Document:

exv10w7

 

EXHIBIT 10.7

REVOLVING CREDIT AGREEMENT

     THIS REVOLVING CREDIT AGREEMENT (this “Agreement”) made as of March 31, 2003, by and among
TEKNIK DIGITAL ARTS INC., a Nevada corporation (“Borrower”) and CODEFIRE ACQUISITION CORP., a
California corporation (“Lender”).

     Borrower and Lender agree as follows:

     1. The Revolving Credit. Lender agrees, subject to the terms and conditions hereof,
to lend to Borrower from time to time from the date hereof until March 31, 2004 (unless the Note is
accelerated or terminated earlier than such date) (the “Commitment Period”), such sums (the
“Advances”) not to exceed $500,000 in the aggregate at any one time outstanding (the “Credit”) as
Borrower may request from time to time. The Credit is subject to the terms and conditions of this
Agreement and the Revolving Credit Note (the “Note”), which, together with this Agreement,
evidences the Credit. The Note shall be in the form attached hereto as Exhibit A.
Proceeds of the Credit are to be used for the general corporate purposes of Borrower.

     2. Reduction of Credit. Borrower shall have the right, upon at least thirty (30)
business days notice to Lender, to terminate in whole or reduce in part the unused portion of the
Credit; provided that no reduction shall be permitted if, after giving effect thereto, and to any
prepayment made therewith, the outstanding and unpaid principal amount of the Advances shall exceed
the Credit. The Credit once reduced or terminated may not be reinstated.

     3. Conditions to all Loans. The obligation of Lender to make any Advance is subject
to its satisfaction of the following conditions precedent:

          (a) Delivery of Note. Borrower shall have delivered the Note to Lender, properly
executed by Borrower.

          (b) No Event of Default. No event of default caused by Borrower under this Agreement
or the Note shall have occurred and be continuing on the date the Advance is to be made or after
giving effect to the Advance to be made.

          (c) Borrowing Certificate. Lender shall have received a signed, completed borrowing
request from Borrower in the form of Exhibit B hereto as provided in the Note. Such
borrowing certificate signed by Borrower shall constitute a request for an Advance by Borrower and
shall be binding on Borrower. Borrower shall give Lender at least five (5) business days notice of
any Advance under this Agreement.

          (d) Representations and Warranties. The representations and warranties of Borrower
contained in this Agreement shall be true and correct in all material respects as of the date of
each Advance.

     4. Repayment of Advances. All Advances, if not earlier repaid, shall be repaid to
Lender by the last business day in the relevant Commitment Period.

 

 

     5. Interest. Borrower agrees to pay Lender interest on the unpaid principal amount
from time to time outstanding under this Agreement, in arrears, at a rate equal the lesser of (i)
seven percent (7%) per annum or (ii) the highest lawful rate permissible under any applicable law.
Interest shall be computed as simple interest. Interest shall be paid in immediately available
funds on the first (1st) business day of each month and at maturity of the relevant
Advances.

     6. Prepayments. Borrower may upon at least thirty (30) days notice to Lender, prepay
the Note in whole or in part with accrued interest to the date of such prepayment on the amount
prepaid.

     7. Method of Payment. Borrower shall make each payment under this Agreement and under
the Note not later than 5:00 p.m. Arizona time on the date when due in lawful money of the United
States to the bank account specified in writing to Borrower by Lender in immediately available
funds.

     8. Extension of Commitment Period. Borrower may, at least thirty (30) days before the
end of the Commitment Period then in effect, request in writing to Lender that the Commitment
period be extended one (1) year to the anniversary date next following the last day of the
Commitment Period then in effect. Lender shall not be obligated to grant Borrower any such
extension. If any such extension is granted by Lender, Borrower shall execute and deliver an
amended and restated Note reflecting such extension.

     9. Representations and Warranties. Borrower makes the following representations and
warranties, all of which shall be deemed to be continuing representations and warranties so long as
any part of the Credit is unpaid or any commitment of Lender to make Advances exists hereunder.

          (a) Good Standing and Authority of Borrower. Borrower is duly organized, validly
existing and in good standing under the laws of the state of its incorporation. Borrower has
corporate power and authority to transact the business in which it is engaged; is duly licensed or
qualified and in good standing in each jurisdiction in which the conduct of business or ownership
of property requires such licensing or such qualification, except where the failure to be so
licensed or qualified could not reasonably be expected to have a material adverse effect on the
business or financial condition of Borrower; and has all necessary corporate power and authority to
enter into this Agreement and to execute, deliver and perform this Agreement, the Note and any
other document executed in connection with this Agreement to which it is a party, all of which have
been duly authorized by all proper and necessary corporate and shareholder action, as appropriate.
This Agreement and the Note constitute the legal, valid and binding obligations of Borrower,
enforceable in accordance with their respective terms. To the knowledge of Borrower, after
reasonable review and consideration, the execution and delivery of this Agreement and the Note is
not and will not be in violation of any agreement to which Borrower is a party (except for any
violation which would not have a material adverse effect on Borrower), and no consent of any kind
is required for Borrower to enter into or perform this Agreement or to execute and deliver the
Note.

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          (b) Financial Condition. Borrower has the financial resources or can obtain the
necessary financing to meet its debt obligations under this Agreement and the Note.

          (c) Litigation. There are no actions, suits, proceedings or investigations pending
or, to the knowledge of Borrower, threatened against Borrower, which could reasonably be expected
to, in any case or in the aggregate, materially adversely affect the property, assets, financial
condition or business of Borrower taken as a whole.

     10. Covenants. So long as any part of the Credit is unpaid, or there exists any
commitment of Lender to make Advances:

          (a) Future Financial Statements. Borrower will furnish or cause to be furnished to
Lender: (i) within 45 days after the end of each quarter, including the last quarter of any fiscal
year, an unaudited financial statement, in consolidated form under GAAP, of Borrower as of the end
of such and as of the end of each month in such quarter, which statement shall consist of a balance
sheet, and related statements of income and retained earnings, covering the period from the end of
Borrower’s immediately preceding fiscal year to the end of such quarter, certified to be correct in
all material respects by the President or Chief Financial Officer of Borrower, subject to such
year-end accounting adjustments as are normal and customary; and (ii) within 120 days after the end
of each of its fiscal years, a financial statement of Borrower, which shall consist of a balance
sheet, and related statements of income and retained earnings, covering the period of Borrower’s
immediately preceding fiscal year, and which shall be audited by independent certified public
accountants reasonably satisfactory to Lender, and in consolidated form under GAAP.

          (b) Taxes. Borrower will promptly pay and discharge all of its taxes, assessments and
other governmental charges (including any charged or assessed on the issuance of the Note) prior to
the date on which material penalties are attached thereto, establish adequate reserves for the
payment of taxes and assessments and make all required withholding and other tax deposits;
provided, however, that nothing contained herein shall require the payment of any tax assessment or
charge so long as its validity is being contested in good faith and by appropriate proceedings
diligently conducted.

          (c) Litigation. Borrower will promptly notify Lender in writing as soon as Borrower
has knowledge of the institution or filing of any material litigation, or governmental or
regulatory proceeding against, or investigation of, Borrower: (i) the outcome of which may
reasonably be expected to materially and adversely affect the finances or operations of Borrower or
Borrower’s ability to fulfill its obligations hereunder; or (ii) which questions the validity of
this Agreement, the Note or any action taken or to be taken pursuant thereto; and furnish or cause
to be furnished to Lender such information regarding any such matter as Lender may request.

          (d) Corporate Standing; Business. Borrower will maintain its corporate existence in
good standing and remain or become duly licensed or qualified and in good standing in each
jurisdiction in which the conduct of its business or ownership of its property requires such
qualification or licensing.

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          (e) Other Acts. Borrower will execute and deliver, or cause to be executed and
delivered, to Lender all further documents and perform all other acts which Lender reasonably deems
necessary or appropriate to protect the Credit.

     11. Events of Default. The occurrence of any one or more of the following events
shall constitute an event of default (“Event of Default”):

          (a) Nonpayment. Nonpayment within five business days of when due, whether by
acceleration or otherwise, of principal of or interest on the Note or of any cost or expense
provided for in this Agreement.

          (b) Covenants. Default in the observance of covenants or agreements contained in this
Agreement, which is not remedied within thirty (30) days after written notice thereof by Lender to
Borrower.

          (c) Financial Condition. The filing by or against Borrower of a request or petition
for liquidation, reorganization, arrangement adjustment of debts, adjudication as a bankrupt,
relief as a debtor or other relief under the bankruptcy, insolvency or similar laws of the United
States or any state or territory thereof or any foreign jurisdiction, now or hereafter in effect
(but in the case of a filing against Borrower, only if such filing is not vacated or bonded within
sixty (60) days of filing); the making of any general assignment by Borrower for the benefit of
creditors; the appointment of a receiver or trustee for Borrower or for any assets of any of them,
including, without limitation, the appointment of or taking possession by a “custodian,” as defined
in the Federal Bankruptcy Code; or the institution by or against Borrower of any other type of
insolvency proceeding (under the Federal Bankruptcy Code or otherwise) or of any formal or informal
proceeding for the dissolution or liquidation of, settlement of claims against or winding up of
affairs of Borrower (but in the case of a proceeding instituted against Borrower, only if such
proceeding is not vacated or bonded within sixty (60) days of such institution).

          (d) Business; Judgments. The cessation of Borrower as a going business concern; the
entry judgment against Borrower in an amount in excess of $5,000,000.00, other than a judgment for
which Borrower is fully insured, if thirty (30) days after entry of judgment, such judgment is not
satisfied, vacated, bonded or stayed pending appeal; or if Borrower is generally not paying its
debts as such debts become due.

          (e) Representations. If any certificate, statement, representation, warranty or audit
heretofore or hereafter furnished by or on behalf of Borrower pursuant to or in connection with
this Agreement, or as an inducement to Lender to extend the Credit to, or to enter into this or any
other agreement with Borrower proves to have been false in any material respect at the time as of
which the facts therein set forth were stated or certified, or to have omitted any substantial and
material contingent or unliquidated liability or claim against Borrower.

          (f) Other Indebtedness. Nonpayment by Borrower when due of any indebtedness for
borrowed money owing to any party other than Lender and such failure continues after any applicable
grace or notice period, or the occurrence of any event which permits the acceleration of payment of
any such indebtedness except where such nonpayment would not have a material adverse effect on the
Borrower.

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     12. Acceleration. Upon the happening of an Event of Default specified in subsection
(f), above, any obligation of Lender to make Advances shall cease immediately, and the Note shall
become immediately due and payable, without presentation, demand or notice of any kind to Borrower.
Upon the happening of any other Event of Default, Lender may, upon notice to Borrower, terminate
any obligation of Lender to make Advances and declare the Note immediately due and payable, without
presentation, demand or further notice of any kind to Borrower. Notwithstanding the foregoing, any
acceleration herein shall be subject to any applicable grace periods provided for in this
Agreement.

     13. Expenses. Borrower shall reimburse Lender promptly for all of its reasonable and
documented out-of-pocket costs and expenses incurred in connection with the Credit including,
without limitation, filing fees, recording fees, any taxes which Lender may be required to pay in
connection with the execution and delivery of this Agreement and the Note, and any costs and
expenses incident to the enforcement of any provision of this Agreement or the Note. “Costs and
expenses” as used in the preceding sentence shall also include, without limitation, the reasonable
outside attorneys’ fees incurred by Lender in retaining counsel in connection with the preparation
or execution of this Agreement; for advice, suit, appeal, any insolvency or other proceedings under
the Federal Bankruptcy Code or otherwise; or for any other purpose related to the Credit.

     14. Miscellaneous.

          (a) Amendments and Waivers. No modification, rescission, waiver, release, or
amendment of any provision of this Agreement shall be made except by a written agreement signed by
a duly authorized officer of Borrower and a duly authorized officer of Lender.

          (b) Delays and Omissions. No delay or omission by Lender in exercising any right or
remedy hereunder or with respect to the Credit shall operate as a waiver thereof or of any other
right or remedy, and no single or partial exercise thereof shall preclude any other or further
exercise thereof or the exercise of any other right or remedy. Lender may remedy any default by
Borrower hereunder or with respect to the Credit in any reasonable manner without waiving the
default remedied and without waiving any other prior or subsequent default by Borrower, and shall
be reimbursed for its expenses in so remedying such default. All rights and remedies of Lender
hereunder, under any other agreement and otherwise are cumulative; if any provision of this
Agreement is inconsistent with any provision of any other agreement between Lender and Borrower,
the provisions of this Agreement shall control.

          (c) Successors and Assigns. Borrower and Lender as used herein shall include the
legal representatives, successors, and assigns of those parties. Notwithstanding the foregoing,
Borrower may not assign or transfer this Agreement, the Note, or any rights under the Note or this
Agreement without the prior written consent of Lender.

          (d) Notices. All notices, requests, demands and other communications which are
required or may be given under this Agreement shall be in writing and shall be deemed to have been
duly given when received if personally delivered; when transmitted if transmitted by telecopy,
electronic or digital transmission method; the day after it is sent, if sent for next day delivery
to a domestic address by recognized overnight delivery service (e.g., Federal Express);

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and upon receipt, if sent by certified or registered mail, return receipt requested. In each
case notice shall be sent to:

     If to Lender, addressed to:

CodeFire Acquisition Corp.

3104 East Camelback Road #509

Phoenix, Arizona 85016

Fax: (602) 485-8782

     If to Borrower, addressed to:

Teknik Digital Arts Inc.

c/o Corporation Trust Company of Nevada

6100 Neil Road, Suite 500

Reno, Nevada 89511

     with a copy to:

Squire, Sanders & Dempsey L.L.P.

Two Renaissance Square

40 North Central Avenue, Suite 2700

Phoenix, Arizona 85004

Attention: Gregory R. Hall, Esquire

Fax: (602) 253-8129

or to such other place and with such other copies as either party may designate as to itself by
written notice to the others.

          (e) Generally Accepted Accounting Principles. Any financial calculation to be made,
and books and records to be kept, in connection with the provisions of this Agreement shall be in
accordance with generally accepted accounting principles consistently applied each year and from
year to year.

          (f) Severability. The invalidity, illegality or unenforceability of any provision of
this Agreement shall not affect or impair the validity, legality or enforceability of the remainder
of this Agreement, and to this end, the provisions of this Agreement are declared to be severable.

          (g) Governing Law. This Agreement shall be governed by and construed and enforced in
accordance with the substantive laws (other than conflict laws) of the State of Arizona.

          (h) Arbitration. Any controversy arising out of or relating to this Agreement shall
be settled by arbitration conducted in Phoenix, Arizona in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect. The award rendered by

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the arbitrator(s) shall be final and judgment upon the award rendered by the arbitrator(s) may
be entered upon it in any court having jurisdiction thereof. The arbitrator(s) shall possess the
powers to issue mandatory orders and restraining orders in connection with such arbitration. The
expenses of the arbitration shall be borne by the losing party unless otherwise allocated by the
arbitrator(s). The agreement to arbitrate shall be specifically enforceable under the prevailing
arbitration law. During the continuance of any arbitration proceedings, the parties shall continue
to perform their respective obligations under this Agreement.

[Remainder of Page Intentionally Left Blank]

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     THE PARTIES HERETO have signed this Agreement on the date written above.

	 	 	 	 	 
	 	 	LENDER
	 
	 	 	 	 
	 	 	CodeFire Acquistion
Corp.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	Name:	 	 
	

	 	 	 	 
	

	 	Its:	 	 
	

	 	 	 	 
	 
	 	 	 	 
	 	 	BORROWER
	 
	 	 	 	 
	 	 	Teknik Digital Arts Inc.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	Name:	 	 
	

	 	 	 	 
	

	 	Its:	 	 
	

	 	 	 	 
	:
	 	 	 	 

8

 

EXHIBIT A TO THE REVOLVING CREDIT AGREEMENT

FORM OF REVOLVING CREDIT NOTE

March  __, 2003

$500,000

Due: March __, 2004

1. Promise to Pay. FOR VALUE RECEIVED, TEKNIK DIGITAL ARTS INC., a Nevada corporation
(“Borrower”), promises to pay to the order of CODEFIRE ACQUISITION CORP., a California corporation
(“Lender”), the sum not to exceed of Five Hundred Thousand Dollars ($500,000.00), or so much
thereof as may be from time to time outstanding, together with all other amounts added thereto
pursuant to this Note or otherwise payable to Lender (together, the “Loan”), together with default
interest thereon (if any) as hereinafter set forth, payable in lawful money of the United States of
America. Payments shall be made to Lender at such address or account as Lender may hereafter
designate in writing to Borrower.

2. Revolving Loan. This Note evidences a revolving credit, all or any part of which may be
advanced to Borrower, repaid by Borrower, and readvanced to Borrower from time to time, subject to
the other provisions hereof and the provisions of the Revolving Credit Agreement (the “Credit
Agreement”), dated as of March 31, 2003, by and between Borrower and Lender provided that the
principal balance outstanding hereunder at any one time shall not exceed $500,000.00.

3. Interest. Borrower promises to pay interest on the unpaid principal amount of each
Advance (as defined in the Credit Agreement) evidenced hereby from the date of such Advance until
the principal amount is paid in full, at such interest rates, and payable at such times, as are
specified in the Credit Agreement.

4. Repayment of Advances. Borrower promises to pay the principal of any Advance at such
times and on such dates as specified in the Credit Agreement.

5. Governing Law; Severability. This Note shall be governed by and construed in accordance
with the internal laws of the State of Arizona, without regard to conflicts of laws principles.
The invalidity, illegality or unenforceability of any provision of this Note shall not affect or
impair the validity, legality or enforceability of the remainder of this Note, and to this end, the
provisions of this Note are declared to be severable.

6. Miscellaneous.

     6.1 Amendments. This Note may not be terminated or amended orally, but only by a
termination or amendment in writing signed by Lender.

 

 

     6.2 Lawful Rate of Interest. In no event whatsoever shall the amount of interest paid
or agreed to be paid to Lender pursuant to this Note exceed the highest lawful rate of interest
permissible under applicable law.

     6.3 Waivers. Borrower hereby waives grace, diligence, presentment, demand, notice of
demand, dishonor, notice of dishonor, protest, notice of protest, any and all exemption rights
against the indebtedness evidenced by this Note and the right to plead any statute of limitations
as a defense to the repayment of all or any portion of this Note, and interest thereon, to the
fullest extent allowed by law. No delay, omission and/or failure on the part of the Lender in
exercising any right and/or remedy hereunder shall operate as a waiver of such right and/or remedy
or of any other right and/or remedy of Lender.

     6.4 Captions. The captions of the Sections of this Note are for convenience of
reference only and shall not be deemed to modify, explain, enlarge or restrict any of the
provisions hereof.

     6.5 Notices. Notices shall be given under this Note in conformity with the terms and
conditions of the Credit Agreement.

     6.6 Time of Essence. Time is of the essence of this Note and the performance of each
of the covenants and agreements contained herein.

     6.7 Arbitration. Any controversy arising out of or relating to this Note shall be
settled by arbitration conducted in Phoenix, Arizona in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then in effect. The award rendered by the
arbitrator(s) shall be final and judgment upon the award rendered by the arbitrator(s) may be
entered upon it in any court having jurisdiction thereof. The arbitrator(s) shall possess the
powers to issue mandatory orders and restraining orders in connection with such arbitration. The
expenses of the arbitration shall be borne by the losing party unless otherwise allocated by the
arbitrator(s). The agreement to arbitrate shall be specifically enforceable under the prevailing
arbitration law. During the continuance of any arbitration proceedings, the parties shall continue
to perform their respective obligations under this Note.

[Remainder of page intentionally left blank. See signature page attached.]

 

 

     IN WITNESS WHEREOF, Borrower has executed this Note or has caused the same to be executed by
its duly authorized representatives as of the date set first forth above.

	 	 	 	 	 
	

	 	 	BORROWER:
	 
	 	 	 	 
	 

	 	 	TEKNIK DIGITAL ARTS INC.
	 
	 	 	 	 
	

	 	 	By:	 
	

	 	 	 	 
	

	 	 	 	Name:
	

	 	 	 	Its:

 

 

EXHIBIT B TO THE REVOLVING CREDIT AGREEMENT

FORM OF ADVANCE REQUEST

Date:                     

Time:                     

CodeFire Acquisition Corp.

3104 East Camelback Road #509

Phoenix, Arizona 85016

Dear Ladies and Gentlemen:

     The undersigned, Teknik Digital Arts Inc. (“Borrower”) refers to the Revolving Credit
Agreement dated as of March 31, 2003 (as it may hereafter be amended, modified, extended or
restated from time to time, the “Credit Agreement”) by and between Borrower and CodeFire
Acquisition Corp., a California corporation. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Credit Agreement.

     Borrower hereby gives notice that it requests an Advance pursuant to the Credit Agreement and
sets forth below the terms of such requested Advance:

	 	 	 	 	 	 	 
	A.

	 	Date of Advance
	 	 	 	                    
	 
	 	 	 	 	 	 
	B.

	 	Principal Amount of Advance
	 	 	 	                    
	 
	 	 	 	 	 	 
	

	 	 	 	Sincerely,
	 
	 	 	 	 	 	 
	

	 	 	 	TEKNIK DIGITAL ARTS INC.
	 
	 	 	 	 	 	 
	

	 	 	 	By: 
	                                                                                
	

	 	 	 	Its:exv10w8

 

EXHIBIT 10.8

SOFTWARE PURCHASE AGREEMENT

     This SOFTWARE PURCHASE AGREEMENT, dated as of December 31, 2003 (the “Agreement”), is by and
between Teknik Digital Arts Inc., a Nevada corporation (the “Buyer”) and Fortune Labs LLC, a Nevada
limited liability company (“Seller”).

RECITALS

     A. Seller owns certain Software (defined below) that it uses in the conduct of its business.

     B. Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, the Software
described herein upon the terms and subject to the conditions of this Agreement.

AGREEMENT

     NOW THEREFORE, in consideration of the mutual covenants and promises contained herein and for
other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged,
the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

     1.1 Defined Terms. As used herein, the terms below shall have the following
meanings. Any of such terms, unless the context otherwise requires, may be used in the singular or
plural, depending upon the reference.

          “Closing Date” shall mean the date hereof or such other date as Buyer and Seller shall
mutually agree upon.

          “Encumbrance” shall mean any claim, lien, pledge, option, charge, easement, security
interest, deed of trust, mortgage, use restriction, conditional sales agreement, encumbrance or
other right of third parties, whether voluntarily incurred or arising by operation of law, and
includes, without limitation, any agreement to give any of the foregoing, and any contingent sale
or other title retention agreement or lease in the nature thereof.

          “Representative” shall mean any officer, director, principal, attorney, agent,
employee or other representative.

          “Software” means the software called “Spameater Antispam,” which is a software
application designed to filter spam e-mails, as further described in Exhibit A hereto.

     1.2 Other Defined Terms. The following terms shall have the meanings defined for such
terms in the Sections set forth below:

	 	 	 	 	 
	Term	 	Section or Exhibit	 
	Closing
	 	 	4.1	 
	Credits
	 	 	3.3	 
	Damages
	 	 	7.2.1	 
	Excluded Liabilities
	 	 	2.3	 
	IP Rights
	 	 	5.7	 
	Purchase Price
	 	 	2.4.1	 

ARTICLE 2

PURCHASE AND SALE OF SOFTWARE

 

 

     2.1 Transfer of Software. Upon the terms and subject to the conditions
contained herein, at the Closing, Seller will sell, convey, transfer, assign and deliver to Buyer,
and Buyer will acquire from Seller, all of the rights, title and interest of Seller in and to the
Software.

     2.2 Assignment of Intellectual Property. Seller hereby assigns to Buyer,
its successors and assigns, all right, title and interest in and to the intellectual property
related to the Software (including, but not limited to all applications, registrations and grants
of copyrights, patents and trademarks (together with good will), trade secrets, and other
proprietary rights therein (including renewals thereof)).

     2.3 Excluded Liabilities. Buyer shall not assume, or otherwise be
responsible for, any of Seller’s liabilities or obligations with respect to the Software, whether
actual or contingent, matured or unmatured, liquidated or unliquidated, known or unknown, whether
arising out of occurrences prior to, at or after the Closing Date (collectively, “Excluded
Liabilities”).

     2.4 Purchase Price.

          2.4.1 Purchase Price. At the Closing, upon the terms and subject to the
conditions set forth herein, Buyer shall pay to Seller in consideration for the Software the
consideration described below (the “Purchase Price”):

               2.4.1.1 Buyer shall issue to Seller an aggregate of 100,000 shares of common stock
of Buyer (the “Buyer Common Stock”), which shares shall be restricted securities as such
term is defined under the U.S. federal securities laws.

               2.4.1.2 Buyer shall issue to Seller a warrant to purchase an aggregate of 40,000
shares of Buyer Common Stock at a per share exercise price of $2.50 if exercised within 30 days of
the date Buyer obtains an effective registration statement registering the resale of such shares,
which exercise price shall increase to $5.00 per share thereafter. The warrant shall be in
substantially the same form of Exhibit B attached hereto.

               2.4.1.3 Buyer and Chris Fortune shall enter into a Consulting Agreement in
substantially the form of Exhibit C attached hereto.

     2.5 Closing Costs; Transfer Taxes and Fees. Seller shall be responsible for
any documentary and transfer taxes and any sales, use or other taxes imposed by reason of the
transfer of Software provided hereunder and any deficiency, interest or penalty asserted with
respect thereto. Buyer shall pay all costs of applying for new licenses, if any, related to the
Software and obtaining the transfer of existing licenses, which may be lawfully transferred.
Seller shall pay the fees and costs of recording or filing all applicable conveyancing instruments
described in Section 4.2.1, and shall pay the fees and costs of recording or filing all UCC
termination statements and other releases of Encumbrances.

ARTICLE 3

REGISTRATION RIGHTS; STOCK PURCHASE OBLIGATION

          3.1.1 Piggy-Back Registration. If Buyer proposes to register (including for
this purpose a registration effected by Buyer for its stockholders) any of its stock or other
securities under the Securities Act of 1933, as amended (the “Securities Act”), in
connection with the public offering of such securities, on a registration form that would also
allow the registration of the Buyer Common Stock (other than a registration relating solely to the
sale of securities to participants in a Buyer stock plan, a registration relating to corporate
reorganization or other transaction under Rule 145 of the Securities Act, or a registration in
which the only common stock being registered is common stock issuable upon conversion of debt
securities which are also being registered), Buyer shall:

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                         (i) promptly give to Seller written notice of Buyer registration (which shall
include the number of shares Buyer or other holders propose to register and, if known, the name of
the proposed underwriter); and

                         (ii) use its best efforts to include in such registration all the Buyer Common Stock
specified in a written request or requests, made by Seller within fifteen (15) days after the date
of delivery of the written notice from Buyer described in clause (i) above.

     Buyer shall not be required to effect a registration pursuant to this Section 3.1 if Seller,
after having been afforded an opportunity to include its shares of Buyer Common Stock in a Buyer
registration in accordance with this Section 3.1, elects not to include all of its shares of Buyer
Common Stock in such registration.

     3.2 Stock Purchase. As a material condition to Buyer’s purchase of the
Software, Seller hereby agrees to purchase 40,000 shares of validly issued, fully paid and
nonassessable shares of Buyer Common Stock (the “Purchased Shares”) at a per share purchase
price of $2.50 (the “Stock Purchase Price”), which amount shall be payable on the Closing
Date by wire transfer of immediately available funds to an account designated by Buyer.

ARTICLE 4

CLOSING

     4.1 Closing. The Closing of the transactions contemplated herein (the
“Closing”) shall be held on the Closing Date at a time and place as the parties shall mutually
agree.

     4.2 Conveyances at Closing.

          4.2.1 Seller’s Closing Deliveries. To effect the sale and transfer referred
to in Section 2.1 and hereof and the purchase referred to in Section 3.2, Seller will, at the
Closing, execute or cause to be executed, as appropriate, and deliver to Buyer:

               4.2.1.1 one or more bills of sale, each in the form of Exhibit D attached
hereto, conveying in the aggregate all of Seller’s ownership in the Software, free and clear of all
Encumbrances;

               4.2.1.2 the Consulting Agreement, executed by Christ Fortune;

               4.2.1.3 the Stock Purchase Price;

               4.2.1.4 all documents necessary to release the Software from all Encumbrances, if
any, which documents shall be in a form reasonably satisfactory to Buyer; and

               4.2.1.5 such other instruments as shall be requested by Buyer to vest in Buyer title
in and to the Software in accordance with the provisions hereof.

          4.2.2 Buyer’s Closing Deliveries. To effect the sale and transfer referred
to in Section 2.1 hereof, Buyer will, at the Closing, execute and deliver to Seller:

               4.2.2.1 the Buyer Common Stock and the Purchased Shares;

               4.2.2.2 the Warrant;

               4.2.2.3 the Consulting Agreement; and

3

 

               4.2.2.4 such other instruments as the parties shall mutually agree upon in order to
vest Buyer title in and to the Software in accordance with the provisions hereof and to carry into
effect the purpose and intent of this Agreement.

          4.2.3 Form of Instruments. To the extent that a form of any document to be
delivered hereunder is not attached as an exhibit hereto, such documents shall be in form and
substance, and shall be executed and delivered in a manner, reasonably satisfactory to the
recipient.

          4.2.4 Consents. Subject to Section 8.3, Seller shall deliver all third
party consents required for the valid transfer of the Software as contemplated by this Agreement.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF SELLER

     Seller represents and warrants to Buyer as follows, which representations and warranties are,
as of the date hereof, and will be, as of the Closing Date, true and correct:

     5.1 Organization of Seller. Seller is a Nevada limited liability company
duly formed, validly existing and in good standing under the laws of the State of Nevada.

     5.2 Authorization. The Seller has all requisite power and authority, and
has taken all action necessary, to own, lease and operate the Software, to execute and deliver this
Agreement, to consummate the transactions contemplated hereby and to perform its obligations
hereunder. This Agreement has been duly executed and delivered by Seller and is a legal, valid and
binding obligation of Seller enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting
creditors’ rights or by principles of equity.

     5.3 Software. Seller is the sole and exclusive owner of the Software.
Seller has and will transfer good and marketable fee simple title to the Software and upon the
consummation of the transactions contemplated hereby, and Buyer will acquire good title to all of
the Software, free and clear of any Encumbrances.

     5.4 No Conflict or Violation. After giving effect to consents and lien
releases that have been obtained from third parties or will be so obtained prior to the Closing
Date, neither the execution and delivery of this Agreement by Seller nor the consummation of the
transactions contemplated hereby, nor compliance by Seller with any of the provisions hereof, will
(i) violate or conflict with any provision of the Articles of Incorporation or Bylaws of Seller,
(ii) conflict with, or result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Encumbrance upon any of the Software under,
any of the terms, conditions or provisions of any contract, agreement, or other instrument or
obligation (a) to which Seller is a party or (b) by which the Software is bound, (iii) violate any
statute, rule, regulation, ordinance, code, order, judgment, ruling, writ, injunction, decree or
award or (iv) impose any Encumbrance, restriction or charge on the Software.

     5.5 Litigation. There is no action, order, writ, injunction, judgment or
decree outstanding or any claim, suit, litigation, proceeding, labor dispute, arbitral action,
governmental audit or investigation pending, or to the best of Seller’s knowledge, threatened or
anticipated (i) against, related to or affecting the Software or (ii) seeking to delay, limit or
enjoin the transactions contemplated by this Agreement. Seller is not in default with respect to
or subject to any judgment, order, writ, injunction or decree of any court or governmental agency,
and there are no unsatisfied judgments against the Software.

     5.6 No Other Agreements to Sell the Software. Neither Seller nor any of its
respective officers, directors, shareholders or affiliates have any commitment or legal obligation,
absolute or contingent, to any other person or firm other than Buyer to sell, assign, transfer or
effect a sale of any of the Software.

4

 

     5.7 Intellectual Property Rights. All intellectual property relating to the
Software, including all patents, patent applications, trademarks, trade names (whether registered
or unregistered), copyrights, patent license, service marks, logos and commercial symbols, together
with all other inventions, licenses, trade secrets, patterns, drawings, software, formulae,
technical information, research, data, concepts, methods, “know-how,” and trade secrets relating to
the Software, are held by, owned by, licensed to or used by the Seller (collectively, the “IP
Rights”), are valid and in good standing and none of them infringes (nor has any claim been made
that any of them infringes) the patents, trademarks or other rights of others. Seller has taken
all action necessary to protect the IP Rights in the United States and all foreign countries
reasonably related to Seller’s markets and business objectives. There is no agreement to which
Seller is a party or to which Seller is legally bound and no restriction or Encumbrances,
materially and adversely affecting the use by Seller and, after the Closing Date, the use by
Buyer, of any of the IP Rights. There is no pending litigation or other legal action with respect
to any of the IP Rights, and no order, holding, decision or judgment has been rendered by any
authority, and no agreement, consent or stipulation exists to which the Seller is a party or of
which Seller has knowledge, which would prevent the Seller, or after the Closing Date, Buyer, from
using any of the IP Rights.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF BUYER

     Buyer hereby represents and warrants to Seller as follows, which representations and
warranties are, as of the date hereof, and will be, as of the Closing Date, true and correct, to
Seller as follows:

     6.1 Organization of Buyer. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada.

     6.2 Authorization. Buyer has all requisite power and authority, and has
taken all action necessary under its organizational documents, to execute and deliver this
Agreement, to consummate the transactions contemplated hereby, including the issuance of the Buyer
Common Stock and the Purchased Shares, and to perform its obligations hereunder. This Agreement
has been duly executed and delivered by Buyer and is a legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws affecting creditor’s rights or by
principles of equity.

     6.3 No Conflict or Violation. Neither the execution, delivery or
performance of this Agreement nor the consummation of the transactions contemplated hereby, nor
compliance by Buyer with any of the provisions hereof, will (i) violate or conflict with any
provision of the organizational documents or Bylaws of Buyer, or (ii) violate any statute, rule,
regulation, ordinance, code, order, judgment, ruling, writ, injunction, decree or award binding
upon Buyer.

     6.4 Consents and Approvals. No notice to, declaration, filing or
registration with, or authorization, consent or approval of, or permit from, any governmental or
regulatory body or authority, or any other person or entity, is required to be made or obtained by
Buyer in connection with the execution, delivery and performance of this Agreement.

ARTICLE 7

ACTIONS BY SELLER AND BUYER

AFTER THE CLOSING

     7.1 Survival of Representations. All statements contained in any
certificate, schedule, exhibit, instrument or conveyance delivered by or on behalf of the parties
pursuant to this Agreement or in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by the parties hereunder. The representations,
warranties, covenants and agreements of Seller and Buyer contained herein shall survive the
consummation of the transactions contemplated hereby and the Closing Date, without regard to any
investigation made by any of the parties hereto. Except as provided in this sentence, all such
representations and warranties and

5

 

all claims and causes of action with respect thereto shall terminate upon expiration of two
years after the Closing Date. The termination of the representations and warranties provided
herein shall not affect the rights of a party in respect of any claim made by such party in a
writing received by the other party prior to the expiration of the applicable survival period
provided herein.

     7.2 Indemnifications.

          7.2.1 By Seller. Regardless of Seller’s knowledge of the existence of an
Indemnifiable Event, as defined below, Seller shall indemnify, defend, save and hold harmless
Buyer, its affiliates and subsidiaries, and its respective Representatives, from and against any
and all claims, damages, costs, losses (including without limitation diminution in value), taxes,
liabilities, judgments, penalties, fines, obligations, lawsuits, deficiencies, demands and expenses
(whether or not arising out of third-party claims), including without limitation interest,
penalties, costs of mitigation, losses in connection with lost profits, attorneys’ fees, experts’
fees and all amounts paid in investigation, defense or settlement of any of the foregoing (herein,
“Damages”), incurred in connection with, arising out of, resulting from or incident to (i) any
breach of any representation or warranty, or the inaccuracy of any representation or warranty, made
by Seller in or pursuant to this Agreement; (ii) any breach of any covenant or agreement made by
Seller in or pursuant to this Agreement; (iii) any Excluded Liability; and (iv) any liability
imposed upon Buyer by reason of Buyer’s status as transferee of the Software.

          7.2.2 By Buyer. Buyer shall indemnify and save and hold harmless Seller,
its affiliates and its Representatives from and against any and all Damages incurred in connection
with, arising out of, resulting from or incident to (i) any breach of any representation or
warranty, or the inaccuracy of any representation or warranty, made by Buyer in or pursuant to this
Agreement; or (ii) any breach of any covenant or agreement made by Buyer in or pursuant to this
Agreement.

          7.2.3 General Indemnification Procedures. If a party or person entitled to
indemnification hereunder obtains knowledge of any claim, obligation, liability or action for which
indemnification may be sought hereunder by such indemnified party, such indemnified party shall
give prompt written notice thereof to the indemnifying party. The indemnifying party shall be
entitled to control the defense of any such legal proceeding, through legal counsel reasonably
satisfactory to the indemnified party, at the sole expense of the indemnifying party, and the
indemnified party shall cooperate with the indemnifying party in the defense of such claim. The
indemnifying party shall have the right, after reasonable consultation with the indemnified party,
to compromise or settle any claim or action which is tendered to the indemnifying party hereunder.

          7.2.4 Buyer’s Right of Offset. Anything in this Agreement to the contrary
notwithstanding, Buyer may withhold and set off any amount which Buyer is obligated to indemnify
Seller pursuant to this Section 7.2 against any other amounts otherwise due from Seller.

          7.2.5 Liability and Remedies. Except as set forth below, no individual
Representative of any party shall be personally liable for any Damages under the provisions
contained in this Section 7.2. Nothing herein shall relieve either party of any liability to make
any payment expressly required to be made by such party pursuant to this Agreement. The term
“Damages” as used in this Section 7.2 is not limited to matters asserted by third parties against
Seller or Buyer, but includes Damages incurred or sustained by Seller or Buyer in the absence of
third party claims. Payments by Buyer of amounts for which Buyer is indemnified hereunder, and
payments by Seller of amounts for which Seller is indemnified, shall not be a condition precedent
to recovery. Seller’s obligation to indemnify Buyer, and Buyer’s obligation to indemnify Seller,
shall not limit any other rights, including without limitation rights of contribution that either
party may have under statute or common law. Buyer shall have all other remedies provided by law or
in this Agreement.

     7.3 Assistance. Seller shall execute and deliver such instruments and take
such other action as may be requested by Buyer to perfect or protect Buyer’s rights in the Software
and to carry out the assignments contemplated in this Agreement and assist Buyer and its nominees
in every proper way to secure, maintain, protect and defend for Buyer’s own benefit all such rights
in the Software in any and all countries. Seller shall cooperate with Buyer in the filing and
prosecution of any copyright, trademarks, and patent applications that Buyer may elect

6

 

to file on Buyer’s right in the Software or inventions and designs relating to the Software.
Seller shall not charge Buyer for mere ministerial executions and the like, but to the extent that
such assistance and/or cooperation in the filing or prosecution of copyright or patent applications
results in expenditures by Seller of substantial time, material or resources, then Buyer shall
reasonably compensate Seller for same.

     7.4 Further Action. After the Closing, Seller shall take all actions
reasonably necessary to effect the conveyance of the Software to Buyer free and clear of all
Encumbrances.

ARTICLE 8

MISCELLANEOUS

     8.1 Termination.

          8.1.1 Termination. If the Closing Date is not the execution date of this
Agreement, this Agreement may be terminated at any time prior to Closing by mutual written consent
of Buyer and Seller.

          8.1.2 In the Event of Termination. In the event of termination of this
Agreement:

               8.1.2.1 Each party will redeliver all documents, work papers and other material of
any other party relating to the transaction contemplated hereby, whether so obtained before or
after the execution hereof, to the party furnishing the same; and

               8.1.2.2 No party hereto shall have any liability or further obligation to any other
party to this Agreement, except as stated in Sections 8.9, 8.12, 8.1.2.1 or this Section 8.1.2.2,
and except for any willful breach of this Agreement occurring prior to the proper termination of
this Agreement. The foregoing provisions shall not limit or restrict the availability of specific
performance or other injunctive relief to the extent that specific performance or such other relief
would otherwise be available to a party hereunder.

     8.2 Further Assurances. Upon the terms and subject to the conditions
contained herein, each of the parties hereto agrees, both before and after the Closing, (i) to use
all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done,
all things necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement, (ii) to execute any documents, instruments or conveyances of any
kind which may be reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder, and (iii) to cooperate with each other in connection with the foregoing,
including using their respective best efforts (a) to obtain all necessary waivers, consents and
approvals from other parties required under this Agreement; provided, however, that Buyer shall not
be required to make any additional payments to obtain any such waivers, consents or approvals, (b)
to effect all necessary registrations and filings, including without limitation submissions of
information requested by governmental authorities, and (c) to fulfill all conditions to this
Agreement.

     8.3 Consents to Assignment of Software. Anything in this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an agreement to assign any contract,
lease, license, sales order, purchase order or any claim or right or any benefit arising thereunder
or resulting therefrom if an attempted assignment thereof, without the consent of a third party
thereto, would constitute a breach thereof or in any way adversely affect the rights of Buyer
thereunder. If such consent is not obtained, or if an attempted assignment thereof would be
ineffective or would affect the rights thereunder so that Buyer would not receive all such rights,
Seller will cooperate with Buyer, in all reasonable respects, to provide to Buyer the benefits
under any such contract, lease, license, sales order, purchase order, claim or right including
without limitation enforcement for the benefit of Buyer of any and all rights of Seller against a
third party thereto arising out of the breach or cancellation by such third party or otherwise.

     8.4 Assignment of Agreement. Neither this Agreement nor any of the rights
or obligations hereunder may be assigned by any party without the prior written consent of the
other parties; except that Buyer may, without

7

 

such consent, assign all such rights to any lender as collateral security and assign all such
rights and obligations to a wholly-owned subsidiary (or a partnership controlled by Buyer) or
subsidiaries of Buyer or to a successor in interest to Buyer which shall assume all obligations and
liabilities of Buyer under this Agreement. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and
permitted assigns, and no other person shall have any right, benefit or obligation under this
Agreement as a third party beneficiary or otherwise.

     8.5 Notices. All notices, requests, demands and other communications which
are required or may be given under this Agreement shall be in writing and shall be deemed to have
been duly given when received if personally delivered; when transmitted if transmitted by telecopy,
electronic or digital transmission method; the day after it is sent, if sent for next day delivery
to a domestic address by recognized overnight delivery service (e.g., Federal Express); and upon
receipt, if sent by certified or registered mail, return receipt requested. In each case notice
shall be sent to:

     If to the Seller, addressed to:

Fortune Labs, LLC

930 Tahoe Boulevard, #802-704

Incline Village, NV 89451

     If to Buyer, addressed to:

Teknik Digital Arts Inc.

3104 E. Camelback Rd. #504

Phoenix, AZ 85016

Attention: J. Ward

     with a copy to:

Squire, Sanders & Dempsey L.L.P.

Two Renaissance Square

40 North Central Avenue, Suite 2700

Phoenix, Arizona 85004

Attention: Gregory R. Hall, Esq.

Fax: (602) 253-8129

or to such other place and with such other copies as either party may designate as to itself by
written notice to the others.

     8.6 Choice of Law. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of the State of Nevada (without
reference to the choice of law provisions thereof), except with respect to matters of law
concerning the internal corporate affairs of any corporate entity which is a party to or the
subject of this Agreement, and as to those matters the law of the jurisdiction under which the
respective entity derives its powers shall govern.

     8.7 Entire Agreement; Amendments and Waivers. This Agreement, together with
all exhibits hereto, constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto. No amendment, supplement, modification
or waiver of this Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute
a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.

8

 

     8.8 Multiple Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

     8.9 Expenses. Except as otherwise specified in this Agreement, each party
hereto shall pay its own legal, accounting, out-of-pocket and other expenses incident to this
Agreement and to any action taken by such party in preparation for carrying this Agreement into
effect.

     8.10 Severability. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein, shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent
permitted by law, such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement or any other such instrument.

     8.11 Titles. The titles, captions or headings of the Articles, Sections and
subsections herein are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.

     8.12 Confidentiality. Neither Buyer nor the Seller shall issue any press
release or make any public statement regarding, or disclose to any third party (except as required
by law or legal process, and except to each party’s lenders if such lenders so require) any of the
terms of, the transactions contemplated hereby, without prior written approval of the other party.
In the event that this Agreement is terminated prior to Closing, Buyer agrees to return to the
Seller all correspondence and documents furnished by the Seller or its Representatives, and agrees
not to disclose or use for its own purposes any confidential or proprietary information of the
Seller that has been furnished to it by the Seller or its Representatives.

     8.13 Cumulative Remedies. All rights and remedies of either party hereto
are cumulative of each other and of every other right or remedy such party may otherwise have at
law or in equity, and the exercise of one or more rights or remedies shall not prejudice or impair
the concurrent or subsequent exercise of other rights or remedies.

     8.14 Arbitration. Any controversy arising after the Closing out of or
relating to this Agreement, or relating to the breach hereof, shall be settled by arbitration
conducted in Phoenix, Arizona in accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect (except as otherwise expressly provided in this Agreement).
The award rendered by the arbitrator(s) shall be final and judgment upon the award rendered by the
arbitrator(s) may be entered upon it in any court having jurisdiction thereof. The arbitrator(s)
shall possess the powers to issue mandatory orders and restraining orders in connection with such
arbitration. The expenses of the arbitration shall be borne by the losing party unless otherwise
allocated by the arbitrator(s). The agreement to arbitrate shall be specifically enforceable under
the prevailing arbitration law. During the continuance of any arbitration proceedings, the parties
shall continue to perform their respective obligations under this Agreement.

[Signature page follows.]

9

 

     IN WITNESS WHEREOF, the parties hereto have executed or caused this Agreement to be duly
executed on their respective behalf, by their respective, duly authorized officers, all as of the
date first above written.

	 	 	 	 	 
	 	 	FORTUNE LABS LLC
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	Name:	 	 
	

	 	Its:	 	 
	 
	 	 	 	 
	 	 	TEKNIK DIGITAL ARTS INC.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	Name:	 	 
	

	 	Its:	 	 
	:
	 	 	 	 

10

 

EXHIBIT A TO SOFTWARE PURCHASE AGREEMENT

DESCRIPTION OF “SPAMEATER ANTISPAM” SOFTWARE

The definition of Software shall include the following:

     (a) All rights in the underlying technologies held by Seller in making “Spameater Antispam”,
e.g. all discoveries, inventions, writings, know-how, designs, techniques, methods, formulae,
algorithms, procedures, and all other knowledge or other information, whether or not the subject
matter thereof is patentable, copyrightable, or eligible for mask work protection, which are or
were incorporated in or used in designing, developing, or modifying “Spameater Antispam” or any
hardware or software component thereof, or are known or became known to Seller during development
of “Spameater Antispam” and are useful in connection therewith, excluding subject matter in the
public domain as of the date hereof or which hereafter enters the public domain through no fault of
Seller;

     (b) all rights to the software development tools, software libraries, music, rendering engines
used or incorporated in development of “Spameater Antispam”;

     (c) all rights to the software engine associated with “Spameater Antispam”;

     (d) all rights to the Fiction used in “Spameater Antispam”, with “Fiction” meaning plots,
characters, names, fictional universes, storylines, likenesses, pictures, graphics, cinema graphic
sequences, or any associated trademarks, trade names, service marks, copyrights, or patents;

     (e) all rights in any Sequel of “Spameater Antispam”, with “Sequel” meaning any further
product that contains one or more elements from “Spameater Antispam” that is or are copyrighted,
capable of being copyrighted, trademarked, or capable of being trademarked; or where the visual
display(s), character(s), background(s), environments(s), or any other elements(s) visible to the
user, or sound(s), sound effect(s), sound tracks(s) or any other elements(s) audible to the user,
or any program rules(s) of operation or method(s) in which the user interacts with the
character(s), background(s), or environment(s) of the further products(s) are reasonably similar to
the corresponding element(s) of the first “Spameater Antispam”;

     (f) all rights in any Add-On for “Spameater Antispam”, with “Add-On” meaning an additional
component, feature, expansion, or content for use in combination with or as an enhancement to the
original release of “Spameater Antispam” that may be offered for sale by Buyer;

     (g) all rights in any Port of “Spameater Antispam”, with “Port” meaning a substantially
similar version of a work compatible with and for use on a computer or video game system other than
that for which the work was originally designed; and

     (h) all rights to derivative products in any form, tangible or intangible, software based or
otherwise, including but not limited to merchandising, television, and cinema.

 

 

EXHIBIT B TO SOFTWARE PURCHASE AGREEMENT

FORM OF WARRANT

THIS WARRANT AND THE SHARES OF COMMON STOCK UNDERLYING THIS WARRANT (COLLECTIVELY, THE
“SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS, OR PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT OR ANY APPLICABLE STATE
SECURITIES LAWS.

Warrant To Purchase Common Stock

Of

TEKNIK DIGITAL ARTS INC.

			
	Warrant No.:___
	 	Number of Shares: 400,000
	Date of Issuance: ___, 2003	 	 

     Teknik Digital Arts Inc., a Nevada corporation (the “Company”), hereby certifies that, for
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
Fortune Labs LLC, the registered holder hereof or its permitted assigns (“holder”), is entitled,
subject to the terms set forth below, to purchase from the Company upon surrender of this Warrant,
at any time or times on or after the date hereof, but not after 11:59 P.M. Eastern Time on the
Expiration Date (as defined herein) four hundred thousand (400,000) duly authorized and validly
issued, fully paid and nonassessable shares of Common Stock (as defined herein) of the Company (the
“Warrant Shares”) at the Warrant Exercise Price set forth below, in each case, subject to
adjustment as provided herein.

     1. Definitions.

     (a) Agreement. This Warrant is being issued in connection with transactions
entered into by and among the Company and Fortune Labs LLC pursuant to that certain Software
Purchase Agreement of even date herewith.

     (b) Definitions. The following words and terms as used in this Warrant
shall have the following meanings:

     (i) “Business Day” means any day other than Saturday, Sunday or other day on
which commercial banks in the City of Arizona are authorized or required by law to remain
closed.

     (ii) “Closing Bid Price” means, for any security as of any date, the last
closing bid price for such security on the Principal Market (as defined below) as reported
by Bloomberg Financial Markets (“Bloomberg”), or, if the Principal Market is not the
principal trading market for such security, the last closing bid price of such security on
the principal securities exchange or trading market where such security is listed or traded
as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price of
such security in the over-the-counter market on the electronic bulletin board for such
security as reported by Bloomberg, or, if no closing bid price is reported for such security
by Bloomberg, the last

2

 

closing trade price for such security as reported by Bloomberg, or, if no last closing
trade price is reported for such security by Bloomberg, the average of the bid prices of any
market makers for such security as reported in the “pink sheets” by the National Quotation
Bureau, Inc. If the Closing Bid Price cannot be calculated for such security on such date
on any of the foregoing bases, the Closing Bid Price of such security on such date shall be
the fair market value as mutually determined by the Company and the holder of this Warrant.
All such determinations to be appropriately adjusted for any stock dividend, stock split or
other similar transaction during such period.

     (iii) “Closing Sale Price” means, for any security as of any date, the last
closing trade price for such security on the Principal Market (as defined below) as reported
by Bloomberg, or, if the Principal Market is not the principal securities exchange or
trading market for such security, the last closing trade price of such security on the
principal securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last closing trade price of
such security in the over-the-counter market on the electronic bulletin board for such
security as reported by Bloomberg, or, if no last closing trade price is reported for such
security by Bloomberg, the last closing ask price of such security as reported by Bloomberg,
or, if no last closing ask price is reported for such security by Bloomberg, the average of
the lowest ask price and lowest bid price of any market makers for such security as reported
in the “pink sheets” by the National Quotation Bureau, Inc. If the Closing Sale Price
cannot be calculated for such security on such date on any of the foregoing bases, the
Closing Sale Price of such security on such date shall be the fair market value as mutually
determined by the Company and the holder of this Warrant. If the Company and the holder of
this Warrant are unable to agree upon the fair market value of the Common Stock, then such
dispute shall be resolved by the term “Market Price” being substituted for the term “Closing
Sale Price” and the procedures set forth in Section 2(a) shall be applied. All such
determinations to be appropriately adjusted for any stock dividend, stock split or other
similar transaction during such period.

     (iv) “Common Stock” means (i) the Company’s common stock, par value $0.001
per share, and (ii) any capital stock into which such Common Stock shall have been changed
or any capital stock resulting from a reclassification of such Common Stock.

     (v) “Expiration Date” means the date four (4) years from the Issuance Date
or, if such date falls on a Saturday, Sunday or other day on which banks are required or
authorized to be closed in the City of Arizona or the State of Arizona or on which trading
does not take place on the principal exchange or automated quotation system on which the
Common Stock is traded (a “Holiday”), the next date that is not a Holiday.

     (vi) “Issuance Date” means the date of issuance of this Warrant.

     (vii) “Market Price” means, with respect to any security for any date of
determination, that price which shall be computed as the arithmetic average of the Closing
Bid Prices for such security on each of the five (5) consecutive trading days immediately
preceding such date of determination (all such determinations to be appropriately adjusted
for any stock dividend, stock split or similar transaction during the pricing period).

     (viii) “Person” means an individual, a limited liability company, a
partnership, an association, a joint venture, a joint-stock company, a corporation, a trust,
an unincorporated organization and a government or any department or agency or political
subdivision thereof.

     (ix) “Principal Market” means the OTC Bulletin Board, Nasdaq SmallCap Market
or Nasdaq National Market.

     (x) “Securities Act” means the Securities Act of 1933, as amended.

3

 

     (xi) “Warrant” means this Warrant and all warrants issued in exchange,
transfer or replacement thereof.

     (xii) “Warrant Exercise Price” shall be $2.50 for the 30-day period
commencing on the date a registration statement relating to the resale of the Warrant Shares
is declared effective by the Securities and Exchange Commission and such shares are eligible
for trading on a Principal Market, and $5.00 thereafter, subject to adjustment as herein
provided.

     (xiii) Other Definitional Provisions. Except as otherwise specified
herein, all references herein (A) to the Company shall be deemed to include the Company’s
successors and (B) to any applicable law defined or referred to herein, shall be deemed
references to such applicable law as the same may have been or may be amended or
supplemented from time to time. When used in this Warrant, the words “herein,” “hereof,”
and “hereunder,” and words of similar import, shall refer to this Warrant as a whole and not
to any provision of this Warrant, and the words “Section,” “Schedule,” and “Exhibit” shall
refer to Sections of, and Schedules and Exhibits to, this Warrant unless otherwise
specified. Whenever the context so requires, the neuter gender includes the masculine or
feminine, and the singular number includes the plural, and vice versa.

     2. Exercise of Warrant

     (a) Subject to the terms and conditions hereof, including the conditions on exercise
set forth in subparagraph 2(b) hereof, this Warrant may be exercised by the holder hereof then
registered on the books of the Company, in whole or in part, at any time on any Business Day on or
after the opening of business on the date hereof and prior to 11:59 P.M. Eastern Time on the
Expiration Date by (i) delivery of a written notice, in the form of the subscription notice
attached as Exhibit A hereto (the “Exercise Notice”), of such holder’s election to exercise
this Warrant, which notice shall specify the number of Warrant Shares to be purchased; (ii) payment
to the Company of an amount equal to the Warrant Exercise Price multiplied by the number of Warrant
Shares as to which this Warrant is being exercised (the “Aggregate Exercise Price”) in cash, check
or bank funds or wire transfer of immediately available funds; and (iii) the surrender of this
Warrant (or a Lost Warrant Affidavit in substantially the form annexed hereto as Exhibit C
with respect to this Warrant in the case of its loss, theft or destruction) to a common carrier for
overnight delivery to the Company; provided, that if such Warrant Shares are to be issued in any
name other than that of the registered holder of this Warrant, such issuance shall be deemed a
transfer and the provisions of Section 8 shall be applicable. In the event of any exercise of the
rights represented by this Warrant in compliance with this Section 2(a), the Company shall on the
third Business Day following the date of receipt of the Exercise Notice, the Aggregate Exercise
Price and this Warrant (or a Lost Warrant Affidavit in substantially the form annexed hereto as
Exhibit C with respect to this Warrant in the case of its loss, theft or destruction) (the
“Exercise Delivery Documents”), credit such aggregate number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock to which the holder (or its designee) shall be
entitled to the holder’s (or its designee’s) balance account with The Depository Trust Company and
remit any cash amount owed in lieu of any fraction of a share pursuant to Section 2(d);
provided, however, if the holder who submitted the Exercise Notice requested
physical delivery of any or all of the Warrant Shares, then the Company shall, on or before the
third Business Day following receipt of the Exercise Delivery Documents issue and surrender to a
common carrier for overnight delivery to the address specified in the Exercise Notice, a
certificate or certificates, registered in the name of the holder (or its designee), for the number
of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock to which
the holder (or its designee) shall be entitled together with an amount of cash in lieu of any
fraction of a share as provided in Section 2(d). Upon delivery of the Exercise Notice and
Aggregate Exercise Price referred to above, the holder of this Warrant (or its designee) shall be
deemed for all corporate purposes to have become the holder of record of the Warrant Shares with
respect to which this Warrant has been exercised, irrespective of the date of delivery of this
Warrant as required by clause (iii) above or the certificates evidencing such Warrant Shares. In
the case of a dispute as to the determination of the Warrant Exercise Price or the Market Price of
a security or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to
the holder (or its designee) the number of shares of Common Stock that is not disputed and shall
submit the disputed determinations or arithmetic calculations to the holder via facsimile within
one Business Day of receipt of the holder’s Exercise Notice. If the holder and the Company are
unable to agree upon the determination of the Warrant Exercise Price or the Market Price or
arithmetic calculation of the Warrant Shares within one day of such disputed

4

 

determination or arithmetic calculation being submitted to the holder, then the Company shall
immediately submit via facsimile (i) the disputed determination of the Warrant Exercise Price or
the Market Price to an independent, reputable investment banking firm of nationally recognized
standing, mutually acceptable to both the Company and the holder or (ii) the disputed arithmetic
calculation of the Warrant Shares to an independent, outside accountant, mutually acceptable to
both the Company and the holder. The Company shall cause the investment banking firm or the
accountant, as the case may be, to perform the determinations or calculations and notify the
Company and the holder of the results no later than forty-eight (48) hours from the time it
receives the disputed determinations or calculations. Such investment banking firm’s or
accountant’s determination or calculation, as the case may be, shall be deemed conclusive absent
manifest error. Fees and expenses incurred in connection with the retention of an investment
banking or accounting firm pursuant to this Section 2(a) shall be shared equally by the Company and
the holder irrespective of the determination or calculation of such firm.

     (b) Subject to the conditions on exercise set forth herein, unless the rights
represented by this Warrant shall have expired or shall have been fully exercised, the Company
shall, as soon as practicable and in no event later than three (3) Business Days after delivery of
the Exercise Delivery Documents and at its own expense, issue a new Warrant identical in all
respects to this Warrant exercised except it shall represent rights to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this Warrant exercised, less
the number of Warrant Shares with respect to which such Warrant is exercised. The new Warrant
shall be registered in such name or names as may be directed in writing by the holder and delivered
to the Person or Persons entitled to receive the same.

     (c) No fractional shares or scrip representing fractional shares of Common Stock are
to be issued upon the exercise of this Warrant. In lieu of any fractional shares to which a holder
would otherwise be entitled, the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.

     3. (a) Adjustment for Dividends in Other Stock and Property;
Reclassifications. In case at any time or from time to time the holders of the Common Stock
(or any shares of stock or other securities at the time receivable upon the exercise of this
Warrant) shall have received, or, on or after the record date fixed for the determination of
eligible shareholders, shall have become entitled to receive, without payment therefor,

     (1) other or additional stock or other securities or property
(other than cash) by way of dividend or other distribution,

     (2) any cash or other property paid or payable out of any
source other than retained earnings (determined in accordance with generally
accepted accounting principles), or

     (3) other or additional stock or other securities or property
(including cash) by way of stock-split, spin-off, reclassification,
combination of shares or similar corporate rearrangement,

(other than (x) shares of Common Stock or any other stock or securities into which such Common
Stock shall have been exchanged, or (y) any other stock or securities convertible into or
exchangeable for such Common Stock or such other stock or securities), then and in each such case a
holder, upon the exercise hereof as provided in Section 2, shall be entitled to receive the amount
of stock and other securities and property (including cash in the cases referred to in clauses (2)
and (3) above) which such holder would hold on the date of such exercise if on the Issuance Date
such holder had been the holder of record of the number of shares of Common Stock called for on the
face of this Warrant, and had thereafter, during the period from the Issuance Date to and including
the date of such exercise, retained such shares and/or all other or additional stock and other
securities and property (including cash in the cases referred to in clause (2) and (3) above)
receivable by it as aforesaid during such period, giving effect to all adjustments called for
during such period by Section 3 hereof.

     (b) Adjustment for Reorganization, Consolidation and Merger. In case of any
reorganization of the Company (or any other corporation the stock or other securities of which are
at the time receivable on the exercise

5

 

of this Warrant) or reclassification of its securities after the Issuance Date (including any
such reclassification in connection with a merger, consolidation or other business combination in
which the Company is the surviving corporation), or the Company (or any such other corporation)
shall consolidate with or merge into or engage in a share exchange or similar corporate transaction
with another corporation or entity pursuant to which the Company is not the surviving corporation
or convey or exchange all or substantially all its assets to another corporation or entity, then
and in each such case the holder of this Warrant, upon the exercise hereof as provided in Section 2
at any time after the consummation of such reorganization, reclassification, consolidation, merger,
share exchange, conveyance or exchange, shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise of this Warrant prior to such consummation,
the stock or other securities or property to which such holder would have been entitled upon such
consummation if such holder had exercised this Warrant immediately prior thereto, all subject to
further adjustment as provided in Section 3 hereof; in each such case, the terms of this Warrant
shall be applicable to the shares of stock or other securities or property receivable upon the
exercise of this Warrant after such consummation. An adjustment made pursuant to this Section 3(b)
shall become effective immediately after the effective date of such event retroactive to the record
date, if any, for such event.

     (c) Adjustment for Certain Dividends and Distributions. If the Company at
any time or from time to time makes, or fixes a record date for the determination of holders of
Common Stock (or any shares of stock or other securities at the time receivable upon the exercise
of this Warrant) entitled to receive, a dividend or other distribution payable in additional shares
of (x) Common Stock or any other stock or securities into which such Common Stock shall have been
exchanged, or (y) any other stock or securities convertible into or exchangeable for such Common
Stock or such other stock or securities, then and in each such event

     (1) the Warrant Exercise Price then in effect shall be
decreased as of the time of the issuance of such additional shares or, in
the event such record date is fixed, as of the close of business on such
record date, by multiplying the Warrant Exercise Price then in effect by a
fraction (A) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance
or the close of business on such record date, and (B) the denominator of
which shall be the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date as the case may be, plus the number of shares
of Common Stock issuable in payment of such dividend or distribution;
provided, however, that if such record date is fixed and such dividend is
not fully paid or if such distribution is not fully made on the date fixed
therefor, the Warrant Exercise Price shall be recomputed accordingly as of
the close of business on such record date, and thereafter the Warrant
Exercise Price shall be adjusted pursuant to this Section 3(c) as of the
time of actual payment of such dividends or distributions; and

     (2) the number of shares of Common Stock theretofore
receivable upon the exercise of this Warrant shall be increased, as of the
time of such issuance or, in the event such record date is fixed, as of the
close of business on such record date, to a number determined by multiplying
the number of shares of Common Stock so purchasable prior to the time of
such issuance or the close of business on such record date as the case may
be by a fraction, the numerator of which shall be the Exercise Price in
effect immediately prior to the adjustment required by clause (1) of this
Section 3(c) and the denominator of which shall be the Exercise Price in
effect immediately after such adjustment.

     (d) Stock Split and Reverse Stock Split. If the Company at any time or from
time to time effects a stock split or subdivision of the outstanding Common Stock, the Warrant
Exercise Price then in effect immediately before that stock split or subdivision shall be
proportionately decreased and the number of shares of Common Stock theretofore receivable upon the
exercise of this Warrant shall be proportionately increased. If the Company at any time or from
time to time effects a reverse stock split or combines the outstanding shares of Common Stock into
a smaller number of shares, the Warrant Exercise Price then in effect immediately before that
reverse stock split or combination shall be proportionately increased and the number of shares of
Common Stock theretofore receivable upon the exercise of this Warrant shall be proportionately
decreased. Each adjustment under this Section 3(d) shall

6

 

become effective at the close of business on the date the stock split, subdivision, reverse
stock split or combination becomes effective.

     (e) Notice of Adjustment. Whenever the number of Warrant Shares issuable
upon the exercise of a Warrant is adjusted, as herein provided, the Company shall mail by first
class mail, postage prepaid, to each holder, notice of such adjustment or adjustments setting forth
the number of Warrant Shares or other stock or property issuable upon the exercise of each Warrant
after such adjustment, setting forth a brief statement of the facts requiring such adjustment and
setting forth the computation by which such adjustment was made.

     4. Mandatory Exercise. If at any time during the term of this Warrant the
Closing Bid Price of the Common Stock shall equal or exceed $9.00 (as equitably adjusted to reflect
any merger, consolidation or reorganization of the Company or any stock split, subdivision, reverse
stock split or combination effected by the Company) on each of twenty (20) consecutive trading
days, holder shall automatically be deemed to have exercised this Warrant effective as of the next
succeeding Business Day (the “Mandatory Exercise Event”). The Company shall promptly give holder
notice of the occurrence of the Mandatory Exercise Event and holder shall thereafter have three (3)
Business Days from receipt of such notice to deliver this Warrant and the Exercise Price (if and to
the extent the holder does make a Cashless Exercise from the Warrant Shares) in accordance with the
terms of Section 2 hereof. The Company shall credit such number of duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock to which the holder (or its designee)
shall be entitled to the holder’s (or its designee’s) balance account with the Depository Trust
Company effective as of the Mandatory Exercise Event. Alternatively, at the holder’s request, the
Company shall, on or before the third Business Day following the receipt of such request issue and
surrender to a common carrier for overnight delivery to the address specified in the request, a
certificate or certificates, registered in the name of the holder (or its designee), for the number
of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock to which
the holder (or its designee) shall be entitled. Cash in lieu of fractional shares shall be paid to
the holder as promptly as practicable.

     5. Covenants as to Common Stock. The Company hereby covenants and agrees as
follows:

     (a) This Warrant is, and any Warrants issued in substitution for or replacement of
this Warrant will upon issuance be, duly authorized and validly issued.

     (b) All Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the issuance thereof.

     (c) During the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized, reserved and available (free from
preemptive rights), out of its authorized but unissued shares of Common Stock, solely for the
purpose of issue upon exercise of this Warrant, at least 100% of the number of shares of Common
Stock needed to provide for the exercise of the rights then represented by this Warrant and the par
value of said shares will at all times be less than or equal to the applicable Warrant Exercise
Price.

     (d) The Company shall secure the listing of the shares of Common Stock issuable upon
exercise of this Warrant upon each national securities exchange or automated quotation system, if
any, upon which shares of Common Stock are then listed within the time required by such exchange or
quotation system’s rules and regulations and shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all shares of Common Stock from time to time issuable
upon the exercise of this Warrant; and the Company shall so list on each national securities
exchange or automated quotation system within the time required by such exchange or quotation
system’s rules and regulations, as the case may be, and shall maintain such listing of, any other
shares of capital stock of the Company issuable upon the exercise of this Warrant if and so long as
any shares of the same class shall be listed on such national securities exchange or automated
quotation system.

     (e) The Company will not, by amendment of its Certificate of Incorporation or
through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale
of securities, or any other

7

 

voluntary action, avoid or seek to avoid the observance or performance of any of the terms to
be observed or performed by it hereunder, but will at all times in good faith assist in the
carrying out of all the provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the holder of this Warrant in order to protect the exercise privilege of
the holder of this Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant. Without limiting the generality of the foregoing, the Company (i) will not
increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant
above the Warrant Exercise Price then in effect, and (ii) will take all such actions as may be
necessary or appropriate in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.

     (f) This Warrant will be binding upon the Company and its respective successors,
assigns, beneficiaries, executors and administrators.

     6. Taxes. The Company shall pay any and all taxes and similar governmental
charges which may be payable with respect to the issuance and delivery of the Warrants or any
Warrant Shares (or other securities) deliverable upon exercise of this Warrant; provided,
however, that the Company shall not be required to pay any tax and similar governmental
charges that may be payable in respect of any transfer involved in the issue or delivery of Common
Stock or other securities or property in a name other than that of the registered holders of this
Warrant to be converted and such holder shall pay such amount, if any, to cover any applicable
transfer or similar tax.

     7. Warrant Holder Not Deemed a Stockholder. Except as otherwise
specifically provided herein, no holder of this Warrant, solely by virtue of such holding, shall be
entitled to vote or receive dividends or be deemed the holder of shares of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer upon the holder
hereof, as such, any of the rights of a stockholder of the Company or any right to vote, give or
withhold consent to any corporate action (whether a reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the
holder of this Warrant of the Warrant Shares which he or she is then entitled to receive upon the
due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on such holder to purchase any securities (upon exercise of this Warrant
or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the
Company or by creditors of the Company. Notwithstanding this Section 7, the Company will provide
the holder of this Warrant with copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof to the
stockholders.

     8. Representations of Holder. The holder of this Warrant, by the acceptance
hereof, represents that it is acquiring this Warrant and the Warrant Shares for its own account for
investment only and not with a view towards, or for resale in connection with, the public sale or
distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted
under the Securities Act; provided, however, that by making the representations herein, the holder
does not agree to hold this Warrant or any of the Warrant Shares for any minimum or other specific
term and reserves the right to dispose of this Warrant and the Warrant Shares at any time in
accordance with or pursuant to a registration statement or an exemption under the Securities Act.
The holder of this Warrant further represents, by acceptance hereof, that, as of this date, such
holder is an “accredited investor” as such term is defined in Rule 501(a)(1) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act (an “Accredited
Investor”).

     9. Representations of the Company.

     (a) The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada and has all requisite corporate power and authority
to carry on its business as now conducted.

     (b) The authorized capital of the Company consists of 50,000,000 shares of Common
Stock and 10,000,000 shares of par value $.001 preferred stock. As of the close of business on
December 30, 2003, ___shares of Common Stock were issued and outstanding, and no such
shares were held in treasury.

8

 

     (c) All corporate action on the part of the Company necessary for the authorization,
execution, delivery of this Warrant by the Company and for the authorization, issuance and delivery
of the Warrant Shares has been taken.

     10. Ownership and Transfer.

     (a) The Company shall maintain at its principal executive offices (or such other
office or agency of the Company as it may designate by notice to the holder hereof), a register for
this Warrant, in which the Company shall record the name and address of the person in whose name
this Warrant has been issued, as well as the name and address of each authorized transferee. The
Company may treat the person in whose name any Warrant is registered on the register as the owner
and holder thereof for all purposes, but in all events recognizing any transfers made in accordance
with the terms of this Warrant.

     (b) This Warrant and the rights granted hereunder shall not be assignable by the
holder hereof without the prior express written consent of the Company, which consent may be
withheld in the Company’s sole and absolute discretion.

     (c) The Company is obligated to register the Warrant Shares for resale under the
Securities Act pursuant to the Registration Rights Agreement entered into concurrently with this
Warrant and any holder of this Warrant (and the authorized assignees thereof) is entitled to the
registration rights in respect of the Warrant Shares as set forth in the Registration Rights
Agreement.

     (d) The Warrant Shares may be disposed of by the holder hereof in “brokers’
transactions” within the meaning of Section 4(4) of the Securities Act. In addition, in the event
the holder desires to dispose of the Warrant Shares in a privately negotiated transaction with a
third party (or third parties, as the case may be), such transaction (or transactions) shall,
subject to the exceptions below, be subject to the mutual agreement of the holder and the Company
as to the third party, which agreement shall be evidenced by a written instrument in form and
substance reasonably satisfactory to the parties. The provisions of this Section 10(d) shall not
apply to a transfer (each, a “Permitted Transfer”) by the holder which is an affiliate of holder,
provided the transferee will be subject to the terms of this Section 10 and any such transfer is
not in violation of applicable federal or state securities laws.

     11. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost,
stolen, mutilated or destroyed, the Company shall, on receipt of an executed Lost Warrant Affidavit
in substantially the form annexed hereto as Exhibit C (or, in the case of a mutilated
Warrant, the Warrant), issue a new Warrant of like denomination and tenor as this Warrant so lost,
stolen, mutilated or destroyed. Every new Warrant executed and delivered pursuant to this Section
11 in lieu of any destroyed, lost or stolen Warrant shall constitute an original contractual
obligation of the Company, whether or not the destroyed, lost or stolen Warrant shall be at any
time enforceable by anyone.

     12. Notice. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Warrant must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:

	   	If to the Company:

Teknik Digital Arts Inc.

3104 East Camelback Road, Suite 509

Phoenix, Arizona 85016

Telephone: ___-___-___

Facsimile: ___-___-___

Attention: John R. Ward, President

9

 

	   	With copy to:
	 
	   	Squire, Sanders & Dempsey L.L.P.

Two Renaissance Square

40 North Central Avenue, Suite 2700

Phoenix, Arizona 85004

Telephone: 602-528-4000

Facsimile: 602-253-8129

Attention: Gregory R. Hall, Esq.

	   	If to the Holder:	 
	 
	 	
 	 
	 	
 	 
	 	
 	 
	 	
 	 

If to a holder of this Warrant, to it at the address and facsimile number as shall be delivered to
the Company by such holder at any time with copies to such holder’s representatives at such address
and facsimile as shall be delivered to the Company by the holder at any time. Each party shall
provide five days’ prior written notice to the other party of any change in address or facsimile
number. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver
or other communication, (B) mechanically or electronically generated by the sender’s facsimile
machine containing the time, date, recipient facsimile number and an image of the first page of
such transmission or (C) provided by a nationally recognized overnight delivery service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.

     13. Date. The date of this Warrant is December 31, 2003. This Warrant, in
all events, shall be wholly void and of no effect after the close of business on the Expiration
Date, except that notwithstanding any other provisions hereof, the provisions of Sections 5, 8 and
9 shall continue in full force and effect after such date as to any Warrant Shares or other
securities issued upon the exercise of this Warrant.

     14. Amendment and Waiver. Except as provided herein, neither this Warrant
nor any term hereof may be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or
termination is sought.

     15. Descriptive Headings; Governing Law; Jurisdiction. The descriptive
headings of the several Sections and paragraphs of this Warrant are inserted for convenience only
and do not constitute a part of this Warrant. The corporate laws of the State of Nevada shall
govern all issues concerning the relative rights of the Company and its stockholders. All other
questions concerning the construction, validity, enforcement and interpretation of this Warrant
shall be governed by the internal laws of the State of Arizona, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of Arizona, or any other
jurisdictions) that would cause the application of the laws of any jurisdictions other than the
State of Arizona. Each of the parties hereto irrevocably consents and submits to the nonexclusive
jurisdiction of the Supreme Court of the State of Arizona and the United States District Court for
the Southern District of Arizona in connection with any proceeding arising out of or relating to
this Warrant, waives any objection to venue in the County of Arizona, State of Arizona, or such
District, and agrees that service of any summons, complaint, notice of other process relating to
such proceeding may be effected in the manner provided by Section 11 hereof

     16. .Registration Rights.

     (a) All Warrant Shares issuable upon exercise of this Warrant shall be entitled to
“piggy-back” registration rights as follows: If the Company proposes to register (including for
this purpose a registration effected by the Company for its stockholders) any of its stock or other
securities under the Securities Act of 1933, as

10

 

amended (the “Securities Act”), in connection with the public offering of such securities
(other than in connection with the Company’s initial public offering), on a registration form that
would also allow the registration of the Warrant Shares (other than a registration relating solely
to the sale of securities to participants in a Company stock plan, a registration relating to
corporate reorganization or other transaction under Rule 145 of the Securities Act, or a
registration in which the only Common Stock being registered is Common Stock issuable upon
conversion of debt securities which are also being registered), the Company shall: (a) promptly
give to each holder written notice of the Company registration (which shall include the number of
shares the Company or other holders propose to register and, if known, the name of the proposed
underwriter); and (b) use its best efforts to include in such registration all the Warrant Shares
specified in a written request or requests, made by any holder within fifteen (15) days after the
date of delivery of the written notice from the Company described in clause (a) above.

     (b) The Company shall have the right to terminate or withdraw any registration
initiated by it under this Section 16 prior to the effectiveness of such registration whether or
not any holder has elected to include securities in such registration. The expenses of such
withdrawn registration shall be borne by the Company.

     (c) In connection with any offering involving an underwriting of shares of the
Company’s capital stock, the Company shall not be required under this Section 16 to include any of
the holders’ securities in such underwriting unless they accept the terms of the underwriting as
agreed upon between the Company and the underwriters selected by it (or by other persons entitled
to select the underwriters) and to enter into any underwriting agreement in customary form with an
underwriter or underwriters selected by the Company, and then only in such quantity as the
underwriters determine will not jeopardize the success of the offering by the Company. If the
total amount of securities, including Warrant Shares, requested to be included in such offering
exceeds the amount of securities that the underwriters determine is compatible with the success of
the offering, then the Warrant Shares of the holders, the securities of the Company and the
securities held by any other stockholders distributing their securities through such underwriting
shall be excluded from the underwriting by reason of the underwriter’s marketing limitation to the
extent so required by such limitation as follows: (a) first, the securities held by such other
stockholders distributing their securities through such underwriting shall be excluded, (b) if
after all securities held by such other stockholders have been excluded and additional shares are
required to be excluded, Warrant Shares of the holders shall be excluded in a manner such that the

number of any Warrant Shares that may be included by such holders are allocated in proportion, as
nearly as practicable to the amounts of Warrant Shares held by such holders, and (c) if after all
securities held by the holders and such other stockholders have been excluded and additional shares
are required to be excluded, securities of the Company shall be excluded.

	 	 	 	 	 
	 	TEKNIK DIGITAL ARTS INC.

 	 
	 	By:  	
 	 
	 	Name:  	
 	 
	 	Title:  	
 	 

11

 

Exhibit A To Warrant

SUBSCRIPTION FORM

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT

TEKNIK DIGITAL ARTS INC.

     The undersigned holder hereby exercises the right to purchase _________of the shares
of Common Stock (“Warrant Shares”) of Teknik Digital Arts Inc., a Nevada corporation (the
“Company”), evidenced by the attached Warrant (the “Warrant”). Capitalized terms used herein and
not otherwise defined shall have the respective meanings set forth in the Warrant.

     1. Form of Warrant Exercise Price. The Holder intends that payment of the Warrant Exercise
Price shall be made as:

	 	   	_________a “Cash Exercise” with respect to _________Warrant
Shares.

     2. Payment of Warrant Exercise Price. The holder shall pay the sum of $_________to
the Company in accordance with the terms of the Warrant.

     3. Delivery of Warrant Shares. The Company shall deliver to the holder _________Warrant
Shares in accordance with the terms of the Warrant.

Date: _______________ __, ______

	 	 
	 	 
	Name of Registered Holder	 

	 	 	 	 
	 	 
	By:  	 	 	 
	 	Name:  	 	 
	 	Title:  	 	 

 

 

Exhibit B To Warrant

FORM OF WARRANT POWER

FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to _________, Federal
Identification No. _________, a warrant to purchase _________shares of the capital stock of
Teknik Digital Arts Inc., a Nevada corporation, represented by warrant certificate no. _________,
standing in the name of the undersigned on the books of said corporation. The undersigned does
hereby irrevocably constitute and appoint _________, attorney to transfer the warrants of said
corporation, with full power of substitution in the premises.

Dated: _________________, ____

	 	 	 	 	 
	 	
 	 
	 
	 	By:  	
 	 
	 	Its:	
 	 

 

 

Exhibit C To Warrant

FORM OF AFFIDAVIT OF LOSS

	 	 	 	 	 
	STATE OF

	 	 	)	 
	

	 	 	) ss:

	COUNTY OF

	 	 	)	 

     The undersigned (hereinafter “Deponent”), being duly sworn, deposes and says that:

          1. Deponent is an adult whose mailing address is:

          2. Deponent is the recipient of a Warrant (the “Warrant”) from Teknik Digital Arts Inc. (the
“Company”), dated _________for the purchase of
_________shares of Common Stock, par value $.001 per share, of the
Company, at an exercise price of $_________per share.

          3. The Warrant has been lost, stolen, destroyed or misplaced, under the following
circumstances:

          4. The Warrant was not endorsed.

          5. Deponent has made a diligent search for the Warrant, and has been unable to find or recover
same, and Deponent was the unconditional owner of the Warrant at the time of loss, and is entitled
to the full and exclusive possession thereof; that neither the Warrant nor the rights of Deponent
therein have, in whole or in part, been assigned, transferred, hypothecated, pledged or otherwise
disposed of, in any manner whatsoever, and that no person, firm or corporation other than the
Deponent has any right, title, claim, equity or interest in, to, or respecting the Warrant.

          6. Deponent makes this Affidavit for the purpose of requesting and inducing the Company and
its agents to issue a new warrant in substitution for the Warrant.

          7. If the Warrant should ever come into the hands, custody or power of the Deponent or the
Deponent’s representatives, agents or assigns, the Deponent will immediately and without
consideration surrender the Warrant to the Company, its representatives, agents or assigns, its
transfer agents or subscription agents for cancellation.

          8. The Deponent hereby indemnifies and holds harmless the Company from any claim or demand for
payment or reimbursement of any party arising in connection with the subject matter of this
Affidavit.

Signed, sealed and dated: _________________________

	 	 	 	 	 
	 	
 	 
	 	Deponent
 	 

Sworn to and subscribed before me this

____ day of _____________, _________

Notary Public

 

 

EXHIBIT C TO SOFTWARE PURCHASE AGREEMENT

FORM OF CONSULTING AGREEMENT

CONSULTING AGREEMENT

          This Consulting Agreement (the “Agreement”) is entered into this January 1, 2004 by and
between, Chris Fortune (the “Consultant”), an Individual, for itself and its heirs, executors,
administrators, related entities and assigns and Teknik Digital Arts Inc. (the “Company”).

RECITALS

          WHEREAS, the Company is in need of assistance in the area of Software Development; and
WHEREAS, Consultant has agreed to perform consulting work for the Company in Software Development
services and other related activities for the Company;

          NOW, THEREFORE, the parties hereby agree as follows:

     1. Consultant’s Services. Consultant shall be available and shall provide to the Company
professional services in the area of Software Development (“Consulting Services”) as needed and
requested.

     2. Consideration

     A. RATE. In consideration of the Services to be performed by Consultant under this Agreement,
the Company will (i) pay Consultant the rate of $3,000 per month, and (ii) issue to Consultant an
aggregate of 50,000 shares of common stock of the Company, which shares shall be restricted
securities within the meaning of the U.S federal securities laws. .

     B. EXPENSES. Additionally, the Company will pay Consultant for the following expenses: all
travel expenses to and from all work sites; meal expenses, administrative expenses, lodging
expenses for overnight stays; and miscellaneous travel-related expenses including parking and tolls
incurred while this Agreement between Company and the Company exists.

Consultant shall submit written documentation and receipts where available itemizing the dates on
which expenses are incurred. The Company shall pay Consultant the amounts due pursuant to
submitted reports within Seven days after a report is received by the Company.

     3. Independent Contractor. Nothing contained herein or any document executed in connection
herewith, shall be construed to have created an employer-employee partnership or joint venture
relationship between the Company and Consultant. Consultant is an independent contractor and not
an employee of the company or any of its subsidiaries or affiliates. The consideration set forth
in Section 2 shall be the sole consideration due Consultant for the services rendered hereunder.
It is understood that the Company will not withhold any amounts for payment of taxes from the
compensation of Consultant hereunder. Consultant will not represent to be or hold itself out as an
employee of the Company and Consultant acknowledges that it shall not have the right or entitlement
in or to any of the pension, retirement or other benefit programs now or hereafter available to the
Company’s regular employees. Any and all sums subject to deductions, if any, required to be
withheld and/or paid under any applicable state, federal or municipal laws or union or professional
guild regulations shall be Consultant’s sole responsibility and Consultant shall indemnify and hold
Company harmless from any and all damages, claims and expenses arising out of or resulting from any
claims asserted by any taxing authority as a result of or in connection with said payments.

     4. Confidentiality. In the course of performing consulting services, the parties recognize
that Consultant may come in contact or become familiar with information which the company or its
subsidiaries or affiliates may consider confidential. This information may include, but is not
limited to, information pertaining to Software and Video Game Development— which information may
be of value to a competitor. Consultant agrees to

 

 

keep all such information confidential and not to discuss or divulge it to anyone other than
appropriate Company personnel or their designees.

     5. Term. This Agreement shall commence on January 1, 2004 and shall terminate on December 31,
2004 unless earlier terminated by either party hereto.

     6. Competent Work. All work will be done in a competent fashion in accordance with applicable
standards of the profession and all services are subject to final approval by a representative of
the Company prior to payment.

     7. Representations and Warranties. The Consultant will make no representations, warranties,
or commitments binding the Company without the Company’s prior consent.

     8. Legal Right. Consultant covenants and warrants that it has the unlimited legal right to
enter into this Agreement and to perform in accordance with its terms and without violating the
rights of others or any applicable law and that it has not and shall not become a party to any
other agreement or any kind which conflicts with this Agreement. Consultant shall hold indemnify
and hold harmless the Company from any and all damages, claims and expenses arising out of or
resulting from any claim that this Agreement violates any such agreements. Breach of this warranty
shall operate to terminate this Agreement automatically without notice as specified in Paragraph 5
and to terminate all obligations of the Company to pay any amounts which remain unpaid under this
Agreement.

     9. The Waiver. Failure to invoke any right, condition, or covenant in this Agreement by
either party shall not be deemed to imply or constitute a waiver of any rights, condition, or
covenant and neither party may rely on such failure.

     10. Notice. Any notice or communication permitted or required by this Agreement shall be
deemed effective when personally delivered or deposited, postage prepaid, in the first class mail
of the United States properly addressed to the appropriate party at the address set forth below:

	 	 	 	 	 
	1.

	 	Notices as to Consultant:
	 	Chris Fortune
	

	 	 	 	413 3rd Street
	

	 	 	 	Nelson, BC V1L 3G3
	 
	 	 	 	 
	2.

	 	Notices as to Company:
	 	Teknik Digital Arts Inc.
	

	 	 	 	3104 E. Camelback Rd., #509
	

	 	 	 	Phoenix AZ 85016

     11. Enforceability. If any provision of this Agreement is held by a court of competent
jurisdiction to be unenforceable, the remainder of the Agreement shall be remain in full force and
effect and shall in no way be impaired.

     12. Miscellaneous.

	 	   	a. Entire Agreement and Amendments. This Agreement constitutes the entire agreement
of the parties with regard to the subject matter hereof, and replaces and supersedes
all other agreements or understandings, whether written or oral. No amendment or
extension of this Agreement shall be binding unless in writing and signed by both
parties.
	 
	 	   	b. Binding Effect, Assignment. This Agreement shall be binding upon and shall inure
to the benefit of Consultant and the Company and to the Company’s successors and
assigns. Nothing in this Agreement shall be construed to permit the assignment by
Consultant of any of its rights or obligations hereunder, and such assignment is
expressly prohibited without the prior written consent of the Company.

 

 

	 	   	c. Governing Law, Severability. This Agreement shall be governed by the laws of the
State of Arizona. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision.

     WHEREFORE, the parties have executed this Agreement as of the date written above.

COMPANY:

	 	 	 	 	 	 	 
	By:

	 	 	 	Date:	 	 

CONSULTANT:

	 	 	 	 	 	 	 
	By:

	 	 	 	Date:	 	 

 

 

EXHIBIT D TO SOFTWARE PURCHASE AGREEMENT

FORM OF BILL OF SALE

BILL OF SALE

     This Bill of Sale is made as of the ___day of _________, 200______, by Fortune Labs LLC, a Nevada
limited liability company (“Seller”), in favor of and to Teknik Digital Arts, Inc., a Nevada
corporation (“Buyer”).

Recitals

     A. Seller and Buyer entered into that certain Software Purchase Agreement dated December 31,
2003.

     B. In connection with such Software Purchase Agreement, Seller has agreed to sell, convey, and
transfer to Buyer, by this Bill of Sale, certain personal property being more specifically
identified on Exhibit A to the Software Purchase Agreement (the “Property”).

Agreement

     Now therefore, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Seller has given, granted, conveyed, assigned, transferred, bargained, sold,
remised, released, alienated, set over and confirmed, and by these presents does give, grant,
convey, assign, transfer, bargain, sell, remise, release, alienate, set over and confirm unto
Buyer, its successors and assigns, forever, the Property.

     To have and to hold the Property unto Buyer, and Seller does hereby bind its successors and
assigns to warrant and defend all and singular the Property unto Buyer and its successors and
assigns against every person or entity.

     In witness whereof, Seller has caused this Bill of Sale to be executed as of the date set
forth above.

	 	 	 	 	 
	 	SELLER:

FORTUNE LABS LLC

 	 
	 	By:  	
 	 
	 	Name:  	
 
	 	Its:

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