidiary or in accordance with any notice of assessment or reassessment issued by any taxing authority have been so paid;

	 
	
 
	
(z)
	
Current Taxes. Adequate provisions have been made for taxes payable for the current period for which tax returns are not yet required to be filed and there are no agreements, waivers, or other arrangements providing for an extension of time with respect to the filing of any tax return by, or payment of, any tax, governmental charge or deficiency by Tech Full. Tech Full and the Tech Full Subsidiary are not aware of any contingent tax liabilities or any grounds which would prompt a reassessment including aggressive treatment of income and expenses in filing earlier tax returns;

	 
	
Tech Full - Applicable Laws and Legal Matters

	 
	
 
	
(aa)
	
Licenses. Tech Full and the Tech Full Subsidiary hold all licenses and permits as may be requisite for carrying on the Tech Full Business in the manner in which it has heretofore been carried on, which licenses and permits have been maintained and continue to be in good standing except where the failure to obtain or maintain such licenses or permits would not have a material adverse effect on the Tech Full Business;

	 
	
 
	
(bb)
	
Applicable Laws. Neither Tech Full nor the Tech Full Subsidiary have been charged with or received notice of breach of any laws, ordinances, statutes, regulations, by-laws, orders or decrees to which they are subject or which applies to them the violation of which would have a material adverse effect on the Tech Full Business, and, to the knowledge of the Tech Full Shareholders, Neither Tech Full nor he Tech Full Subsidiary are in breach of any laws, ordinances, statutes, regulations, by-laws, orders or decrees the contravention of which would result in a material adverse impact on the Tech Full Business; 

	 
	
 
	
(cc)
	
Pending or Threatened Litigation. There is no material litigation or administrative or governmental proceeding pending or threatened against or relating to Tech Full, the Tech Full Subsidiary, the Tech Full Business, or any of the Tech Full Assets, nor do the Tech Full Shareholders have any knowledge of any deliberate act or omission of Tech Full of the Tech Full Subsidiary that would form any material basis for any such action or proceeding;

 

 

-18-

	 	
(dd) 
	
No Bankruptcy. Neither Tech Full nor the Tech Full Subsidiary have made any voluntary assignment or proposal under applicable laws relating to insolvency and bankruptcy and no bankruptcy petition has been filed or presented against Tech Full or the Tech Full Subsidiary and no order has been made or a resolution passed for the winding-up, dissolution or liquidation of Tech Full or the Tech Full Subsidiary;

	 
	 	
(ee)
	
Labor Matters. Neither Tech Full nor the Tech Full Subsidiary are party to any collective agreement relating to the Tech Full Business with any labor union or other association of employees and no part of the Tech Full Business has been certified as a unit appropriate for collective bargaining or, to the knowledge of the Tech Full Shareholders, has made any attempt in that regard.

	 
	
 
	
(ff)
	
Finder's Fees. Except for amounts payable to Century Capital Management, neither Tech Full nor the Tech Full Subsidiary are party to any agreement which provides for the payment of finder's fees, brokerage fees, commissions or other fees or amounts which are or may become payable to any third party in connection with the execution and delivery of this Agreement and the transactions contemplated herein;

	 
	
Execution and Performance of Agreement

	 
	
 
	
(gg)
	
Authorization and Enforceability. The execution and delivery of this Agreement, and the completion of the transactions contemplated hereby, have been duly and validly authorized by all necessary corporate action on the part of Tech Full;

	 
	
 
	
(hh)
	
No Violation or Breach. The execution and performance of this Agreement will not

	
 
	 	
(i)
	
violate the charter documents of Tech Full or result in any breach of, or default under, any loan agreement, mortgage, deed of trust, or any other agreement to which Tech Full or the Tech Full Subsidiary is a party,

	 
	
 
	 	
(ii)
	
give any person any right to terminate or cancel any agreement including, without limitation, Tech Full Material Contracts, or any right or rights enjoyed by Tech Full or the Tech Full Subsidiary,

	 
	
 
	 	
(iii)
	
result in any alteration of Tech Full's or the Tech Full Subsidiary's obligations under any agreement to which Tech Full or the Tech Full Subsidiary is a party including, without limitation, the Tech Full Material Contracts,

	 
	
 
	 	
(iv)
	
result in the creation or imposition of any lien, encumbrance or restriction of any nature whatsoever in favor of a third party upon or against the Tech Full Assets,

	 
	
 
	 	
(v)
	
result in the imposition of any tax liability to Tech Full or the Tech Full Subsidiary relating to Tech Full Assets or the Tech Full Shares, or

	 
	
 
	 	
(vi)
	
violate any court order or decree to which either Tech Full or the Tech Full Subsidiary is subject; 

	 
	
Tech Full Assets - Ownership and Condition

	 
	 	
(ii)
	
Business Assets. The Tech Full Assets, including the Tech Full Subsidiary, comprise all of the property and assets of the Tech Full Business, and neither the Tech Full Shareholders nor any other person, firm or corporation owns any assets used by Tech Full or the Tech Full Subsidiary in operating the Tech Full Business, whether under a lease, rental agreement or other arrangement, other than as disclosed in Schedules "F" or "I" hereto;

 

 

-19-

	 	
(jj)
	
Title. Tech Full or the Tech Full Subsidiary is the legal and beneficial owner of the Tech Full Assets, free and clear of all mortgages, liens, charges, pledges, security interests, encumbrances or other claims whatsoever, save and except as disclosed in Schedules "F" or "I" hereto;

	 
	
 
	
(kk)
	
No Option. No person, firm or corporation has any agreement or option or a right capable of becoming an agreement for the purchase of any of the Tech Full Assets;

	 
	
 
	
(ll)
	
Tech Full Insurance Policies. Tech Full or the Tech Full Subsidiary maintains the public liability insurance and insurance against loss or damage to the Tech Full Assets and the Tech Full Business as described in Schedule "G" hereto;

	 
	
 
	
(mm)
	
Tech Full Material Contracts. The Tech Full Material Contracts listed in Schedule "I" constitute all of the material contracts of Tech Full and the Tech Full Subsidiary;

	 
	
 
	
(nn)
	
No Default. There has not been any default in any material obligation of Tech Full or any other party to be performed under any of Tech Full Material Contracts, each of which is in good standing and in full force and effect and unamended (except as disclosed in Schedule "I"), and Tech Full is not aware of any default in the obligations of any other party to any of the Tech Full Material Contracts;

	 
	
 
	
(oo)
	
No Compensation on Termination. There are no agreements, commitments or understandings relating to severance pay or separation allowances on termination of employment of any employee of Tech Full or the Tech Full Subsidiary.  Neither Tech Full nor the Tech Full Subsidiary is obliged to pay benefits or share profits with any employee after termination of employment except as required by law;

	 
	
Tech Full Assets - Tech Full Equipment

	 
	
 
	
(pp)
	
Tech Full Equipment. The Tech Full Equipment has been maintained in a manner consistent with that of a reasonably prudent owner and such equipment is in good working condition;

	 
	
Tech Full Assets - Tech Full Goodwill and Other Assets

	 
	
 
	
(qq)
	
Tech Full Goodwill. Tech Full and the Tech Full Subsidiary carries on the Tech Full Business only under the name "Harbin Tech Full Electric Co., Ltd." and variations thereof and under no other business or trade names. The Tech Full Shareholders do not have any knowledge of any infringement by Tech Full or the Tech Full Subsidiary of any patent, trademark, copyright or trade secret;

	 
	
The Business of Tech Full

	 
	
 
	
(rr)
	
Maintenance of Business. Since the date of the Tech Full Financial Statements, the Tech Full Business has been carried on in the ordinary course and Tech Full and the Tech Full Subsidiary have not entered into any material agreement or commitment except in the ordinary course; and

	 	 	 
	 	
(ss)
	
Subsidiaries. Except for the Tech Full Subsidiary, Tech Full does not own any subsidiaries and does not otherwise own, directly or indirectly, any shares or interest in any other corporation, partnership, joint venture or firm and Tech Full does not own any subsidiary and does not otherwise own, directly or indirectly, any shares or interest in any other corporation, partnership, joint venture or firm.

 

 

-20-

Non-Merger and Survival

5.2     The representations and warranties of Tech Full contained herein will be true at and as of Closing in all material respects as though such representations and warranties were made as of such time.  Notwithstanding the completion of the transactions contemplated hereby, the waiver of any condition contained herein (unless such waiver expressly releases a party from any such representation or warranty) or any investigation made by Torch, the representations and warranties of Tech Full shall survive the Closing. 

Indemnity

5.3     The Tech Full Shareholders agree to indemnify and save harmless Torch from and against any and all claims, demands, actions, suits, proceedings, assessments, judgments, damages, costs, losses and expenses, including any payment made in good faith in settlement of any claim (subject to the right of the Tech Full Shareholders to defend any such claim), resulting from the breach by any of them of any representation or warranty of such party made under this Agreement or from any misrepresentation in or omission from any certificate or other instrument furnished or to be furnished by Tech Full or the Tech Full Shareholders to Torch hereunder.

ARTICLE 6

COVENANTS OF TECH FULL AND

THE TECH FULL SHAREHOLDERS

Covenants

6.1     Tech Full and the Tech Full Shareholders covenant and agree with Torch that they will:

	 	
(a)
	
Conduct of Business. Until the Closing, conduct the Tech Full Business diligently and in the ordinary course consistent with the manner in which the Tech Full Business generally has been operated up to the date of execution of this Agreement; 

	 
	
 
	
(b)
	
Preservation of Business.  Until the Closing, use their best efforts to preserve the Tech Full Business and the Tech Full Assets and, without limitation, preserve for Torch Tech Full's and the Tech Full Subsidiary's relationships with their suppliers, customers and others having business relations with them;

	 
	
 
	
(c)
	
Access. Until the Closing, give Torch and its representatives full access to all of the properties, books, contracts, commitments and records of Tech Full relating to Tech Full, the Tech Full Business and the Tech Full Assets, and furnish to Torch and its representatives all such information as they may reasonably request;

	 
	
 
	
(d)
	
Procure Consents. Until the Closing, take all reasonable steps required to obtain, prior to Closing, any and all third party consents required to permit the Merger and to preserve and maintain the Tech Full Assets, including the Tech Full Material Contracts, notwithstanding the change in control of Tech Full arising from the Merger;

	 
	
 
	
(e)
	
Reporting and Internal Controls. From and after the Effective Time, the Tech Full Shareholders shall forthwith take all required actions to implement internal controls on the business of the Surviving Company to ensure that the Surviving Company and Torch comply with Section 13(b)(2) of the Securities and Exchange Act of 1934; and

 

 

-21-

	 	
(f)
	
1934 Act Reports.  From and after the Closing Date, take all such steps as are necessary to discharge all reporting obligations imposed upon them by the Securities Exchange Act of 1934.

Authorization

6.2     Tech Full hereby agrees to authorize and direct any and all federal, state, municipal, foreign and international governments and regulatory authorities having jurisdiction respecting Tech Full or the Tech Full Subsidiary to release any and all information in their possession respecting Tech Full or the Tech Full Subsidiary to Torch.  Tech Full shall promptly execute and deliver to Torch any and all consents to the release of information and specific authorizations which Torch reasonably require to gain access to any and all such information.

Survival

6.3     The covenants set forth in this Article shall survive the Closing for the benefit of Torch. 

ARTICLE 7

REPRESENTATIONS AND WARRANTIES OF

THE TECH FULL SHAREHOLDERS RELATING TO TECH FULL SUBSIDIARY

Representations and Warranties

7.1     The Tech Full Shareholders hereby jointly and severally represent and warrant in all material respects to Torch, with the intent that it will rely thereon in entering into this Agreement and in approving and completing the transactions contemplated hereby, that: 

Tech Full Subsidiary - Records and Financial Statements

	 	
(tt)
	
Charter Documents. The charter documents of Tech Full Subsidiary have not been altered since its incorporation date, except as filed in the record books of Tech Full Subsidiary;

	 
	
 
	
(uu)
	
Corporate Minute Books. The corporate minute book of Tech Full Subsidiary is complete and each of the minutes contained therein accurately reflect the actions that were taken at a duly called and held meeting or by consent without a meeting. All actions by Tech Full and the Tech Full Subsidiary which required director or shareholder approval are reflected on the corporate minute books of  Tech Full Subsidiary. Tech Full Subsidiary is not in violation or breach of, or in default with respect to any terms of its Certificate of Incorporation (or other charter documents) or by-laws.

	 
	
 
	
(vv)
	
Tech Full Subsidiary Financial Statements. The Tech Full Subsidiary Financial Statements present fairly, in all material respects, the assets and liabilities (whether accrued, absolute, contingent or otherwise) of Tech Full Subsidiary as of the dates thereof, and the sales and earnings of the Tech Full Subsidiary Business during the periods covered thereby, in all material respects, and have been prepared in substantial accordance with generally accepted accounting principles consistently applied;

	 
	
 
	
(ww)
	
Tech Full Subsidiary Accounts Payable and Liabilities. There are no material liabilities, contingent or otherwise, of Tech Full Subsidiary which are not disclosed in Schedule "B" hereto or reflected in the Tech Full Subsidiary Financial Statements except those incurred in the ordinary course of business since the date of the said schedule and the Tech Full Subsidiary Financial Statements, and Tech Full Subsidiary has not guaranteed or agreed to guarantee any debt, liability or other obligation of any person, firm or corporation. Without limiting the generality of the foregoing, all accounts payable and liabilities of Tech Full Subsidiary as of September 30, 2004 are described in Schedule "B" hereto;

 

-22-

	 	
(xx)
	
Tech Full  Subsidiary Accounts Receivable. All the Tech Full Subsidiary Accounts Receivable result from bona fide business transactions and services actually rendered without, to the knowledge and belief of the Tech Full Shareholders, any claim by the obligor for set-off or counterclaim.  Without limiting the generality of the foregoing, all accounts receivable of Tech Full Subsidiary as of September 30, 2004, are described in Schedule "C" hereto;

	 
	
 
	
(yy)
	
Tech Full Subsidiary Bank Accounts. All of the Tech Full Bank Accounts, their location, numbers and the authorized signatories thereto are as set forth in Schedule "D" hereto;

	 
	
 
	
(zz)
	
No Debt to Related Parties. Except as disclosed in Schedule "E" hereto, Tech Full Subsidiary is, and on Closing will not be, indebted to the Tech Full Shareholders nor to any family member thereof, nor to any affiliate, director or officer of Tech Full Subsidary or the Tech Full Shareholders except accounts payable on account of bona fide business transactions of Tech Full Subsidiary incurred in normal course of Tech Full Subsidiary Business, including employment agreements with the Tech Full Shareholders, none of which are more than 30 days in arrears;

	 
	
 
	
(aaa)
	
No Related Party Debt to Tech Full. No Tech Full Shareholder nor any director, officer or affiliate of Tech Full Subsidiary are now indebted to or under any financial obligation to Tech Full or the Tech Full Subsidiary on any account whatsoever, except for advances on account of travel and other expenses not exceeding $5,000 in total;

	 
	
 
	
(bbb)
	
No Dividends. No dividends or other distributions on any shares in the capital of Tech Full Subsidiary have been made, declared or authorized since the date of the Tech Full Subsidiary Financial Statements;

	 
	
 
	
(ccc)
	
No Payments. No payments of any kind have been made or authorized since the date of the Tech Full Subsidiary Financial Statements to or on behalf of the Tech Full Shareholders or to or on behalf of officers, directors, shareholders or employees of Tech Full Subsidiary or under any management agreements with Tech Full Subsidiary, except payments made in the ordinary course of business and at the regular rates of salary or other remuneration payable to them;

	 
	
 
	
(ddd)
	
No Pension Plans. There are no pension, profit sharing, group insurance or similar plans or other deferred compensation plans affecting Tech Full Subsidiary, other than any such plans disclosed in the Tech Full Subsidiary Financial Statements;

	 
	
 
	
(eee)
	
No Adverse Events. Since the date of the Tech Full Subsidiary Financial Statements:

	 
	
 
	 	
(viii)
	
there has not been any material adverse change in the consolidated financial position or condition of Tech Full Subsidiary, its liabilities or the Tech Full Subsidiary Assets or any damage, loss or other change in circumstances materially affecting Tech Full Subsidiary, the Tech Full Subsidiary Business or the Tech Full Subsidary Assets or Tech Full Subsidiary's right to carry on the Tech Full Subsidiary Business, other than changes in the ordinary course of business, 

	 
	
 
	 	
(ix)
	
there has not been any damage, destruction, loss or other event (whether or not covered by insurance) materially and adversely affecting Tech Full Subsidiary, the Tech Full Subsidiary Business or the Tech Full Subsidiary Assets,

 

 

-23-

	 	 	
(x)
	
there has not been any material increase in the compensation payable or to become payable by Tech Full Subsidiary to the Tech Full Shareholders or to any of Tech Full Subsidiary's officers, employees or agents or any bonus, payment or arrangement made to or with any of them,

	 
	
 
	 	
(xi)
	
the Tech Full Subsidiary Business has been and continues to be carried on in the ordinary course,

	 
	
 
	 	
(xii)
	
Tech Full Subsidiary has not waived or surrendered any right of material value,

	 
	
 
	 	
(xiii)
	
Tech Full Subsidiary has not discharged or satisfied or paid any lien or encumbrance or obligation or liability other than current liabilities in the ordinary course of business, and 

	 
	
 
	 	
(xiv)
	
no capital expenditures in excess of $10,000 individually or $30,000 in total have been authorized or made;

	 
	
Tech Full Subsidiary - Income Tax Matters

	 
	
 
	
(fff)
	
Tax Returns. All tax returns and reports of Tech Full Subsidiary required by law to be filed have been filed and are true, complete and correct, and any taxes payable in accordance with any return filed by Tech Full Subsidiary or in accordance with any notice of assessment or reassessment issued by any taxing authority have been so paid;

	 
	
 
	
(ggg)
	
Current Taxes. Adequate provisions have been made for taxes payable for the current period for which tax returns are not yet required to be filed and there are no agreements, waivers, or other arrangements providing for an extension of time with respect to the filing of any tax return by, or payment of, any tax, governmental charge or deficiency by Tech Full Subsidiary. Tech Full Subsidiary is not aware of any contingent tax liabilities or any grounds which would prompt a reassessment including aggressive treatment of income and expenses in filing earlier tax returns;

	 
	
Tech Full Subsidiary- Applicable Laws and Legal Matters

	 
	
 
	
(hhh)
	
Licenses. Tech Full Subsidiary holds all licenses and permits as may be requisite for carrying on the Tech Full Subsidiary Business in the manner in which it has heretofore been carried on, which licenses and permits have been maintained and continue to be in good standing except where the failure to obtain or maintain such licenses or permits would not have a material adverse effect on the Tech Full Subsidiary Business;

	 
	
 
	
(iii)
	
Applicable Laws. Tech Full Subsidiary has not been charged with or received notice of breach of any laws, ordinances, statutes, regulations, by-laws, orders or decrees to which they are subject or which applies to them the violation of which would have a material adverse effect on the Tech Full Subsidiary Business, and, to the knowledge of the Tech Full Shareholders,  Tech Full Subsidiary is not in breach of any laws, ordinances, statutes, regulations, by-laws, orders or decrees the contravention of which would result in a material adverse impact on the Tech Full Subsidiary Business; 

	 
	
 
	
(jjj)
	
Pending or Threatened Litigation. There is no material litigation or administrative or governmental proceeding pending or threatened against or relating to Tech Full Subsidiary, the Tech Full Subsidiary Business, or any of the Tech Full Subsidiary Assets, nor do the Tech Full Shareholders have any knowledge of any deliberate act or omission of Tech Full Subsidiary that would form any material basis for any such action or proceeding;

 

-24-

	 	
(kkk)
	
No Bankruptcy. Tech Full Subsidiary has not made any voluntary assignment or proposal under applicable laws relating to insolvency and bankruptcy and no bankruptcy petition has been filed or presented against Tech Full Subsidiary and no order has been made or a resolution passed for the winding-up, dissolution or liquidation of  Tech Full Subsidiary;

	 
	
 
	
(lll)
	
Labor Matters. Tech Full Subsidiary  is not a party to any collective agreement relating to the Tech Full Subsidiary Business with any labor union or other association of employees and no part of the Tech Full Subsidiary Business has been certified as a unit appropriate for collective bargaining or, to the knowledge of the Tech Full Shareholders, has made any attempt in that regard.

	 
	
 
	
(mmm)
	
Finder's Fees. Tech Full Subsidiary is not a  party to any agreement which provides for the payment of finder's fees, brokerage fees, commissions or other fees or amounts which are or may become payable to any third party in connection with the execution and delivery of this Agreement and the transactions contemplated herein;

	 
	
Tech Full Subsidiary Assets - Ownership and Condition

	 
	
 
	
(nnn)
	
Business Assets. The Tech Full Subsidiary Assets comprise all of the property and assets of the Tech Full Subsidiary Business, and neither the Tech Full Shareholders nor any other person, firm or corporation owns any assets used by Tech Full Subsidiary in operating the Tech Full Subsidiary Business, whether under a lease, rental agreement or other arrangement, other than as disclosed in Schedules "F" or "I" hereto;

	 
	
 
	
(ooo)
	
Title. Tech Full Subsidiary is the legal and beneficial owner of the Tech Full  Subsidiary Assets, free and clear of all mortgages, liens, charges, pledges, security interests, encumbrances or other claims whatsoever, save and except as disclosed in Schedules "F" or "I" hereto;

	 
	
 
	
(ppp)
	
No Option. No person, firm or corporation has any agreement or option or a right capable of becoming an agreement for the purchase of any of the Tech Full Subsidiary Assets;

	 
	
 
	
(qqq)
	
Tech Full Subsidiary Insurance Policies. Tech Full Subsidiary maintains the public liability insurance and insurance against loss or damage to the Tech Full Subsidiary Assets and the Tech Full Subsidiary Business as described in Schedule "G" hereto;

	 
	
 
	
(rrr)
	
Tech Full Subsidiary  Material Contracts. The Tech Full Subsidiary Material Contracts listed in Schedule "I" constitute all of the material contracts of Tech Full Subsidiary;

	 
	
 
	
(sss)
	
No Default. There has not been any default in any material obligation of Tech Full Subsidiary or any other party to be performed under any of Tech Full Subsidiary Material Contracts, each of which is in good standing and in full force and effect and unamended (except as disclosed in Schedule "I"), and Tech Full Shareholders are not aware of any default in the obligations of any other party to any of the Tech Full Subsidiary Material Contracts;

	 
	
 
	
(ttt)
	
No Compensation on Termination. There are no agreements, commitments or understandings relating to severance pay or separation allowances on termination of employment of any employee of Tech Full Subsidiary.  Tech Full Subsidiary is not obliged to pay benefits or share profits with any employee after termination of employment except as required by law;

 

 

-25-

	
Tech Full Subsidiary Assets - Tech Full Subsidiary Equipment

	
 
	
(uuu) 
	
Tech Full Subsidiary Equipment. The Tech Full Subsidiary Equipment has been maintained in a manner consistent with that of a reasonably prudent owner and such equipment is in good working condition;

	 
	
Tech Full Subsidiary Assets - Tech Full Subsidiary Goodwill and Other Assets

	
 
	
(vvv)
	
Tech Full Subsidiary Goodwill. Tech Full Subsidiary carries on the Tech Full Subsidiary Business only under the name "Harbin Tech Full Electric Co., Ltd." and variations thereof and under no other business or trade names. The Tech Full Shareholders do not have any knowledge of any infringement by Tech Full Subsidiary of any patent, trademark, copyright or trade secret;

	 
	
The Business of Tech Full Subsidiary

	
 
	
(www)
	
Maintenance of Business. Since the date of the Tech Full Subsidiary Financial Statements, the Tech Full Subsidiary Business has been carried on in the ordinary course and Tech Full Subsidiary have not entered into any material agreement or commitment except in the ordinary course; and

	 
	
 
	
(xxx)
	
Subsidiaries. Tech Full Subsidiary does not own any subsidiaries and does not otherwise own, directly or indirectly, any shares or interest in any other corporation, partnership, joint venture or firm and Tech Full Subsidiary does not own any subsidiary and does not otherwise own, directly or indirectly, any shares or interest in any other corporation, partnership, joint venture or firm.

	 
	
Non-Merger and Survival

	 
	
7.2
	
The representations and warranties of Tech Full Shareholders relating to Tech Full Subsidiary contained herein will be true at and as of Closing in all material respects as though such representations and warranties were made as of such time.  Notwithstanding the completion of the transactions contemplated hereby, the waiver of any condition contained herein (unless such waiver expressly releases a party from any such representation or warranty) or any investigation made by Torch, the representations and warranties of Tech Shareholders relating to Tech Full Subsidiary shall survive the Closing. 

	 
	
ARTICLE 8

	
COVENANTS RELATING TO TECH FULL SUBSIDIARY BY 

	
THE TECH FULL SHAREHOLDERS

	
Covenants

	 
	
8.1
	
Tech Full Shareholders covenant and agree with Torch that they will:

	 
	
 
	
(g)
	
Conduct of Business. Until the Closing, conduct the Tech Full Subsidiary Business diligently and in the ordinary course consistent with the manner in which the Tech Full Subsidiary Business generally has been operated up to the date of execution of this Agreement; 

	 
	
 
	
(h)
	
Preservation of Business.  Until the Closing, use their best efforts to preserve the Tech Full Subsidiary Business and the Tech Full Subsidiary Assets and, without limitation, preserve for Tech Full Subsidiary's relationships with their suppliers, customers and others having business relations with them;

	 
	
 
	
(i)
	
Access. Until the Closing, give Torch and its representatives full access to all of the properties, books, contracts, commitments and records of Tech Full Subsidiary Business and the Tech Full Subsidiary Assets, and furnish to Torch and its representatives all such information as they may reasonably request;

 

-26-

	 	
(j)
	
Procure Consents. Until the Closing, take all reasonable steps required to obtain, prior to Closing, any and all third party consents required to permit the Merger and to preserve and maintain the Tech Full Subsidiary Assets, including the Tech Full Subsidiary Material Contracts;

Survival

8.3     The covenants set forth in this Article shall survive the Closing for the benefit of Torch. 

ARTICLE 9

CONDITIONS PRECEDENT

Conditions Precedent in favor of Torch

9.1     Torch's obligations to carry out the transactions contemplated hereby are subject to the fulfillment of each of the following conditions precedent on or before the Closing:

	 	
(a)
	
all documents or copies of documents required to be executed and delivered to Torch hereunder will have been so executed and delivered;

	 
	
 
	
(b)
	
all of the terms, covenants and conditions of this Agreement to be complied with or performed by Tech Full or the Tech Full Shareholders at or prior to the Closing will have been complied with or performed;

	 
	
 
	
(c)
	
title to the Tech Full Shares held by the Tech Full Shareholders and to the Tech Full Assets will be free and clear of all mortgages, liens, charges, pledges, security interests, encumbrances or other claims whatsoever, save and except as disclosed herein;

	 
	
 
	
(d)
	
the Certificate of Merger shall be executed by Tech Full in form acceptable for filing with the Delaware Secretary of State;

	 
	
 
	
(e)
	
subject to Article 10 hereof, there will not have occurred

	 
	
 
	 	
(i)
	
any material adverse change in the financial position or condition of Tech Full, its liabilities or the Tech Full Assets or any damage, loss or other change in circumstances materially and adversely affecting Tech Full, the Tech Full Business or the Tech Full Assets or Tech Full's right to carry on the Tech Full Business, other than changes in the ordinary course of business, none of which has been materially adverse, or

	 
	
 
	 	
(ii)
	
any damage, destruction, loss or other event, including changes to any laws or statutes applicable to Tech Full or the Tech Full Business (whether or not covered by insurance) materially and adversely affecting Tech Full, the Tech Full Business or the Tech Full Assets; 

	 
	
 
	
(f)
	
the transactions contemplated hereby shall have been approved by all other regulatory authorities having jurisdiction over the subject matter hereof, if any;

	 
	
 
	
(g)
	
that the Tech Full Shareholders have completed and delivered Schedule "S" attached to this Agreement to Torch in a form satisfactory to Torch;

	 
	
 
	
(h)
	
that Torch has redeemed all Torch Common Shares held by Frank Torchia; and

 

 

-27-

	 	
(i)
	
that Torch has repaid Frank Torchia for his shareholder loan.

Waiver by Torch

9.2     The conditions precedent set out in the preceding section are inserted for the exclusive benefit of Torch and any such condition may be waived in whole or in part by Torch at or prior to the Closing by delivering to Tech Full a written waiver to that effect signed by Torch. In the event that the conditions precedent set out in the preceding section are not satisfied on or before the Closing, Torch shall be released from all obligations under this Agreement.

Conditions Precedent in Favor of Tech Full and the Tech Full Shareholders

9.3     The obligations of Tech Full and the Tech Full Shareholders to carry out the transactions contemplated hereby are subject to the fulfillment of each of the following conditions precedent on or before the Closing:

	 	
(a)
	
all documents or copies of documents required to be executed and delivered to Tech Full hereunder will have been so executed and delivered;

	 
	
 
	
(b)
	
all of the terms, covenants and conditions of this Agreement to be complied with or performed by Torch at or prior to the Closing will have been complied with or performed;

	 
	
 
	
(c)
	
Torch will have delivered the Acquisition Shares to be issued pursuant to the terms of the Merger to Tech Full at the Closing and the Acquisition Shares will be registered on the books of Torch in the names of the holders of Tech Full Shares at the Effective Time;

	 
	
 
	
(d)
	
title to the Acquisition Shares will be free and clear of all mortgages, liens, charges, pledges, security interests, encumbrances or other claims whatsoever;

	 
	
 
	
(e)
	
the Certificate of Merger shall be executed by the Acquirer in form acceptable for filing with the Delaware Secretary of State; 

	 
	
 
	
(f)
	
subject to Article 8 hereof, there will not have occurred

	 
	
 
	 	
(i)
	
any material adverse change in the financial position or condition of Torch, its subsidiaries, their liabilities or the Torch Assets or any damage, loss or other change in circumstances materially and adversely affecting Torch, the Torch Business or the Torch Assets or Torch' right to carry on the Torch Business, other than changes in the ordinary course of business, none of which has been materially adverse, or

	 
	
 
	 	
(ii)
	
any damage, destruction, loss or other event, including changes to any laws or statutes applicable to Torch or the Torch Business (whether or not covered by insurance) materially and adversely affecting Torch, its subsidiaries, the Torch Business or the Torch Assets;

	 
	
 
	
(j)
	
the transactions contemplated hereby shall have been approved by all other regulatory authorities having jurisdiction over the subject matter hereof, if any; and

	 
	
 
	
(k)
	
the satisfaction of all liabilities of Torch on or prior to the Closing Date, other than those liabilities to be transferred to Mr. Torchia, save and except for liabilities incurred in connection with the Merger. 

 

 

-28-

Waiver by Tech Full and the Tech Full Shareholders

9.4     The conditions precedent set out in the preceding section are inserted for the exclusive benefit of Tech Full and the Tech Full Shareholders and any such condition may be waived in whole or in part by Tech Full or the Tech Full Shareholders at or prior to the Closing by delivering to Torch a written waiver to that effect signed by Tech Full and the Tech Full Shareholders. In the event that the conditions precedent set out in the preceding section are not satisfied on or before the Closing, Tech Full and the Tech Full Shareholders shall be released from all obligations under this Agreement.

Nature of Conditions Precedent

9.5     The conditions precedent set forth in this Article are conditions of completion of the transactions contemplated by this Agreement and are not conditions precedent to the existence of a binding agreement. Each party acknowledges receipt of the sum of $1.00 and other good and valuable consideration as separate and distinct consideration for agreeing to the conditions of precedent in favor of the other party or parties set forth in this Article.

Termination

9.6     Notwithstanding any provision herein to the contrary, if the Closing does not occur on or before February 1, 2005, this Agreement will be at an end and will have no further force or effect, unless otherwise agreed upon by the parties in writing.

Confidentiality

9.7     Notwithstanding any provision herein to the contrary, the parties hereto agree that the existence and terms of this Agreement are confidential and that if this Agreement is terminated pursuant to the preceding section the parties agree to return to one another any and all financial, technical and business documents delivered to the other party or parties in connection with the negotiation and execution of this Agreement and shall keep the terms of this Agreement and all information and documents received from Tech Full and Torch and the contents thereof confidential and not utilize nor reveal or release same, provided, however, that Torch will be required to issue a news release regarding the execution and consummation of this Agreement and file a Current Report on Form 8-K with the Securities and Exchange Commission respecting the proposed Merger contemplated hereby together with such other documents as are required to maintain the currency of Torch's filings with the Securities and Exchange Commission.

ARTICLE 10

RISK

Material Change in the Business of Tech Full

10.1     If any material loss or damage to the Tech Full Business occurs prior to Closing and such loss or damage, in Torch' reasonable opinion, cannot be substantially repaired or replaced within sixty (60) days, Torch shall, within two (2) days following any such loss or damage, by notice in writing to Tech Full, at its option, either:

	 	
(a) 
	
terminate this Agreement, in which case no party will be under any further obligation to any other party; or

	 
	
 
	
(b) 
	
elect to complete the Merger and the other transactions contemplated hereby, in which case the proceeds and the rights to receive the proceeds of all insurance covering such loss or damage will, as a condition precedent to Torch' obligations to carry out the transactions contemplated hereby, be vested in Tech Full or otherwise adequately secured to the satisfaction of Torch on or before the Closing Date.

 

-29-

Material Change in the Torch Business

10.2     If any material loss or damage to the Torch Business occurs prior to Closing and such loss or damage, in Tech Full's reasonable opinion, cannot be substantially repaired or replaced within sixty (60) days, Tech Full shall, within two (2) days following any such loss or damage, by notice in writing to Torch, at its option, either:

	 	
(a)
	
terminate this Agreement, in which case no party will be under any further obligation to any other party; or

	 
	
 
	
(b)
	
elect to complete the Merger and the other transactions contemplated hereby, in which case the proceeds and the rights to receive the proceeds of all insurance covering such loss or damage will, as a condition precedent to Tech Full's obligations to carry out the transactions contemplated hereby, be vested in Torch or otherwise adequately secured to the satisfaction of Tech Full on or before the Closing Date.

ARTICLE 11

CLOSING

Closing

11.1     The Merger and the other transactions contemplated by this Agreement will be closed at the Place of Closing in accordance with the closing procedure set out in this Article, but not later than February 1, 2005.  In the event Closing does not occur on or before February 1, 2005, this agreement will terminate and be of no further force and effect

Documents to be Delivered by Tech Full

11.2     On or before the Closing, Tech Full and the Tech Full Shareholders will deliver or cause to be delivered to Torch:

	 	
(a)
	
the original or certified copies of the charter documents of Tech Full and all corporate records documents and instruments of Tech Full  and Tech Full Subsidiary and all books and accounts of Tech Full and Tech Full Subsidiary;

	 
	
 
	
(b)
	
all reasonable consents or approvals required to be obtained by Tech Full for the purposes of completing the Merger and preserving and maintaining the interests of Tech Full under any and all Tech Full Material Contracts and in relation to Tech Full Assets;

	 
	
 
	
(c)
	
certified copies of such resolutions of the shareholders and directors of Tech Full as are required to be passed to authorize the execution, delivery and implementation of this Agreement;

	 
	
 
	
(d)
	
an acknowledgement from Tech Full and the Tech Full Shareholders of the satisfaction of the conditions precedent set forth in section 7.3 hereof;

	 
	
 
	
(e)
	
the Certificate of Merger, duly executed by Tech Full; 

	 
	
 
	
(f)
	
such other documents as Torch may reasonably require to give effect to the terms and intention of this Agreement; and

	 
	
 
	
(g)
	
completed and signed Schedule "S" to this Agreement.

 

-30-

Documents to be Delivered by Torch

11.3     On or before the Closing, Torch shall deliver or cause to be delivered to Tech Full and the Tech Full Shareholders:

	 	
(a)
	
share certificates representing the Acquisition Shares duly registered in the names of the holders of shares of Tech Full Common Stock;

	 
	
 
	
(b)
	
certified copies of such resolutions of the directors of Torch as are required to be passed to authorize the execution, delivery and implementation of this Agreement;

	 
	
 
	
(c)
	
a certified copy of a resolution of the directors of Torch dated as of the Closing Date appointing the nominees of Tech Full as officers of Tech Full;

	 
	
 
	
(d)
	
an undated resolution of the directors of Torch appointing the nominee of the Tech Full Shareholders listed below to the board of directors of Torch;

	 
	
 
	
(e)
	
the resignation of Frank Torchia as a director of Torch and as all officer positions he holds at Closing;

	 
	
 
	
(f)
	
an acknowledgement from Torch of the satisfaction of the conditions precedent set forth in section 7.1 hereof;

	 
	
 
	
(g)
	
the Certificate of Merger, duly executed by the Acquirer;

	 
	
 
	
(h)
	
such other documents as Tech Full may reasonably require to give effect to the terms and intention of this Agreement.

	 
	
 
	
(i)
	
a copy of the information required by section 14(f) and regulation 14f-1 of the Securities Exchange Act of 1934 filed with the Securities and Exchange Commission; and,

	 
	
 
	
(j)
	
a copy of the Form 8-K filed with the Securities and Exchange Commission disclosing the execution of this Agreement.  With the exception of this item (j) and item (i) set forth above, all subsequent filings with the Securities and Exchange Commission will be the responsibility of  management of Torch post-Closing.

ARTICLE 12

POST-CLOSING MATTERS

Forthwith after the Closing, the Tech Full Shareholders, as the case may be, agree to use all their best efforts to cause the following to be completed:

	 	
(a)
	
file the Certificate of Merger with Secretary of State of the State of Delaware;

	 
	
 
	
(b)
	
issue a news release reporting the Closing and make all requisite Form 8-K filings with the Securities and Exchange Commission in connection with the Closing of the transactions contemplated in this Agreement;

	 
	
 
	
(c)
	
file reports on Forms 13D and 3 with the Securities and Exchange Commission disclosing the acquisition of the Acquisition Shares by the Tech Full Shareholders;

 

-31-

	 	
(d)
	
within 10 days of the Closing, take such steps are required to change the name of Torch to "Harbin Electric, Inc." or such similar name as may be acceptable to the board of directors of Torch; and

	 
	
 
	
(e)
	
within 10 days of the Closing, take such steps are required to effectuate a 1.5-for-one forward split of the Torch Common Shares by way of stock dividend.

ARTICLE 13

GENERAL PROVISIONS

Arbitration

13.1     The parties hereto shall attempt to resolve any dispute, controversy, difference or claim arising out of or relating to this Agreement by negotiation in good faith.  If such good negotiation fails to resolve such dispute, controversy, difference or claim within fifteen (15) days after any party delivers to any other party a notice of its intent to submit such matter to arbitration, then any party to such dispute, controversy, difference or claim may submit such matter to arbitration in the City of New York, New York.

Notice

13.2     Any notice required or permitted to be given by any party will be deemed to be given when in writing and delivered to the address for notice of the intended recipient by personal delivery, prepaid single certified or registered mail, or telecopier. Any notice delivered by mail shall be deemed to have been received on the fourth business day after and excluding the date of mailing, except in the event of a disruption in regular postal service in which event such notice shall be deemed to be delivered on the actual date of receipt. Any notice delivered personally or by telecopier shall be deemed to have been received on the actual date of delivery.

Addresses for Service

13.3     The address for service of notice of each of the parties hereto is as follows:

	 	
(a)
	
Torch or the Acquirer:

	 
	 	 	
Torch Executive Services Ltd.

	 	 	
124 Minikada Bay

	 	 	
Winnipeg, Manitoba

	 	 	
Canada R2C 0G7

	 	 	
Attn:  Frank Torchia, President

	 	 	
Phone:  (204) 222-1959

	 
	 	 	
With a copy to:

	 
	 	 	
Conrad C. Lysiak

	 	 	
Attorney at Law

	 	 	
601 West First Avenue

	 	 	
Suite 503

	 	 	
Spokane, Washington  99201

	 	 	
Phone:  (509) 624-1475

	 	 	
Telecopier: (509) 747-1770

 

 

-32-

	 	
(b)
	
Tech Full or the Tech Full Shareholders:

	 
	 	 	
Tech Full International, Inc.

	 
	 	 	
No. 9, Ha Ping Xi Lu

	 	 	
Ha Ping Lu Ji Zhong Qu

	 	 	
Harbin Kai Fa Qu

	 	 	
Harbin, Postal Code: 150001

	 	 	
China

	 	 	
Office: 86-82629583

	 	 	
Fax: 86-82621768

	 
	 	 	
With a copy to:

	 
	 	 	
Sichenzia Ross Friedman Ference LLP

	 	 	
1065 Avenue of the Americas

	 	 	
New York, New York 10018

	 	 	
Attn:  Marc Ross, Esq.

	 	 	
Phone:  (212) 930-9700

	 	 	
Telecopier:  (212) 930-9725

Change of Address

13.4     Any party may, by notice to the other parties change its address for notice to some other address in North America and will so change its address for notice whenever the existing address or notice ceases to be adequate for delivery by hand. A post office box may not be used as an address for service.

Further Assurances

13.5     Each of the parties will execute and deliver such further and other documents and do and perform such further and other acts as any other party may reasonably require to carry out and give effect to the terms and intention of this Agreement.

Time of the Essence

13.6     Time is expressly declared to be the essence of this Agreement.

Entire Agreement

13.7     The provisions contained herein constitute the entire agreement among Tech Full, the Tech Full Shareholders, the Acquirer and Torch respecting the subject matter hereof and supersede all previous communications, representations and agreements, whether verbal or written, among Tech Full, the Tech Full Shareholders, the Acquirer and Torch with respect to the subject matter hereof.

Enurement

13.8     This Agreement will enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and permitted assigns.

 

 

-33-

Assignment

13.9     This Agreement is not assignable without the prior written consent of the parties hereto. 

Counterparts

13.10     This Agreement may be executed in counterparts, each of which when executed by any party will be deemed to be an original and all of which counterparts will together constitute one and the same Agreement. Delivery of executed copies of this Agreement by telecopier will constitute proper delivery, provided that originally executed counterparts are delivered to the parties within a reasonable time thereafter.

 

[The remainder of this page has intentionally been left blank]

 

 

 

 

 

 

 

 

 

 

 

 

 

-34-

Applicable Law - EXCLUSIVE JURISDICTION AND VENUE

13.11     This Agreement is subject to the laws of the State of  Nevada and exclusive jurisdiction and venue of any action brought under this agreement will be in the state or federal courts of the State of Nevada.

 

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

	 	
TORCH EXECUTIVE SERVICES LTD.

	 
	 
	 
	 	
By:
	
/s/ Frank Torchia

	 	 	
Frank Torchia, President

	 
	
/s/ Richard Achron

	
Witness

	 
	
Richard Achron

	
Name

	 
	
155 - 11960 Hammersmith Way

	
Address

	 
	
Richmond, BC V7A 5C9

	 
	 	
TORCH SUBSIDIARY, INC.

	 
	 
	 	
By:
	
/s/ Frank Torchia

	 	 	
Frank Torchia, President

	 
	
/s/ Richard Achron

	
Witness

	 
	
Richard Achron

	
Name

	 
	
155 - 11960 Hammersmith Way

	
Address

	 
	
Richmond, BC   V7A 5C9

 

 

 

 

-35-

	 	
TECH FULL INTERNATIONAL INC.

	 
	 
	 
	 	
By:
	
/s/ Tinafu Yang

	 	 	
Tianfu Yang, President

	 
	
/s/ Weiguo Wang

	
Witness Signature

	 
	
Weiguo Wang

	
Name (Please print)

	 
	
Floor 15, the Union Plaza, No.20 Chaoyangmenwai

	
Dajie,Beijing ,Postal Code: 100020 ,China

	
Address (Please print)

	 
	 
	 
	 	
TECH FULL SHAREHOLDERS

	 
	 
	 	
/s/ Tianfu Yang

	 	
Tianfu Yang

	 
	 
	 	
/s/ Tianli Yang

	 	
Tianli Yang

	 
	 
	 	
/s/ Suofei Xu

	 	
Suofei Xu

	 
	 
	 	
/s/ Lianying Wang

	 	
Lianying Wang

	 
	 
	 	
/s/ Zedong Xu

	 	
Zedong Xu

	 
	 
	 	
/s/ Yunyue Ye

	 	
Yunyue Ye

 

 

 

 

-36-Exhibit 10.8

                                 LOAN AGREEMENT

                            DATED AS OF July 30, 2004

                                     BETWEEN

                           R.J. HALDEN HOLDINGS, INC.

                                       AND

                      URBAN TELEVISION NETWORK CORPORATION

                                 LOAN AGREEMENT

         This Loan and Security Agreement (this "Agreement") is made and entered
into as of July 30, 2004, by and between Urban Television Network Corporation, a
Nevada  corporation  (the "Company"),  and R.J. Halden Holdings,  Inc., a Nevada
corporation (the "Lender").

                                    ARTICLE 1

                           AMOUNT AND TERMS OF CREDIT

1.1.  SECURED TERM LOAN.  Subject to the terms and conditions of this Agreement,
at the Closing,  periodically  Lender  agrees to lend and the Company  agrees to
borrow an amount  pursuant to a  promissory  note in the form of Exhibit A, with
appropriate  insertions  (herein called  Lender's  "Note") to be dated as of the
Closing  Date (as  defined  herein).  Additional  amounts  may be  loaned to the
Company by Lender during the Commitment  Period, so long as the aggregate amount
of the Loans outstanding at any time does not exceed the Maximum Loan Amount. No
additional  amounts may be loaned to the Company  hereunder after the expiration
of the  Commitment  Period.  At the time  that  additional  amounts  are  loaned
hereunder,  the Company  shall (a) prepare a  promissory  note to Lender for the
additional amount loaned.

1.2 CLOSING.  The funding of the initial Loan (the  "Closing")  shall occur upon
the  satisfaction  of all  conditions  to Closing  specified in Article 4 hereof
("Closing  Date"),  and may be  accomplished  via the exchange of all  requisite
documentation by overnight mail, messenger, e-mail or telecopy.

1.2.  DOCUMENTATION  EXPENSES.  The Company  shall pay all  reasonable  fees and
expenses  relating to the  negotiation and preparation of this Agreement and the
consummation of the transactions contemplated hereby. To the extent the same are
known, the Company shall pay all such fees and expenses on the Closing Date.

ARTICLE 2

NOTE PAYMENTS AND CONVERSION PRIVILEGES

2.1. INTEREST PAYMENTS. The principal balance due and owing on the Loan(s) shall
bear  interest  as stated in the Note and shall be due and  payable as stated in
the Note.

2.2. PRINCIPAL  PAYMENTS.  Principal payments shall be due and payable as stated
in the Note(s).

2.3. VOLUNTARY PREPAYMENT. The Company may from time to time, without premium or
penalty,  prepay the  Loan(s) in whole or in part.  Any  prepayment  of the full
amount of the Loan(s) shall include all accrued interest  thereon.  All payments
and  prepayments  of the  Loan(s)  shall be first  applied to accrued and unpaid
interest on the unpaid  principal  balance of the Loan(s)and  the remainder,  if
any, to any unpaid principal balance.

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2.4 PAYMENTS TO LENDER. All payments,  distributions,  collections or recoveries
made hereunder and under the other Loan Documents shall be made to the Lender at
the time of any such payment.

2.5  CONVERSION  PRIVILEGES.  The  Lender  shall  be  entitled  to  convert  the
outstanding  balance of the Loan(s) and accrued  interest  thereon,  at any time
before the maturity date of the Loan(s) or date the Company  announces intent to
prepay the Loan(s), at the rate of five shares of the Company's common stock for
each $1.00 of Loan balance and accrued interest thereon.

                                    ARTICLE 3

                         WARRANTIES AND REPRESENTATIONS

The Company represents and warrants to Lender as follows:

3.1. CORPORATE ORGANIZATION AND AUTHORITY. The Company,

     (a) is a corporation duly organized,  validly existing and in good standing
under the laws of its jurisdiction of incorporation;

     (b) has all requisite  power and  authority and all necessary  licenses and
permits to own and operate its  properties  and to carry on its  business as now
conducted and as presently proposed to be conducted;

     (c) has duly taken all action  necessary to  authorize  the  execution  and
delivery by it of the Loan  Documents and to authorize the  consummation  of the
transactions  contemplated  thereby  and  the  performance  of  its  obligations
hereunder;

     (d) is duly authorized to borrow funds hereunder;

     (e) the Company is duly  licensed or qualified and is in good standing as a
foreign  corporation  in each  jurisdiction  wherein the nature of the  business
transacted by it or the nature of the property  owned or leased by it makes such
licensing or qualification necessary; and

3.2.  FULL  DISCLOSURE.  All  filings of the  Company  with the  Securities  and
Exchange  Commission ("SEC Filings") have been timely made, are true and correct
and are not being  investigated,  challenged or  supplemented  or amended in any
way.

3.3. PENDING  LITIGATION.  Except as may be set forth in the SEC Filings,  there
are no  proceedings  or  governmental  investigations  pending  or,  to the best
knowledge of the  Company,  threatened  against or affecting  the Company in any
court or before any governmental authority or arbitration board or tribunal, (b)
there are no outstanding judgments, injunctions, writs, rulings or orders by any
such court,  governmental  authority,  arbitration board or tribunal against the
Company or any of the Company's  stockholders,  partners,  directors or officers
and counsel which could cause a Material Adverse Change,  and (c) the Company is
not in default with respect to contracts or agreements to which it is a party or
any  order of any  court  or  governmental  authority  or  arbitration  board or
tribunal.

3.4. NO  CONFLICTS.  The  borrowing  under the  Loan(s) and the  issuance of the
Note(s)  and  compliance  by the  Company  with  all of the  provisions  of this
Agreement,  the  Note(s)  and the other Loan  Documents  do not and will not (i)
violate  any  provisions  of any law or any order of any  court or  governmental
authority or agency,  (ii)  conflict  with or result in any breach of any of the
terms,   conditions  or  provisions  of,  or  constitute  a  default  under  the
Certificate of  Incorporation or Bylaws of the Company or any indenture or other
contract or agreement or  instrument to which the Company is a party or by which
it may be bound,  (iii) result in the acceleration of any  Indebtedness  owed by
the Company,  or (iv) result in the imposition of any liens or  encumbrances  on
any property of the Company,  except as expressly  contemplated  or permitted in
the Loan Documents.

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3.5. This section left blank intentionally.

3.6. GOVERNMENTAL  CONSENT. No approval,  consent or withholding of objection on
the part of any  regulatory  body,  state,  Federal or local,  is  necessary  in
connection with the execution and delivery by the Company of this Agreement, the
Note(s) or the Loan  Documents  or  compliance  by the  Company  with any of the
provisions of this Agreement, the Note(s) or the Loan Documents.

3.7. USE OF PROCEEDS. The Company will use the Loan(s) proceeds as follows:

     (a) to fund the Company's operations.

3.8.  ENFORCEABLE  OBLIGATIONS.  This Agreement is, and the other Loan Documents
when duly executed and delivered will be, legal,  valid and binding  obligations
of the  Company,  enforceable  in  accordance  with their  terms  except as such
enforcement may be limited by bankruptcy,  insolvency or similar laws of general
application relating to the enforcement of creditors' rights.

3.9. OTHER OBLIGATIONS. The Company has outstanding Liabilities of the following
kind,  including,   but  not  limited  to  programming  contracts,   affiliation
agreements,  and satellite space and satellite  uplink  agreements which are, in
the aggregate, material to the Company or material with respect to the Company's
consolidated financial condition which have been disclosed in the company's last
10K.

3.10. LABOR DISPUTES AND ACTS OF GOD. Except as disclosed in this Loan Agreement
or  other  Schedules  to this  Loan  Agreement,  neither  the  business  nor the
properties of the Company have been affected by any fire,  explosion,  accident,
strike,  lockout or other  labor  dispute,  drought,  storm,  hail,  earthquake,
embargo,  act of God or of the public  enemy or other  casualty  (whether or not
covered by insurance), which could cause a Material Adverse Change.

3.11.  NAMES AND PLACES OF BUSINESS.  The Company has not,  during the preceding
five  years,  had,  been known by, or used any other trade or  fictitious  name,
except as disclosed in the Company's SEC filings.  Except as otherwise indicated
in the SEC filings,  the chief executive  office and principal place of business
of the  Company is (and for the  preceding  five years has been)  located at the
address of the Company set out on the signature pages hereto.

3.12. GOVERNMENT REGULATION.  The Company is not subject to regulation under the
Public  Utility  Holding  Company  Act of  1935,  the  Federal  Power  Act,  the
Investment  Company Act of 1940 (as any of the preceding acts have been amended)
or any other law which  regulates the incurring by the Company of  indebtedness,
including laws relating to common contract  carriers or the sale of electricity,
gas, steam, water or other public utility services.

3.13. SOLVENCY. Upon giving effect to the issuance of the Note(s), the execution
of the Loan Documents by the Company and the  consummation  of the  transactions
contemplated  hereby,  the  Company  will be  solvent  (as such  term is used in
applicable bankruptcy, liquidation, receivership, insolvency or similar laws).

3.14. TITLE TO PROPERTIES;  LICENSES.  The Company has good and defensible title
to all of the Collateral and to all of its material  properties and assets, free
and clear of all Liens, encumbrances,  or adverse claims, everything is free and
clear  of all  impediments  to the  use of such  properties  and  assets  in the
Company's  business.  The Company possesses all licenses,  permits,  franchises,
patents, copyrights, trademarks and trade names, and other intellectual property
(or otherwise  possesses  the right to use such  intellectual  property  without
violation of the rights of any other  Person)  which are  necessary to carry out
its business as presently  conducted  and as presently  proposed to be conducted
hereafter,  and the Company is not in violation  in any material  respect of the
terms under which it possesses  such  intellectual  property or the right to use
such intellectual property.

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<PAGE>

3.15. SECURITY DOCUMENT  REPRESENTATIONS AND WARRANTIES.  Capitalized terms used
in this section,  not otherwise  defined in this  Agreement,  and defined in the
Security  Documents shall when used in this section have the meanings given them
in the Security Documents. Exhibit 10.8

     (a) OWNERSHIP FREE OF LIENS. No effective financing  statement,  other than
the financing  statements  relative to the bridge loans from Richard Halden,  or
other  registration or instrument  similar in effect covering all or any part of
the  Collateral is on file in any recording  office except any,  which have been
filed in favor of Lender  relating to the Security  Documents and any which have
been filed to perfect or protect any Permitted  Lien.  None of the Collateral is
in the  possession  of any Person other than the Company or the Lenders,  except
for Collateral being transported in the ordinary course of business.

     (b) RECEIVABLES.  Each Receivable  represents the valid and legally binding
indebtedness of a bona fide account debtor arising from the sale or lease by the
Company of goods or the  rendition by the Company of services and is not subject
to  contra-accounts,  setoffs,  defenses or  counterclaims  by or  available  to
account  debtors  obligated  on the  Receivables,  except  for  those  for which
adequate  reserves have been taken in substantially  the same amount as is shown
on the Initial Financial Statements.

     (c) DOCUMENTS AND  INSTRUMENTS.  All  Documents  and  Instruments  included
within the Collateral are valid and genuine. Any such document or Instrument has
only one original counterpart,  which constitutes  collateral within the meaning
of the UCC or the law of any  applicable  jurisdiction,  and all  such  original
counterparts  (other  than checks  delivered  in payment of  Receivables  in the
ordinary  course of business)  have been  delivered  into the possession of such
Person designated by Lender as agent pursuant to the Security Agreement.

     (d) ADDRESS. The chief executive office and principal place of business and
the office where all records concerning the Collateral are kept at the Company's
address set forth on its signature page hereto.

The representations and warranties contained in this Agreement,  the Note(s) and
the other Loan  Documents  are made by the Company as an inducement to Lender to
make its  Loan(s),  and the Company  understands  that Lender is relying on such
representations and warranties, and that such representations and warranties are
true and  correct  at the time of the  first  disbursement  hereunder  and shall
remain  true and  correct  at all  times  thereafter  so long as any part of the
Loan(s) shall remain outstanding.

                                    ARTICLE 4

                           CONDITIONS TO DISBURSEMENT

4.1.  DOCUMENTS TO BE  DELIVERED.  Lender has no  obligation to make its Loan(s)
unless Lender shall have received all of the  following,  at Lender's  office as
set forth in this Agreement,  duly executed and delivered and in form, substance
and date satisfactory to Lender:

          (a) This Agreement.

          (b) The Note(s).

          Each Security Document listed in the Security Schedule.

4.2.  ADDITIONAL  CONDITIONS  PRECEDENT.  Lender has no  obligation  to make its
Loan(s) unless the following conditions precedent have been satisfied:

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<PAGE>

     (a) All  representations  and  warranties  made by the  Company in any Loan
Document  shall  be true on and as of the  date of the  Loan(s)  (except  to the
extent  that the facts  upon  which  such  representations  are based  have been
changed by the  extension of credit  hereunder) as if such  representations  and
warranties had been made as of the date of the Loan(s).

     (b) No Material  Adverse  Change shall have occurred since the date of last
10K.

     (c) The Company shall have  performed and complied with all  agreements and
conditions required in the Loan Documents to be performed or complied with by it
on or prior to the date of the Loan(s).

     (d) The making of the Loan(s)  shall not be prohibited by any law and shall
not  subject  the Lender to any  penalty  or other  onerous  condition  under or
pursuant to any such law.

     (e) Lender shall have received all documents and  instruments  which Lender
has then  requested,  in addition to those  described in Section 4.1  (including
corporate documents and records; certificates of officers and representatives of
the  Company;  and  all  reports,  records,  certificates  and  other  documents
requested in relation to any Security Document delivered pursuant hereto), as to
the accuracy and validity of or compliance with all representations,  warranties
and  covenants  made  by the  Company  in this  Agreement  and  the  other  Loan
Documents,  the satisfaction of all conditions  contained herein or therein, and
all other matters pertaining hereto and thereto.  All such additional  documents
and instruments shall be satisfactory to Lender in form, substance and date.

                                    ARTICLE 5

                                COMPANY COVENANTS

From and after the date  hereof and  continuing  so long as any  amount  remains
unpaid on the Note(s).

5.1. CORPORATE  EXISTENCE,  ETC. The Company will preserve and keep in force and
effect its corporate  existence,  its rights and franchises and all licenses and
permits that it currently  has, which are necessary to the proper conduct of its
business  and will qualify to do business in all states or  jurisdictions  where
required by  applicable  law,  except  where the failure to so qualify  will not
cause a Material Adverse Change.

5.2.  INSURANCE.  The Company will at all times maintain  casualty and liability
insurance coverage by financially sound and reputable insurers in such forms and
amounts and against such risks as are customary for  corporations of established
reputation  engaged in the same or a similar  business and owning and  operating
similar  properties with limits and scope of coverage  reasonably  acceptable to
Lender.  All  policies  evidencing  such  insurance  shall name the Lender as an
additional insured and shall contain a loss payable endorsement to the Lender in
form and  substance  acceptable  to Lender that will become  effective  upon the
occurrence of an Event of Default.

5.3. TAXES, CLAIMS FOR LABOR AND MATERIALS. The Company will pay or discharge or
cause to be paid or discharged,  before the same shall become delinquent (i) all
taxes,  assessments and  governmental  charges levied or imposed upon it or upon
the income,  profits or property of the Company,  and (ii) all lawful claims for
labor,  materials and supplies  which, if unpaid might by law become a Lien upon
the property of the Company;  PROVIDED,  HOWEVER,  that the Company shall not be
required to pay or  discharge  or cause to be paid or  discharged  any such tax,
assessment,  charge or claim whose  amount,  applicability  or validity is being
contested in good faith by appropriate proceeding. The Company will promptly pay
and discharge when due all other Liabilities now or hereafter owed by it.

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<PAGE>

5.4.  MAINTENANCE,  ETC.  The  Company  will  maintain,  preserve  and  keep all
Collateral  and all other property used or useful in the conduct of its business
in good repair and working order, ordinary wear and tear excepted, in compliance
with all  applicable  laws,  and from time to time will,  as  determined  in the
reasonable  judgment of the Company,  make all necessary repairs,  replacements,
renewals and  additions  thereto  needed to enable the  business and  operations
carried on in connection  therewith to be promptly and advantageously  conducted
at all times.

5.5.  NATURE OF  BUSINESS.  The Company will not engage in any business if, as a
result, the general nature of the business which would then be engaged in by the
Company would be  substantially  changed from the general nature of the business
engaged in by the Company on the date of this Agreement. Exhibit 10.8

5.6. SEC FILINGS.  The Company shall at all times make all SEC Filings  required
pursuant to the  Securities  Exchange Act of 1934, as amended,  and the rules of
any stock exchange upon which the Company shall have listed its securities,  and
shall notify  Lender of any  inquiries  from the SEC or any stock  exchange with
respect to all of its SEC Filings,  to the extent  permitted by law. The Company
shall provide Lender with copies of all such SEC Filings.

5.7. REPORTS.  The Company will keep proper books of record and account in which
full and correct  entries will be made of all dealings or  transactions of or in
relation to the business and affairs of the Company in accordance with GAAP.

     (a) As soon as  available,  and in any event  within  ninety-one  (91) days
after the end of each  Fiscal  Year,  complete  consolidated  and  consolidating
financial statements of the Company together with all notes thereto, prepared in
reasonable  detail in  accordance  with GAAP based on an audit  using  generally
accepted  auditing  standards,  by an independent  certified  public  accountant
selected by the Company stating that such consolidated financial statements have
been so prepared.  These financial  statements  shall contain a consolidated and
consolidating  balance sheet as of the end of such Fiscal Year and  consolidated
and  consolidating  statements  of  earnings,  of cash flows,  and of changes in
owners' equity for such Fiscal Year, each setting forth in comparative  form the
corresponding figures for the preceding Fiscal Year.

     (b) As soon as  available,  and in any event  within  forty-five  (45) days
after  the  end  of  each  Fiscal  Quarter,   the  Company's   consolidated  and
consolidating   balance  sheet  as  of  the  end  of  such  Fiscal  Quarter  and
consolidated  and  consolidating  statements of the Company's  earnings and cash
flows for the period from the  beginning of the then current  Fiscal Year to the
end of such Fiscal Quarter,  all in reasonable detail and prepared in accordance
with GAAP, subject to changes resulting from normal year-end adjustments.

5.8.  PAYMENT AND  PERFORMANCE.  The Company  will pay all amounts due under the
Loan  Documents in accordance  with the terms thereof and will observe,  perform
and comply with every covenant,  term and condition  expressed or implied in the
Loan Documents.

5.9.  PERFORMANCE ON BORROWER'S  BEHALF.  If the Company fails to pay any taxes,
insurance premiums, expenses, attorneys' fees or other amounts it is required to
pay  under  any Loan  Document,  Lender  may pay the  same.  The  Company  shall
immediately  upon written  notice of any such payment  reimburse  Lender for any
such payments and each amount paid by Lender shall constitute an Obligation owed
hereunder which is due and payable on the date such amount is paid by Lender.

5.9.  INTEREST.  The Company  hereby  promises to Lender to pay  interest at the
Default  Rate  on all  Obligations  (including  Obligations  to pay  fees  or to
reimburse or indemnify  Lender) that the Company has in this Agreement  promised
to pay to the Lender and which are not paid when due. Such interest shall accrue
from the date such Obligations become due until they are paid.

     (a) IMPAIRMENT OF SECURITY  INTEREST.  The Company will not take or fail to
take any action that would in any manner impair the value or  enforceability  of
the Lender's first priority security interest in any Collateral.

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<PAGE>

     (b)  COMPROMISE  OF  COLLATERAL.  The  Company  will  not  adjust,  settle,
compromise, amend or modify any of its rights in the Collateral.

     (c) EQUIPMENT. The Company will use its best efforts to maintain, preserve,
protect and keep all Equipment included within the Collateral in good condition,
repair and working  order and will use its best efforts to cause such  Equipment
to be  used  and  operated  in a good  and  workmanlike  manner  to  the  extent
commercially reasonable, in accordance with applicable law and in a manner which
will not make void or cancelable any insurance with respect to such Equipment.

                                    ARTICLE 6

                              DEFAULTS AND REMEDIES

6.1.  EVENTS OF DEFAULT.  Any one or more of the following  shall  constitute an
"Event of Default" as the term is used herein:

     (a) Default shall occur in the observance or performance of any covenant or
agreement  contained herein or in the other Loan Documents that are not remedied
within 30 days after notice thereof to the Company by Lender's Agent; or

     (b) If any  representation or warranty made by the Company herein or in any
Loan Document,  or made by the Company in any statement or certificate furnished
by the Company pursuant  hereto,  is untrue or incorrect in any material respect
as of the date of the making thereof or subsequently becomes untrue or incorrect
and such inaccuracy is not immediately disclosed to Lender; or

     (c) The Company  becomes  insolvent or bankrupt or makes an assignment  for
the benefit of creditors,  or the Company  causes or suffers an order for relief
to be entered  with respect to it under  applicable  Federal  bankruptcy  law or
applies for or consents to the appointment of a custodian,  trustee, liquidator,
or receiver for the Company or for the major part of the property of either; or

     (d) A custodian,  trustee,  liquidator,  or receiver is  appointed  for the
Company or for the major part of the  property  of either and is not  discharged
within 30 days after such appointment; or

     (e) Bankruptcy,  reorganization,  arrangement or insolvency proceedings, or
other proceedings for relief under any bankruptcy or similar law or laws for the
relief of debtors,  are  instituted by or against the Company and, if instituted
against the Company,  are consented to or are not dismissed within 60 days after
such institution; or

6.2.  REMEDIES.  When any Event of Default described in Section 6.1 has occurred
and is continuing,  the Lender's  obligation to make the Loan(s) shall terminate
and the principal  balance and all accrued interest as well as other costs, fees
and  expenses  due and owing on the  Loan(s)  shall  immediately  become due and
payable, without presentment,  demand, notice of acceleration,  notice of intent
to accelerate,  protest or further notice of any kind or nature whatsoever,  all
of which are hereby  expressly  waived,  and the Default Rate shall  commence to
accrue.  In  addition,  Lender may pursue any or all of the rights  available to
them at law or in equity or as provided  herein and in the  Note(s),  including,
without limitation, all rights and remedies of a secured party under the UCC. In
connection  therewith,  the Company  agrees that a ten (10) day notice period is
commercially  reasonable  for the conduct of a public or private  sale under the
UCC, and the Company hereby irrevocably  makes,  constitutes and appoints Lender
or any other Person  designated by Lender for that purpose as the Company's true
and lawful  attorney  and  agent-in-fact  to sign the name of the Company on any
continuation  statement  or other  document  necessary  to further  perfect  the
Lender" security interest or foreclose and/or take possession of the Collateral.

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6.3 COSTS OF  REMEDIES.  Any and all costs and  expenses  (including  reasonable
attorney's fees) incurred by Lender in pursuing its remedies  hereunder shall be
an additional  indebtedness  due and owing by the Company to Lender and shall be
governed by this Agreement, the Note(s) and the other Loan Documents.

                                    ARTICLE 7

                               CERTAIN DEFINITIONS

"Affiliate" shall mean a Person (a) which, directly or indirectly through one or
more intermediaries,  controls,  or is controlled by, or is under common control
with,  another  Person (b) which  beneficially  owns or holds 10% or more of any
class of the voting  interests of such Person,  or (c) 10% or more of the voting
interests  of  which is  beneficially  owned  or held by such  Person.  The term
"control" means the possession,  directly or indirectly,  of the power to direct
or cause the  direction  of the  management  and  policies of a Person,  whether
through the ownership of voting interests, by contract or otherwise.

"Business Day" means a day other than a Saturday or Sunday,  on which commercial
banks are open for business with the public in Fort Worth, Texas.

"Change of Control" means the occurrence of either of the following events:  (a)
any Person or two or more  Persons  acting as a group shall  acquire  beneficial
ownership  (within  the  meaning of Rule 13d-3 of the  Securities  and  Exchange
Commission under the Securities Act of 1934, as amended,  and including  holding
proxies to vote for the  election of  directors  other than  proxies held by the
Company's  management  or their  designees  to be  voted  in  favor  of  Persons
nominated by the Company's Board of Directors) of 50% or more of the outstanding
voting  securities  of the  Company,  measured by voting power  (including  both
common stock and any preferred  stock or other equity  securities  entitling the
holders  thereof  to vote with the  holders  of common  stock in  elections  for
directors  of the  Company) or (b)  one-third  or more of the  directors  of the
Company  shall  consist of  Persons  not  nominated  by the  Company's  Board of
Directors  (not  including as Board  nominees any  directors  which the Board is
obligated  to  nominate  pursuant  to  shareholders'  agreements,  voting  trust
arrangements or similar arrangements).

"Closing" and "Closing Date" are defined in Section 1.2.

"Collateral"  means the specific  property that is subject to a UCC-1  financing
statement on accounts  receivable,  notes receivable and the Company's  personal
property in favor of Lender.

"Commitment  Period"  means the period from and including the Closing Date until
and including the date that is one year after the Closing Date.

"Default" shall mean any event or condition, the occurrence of which would, with
the  lapse of time or the  giving of  notice,  or both,  constitute  an Event of
Default as defined in Section 6.1.

"Default  Rate"  shall mean 10% per annum (or the maximum  rate  allowed by law)
calculated on the basis of a 360 day year.

"Distribution"  means (i) any dividend or other distribution made by the Company
on or in respect of any stock, partnership interest, or other equity interest in
the Company or any subsidiary of the Company (including any option or warrant to
buy  such an  equity  interest),  or (ii) any  payment  made by the  Company  to
purchase,  redeem,  acquire or retire any stock,  partnership interest, or other
equity  interest in the Company or any subsidiary of the Company  (including any
such option or warrant).

                                       8
<PAGE>

"Existing Credit Facility" means certain credit  facilities  between the Company
and Richard  Halden  Lending  Group as evidenced by a Business  Loan  Agreement,
between the Company and Richard Halden,  together with all promissory notes made
by the Company  hereunder and all other agreements,  documents,  instruments and
writings at any time delivered to Richard Halden in connection therewith.

"Fiscal  Quarter"  means a  three-month  period  ending  on March  31,  June 30,
September 30 or December 31 of any year.

"Fiscal Year" means a twelve-month period ending on September 30 of any year.

"GAAP" means those generally accepted accounting  principles and practices which
are  recognized  as such by the  Financial  Accounting  Standards  Board (or any
generally  recognized  successor)  and which,  in the case of the  Company,  are
applied for all periods  after the date hereof in a manner  consistent  with the
manner in which such  principles  and  practices  were  applied  to the  Initial
Financial  Statements.  If any change in any accounting principle or practice is
required by the Financial  Accounting Standards Board (or any such successor) in
order for such  principle  or  practice  to  continue  as a  generally  accepted
accounting principle or practice,  all reports and financial statements required
hereunder with respect to the Company shall be prepared in accordance  with such
change.

"Indebtedness"  of  any  Person  means  Liabilities  in  any  of  the  following
categories:

     (a) Liabilities for borrowed money,

     (b)  Liabilities  constituting  an obligation to pay the deferred  purchase
price of property or services,

     (c) Liabilities evidenced by a bond, debenture, note or similar instrument,

     (d)  Liabilities  which would under GAAP be shown on such Person's  balance
sheet as a  liability,  and are  payable  more  than  one year  from the date of
creation  thereof  (other than  reserves for taxes and  reserves for  contingent
obligations),

     (e) Liabilities owing under direct or indirect guaranties of Liabilities of
any other Person or otherwise constituting obligations to purchase or acquire or
to otherwise protect or insure a creditor against loss in respect of Liabilities
of any other Person  (such as  obligations  under  working  capital  maintenance
agreements,  agreements  to keep-well,  or  agreements to purchase  Liabilities,
assets,  goods,  securities or  services),  but  excluding  endorsements  in the
ordinary  course  of  business  of  negotiable  instruments  in  the  course  of
collection,

     (f) Liabilities (for example, repurchase agreements, mandatorily redeemable
preferred stock and  sale/leaseback  agreements)  consisting of an obligation to
purchase or redeem securities or other property,  if such Liabilities arises out
of or in connection with the sale or issuance of the same or similar  securities
or property,

     (g)  Liabilities  with  respect  to letters  of credit or  applications  or
reimbursement agreements therefor, or

     (h)  Liabilities  with  respect to other  obligations  to deliver  goods or
services in consideration of advance payments therefore; provided, however, that
the  "Indebtedness"  of any Person shall not include (i)  Liabilities  that were
incurred by such Person on ordinary trade terms to vendors,  suppliers, or other
Persons  providing  goods and  services  for use by such Person in the  ordinary
course of its business,  unless and until such  Liabilities are outstanding more
than 90 days past the original invoice or billing date therefore.

                                       9
<PAGE>

"Investment" means any investment, made directly or indirectly, in any Person or
any  property,  whether by  purchase,  acquisition  of shares of capital  stock,
indebtedness  or other  obligations or securities or by loan,  advance,  capital
contribution or otherwise and whether made in cash, by the transfer of property,
or by any other means.

"Law" means any statute,  law, regulation,  ordinance,  rule, treaty,  judgment,
order,  decree,  permit,  concession,  franchise,  license,  agreement  or other
governmental  restriction  of the  United  States  or  any  state  or  political
subdivision  thereof or of any foreign  country or any  department,  province or
other political subdivision thereof.

"Lenders' Agent" shall be elected by the Lender.

"Liabilities"  means,  as to  any  Person,  all  indebtedness,  liabilities  and
obligations  of  such  Person,  whether  matured  or  unmatured,  liquidated  or
unliquidated,  primary or  secondary,  direct or  indirect,  absolute,  fixed or
contingent, and whether or not required to be considered pursuant to GAAP.

"Lien"  means,  with  respect to any  property or assets,  any right or interest
therein of a creditor to secure  Liabilities owed to it or any other arrangement
with such creditor  which  provides for the payment of such  Liabilities  out of
such property or assets or which allows such  creditor to have such  Liabilities
satisfied out of such  property or assets prior to the general  creditors of any
owner thereof, including any lien, mortgage, security interest, pledge, deposit,
production payment,  rights of a vendor under any title retention or conditional
sale agreement or lease substantially  equivalent thereto, tax lien,  mechanic's
or  material  man's  lien,  or any other  charge  or  encumbrance  for  security
purposes, whether arising by Law or agreement or otherwise,

but excluding any right of offset which arises without agreement in the ordinary
course  of  business.  "Lien"  also  means any filed  financing  statement,  any
registration of a pledge (such as with an issuer of uncertificated  securities),
or any other arrangement or action which would serve to perfect a Lien described
in the preceding  sentence,  regardless of whether such  financing  statement is
filed,  such  registration is made, or such  arrangement or action is undertaken
before or after such Lien exists.

"Loan(s)" has the meaning given to such term in Section 1.1.

"Loan  Documents" means this Agreement,  the Notes, the Subscription  Agreement,
the  Questionnaire,   the  UCC-1  financing   statement,   and  all  amendments,
modifications and restatements of such documents and instruments.

"Material Adverse Change" means a material and adverse change, from the state of
affairs  presented in the Initial  Financial  Statements  or as  represented  or
warranted in any Loan Document,  to (a) the Company's financial  condition,  (b)
the Company's  operations,  properties or prospects,  considered as a whole, (c)
the Company's ability to timely pay the Obligations,  (d) the  enforceability of
the material  terms of any Loan  Documents,  or (e) the  Collateral  or Lenders'
Liens on the Collateral.

"Maximum Loan Amount" means the amount equal to $1,000,000.

"Maximum Rate" means,  at any time and with respect to Lender,  the maximum rate
of nonusurious interest under applicable law that Lender may contract for, take,
charge or receive with respect to the Obligations.

"Note(s)" has the meaning given to such term in Section 1.1.

"Obligations"  means all  Liabilities  from time to time owing by the Company to
Lender under or pursuant to this Agreement, the Note(s) or any Security Document
(including any  modifications,  amendments or restatements of any such documents
or instruments). "Obligation" means any part of the Obligations.

                                       10
<PAGE>

"Permitted Investments" means

     (a) property used in the ordinary course of business of the Company;

     (b) current  assets arising from the sale or lease of goods and services in
the  ordinary  course of business by the Company or from sales  permitted  under
Section 5.23; and

     (c) Investments by the Company in any Additional Stations.

"Permitted Liens" means:

     (a) statutory Liens for taxes, assessments or other governmental charges or
levies which are not yet  delinquent or which are being  contested in good faith
by appropriate  action and for which adequate  reserves have been  maintained in
accordance with GAAP;

     (b)  landlords',   operators',  carriers',   warehousemen's,   repairmen's,
mechanics',   material   men's,   or  other  like  Liens  which  do  not  secure
Indebtedness,  in each case only to the extent arising in the ordinary course of
business and only to the extent securing obligations which are not delinquent or
which are being contested in good faith by appropriate proceedings and for which
adequate reserves have been maintained in accordance with GAAP;

     (c) minor defects and  irregularities in title to any property,  so long as
such defects and  irregularities  neither  secure  Indebtedness  nor  materially
impair the value of such  property or the use of such  property for the purposes
for which such property is held;

     (d) deposits of cash or securities to secure the performance of bids, trade
contracts,  leases, statutory obligations and other obligations of a like nature
(excluding appeal bonds) incurred in the ordinary course of business;

     (e) Liens under the Security Documents;

     (f)  Liens  securing  purchase  money  Indebtedness,   provided  that  such
Indebtedness shall be secured only by the acquired asset;

     (g) Liens  securing  Indebtedness  outstanding  under the  instruments  and
agreements described in Schedule I;

     (h) with  respect  only to  property  subject  to any  particular  Security
Document,  Liens  burdening  such property  that are  expressly  allowed by such
Security Document.

"Person"  shall  mean  an  individual,   partnership,   corporation,   trust  or
unincorporated organization, and a government or agency or political subdivision
thereof.

"Security  Agreement"  means  the  security  agreement  of  even  date  herewith
delivered by the Company to the Lender in  connection  with this  Agreement  and
listed on the Security Schedule.

"Security  Documents" means the instruments  listed in the Security Schedule and
all other security  agreements,  deeds of trust,  mortgages,  chattel mortgages,
pledges, guaranties,  financing statements,  continuation statements,  extension
agreements and other  agreements or instruments  now,  heretofore,  or hereafter
delivered by the Company to any Lender in connection  with this Agreement or any
transaction  contemplated  hereby to secure or guarantee the payment of any part
of the  Obligations  or  the  performance  of the  Company's  other  duties  and
obligations under the Loan Documents.

"Security Schedule" means Schedule II hereto.

                                       11
<PAGE>

"Subsidiary"  means, with respect to any Person,  any corporation,  association,
partnership,  limited  liability  company,  joint venture,  or other business or
corporate  entity,  enterprise  or  organization  that is directly or indirectly
(through one or more  intermediaries)  controlled  by or owned fifty  percent or
more by such Person.

"UCC"  means the  Uniform  Commercial  Code in effect in the State of Texas,  as
amended.

                                    ARTICLE 8

                            INTERCREDITOR PROVISIONS

8.1. This Section Intentionally Left Blank.

8.2. This Section Intentionally Left Blank.

8.3. This Section Intentionally Left Blank.

                                    ARTICLE 9

                            MISCELLANEOUS PROVISIONS

9.1. WAIVERS AND AMENDMENTS; ACKNOWLEDGMENTS.

WAIVERS  AND  AMENDMENTS.  No failure or delay  (whether by course of conduct or
otherwise) by Lender in exercising  any right,  power or remedy which Lender may
have under any of the Loan Documents shall operate as a waiver thereof or of any
other right, power or remedy, nor shall any single or partial exercise by Lender
of any such  right,  power or  remedy  preclude  any other or  further  exercise
thereof or of any other right,  power or remedy.  No waiver of any  provision of
any Loan  Document  and no  consent  to any  departure  there from shall ever be
effective  unless it is in writing and signed as provided below in this section,
and then  such  waiver  or  consent  shall  be  effective  only in the  specific
instances  and for the purposes  for which given and to the extent  specified in
such writing.  No notice to or demand on the Company shall in any case of itself
entitle the Company to any other or further notice or demand in similar or other
circumstances.  This Agreement and the other Loan Documents set forth the entire
understanding  between  the  parties  hereto  with  respect to the  transactions
contemplated  herein  and  therein  and  supersede  all  prior  discussions  and
understandings  with respect to the subject  matter  hereof and thereof,  and no
waiver,  consent,  release,  modification  or amendment of or supplement to this
Agreement or the other Loan  Documents  shall be valid or effective  against any
party  hereto  unless the same is in writing  and signed by (i) if such party is
the Company, by the Company, and (ii) if such party is Lender, by Lender.

     (b)  ACKNOWLEDGMENTS   AND  ADMISSIONS.   The  Company  hereby  represents,
warrants, acknowledges and admits that (i) it has been advised by counsel in the
negotiation,  execution and delivery of the Loan Documents,  (ii) it has made an
independent  decision to enter into this Agreement and the other Loan Documents,
without reliance on any representation, warranty, covenant or undertaking by any
Lender,  whether written,  oral or implicit,  other than as expressly set out in
this  Agreement  or in  another  Loan  Document  delivered  on or after the date
hereof, (iii) there are no representations,  warranties, covenants, undertakings
or agreements by Lender as to the Loan Documents  except as expressly set out in
this  Agreement  or in  another  Loan  Document  delivered  on or after the date
hereof, (iv) Lender has no fiduciary  obligation toward the Company with respect
to  any  Loan  Document  or  the  transactions  contemplated  thereby,  (v)  the
relationship  pursuant to the Loan Documents  between the Company and the Lender

                                       12
<PAGE>

is and  shall be solely  that of  debtor  and  creditor,  respectively,  (vi) no
partnership or joint venture  exists with respect to the Loan Documents  between
the Company and the Lenders,  (vii)  should an Event of Default  occur or exist,
Lender  will  determine  in its sole  discretion  and for its own  reasons  what
remedies and actions it will or will not  exercise or take at that time,  (viii)
without  limiting  any of the  foregoing,  the Company is not  relying  upon any
representation or covenant by Lender, or any representative thereof, and no such
representation  or covenant has been made,  that Lender will,  at the time of an
Event of Default,  or at any other time, waive,  negotiate,  discuss, or take or
refrain from taking any action  permitted  under the Loan Documents with respect
to any such Event of Default or any other provision of the Loan  Documents,  and
(ix)  Lender has relied upon the  truthfulness  of the  acknowledgments  in this
section  in  deciding  to  execute  and  deliver  this  Agreement  and to become
obligated hereunder.

     (c)  JOINT  ACKNOWLEDGMENT.  THIS  WRITTEN  AGREEMENT  AND THE  OTHER  LOAN
DOCUMENTS  REPRESENT  THE FINAL  AGREEMENT  BETWEEN  THE  PARTIES AND MAY NOT BE
CONTRADICTED  BY  EVIDENCE  OF  PRIOR,   CONTEMPORANEOUS,   OR  SUBSEQUENT  ORAL
AGREEMENTS OF THE PARTIES.

     THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

9.2.  SET-OFF.  In  addition  to any  rights  now  or  hereafter  granted  under
applicable  law  and not by way of  limitation  of any  such  rights,  upon  the
occurrence and  continuance  of any Event of Default or any condition,  event or
act which, with the giving of notice or lapse of time, or both, would constitute
such an Event of Default,  the Lender is hereby  authorized  at any time or from
time to time,  without prior notice to the Company or to any other  Person,  any
such prior notice being hereby expressly  waived,  to set-off and to appropriate
and apply any and all deposits  (general or special) and any other  indebtedness
at any time held or owing by any office of the Lender or their  Affiliates to or
for the credit of the account of the Company, regardless of the currency of such
deposits or other  indebtedness,  against and on account of the  obligations and
liabilities of the Company to the Lender under this Agreement and the other Loan
Documents,   including,   without  limitation,  all  claims  of  any  nature  or
description  arising out of or connected  with this Agreement and the other Loan
Documents,  irrespective of whether or not the Lender shall have made any demand
hereunder and although such obligations,  liabilities or claims, or any of them,
shall be contingent or unmatured.  The Lender shall provide  Company with notice
of such  set-off  within a  reasonable  time  after the  occurrence  of any such
set-off.

9.3.  SURVIVAL  OF  AGREEMENTS;   CUMULATIVE   NATURE.   The  Company's  various
representations,  warranties,  covenants and  agreements  in the Loan  Documents
shall survive the  execution  and delivery of this  Agreement and the other Loan
Documents  and the  performance  hereo  and  thereof,  including  the  making or
granting  of the  Loan(s)  and the  delivery  of the  Note(s) and the other Loan
Documents,  and shall further  survive until all of the  Obligations are paid in
full  to the  Lender  and  all  of  Lender's  obligations  to  the  Company  are
terminated.  All statements and agreements contained in any certificate or other
instrument  delivered by the Company to Lender under any Loan Document  shall be
deemed representations and warranties by the Company or agreements and covenants
of  the  Company  under  this  Agreement.   The   representations,   warranties,
indemnities,  and covenants made by the Company in the Loan  Documents,  and the
rights, powers, and privileges granted to the Lender in the Loan Documents,  are
cumulative,  and, except for expressly  specified waivers and consents,  no Loan
Document shall be construed in the context of another to diminish,  nullify,  or
otherwise reduce the benefit to the Lender of any such representation, warranty,
indemnity,  covenant,  right,  power or  privilege.  In  particular  and without
limitation,  no  exception  set out in  this  Agreement  to any  representation,
warranty,  indemnity,  or covenant  herein  contained shall apply to any similar
representation,  warranty,  indemnity,  or covenant  contained in any other Loan
Document, and each such similar representation, warranty, indemnity, or covenant
shall be subject only to those exceptions which are expressly made applicable to
it by the terms of the various Loan Documents.

                                       13
<PAGE>

9.4.  INDEMNITY.  THE COMPANY AGREES TO INDEMNIFY LENDER,  UPON DEMAND, FROM AND
AGAINST ANY AND ALL LIABILITIES,  OBLIGATIONS,  BROKER'S FEES,  CLAIMS,  LOSSES,
DAMAGES,  PENALTIES,  FINES,  ACTIONS,  JUDGMENTS,  SUITS,  SETTLEMENTS,  COSTS,
EXPENSES OR DISBURSEMENTS (INCLUDING REASONABLE FEES OF ATTORNEYS,  ACCOUNTANTS,
EXPERTS  AND  ADVISORS)  OF ANY  KIND OR  NATURE  WHATSOEVER  (IN  THIS  SECTION
COLLECTIVELY CALLED "LIABILITIES AND COSTS") WHICH TO ANY EXTENT (IN WHOLE OR IN
PART) MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST LENDER GROWING OUT OF,
RESULTING FROM OR IN ANY OTHER WAY ASSOCIATED  WITH ANY OF THE  COLLATERAL,  THE
LOAN DOCUMENTS AND THE  TRANSACTIONS  AND EVENTS  (INCLUDING THE  ENFORCEMENT OR
DEFENSE  THEREOF)  AT ANY TIME  ASSOCIATED  THEREWITH  OR  CONTEMPLATED  THEREIN
(WHETHER ARISING IN CONTRACT OR IN TORT OR BY STATUTE OR OTHERWISE). AMONG OTHER
THINGS, THE FOREGOING  INDEMNIFICATION COVERS ALL LIABILITIES AND COSTS INCURRED
BY LENDER  RELATED TO ANY BREACH OF A LOAN  DOCUMENT BY THE COMPANY,  ANY BODILY
INJURY TO ANY PERSON OR DAMAGE TO ANY  PERSON'S  PROPERTY,  OR ANY  VIOLATION OR
NONCOMPLIANCE  WITH ANY ENVIRONMENTAL  LEGAL REQUIREMENTS BY LENDER OR ANY OTHER
PERSON OR ANY  LIABILITIES  OR DUTIES OF LENDER OR ANY OTHER PERSON WITH RESPECT
TO HAZARDOUS MATERIALS FOUND IN OR RELEASED INTO THE ENVIRONMENT.

THE FOREGOING  INDEMNIFICATION  SHALL APPLY WHETHER OR NOT SUCH  LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT  LIABILITY OR CAUSED,  IN WHOLE OR IN PART BY ANY  NEGLIGENT
ACT OR OMISSION OF ANY KIND BY LENDER,

provided  only that Lender  shall not be entitled  under this section to receive
indemnification  for that portion, if any, of any liabilities and costs which is
proximately caused by its own individual gross negligence or willful misconduct,
as determined in a final judgment.  If any Person  (including the Company or any
of its Affiliates) ever alleges such gross  negligence or willful  misconduct by
Lender,  the  indemnification  provided for in this section shall nonetheless be
paid upon demand, subject to later adjustment or reimbursement,  until such time
as a court of competent  jurisdiction  enters a final  judgment as to the extent
and effect of the alleged  gross  negligence or willful  misconduct.  As used in
this section the term "Lender"  shall  include each  director,  officer,  agent,
trustee, attorney, employee, representative and Affiliate of or for Lender.

9.5. EXECUTION IN COUNTERPARTS.  This Agreement may be executed in any number of
counterparts  and  by  the  different  parties  hereto  or  thereto-in  separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken  together  shall  constitute one and the same
instrument.

9.6. NOTICES.  Any notices to be served pursuant hereto shall be deemed properly
delivered if delivered  personally,  by United  States  certified or  registered
mail,  postage prepaid,  or by Federal Express or comparable  overnight  courier
service fare prepaid, or by legible facsimile transmission,  to set forth on its
signature  page  hereto or to such other  address as the  Company  may direct in
writing  and to Lender at its  address  set forth in this  Agreement  or at such
other  address as Lender may direct in  writing.  Such  notices  shall be deemed
received the same day if delivered  personally  or by legible  facsimile,  three
business  days after  delivery by certified  or  registered  mail,  and the next
business day if delivered by overnight courier.

9.7. GOVERNING LAW; SUBMISSION TO PROCESS.  EXCEPT TO THE EXTENT THAT THE LAW OF
ANOTHER JURISDICTION IS EXPRESSLY ELECTED IN A LOAN DOCUMENT, THE LOAN DOCUMENTS
SHALL BE DEEMED  CONTRACTS AND  INSTRUMENTS  MADE UNDER THE LAWS OF THE STATE OF
TEXAS AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.  CHAPTER 346 OF THE TEXAS FINANCE CODE
(WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING  TRI-PARTY
ACCOUNTS) DOES NOT APPLY TO THIS AGREEMENT OR TO THE NOTE(S). THE COMPANY HEREBY
IRREVOCABLY  SUBMITS ITSELF TO THE  NON-EXCLUSIVE  JURISDICTION OF THE STATE AND

                                       14
<PAGE>

FEDERAL  COURTS  SITTING  IN THE STATE OF TEXAS AND  AGREES  AND  CONSENTS  THAT
SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL  PROCEEDING  RELATING TO THE
LOAN  DOCUMENTS OR THE  OBLIGATIONS  BY ANY MEANS ALLOWED UNDER TEXAS OR FEDERAL
LAW. IN ADDITION TO THE PLACES OF PAYMENT  SPECIFIED  IN THE NOTES,  THE COMPANY
AND LENDER STIPULATE AND AGREE THAT TARRANT COUNTY,  TEXAS IS AN APPROPRIATE AND
ACCEPTABLE  VENUE FOR ANY STATE OR  FEDERAL  COURT  ACTION  CONCERNING  THE LOAN
DOCUMENTS.

9.8.  CONSTRUCTION.  This Agreement shall not be construed more strictly against
Lender than  against the Company  merely by virtue of the fact that the same has
been prepared by counsel for Lender,  it being  recognized that both the Company
and the Lender have contributed  substantially and materially to the preparation
of this Agreement.

9.9. CAPTIONS.  The captions of various articles herein are for convenience only
and  are  not to be  utilized  in  construing  the  content  or  meaning  of the
substantive provisions hereof.

9.10.  POTENTIAL  INVALIDITY.  In the event of any inconsistency among the terms
hereof (including incorporated terms) or between such terms and the terms of the
Notes,  the terms of this  Agreement  shall  govern  and  prevail.  The whole or
partial  invalidity,  illegality or  unenforceability of any provision hereof or
the Notes at any time,  whether  pursuant to the terms of then applicable law or
otherwise,  shall not affect: in the instance of partial invalidity,  illegality
or unenforceability,  the validity, legality or enforceability of such provision
at such time  except to the extent of such  partial  invalidity,  illegality  or
unenforceability;  or (b)  the  validity,  legality  or  enforceability  of such
provision  at any  other  time or of any other  provision  hereof at that or any
other time.

9.11.  INTERPRETATION.  All words herein which are expressed in the masculine or
neuter  gender  shall be deemed to include the  masculine,  feminine  and neuter
Lenders.  Any word herein  which is expressed in the singular or plural shall be
deemed,  whenever  appropriate  in the  context,  to include  the plural and the
singular.

9.12. AGREEMENT BINDING ON SUCCESSORS.  This Agreement shall be binding upon and
shall  inure to the benefit of the  Company  and the  Lender,  their  respective
successors,  permitted assigns, grantees and legal representatives.  The Company
may not  assign  any of its  rights or  delegate  any of its  duties  under this
Agreement, Note(s) or any other Loan Documents.

9.13.  LIMITATION ON INTEREST.  The Lender and the Company and any other parties
to the Loan Documents  intend to contract in strict  compliance  with applicable
usury law from time to time in  effect.  In  furtherance  thereof  such  Persons
stipulate and agree that none of the terms and provisions  contained in the Loan
Documents  shall ever be  construed  to create a contract  to pay,  for the use,
forbearance  or detention of money,  interest in excess of the maximum amount of
interest  permitted to be charged by applicable law from time to time in effect.
Neither  the  Company  nor any  present or future  endorsers,  or other  Persons
hereafter becoming liable for payment of any Obligation shall ever be liable for
unearned  interest  thereon or shall ever be required to pay interest thereon in
excess of the maximum amount that may be lawfully  contracted for,  charged,  or
received under applicable law from time to time in effect, and the provisions of
this section shall control over all other provisions of the Loan Documents which
may be in conflict or apparent conflict herewith.  The Lender expressly disavows
any intention to contract for, charge, or collect excessive unearned interest or
finance charges in the event the maturity of any Obligation is  accelerated.  If
maturity of any  Obligation is  accelerated  for any reason,  any  Obligation is
prepaid and as a result any amounts held to constitute  interest are  determined
to be in excess of the legal  maximum,  or Lender or any other  holder of any or
all of the Obligations  shall  otherwise  collect moneys which are determined to
constitute interest which would otherwise increase the interest on any or all of
the  Obligations  to an  amount in excess of that  permitted  to be  charged  by
applicable law then in effect,  then all sums determined to constitute  interest

                                       15
<PAGE>

in excess of such legal limit shall,  without  penalty,  be promptly  applied to
reduce the then  outstanding  principal of the related  Obligations  or, at such
Lender's or such holder's option,  promptly returned to the Company or the other
payor  thereof  upon  such  determination.  In  determining  whether  or not the
interest paid or payable, under any specific  circumstance,  exceeds the maximum
amount permitted under applicable law, the Lender and the Company (and any other
payors  thereof) shall to the greatest extent  permitted  under  applicable law,
characterize any non-principal payment as an expense, fee or premium rather than
as  interest,  exclude  voluntary  prepayments  and  the  effects  thereof,  and
amortize,  prorate, allocate, and spread the total amount of interest throughout
the entire  contemplated  term of the instruments  evidencing the Obligations in
accordance  with the amounts  outstanding  from time to time there under and the
maximum legal rate of interest from time to time in effect under  applicable law
in order to lawfully  contract  for,  charge,  or receive the maximum  amount of
interest  permitted under  applicable law. In the event  applicable law provides
for an interest  ceiling under Chapter 303 of the Texas Finance Code (the "Texas
Finance  Code") as  amended,  for that day,  the  ceiling  shall be the  "weekly
ceiling" as defined in the Texas Finance Code,  provided that if any  applicable
Law permits  greater  interest,  the Law permitting the greatest  interest shall
apply. As used in this section the term  "applicable  law" means the laws of the
State of Texas or the Laws of the United States of America, whichever laws allow
the  greater  interest,  as such laws now exist or may be  changed or amended or
come into effect in the future.

9.14.  CREDIT  DECISIONS;   EXCULPATION.   Lender   acknowledges  that  it  has,
independently  made  its  own  analysis  of the  Company  and  the  transactions
contemplated  hereby  and  its own  independent  decision  to  enter  into  this
Agreement and the other Loan Documents.  Lender also  acknowledges that it will,
independently  based  on  such  documents  and  information  as  it  shall  deem
appropriate at the time,  continue to make its own credit decisions in taking or
not taking action under the Loan Documents.  Nothing in the Loan Documents shall
be construed to constitute the Lender a trustee. Lender acknowledges that Lender
may take such actions and exercise such powers that are granted to Lender in the
Loan Documents.

9.15.  WAIVER OF JURY TRIAL,  PUNITIVE  DAMAGES.  THE COMPANY AND LENDER  HEREBY
KNOWINGLY,  VOLUNTARILY,  INTENTIONALLY,  AND IRREVOCABLY WAIVES, TO THE MAXIMUM
EXTENT  NOT  PROHIBITED  BY LAW,  ANY  RIGHT  IT MAY  HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY  LITIGATION  BASED HEREON,  OR DIRECTLY OR INDIRECTLY AT ANY TIME
ARISING  OUT  OF,  UNDER  OR IN  CONNECTION  WITH  THE  LOAN  DOCUMENTS  OR  ANY
TRANSACTION  CONTEMPLATED  THEREBY  OR  ASSOCIATED  THEREWITH,  BEFORE  OR AFTER
MATURITY;  WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY
HAVE TO CLAIM OR  RECOVER  IN ANY SUCH  LITIGATION  ANY  "SPECIAL  DAMAGES",  AS
DEFINED BELOW, CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR
COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED
THAT SUCH  PARTY  WOULD NOT,  IN THE EVENT OF  LITIGATION,  SEEK TO ENFORCE  THE
FOREGOING WAIVERS,  AND ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS  CONTAINED
IN THIS  SECTION.  AS  USED IN THIS  SECTION,  "SPECIAL  DAMAGES"  INCLUDES  ALL
SPECIAL,  CONSEQUENTIAL,  EXEMPLARY,  OR  PUNITIVE  DAMAGES  (REGARDLESS  OF HOW
NAMED),  BUT DOES NOT INCLUDE ANY  PAYMENTS OR FUNDS WHICH ANY PARTY  HERETO HAS
EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY HERETO.

IN WITNESS OF THE FOREGOING, the Company and Lender have executed or caused this
Agreement  to be  executed by their duly  authorized  officers as of the day and
year first above written.

                                       16
<PAGE>

                         LENDERS:

                         R.J. Halden Holdings, Inc.

                         /s/Richard J. Halden, CEO

                         BORROWER:

                         URBAN TELEVISION NETWORK CORPORATION

                         By: /s/ Randy Moseley
                            Chief Financial Officer

                         Address:

                            Urban Television Network Corporation
                            2707 S. Cooper   Ste. 119
                            Arlington, Texas 76015
                            Attention:  Randy Moseley

                                       17

<PAGE>

                                   SCHEDULE II

                                SECURITY SCHEDULE

1.   UCC-1  Financing  Statement  naming  the  Company  as debtor  and Lender as
     secured party,  covering all personal property of the Company,  to be filed
     with the Secretary of State of Texas.

<PAGE>

                                 PROMISSORY NOTE

$228,289.80.00                                                     July 31, 2004

     FOR VALUE RECEIVED, the undersigned,  Urban Television Network Corporation,
a Nevada corporation  ("Borrower"),  hereby promises to pay to the order of R.J.
Halden Holdings,  Inc., a Nevada corporation  ("Payee"),  in lawful money of the
United States of America in immediately  available  funds,  the principal sum of
Two Hundred  Twenty Eight  Thousand Two Hundred  Eighty Nine and 80/100  Dollars
($228,289.80), together with interest on the unpaid principal balance thereof as
hereinafter set forth, both principal and interest payable as herein provided in
lawful  money of the United  States of America at the  offices of Borrower or at
such other  place as from time to time may be  designated  by the holder of this
Note.

     All principal and interest on the  outstanding  principal  balance shall be
payable at the expiration of the first to occur of the  following:  (a) July 31,
2005;  (b) the closing by Borrower of a public  offering or  offerings  (whether
debt or equity or a combination) raising in the aggregate at least $5,000,000 of
gross  proceeds  (i.e.  prior  to  the  payment  of  underwriting  expenses  and
commissions)  to  Borrower;  and (c)  the  closing  of a  private  placement  or
placements  (whether debt or equity or a combination)  whereby Borrower receives
gross  proceeds  of at least  $5,000,000  in the  aggregate  (i.e.  prior to the
payment of sales expenses and  commissions).  The principal  amount of this Note
(exclusive of any past due principal or interest) from time to time  outstanding
shall bear interest on each day  outstanding  at the rate of six percent  (6.0%)
per annum,  calculated  at on the basis of actual days elapsed and a year of 360
days. All past due principal of and interest on this Note shall bear interest on
each day outstanding at the rate of ten percent (10.0%) per annum, calculated at
on the basis of actual days  elapsed and a year of 360 days,  and such  interest
shall be due and payable daily as it accrues.

     Borrower shall have the right to prepay, without premium or penalty, at any
time, any part or all of the  indebtedness  evidenced by this Note upon five (5)
days advance notice to Payee.  Any prepayment  shall include interest accrued to
the date of such  prepayment,  and all prepayments of principal shall be applied
first against accrued interest and then principal.

     Payee shall be entitled to convert the outstanding balance of the Loans and
accrued  interest  thereon at anytime  before the  maturity  date or  Borrower's
announced  prepayment  date,  of the  Loans  at the rate of five  shares  of the
Company's  common stock for each $1.00 of Loan(s)  balance and accrued  interest
thereon.

     1. This Note is issued and delivered  under that certain Loan  Agreement of
even date herewith between  Borrower and Lenders (as defined therein;  including
Payee) (herein, as from time to time supplemented,  amended or restated,  called
the "Loan Agreement"), and is a "Note" as defined therein, (b) is subject to the
terms and  provisions  of the Loan  Agreement,  which  contains  provisions  for
payments and prepayments  hereunder and acceleration of the maturity hereof upon
the happening of certain  stated  events,  and (c) is secured by and entitled to
the benefits of certain  Security  Documents (as  identified  and defined in the
Loan  Agreement).  Payments  on this Note shall be made and  applied as provided
herein and in the Loan Agreement. Reference is hereby made to the Loan Agreement
for a description  of certain  rights,  limitations of rights,  obligations  and
duties of the parties hereto and for the meanings assigned to terms used and not
defined herein and to the Security Documents for a description of the nature and
extent of the security thereby provided and the rights of the parties thereto.

     All  remedies  afforded  by law  shall  be  cumulative,  and all  shall  be
available  to Payee at all times until this Note has been paid and  performed in
full.  No delay or omission  of Payee to exercise  any right or power under this
Note  shall  impair  such right or power or be  construed  to be a waiver of any
Default or Event of Default or acquiescence  therein,  and any single or partial
exercise  of any such  right or power  shall not  preclude  any other or further
exercise  thereof or the  exercise  of any other  right or power,  and no waiver
whatsoever  shall be valid  unless it is in a  writing  signed by Payee and then
only to the extent specifically set forth in such writing.

<PAGE>

     The terms and  provisions  of this Note shall  inure to the  benefit of any
assignee,  transferee, or holder of this Note, and in the event of such transfer
or assignment,  each of the rights,  powers,  privileges and benefits  conferred
upon  Payee by this Note  shall  automatically  be  vested  in such  transferee,
assignee, or holder.

     The terms and  provisions  of this Note shall be binding upon  Borrower and
its successors,  assigns,  and transferees,  but any such assignment or transfer
shall not relieve Borrower of its obligations under this Note.

     The  invalidity or  unenforceability  of any of the provisions of this Note
shall not affect the validity or enforceability of the remainder hereof.

     If this Note is placed in the hands of an  attorney  for  collection  after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, Borrower and all endorsers, sureties
and  guarantors  of this Note  jointly  and  severally  agree to pay  reasonable
attorneys'  fees and  collection  costs to the holder  hereof in addition to the
principal and interest payable hereunder.

     Borrower and all  endorsers,  sureties and  guarantors  of this Note hereby
severally  waive  demand,  presentment,  notice of demand  and of  dishonor  and
nonpayment  of this Note,  protest,  notice of protest,  notice of  intention to
accelerate the maturity of this Note,  declaration or notice of  acceleration of
the  maturity of this Note,  diligence in  collecting,  the bringing of any suit
against  any party and any notice of or  defense  on account of any  extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms,  provisions and covenants, or any releases or substitutions of any
security,  or any delay,  indulgence  or other act of any  trustee or any holder
hereof, whether before or after maturity.

     Notwithstanding  the foregoing  paragraph and all other  provisions of this
Note, in no event shall the interest  payable  hereon,  whether  before or after
maturity, exceed the maximum amount of interest which, under applicable law, may
be contracted for, charged, or received on this Note, and this Note is expressly
made subject to the provisions of the Loan Agreement that more fully set out the
limitations on how interest accrues hereon. In the event applicable law provides
for an interest  ceiling under Chapter 303 of the Texas Finance Code (the "Texas
Finance  Code") as  amended,  for that day,  the  ceiling  shall be the  "weekly
ceiling" as defined in the Texas Finance Code and shall be used in this Note for
calculating  the Maximum Rate and for all other purposes.  The term  "applicable
law" as used in this Note  shall mean the laws of the State of Texas or the laws
of the United  States,  whichever laws allow the greater  interest,  and as such
laws now exist or may be changed or amended or come into effect in the future.

     This Note and the rights and duties of the parties hereto shall be governed
by the laws of the State of Texas (without  regard to principles of conflicts of
law), except to the extent the same are governed by applicable federal law.

THIS  CONVERTIBLE  PROMISSORY NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION
HEREOF HAVE NOT BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933, AS AMENDED
(THE  "SECURITIES  ACT"),  OR ANY  STATE  SECURITIES  LAW,  AND MAY NOT BE SOLD,
TRANSFERRED,  PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS
(i) A REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT AND  APPLICABLE  STATE
SECURITIES  LAWS SHALL HAVE BECOME  EFFECTIVE  WITH REGARD  THERETO,  OR (ii) AN
EXEMPTION  FROM  REGISTRATION  UNDER THE  SECURITIES  ACT AND  APPLICABLE  STATE
SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.

AN INVESTMENT  IN THESE  SECURITIES  INVOLVES A HIGH DEGREE OF RISK.  PAYEE MUST
RELY ON HIS OR HER OWN ANALYSIS OF THE  INVESTMENT  AND  ASSESSMENT OF THE RISKS
INVOLVED.

<PAGE>

                                    BORROWER:
                                    URBAN TELEVISION NETWORK CORPORATION
                                    By:   /s/ Randy Moseley
                                    Its: Chief Financial Officer

<PAGE>

                                 PROMISSORY NOTE

$171,710.00                                                     August 31, 2004

     FOR VALUE RECEIVED, the undersigned,  Urban Television Network Corporation,
a Nevada corporation  ("Borrower"),  hereby promises to pay to the order of R.J.
Halden Holdings,  Inc., a Nevada corporation  ("Payee"),  in lawful money of the
United States of America in immediately  available  funds,  the principal sum of
One  Hundred   Seventy  One  Thousand  Seven  Hundred  Ten  and  NO/100  Dollars
($171,7710.00),  together with interest on the unpaid principal  balance thereof
as hereinafter set forth, both principal and interest payable as herein provided
in lawful money of the United States of America at the offices of Borrower or at
such other  place as from time to time may be  designated  by the holder of this
Note.

     All principal and interest on the  outstanding  principal  balance shall be
payable at the expiration of the first to occur of the  following:  (a) July 31,
2005;  (b) the closing by Borrower of a public  offering or  offerings  (whether
debt or equity or a combination) raising in the aggregate at least $5,000,000 of
gross  proceeds  (i.e.  prior  to  the  payment  of  underwriting  expenses  and
commissions)  to  Borrower;  and (c)  the  closing  of a  private  placement  or
placements  (whether debt or equity or a combination)  whereby Borrower receives
gross  proceeds  of at least  $5,000,000  in the  aggregate  (i.e.  prior to the
payment of sales expenses and  commissions).  The principal  amount of this Note
(exclusive of any past due principal or interest) from time to time  outstanding
shall bear interest on each day  outstanding  at the rate of six percent  (6.0%)
per annum,  calculated  at on the basis of actual days elapsed and a year of 360
days. All past due principal of and interest on this Note shall bear interest on
each day outstanding at the rate of ten percent (10.0%) per annum, calculated at
on the basis of actual days  elapsed and a year of 360 days,  and such  interest
shall be due and payable daily as it accrues.

     Borrower shall have the right to prepay, without premium or penalty, at any
time, any part or all of the  indebtedness  evidenced by this Note upon five (5)
days advance notice to Payee.  Any prepayment  shall include interest accrued to
the date of such  prepayment,  and all prepayments of principal shall be applied
first against accrued interest and then principal.

     Payee shall be entitled to convert the outstanding balance of the Loans and
accrued  interest  thereon at anytime  before the  maturity  date or  Borrower's
announced  prepayment  date,  of the  Loans  at the rate of five  shares  of the
Company's  common stock for each $1.00 of Loan(s)  balance and accrued  interest
thereon.

     2. This Note is issued and delivered  under that certain Loan  Agreement of
even date herewith between  Borrower and Lenders (as defined therein;  including
Payee) (herein, as from time to time supplemented,  amended or restated,  called
the "Loan Agreement"), and is a "Note" as defined therein, (b) is subject to the
terms and  provisions  of the Loan  Agreement,  which  contains  provisions  for
payments and prepayments  hereunder and acceleration of the maturity hereof upon
the happening of certain  stated  events,  and (c) is secured by and entitled to
the benefits of certain  Security  Documents (as  identified  and defined in the
Loan  Agreement).  Payments  on this Note shall be made and  applied as provided
herein and in the Loan Agreement. Reference is hereby made to the Loan Agreement
for a description  of certain  rights,  limitations of rights,  obligations  and
duties of the parties hereto and for the meanings assigned to terms used and not
defined herein and to the Security Documents for a description of the nature and
extent of the security thereby provided and the rights of the parties thereto.

     All  remedies  afforded  by law  shall  be  cumulative,  and all  shall  be
available  to Payee at all times until this Note has been paid and  performed in
full.  No delay or omission  of Payee to exercise  any right or power under this
Note  shall  impair  such right or power or be  construed  to be a waiver of any
Default or Event of Default or acquiescence  therein,  and any single or partial
exercise  of any such  right or power  shall not  preclude  any other or further
exercise  thereof or the  exercise  of any other  right or power,  and no waiver
whatsoever  shall be valid  unless it is in a  writing  signed by Payee and then
only to the extent specifically set forth in such writing.

<PAGE>

     The terms and  provisions  of this Note shall  inure to the  benefit of any
assignee,  transferee, or holder of this Note, and in the event of such transfer
or assignment,  each of the rights,  powers,  privileges and benefits  conferred
upon  Payee by this Note  shall  automatically  be  vested  in such  transferee,
assignee, or holder.

     The terms and  provisions  of this Note shall be binding upon  Borrower and
its successors,  assigns,  and transferees,  but any such assignment or transfer
shall not relieve Borrower of its obligations under this Note.

     The  invalidity or  unenforceability  of any of the provisions of this Note
shall not affect the validity or enforceability of the remainder hereof.

     If this Note is placed in the hands of an  attorney  for  collection  after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, Borrower and all endorsers, sureties
and  guarantors  of this Note  jointly  and  severally  agree to pay  reasonable
attorneys'  fees and  collection  costs to the holder  hereof in addition to the
principal and interest payable hereunder.

     Borrower and all  endorsers,  sureties and  guarantors  of this Note hereby
severally  waive  demand,  presentment,  notice of demand  and of  dishonor  and
nonpayment  of this Note,  protest,  notice of protest,  notice of  intention to
accelerate the maturity of this Note,  declaration or notice of  acceleration of
the  maturity of this Note,  diligence in  collecting,  the bringing of any suit
against  any party and any notice of or  defense  on account of any  extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms,  provisions and covenants, or any releases or substitutions of any
security,  or any delay,  indulgence  or other act of any  trustee or any holder
hereof, whether before or after maturity.

     Notwithstanding  the foregoing  paragraph and all other  provisions of this
Note, in no event shall the interest  payable  hereon,  whether  before or after
maturity, exceed the maximum amount of interest which, under applicable law, may
be contracted for, charged, or received on this Note, and this Note is expressly
made subject to the provisions of the Loan Agreement that more fully set out the
limitations on how interest accrues hereon. In the event applicable law provides
for an interest  ceiling under Chapter 303 of the Texas Finance Code (the "Texas
Finance  Code") as  amended,  for that day,  the  ceiling  shall be the  "weekly
ceiling" as defined in the Texas Finance Code and shall be used in this Note for
calculating  the Maximum Rate and for all other purposes.  The term  "applicable
law" as used in this Note  shall mean the laws of the State of Texas or the laws
of the United  States,  whichever laws allow the greater  interest,  and as such
laws now exist or may be changed or amended or come into effect in the future.

     This Note and the rights and duties of the parties hereto shall be governed
by the laws of the State of Texas (without  regard to principles of conflicts of
law), except to the extent the same are governed by applicable federal law.

THIS  CONVERTIBLE  PROMISSORY NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION
HEREOF HAVE NOT BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933, AS AMENDED
(THE  "SECURITIES  ACT"),  OR ANY  STATE  SECURITIES  LAW,  AND MAY NOT BE SOLD,
TRANSFERRED,  PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS
(i) A REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT AND  APPLICABLE  STATE
SECURITIES  LAWS SHALL HAVE BECOME  EFFECTIVE  WITH REGARD  THERETO,  OR (ii) AN
EXEMPTION  FROM  REGISTRATION  UNDER THE  SECURITIES  ACT AND  APPLICABLE  STATE
SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.

<PAGE>

AN INVESTMENT  IN THESE  SECURITIES  INVOLVES A HIGH DEGREE OF RISK.  PAYEE MUST
RELY ON HIS OR HER OWN ANALYSIS OF THE  INVESTMENT  AND  ASSESSMENT OF THE RISKS
INVOLVED.

                                BORROWER:
                                URBAN TELEVISION NETWORK CORPORATION
                                By:   /s/ Randy Moseley
                                Its: Chief Financial Officer

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