TEKNIK DIGITAL ARTS,
INC.
CONVERTIBLE NOTE PURCHASE
AGREEMENT
THIS CONVERTIBLE
NOTE PURCHASE AGREEMENT (the “Agreement”) is made as of
the ___day of ___, 2006 by and between Teknik Digital Arts, Inc., a
Nevada corporation (the “ Company ”), and the
investors listed on Exhibit A attached to this
Agreement (each a “ Purchaser ” and
collectively, the “ Purchasers ”).
A
. The Company desires to issue and sell and each Purchaser,
severally and not jointly, desires to purchase a convertible
promissory note in substantially the form attached to this
Agreement as Exhibit B (the “ Note
”), which shall be convertible on the terms stated therein
into common stock, par value $.001 per share of the Company
(“ Common Stock ”). The Note and the shares of
Common Stock upon conversion thereof are collectively referred to
herein as the “ Securities .”
B
. The Company intends to offer a maximum of $1,500,000 of
Securities during the period commencing on May ___, 2006 to
July 31, 2006 (the “ Offering Period ”).
The Company and the Placement Agent may, in their sole discretion,
extend the Offering Period without notice of such extension to any
Purchaser.
In consideration
of the mutual promises contained herein and other good and valuable
consideration, receipt of which is hereby acknowledged, the parties
to this Agreement agree as follows:
1.
Purchase and Sale of Notes .
(a) Sale and Issuance of Note . Subject to the terms
and conditions of this Agreement, Purchaser agrees to purchase at
the Closing (as defined in Section I(b) herein) and the
Company agrees to sell and issue to Purchaser a Note in the
principal amount specified with respect to such Purchaser on
Exhibit A to this Agreement. The purchase price of the
Note shall be equal to 100% of the principal amount of such Note.
The minimum amount of each Note shall be $50,000 unless otherwise
agreed upon between the Company and Girard Securities who is acting
as the Placement Agent.
(b) Closing; Delivery . The purchase and sale of the
Note shall take place at the offices of the Company at the
Company’s address set forth on the signature page hereto at
11:00 a.m., on the date hereof, or at such other time and place as
the Company and each Purchaser mutually agree upon, orally or in
writing (which time and place are designated as the “
Closing ”). At the Closing, the Company shall deliver
to Purchaser the Note against payment of the purchase
price therefor
by certified or cashiers check or by wire transfer of immediately
available funds to a bank account of the Company specified in
writing by the Company to the Purchaser.
2.
Stock Purchase Agreement . Purchaser understands and
agrees that the conversion of the Note into shares of Common Stock
of the Company may require Purchaser’s execution of certain
agreements (in form and substance acceptable to Purchaser) relating
to the purchase and sale of such securities.
3. No
Security Interest. The indebtedness represented by the Note
shall be unsecured.
4.
Representations and Warranties of the Company . The
Company hereby represents and warrants to Purchaser
that:
(a) Organization and Standing . 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 and as proposed to be conducted.
(b) Corporate Power . The Company has now, or will
have at the Closing Date, all requisite corporate power to enter
into this Agreement and to sell and issue the Securities. This
Agreement is the valid and binding obligation of the Company
enforceable in accordance with its terms, except as the same may be
limited by equitable principles and by bankruptcy, insolvency,
moratorium, and other laws of general application affecting the
enforcement of creditors’ rights.
(c) Subsidiaries. The Company does not control,
directly or indirectly, any other corporation, association or
business entity.
(d) Capitalization . The authorized capital stock of
the Company is 50,000,000 shares of Common Stock and 10,000,000 of
Preferred Stock. As of immediately prior to the Closing, there were
issued and outstanding 9,125,000 shares of the Company’s
Common Stock and options and warrants to purchase an aggregate of
3,550,000 shares of Common Stock. All such issued and outstanding
shares of Common Stock and Series A Preferred Stock have been
duly authorized and validly issued, are fully paid and
nonassessable. Except as set forth herein, there are no outstanding
rights, options, warrants, conversion rights or agreements for the
purchase or acquisition from the Company of any shares of its
capital stock.
(e) Corporate Action . All corporate action on the
part of the Company, its officers, directors and shareholders
necessary for the sale and issuance of the Securities and the
performance of the Company’s obligations hereunder and
thereunder has been taken or will be taken prior to the
Closing.
(f) Valid Issuance. The Securities, when issued in
compliance with the provisions of this Agreement, will be validly
issued, fully paid and nonassessable and will be free of any liens
or encumbrances caused or created by the Company; provided,
however, that the
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Securities may
be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein, and as may be required by
future changes in such laws.
(g) Compliance with Articles and Bylaws. The Company
is not in violation of any material term of its Articles of
Incorporation or Bylaws. The execution, delivery and performance of
and compliance with this Agreement and the issuance and sale of the
Securities pursuant hereto will not result in any such violation,
or be in conflict with or constitute a default under any such
term.
(h) Litigation . There is no action, suit, proceeding
or investigation pending or, to the Company’s knowledge,
threatened against the company that questions the validity of this
Agreement or the right of the Company to enter into this Agreement
or to consummate the transactions contemplated hereby.
(i) Governmental Consent, etc . No consent, approval
or authorization of or designation, declaration or filing with any
governmental authority on the part of the Company is required in
connection with the valid execution, delivery and performance of
this Agreement, or the offer, sale or issuance of the Securities,
except, if required, filings or qualifications under the applicable
blue sky laws, which filings or qualifications, if required, will
be timely filed or obtained.
(j) Use of Proceeds . The Company shall use the
proceeds from the sale of the Securities for working capital and
general corporate purposes.
(k) No Breach of Material Agreements . The Company
has not breached, nor does the Company have any knowledge of any
claim or threat that the Company has breached, any term or
condition of any agreement which is material to the Company’s
business or operations ( “Material Agreement ”).
Each Material Agreement is in full force and effect and, to the
Company’s knowledge, no other party to such Material
Agreement is in default thereunder.
(l) Disclosure Documents . The Company has delivered
to Purchaser, the Company’s balance sheets, and statements of
operations of the Company for the last 3 quarterly reports (10Q)
and the most recent Annual Filing (10K), such financial statements
being collectively referred to herein as the “ Financial
Statements ”) and the documents described on
Exhibit C attached hereto. Such Financial Statements
(i) are in accordance with the books and records of the
Company, (ii) are true, correct and complete and present
fairly the financial condition of the Company at the date or dates
therein indicated and the results of operations for the period or
periods therein specified, and (iii) have been prepared in
accordance with generally accepted accounting principles applied on
a consistent basis, except, with respect to the unaudited
financials, for the omission of notes thereto and normal year-end
audit adjustments.
(m) C Corporation . The Company is and has been since
its inception, a C corporation for Federal and state income tax
purposes.
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(n) Intellectual Property. The Company owns or
possesses sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses,
information and proprietary rights and processes necessary to the
Company’s business as now conducted and as presently
contemplated to be conducted without any conflict with, or
infringement of, the rights of others. There are no outstanding
options, licenses, or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options,
licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, proprietary rights and processes of any
other person or entity. The Company has not received any
communications alleging that the Company has violated or, by
conducting its business, would violate any of the patents,
trademarks, service marks, trade names, copyrights, trade secrets
or other proprietary rights or processes of any other person or
entity. The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency,
that would interfere with the use of such employee’s best
efforts to promote the interest of the Company or that would
conflict with the Company’s business. Neither the execution
or delivery of this Agreement, nor the carrying on of the
Comp
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