UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM S-1

 

REGISTRATION STATEMENT UNDER

THE SECURITIES ACT OF 1933

 

Force Protection Video Equipment Corp.

 (Exact name of registrant as specified in its charter)

 

                   Florida                                                         7382                                                         45-1443512

(State of incorporation or organization)          (Primary Standard Industrial Classification Code)       (I.R.S. Employer Identification Number)

 

Force Protection Video Equipment Corp.

140 Iowa Lane

Suite 101

Cary, NC 27511

(919) 780-7897

(Address, including zip code, and telephone number including area code, of registrant’s principal executive offices)

 

Brenda Hamilton, Esq.

Hamilton & Associates Law Group, P.A.

101 Plaza Real South, Suite 202 N

Boca Raton, FL 33432

Tel: (561) 416-8956

Fax: (561) 416-2855

https://www.securitieslawyer101.com

(Name, address, including zip code, and telephone number,

Including area code, of agent for service)

 

Copies to:

Brenda Hamilton, Esq.

Hamilton & Associates Law Group, P.A.

101 Plaza Real South, Suite 202 N

Boca Raton, FL 33432

Tel: (561) 416-8956

Fax: (561) 416-2855

https://www.securitieslawyer101.com

 

Approximate date of commencement of proposed sale to public:  As soon as practicable after this Registration Statement becomes effective.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:  [X]

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  [  ]

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  [  ]



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If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

[  ]

Accelerated filer

[  ]

Non-accelerated filer

[  ]

Smaller reporting company

[X]

(Do not check if a smaller reporting company)

 

 

 


 

Calculation of Registration Fee


Title of Each Class of Securities to be Registered

Amount to be Registered (1)

Proposed Maximum Offering

Price per Share (2)

Proposed Aggregate Maximum Offering Price

Amount of Registration

Fee (3)

Common stock, $.0001 par value

2,415,000

$.63

$1,521,450

$153.21


(1)  Represents shares of our common stock being registered for resale that have been issued or will be issued to the

       sole Selling Stockholder named in the registration statement.

(2)  Price per share shown is the average of the high and low prices reported in the consolidated reporting system as

       reported on the OTC Markets OTCQB on February 18, 2016.

(3) Estimated solely for the purposes of computing the registration fee in accordance with Rule 457© of the  Securities Act of 1933, as amended.

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.



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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted .


PRELININARY PROSPECTUS 

SUBJECT TO COMPLETION

DATED_____


Force Protection Video Equipment Corp.
Up to 2,415,000 Shares of Common Stock

 

This prospectus relates to the registration and resale of up to 2,415,000 shares of our common stock, par value $0.0001 per share, the selling stockholder identified herein, by RDW Capital, LLC (“RDW” or the “Selling Stockholder”). The shares of common stock offered under this prospectus by the Selling Stockholder have been or are issuable to the Selling Stockholder pursuant to a Securities Purchase Agreement and related documents described below between the Selling Stockholder and the Company dated November 12, 2015 (the “RDW Financing”). We will not receive any proceeds from the sale of these shares by the Selling Stockholder. This registration statement covers 2,415,000 shares of common stock issuable to the Selling Stockholder pursuant to the RDW Financing, as further detailed in this prospectus.


We will pay all expenses of registering the securities. We will not receive any proceeds of the sale of the securities by the Selling Stockholder.

 

Our common stock is currently listed on the OTC Markets OTCQB with the symbol “FPVD.”  


The Selling Stockholder may sell the shares of common stock described in this prospectus in a number of different ways and at varying prices. We provide more information about how the Selling Stockholder may sell its respective shares of common stock in the section of this prospectus entitled “Plan of Distribution.”


The Selling Stockholder is an “underwriter” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), in connection with the resale of its common stock issued pursuant to RDW Financing.

 

Carter, Terry & Company, a registered broker-dealer who served as the placement agent for the RDW Financing is an underwriter within the meaning of the Securities Act.


This investment involves a high degree of risk. You should purchase shares only if you can afford a complete loss. See “Risk Factors” beginning on page 7.

 

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

The date of this prospectus is ________ 2016.


 



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TABLE OF CONTENTS

PAGE NO

PROSPECTUS SUMMARY

5

THE OFFERING                   

6

RISK FACTORS

7

FORWARD LOOKING STATEMENTS                      

30

USE OF PROCEEDS

30

SELLING SECURITY HOLDERS                                                                            

31

PLAN OF DISTRIBUTION

32

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

34

DESCRIPTION OF SECURITIES

36

OUR BUSINESS

38

MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS

42

MANAGEMENT

45

EXECUTIVE COMPENSATION

46

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

49

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

49

LEGAL PROCEEDINGS

50

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

50

INTEREST OF NAMED EXPERTS

51

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES LIABILITIES

51

ADDITIONAL INFORMATION

51

FINANCIAL STATEMENTS

52

SIGNATURES

83




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We have not authorized any person to give you any supplemental information or to make any representations for us. You should not rely upon any information about our company that is not contained in this prospectus. Information contained in this prospectus may become stale. You should not assume that the information contained in this prospectus or any prospectus supplement is accurate as of any date other than their respective dates, regardless of the time of delivery of this prospectus, any prospectus supplement or of any sale of the shares. Our business, financial condition, results of operations and prospects may have changed since those dates. The Selling Stockholder is offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted.


PROSPECTUS SUMMARY

 

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our securities, you should carefully read this entire prospectus, including our financial statements and the related notes and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in each case included elsewhere in this prospectus.


In this prospectus, “Force Protection” the “Company,” “we,” “us,” and “our” refer to Force Protection Video Equipment Corp., a Florida corporation.

 

Company Information


Our principal executive office is located at 140 Iowa Lane, Suite 101, Cary, North Carolina 27511. Our telephone number is 919-780-7897. Our website is www.forceprovideo.com and is not part of this prospectus.


We were a development-stage company, incorporated in the state of Florida on March 11, 2011, as M Street Gallery, Inc to distribute artwork created by German artist Reinhold Mackenroth. On September 25, 2013, we changed our name to Enhance-Your-Reputation.com, Inc. and changed our business to providing reputation management and enhancement services.

On February 2, 2015, Douglas Ward our then controlling stockholder, sold 10,000,000 shares of our common stock, representing approximately fifty-five percent (55%) of our common shares then outstanding to Paul Feldman, our current Director, President and Chief Executive Officer for the price of $.001 per share or an aggregate of $1,000. As a result of Mr. Feldman’s purchase of the 10,000,000 common shares:


·

Mr. Feldman became our controlling stockholder holding approximately fifty-five (55%) of our common stock,

·

Mr. Feldman became our Director, President and Chief Executive Officer,

·

We changed our name to Force Protection Video Equipment Corp., and

·

Our stopped providing reputation enhancement services and our business became the commercialization of mini on body video cameras to state and local law enforcement.


As of the date of this prospectus, Paul Feldman is our sole officer and director. Mr. Feldman spends fulltime on our business. We sold our first on body video camera in May of 2015. To date, our products have been sold to twenty- nine (29) state and local law enforcement agencies.


For the six (6) months ending October 31, 2015, we had revenues of $35,548 from the sale of our products. For the year ended April 30, 2015, we had revenues of $5,000 from our reputation enhancement services.  For the year ended April 30, 2015 and six (6) months ended October 31, 2015, we have a net loss of $10,050 and $202,389 respectively.


As of the date of this prospectus, we had cash on hand of $160,000 for our operational needs. Currently, our operating expenses are approximately $16,000 per month. If we fail to generate sufficient revenues or raise additional funds to meet our monthly operating costs, we would have available cash for our operating needs for approximately ten (10) months.



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THE OFFERING

Issuer

Force Protection Video Equipment Corp.

Shares of Common Stock Offered

Up to 2,415,000 shares of Common Stock issuable upon conversion of promissory notes held by RDW Capital, LLC, the Selling Stockholder named herein.

Conversion Price

The number of shares issuable upon conversion of RDW Capital, LLC Notes at sixty percent (60%) of the lowest traded price of our common stock in the twenty (20) days prior to the conversion date, at any time at the option of RDW Capital, LLC.

Offering Price By Selling Stockholder

The Selling Stockholder will offer its shares at prevailing market prices or privately negotiated prices.

Offering Expenses

We will pay all expenses of registering the securities, estimated at approximately $37,153. We will not receive any proceeds of the sale of the securities by the Selling Stockholder.

Previous Securities Offerings

Between March 24, 2015 and May 14, 2015, we sold 100,000 and 50,000 shares of our common stock at the price of $0.50 and $.10 per share respectively, or an aggregate of $50,000 and $5,000.


From August 25, 2015 through November 12, 2015, we issued $334,000 of convertible promissory notes (the “Private Placement Notes”) to six (6) accredited investors. On November 12, 2015 and December 31, 2015, we issued two (2) notes to RDW with an aggregate principal amount of $262,500. The foregoing notes have interest rates of between eight percent (8%) and twelve percent (12%) per annum and have pre-payment penalties up to one hundred fifty percent (150%) of the amount outstanding. See Prior Note Offerings on page ______ of this prospectus.

Shares of Common Stock Outstanding Before the Offering

18,295,000 Common Shares.

Shares of Common Stock Outstanding After the Offering

Up to 20,710,000 Common Shares.

Terms of the Offering

Upon conversion of the notes, the Selling Stockholder will determine when and how they will sell the securities offered in this prospectus.

Trading Market

Our common stock is quoted by the OTC Markets OTCQB with the symbol FPVD.

Use of the Proceeds

We will not receive proceeds from the sale of the shares by the Selling Stockholder.

Risk Factors

The common stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors” below.




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Risk Factors

 

Our ability to successfully operate our business and achieve our goals and strategies is subject to numerous risks including:


·

We are obligated to issue common shares upon conversion of outstanding promissory notes which will cause substantial dilution to investors and reduce the trading price of our common shares.

·

Note holders will pay less than the then-prevailing market price for our common stock if they convert the notes that they hold.

·

Our stock price is volatile and you may not be able to resell your common shares at or above the current trading price of our common shares.

·

Our stock price will likely materially decline because holders of convertible notes will have the ability to convert the notes into a large number of common shares which will result in significant dilution.

·

There is not now, and there may never be, an active, liquid and orderly trading market for our common stock, which may make it difficult for you to sell your shares of our common stock.

·

We only commenced our present business plan to sell on-body cameras in May of 2015 and as such, there little or no historical performance for you to base an investment decision upon, and we may never become profitable.

·

We are dependent on sales of our securities to fund our operations.

·

Third parties can purchase the same products we sell which may negatively affect our revenues.

·

Our failure to compete effectively could adversely affect our market share, financial condition and future growth.

·

We are dependent on our manufacturer in China and any disruption or extended delay in product supply from our manufacturer could have a significant adverse impact on our operations.

·

We do not have a written agreement with our manufacturer that obligates it to provide products to us.

·

Expenses required to operate as a public company will reduce funds available to develop our business.

·

We may be subject to product liability claims and we do not have insurance coverage for such claims.

·

There is a limited market for our common shares.

Should we lose the service of Paul Feldman, our sole officer and director, our operations and financial condition will be adversely affected.



RDW Financing


On November 12, 2015 (the “Closing Date”), we entered into a securities purchase agreement (the “RDW Agreement”) with RDW Capital, LLC, (“RDW”) a Florida limited liability company controlled by Gary Rogers and John DeNobile wherein RDW committed to invest up to $1,150,000 in convertible notes (the “RDW Financing”).


In connection with the RDW Agreement, on November 12, 2015, we issued to RDW, an eight percent (8%) convertible note in the principal amount of $157,500, in exchange for RDW’s investment of $150,000 (the “First RDW Note”).  Out of the proceeds from the First RDW Note, we paid the sum of $5,000 to RDW’s legal counsel, and paid $15,000 to our placement agent, Carter, Terry & Company (“CTC”), a broker-dealer registered with the Securities & Exchange Commission (“SEC”) and Financial Industry Regulatory Authority (“FINRA”). Pursuant to the terms of our agreement with CTC, we received net proceeds of $130,000 from the First RDW Note. We are obligated to issue 5,042 common shares to CTC as a commission in connection with the First RDW Note.


In connection with the RDW Agreement, on December 31, 2015, we issued to RDW a second convertible note in the principal amount of $105,000 (the “Second RDW Note”) in exchange for RDW’s investment of $100,000. Out of the proceeds from the Second RSW Note, we paid the sum of $10,000 to CTC, as the placement agent pursuant to the terms of our agreement with CTC.  After payment of these amounts, we received net proceeds of $90,000 from the Second RDW Note. We are obligated to issue 4,468 common shares to CTC as a commission in connection with the Second RDW Note.



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Pursuant to our agreement with CTC, we will pay CTC the following from the RDW Financing:


·

10% cash fee of any funding up to $1,000,000,

·

8% cash fee of any funding up to $5,000,000,

·

6% cash fee of any funding over $1,000,000, and

·

A stock fee equal to 4% of any financing we receive dividend by the closing price of our common stock on the date of closing of the financing transaction.


On November 24, 2015, we entered into an amendment to the RDW Financing which increased RDW’s investment to $2,250,000 of notes (“RDW Notes”) payable in six tranches.


In connection with the RDW Financing, we entered into three agreements (the “RDW Financing Documents”):


·

A securities purchase agreement, as amended (the “RDW Purchase Agreement”),

·

Promissory Note, and

·

Registration Rights Agreement.


Assuming we comply with the terms and conditions of the RDW Financing, RDW is required to invest four (4) additional tranches (“RDW Additional Financings”) of RDW Notes upon the terms and conditions set forth in the RDW Financing Documents as follows:


·

$500,000 within five (5) business days after the effective date of this Registration Statement (the “Third RDW Note”),

·

$500,000 within five (5) business days after the effective date of a Registration Statement covering the fourth tranche (the “Fourth RDW Note”),

·

$500,000 within five (5) business days after the effective date of a Registration Statement covering the fifth tranche (the “Fifth RDW Note”), and

·

$500,000 within five (5) business days after the effective date of a Registration Statement covering the sixth tranche (the “Sixth RDW Note”).


The RDW Notes have the following terms and conditions:


·

The principal amount outstanding accrues interest at a rate of eight percent (8%) per annum.

·

Interest is due and payable on each conversion date and on the Maturity Date.

·

RDW Notes mature five (5) months, after issuance.

·

At any time, at the option of the holder, the RDW notes are convertible, into shares of our common stock at a conversion price equal to sixty percent (60%) of the lowest traded price of our common stock in the twenty (20) days prior to the conversion date, at any time, at the option of the holder (the “Conversion Price”).

·

RDW Notes are unsecured obligations.

·

We may prepay RDW Notes in whole or in part at any time with ten (10) days written notice to the holder for the sum of the outstanding principal and interest multiplied by one hundred and thirty percent (130%).  RDW may continue to convert the notes from the date of the notice of prepayment until the date of prepayment.

·

RDW Notes have default interest of twenty-four percent (24%) per annum.

·

Interest on overdue accrued and unpaid interest will incur a late fee of the lower of eighteen percent (18%) per annum or the maximum rate permitted by law.

·

Upon an event of default under RDW Notes, RDW may accelerate the outstanding principal, plus accrued and unpaid interest, and other amounts owing through the date of acceleration (“Acceleration”).



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·

Upon Acceleration, the amount due will be one hundred thirty percent (130%) of the outstanding principal amount of the Note and accrued and unpaid interest, together with payment of all other amounts, costs, expenses and liquidated damages due under RDW Notes.

·

Upon an event of default, RDW may choose to convert all outstanding amounts outstanding into our common stock at a conversion price equal to sixty percent (60%) of the lowest traded price in the twenty (20) days prior to conversion (the “Default Conversion Price”).

·

In the event of our default, at the request of the holder, we must pay one hundred fifty percent (150%) of the outstanding balance plus accrued interest and default interest.

·

We must reserve three (3) times the amount of shares necessary for the issuance of common stock upon conversion. 

·

Conversions of the RDW Notes shall not be permitted if such conversion will result in the holder owning more than four point ninety-nine percent (4.99%) of our common shares outstanding after giving effect to such conversion.


We are required to comply with certain “Equity Conditions” set forth in the RDW Purchase Agreement in connection with the First and Second RDW Notes. Additionally, RDW is only obligated to invest in the RDW Additional Financings if we meet all “Equity Conditions” as defined in the RDW Purchase Agreement and we are not in default of the First or Second RDW Note or any Additional RDW Note.


The Equity Conditions include:

·

There must not be an “Event of Default” under any RDW Note.

·

We have timely filed (or obtained extensions in respect thereof and filed within the applicable grace period) all reports other than Current Reports on Form 8-K required to be filed by us pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

·

Our common stock must be DWAC (Deposit/Withdrawal at Custodian) eligible and not subject to a “DTC chill” (a limitation of certain services available for a security on deposit at the Deposit Trust Company (“DTC”)), the largest securities depository in the world, e.g. a limitation on a DTC participant’s ability to make a deposit or withdrawal of the security).

·

The common shares issued upon conversion of the RDW Note must be delivered via an “Automatic Conversion” of principal and/or interest.


 An “Event of Default” includes the following:


·

any default in the payment of the principal amount of any RDW Note,

·

a default in the payment of interest, liquidated damages and other amounts owed to the holder of any RDW Note which is not cured within three (3) trading days;

·

our failure to observe or perform any other material covenant or agreement contained in the RDW Notes (and other than a breach by us of our obligations to deliver shares of common stock to the holder of the Notes upon conversion, which breach is addressed below) which failure is not cured, if possible to cure, within the earlier to occur of five (5) trading days after the holder sends us notice and ten (10) trading days after we become or should have become aware of such failure;

·

a material default or material event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall occur under any of RDW Financing Documents or any other material agreement, document or instrument to which we are obligated;

·

any representation or warranty made in any RDW Financing Document or any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to RDW or any other holder of any such note shall be untrue or incorrect in any material respect as of the date when made or deemed made;



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·

we default on any of our obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater than $100,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

·

our common stock shall not be eligible for listing or quotation by the OTC Markets OTCQB and shall not be eligible to resume listing or quotation for trading thereon within five (5) trading days or the transfer of shares of our common stock through the DTC System is no longer available or “chilled”;

·

we are a party to any change of control transaction or transaction involving the sale of all or substantially all of our assets, or we agree to sell or dispose of all or in excess of fifty percent (50%) of our assets in one transaction or a series of related transactions;

·

we fail to file with the SEC any required reports under Section 13 or 15(d) of the Securities Exchange Act of 1934;

·

if, during the Effectiveness Period (as defined in the Registration Rights Agreement), either (a) the effectiveness of the Registration Statement lapses for any reason or (b) the holder shall not be permitted to resell Registrable Securities (as defined in the Registration Rights Agreement) under the Registration Statement for a period of more than twenty (20) consecutive trading days or thirty (30) non-consecutive trading days during any twelve (12) month period; provided, however, that if we are negotiating a merger, consolidation, acquisition or sale of all or substantially all of our assets or a similar transaction and, in the written opinion of our legal counsel, the Registration Statement would be required to be amended to include information concerning such pending transaction(s) or the parties thereto which information is not available or may not be publicly disclosed at the time, we shall be permitted an additional ten (10) consecutive trading days during any twelve (12) month period.

·

we do not meet the current public information requirements of Rule 144 in respect of the Registrable Securities;

·

we become subject to a voluntary or involuntary bankruptcy or we (i) apply for or consent to the appointment of a trustee, custodian or liquidator of our or any of our properties, (ii) admit in writing our inability to pay our debts as they mature, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated as bankrupt or insolvent or be the subject of an order for relief under Title 11 of the United States Code or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute of any other jurisdiction or foreign country, or (v) file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law, or (vi) take or permit to be taken any action in furtherance of or for the purpose of effecting any of the foregoing;

·

we fail for any reason to deliver certificates to a holder prior to the third trading day after a conversion, or we provide at any time notice to the holder, including by way of public announcement, of our intention to not honor requests for conversions of any RDW Notes in accordance with the terms of the RDW Notes;

·

if any order, judgment or decree shall be entered, without our application, approval or consent, by any court of competent jurisdiction, approving a petition seeking our liquidation or reorganization, or appointing a receiver, trustee, custodian or liquidator of us, or of all or any substantial part of our assets, and such order, judgment or decree shall continue unstayed and in effect for any period of sixty (60) days;

·

the occurrence of any levy upon or seizure or attachment of, or any uninsured loss of or damage to, any of our property having an aggregate fair value or repair cost in excess of $100,000 individually or in the aggregate, and any such levy, seizure or attachment shall not be set aside, bonded or discharged within thirty (30) days after the date thereof;

·

we must reserve and keep available out of our authorized and unissued shares of common stock at least three hundred percent (300%) of the maximum aggregate number of shares of common stock then issued or potentially issuable in the future pursuant to the terms of the RDW Notes.



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·

any monetary judgment, writ or similar final process shall be entered or filed against us or our property or assets for more than $100,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of forty-five (45) calendar days.    


There is no guarantee that we will be able to meet the foregoing conditions or any other conditions of the RDW Financing or that we will receive all of the amounts pursuant to the RDW Additional Financings.  

 

The number of common shares we will issue upon conversion of the RDW Notes is dependent upon the price per share applicable to the conversion of the RDW Notes. The conversion price for RDW Notes varies depending on the trading price of our common stock and whether there is an Event of Default. If there is an Event of Default, the conversion price shall be equal to the Default Conversion Price.

 

We are seeking to register 2,415,000 shares, which we estimate we would be obligated to issue if the First, Second and Third RDW Notes in the aggregate amount of $762,500 are converted, based on all potential interest and other charges. By registering 2,415,000 shares, we are taking into consideration potential adjustments to the applicable conversion price pursuant to RDW Financing. There is no assurance our assumptions are correct.


Accordingly, the dilutive effect of the RDW Financing depends upon whether RDW voluntarily converts any RDW Note, the price when RDW converts and whether an Event of Default has occurred.  The dilutive effect of RDW Financing is directly tied to the performance of our stock during the time RDW Notes are outstanding, and any decrease in our stock price will result in additional dilution to our stockholders. If our share price decreases prior to the time shares are issued upon conversion, we will need to issue more shares than if our share price had increased. Such issuances will have a dilutive effect and may further decrease our stock price. The effect of this dilution may, in turn, cause the price of our common stock to decrease further, both because of the downward pressure on the stock price that would be caused by a large number of sales of our shares into the public market by RDW, and because our existing stockholders and other convertible note holders may also sell their shares into the public market based on their belief that the dilutive effect of the RDW Financing will cause our stock price to further decrease.

 

In connection with the RDW Financing, on November 12, 2015, we entered into a Registration Rights Agreement (“RDW Registration Rights Agreement”) pursuant to which we agreed to register for resale on Form S-1 the shares of common stock issuable conversion of the RDW Notes. Pursuant to RDW Registration Rights Agreement, we agreed to file the registration statement within forty-five (45) days after execution or by December 27, 2015. We are obligated to pay financial penalties of one percent (1%) of the subscription amount if this registration statement is not declared effective by the SEC within ninety (90) days after filing.  


The RDW Notes and the shares of common stock that may be issued to the holder upon conversion of RDW Notes will be issued pursuant to an exemption from registration under the Securities Act of 1933, as amended.


Pursuant to the RDW Financing Documents, we have filed a registration statement, of which this prospectus is a part, covering the possible resale by the RDW of all of the common shares that we may issue to RDW upon conversion of the RDW Notes. Through this prospectus, RDW may offer to the public for resale shares of our common stock that we may issue upon conversion of the RDW Notes.

 

The RDW Financing Documents contain representations and warranties by us and RDW which are typical for transactions of this type.

 

As set forth in the RDW Purchase Agreement, RDW has represented to us that commencing on the date we signed RDW Financing Documents, it has not, directly or indirectly, executed any purchases or sales, including short sales, of our common stock. The RDW Purchase Agreement, specifically provides that RDW will not purchase our common shares, long and/or short.

 

RDW Financing obligates us to indemnify RDW for certain losses resulting from a misrepresentation or breach of any representation or warranty made by us or breach of any obligation of ours. RDW also indemnifies us for similar matters.



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The issuance of our shares of common stock under RDW Financing will have no effect on the rights or privileges of existing holders of common stock except that the economic and voting interests of each stockholder will be substantially diluted as a result of the issuance of our shares. Although the number of shares of common stock that stockholders presently own will not decrease as a result of RDW Financing, these shares will represent a smaller percentage of our total shares that will be outstanding after any issuances of shares of common stock to the Selling Stockholder.

 

We entered into RDW Financing to obtain capital to grow our business, which in turn should increase our value. We plan to add significant positive value through the use of funds received pursuant to RDW Financing. However, as reflected above, our share price will likely decline significantly.

 

From August 25, 2015 through November 12, 2015, we issued $334,000 of convertible promissory notes (the “Private Placement Notes”) to six (6) accredited investors. On November 12, 2015 and December 31, 2015, we issued two (2) notes to RDW with an aggregate principal amount of $262,500. The Private Placement Notes and the RDW Notes were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. The RDW Notes bear interest at 8% per annum and the Private Placement Notes have varied interest rates. This registration statement covers 2,415,000 common shares issuable to RDW. Shares issuable to the six (6) investors upon conversion of the Private Placement Notes are not being registered.  The conversion prices of the RDW Notes and Private Placement Notes are between forty percent (40%) and sixty percent (60%) of the lowest traded price of our common shares in the twenty (20) days prior to conversion. Based upon the twenty (20) day period prior to the filing of this registration statement, the lowest traded price was $.55 on February 3, 2016. The Private Placement Notes and RDW Notes are summarized below.


As set forth in the chart below, if the RDW Notes and Private Placement Notes are converted we would issue approximately 8,933,665 additional common shares based upon the trading price of our common shares on February 3, 2016.

 

Note Holder

Principal Amount

Interest Rate

Default Interest

Additional Increase in Principal & Interest Upon Default

Conversion

Price

Approximate

Principal & Interest Accrued as of 02/18/16

Maturity

Approximate

Number of Shares issuable upon Conversion (2)

Maximum

Percentage of our Common Stock that may

Be Held by Note Holder

at anytime

RDW Capital, LLC

$2,500,000(1)

8%

24%

Outstanding Principal and Interest Increase by 130%

60% of lowest traded price during the 20 days prior to conversion

(3)

--

 7,800,000

4.99%

Black Forest Capital, LLC

$53,000

10%

---

Outstanding Principal and Interest Increase by 140%

40% of lowest traded price during the 20 days prior to conversion

$54,000

10/8/16

249,848

4.99%

JSJ Investments, Inc.

$56,000

12%

18%

Outstanding Principal and Interest Increase by 150%

60% of lowest trading price during the 20 days prior to conversion

$57,000

4/6/16

177,397

4.99%

Auctus Fund, LLC

$66,000

8%

24%

Greater of 150% of outstanding principle & interest, or Parity. (3)

60% of lowest trading value for the 20 days prior to conversion

$67,000

6/30/16

206,277

4.99%




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LG Capital Funding, LLC

$27,000

8%

24%

Outstanding Principal and Interest Increase by 150%

60% of lowest trading value for the 20 days prior to conversion

$27,500

9/11/16

84,688

9.9%

Adar Bays, LLC

$27,000

8%

24%

---

60% of lowest trading value for the 20 days prior to conversion

$27,500

9/11/16

84,688

9.9%

EMA Financial, LLC

$105,000

8%

24%

Outstanding Principal and Interest Increase by 150%

60% of lowest trading value for the 20 days prior to conversion

$107,600

8/26/16

330,767

4.9%

Total Common Shares Issuable Upon Conversion of All Notes

 

 

 

 

 

 

 

8,933,665

 

(1)

  Includes approximately $266,188 of principal and interest outstanding as of February 18, 2016, pursuant to the First and Second RDW Notes issued on November 12, 2015 and December 31, 2015 respectively, and $2,000,000 of RDW Notes not yet issued. If RDW provides the remaining financing of $2,000,000 and holds its notes until maturity, after taking into consideration interest accruing on the notes, the total amount repaid through cash or stock could exceed $3,000,000 (assuming no events of default occur). If this entire balance is paid by us in shares issuable upon conversion, we would have to issue approximately 7,800,000 shares to RDW in satisfaction of our obligations under RDW Financing based upon 60% of the lowest traded price of $.55 of our shares as on February 3, 2016 (the lowest traded price of our shares in the twenty (20) days prior to the filing of this registration statement ).

(2)

Based upon the price of $0.55 per share reflecting the lowest traded price of our common stock on February 3, 2016, which is the lowest traded price of our shares in the twenty (20) days prior to the filing of this registration statement.  Because the Private Placement Notes and RDW Notes are convertible into our common shares at prices that are based upon our market price we cannot determine with certainty the number shares that will be issued upon conversion of promissory notes. The number of shares issuable by us upon conversion of the notes is dependent on the lowest traded price during the twenty (20) day period prior to conversion.  If the price of our stock declines in value, and it is likely that our stock price will decline in value, we will be obligated to issue more shares to the note holders than the number of shares which we would be required to issue based upon our current trading price. This will have a further substantial dilutive effect on our stock which will further depress the market price of our common stock.

(3)

Parity Value for purposes of the note held by Auctus Fund, LLC means the highest number of shares of common stock issuable upon conversion of or otherwise pursuant to such "default sum", treating the trading day immediately preceding the "mandatory prepayment date" as the "conversion date" for purposes of determining the lowest applicable conversion price.



13




Black Forest Capital, LLC


On October 8, 2015, we entered into a Convertible Note (the “Black Forest Note”) with Black Forest Capital, LLC (“Black Forest”) a Wyoming Limited Liability Company controlled by Keith Vogt, whereby we borrowed $53,000.


The Black Forest Note has the following terms and conditions:


·

The principal amount is $53,000 and accrues interest at a rate of ten percent (10%) per annum.

·

We paid $3,000 of legal and due diligence fees and as such received the sum of $50,000.

·

Outstanding principal and accrued interest is due in full on October 8, 2016.

·

The note is an unsecured obligation.

·

At our option at any time during the first one hundred eighty (180) days the note is outstanding, we may redeem the note at one hundred thirty-five percent (135%) of its face amount plus accrued interest.

·

We may not redeem the note after one hundred eighty (180) days.

·

The note is convertible by the holder at any time at forty percent (40%) of the lowest traded price in the twenty (20) trading days prior to the date of the notice of conversion.

·

In the event of our default, the amount outstanding will increase to one hundred forty percent (140%) of the outstanding balance.

·

We must reserve a sufficient number of shares to provide for the issuance of common stock for conversion. 

·

The note is not convertible if such conversion would result in the holder owning more than four point ninety-nine percent (4.99%) of our shares outstanding after giving effect to such conversion.


As of February 18, 2016, the Black Forest Note has principal and interest due of $54,967. If Black Forest elects to convert the full amount due into our common stock, at the price of $.22 representing 40% of the lowest traded price in the prior twenty days ($.55 on February 3, 2016), we would be obligated to issue approximately 249,848 common shares to Black Forest.



14




JSJ Investments, Inc.


On October 6, 2015 we entered into a Convertible Note Agreement (“JSJ Note”) with JSJ Investments, Inc. (“JSJ”), a Texas corporation controlled by Sameer Hirji, whereby we are obligated to pay the principal amount of $56,000.


The JSJ Note has the following terms and conditions:


·

The principal amount is $56,000 and accrues interest at a rate of twelve (12) percent (12%) per annum.

·

The loan had a discount and as such we received the sum of $51,000.

·

Outstanding principal and accrued interest is due in full on April 6, 2016.

·

The note is an unsecured obligation.

·

We may redeem the note at one hundred fifty percent (150%) of its face amount in addition to accrued interest only with the consent of the holder.

·

The note is convertible by the holder at any time at sixty percent (60%) of the lowest traded price in the twenty (20) trading days prior to the date of the notice of conversion.

·

In the event of our default, at the request of the holder, we must pay one hundred fifty percent (150%) of the outstanding balance plus accrued interest and default interest.

·

The note will accrue interest at a rate of eighteen percent (18%) per annum in the event of default.

·

We must reserve a sufficient number of shares to provide for the issuance of common stock for conversion. 

·

The note is not convertible if such conversion would result in the holder owning more than four point ninety-nine percent (4.99%) of our shares outstanding after giving effect to such conversion. The note is an unsecured obligation.


As of February 10, 2016, the JSJ Note has principal and interest due of $58,541. If JSJ elects to convert the full amount due into our common stock, at the price of $0.33 representing 60% of the lowest traded price in the prior twenty days ($0.55 on February 3, 2016), we would be obligated to issue approximately 177,397 common shares to JSJ.

  Auctus Fund, LLC

On September 30, 2015 we entered into a Securities Purchase Agreement and Convertible Note Agreement (the “Auctus Note”) with Auctus Fund, LLC, a Delaware Limited Liability Company (“Auctus”) controlled by Lou Posner, whereby we borrowed $66,000.


The Auctus Note has the following terms and conditions:


·

The principal amount is $66,000 and accrues interest at a rate of eight percent (8%) per annum.

·

We paid $8,500 in legal and due diligence fees and as such received the sum of $57,500.

·

Outstanding principal and accrued interest is due in full on June 30, 2016.

·

The note is an unsecured obligation.

·

The note is convertible by the holder at any time after it has been outstanding for one hundred and eighty days (180) at sixty percent (60%) of the lowest traded price in the twenty (20) trading days prior to the date of the notice of conversion.

·

At our option at any time the note is outstanding, we may prepay the note at an amount up to one hundred fifty percent (150%) of its face amount plus accrued interest.



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·

For six (6) months after issuance, we may prepay the note after issuance at amounts ranging one hundred twenty percent (125%) to one hundred and fifty percent (150%) of the face amount plus accrued interest and default interest if any. We may not repay the Auctus Note after it is outstanding for six (6) months.

·

In the event of default, the amount outstanding will increase to two hundred percent (200%) of the outstanding balance.

·

The note will accrue interest at a rate of twenty-four percent (24%) per annum should we default.

·

We agreed to reserve seven (7) times the number of shares required for conversions under the note. 

·

The note is not convertible if such conversion would result in the holder owning more than four point ninety-nine percent (4.99%) of our shares outstanding after giving effect to such conversion.


As of February 18, 2016, the Auctus Note has principal and interest due of $68,071. If Auctus elects to convert the full amount due into our common stock, at the price of $.33 representing 60% of the lowest traded price in the prior twenty days ($.55 on February 3, 2016), we would be obligated to issue approximately 206,277 common shares to Auctus.


LG Capital Funding, LLC


On September 11, 2015 we entered into a Convertible Note Agreement (the “LG Note”) with LG Capital Funding, LLC, (“LG Capital”) a New York Limited Liability Company controlled by Joseph Lerman, whereby we borrowed $27,000.


·

The principal amount is $27,000 and accrues interest at a rate of eight percent (8%) per annum.

·

We paid $4,500 for it and as such received the sum of $22,500 outstanding principal and accrued interest is due in full on September 11, 2016.

·

The note is an unsecured obligation.

·

The note is convertible by the holder at any time after it has been outstanding for one hundred and eighty (180) days at sixty percent (60%) of the lowest traded price in the twenty (20) trading days prior to the date of the notice of conversion.

·

At our option for one hundred and eighty (180) days after issuance, we may redeem the LG Note for one hundred fifty percent (150%) of its face amount plus accrued interest. The LG Note may not be repaid after one hundred and eighty (180) days.

·

The note will accrue interest at a rate of twenty-four percent (24%) per annum should we default.

·

We agreed to reserve 98,552 shares of Common Stock issuable if the entire note is converted. 

·

The note is not convertible if such conversion would result in the holder owning more than nine point nine percent (9.9%) of our shares outstanding after giving effect to such conversion.


As of February 18, 2016, the LG Note has principal and interest due of $27,947. If LG Capital elects to convert the full amount due under the LG Note into our common stock, at the price of $.33 representing 60% of the lowest traded price in the prior twenty days ($.55 on February 3, 2016), we would be obligated to issue approximately 84,688 common shares to LG.


Adar Bays, LLC


On September 11, 2015 we entered into a Convertible Note Agreement (“Adar Note”) with Adar Bays, LLC. (“Adar Bays”) a Florida Limited Liability Company controlled by Sarah Eisenberg, whereby we borrowed $27,000 with interest at a rate of eight percent (8%) per annum.



16




The Adar Note has the following terms and conditions:


·

The principal amount is $27,000 and accrues interest at a rate of eight percent (8%) per annum.

·

We paid $4,500 for it and as such received the sum of $22,500.

·

Outstanding principal and accrued interest is due in full on September 11, 2016.

·

The note is an unsecured obligation.

·

At our option at during the first six (6) months after issuance, we may redeem the note at one hundred fifty percent (150%) of its face amount plus accrued interest.

·

The note is convertible by the holder at any time after it has been outstanding for six (6) months at sixty percent (60%) of the lowest traded price in the twenty (20) trading days prior to the date of the notice of conversion.

·

The note will accrue interest at a rate of twenty-four percent (24%) per annum should we default.

·

We agreed to reserve 98,552 shares of Common Stock issuable if the entire Note is converted. 

·

The note is not convertible if such conversion would result in the holder owning more than nine point nine percent (9.9%) of our shares outstanding after giving effect to such conversion.


As of February 18, 2016, the Adar Note has principal and interest due of $27,947. If Adar Bays elects to convert the full amount due under the Adar Note into our common stock, at the price of $.33 representing 60% of the lowest traded price in the prior twenty (20) days ($.55 on February 3, 2016), we would be obligated to issue approximately 84,688 common shares to Adar Bays.


EMA Financial, LLC


On August 25, 2015, we entered into a Convertible Note Agreement (the “EMA Note”) with EMA Financial, LLC, (“EMA”) a Delaware Limited Liability Company controlled by Paul Carrozzo, whereby we agreed to pay the sum of $105,000 to EMA.


The EMA Note has the following terms and conditions:


·

The principal amount is $105,000 and accrues interest at a rate of eight percent (8%) per annum.

·

We received $80,504 after payment of legal and due diligence fees of $5,000, finder’s fees of $9,500 and an original discount of $9,996.

·

The EMA Note is due on August 25, 2016.

·

The note is an unsecured obligation.

·

The EMA Note is convertible at a price per share equal to sixty percent (60%) of the lowest traded price of our common stock in the twenty (20) consecutive trading days immediately preceding the conversion date.

·

The EMA Note can be prepaid, at redemption premiums ranging from one hundred twenty-five percent (125%) to one hundred forty percent (140%), until ninety (90) days following the issuance date of the EMA Note, after which we have no right of repayment.

·

Upon the occurrence of an Event of Default and at the option of EMA, we shall either pay an a mount equal to the greater of (i) one hundred fifty percent (150%) of the then outstanding principle and interest, or (ii) the “parity value” of the “default sum” to be prepaid, where parity value means the highest number of shares of common stock issuable upon conversion of or otherwise pursuant to such “default sum” treating the trading day immediately preceding the “mandatory prepayment date” as the “conversion date” for purposes of determining the lowest applicable conversion price.

·

The EMA Note will accrue interest at a rate of twenty-four percent (24%) per annum should we default.

·

We agreed to reserve 390,000 common shares for issuance upon conversion of the entire note. 

·

The note is not convertible if such conversion would result in the holder owning more than four point nine percent (4.9%) of our shares after giving effect to the conversion.



17




As of February 18, 2016, the EMA Note has principal and interest due of $109,153. If EMA elects to convert the full amount due under the EMA Note into our common stock, at the price of $.33 representing 60% of the lowest traded price in the prior twenty (20) days ($.55 on February 3, 2016), we would be obligated to issue approximately 330,767 common shares to EMA.


Placement Agent

 

Pursuant to our agreement with Carter, Terry & Company (“CTC”), we are required to pay CTC the following from the RDW Financing:


·

10% cash fee of any funding up to $1,000,000,

·

8% cash fee of any funding up to $5,000,000,

·

6% cash fee of any funding over $1,000,000, and

·

A stock fee equal to 4% of any financing we receive dividend by the closing price of our common stock on the date of closing of the financing transaction.


We paid CTC $15,000 and $10,000 from the proceeds of the First Note and Second RDW Note, respectively. We are obligated to issue 4,800 shares and 4,255 of our common stock to CTC as a commission in connection with the First and Second RDW Note. If we receive the aggregate amount of $2,000,000 from the RDW Additional Financing, we will pay a cash fee of $175,000 and stock fee $80,000 (4% of $2,000,000) divided by the closing price of our common stock on the closing date.

CTC is an underwriter within the meaning of the Securities Act.


Financial Summary

 

The tables and information below are derived from our audited financial statements for the period ended April 30, 2014 to April 30, 2015, and unaudited financial information to October 31, 2015.

 

As of the date of this prospectus, we had cash on hand of approximately $160,000 for our operational needs. Currently, our operating expenses are approximately $16,000 per month. If we fail to generate sufficient revenues or raise additional funds to meet our monthly operating costs we would have available cash for our operating needs for approximately ten (10) months.


Because this is only a financial summary, it does not contain all the financial information that may be important to you. Therefore, you should carefully read all the information in this prospectus, including the consolidated financial statements and their explanatory notes before making an investment decision.



18




 

For the Six (6) Months Ending October 31, 2015

Unaudited

 

For the Six (6) Months Ending October 31, 2014

Unaudited

 

Audited

For the Year

Ended

April 30, 2015

 

Audited

For the Year

Ended

April 30, 2014

Financial Summary

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

Cash & Cash Equivalents

$    169,670

 

   $      29,598

 

    $     35,226

 

$   53,751

 

 

 

 

 

 

 

 

Total Assets

$    257,470

 

$      29,598

 

 $     60,576

 

$   53,751

 

 

 

 

 

 

 

 

Total Current Liabilities

$      68,796

 

$        2,550

 

 $     17,017

 

$     2,192

  

 

 

 

 

 

 

 

Total Liabilities and Stockholders’ Equity (Deficit)

$    257,470

 

$      29,598

 

 $     60,576

 

$   53,751

 

 

For the Six (6)

Months Ending

October 31, 2015

Unaudited

 

For the Three (3) Months Ending October 31, 2014

Unaudited

 

Audited

For The Year Ended

April 30, 2015

 

Audited

For The Year Ended

April 30, 2014

Statement of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$      35,548

 

    $       3,500

 

$        5,000

 

       $        3,000

 

 

 

 

 

 

 

 

 

Total Expenses

 

$    237,937

 

    $     28,011

 

$      67,999

 

       $      58,415

 

 

 

 

 

 

 

 

 

Net Income (loss) for the Period

 

$  (202,389)

 

     $    (24,511)

 

$    (62,999)

 

       $    (55,415)



RISK FACTORS

 

You should carefully consider the risks described below together with all of the other information included in this prospectus before making an investment decision with regard to our securities. The statements contained in or incorporated herein that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, you may lose all or part of your investment.

 

Risks Related to Our Financial Condition

 

We only commenced our present business plan to sell on-body cameras in May of 2015 and as such, there is little historical performance for you to base an investment decision upon, and we may never become profitable.

 

In February of 2015, we changed our business from reputation enhancement services to the commercialization of on-body cameras. Our first sale of on-body cameras was in May 2015. For the six (6) months ended October 31, 2015, we had revenues of only $35,548 and net losses of $202,389. Accordingly, because we have had only limited sales since implementing our present business plan, there is limited historical performance for you to evaluate our prospects for achieving our business objectives and becoming profitable in light of the risks, difficulties and uncertainties frequently encountered by early stage companies such as us. Accordingly, before investing in our common stock, you should consider the challenges, expenses and difficulties that we will face as an early stage company, and whether we will ever become profitable.

 



19




We are dependent on the sale of our securities to fund our operations.

 

From March 24, 2015 to December 31, 2015, we received proceeds of $55,000 from the sale of 150,000 shares of our common stock, and $596,500 from the sale of convertible promissory notes which fund our current operations. As of October 31, 2015 we had generated revenues of only $35,548 from our current business of selling on-body cameras. We are dependent on the sale of our securities to fund our operations, and will remain so until we generate sufficient revenues to pay for our operating costs. Our officers and directors have made no written commitments with respect to providing a source of liquidity in the form of cash advances, loans and/or financial guarantees.

 

If we are unable to generate sufficient revenues for our operating expenses we will need financing, which we may be unable to obtain; should we fail to obtain sufficient financing, our revenues will be negatively impacted.

 

For the six (6) months ending October 31, 2015, we had revenues of $35,548 from the sale of our on-body camera and related accessories. For the year ended April 30, 2015, and six (6) months ending October 31, 2015, we have a net loss of $62,999 and $202,389 respectively. Because we have limited revenues and lack historical financial data, including revenue data, our future revenues are unpredictable.


As of the date of this prospectus, we had cash on hand of $160,000 for our operational needs. Currently, our operating expenses are approximately $16,000 per month.

 

Until we generate material operating revenues, we require additional debt or equity funding to continue our operations and implement our plan of operations. We expected to receive additional funding of $2,000,000 from the RDW Financing; however, there is no assurance we will receive such funds. If we fail to generate sufficient revenues or raise additional funds to meet our monthly operating costs we would have available cash for our operating needs for approximately ten (10) months.


Risks Related to Our Business


Our business depends on the development of markets for detection and surveillance products and solutions.


Our products are designed to address the markets for detection, surveillance and integrated solutions. Our products are targeted to both state and local governmental agencies and the private sector. These markets and the types of products and services sold in these markets are emerging. Our ability to grow will depend in part on the rate at which markets for our products develop and on our ability to adapt to emerging demands in these markets. Geopolitical developments, terrorist attacks and government mandates may cause sharp fluctuations in the demand for our products.


Third parties can purchase the same products we sell which may negatively affect our revenues.


We purchase our products from a third party manufacturer in China which sells products to other companies.  As such, third parties can purchase the same products as us which puts us at a competitive disadvantage and may have a negative impact on our revenues 

 

Our industry is highly competitive, and our failure to compete effectively could adversely affect our market share, financial condition and future growth.

 

We operate in a highly competitive environment. In addition to facing competition generally from businesses seeking to attract discretionary spending dollars, the on-body camera industry itself is highly fragmented, resulting in intense competition. We compete with single location dealers and, to a lesser degree, with national specialty stores. Dealer competition is based on the quality of available products, the price and value of the products and attention to customer service. There is significant competition in the markets which we plan to enter.



20




Our competitors are large national or regional chains that have substantially greater financial, marketing and other resources than us. There can be no assurance that we will be able to compete successfully against current or future competitors or that competitive pressure will not have a material adverse effect on our business, operating results and financial condition.

 

The success of our business depends on our ability to market our on-body camera and accessories effectively.

 

Our ability to establish effective marketing and advertising campaigns is the key to our success. Our advertisements must effectively promote our corporate image and the pricing of such products. If we are unable to create awareness of our products, we may not be able to attract customers. Our marketing activities may not be successful in promoting the products we sell or pricing strategies or in retaining and increasing our customer base. We cannot assure you that our marketing programs will be adequate to create a demand for our products or support our future growth, which may result in a material adverse effect on our results of operations.


We may be subject to warranty claims that could result in significant direct or indirect costs, or we could experience greater returns from retailers than expected, which could harm our business and operating results.


We except returns of defective products for two (2) weeks after purchase. Additionally, our manufacturer provides a ten (10) month warranty on all of our products. The occurrence of any material defects in our products could make us liable for warranty claims in excess of our current reserves. In addition, we could incur significant costs to correct any defects, warranty claims or other problems, including costs related to product recalls. A significant product defect could materially harm our brand image and could force us to conduct a product recall. This could damage our relationships with our customers and reduce end-user loyalty


A product recall would be particularly harmful to us because we have limited financial and administrative resources to effectively manage a product recall and it would detract management’s attention from implementing our core business strategies. As a result, a significant product defect or product recall could cause a decline in our sales and profitability, and could reduce or deplete our financial resources. Any negative publicity related to the perceived quality of our products could affect our brand image, decrease retailer, distributor and customer demand, and adversely affect our operating results and financial condition.  Warranty claims may result in litigation, the occurrence of which could adversely affect our business and operating results.


Purchases of our products may be injured while engaging in activities that they self-capture with our on-body camera, and we may be exposed to claims, or regulations could be imposed, which could adversely affect our brand, operating results and financial condition.


Our law enforcement and other customers use our on-body camera and accessories to self-capture their participation in a wide variety of activities which may carry the risk of significant personal injury or result in death. We may be subject to claims if our customers are injured while using our products. We have no insurance coverage for such claims. Additionally, some businesses may ban the use of our products in their facilities to limit their own liability. If lawmakers or governmental agencies were to determine that the use of our products increased the risk of injury to all or a subset of our customers, they may pass laws or adopt regulations that limit the use of our products or increase our liability associated with the use of our products. Any of these events could adversely affect our brand, operating results or financial condition.

  

We may be subject to intellectual property rights claims, which are costly to defend, could require us to pay damages and could limit our ability to sell some of our products.

 

We have not secured intellectual property protection of the Force Protection name. Our industry is characterized by vigorous pursuit and protection of intellectual property rights, which has resulted in protracted and expensive litigation for several companies. Third parties may assert claims of misappropriation of trade secrets or infringement of intellectual property rights against us for which we may be liable.

 



21




If our business expands, the number of products and competitors in our markets increases and product overlaps occur, infringement claims may increase in number and significance. Intellectual property lawsuits are subject to inherent uncertainties due to the complexity of the technical issues involved, and we cannot be certain that we would be successful in defending ourselves against intellectual property claims. Further, many potential litigants have the capability to dedicate substantially greater resources than we can to enforce their intellectual property rights and to defend claims that may be brought against them. Furthermore, a successful claimant could secure a judgment that requires us to pay substantial damages or prevents us from distributing our products.

 

If we fail to develop our brand, cost-effectively, our business may be adversely affected.

 

The success of our products marketed under the Force Protection brand will depend upon the effectiveness of our marketing efforts. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses incurred in building the brands. If we fail to successfully promote and maintain our brand, or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new customers or retain our existing customers to the extent necessary to realize a sufficient return on our brand-building efforts, and our business and results of operations could suffer.


We must be able to adapt to rapidly changing technology trends and evolving industry standards or we risk our products becoming obsolete.


The market in which we compete is characterized by intensive development efforts and rapidly advancing technology.  Our future success will depend, in large part, upon our ability to anticipate and keep pace with advancing technology and competing innovations.  We may not be successful in identifying, developing and marketing new products or enhancing our existing products.  We believe that a number of large companies, with significantly greater financial, manufacturing, marketing, distribution and technical resources and experience than ours, are focusing on the development of products in the security and law enforcement industry.


We are dependent on our manufacturer in China.  Any disruption or extended delay in product supply from any of our distributors could have a significant adverse impact on our operations.


We are dependent on one (1) manufacturer in China. We do not have guaranteed supply or pricing arrangements with our manufacturer, but submit purchase orders and pay for products as needed. As a result, we risk increased cost of our products.  


Our ability to sustain satisfactory levels of sales will be dependent in part upon the ability of third party suppliers of raw materials to our manufacturer as well as our manufacturer to properly perform its functions and to comply with local regulations and market our products. While outsourcing manufacturing and distribution to third parties may reduce the cost of operations, it also reduces direct control by us over the services rendered.  Although we attempt to select a reputable manufacturer, it is possible it could fail to perform as we expect.

 

The failure of our manufacturer to supply products as required by us could have a material adverse effect on our business, results of operations and financial condition. If we do not timely and effectively develop and implement our outsourcing strategy or if third party providers do not perform as anticipated, we may experience operational difficulties, increased costs, or even manufacturing delays, which could materially and adversely affect our business, financial condition and results of operations.


Although a number of alternative manufacturers exist that we believe could replace our manufacturer with alternative sources at comparable prices and terms, any disruption or extended delay in our manufacturing obtaining raw material products from any of our third party suppliers could have a significant adverse impact on our operations.  In addition, the time needed to replace our manufacturer could adversely affect our operations by delaying shipments and potentially losing customers to our competition.



22




Our manufacturer purchases some components, subassemblies and products from third party suppliers. The loss of any of these suppliers may substantially disrupt our ability to obtain orders and fulfill sales as we design and qualify new components.

 

We rely on third party components and technology to build our products, and we rely on our manufacturer to obtain the components, subassemblies and products necessary for the manufacture of our products. Shortages in components that we use in our products are possible, and our ability to predict the availability of such components is limited. While components and supplies are generally available from a variety of sources, we and our manufacturer currently depend on a single or limited number of suppliers for several components for our products. If our suppliers of these components or technology were to enter into exclusive relationships with other providers, or were to discontinue providing such components and technology to us and we were unable to replace them cost effectively, or at all, our ability to provide our products would be impaired. Our manufacturer generally relies on purchase orders rather than long-term contracts with these suppliers. As a result, even if available, we and our manufacturer may not be able to secure sufficient components at reasonable prices or of acceptable quality to build our products in a timely manner. Therefore, we may be unable to meet customer demand for our products, which would have a material adverse effect on our business, operating results and financial condition.


Risks Related To Our Management

 

Should we lose the services of Paul Feldman, our sole officer and director, our operations and financial condition may be negatively impacted.

 

Our future depends on the continued contributions of Paul Feldman, our sole officer and director, who would be difficult to replace. Mr. Feldman’s services are critical to the management of our business and operations. We do not maintain key man life insurance on Mr. Feldman. Should we lose the services of Mr. Feldman, we may be unable to replace their services with equally competent and experienced personnel and our operational goals and strategies may be adversely affected, which will negatively affect our potential revenues.


We incur costs and management time related expenses pertaining to SEC reporting obligations and SEC compliance matters and our management has no experience in such matters.

 

Paul Feldman, our sole officer and director is responsible for managing us, including compliance with SEC reporting obligations and maintaining disclosure controls and procedures and internal control over financial reporting. These public reporting requirements and controls are relatively new to these individuals and at times will require us to obtain outside assistance from legal, accounting or other professionals that will increase our costs of doing business.  Should we fail to comply with SEC reporting and internal controls and procedures, we may be subject to securities law violations that may result in additional compliance costs or costs associated with SEC judgments or fines, each of which would increase our costs and negatively affect our potential profitability and our ability to conduct our business.

 

Because we do not have an audit or compensation committee, shareholders must rely on our sole director Paul Feldman, who is not independent, to perform these functions.

 

We have only one officer and director. We do not have an audit or compensation committee or Board of Directors as a whole that is composed of independent directors. Because Paul Feldman, our sole director, is also our sole officer and controlling shareholder, he is not independent. There is a potential conflict between his interests, our interests and our shareholders’ interests, since our sole director is also our sole officer will make decisions concerning his own compensation and audit issues. Until we have an audit or compensation committee or independent directors, there may be less oversight of Mr. Feldman’s decisions and activities and little or no ability for our minority shareholders to challenge or reverse his activities and decisions, even if they are not in the best interests of minority shareholders.

 



23




Risks Related to the Financing and our Common Stock

 

Common Shares that we issue upon conversion of promissory notes will dilute our existing stockholders and depress the market price of our common stock.


As of the date of this prospectus, we are obligated to issue approximately 1,131,238 common shares upon conversion of the Private Placement Notes based upon the trading price of $.55 of our shares as of February 3, 2016. Additionally, if RDW provides the remaining financing of $2,000,000 and holds all six (6) of the RDW Notes until maturity, after taking into consideration interest accruing on the notes, the total amount repaid through cash or stock could exceed $3,000,000 (assuming no events of default occur). If this entire balance is paid by us in shares issuable upon conversion, we would have to issue approximately 7,800,000 shares to RDW in satisfaction of our obligations under RDW Financing based upon 60% of the trading price of $.55 of our shares as of February 3, 2016.  The issuance of these shares upon conversion of the RDW Notes and Private Placement Notes will dilute our existing shareholders.


The number of common shares issuable by us upon conversion of the RDW Notes and Private Placement Notes is dependent on the trading price of our common shares during the twenty (20) days prior to conversion.  If the price of our stock declines in value, we will be obligated to issue more shares to the note holders which would have a further dilutive effect on our stock which could depress the market price of our common stock.


We may be required to issue significant amount of common shares upon conversion of notes that could result in a change of control.

 

The conversion price of the RDW and Private Placement is based upon the trading price of our common shares. There is no way to determine with certainty the number of common shares we will be required to issue should note holders convert their notes into our common shares. As the RDW and Private Placement Notes are converted our stock price will decline requiring us to issue an increased number of common shares. We are currently authorized to issue 250,000,000 common shares. We presently have 18,295,000 shares outstanding.  We could be required to increase our authorized shares to provide sufficient authorized common stock for conversion of the RDW and Private Placement Notes. Paul Feldman, our Chief Executive Officer, President and Director presently holds 210,00,000 votes on matters submitted to our common stockholders.  If we increase our authorized shares and issue more than 210,000,000 common shares, Mr. Feldman could lose voting control of us.  This would likely jeopardize the execution of our business plan and disrupt our operations.


Holders of the RDW and Private Placement Notes convertible into our common stock will pay less than the then-prevailing market price for our common stock.


The RDW Notes and Private Placement Notes are convertible at prices ranging from forty (40) to sixty percent (60%) of the lowest traded price in the twenty (20) days prior to the date of conversion. As such, these note holders have a financial incentive to sell our common stock immediately upon receiving the shares to realize the profit equal to the difference between the discounted price and the market price. If these noteholders sell the shares, the price of our common stock will likely decrease. If our stock price decreases, the noteholders may have a further incentive to sell the shares of our common stock that they hold. These sales may put further downward pressure on our stock price and reduce the value of your common shares

 

If our stock price materially declines, the convertible note holders will have the right to a large number of shares of common stock upon exchange of amounts due under the Notes, which may result in significant dilution.

 

We have issued notes that have a conversion feature which is based upon a percentage of our lowest trading price over a twenty (20) day period. If our common stock price materially declines, we will be obligated to issue a large number of shares to the holders of these notes upon conversion. This will likely materially dilute existing shareholders. The potential for such dilutive issuances upon conversion of outstanding notes may depress the price of common stock regardless of our business performance, and could encourage short selling by market participants, especially if the trading price of our common stock begins to decrease.



24




The market for shares quoted on the OTC Markets OTCQB has experienced numerous frauds and abuses, which could adversely affect investors in our stock.

 

We believe that the market for shares of companies quoted on the OTC Markets OTCQB has suffered from patterns of fraud and abuse. Such patterns include:


·

control of the market for the security by one or a few broker-dealers;

·

manipulation of prices through prearranged matching of purchases and sales and false and misleading statements made by parties unrelated to the issuer;

·

“boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;

·

excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and

·

wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

 

We believe that many of these abuses have occurred with respect to the promotion of OTC Pink companies that lacked experienced management, adequate financial resources, an adequate business plan and/or marketable and successful business or product. Should this occur in our common stock, investors will likely be adversely affected.


Our common shares are thinly traded, so you may be unable to sell at or near asking prices, or at all.


Our common stock is quoted by the OTC Markets OTC Markets OTCQB. Shares of our common stock are thinly-traded, meaning that the number of persons interested in purchasing our common shares at or near asking prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including :


·

we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume; and

·

stock analysts, stock brokers and institutional investors may be risk-averse and be reluctant to follow an unproven, early stage company such as ours or purchase or recommend the purchase of our shares until such time as we become more seasoned and viable

 

As a result, our stock price may not reflect an actual or perceived value. Also, there may be periods of several days or more when trading activity in our shares is minimal, as compared to a seasoned issuer that has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. A broader or more active public trading market for our common shares may not develop or if developed, may not be sustained. Due to these conditions, you may not be able to sell your shares at or near asking prices or at all should you attempt to sell your shares.



25




Our stock price may be volatile and you may not be able to resell your shares at or above the current trading price.

 

Our common stock is quoted on the OTC Markets Group’s OTC Pink. Trading in stock quoted on the OTC Pink is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. The market price of our Common Stock may be highly volatile. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Pink and other over the counter trading systems do not benefit from the same type of Market-Maker trading systems utilized by stock exchanges such as the NYSE and AMEX and quotation systems such as the NASDAQ in which trading of a security is enhanced by to the presence of Market-Maker(s) who are dedicated to the trading of a particular listed company’s shares. Rather, on the OTC Pink and other over the counter markets, there is no assurance that a bid/ask will be posted to facilitate trading of an over the counter listed issue at any particular point in time. As a result, trading of securities on the OTC Pink and other over the counter systems is often more sporadic than the trading of securities listed on the NYSE, AMEX, NASDAQ or similar large stock exchanges or stock markets. Accordingly, shareholders may have difficulty selling their shares at any particular point in time. Additionally, the market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:


·

our ability to fully execute our business plan;

·

changes in our industry;

·

our ability to obtain working capital financing;

·

additions or departures of key personnel;

·

a “public float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock;

·

sales of our common stock (particularly following effectiveness of this resale registration statement) upon conversion of outstanding promissory notes;

·

operating results that fall below expectations;

·

regulatory developments;

·

economic and other external factors;

·

period-to-period fluctuations in our financial results;

·

the public’s response to press releases or other public announcements by us or third parties,

·

the development and sustainability of an active trading market for our common stock; and

·

future sales of common stock by our officers, directors and significant stockholders.


In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.


Our officers and directors have voting control over all matters submitted to a vote of our common stockholders, which will prevent our minority shareholders from having the ability to control any of our corporate actions.

 

As of the date of this prospectus, we had 18,295,000 shares of common stock outstanding, each entitled to one vote per common share and 1,000,000 shares of Series A Preferred Stock which entitled the holder two hundred (200) votes per share. Our sole officer and director, Paul Feldman, controls 10,000,000 common shares and 1,000,000 Series A Preferred Shares which represent an aggregate of 210,000,000 out of 218,295,000 total votes outstanding or ninety-eight (98%) of the votes on all matters submitted to a vote of our stockholders. As such, Mr. Feldman has the ability to determine the outcome of all matters submitted to our stockholders for approval, including the election of directors. Mr. Feldman’s control of our voting securities may make it impossible to complete some corporate transactions without his support and may prevent a change in our control. In addition, this ownership could discourage the acquisition of our common stock by potential investors and could have an anti-takeover effect, possibly depressing the trading price of our common stock.

 



26




There is not now, and there may never be, an active, liquid and orderly trading market for our Common Stock, which may make it difficult for you to sell your shares of our Common Stock.

 

There is not now, nor has there been since our inception, significant trading activity in our common stock or a market for our common stock, and an active trading market for our shares may never develop or be sustained. As a result, investors in our common stock must bear the economic risk of holding those shares for an indefinite period of time. Although our common stock is quoted on the OTC Markets OTCQB, an over-the-counter quotation system, operated by the OTC Markets, trading of our common stock is extremely limited and sporadic and at very low volumes. We do not now, and may not in the future, meet the initial listing standards of any national securities exchange, and we presently anticipate that our common stock will continue to be quoted by the OTC Markets or another over-the-counter quotation system in the foreseeable future. In those venues, our stockholders may find it difficult to obtain accurate quotations as to the market value of their shares of our common stock, and may find few buyers to purchase their stock and few market makers to support our stock price. As a result of these and other factors, you may be unable to resell your shares of our common stock at or above the price for which you purchased them, or at all. Further, an inactive market may also impair our ability to raise capital by selling additional equity in the future, and may impair our ability to enter into strategic partnerships or acquire companies or products by using shares of our common stock as consideration.

 

If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our Common Stock.

 

Effective internal controls are necessary for us to provide reliable financial reports and to effectively prevent fraud. We maintain a system of internal control over financial reporting, which is defined as a process designed by, or under the supervision of, our principal executive officer and principal financial officer, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

As a public company, we have significant additional requirements for enhanced financial reporting and internal controls. We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing these assessments. The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.

 

We cannot assure you that we will, in the future, identify areas requiring improvement in our internal control over financial reporting. We cannot assure you that the measures we will take to remediate any areas in need of improvement will be successful or that we will implement and maintain adequate controls over our financial processes and reporting in the future as we continue our growth. If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our Common Stock.



27




Because our sole officer and director is our controlling stockholder, he can exert significant control over our business and affairs, and have actual or potential interests that may depart from those of investors.

 

As of the date of this prospectus, our sole officer and director, Paul Feldman, holds approximately ninety percent (90%) of our outstanding voting stock and has the ability to control all matters submitted to a vote of our stockholders. The interests of Mr. Feldman may differ from the interests of our other stockholders, including investors. As a result, in addition to board seats and offices, Mr. Feldman controls all corporate actions requiring stockholder approval, irrespective of how our other stockholders, including investors, may vote, including the following actions:


·

to elect or defeat the election of our directors;

·

to amend or prevent amendment of our Certificate of Incorporation or By-laws;

·

to effect or prevent a merger, sale of assets or other corporate transaction; and

·

to control the outcome of any other matter submitted to our stockholders for vote.

 

 

A decline in the price of our common stock could affect our ability to raise further working capital, it may adversely impact our ability to continue operations and we may go out of business.

 

A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because we may attempt to acquire a significant portion of the funds we need in order to conduct our planned operations through the sale of equity securities, a decline in the price of our common stock could be detrimental to our liquidity and our operations because the decline may cause investors not to choose to invest in our stock. If we are unable to raise the funds we require for all our planned operations, we may be forced to reallocate funds from other planned uses and may suffer a significant negative effect on our business plan and operations, including our ability to develop new products and continue our current operations. As a result, our business may suffer, and not be successful and we may go out of business. We also might not be able to meet our financial obligations if we cannot raise enough funds through the sale of our common stock and we may be forced to go out of business.

 

Because we do not intend to pay any cash dividends on our shares of common stock in the near future, our stockholders will not be able to receive a return on their shares unless they sell them.

 

We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of the Board of Directors, and will depend upon, among other things, the results of operations, cash flows and financial condition, operating and capital requirements, and other factors as the Board of Directors considers relevant. There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend. For the foreseeable future, earnings generated from our operations will be retained for use in our business and not to pay dividends. In addition, the terms of our existing credit facilities preclude, and the terms of any future debt agreements is likely to similarly preclude, us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole resource of gain for the foreseeable future. Investors seeking cash dividends should not purchase our common stock.



28




Our stock is a penny stock. Trading of our stock may be restricted by the Securities and Exchange Commission (“SEC”)’s penny stock regulations which may limit a stockholder’s ability to buy and sell our stock.

 

Our stock is a penny stock. The Securities and Exchange Commission (“SEC”) has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

 

Financial Industry Regulatory Authority (“FINRA”) sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

 

FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.

  

We may, in the future, issue additional securities, which would reduce investors’ percent of ownership and may dilute our share value.

 

Our Articles of Incorporation authorize us to issue 250,000,000 shares of common stock, $.0001 par value per share and 1,000,000 shares of Series A Preferred Stock. As of the date of this prospectus, we had 18,295,000 shares of common stock and 1,000,000 shares of Series A Preferred Stock outstanding. Accordingly, we may issue up to an additional 231,785,000 shares of common stock including the 2,415,000 shares being registered hereunder. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any common stock issued in the future on an arbitrary basis including for services or acquisitions or other corporate actions that may have the effect of diluting the value of the shares held by our stockholders, and might have an adverse effect on any trading market for our common stock.

  



29




As an issuer of “penny stock” the protection provided by the federal securities laws relating to forward looking statements does not apply to us.

 

Although the federal securities law provides a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, if we are a penny stock we will not have the benefit of this safe harbor protection in the event of any claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading.

 

FORWARD LOOKING STATEMENTS

 

Some of the statements in this prospectus are “forward-looking statements.” These forward-looking statements involve certain known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among others, the factors set forth above under “Risk Factors”. The words “believe,” “expect,” “anticipate,” “intend,” “plan,” and similar expressions identify forward-looking statements. We caution you not to place undue reliance on these forward-looking statements. We undertake no obligation to update and revise any forward-looking statements or to publicly announce the result of any revisions to any of the forward-looking statements in this document to reflect any future or developments. However, the Private Securities Litigation Reform Act of 1995 is not available to us as a non-reporting issuer.

 

Further, Section 27A(b)(2)(D) of the Securities Act and Section 21E(b)(2)(D) of the Securities Exchange Act expressly state that the safe harbor for forward looking statements does not apply to statements made in connection with an initial public offering.


USE OF PROCEEDS

 

We will not receive any proceeds from the sale of common stock offered by RDW, the Selling Stockholder named in this prospectus. However, we will receive proceeds from the issuance of the RDW Additional Notes pursuant to RDW Financing. The proceeds from our issuance of the RDW Additional Notes will be used for working capital that will include inventory purchases and accounts receivable financing; and also for general corporate expenses.

 



30




We propose to expend the proceeds as follows:

 

 

 

Proceeds of $262,500 is received in the RDW Financing

 

Proceeds of $762,500 is received in the RDW Financing

 

Proceeds of $1,262,500 is received in the RDW Financing

 

Proceeds of $2,100,000 is received in the RDW Financing

 

 

 

 

 

 

 

 

 

Gross proceeds

 

$

262,500

 

$

762,500

 

$

1,262,500

 

$

2,100,000

Offering expenses:

 

 

 

 

 

 

 

 

   Broker-Dealer

   commissions

 

62,500

 

76,250

 

126,250

 

210,000

   Legal fees

 

10,000

 

10,000

 

10,000

 

10,000

   Accounting and auditing

   fees

 

10,000

 

10,000

 

10,000

 

10,000

   Miscellaneous fees (1)

 

1,000

 

2,000

 

2,000

 

3,000

Total offering expenses

 

$

83,500

 

$

98,250

 

$

148,250

 

$

233,000

Net proceeds

 

$

179,000

 

$

664,250

 

$

968,000

 

$

1,867,000

 

 

 

 

 

 

 

 

 

Use of proceeds:

 

 

 

 

 

 

 

 

   Marketing

 

$

40,000

 

$

64,000

 

$

86,000

 

$

250,000

   Inventory purchases

 

 

 

 

 

 

 

 

   General working capital

   needs (2)

 

159,000

 

600,250

 

862,000

 

1,577,000

Total use of proceeds

 

$

179,000

 

$

664,250

 

$

968,000

 

$

1,867,000

____________

 

(1)

Miscellaneous fees include securities fees, transfer agent fees and other miscellaneous expense.


 

(2)

General working capital needs consists primarily of accounts receivable financing and inventory purchases.

 

We expect to use the net proceeds received from as detailed above.

  

SELLING SECURITY HOLDERS

 

The following table details the name of the sole Selling Stockholder, RDW Capital, LLC (“RDW”), the number of shares owned by such Selling Stockholder and the number of shares that may be offered by such Selling Stockholder for resale under this prospectus. RDW may sell any number of shares of our common stock which are issuable upon conversion of amounts due under RDW Notes. Because RDW may offer all, some or none of the shares it holds, and because, based upon information provided to us, there are currently no agreements, arrangements or understandings with respect to the resale of any of the shares, no definitive estimate as to the number of shares that will be held by RDW after the offering can be provided. The following table has been prepared on the assumption that the entire 2,415,000 common shares are issued to RDW and that all shares offered under this prospectus will be sold by RDW to parties unaffiliated with RDW. The following table is based on 18,295,000 shares outstanding as of the date of this registration statement.

Name of selling security holder

Number of shares owned before this offering

Number of shares to be offered for sale

Number of share to be owned after the offering is complete (2)

Percent of Common Stock owned after the offering is complete

RDW Capital, LLC(1)

0

2,415,000

2,415,000

1.17%




31




(1)

RDW Capital LLC is a Florida limited liability company controlled by Gary Rogers and John DeNobile.

(2)

We have assumed that all shares registered for sale under this prospectus will be sold, but there is no obligation on the part of the sole Selling Stockholder to sell all of our shares offered by this prospectus as detailed below in the section entitled “Plan of Distribution”.

(3)

After the offering is complete, assuming all RDW Notes are issued and converted into the 2,415,000 shares being registered we would have 20,710,000 common shares outstanding.


  To our knowledge, neither the Selling Security Holder or its beneficial owners:

 

 

has had a material relationship with us other than as a shareholder at any time within the past three years; or

 

 

 

 

has ever been one of our officers or directors or an officer or director of our predecessors or affiliates; or

 

 

 

 

are broker-dealers or affiliated with broker-dealers.


PLAN OF DISTRIBUTION

 

We are registering up to 2,415,000 shares of our common stock offered by the Selling Stockholder. As discussed above in the subsection entitled “Risk Factors - Risks Related to the Financing and our Common Stock ”, we are registering shares issuable upon conversion of  the First, Second and Third RDW Notes totaling approximately $762,500 as of the date of this registration statement, at the conversion price of sixty percent (60%) of the lowest trading price in the twenty (20) days prior to the filing of this registration statement ($.55 on February 3, 2016).


The Selling Stockholder and any of its pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on the OTC Markets or any other stock exchange, market or trading facility on which our shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The Selling Stockholder may use any one or more of the following methods when selling shares:


·

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

·

block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

·

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

·

an exchange distribution in accordance with the rules of the applicable exchange;

·

privately negotiated transactions;

·

settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;

·

broker-dealers may agree with the Selling Stockholder to sell a specified number of such shares at a stipulated price per share;

·

through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

·

a combination of any such methods of sale; or

·

any other method permitted pursuant to applicable law.

 



32




The Selling Stockholder or its pledgees, donees, transferees or other successors in interest, may also sell the shares directly to market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the Selling Stockholder and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer might be in excess of customary commissions. Market makers and block purchasers purchasing the shares will do so for their own account and at their own risk. It is possible that the Selling Stockholder will attempt to sell shares of common stock in block transactions to market makers or other purchasers at a price per share which may be below the then market price. The Selling Stockholder cannot assure that all or any of the shares offered in this prospectus will be issued to, or sold by, such Selling Stockholder.


RDW and Carter, Terry & Company, a registered broker-dealer who served as the placement agent for the RDW Financing are each underwriters within the meaning of the Securities Act. In addition to RDW and Carter, Terry & Company being underwriters under the Securities Act, any other brokers, dealers or agents affecting the sale of any of the shares offered in this prospectus, may be “underwriters” as that term is defined under the Securities Act or the Exchange Act, or the rules and regulations under such acts.  Any commissions received by underwriters and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.

 

We are paying all fees and expenses incident to the registration of the shares, but excluding brokerage commissions or underwriter discounts. The Selling Stockholder, alternatively, may sell all or any part of the shares offered in this prospectus through an underwriter. The Selling Stockholder has not entered into any agreement with a prospective underwriter and there is no assurance that any such agreement will be entered into.

 

The Selling Stockholder may pledge its shares to its brokers under the margin provisions of customer agreements. If the Selling Stockholder defaults on a margin loan, the broker may, from time to time, offer and sell the pledged shares. The Selling Stockholder and any other persons participating in the sale or distribution of the shares will be subject to applicable provisions of the Exchange Act, and the rules and regulations under such act, including, without limitation, Regulation M. These provisions may restrict certain activities of, and limit the timing of purchases and sales of any of the shares by, the Selling Stockholder or any other such person. In the event that the Selling Stockholder is deemed affiliated with purchasers or distribution participants within the meaning of Regulation M, then the Selling Stockholder will not be permitted to engage in short sales of common stock. Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in market making and certain other activities with respect to such securities for a specified period of time prior to the commencement of such distributions, subject to specified exceptions or exemptions. In regards to short sales, RDW may engage in the purchase or sale, long and/or short, of our securities or engage in trading of “derivative” securities based on securities issued by the Company.

 

We have agreed to indemnify RDW, or its transferees or assignees, against certain liabilities, including liabilities under the Securities Act, or to contribute to payments RDW or its pledgees, donees, transferees or other successors in interest, may be required to make in respect of such liabilities.

 

We agreed to use our commercially reasonable efforts to keep this prospectus effective until the earlier of the date on which (i) RDW has sold all of the shares of our common stock issued or issuable pursuant to RDW Notes and/or the conversion of the Notes; or (ii) RDW has no right to acquire any additional shares of our common stock pursuant to RDW Notes and/or the conversion of the Notes.



33




MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market Information


Our common stock, par value $0.0001 per share (the "Common Stock"), has been quoted with the symbol “FVPD” on the OTC Markets OTCQB since February 18, 2016. From March 15, 2015, through February 9, 2016, we were quoted on the OTC Pinks with the symbol “FVPD”. Prior to March 15, 2015, our stock was quoted on the OTC Pinks with the symbol “MREY”.


Trading in stocks quoted on the OTC Markets OTCQB and OTC Pink are often thin and is characterized by wide fluctuations in trading prices due to many factors that may have little to do with a company’s operations or business prospects.

 

OTC Markets OTCQB securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTC Markets OTCQB securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTC Markets OTCQB issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.


Set forth below are the range of high and low prices for our common stock from the OTC Markets OTC Pinks for the periods indicated. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions:


 Year 2015

  

  High

  

 Low

  

  

  

  

  

 First Quarter

 

$   0.01

  

$ 0.01

 Second Quarter 

 

$   0.01

  

$ 0.01

 Third Quarter 

 

$ 23.96

  

$ 0.50

 Fourth Quarter

 

$   1.69

  

$ 0.92

  

  

  

  

  

 Year 2014

  

 High

  

 Low

  

  

  

  

  

 First Quarter

  

$ 0.01

 

$ 0.01

 Second Quarter

 

$ 0.01

 

$ 0.01

 Third Quarter

  

$ 0.01

 

$ 0.01

 Fourth Quarter

  

$ 0.01

 

$ 0.01


Transfer Agent


Our Transfer Agent is Interwest Transfer Co., Inc. located at 1981 Murray Holladay Road, Suite 100, Salt Lake City, Utah. Their telephone number is 801-272-9294 and their website is www.interwesttc.com.


Holders


As of the date of this prospectus, we had 18,295,000 shares of common stock outstanding and forty-one (41) record holders of our common stock.


Dividends


We have not paid any dividends to the holders of our common stock and we do not expect to pay any such dividends in the foreseeable future as we expect to retain our future earnings for use in the operation and expansion of our business.



34




Securities Authorized for Issuance Under Equity Compensation Plans

 

We presently do not have any equity based or other long-term incentive programs. In the future, we may adopt and establish an equity-based or other long-term incentive plan if it is in our best interest and our shareholders to do so.

 

Penny Stock Considerations

 

Our shares will be "penny stocks", as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00. Thus, our shares will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.

 

Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer must make a special suitability determination regarding the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt.

 

In addition, under the penny stock regulations, the broker-dealer is required to:


·

Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;

·

Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;

·

Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer's account, the account's value, and information regarding the limited market in penny stocks; and

·

Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction, prior to conducting any penny stock transaction in the customer's account

 

Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of the Selling Stockholder or other holders to sell their shares in the secondary market, and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities, if our securities become publicly traded. In addition, the liquidity for our securities may be decreased, with a corresponding decrease in the price of our securities.

 

Our shares in all probability will be subject to such penny stock rules and our shareholders will, in all likelihood, find it difficult to sell their securities.

 

Sales of Our Common Stock Under Rule 144

 

We presently have 18,295,000 common shares outstanding. Of these shares 8,295,000 common shares are held by non-affiliates and 10,000,000 common shares are held by affiliates, which Rule 144 of the Securities Act of 1933 defines as restricted securities.

 

We are registering 2,415,000 common shares that are issuable to the Selling Stockholder upon conversion of the RDW Notes. We are not registering shares held by affiliates in this offering. The remaining non-affiliate shares as well as all of the affiliates’ shares will be subject to the resale restrictions of Rule 144. In general, persons holding restricted securities, including affiliates, must hold their shares for a period of at least six (6) months, may not sell more than one percent (1%) of the total issued and outstanding shares in any ninety (90) day period, and must resell the shares in an unsolicited brokerage transaction at the market price. The availability for sale of substantial amounts of common stock under Rule 144 could reduce prevailing market prices for our securities.

  



35




Where You Can Find Additional Information

 

We have filed with the Securities and Exchange Commission a registration statement on Form S-1. For further information about us and the shares of common stock to be sold in the offering, please refer to the registration statement and the exhibits and schedules thereto.  The registration statement and exhibits and any materials we file with the Commission may be read and copied, at the SEC's Public Reference Room at 100 F St., N.E., Washington, D.C. 20549, on official business days during the hours of 10:00 a.m. to 3:00 p.m. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC- 0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission and state the address of that site ( http://www.sec.gov ).  Our registration statement and other information we file with the SEC is available at the web site maintained by the SEC at http://www.sec.gov.


DESCRIPTION OF SECURITIES

 

The following description is a summary of the material terms of the provisions of our Articles of Incorporation and Bylaws. Our Articles of Incorporation and Bylaws have been filed as exhibits to the registration statement of which this prospectus is a part.


We are authorized to issue 250,000,000 shares of common stock, $.0001 par value per share and 1,000,000 shares of Series A Preferred Stock. As of the date of this prospectus there are 18,295,000 shares of our common stock issued and outstanding held by forty-one (41) stockholders of record and 1,000,000 shares of our Series A Preferred Stock outstanding held by one (1) person, Paul Feldman, our sole officer and director.


Common Stock

 

Each share of our common stock entitles the holder to one (1) vote, either in person or by proxy, at meetings of shareholders. The shareholders are not permitted to vote their shares cumulatively. Accordingly, the holders of more than fifty percent (50%) of the total voting rights on matters presented to our common stockholders can elect all of our directors and, in such event, the holders of the remaining minority shares will not be able to elect any such directors. The vote of the holders of a majority of the holders entitled to vote on matters submitted to our common stockholders is sufficient to authorize, affirm, ratify, or consent to such act or action, except as otherwise provided by law.

 

To date, we have paid no cash dividends on our shares of common stock. Any future payment of dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our future earnings, operating and financial condition, capital requirements, and other factors. We have no present plans for future cash or stock dividends. We intend to retain future earnings, if any, to provide funds for operation of our business.

 

Holders of our common stock have no preemptive rights.

 

Upon our liquidation or dissolution, the assets legally available for distribution to holders of shares of the common stock, after payment of all of our obligations, are distributable ratably among the holders of the then outstanding common stock.



36




Preferred Stock


We are authorized to issue 1,000,000 preferred shares $.0001 par value which we have designated as Series A Preferred Stock. The Series A Preferred Stock have the rights designations and preferences set forth below:


·

No dividends shall be paid on the Series A Preferred Stock.

·

The Series A Preferred Stock shall not be convertible into shares of Common Stock.

·

Each share of Series A Stock shall be entitled to 200 votes per share on all matters submitted to a vote of our stockholders.

·

We shall redeem the Series A Preferred Stock upon request by the holder for the price of

$.0001 per share.


On December 1, 2015, we approved the issuance of 1,000,000 shares of our non-convertible Series A Preferred Stock to Mr. Feldman which entitle him to 200,000 votes per share or an aggregate of 200,000,000 on all matters submitted to our common stockholders. Both before and after the issuance of the 1,000,000 Series A Preferred Stock to Mr. Feldman he had the ability to control all matters submitted to a vote of our common stockholders.


Options and Warrants


We have no warrants or options to purchase our shares outstanding.


Florida Anti-Takeover Laws

 

As a Florida corporation, we are subject to certain anti-takeover provisions that apply to public corporations under Florida law.

 

Pursuant to Section 607.0901 of the Florida Business Corporation Act, or the Florida Act, a publicly held Florida corporation may not engage in a broad range of business combinations or other extraordinary corporate transactions with an interested shareholder without the approval of the holders of two-thirds of the voting shares of the corporation (excluding shares held by the interested shareholder), unless:


·

The transaction is approved by a majority of disinterested directors before the shareholder becomes an interested shareholder;

·

The interested shareholder has owned at least eighty percent (80%) of the corporation’s outstanding voting shares for at least five (5) years preceding the announcement date of any such business combination;

·

The interested shareholder is the beneficial owner of at least ninety percent (90%) of the outstanding voting shares of the corporation, exclusive of shares acquired directly from the corporation in a transaction not approved by a majority of the disinterested directors; or

·

The consideration paid to the holders of the corporation’s voting stock is at least equal to certain fair price criteria.

 

An interested shareholder is defined as a person who, together with affiliates and associates, beneficially owns more than ten percent (10%) of a corporation’s outstanding voting shares. We have not made an election in our amended Articles of Incorporation to opt out of Section 607.0901.

 

In addition, we are subject to Section 607.0902 of the Florida Act which prohibits the voting of shares in a publicly held Florida corporation that are acquired in a control share acquisition unless (i) our Board of Directors approved such acquisition prior to its consummation or (ii) after such acquisition, in lieu of prior approval by our Board of Directors, the holders of a majority of the corporation’s voting shares, exclusive of shares owned by officers of the corporation, employee directors or the acquiring party, approve the granting of voting rights as to the shares acquired in the control share acquisition. A control share acquisition is defined as an acquisition that immediately thereafter entitles the acquiring party to twenty percent (20%) or more of the total voting power in an election of directors.



37




OUR BUSINESS

Overview


Our principal executive office is located at 140 Iowa Lane, Suite 101, Cary, North Carolina 27511. Our telephone number is 919-780-7897. Our website is www.forceprovideo.com and is not part of this prospectus.


We were a development-stage company, incorporated in the state of Florida on March 11, 2011, as M Street Gallery, Inc to distribute artwork created by German artist Reinhold Mackenroth. On September 25, 2013, we changed our name to Enhance-Your-Reputation.com, Inc. and changed our business to providing reputation management and enhancement services.

On February 2, 2015, Douglas Ward our then controlling stockholder, sold 10,000,000 shares of our common stock, representing approximately fifty-five percent (55%) of our common shares then outstanding to Paul Feldman, our current Director, President and Chief Executive Officer for the price of $.001 per share or an aggregate of $1,000. As a result of Mr. Feldman’s purchase of the 10,000,000 common shares:


·

Mr. Feldman became our controlling stockholder holding approximately fifty-five (55%) of our common stock,

·

Mr. Feldman became our Director, President and Chief Executive Officer,

·

We changed our name to Force Protection Video Equipment Corp., and

·

Our business became the distribution of mini on body video cameras to state and local law enforcement.


As of the date of this prospectus, Paul Feldman is our sole officer and director. Mr. Feldman spends fulltime on our business. We sold our first on body video camera in May of 2015. To date, our products have been sold to twenty-nine (29) state and local law enforcement agencies.


For the year ended April 30, 2015 and six (6) months ending October 31, 2015, we had revenues of $5,000 and $35,548 from the sale of our products and services. For the year ended April 30, 2015 and six (6) months ended October 31, 2015, we have a net loss of $10,050 and $202,389 respectively.


As of the date of this prospectus, we had cash on hand of $160,000 for our operational needs. Currently, our operating expenses are approximately $16,000 per month. If we fail to generate sufficient revenues or raise additional funds to meet our monthly operating cost, we would have available cash for our operating needs for approximately ten (10) months.


Product Development and Sales


Our on-body mini-camera was developed by Paul Feldman, our Chief Executive Officer, President and Director who has significant experience in the development and commercialization of security and surveillance related products. From 2001 through August 2009, Mr. Feldman served as President and a Director of Law Enforcement Associates, Inc., a manufacturer of surveillance products and audio intelligent devices which were sold to the U.S. military and law enforcement.  Patent technologies previously developed by Mr. Feldman include U.S. Patent Number 7,631,601 Surveillance Projectile and U.S. Patent Number 2006/0283,345 Surveillance Projectile.


The LE10 on-body camera is designed for use by law enforcement and can be mounted on helmets, tactical vest and riot shields. The LE10 has built-in Wi-Fi, providing connectivity with a smartphone or tablet to enable remote control and content viewing functionality.  Video taken by the LE10 is stored by on a HD micro HD SD card which can be transferred to a computer for use as evidence.  Downloading the video into evidence requires no special software or expensive cloud storage contracts. The LE10 is equipped with a high definition microphone to capture and record audio. The LE10 can also be used only as a standalone audio recorder to record witness statements or conduct interviews.



38




The LE10 allows the use of smartphones as a remote control of the camera and has 100 meter WiFi range allowing its user to manage the device with their IPhone or Android device.  The LE10 provides high quality video and a sensor that allows the device to shoot in full HD at 30 fps, and 8 MP photos with shutter speed of 8fps in burst mode. In photo mode, the user can take pictures with a delayed timer. The device has three (3) resolutions and slow motion capability allowing its user to create highly quality video while engaged in a variety of physical activity.


The LE10 has a retail price of $195.


We also sell accessories that enhance the functionality and versatility of the LE10. Our products include that enable our customers to capture content while engaged in a wide range of activity. We offer equipment-based mounts, such as the helmet, handlebar, roll bar and tripod mounts, as well as mounts that enable users to wear the mount on their bodies, such as the wrist housing, chest harness and head strap. Other accessories include spare batteries, charging accessories.


Our products are summarized below:


Item

Price

LE10 on-body mini camera 

$         195.00 USD 

Remote Control 

$           45.00 USD 

SD Card - 64GB 

$           40.00 USD 

 SD Card - 32GB 

$           25.00 USD 

SD Card - 16GB 

$           15.00 USD 

Ballistic Helmet Mount 

$           19.95 USD 

Evidence Bags - 100 Count 

$           39.00 USD 

Suction Mount 

$           29.95 USD 

High Rated Suction Mount 

$           39.95 USD 

Flotation Block - 1" 

$             6.95 USD 

Flotation Block - 1 1/4" 

$             6.95 USD 

Handheld Extension 

$           49.95 USD 

Forcepro Charger 

$           12.95 USD 

Small Helmet Mount 

$           19.95 USD 

Side Helmet Mount - Pack of 5 

$           24.95 USD 

Small Clamp Mount 

$           26.95 USD 

Static Dash Mount 

$           17.95 USD 

Vented Helmet Strap 

$           14.95 USD 

Helmet Friction Mount 

$           14.95 USD 

Handheld Monopod 

$           26.95 USD 

HDMI Cable 

$           14.95 USD 

12V USB Adapter 

$           10.00 USD 

Surf Mount 

$           19.95 USD 


Our manufacturer provides a one (1) year warranty for our products.


Our customers include more than twenty-nine (29) state and local law enforcement agencies.


Distribution

 

Customers purchase products from our website and by telephone order. All products are shipped from our manufacturer to our facility in North Carolina where we process and ship product to our customers using Federal Express or United Parcel Services. Customers pay all shipping charges.

 



39




Manufacturing

 

We purchase our finished products on an as needed basis from  our manufacturer Shenzhen AEE Technology Co Ltd (“AEE”), in Shenzen China who provides production, labeling and packaging of our finished product according to our specifications.  We agree with AEE as to the particular specifications for manufacturing, labeling and packaging of our products at the time each order is placed.


All material used to manufacture our products is located, purchased and paid for by  AEE  who invoices us only for our finished product.  


We order our products on an as needed basis and we are not obligated to purchase any minimum amount of product from AEE. Additionally, AEE is not obligated to manufacture our products in the future. We pay AEE for all product we order at the time the order is placed. Upon placing an order, AEE creates a purchase order reflecting: (i) the product ordered, (ii) price per item (iii) total cost for the order, (iv) total cost to ship product ordered from our manufacturer to our facility, (iv) that immediate payment in required at the time of the order, and (v) the delivery date and delivery address.


AEE’s purchase order also reflects the twelve (12) month warranty of all product manufactured.


Marketing

 

Primarily, our sales and marketing efforts include print marketing brochures featuring our products to state and local law enforcement agencies. We create and deliver brochures to state and local law enforcement, every four (4) weeks, using U.S. Mail.

 

We believe that a marketing strategy focused on print marketing to law enforcement will provide our target customers with the opportunity to view our specific information about our products and their features, which is an optimal strategy to increase sales.


Property

 

We occupy approximately 524 square feet at 140 Iowa Lane, Suite 101, Cary, NC 27511 pursuant to a lease agreement which expires on October 31, 2018. Our annual rent for this location is $7,016 for 2015, $9,207 for 2016, $9,483 for 2017 and $2,388 for 2018.


We believe this location is suitable for our current needs.

 

Research and Development

 

We have not spent any amounts on research and development in the prior two (2) years. All research and development has been completed by Paul Feldman, our Director, President and Chief Executive Officer.

 

Employees

 

As of the date of this prospectus, we have three (3) full time employees including Paul Feldman who is our Director, President and Chief Executive Officer. Our other two (2) full time employees are sales persons. Mr. Feldman spends approximately forty (40) hours per week on our business. We have one (1) part time employee who provides clerical and administrative services.


 

None of our employees are represented by a collective bargaining agreement, nor have we experienced any work stoppages. We maintain good relationships with our employees.



40




Dependence On a Few Customers

 

We are not dependent on one (1) or a few customers and we do not expect to be so in the future.


Product Warranty


We except returns of products two (2) weeks after purchase. Additionally, our manufacturer provides a twelve (12)-month warranty on all products manufactured. The occurrence of any material defects in our products could make us liable for damages and warranty claims in excess of our current reserves. In addition, we could incur significant costs to correct any defects, warranty claims or other problems, including costs related to product recalls. Any negative publicity related to the perceived quality of our products could affect our brand image, decrease retailer, distributor and customer demand, and adversely affect our operating results and financial condition.  Warranty claims may result in litigation, the occurrence of which could adversely affect our business and operating results.


Competition


The market for on-body cameras is highly competitive. Further, we expect competition to increase in the future as existing competitors introduce new and more competitive offerings alongside their existing products, and as new market entrants introduce new products into our markets. We compete against established, well-known camera manufacturers such as Go Pro, Canon Inc., Nikon Corporation, Olympus Corporation, Polaroid Holding Corporation and Vivitar Corporation, large, diversified electronics companies such as JVC Kenwood Corporation, Panasonic Corporation, Samsung Electronics Co., Sony Corporation and Toshiba Corporation, and specialty companies such as Garmin Ltd. Many of our current competitors have substantial market share, diversified product lines, well-established supply and distribution systems, strong worldwide brand recognition and greater financial, marketing, research and development and other resources than we do.

 

In addition, many of our existing and potential competitors have substantial competitive advantages, such as:


·

longer operating histories;

·

the capacity to leverage their sales efforts and marketing expenditures across a broader portfolio of products;

·

broader distribution and established relationships with channel partners;

·

access to larger established customer bases;

·

greater financial resources;

·

large intellectual property portfolios; and

·

the ability to bundle competitive offerings with other products and services.


Moreover, smartphones and tablets with photo and video functionality have significantly displaced traditional camera sales. It is possible that, in the future, the manufacturers of these devices, such as Apple Inc. and Samsung, may design them for use in a range of conditions, including challenging physical environments, or develop products similar to ours. In addition to competition or potential competition from large, established companies, new companies may emerge and offer competitive products. Further, we are aware that certain companies have developed cameras designed and labeled to appear similar to our products, which may confuse consumers or distract consumers from purchasing our products.

  

Increased competition may result in pricing pressures and reduced profit margins and may impede our ability to continue to increase the sales of our products or cause us to lose market share, any of which could substantially harm our business and results of operations

 

Seasonality

 

Our business, as well as the industry in which we operate, is not seasonal.

 



41




Intellectual Property

 

We have no registered or patented intellectual property. Trademarks and trade names distinguish the various companies from each other. If customers are unable to distinguish our products from those of other companies, we could lose sales to our competitors. We do not have any registered trademarks and trade names, so we only have common law rights with respect to infractions or infringements on its products. Many subtleties exist in product descriptions, offering and names that can easily confuse customers. The name of our principal products may be found in numerous variations of the name and descriptions in various media and product labels. This presents a risk of losing potential customers looking for our products and buying someone else’s because they cannot differentiate between them.

 

Legal Proceedings

 

We are not a party to any legal proceedings.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION S


Forward Looking Statements

The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Report.  Some of the statements contained in this Report that are not historical facts are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which can be identified by the use of terminology such as "estimates," "projects," "plans," "believes," "expects," "anticipates," "intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. However, as the Company intends to issue “penny stock,” as such term is defined in Rule 3a51-1 promulgated under the Exchange Act, the Company is ineligible to rely on these safe harbor provisions. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Report, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:

·

Our ability to attract and retain management, and to integrate and maintain technical information and management information systems;

·

Our ability to raise capital when needed and on acceptable terms and conditions;

·

The intensity of competition;

·

General economic conditions; and

·

Changes in government regulations.



42




Comparison of Operating Results for the Twelve (12) Months Ended April 30, 2015 to the Twelve (12) Months Ended April 30, 2014:


Revenues


For the twelve (12) months ended April 30, 2015 we had $5,000 in revenues as compared to $3,000 for the twelve (12) months ended April 30, 2014. The increase in revenues are attributable to service contracts which we had with several customers when we are in the business of aiding clients attempting to improve their on-line profile. As of February 2, 2015, we changed the business of the Company to the selling of mini body cameras with a focus on law enforcement agencies.  During the first quarter of fiscal 2016, the Company already has generated revenues from sales of its mini body cameras to law enforcement agencies.


Operating Expenses


For the twelve (12) months ended April 30, 2015, we had operating expenses of $67,999, consisting primarily of accrued officer compensation of $9,000 and $58,999 primarily from legal fees, accounting as   well as other general and administrative expenses. For the twelve (12) months ended April 30, 2014, we had operating expenses of $58,415, consisting of accrued officer compensation of $10,000 and $48,415 of legal, accounting, and other general and administrative expenses.


Net Loss


Our Net Loss for the year ended April 30, 2015 was $62,999, as compared to a net loss of $55,415 for the year ended April 30, 2014. The 2015 fiscal year loss consists of $5,000 of revenues and $67,999 of expenses. The 2014 fiscal year loss consists of $3,000 of revenues and $55,415 of expenses. The detail of the Company’s revenues and    expenses are disclosed in the preceding paragraphs. The net loss per share was $(0.00) in fiscal 2015 and $(0.01) in    fiscal 2014.


Liquidity and Working Capital


At April 30, 2015 our current assets (and total assets) were $60,576 as compared to current assets (and total assets) of $53,751 at April 30, 2014. The assets consisted of cash, cash equivalents and prepayments. The decrease in cash in fiscal 2015 is primarily attributable to more operating expenses. The prepaid expenses consist of $750 prepaid rent and $24,600 of other assets.   


At April 30, 2015, our current liabilities (and total liabilities) were $17,017, which consisted of accounts payable and accrued expenses, primarily attributable to professional fees and accrued compensation, as compared to $2,192 as of April 30, 2014.


Our net working capital at April 30, 2015 was $43,559 as compared to a net working capital of $51,559 at April 30, 2014. The decrease in net working capital is primarily attributable to the decrease in cash explained in the two previous paragraphs.


Comparison of Operating Results for the Six (6) Months Ended October 31, 2015 to the Six (6) Months Ended October 31, 2014 :

Revenues

For the six (6) months ended October 31, 2015 we had $35,548 in revenues as compared to $3,500 for the six (6) months ended October 31, 2014.  Our revenues for the six (6) months ended October 31, 2015 were attributable to the sale of our cameras to several law enforcements agencies. For the comparison period for the six (6) months ended October 31, 2014 the sale of cameras had not started yet.



43



Cost of Goods Sold


For the six (6) months ended October 31, 2015 we had cost of goods sold of $22,117 as compared to $0 for the six (6) months ended October 31, 2014. Our cost of goods for the six (6) months ended October 31, 2015 were attributable to the cost of our camera, shipping, and merchant costs. Our cost of goods sold for the six (6) months ended October 31, 2014 were $0 due to camera sales had not started yet.


Operating Expenses


For the six (6) months ended October 31, 2015, we had operating expenses of $168,545 as compared to operating expenses of $28,011 for the six (6) months ended October 31, 2014. The increase of $140,534 in operating expenses for the six (6) months ended October 31, 2015 was primarily attributable to an increase in advertising, salary, along with additional legal and other fees associated with the convertible notes which consisted of  $19,952 of advertising fess, $ 19,756 of accounting and auditor fees, $28,500 of salary, 14,500 of consulting, $57,894 of legal and other fees mostly related to the convertible notes and $27,943 of other general and administrative expenses.


Other Expense


Other expense was $47,275 for the six (6) months ended October 31, 2015 compared to $0 during the six (6) months ended October 31, 2014. All the elements of other expense are related to our convertible promissory notes, including $1,184 of interest income, $3,392 of interest expense, $43,328 of accretion of debt discount and $1,739 of amortization related to deferred financing costs for finder’s fees paid in connection with our convertible promissory notes.


Net Loss


Our Net Loss for the six (6) months ended October 31, 2015 was $202,389, consisting of the operating expenses referred in the preceding paragraph of operating expenses.  Our Net Loss for the six (6) months ended October 31, 2014 was $24,511.  The $177,878 increase in the Net Loss is attributable to the net increase in operating expenses referred to in the preceding paragraph.


Liquidity and Working Capital


At October 31, 2015 our current assets were $256,799 as compared to current assets (and total assets) of $60,576 at April 30, 2015. The assets consisted of cash, cash equivalents, accounts receivable, inventory, fixed assets and prepayments. The increase of current assets as of October 31, 2015 is primarily attributable to cash received from the convertible notes and more inventory received.    


At October 31, 2015, our current liabilities (and total liabilities) were $68,796, which consisted of accounts payable, accrued expense, convertible debts.  The increase is primarily attributable to the acquisition of short term convertible debts as compared to $17,017 as of April 30, 2015 when there were no debt agreements.   


Our net working capital at October 31, 2015 was $188,003 as compared to a net working capital of $43,559 at April 30, 2015. The increase in net working capital is primarily attributable to the increase in current assets as explained in the two previous paragraphs.


Inflation


Management believes that the impact of inflation on our operations since inception has not been material.



44




Off-Balance Sheet Arrangements


We are not currently a party to, or otherwise involved with, any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial position, operating results, liquidity, capital expenditures of capital resources.


MANAGEMENT

 

Directors and Executive Officers

 

The following table sets forth the name, age, and position of our sole executive officer and director. Our executive officers are elected annually by our Board of Directors. Our directors are elected annually by our shareholders at the annual meeting. Each director holds his office until his successor is elected and qualified or his earlier resignation or removal.


Name

Age

Position

Appointment Date

Paul Feldman

59

Chief Executive Officer, President

February 2, 2015

and Director


Paul Feldman, Director Chief Executive Officer and President


Paul Feldman has served as our sole Director, President and Chief Executive Officer since February 2, 2015. From October 2011 to January 29, 2015, Mr. Feldman served as President of Cobra Xtreme Video, Inc., a reseller of video cameras. From November 1, 2009 through September 30, 2011, Mr. Feldman was not employed.


Mr. Feldman received a Bachelor of Science from Duke University in 1978.


Term of Office


Our directors serve for a one-year term to hold office until the next annual meeting of stockholders and until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal. Executive officers serve at the discretion of the Board of Directors, and are elected or appointed to serve until the next Board of Directors meeting following the annual meeting of stockholders.  Our executive officers are appointed by our Board of Directors and hold office until removed by the Board.


Family Relationships

 

There are no family relationships among our directors and executive officers.


Legal Proceedings

 

No officer, director, or persons nominated for such positions, promoter or significant employee has been involved in the last ten years in any of the following:


·

Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two (2) years prior to that time,

·

Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses),

·

Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities,



45



·

Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

·

Having any government agency, administrative agency, or administrative court impose an administrative finding, order, decree, or sanction against them as a result of their involvement in any type of business, securities, or banking activity.

·

Being the subject of a pending administrative proceeding related to their involvement in any type of business, securities, or banking activity.

·

Having any administrative proceeding been threatened against you related to their involvement in any type of business, securities, or banking activity.

 

Code of Business Conduct and Ethics

 

Paul Feldman is our sole officer and director. Mr. Feldman is also our majority shareholder. Mr. Feldman is not “independent” as the term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act of 1934, as amended, and as defined by Rule 4200(a)(15) of the NASDAQ Marketplace Rules.


We do not have any standing audit, nominating, and compensation committees of the Board of Directors, or committees performing similar functions.


We do not currently have a Code of Ethics applicable to our principal executive, financial, or accounting officer. All Board actions have been taken by written action rather than formal meetings.


EXECUTIVE COMPENSATION

 

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the officer and directors for services rendered in all capacities for the years ending April 30, 2014 and 2015. No other officers and directors were compensated during the years ended 2014 and 2015.



Names and Principal Position

Year Ended April 30

Salary ($)

Bonus ($)

Stock Awards ($)

Option Awards ($)

Non-Equity Incentive Plan Compensation Earnings ($)

Non-Qualifies Deferred Compensation Earnings ($)

All Other Compensation ($)

Total ($)

Paul Feldman, Chief Executive Officer, President  and Director

2015

2014

9,000

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0


(1) On February 2, 2105, Paul Feldman purchased 10,000,000 shares of our common stock for $.0001 per share or an aggregate of $1,000 from our former president. On December 1, 2015, we approved the issuance of 1,000,000 shares of our non-convertible Series A Preferred Stock to Mr. Feldman which entitle him to 200,000 votes per share or an aggregate of 200,000,000 on all matters submitted to our common stockholders. We valued the 1,000 Series A shares at $.0001 per share or an aggregate of $1,000.  As a result of Mr. Feldman’s ownership of 10,000,000 common shares and 1,000,000 Series A Preferred Stock he holds an aggregate of 98% of the votes on all matters submitted to a vote of our stockholders. As such, he controls all matters submitted to a vote of our stockholders.




46



OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END APRIL 30, 2015 and April 30, 2014

  

  

Number of Securities Underlying Unexercised Options

(#)

Exercisable

  

  

Number of Securities Underlying Unexercised Options

(#)

Unexercisable

  

  

Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options

(#)

  

  

Option Exercise Price

($)

  

  

Option Expiration Date

  

  

Number of Shares or Units of Stock That Have Not Vested

(#)

  

  

Market Value of Shares or Units of Stock That

Have Not Vested

($)

  

  

Equity Incentive Plan Awards: Number Of Unearned Shares, Units or Other Rights That Have Not Vested

(#)

  

  

Equity

Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested

($)

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Douglas Ward

2015

  

  

0

  

  

  

0

  

  

  

0

  

  

  

0

  

  

  

0

  

  

  

0

  

  

  

0

  

  

  

0

  

  

  

0

  

2014

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Paul

Feldman

2015

  

  

0

  

  

  

0

  

  

  

0

  

  

  

0

  

  

  

0

  

  

  

0

  

  

  

0

  

  

  

0

  

  

  

0

  

2014

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 


We paid our sole officer and director, Paul Feldman $9000 during the year ended April 30, 2015. We did not pay salaries or compensation to our officers and directors in 2014. Mr. Feldman receives an annual salary of $100,000 beginning in November of 2015. We based his salary and stock bonuses upon the hours committed, his experience and the level of skill required to perform services rendered.


Our board of directors determines the compensation paid to our executive officers based upon the years of service to us, whether services are provided on a full time basis and the experience and level of skill required.


We may award our officers and directors shares of common stock as non-cash compensation as determined by the board of directors from time to time. The board will base its decision to grant common stock as compensation on the level of skill required to perform the services rendered and time committed to providing services to us.

 

At no time during the last fiscal year with respect to any person listed in the Table above was there:


·

any outstanding option or other equity-based award re-priced or otherwise materially modified (such as by extension of exercise periods, the change of vesting or forfeiture conditions, the change or elimination of applicable performance criteria, or the change of the bases upon which returns are determined);

·

any waiver or modification of any specified performance target, goal or condition to payout with respect to any amount included in non-stock incentive plan compensation or payouts;

·

any option or equity grant;

·

any non-equity incentive plan award made to a named executive officer;

·

any nonqualified deferred compensation plans including nonqualified defined contribution plans; or

·

any payment for any item to be included under the heading “All Other Compensation” in the Summary Compensation Table.



47




Employment Agreements with Management

 

On November 24, 2015, we entered into an agreement with Paul Feldman, our Chief Executive Officer, President, Treasurer and Director, to provide services to us. The agreement has a term of two (2) years and requires us to pay $100,000 per year to Mr. Feldman for his services as our Chief Executive Officer, President, Treasurer and Director.


Our Board of Directors determines the compensation paid to our executive officers, based upon the years of service to us, whether services are provided on a full time basis and the experience and level of skill required.

 

We may award our officers and directors shares of common stock as non-cash compensation as determined by the Board of Directors from time to time. The Board of Directors will base its decision to grant common stock as compensation on the level of skill required to perform the services rendered and time committed to providing services to us.

 

Outstanding Equity Awards at the End of the Fiscal Year

 

We do not have and have never had any equity compensation plans and therefore no equity awards are outstanding as of the date of this prospectus.

 

Director Compensation

 

Our directors do not receive any other compensation for serving on the Board of Directors.

 

Bonuses and Deferred Compensation

 

We do not have any bonus, deferred compensation or retirement plan. All decisions regarding compensation are determined by our Board of Directors.


Options and Stock Appreciation Rights

 

We do not currently have a stock option or other equity incentive plan. We may adopt one or more such programs in the future.

 

Payment of Post-Termination Compensation

 

We do not have change-in-control agreements with any of our directors or executive officers, and we are not obligated to pay severance or other enhanced benefits to executive officers upon termination of their employment.

 

Involvement in Certain Legal Proceedings


There have been no events under any bankruptcy act, no criminal proceedings, no judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any of our directors, executive officers, promoters or control persons during the past ten years.


Board of Directors


All directors hold office until the next annual meeting of shareholders and until their successors have been duly elected and qualified. Officers are elected by and serve at the discretion of the Board of Directors.

 

Our directors are not reimbursed for expenses incurred by them in connection with attending board meetings and they do not receive any other compensation for serving on the Board of Directors.

 



48




CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


In May 2013, we received $1,700 from our former president, at no cost to us, which we accounted for as a contribution of capital.


During the three (3) month period ended October 31, 2013, our former President paid an aggregate of $22,284 of our obligations which consisted primarily of auditor, legal, and transfer agent fees. These transactions were accounted for as capital contributions.


During the three (3) month period ended January 31, 2014, our former president personally paid $1,750 of our obligations to our auditor.  The transaction was accounted for as a capital contribution. 


On September 27, 2013, we sold 7,500,000 shares of our common stock to Douglas Ward, our former Chief Executive Officer and President at the price of $0.001 per share for an aggregate of $7,500.


On November 24, 2015, we entered into an agreement with Paul Feldman, our Director, Chief Executive Officer and President, to provide services to us. The agreement has a term of two (2) years and requires us to pay $100,000 per year to Mr. Feldman for his services as our Director, Chief Executive Officer and President.


On December 1, 2015, we approved the issuance of 1,000,000 shares of our non-convertible Series A Preferred Stock to Mr. Feldman which entitle him to 200,000 votes per share or an aggregate of 200,000,000 on all matters submitted to our common stockholders. We valued the 1,000 Series A shares at $.0001 per share or an aggregate of $1,000.  As a result of Mr. Feldman’s ownership of 10,000,000 common shares and 1,000,000 Series A Preferred Stock he holds approximately 98% of the votes on all matters submitted to a vote of our stockholders. Both before and after the issuance of the 1,000,000 Series A Preferred Stock to Mr. Feldman he had the ability to control all matters submitted to a vote of our stockholders.


During the three (3) month period ended January 31, 2014, our former president personally paid $1,750 of our obligations to our auditor.  The transaction was accounted for as a capital contribution.  


Except as set forth above, none of the following persons has any direct or indirect material interest in any transaction to which we are a party in the prior two (2) years or in any proposed transaction to which we are proposed to be a party:


·

Any of our directors or officers;

·

Any proposed nominee for election as our director;

·

Any person who beneficially owns, directly or indirectly, shares carrying more than ten percent (10%) of the voting rights attached to our shares; or

·

Any relative or spouse of any of the foregoing persons, or any relative of such spouse, who has the same house as such person or who is a director or officer of any parent or subsidiary of our company.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information regarding our shares of common stock beneficially owned as of the date of this prospectus, for (i) each stockholder known to be the beneficial owner of five percent (5%) or more of our outstanding shares of common stock, (ii) each named executive officer and director, and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within sixty (60) days through an exercise of stock options or warrants or otherwise.  Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.

 



49




For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within sixty (60) days of the date of this prospectus. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within sixty (60) days of the Closing Date is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.


Unless otherwise specified, the address of each of the persons set forth below is in care of the Company at 140 Iowa Lane, Suite 101, Cary, North Carolina 27511.


Name of Beneficial Owner

 

Amount and Nature of
Beneficial Ownership  

 

Percentage Held (1)

 

 

 

 

 

COMMON STOCK

 

 

 

 

Paul Feldman, Director, Chief Executive Officer & President (2)

 

10,000,000

 

53.5%

All Officers & Directors (1 Person)

 

10,000,000

 

53.5%

 

 

 

 

 

PREFERRED STOCK

 

 

 

 

Paul Feldman Director, Chief Executive Officer & President (2)

 

1,000,000

 

100%

All Officers and Directors (1 Person)

 

1,000,000

 

100%


(1)

Based on 18,295,000 shares of common stock issued and outstanding as of the date of this prospectus. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable.

(2)

On February 2, 2105, Paul Feldman purchased 10,000,000 shares of our common stock for $.0001 per share or an aggregate of $1,000 from our former president. On December 1, 2015, we approved the issuance of 1,000,000 shares of our non-convertible Series A Preferred Stock to Mr. Feldman which entitle him to 200,000 votes per share or an aggregate of 200,000,000 on all matters submitted to our common stockholders. We valued the 1,000 Series A shares at $.0001 per share or an aggregate of $1,000.  As a result of Mr. Feldman’s ownership of 10,000,000 common shares and 1,000,000 Series A Preferred Stock he holds an aggregate of 210,000,000 of 218,295,000 total votes representing approximately 98% of the votes on all matters submitted to a vote of our stockholders. Both before and after the issuance of the 1,000,000 Series A Preferred Stock to Mr. Feldman he had the ability to control all matters submitted to a vote of our common stockholders.


This table above is based upon information derived from our stock records. Unless otherwise indicated in the footnotes to this table are subject to community property laws where applicable, each of the shareholders named in this table has sole or shared voting and investment power with respect to the shares indicated as beneficially owned.


LEGAL PROCEEDINGS

 

We are not aware of any pending or threatened legal proceedings in which we are involved.


CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 



50



INTEREST OF NAMED EXPERTS

 

The financial statements for the years ended April 30, 2015 and 2014, included in this prospectus have been audited by Baum & Company P.A., an independent registered public accounting firm, to the extent and for the periods set forth in our report and are incorporated herein in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.


Hamilton & Associates Law Group, P.A. has provided an opinion on the validity of the shares of our common stock being offered pursuant to this prospectus.

   

No expert named in the registration statement of which this prospectus forms a part as having prepared or certified any part thereof (or is named as having prepared or certified a report or valuation for use in connection with such registration statement) or counsel named in this prospectus as having given an opinion upon the validity of the securities being offered pursuant to this prospectus or upon other legal matters in connection with the registration or offering such securities was employed for such purpose on a contingency basis. Also at the time of such preparation, certification or opinion or at any time thereafter, through the date of effectiveness of such registration statement or that part of such registration statement to which such preparation, certification or opinion relates, no such person had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in our company or any of its parents or subsidiaries. Nor was any such person connected with our company or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.


DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES LIABILITIES

 

Our Bylaws, subject to the provisions of Florida Law, contain provisions which allow the corporation to indemnify any person against liabilities and other expenses incurred as the result of defending or administering any pending or anticipated legal issue in connection with service to us if it is determined that person acted in good faith and in a manner which he reasonably believed was in the best interest of the corporation. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.

 

ADDITIONAL INFORMATION

 

We filed with the Securities and Exchange Commission a registration statement under the Securities Act for the securities in this offering. This prospectus does not contain all of the information in the registration statement and the exhibits and schedule that were filed with the registration statement.  For further information with respect to us and our securities, we refer you to the registration statement and the exhibits and schedule that were filed with the registration statement. Statements contained in this prospectus about the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and we refer you to the full text of the contract or other document filed as an exhibit to the registration statement. A copy of the registration statement and the exhibits and schedules that were filed with the registration statement may be inspected without charge at the Public Reference Room maintained by the Securities and Exchange Commission at 100 F Street, N.E. Washington, DC 20549, and copies of all or any part of the registration statement may be obtained from the Securities and Exchange Commission upon payment of the prescribed fee. Information regarding the operation of the Public Reference Room may be obtained by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains a website that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov.

 

We file periodic reports under the Exchange Act, including annual, quarterly and special reports, and other information with the Securities and Exchange Commission. These periodic reports and other information are available for inspection and copying at the regional offices, public reference facilities and website of the Securities and Exchange Commission referred to above.



51




 

FINANCIAL STATEMENTS


Baum & Company, P.A.

Certified Public Accountants

1688 Meridian Avenue, Suite 504

Miami Beach, Florida 33139


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Stockholders and Board of Directors

Force Protection Video Equipment Corp. (formerly known as Enhance-Your-Reputation.Com, Inc.)


We have audited the accompanying balance sheets of Force Protection Video Equipment Corp. (formerly known as Enhance-Your-Reputation.Com, Inc.) as of April 30, 2015 and 2014 and the related statements of operations, cash flows and stockholders' equity for the years then ended.  These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.


We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.


In our opinion, these financial statements present fairly, in all material respects, the financial position of Force Protection Video Equipment Corp. (formerly known as Enhance-Your-Reputation.Com, Inc.) as of April 30, 2015 and 2014 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.


Miami Beach, Florida

July 3, 2015

/s/ Baum & Company, P.A.




52




Force Protection Video Equipment Corp.

(f/k/a) Enhance-Your Reputation.com, Inc.

Balance Sheets


 

April 30, 2015

 

April 30, 2014

CURRENT ASSETS

 

 

 

     Cash and cash equivalents

$

35,226 

 

$

53,751 

     Other Assets

25,350 

 

0

          TOTAL CURRENT ASSETS

$

60,576 

 

$

53,751

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

     Accounts Payable and Accrued Expenses

17,017 

 

2,192 

          TOTAL CURRENT LIABILITIES

17,017 

 

2,192 

 

 

 

 

STOCKHOLDERS' (DEFICIT)

 

 

 

 

 

 

 

     Common stock, $0.0001 par value, 50,000,000 shares authorized, 18,295,000 and 18,145,000 shares issued and outstanding, respectively

1,829 

 

1,814 

     Additional paid-in capital

254,854 

 

199,870 

     Accumulated Deficit

(213,124)

 

(150,125)

          Total Stockholders' Equity

43,559 

 

51,559

          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

60,576 

 

$

53,751 


See Accompanying notes to financial statements.





53





Force Protection Video Equipment Corp.

(f/k/a) Enhance-Your Reputation.com, Inc.

Statements of Operations


 

For the Years Ended

 

April 30,

 

2015

 

2014

REVENUES

 

 

 

     Sales

$

5,000 

 

$

3,000 

 

 

 

 

EXPENSES

 

 

 

     Compensation to related parties

9,000 

 

10,000 

     General and Administrative

58,999 

 

45,415 

          Total Expenses

67,999 

 

58,415 

 

 

 

 

NET (LOSS) BEFORE INCOME TAXES

(62,999)

 

(55,415)

INCOME TAXES

 

 

 

     Provision for Income Taxes

 

 

 

 

 

NET (LOSS)

$

(62,999)

 

$

(55,415)

 

 

 

 

NET (LOSS) PER SHARE- BASIC AND DILUTED

$

 

$

0.01 

 

 

 

 

WEIGHTED AVERAGE OUTSTANDING SHARES BASIC AND DILUTED

18,148,846

 

5,699,965




See Accompanying notes to financial statements.





54





Force Protection Video Equipment Corp.

(f/k/a) Enhance-Your Reputation.com, Inc.

Statements of Stockholders' Equity

For the Period April 30, 2013 through April 30, 2015


 

 

 

Additional

 

Total

 

Common Stock Issued

Paid-In

Accumulated

Stockholders'

 

Shares

Amount

Capital

Deficit

Equity

Balance April 30, 2013

2,645,000

$

264

$

26,636

$(94,710)

$

(67,810) 

 

 

 

 

 

 

Common Stock issued for cash to officer on

 

 

 

 

 

September 27,2013

7,500,000

750

6,750

 

7,500 

Cash received on November 18, 2013 for

 

 

 

 

 

Common Stock issued on April 28, 2014

8,000,000

800

79,200

 

80,000 

Capital Contribution from officers during fiscal

 

 

 

 

 

year 2014

 

 

87,284

 

87,284 

Net Loss, Year Ended April 30, 2014

 

 

 

$

(55,415)

$

(55,415)

Balance - April 30, 2014

18,145,000

1,814

199,870

$

(150,125)

51,559 

 

 

 

 

 

 

Common Stock Issued for Cash in March 2015

100,000

10

49,985

 

49,995 

Common Stock Issued for Cash in April 2015

50,000

5

4,999

 

5,004 

Net Loss, Year Ended April 30, 2015

 

 

 

$

(62,999)

$

(62,999)

Balance - April 30, 2015

18,295,000

$

1,829

$

254,854

$

(213,124)

$

43,559 




See Accompanying notes to financial statements.





55





Force Protection Video Equipment Corp.

(f/k/a) Enhance-Your Reputation.com, Inc.

Statements of Cash Flows



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years Ended April 30,

 

 

 

 

2015

 

2014

OPERATING ACTIVITIES

 

 

 

 

 Net (loss)

 

$

(62,999)

 

$

(55,415)

 

 Adjustments to reconcile net (loss) to

 

 

 

 

   net cash used by operating activities:

 

 

 

 

 Changes in operating assets

 

 

 

 

   and liabilities:

 

 

 

 

 

   Increase in prepaid expenses

(25,350)

 

 

 

   Increase in accounts payable and accrued expenses

14,825 

 

4,218 

 

 

 

 Net Cash Used by

 

 

 

 

 

 

    Operating Activities

(73,524)

 

(51,197)

 FINANCING ACTIVITIES

 

 

 

 

 

 Proceeds from sale of common stock

54,999 

 

87,500 

 

 

 Capital contributions from Stockholder

 

17,284 

 

 

 

 Net Cash Provided by

 

 

 

 

 

 

     Financing Activities

54,999 

 

104,784 

 

 

 NET INCREASE (DECREASE) IN CASH

(18,525) 

 

53,587 

 

 

 CASH AT BEGINNING  OF PERIOD

53,751 

 

164 

 

 

 CASH AT END OF PERIOD

$

35,226 

 

$

53,751 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

     Cash paid for interest

$

-

 

$

-

 

 

     Cash paid for taxes

$

-

 

$

-

 

 

NON-CASH FINANCING ACTIVITY

 

 

 

 

 

     Accrued officer compensation

 

 

 

 

     forgiven  and donated as    

     contributed capital

$

-

 

$

70,000



See Accompanying notes to financial statements.




56





FORCE PROTECTION VIDEO EQUIPMENT CORPORATION

(f/k/a ENHANCE-YOUR-REPUTATION.COM, INC.)

NOTES TO FINANCIAL STATEMENTS

AS OF APRIL 30, 2015


NOTE 1 – COMPANY BACKGROUND AND ORGANIZATION


Force Protection Video Equipment Corporation, (the Company), was incorporated on March 11, 2011, under the laws of the State of Florida.  On February 1, 2015, the Company changed its name to its current name, Forced Protection Video Corporation. We were originally incorporated for the purpose of providing an online marketplace for artwork created by German artist Reinhold Mackenroth on the internet. Unfortunately, sales did not materialize as expected for M Street Galley Inc. and as such, we decided to transition our operations by going into the reputation management and enhancement business and changed the company’s name to Enhance-Your-Reputation.com Inc. Unfortunately, sales did not materialize as expected and as such, we decided to cease all its prior business and change the company’s name, now focus on the sale of mini body video cameras to state and local law enforcement.  


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES    


Accounting Basis


The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted an April 30 fiscal year end.


Cash and Cash Equivalents


The Company considers all highly liquid investments with the original maturities of three (3) months or less to be cash equivalents.


Other Assets


The Company’s other assets are related to prepaid rent and an advance of $24,000 on a purchase commitment for inventory.  


Leases


On March 21, 2015, the Company entered into a lease for approximately 524 square feet. The lease expires on March 31, 2018.  The annual rents are $7016 for 2015, $9207 for 2016, $9483 for 2017 and $2388 for 2018.


Accounts Receivable


The Company may realize accounts receivable consisting of amounts owed by customers for services performed by the Company pursuant to “Service Agreement” contracts.  As of April 30, 2015 and April 30, 2014 there were no accounts receivable.



57




Fair Value of Financial Instruments


The Company’s financial instruments consist of cash and cash equivalents and accounts payable and accrued expenses. The carrying amounts of the Company’s financial instruments approximate fair value because of the short term maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect those estimates. We do not hold or issue financial instruments for trading purposes, nor do we utilize derivative instruments.


Income Taxes

In accordance with ASC 740, deferred income taxes and benefits will be provided for the results of operations of the Company.  The tax effects of temporary differences and carry-forwards that give rise to significant portion of deferred tax assets and liabilities will be recognized as appropriate.  


Use of Estimates


The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.


Revenue Recognition


The Company recognizes revenue when (a) pervasive evidence of an arrangement exists (b) products are delivered or services have been rendered (c) the sales price is fixed or determinable, and (d) collection is reasonably assured.


Stock Based Compensation


Stock based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.


Basic Income (Loss) Per Share


Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common stock by the weighted average number of shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There has not been any dilutive debt since inception.  


Fair Value Measurements


The Company follows the provision of ASC 820, “Fair Value Measurements and Disclosures”. ASC 820 defines fair value, establishes a framework for measuring fair value under generally accepted principles, and enhances disclosures about fair value measurements.


Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:



58




Level 1 – Valuations based on quoted prices for identical assets and liabilities in active market.


Level 2 – Valuations based on observable inputs other than quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.


Level 3 – Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgement.


As of April 30, 2015 and April 30, 2014 the Company did not have any assets or liabilities that were required to be measured at fair value on a recurring basis or on a non-recurring basis.  


Recent Accounting Pronouncements


In June 2014, FASB issued ASU 2014-10, Development Stage Entities, which eliminates the concept of a development stage entity (DSE) in its entirety from current accounting guidance.  The removal of the DSE reporting requirements are effective for public entities for annual reporting periods beginning after December 15, 2014, and interim periods therein.  Early adoption of the new standard is permitted; however, the Company has not adopted the standard.


The Company does not expect the adoption of recently issued accounting pronouncements to have a material impact on the Company’s financial statements.


NOTE 3 - Stockholders’ Equity, sales of common stock, and contributed capital transactions


Throughout the 2013 fiscal year, the company received a total of $10,650 from its president, at no cost to the company, and is accounted for as a contribution of capital.


In May 2013, the Company received a total of $1,700 from its president, at no cost to the company, and is accounted for as contribution of capital.


On September 27, 2013, the Company received $750 from its new President in exchange for 7,500,000 common shares sold at $0.001 per share.


During the quarter ended October 31, 2013, the Company’s former President forgave $70,000 of accrued compensation as a contribution of capital.


During the quarter ended October 31, 2013, both the Company’s former and successor Presidents’ personally paid in the aggregate $22,284 of the Company’s obligations which consisted primarily of auditor, legal, and transfer agent fees. These transactions were accounted for as capital contributions.


On November 18, 2013, the Company received $80,000 from the sale of 8,000,000 share of restricted common stock at $0.01 per share.  The 8,000,000 shares were issued on April 28, 2014


During the quarter ended January 31, 2014, the Company’s former President paid $1,750 of the Company’s obligation to its auditor.  The transaction was accounted for as a capital contribution.


On March 24, 2015 the Company received $50,000 from the sale of 100,000 shares of restricted common stock at $0.50 per share.



59




On April 14, 2015 the Company received $5,000 from the sale of 50,000 shares of restricted stock at $0.10 per share.  


NOTE 4 - Related Party Transactions


The Company’s CEO’s ceased receiving any compensation for services as of July 31, 2013 because of the minimal time required to oversee the Company’s operations.


Commencing November 1, 2011 the Company’s former CEO and President, Mr. Mackenroth, was to receive a salary of $40,000 per year. This compensation was to be deferred until funds were available. In September 2013, the former officer sold his common stock to the Company’s current CEO and President and forgave $70,000 of accrued compensation that was owed to him as a capital contribution to the Company.


In May 2013, the Company received $1,700 from its president, at no cost to the Company, and is accounted for as a contribution of capital.


On September 27, 2013, the Company’s new CEO/President purchased 7,500,000 common shares at $0.001 per share for $7,500.


During the three (3) month period ended October 31, 2013, both the Company’s former and successor Presidents’ personally paid in the aggregate $22,284 of the Company’s obligations which consisted primarily of auditor, legal, and transfer agent fees. These transactions were accounted for as capital contributions.


During the three (3) month period ended January 31, 2014, the Company’s former president personally paid $1,750 of the Company’s obligation to its auditor.  The transaction was accounted for as a capital contribution.  


On November 24, 2015, we entered into an agreement with Paul Feldman, our Chief Executive Officer, President, and Director, to provide services to us. The agreement has a term of two (2) years and requires us to pay $100,000 per year to Mr. Feldman for his services as our Chief Executive Officer, President, Treasurer and Director.

On December 1, 2015, we approved the issuance of 1,000,000 shares of our non-convertible Series A Preferred Stock to Mr. Feldman which entitle him to 200,000 votes per share or an aggregate of 200,000,000 on all matters submitted to our common stockholders. We valued the 1,000 Series A shares at $.0001 per share or an aggregate of $1,000.  As a result of Mr. Feldman’s ownership of 10,000,000 common shares and 1,000,000 Series A Preferred Stock he holds an aggregate of 210,000,000 of 218,295,000 total votes representing approximately 98% of the votes on all matters submitted to a vote of our stockholders. Both before and after the issuance of the 1,000,000 Series A Preferred Stock to Mr. Feldman he had the ability to control all matters submitted to a vote of our common stockholders.


NOTE 5 – Income Taxes


In September 2013, the Company’s sole shareholder/President sold all of his common stock, which represented 94.5% of the Company’s issued and outstanding stock, to the Company’s new president. Pursuant to Internal Revenue Service (IRS) Code Section 382, an ownership change of greater than 50% triggers certain limits to the corporation’s right to use its net operating loss (NOL) carryovers each year thereafter to an annual percentage of the fair market value of the corporation at the time of the ownership change.


The Company determined that the ownership change referred to above will limit the Company to utilize $15,616 of the $41,828 of NOL’s it incurred prior to the ownership change.  



60




No deferred tax asset has been reported in the financial statements because the Company believes there is a 50% or greater chance that its NOL’s will expire unused. Accordingly, the potential tax benefits of the NOL carryforwards are offset by a valuation allowance of the same amount.


As of April 30, 2015, the Company’s NOL carryforward totaled $116,874, $15,616 of which will expire April 30, 2032, $38,259 on April 30, 2033 and $62,999 on April 2035.


The Company’s tax returns are subject to examination by the federal and state tax authorities for years ended April 30, 2012 through 2015.  


NOTE 6 – Subsequent Event


In May 2015, we sold a total of 450,000 shares of our common stock to three (3) accredited investors. These issuances were made pursuant to the exemption provided by Section 4(2) of the Securities Act of 1933, as amended. On November 24, 2015, we entered into an agreement with Paul Feldman, our Chief Executive Officer, President, and Director, to provide services to us. The agreement has a term of two (2) years and requires us to pay $100,000 per year to Mr. Feldman for his services as our Chief Executive Officer, President, Treasurer and Director.




61




Part I – Financial Information


Item 1. Financial Statements (Unaudited)



Force Protection Video Equipment Corp.

Balance Sheets

 

 

 

 

 

October 31, 2015

 

April 30, 2015

 

 

 

 

 

(Unaudited)

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and Cash equivalents

 

$

169,678 

 

$

35,226 

 

Inventory

 

 

 

26,347 

 

 

Accounts Receivable

 

7,163 

 

 

Deferred Financing

 

 

7,761 

 

 

Other Assets

 

 

45,850 

 

25,350 

 

 

TOTAL CURRENT ASSETS

$

256,799 

 

$

60,576 

PROPERTY AND EQUIPMENT

 

 

 

 

Property and Equipment

 

$

671 

 

$

 

 

TOTAL PROPERTY AND EQUIPMENT

$

671 

 

$

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

257,470 

 

$

60,576 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

Accounts Payable and Accrued Expenses

$

15,968 

 

$

17,017 

 

Convertible Promissory Notes net of discount of $281,172

52,828 

 

 

 

TOTAL CURRENT LIABILITIES

$

68,796 

 

$

17,017 

 

 

 

 

 

 

 

 

STOCKHOLDERS EQUITY (DEFICIT)

 

 

 

 

 

Common Stock, $0.0001 par value, 50,000,000

 

 

 

 

shares authorized; issued and outstanding 18,755,095 and 18,295,000 at October 31, 2015 and April 30, 2015, respectively

$

1,875 

 

$

1,829 

 

Additional Paid In Capital

 

602,312 

 

254,854 

 

Accumulated Deficit

 

(415,513)

 

(213,124)

 

 

TOTAL STOCKHOLDERS’ EQUITY

$

188,674 

 

$

43,559 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

257,470 

 

$

60,576 


See accompanying notes to financial statements




62




Force Protection Video Equipment Corp.

Statements of Operations


 

For the three months Ended

 

For the six months Ended

 

October 31,

 

October 31,

 

2015

 

2014

 

2015

 

2014

REVENUES

 

 

 

 

 

 

 

    Sales

$

19,614 

 

$

1,500 

 

$

35,548 

 

$

3,500 

     Cost of goods sold

12,416 

 

 

22,117 

 

GROSS PROFIT

7,198 

 

1,500 

 

13,431 

 

3,500 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

     Compensation to related parties

16,500 

 

 

28,500 

 

     General and administrative

92,770 

 

11,550 

 

140,045 

 

28,011 

          Total operating expenses

109,270 

 

11,550 

 

168,545 

 

28,011 

          Loss from operations

(102,072)

 

(10,050)

 

(155,114)

 

(24,511)

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

     Interest Income

1,184 

 

 

1,184 

 

     Interest expense

(3,392)

 

 

(3,392)

 

     Accretion of debt discount

(43,328)

 

 

(43,328)

 

     Amortization of deferred finance charges

(1,739)

 

 

(1,739)

 

          Total other income (expense)

(47,275)

 

 

(47,275)

 

NET (LOSS) BEFORE INCOME TAXES

(149,347)

 

(10,050)

 

(202,389)

 

(24,511)

     Provision for Income Taxes

 

 

 

NET (LOSS)

$

(149,347)

 

$

(10,050)

 

$

(202,389)

 

$

(24,511)

 

 

 

 

 

 

 

 

NET (LOSS) PER SHARE- BASIC AND DILUTED

$

(0.01)

 

$

(0.00)

 

$

(0.01)

 

$

(0.00)

WEIGHTED AVERAGE OUTSTANDING SHARES BASIC AND DILUTED

18,746,707 

 

18,145,000 

 

18,633,109 

 

18,145,000 



See accompanying notes to financial statements




63




Force Protection Video Equipment Corp.

Statements of Cash Flows

Unaudited


 

 

For the six months ended

 

 

October 31,

 

 

2015

 

2014

 

 

 

 

 

OPERATING ACTIVITIES

 

 

 

 

Net (Loss)

$

(202,389)

 

$

(24,511)

 

Adjustment to reconcile net loss to net cash

 

 

 

 

     used by operating activities:

 

 

 

 

         Depreciation and amortization

1,739 

 

 

         Accretion of debt discount

43,328 

 

    

         Share based compensation expense

14,500 

 

 

Changes in operating assets and liabilities

 

 

 

 

          Increase in accounts receivable

(7,163)

 

 

          Increase in deferred financing cost

(7,761)

 

 

          Increase in Inventory

(26,347)

 

 

          Increase in other assets

(12,739)

 

 

          Accounts payable and accrued expenses

(1,048)

 

358 

 

          Net Cash (Used) by Operating Activities

(197,881)

 

(24,153)

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

Purchase of Equipment

(671)

 

 

Net Cash (Used) by Investing  Activities

(671)

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

Proceeds from sale of common stock

45,000 

 

 

Proceeds from convertible promissory notes

288,004 

 

 

 Net Cash Provided by Financing Activities

333,004 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

134,452 

 

(24,153)

 

 

 

 

 

 

CASH AT BEGINNING OF PERIOD

35,226 

 

53,751 

 

 

 

 

 

 

CASH AT END OF PERIOD

$

169,678 

 

$

29,598 

 

 

 

 

 

SUPPLEMENTAL INFORMATION

 

 

 

                   Cash paid for interest

$

 

$

                   Cash paid for income taxes

 

 

 

 

 

NON-CASH OPERATING ACTIVITIES

 

 

 

                    Value of common stock issued in exchange for services

$

14,500 

 

$

 

 

 

 

 


See accompanying notes to financial statements



64




FORCE PROTECTION VIDEO EQUIPMENT CORP.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)



NOTE 1 – INTERIM UNAUDITED FINANCIAL STATEMENTS


The unaudited financial statements of Force Protection Video Equipment Corp. (the “Company”) as of October 31, 2015, and for the three and six months ended October 31, 2015 and 2014, have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting. Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended April 30, 2015, as filed with the Securities and Exchange Commission as part of the Company’s Form 10-K. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. The Company did not record an income tax provision during the periods presented due to net taxable losses. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.


NOTE 2 – COMPANY BACKGROUND AND ORGANIZATION


Force Protection Video Equipment Corp., (the Company), was incorporated on March 11, 2011, under the laws of the State of Florida.  On February 1, 2015 the Company changed its name to its current name, Force Protection Video Corp. We were originally incorporated for the purpose of providing an online marketplace for artwork created by German artist Reinhold Mackenroth on the internet. Unfortunately, sales did not materialize as expected for M Street Galley Inc. and as such, we decided to transition our operations by going into the reputation management and enhancement business and changed the company’s name to Enhance-Your-Reputation.com Inc. When our business did not grow, we decided to change our business model, change the company’s name, and now focus on the sale of mini body video cameras to state and local law enforcement.  In conjunction with the change in business focus, we then ceased our prior business.


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES    


Accounting Basis


The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted an April 30 fiscal year end.


Cash and Cash Equivalents


The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.


Inventory


Our inventory is comprised of finished goods, cameras and recording equipment. The Company’s inventory is stated at the lower of cost or market.  


Allowance for doubtful accounts


The Company will recognize an allowance for losses on accounts receivable in an amount equal to the estimated probable losses, net of recoveries.   As of October 31, 2015, no allowance was necessary.



65




Commitments


On March 21, 2015, the Company entered into a lease of office space, approximately 524 square feet. The lease expires on March 31, 2018.  The annual rents are $7,016 for 2015, $9,207 for 2016, $9,483 for 2017 and $2,388 for 2018.


Property and Equipment


Property and equipment are recorded at cost.  Depreciation is computed on the straight line method over their useful lives (5-7 years).


Income Taxes


In accordance with ASC 740, deferred income taxes and benefits will be provided for the results of operations of the Company.  The tax effects of temporary differences and carry-forwards that give rise to significant portion of deferred tax assets and liabilities will be recognized as appropriate.  


Use of Estimates


The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.


Revenue Recognition


The Company recognizes revenue when (a) pervasive evidence of an arrangement exists (b) products are delivered or services have been rendered (c) the sales price is fixed or determinable, and (d) collection is reasonably assured. The Company’s revenue recognition policies are in compliance with SAB 104.


Stock Based Compensation


Stock based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.


Basic Income (Loss) Per Share


Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common stock by the weighted average number of shares outstanding during the period. Diluted earnings per share is calculated by dividing the Company’s net income by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There has not been any dilutive debt since inception.  



66




Fair Value Measurements


The Company follows the provision of ASC 820, “Fair Value Measurements And Disclosures”. ASC 820 defines fair value, establishes a framework for measuring fair value under generally accepted principles, and enhances disclosures about fair value measurements.


Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:


Level 1 – Valuations based on quoted prices for identical assets and liabilities in active market.

Level 2 – Valuations based on observable inputs other than quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgement.


As of October 31, 2015 and April 30, 2015, the Company did not have any assets or liabilities that were required to be measured at fair value on a recurring basis or on a non-recurring basis.  


Fair Value of Financial Instruments


The Company’s financial instruments consist of cash and cash equivalents and accounts payable and accrued expenses. The carrying amounts of the Company’s financial instruments approximate fair value because of the short term maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect those estimates. We do not hold or issue financial instruments for trading purposes, nor do we utilize derivative instruments.


Recent Accounting Pronouncements


In September 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-16, Business Combinations (Topic 805). This ASU eliminates the requirement for retrospective application of measurement period adjustments relating to provisional amounts recorded in a business combination as of the acquisition date. The amendments in this update require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. For public business entities, the amendments will be effective for fiscal years beginning after December 15, 2015. Early adoption is permitted. The Company does not expect this accounting update to have a material effect on its consolidated financial statements in future periods, although that could change.


In April 2015, the FASB issued ASU 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40). This ASU provides guidance about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the software license element of the arrangement should be accounted for consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the arrangement should be accounted for as a service contract. For public business entities, the amendments will be effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted.



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In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This ASU requires retrospective adoption and will be effective for fiscal years beginning after December 15, 2015 and for interim periods within those fiscal years. We expect the adoption of this guidance will not have a material impact on our financial statements.


In February 2015, the FASB issued ASU 2015-02, “Amendments to the Consolidation Analysis”, which amends the consolidation requirements in ASC 810 and significantly changes the consolidation analysis required under U.S. GAAP relating to whether or not to consolidate certain legal entities. Early adoption is permitted. The Company’s effective date for adoption is January 1, 2016. The Company does not expect this accounting update to have a material effect on its consolidated financial statements in future periods, although that could change.

 

In January 2015, the FASB issued ASU 2015-01, “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items”, which eliminates the concept from U.S. GAAP the concept of an extraordinary item. Under the ASU, an entity will no longer (1) segregate an extraordinary item from the results of ordinary operations; (2) separately present an extraordinary item on its income statement, net of tax, after income from continuing operations; or (3) disclose income taxes and earnings-per-share data applicable to an extraordinary item. Early adoption is permitted. The Company’s effective date for adoption is May 1, 2016. The Company does not expect this accounting update to have a material effect on its consolidated financial statements in future periods, although that could change.


In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205 40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which is intended to define management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Specifically, ASU 2014-15 provides a definition of the term substantial doubt and requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). It also requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans and requires an express statement and other disclosures when substantial doubt is not alleviated. The new standard will be effective for reporting periods beginning after December 15, 2016, with early adoption permitted. Management does not expect the adoption of ASU 2014-15 to have a material impact on our financial statements and disclosures.


In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes most existing revenue recognition guidance under US GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). On July 9, 2015, the FASB voted to defer the effective date of the new revenue recognition standard by one year. Based on the Board's decision, public organizations would apply the new revenue standard to annual reporting periods beginning after December 15, 2017. We are currently evaluating the impact of the pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard.


We review new accounting standards as issued. Although some of these accounting standards issued or effective after the end of our previous fiscal year may be applicable to us, we have not identified any standards that we believe merit further discussion. We believe that none of the new standards will have a significant impact on our financial statements.



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NOTE 4 – Other assets


The Company’s other assets at October 31, 2015 are related to prepaid rent $750, an advance of $45,100 on a purchase commitment for inventory and $7,761 of deferred financing costs related to out convertible promissory notes.


NOTE 5 – Convertible Promissory Notes


Following is a summary of our outstanding convertible promissory notes as of October 31, 2015:


 

 

Notes

 

Current Balances

Lender

 

Issue Date

 

Maturity

 

Principle

 

Interest

 

Total

EMA Financial, LLC

 

8/25/2015

 

8/25/16

 

$

105,000 

 

$

1,553 

 

$

106,553

Adar Bays, LLC

 

9/11/2015

 

9/11/16

 

27,000 

 

(296)

 

26,704

LG Capital Funding, LLC

 

9/11/2015

 

9/11/16

 

27,000 

 

(296)

 

26,704

Auctus Fund, LLC

 

9/30/2015

 

6/30/16

 

66,000 

 

450 

 

66,450

JSJ Investments, Inc.

 

10/6/2015

 

4/6/16

 

56,000 

 

462 

 

56,462

Black Forest Capital, LLC

 

10/8/2015

 

10/8/16

 

53,000 

 

335 

 

53,335

   Totals

 

 

 

 

 

$

334,000 

 

$

2,208 

 

$

336,208

Debt discount balance

 

 

 

 

 

(281,172)

 

 

-

   Balance sheet balances

 

 

 

 

 

$

52,828 

 

$

2,208 

 

$

336,208


The Company determined that each convertible promissory notes conversion feature is indexed to the Company’s stock, which is an input to a fair value measurement of a fixed-for-fixed option on equity shares. Thus, the conversion feature of the notes meets the scope exception under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ("ASC") 815-40-15-7 and treatment under ASC 470-20 – Debt with Conversion and Other Options is appropriate.


EMA Financial, LLC


On August 25, 2015 the Company entered into a Securities Purchase Agreement with EMA Financial, LLC (“EMA”), for the sale of an 8% convertible note in the principal amount of $105,000 (the “EMA Note”) of which the Company received $80,504 after payment of legal and due diligence fees of $5,000, finder's fee of $9,500 and original issue discount of $9,996. The EMA Note matures in twelve (12) months on August 25, 2016. The EMA Note is convertible into common stock, at EMA’s option anytime following the issuance date, at a price for each share of common stock equal to 60% of the lowest trading price during the twenty (20) trading days immediately preceding the applicable conversion. In no event shall EMA effect a conversion if such conversion results in EMA beneficially owning in excess of 4.9% of the outstanding common stock of the Company. The EMA Note can be prepaid, at redemption premiums ranging from 125% to 140%, until 90 days following the issuance date of the EMA Note, after which the Company has no right of repayment. Any amount of principle or interest which is not paid when due shall bear interest as the rate of twenty-four percent (24%). Upon the occurrence of an event of default and at the option of the EMA, the Company shall either pay an amount equal to the greater of (i) 150% of the then outstanding principle and interest, or (ii) the "parity value" of the "default sum" to be prepaid, where parity value means the highest number of shares of common stock issuable upon conversion of or otherwise pursuant to such "default sum" in accordance with Article 1, treating the trading day immediately preceding the "mandatory prepayment date" as the "conversion date" for purposes of determining the lowest applicable conversion price.



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The intrinsic value of the beneficial conversion feature was computed as the difference between the fair value of the common stock issuable upon conversion of the EMA Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $145,000. As this amount resulted in a total debt discount that exceeds the EMA Note proceeds, the amount recorded for the beneficial conversion feature was limited to the principal amount of the EMA Note less the deferred financing costs of $9,500 which were capitalized and are being amortized over the term of the EMA Note. The resulting $95,500 discount is being accreted over the twelve (12) month term of the EMA Note.


During the three and Six Months Ended October 31, 2015, the Company recognized interest expense of $1,553, debt discount accretion of $17,482 and amortization of deferred financing costs of $1,739 related to the EMA Note.


Adar Bays, LLC


On September 11, 2015 the Company entered into a Securities Purchase Agreement with Adar Bays, LLC ("Adar") for the sale of an 8% convertible note in the principal amount of $81,000 (which includes Adar legal expenses in the amount of $6,000) (the “Adar Note”) of which Adar funded $27,000 upon closing. We have no obligation to pay Adar any amounts on the unfunded portion of the Adar Note. Additionally, Adar issued to the Company two (2) notes, aggregating $54,000, bearing interest at the rate of 8% per annum with each note maturing eight months from September 11, 2015 (the “Adar Buyer Notes”). The Adar Buyer Notes may be prepaid, without penalty, all or portion of the outstanding balance along with accrued but unpaid interest at any time prior to maturity.


The Adar Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on September 11, 2016. The Adar Note is convertible into common stock any time after 6 months, at Adar’s option, at a price for each share of common stock equal to 60% (the “Conversion Factor”) of the lowest trading price during the twenty (20) trading days immediately preceding the applicable conversion. In the event the Company elects to prepay all or any portion of the Adar Note during the first 180 days, the Company is required to pay to Adar an amount in cash equal to 150% multiplied by the sum of all principal and interest. The note may not be prepaid after the 180th day.


Adar has agreed to restrict its ability to convert the Adar Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 9.9% of the then issued and outstanding shares of common stock. The Adar Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company. The Adar Note also provides for penalties and rescission rights if we do not deliver shares of our common stock upon conversion within the required timeframes.


The intrinsic value of the beneficial conversion feature was computed as the difference between the fair value of the common stock issuable upon conversion of the Adar Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $40,856. As this amount resulted in a total debt discount that exceeds the Adar Note proceeds, the amount recorded for the beneficial conversion feature was limited to the principal amount of the Adar Note. The resulting $27,000 discount is being accreted over the twelve (12) month term of the Adar Note.


During the three and Six Months Ended October 31, 2015, the Company recognized net interest income of $296 and $3,699 of debt discount accretion related to the Adar Note.


LG Capital Funding, LLC


On September 11, 2015 the Company entered into a Securities Purchase Agreement with LG Capital Funding, LLC ("LG") for the sale of an 8% convertible note in the principal amount of $81,000 (which includes LG legal expenses in the amount of $6,000) (the “LG Note”) of which LG funded $27,000 upon closing. We have no obligation to pay LG any amounts on the unfunded portion of the LG Note. Additionally, LG issued to the Company two (2) notes, aggregating $54,000, bearing interest at the rate of 8% per annum with each note maturing eight months from September 11, 2015 (the “LG Buyer Notes”). The LG Investor Notes may be prepaid, without penalty, all or portion of the outstanding balance along with accrued but unpaid interest at any time prior to maturity.



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The LG Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on September 11, 2016. The LG Note is convertible into common stock any time after 6 months, at LG’s option, at a price for each share of common stock equal to 60% of the lowest trading price during the twenty (20) trading days immediately preceding the applicable conversion. In the event the Company elects to prepay all or any portion of the LG Note during the first 180 days, the Company is required to pay to LG an amount in cash equal to 150% multiplied by the sum of all principal and interest. The note may not be prepaid after the 180th day.


LG has agreed to restrict its ability to convert the LG Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 9.9% of the then issued and outstanding shares of common stock. The LG Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company. The LG Note also provides for penalties and rescission rights if we do not deliver shares of our common stock upon conversion within the required timeframes.


The intrinsic value of the beneficial conversion feature was computed as the difference between the fair value of the common stock issuable upon conversion of the LG Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $40,856. As this amount resulted in a total debt discount that exceeds the LG Note proceeds, the amount recorded for the beneficial conversion feature was limited to the principal amount of the LG Note. The resulting $27,000 discount is being accreted over the twelve (12) month term of the LG Note.


During the three (3) and Six (6) Months Ended October 31, 2015, the Company recognized net interest income of $296 and $3,699 of debt discount accretion related to the LG Note.


Auctus Fund, LLC


On September 30, 2015 the Company entered into a Securities Purchase Agreement with Auctus Fund, LLC (“Auctus”), for the sale of an 8% convertible note in the principal amount of $66,000 (the “Auctus Note”) of which the Company received $57,500 after payment of legal and due diligence fees. The Auctus Note matures in nine (9) months on June 30, 2016. The Auctus Note is convertible into common stock, at Auctus’s option anytime following the issuance date, at a price for each share of common stock equal to 60% of the lowest trading price during the twenty (20) trading days immediately preceding the applicable conversion. In no event shall Auctus effect a conversion if such conversion results in Auctus beneficially owning in excess of 4.99% of the outstanding common stock of the Company. The Auctus Note and accrued interest may be prepaid from the date of issuance with the following penalties: (i) within 30 days - 125%; (ii) within 31 - 60 days - 130%; (iii) within 61 - 90 days - 135%; (iv) within 91 - 120 days - 140%; (v) within 121 - 150 days - 145%; and (vi) within 151 - 180 days - 150%. After expiration of the 180 days following the issuance, the Auctus Note may not be prepaid. Any amount of principle or interest which is not paid when due shall bear interest as the rate of twenty-four percent (24%). Upon the occurrence of an event of default and at the option of the Auctus, the Company shall either pay an amount equal to the greater of (i) 150% of the then outstanding principle and interest, or (ii) the "parity value" of the "default sum" to be prepaid, where parity value means the highest number of shares of common stock issuable upon conversion of or otherwise pursuant to such "default sum" in accordance with Article 1, treating the trading day immediately preceding the "mandatory prepayment date" as the "conversion date" for purposes of determining the lowest applicable conversion price.


The intrinsic value of the beneficial conversion feature was computed as the difference between the fair value of the common stock issuable upon conversion of the Auctus Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $62,625. As this amount resulted in a total debt discount that exceeds the Auctus Note proceeds, the amount recorded for the beneficial conversion feature was limited to the principal amount of the Auctus Note. The resulting $66,000 discount is being accreted over the nine (9) month term of the Auctus Note.


During the three (3) and Six Months Ended October 31, 2015, the Company recognized interest expense of $450 and $7,467 of debt discount accretion related to the Auctus Note.



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JSJ Investments, Inc.


On October 6, 2015 the Company sold and JSJ Investments, Inc. (“JSJ”) purchased a 12% convertible note in the principal amount of $56,000 (the “JSJ Note”) of which the Company received $51,000 after payment of a $5,000 original issue discount. The JSJ Note matures in six (6) months on April 6, 2016. The JSJ Note is convertible into common stock, at JSJ ’s option anytime following the issuance date, at a price for each share of common stock equal to 60% of the lowest trading price during the twenty (20) trading days immediately preceding the applicable conversion. In no event shall JSJ effect a conversion if such conversion results in JSJ beneficially owning in excess of 4.99% of the outstanding common stock of the Company. The JSJ Note and accrued interest may be prepaid at an amount equal to 150% of the outstanding principle and unpaid interest. Any amount of principle or interest which is not paid when due shall bear interest as the rate of eighteen percent (18%). Upon the occurrence of an event of default the balance of principle and interest shall increase to 150%.


The intrinsic value of the beneficial conversion feature was computed as the difference between the fair value of the common stock issuable upon conversion of the JSJ Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $57,866. As this amount resulted in a total debt discount that exceeds the JSJ Note proceeds, the amount recorded for the beneficial conversion feature was limited to the principal amount of the JSJ Note. The resulting $56,000 discount is being accreted over the twelve (12) month term of the JSJ Note.


During the three (3) and Six Months Ended October 31, 2015, the Company recognized interest expense of $462 and $7,650 of debt discount accretion related to the JSJ Note.


Black Forest Capital, LLC


On October 8, 2015 the Company sold and Black Forest Capital, LLC (“Black Forest”) purchased a 10% convertible note in the principal amount of $53,000 (the “Black Forest Note”) of which the Company received $50,000 after payment of legal fees. The Black Forest Note matures in twelve (12) months on October 8, 2016. The Black Forest Note is convertible into common stock, at Black Forest’s option anytime following the issuance date, at a price for each share of common stock equal to 40% of the lowest trading price during the twenty (20) trading days immediately preceding the applicable conversion. In no event shall Black Forest effect a conversion if such conversion results in Black Forest beneficially owning in excess of 4.99% of the outstanding common stock of the Company. The Black Forest Note and accrued interest may be prepaid within the one hundred and eighty (180) day period following the issuance date at an amount equal to 135% of the outstanding principle and unpaid interest. After expiration of the 180 days, the Black Forest Note may not be prepaid. Upon the occurrence of an event of default the balance of principle and interest shall increase to 140%.


The intrinsic value of the beneficial conversion feature was computed as the difference between the fair value of the common stock issuable upon conversion of the Black Forest Note and the total price to convert based on the effective conversion price on the date of issuance. The calculated intrinsic value was $127,199. As this amount resulted in a total debt discount that exceeds the Black Forest Note proceeds, the amount recorded for the beneficial conversion feature was limited to the principal amount of the Black Forest Note. The resulting $53,000 discount is being accreted over the twelve (12) month term of the Black Forest Note.


During the three (3) and Six Months Ended October 31, 2015, the Company recognized interest expense of $335 and $3,331 of debt discount accretion related to the Black Forest Note.


NOTE 6 – Stock Transactions


On March 24, 2015 the Company received $50,000 from the sale of 100,000 shares of restricted common stock at $0.50 per share.


On April 14, 2015 the Company received $5,000 from the sale of 50,000 shares of restricted stock at $0.10 per share.  



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On May 5. 2015 the Company received $35,000 from the sale of 350,000 shares of restricted stock at $0.10 per share.


On May 14, 2015 the Company received $10,000 from the sale of 100,000 shares of restricted stock at $0.10 per share.


On September 1, 2015 the Company received $4,000 of services for 2,165 shares of restricted stock at $1.85 per share.


On September 11, 2015 the Company received $2,500 of services for 1,320 shares of restricted stock at $1.90 per share.


On October 1, 2015 the Company received $3,000 of services for 2,805 shares of restricted stock at $1.07 per share.


On October 9, 2015 the Company received $2,500 of services for 1,955 shares of restricted stock at $1.28 per share.


On October 12, 2015 the Company received $2,500 of services for 1,850 shares of restricted stock at $1.35 per share.


NOTE 7 - Related Party Transactions


The Company’s CEO’s and president has an informal agreement to receive $4,000 per month that will increase to $5,000 per month beginning November 1, 2015 for his services.   


NOTE 8 – Income Taxes


In September 2013, the Company’s sole shareholder and former President sold all of his common stock, which represented 94.5% of the Company’s issued and outstanding stock, to the Company’s new president. Pursuant to Internal Revenue Service (IRS) Code Section 382, an ownership change of greater than 50% triggers certain limits to the corporation’s right to use its net operating loss (NOL) carryovers each year thereafter to an annual percentage of the fair market value of the corporation at the time of the ownership change.


The Company determined that the ownership change referred to above will limit the Company to utilize $15,616 of the $41,828 of NOL’s it incurred prior to the ownership change.  


No deferred tax asset has been reported in the financial statements because the Company believes there is a 50% or greater chance that it’s NOL’s will expire unused. Accordingly, the potential tax benefits of the NOL carryforwards are offset by a valuation allowance of the same amount.


As of October 31, 2015, the Company’s NOL carryforward totaled $319,263; $15,616 of which will expire April 30, 2032, $38,259 on April 30, 2033, $62,999 on April 30, 2034 and $202,389 on April 30, 2035.


The Company’s tax returns are subject to examination by the federal and state tax authorities for years ended April 30, 2012 through 2015.  



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NOTE 9 – Subsequent Events


On November 12, 2015 (the “Closing Date”), we entered into an agreement (“RDW Purchase Agreement”) with RDW Capital, LLC (“RDW”), a Florida limited liability company. RDW committed to lend us up to $1,207,500 (the “RDW Financing”). On the Closing Date, we issued to RDW, an eight percent (8%) convertible note (the “Initial Note”) in the principal amount of $157,500, in exchange for payment by RDW of the total sum of $150,000. We paid $20,000 out of the loan proceeds to RDW’s Financial Advisor and Attorney. We received net proceeds of $130,000 under the Initial Note. Under the terms of RDW Purchase Agreement, RDW must invest in a second note in the amount of $1,000,000 (the “Second Note”) within five (5) business days after this Form S-1 registration statement is declared effective. On November 24, 2015, we entered into an amendment to RDW Securities Purchase Agreement which increased the amount of the Subscription Notes to $2,250,000 corresponding to an aggregate of $2,362,500 in Principal Amount of Notes. The purchase will occur in four (4) trances (each a “Trance”) with the first Trance of $150,000 having already been paid. The second Trance will be $100,000 and will occur within (5) five business days of the filing of this Registration Statement. The third Trance of will be for $1,000,000 and will occur within five (5) Business Days after the effective date of the Registration Statement. The fourth Trance will be for $1,000,000 and will occur within seven (7) business days after the effective date of the Registration Statement.


Pursuant to the terms of the RDW Financing, and provided we are not in default under the terms of any of RDW Financing documents, RDW will provide funding of an additional $1,000,000 in exchange for delivery of an additional eight percent (8%) Convertible Promissory Note (the “Second Note”) within five (5) business days after this registration statement is declared effective. The First RDW Note and Second RDW Note are collectively referred as ‘RDW Notes”.


On December 8, 2015, we filed a Preliminary Schedule 14c with the SEC which disclosed that by a Consent Action by our majority shareholder that we intend to file an amendment to our Articles of Incorporation which will increase our authorized common stock from 50,000,000 shares to 250,000,000 shares and authorizes the creation of 1,000,000 shares of Series A preferred stock with each share being entitled to 200 votes per share.

On February 2, 2105, Paul Feldman purchased 10,000,000 shares of our common stock for $.0001 per share or an aggregate of $1,000 from our former president. On December 17, 2015, we approved the issuance of 1,000,000 shares of our non-convertible Series A Preferred Stock to Mr. Feldman which entitle him to 200,000 votes per share or an aggregate of 200,000,000 on all matters submitted to our common stockholders. We valued the 1,000 Series A shares at $.0001 per share or an aggregate of $1,000.  As a result of Mr. Feldman’s ownership of 10,000,000 common shares and 1,000,000 Series A Preferred Stock he will hold an aggregate of 210,000,000 of 218,295,000 total votes representing approximately 98% of the votes on all matters submitted to a vote of our stockholders. Both before and after the issuance of the 1,000,000 Series A Preferred Stock to Mr. Feldman he had the ability to control all matters submitted to a vote of our common stockholders.



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2,415,000 Shares of Common Stock

 

FORCE PROTECTION VIDEO EQUIPMENT CORP.

 

PROSPECTUS

 

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE HAVE REFERRED YOU TO.  WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.  THIS PROSPECTUS IS NOT AN OFFER TO SELL COMMON STOCK AND IS NOT SOLICITING AN OFFER TO BUY COMMON STOCK IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

 

Until _____________, all dealers that effect transactions in these securities whether or not participating in this offering may be required to deliver a prospectus.  This is in addition to the dealer’s obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

The Date of This Prospectus is ________ 2016

  

PART II

 

INFORMATION NOT REQUIRED IN THE PROSPECTUS

 

Item 13. OTHER EXPENSES AND ISSUANCE AND DISTRIBUTION

 

The following table is an itemization of all expenses incurred or expected to be incurred by us in connection with the issuance and distribution of the common shares being offered by this Prospectus. Items marked with an asterisk (*) represent offering expenses that we previously paid. We have agreed to pay all the costs and expenses of this offering. Selling security holders will pay no offering expenses.


SEC Registration Fee

$         153.21

Accounting fees and expenses

$      8,000.00

Legal fees and expense

$    25,000.00

Edgar Fees

$      2,500.00

Miscellaneous

$      1,500.00             

Total

$    37,153.21

 

All amounts are estimates other than the Commission’s registration fee.  We are paying all expenses of the offering listed above.  No portion of these expenses will be borne by the Selling Stockholder.  The Selling Stockholder, however, will pay any other expenses incurred in selling their common stock, including any brokerage commissions or costs of sale.

 



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Item 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

 

Florida law permits, under certain circumstances, the indemnification of any person with respect to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, to which such person was or is a party or is threatened to be made a party, by reason of his or her being an officer, director, employee or agent of the corporation or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against liability incurred in connection with such proceeding, including appeals thereof; provided, however, that the officer, director, employee or agent acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any such third-party action by judgment, order, settlement, or conviction or upon a plea of nolo contendere or its equivalent does not, of itself, create a presumption that the person (i) did not act in good faith and in a manner which he or she reasonably believed to be in, or not opposed to, the best interests of the corporation or (ii) with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. In the case of proceedings by or in the right of the corporation, Florida law permits indemnification of any person by reason of the fact that such person is or was a director, officer, employee or agent of the corporation or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against liability incurred in connection with such proceeding, including appeals thereof; provided, however, that the officer, director, employee or agent acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, except that no indemnification is made where such person is adjudged liable, unless a court of competent jurisdiction determines that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.

 

To the extent that such person is successful on the merits or otherwise in defending against any such proceeding, Florida law provides that he or she shall be indemnified against expenses actually and reasonably incurred by him or her in connection therewith.

 

Also, under Florida law, expenses incurred by an officer or director in defending a civil or criminal proceeding may be paid by the corporation in advance of the final disposition of such proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if he or she is ultimately found not to be entitled to indemnification by the corporation pursuant to this section. Expenses incurred by other employees and agents may be paid in advance upon such terms or conditions that the Board of Directors deems appropriate.

 

Our Bylaws provides that we shall indemnify our officers, directors, and employees, and agents unless specifically approved in writing by the Board of Directors, to the fullest extent authorized by Section 607.0850 of the Florida Business Corporation Act, or the FBCA, as it existed when the Bylaws were adopted or as it may hereafter be amended, but, in the case of any such amendment, only to the extent that such amendment permits us to provide broader indemnification rights than were permitted prior to such amendment. Such indemnification shall continue as to a person who has ceased to be a director, officer, employee, or agent; provided, however, that we shall indemnify any such person seeking indemnity in connection with an action, suit, or proceeding (or part thereof) initiated by such person only if such action, suit, or proceeding (or part thereof) was authorized by the our Board of Directors.

 

The Bylaws also provide that such rights of indemnification shall be a contract right and shall include the right to be paid by us for all reasonable expenses incurred in defending any such proceeding in advance of final disposition; provided, however, that the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer in advance of the final disposition of such proceeding shall be made only upon delivery to us of an undertaking, by or on behalf of such director or officer, to repay amounts so advanced if it should be determined ultimately that such director or officer is not entitled to be indemnified under the Bylaws or otherwise.

 



76




In addition to the authority granted to us by Florida law to indemnify our directors, certain other provisions of the Florida Act have the effect of further limiting the personal liability of our directors. Pursuant to Florida law, a director of a Florida corporation cannot be held personally liable for monetary damages to the corporation or any other person for any act or failure to act regarding corporate management or policy except in the case of certain qualifying breaches of the director’s duties.


Insofar as indemnification for liabilities arising under the Securities Act, as amended, may be permitted to our directors and officers, or to persons controlling us, pursuant to our charter documents and Florida law, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, as amended and is therefore unenforceable.

 

Item 15. RECENT SALES OF UNREGISTERED SECURITIES

 

In the prior two years, we offered and sold securities below. None of the issuances involved underwriters, underwriting discounts or commissions. We relied upon Sections 4(2) of the Securities Act, as amended for the offer and sale of the securities. We believed these exemptions were available because sales were made to persons with a pre-existing relationship to our management.


Common Shares


On September 27, 2013, we sold 7,500,000 shares of our common stock to Douglas Ward, our former Chief Executive Officer and President at the price of $0.001 per share for an aggregate of $7,500.


On November 24, 2013, we sold 900,000 shares of our common stock to Arc Capital Corp, a company controlled by Justin West at the price of $.01 per share or an aggregate of $9,000.


On November 24, 2013, we sold 800,000 shares of our common stock to Scott Clayton at the price of $.01 per share or an aggregate of $8,000.


On November 24, 2013, we sold 900,000 shares of our common stock to Clipper Explorations LTD a company controlled by Dale Trujeque at the price of $.01 per share or an aggregate of $9,000.


On November 24, 2013, we sold 900,000 shares of our common stock to Current Capital Corp a company controlled by John D. Robinson at the price of $.01 per share or an aggregate of $9,000.


On November 24, 2013, we sold 900,000 shares of our common stock to Euro Atlantic Holdings, Inc. a company controlled by Lelua Sericum at the price of $.01 per share or an aggregate of $9,000.


On November 24, 2013, we sold 900,000 shares of our common stock to Genuity Merchantil Corp, a company controlled by Miguel Sanchia at the price of $.01 per share or an aggregate of $9,000.


On November 24, 2013, we sold 900,000 shares of our common stock to Fairfax Capital BV a company controlled by Jeffrey Smarts at the price of $.10 per share or an aggregate of $9,000.


On November 24, 2013, we sold 900,000 shares of our common stock to Vantage Management Services Inc. a company controlled by Monica Stuart.


On November 24, 2013, we sold 900,000 shares of our common stock to Vertex Financial LTD a company controlled by Lucae Brughton at the price of $.01 per share or an aggregate of $9,000.


On March 30, 2015, we sold 100,000 shares of our common stock to Sai Ying Pun Trading, Ltd, a company controlled by J.P. Regli , at the per share price of $.50 or an aggregate of $50,000.



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On April 8, 2015, we sold 50,000 shares of our common stock to David Feldman at the per share price of $.10 or an aggregate of $5,000.  


On May 1, 2015, we sold 50,000 shares of our common stock to David Feldman at the price of $.10 per share or an aggregate of $5,000.  


On May 3, 2015 we sold 100,000 shares of our common stock to Rose Faye Parrish at the price of $.10 per share or an aggregate of $10,000.


On May 1, 2015, we sold 200,000 shares of our common stock to James Sally at the price of $.10 per share or an aggregate of $20,000.  


On May 13, 2015 we sold 100,000 shares of our common stock to Rose Faye Parrish at the price of $0.10 per share or an aggregate of $10,000.


Shares Issued for Services


On September 1, 2015, we issued 2,165 shares of restricted stock for services rendered to us. We valued these shares at $1.85 per share or an aggregate of $4,000.


On September 11, 2015, we issued 1,320 shares of restricted stock for services rendered to us. We valued these shares at $1.90 per share or an aggregate of $2,000.


On October 1, 2015, we issued 2,805 shares of restricted stock for services rendered to us. We valued these shares at $1.07 per share or an aggregate of $2,000.


On October 9, 2015, we issued 1,955 shares of restricted stock for services rendered to us. We valued these shares at $1.28 per share or an aggregate of $2,000.


On October 12, 2015, we issued 1,850 shares of restricted stock for services rendered to us. We valued these shares at $1.38 per share or an aggregate of $2,000.


On December 17, 2015, we approved the issuance of 1,000,000 shares of our non-convertible Series A Preferred Stock to Mr. Feldman which entitle him to 200,000 votes per share or an aggregate of 200,000,000 on all matters submitted to our common stockholders. We valued the 1,000 Series A shares at $.0001 per share or an aggregate of $1,000.  


Convertible Notes


In the prior two years, we offered and sold securities below. We relied upon Sections 4(2) of the Securities Act, as amended because the offer and sale did not involve a public offering.  Sales were made to persons with a pre-existing relationship with our placement agent and/or finders. Other than the issuance of the RDW Notes to the Selling Stockholder and fees payable to our placement agent, Carter, Terry & Company , none of the issuances involved underwriters, underwriting discounts or commissions.


On November 12, 2015, we issued a convertible note to RDW Capital, LLC, a Florida limited liability company controlled by Gary Rogers and John DeNobile whereby we borrowed the sum $157,500. On December 31, 2015, we issued a second convertible note to RDW whereby we borrowed the sum $105,000.  As of February 18, 2016, the First and Second RDW Notes have aggregate principal and interest due of $266,188.



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On October 8, 2015, we issued a convertible note to Black Forest Capital, LLC, a Wyoming Limited Liability Company controlled by Keith Vogt, whereby we borrowed the sum of $53,000. As of February 18, 2016, the note has principal and interest due of $54,967.


On October 6, 2015, we issued a convertible note to JSJ Investments, Inc., a Texas corporation controlled by Sameer Hirji, whereby we borrowed the sum of $57,000. As of February 18, 2016, the JSJ Note has principal and interest due of $58,541.


On September 30, 2015 we issued a convertible note to Auctus Fund, LLC, a Delaware Limited Liability Company controlled by Lou Posner, whereby we borrowed the sum of $66,000. As of February 18, 2016, the note has principal and interest due of $68,071.


On September 11, 2015, we issued a convertible note to LG Capital Funding, LLC, (“LG Capital”) a New York Limited Liability Company controlled by Joseph Lerman, whereby we borrowed the sum of $27,000. As of February 18, 2016, the note has principal and interest due of $27,947.


On September 11, 2015, we issued a convertible note to Adar Bays, LLC, a Florida Limited Liability Company controlled by Sarah Eisenberg, whereby we borrowed the sum of $27,000 with interest at a rate of eight percent (8%) per annum. As of February 18, 2016, the note has principal and interest due of $27,947.


On August 25, 2015, we issued a convertible note to EMA Financial, LLC, a Delaware Limited Liability Company controlled by Paul Carrozzo, whereby we borrowed the sum of $105,000. As of February 18, 2016, the note has principal and interest due of $109,153.


Item 16. EXHIBITS


Exhibit No.

Description

3.1

Articles of Incorporation dated March 11, 2011

3.2

Amendment to Articles of Incorporation dated March 28, 20113.4

3.3

Amendment to Articles of Incorporation dated September 25, 2013

3.4

Amendment to Articles of Incorporation dated January 30, 2015

3.5

Amendment to Articles of Incorporation dated December 1, 2015

3.6

Bylaws

5.1

Opinion Regarding Legality

10.1

Securities Purchase Agreement with RDW Capital, LLC

10.2

First Amended Securities Purchase Agreement with RDW Capital LLC

10.3

Convertible Promissory Note Held by RDW Capital, LLC

10.4

Registration Rights Agreement with RDW Capital, LLC

10.5

Convertible Promissory Note with Black Forest Capital, LLC

10.6

Securities Purchase Agreement with Auctus Funds, LLC

10.7

Convertible Promissory Note Agreement with Auctus Funds, LLC

10.8

Convertible Promissory Note LG Capital Funding, LLC

10.9

Convertible Promissory Note Adar Bays, LLC

10.10

Convertible Promissory Note with JSJ Investments, Inc.

10.11

Convertible Promissory Note with EMA Financial, LLC

10.12

Securities Purchase Agreement with EMA Financial, LLC

10.13

Employment Agreement Paul Feldman

10.14

Shenzen AE Technology Purchase Order
10.15

Agreement with Carter, Terry & Company

10.16

Second Amended Securities Purchase Agreement with RDW Capital, LLC

10.17

Third Amended Securities Purchase Agreement with RDW Capital, LLC

23.1

Consent of Baum & Company P.A.

23.2

Consent of Hamilton & Associates Law Group, P.A. (Included in Exhibit 5.1)



79




Item 17. UNDERTAKINGS


The undersigned registrant hereby undertakes:


(b)

Rule 415 Offering:

   

(i) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

 

(ii) To include any prospectus required by section 10(a)(3) of the Securities Act;

 

(iii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

 

(iv) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;


Provided, however, that:

 

(A) Paragraphs (a)(1)(i) and (a)(1)(ii) of this section do not apply if the registration statement is on Form S-8 (§ 239.16b of this chapter), and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Securities and Exchange Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) that are incorporated by reference in the registration statement; and

 

(B) Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the registration statement is on Form S-3 (§ 239.13 of this chapter) or Form F-3 (§ 239.33 of this chapter) and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Securities and Exchange Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) (§ 230.424(b) of this chapter) that is part of the registration statement.

.

(C) Provided further, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is for an offering of asset-backed securities on Form S-1 (§ 239.11 of this chapter) or Form S-3 (§ 239.13 of this chapter), and the information required to be included in a post-effective amendment is provided pursuant to Item 1100(c) of Regulation AB (§ 229.1100(c)).


(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 



80




(4) If the registrant is a foreign private issuer, to file a post-effective amendment to the registration statement to include any financial statements required by “Item 8.A. of Form 20-F (17 CFR 249.220f)” at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act need not be furnished, provided that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. Notwithstanding the foregoing, with respect to registration statements on Form F-3 (§239.33 of this chapter), a post-effective amendment need not be filed to include financial statements and information required by Section 10(a)(3) of the Act or §210.3-19 of this chapter if such financial statements and information are contained in periodic reports filed with or furnished to the Securities and Exchange Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Form F-3. 


(5) That, for the purpose of determining liability under the Securities Act to any purchaser:

 

(i) If the registrant is relying on Rule 430B:

 

(A) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) (§230.424(b)(3) of this chapter) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and

 (B) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) (§230.424(b)(2), (b)(5), or (b)(7) of this chapter) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) (§230.415(a)(1)(i), (vii), or (x) of this chapter) for the purpose of providing the information required by section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial  bona fide  offering thereof.  Provided, however , that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or

 

(ii) If the registrant is subject to Rule 430C (§230.430C of this chapter), each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness.  Provided, however , that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

 

(iii) If the registrant is relying on §230.430D of this chapter:

 

(A) Each prospectus filed by the registrant pursuant to §230.424(b)(3) and (h) of this chapter shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and



81




(B) Each prospectus required to be filed pursuant to §230.424(b)(2), (b)(5), or (b)(7) of this chapter as part of a registration statement in reliance on §230.430D of this chapter relating to an offering made pursuant to §230.415(a)(1)(vii) or (a)(1)(xii) of this chapter for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 (15 U.S.C. 77j(a)) shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in §230.430D of this chapter, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or

  

(6) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:

 

The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

 

(i)

Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§230.424 of this chapter);

(ii)

Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii)

The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv)

Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

 

(7) If the registrant is relying on §230.430D of this chapter, with respect to any offering of securities registered on Form SF-3 (§239.45 of this chapter), to file the information previously omitted from the prospectus filed as part of an effective registration statement in accordance with §§230.424(h) and 230.430D of this chapter.




82



SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Cary North Carolina on February 22, 2016.


Force Protection Video Equipment Corp.


Date: February 22, 2016

By:   /s/ Paul Feldman

        Paul Feldman

        Chief Executive Officer, President and Director

        (Principal Executive Officer)


Date: February 22, 2016

By:  /s/ Paul Feldman

        Paul Feldman

        Acting Chief Financial Officer

        (Principal Accounting Officer)


In accordance with the requirements of the Securities Act of 1933, this Registration Statement on Form S-1 was signed by the following persons in the capacities and on the dates stated.


Date

Name

Title

February 22, 2016

/s/ Paul Feldman

Chief Executive Officer, President and Director

Paul Feldman


February 22, 2016

/s/ Paul Feldman

Acting Chief Financial Officer

Paul Feldman

(Principal Accounting Officer)




83



Exhibit 10.8


THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT”)

                                                                            


  US $27,000.00



FORCE PROTECTION VIDEO EQUIPMENT CORP.  

8% CONVERTIBLE REDEEMABLE NOTE

DUE SEPTEMBER 11, 2016



FOR VALUE RECEIVED, Force Protection Video Equipment Corp.   (the “Company”) promises to pay to the order of LG CAPITAL FUNDING, LLC and its authorized successors and permitted assigns (" Holder "), the aggregate principal face amount of Twenty Seven Thousand Dollars exactly (U.S. $27,000.00) on September 11, 2016 (" Maturity Date ") and to pay interest on the principal amount outstanding hereunder at the rate of 8% per annum commencing on September 4, 2015. The interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note.  The principal of, and interest on, this Note are payable at 1218 Union Street, Suite #2, Brooklyn, NY 11225  initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time.  The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company.  The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer.  Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.


This Note is subject to the following additional provisions:


1.

This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same.  No service charge will be made for such registration or transfer or exchange, except that Holder shall pay any tax or other governmental charges payable in connection therewith.


2.

The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.


3.

This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (" Act ") and applicable state securities laws.  Any attempted transfer to a non-qualifying party shall be treated by the Company as void.  Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company's records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary.  Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted (" Notice of Conversion ") in the form annexed hereto as Exhibit A . The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.


4.

(a)

The Holder of this Note is entitled, at any time after 6 months, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the " Common Stock ") at a price (" Conversion Price ") for each share of Common Stock equal to 60% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTCPink exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future (" Exchange "), for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer agent (provided such Notice of Conversion is delivered by fax or other electronic method of communication to the Company or its transfer agent after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued but unpaid interest shall be subject to conversion.  No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share . To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law.  The Company agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 48% instead of 58% while that “Chill” is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 9.9% of the outstanding shares of the Common Stock of the Company.



(b)

Interest on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum.  Interest shall be paid by the Company in cash only.  


(c)

During the first 180 Days this Note is in effect, the Company may redeem this Note by paying to the Holder an amount at 150% of the face amount plus any accrued interest. This Note may not be prepaid after the 180 th day. The redemption must be closed and paid for within 3 business days of the Company sending the redemption demand or the redemption will be invalid and the Company may not redeem this Note.


(d)

Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a "Sale Event"), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 140% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.


(e)  

In case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.


5.

No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.


6.

The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.


7.

The Company agrees to pay all costs and expenses, including reasonable attorneys' fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note.


8.

If one or more of the following described "Events of Default" shall occur:


(a)

The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company; or


(b)

Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or


(c)

The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of the Company under this Note or any other note issued to the Holder; or


(d)

The Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for  bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or


(e)

A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment; or


(f)

Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or


(g)

Unless previously disclosed in the Company’s filings with the Securities and Exchange Commission, one or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any proposed sale thereunder.


(h)

The Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered and failed to cure such default within the appropriate grace period; or


(i)

The Company shall have its Common Stock delisted from an exchange (including the OTCPink) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;


(j)

If a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;


(k)

The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business days of its receipt of a Notice of Conversion; or


(l)

The Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder; or


(m)

The Company shall not be “current” in its filings with the Securities and Exchange Commission; or


(n)    

The Company shall lose the “bid” price for its stock in a market (including the OTCPink marketplace or other exchange).


Then, or at any time thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder's sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law.  Upon an Event of Default, interest shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law.  In the event of a breach of Section 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4 th day after the conversion notice was delivered to the Company.  This penalty shall increase to $500 per day beginning on the 10 th day.  The penalty for a breach of Section 8(n) shall be an increase of the outstanding principal amounts by 20%.  In case of a breach of Section 8(i), the outstanding principal due under this Note shall increase by 50%. Further, if a breach of Section 8(m) occurs or is continuing after the 6 month anniversary of the Note, then the Holder shall be entitled to use the lowest closing bid price during the delinquency period as a base price for the conversion. For example, if the lowest closing bid price during the delinquency period is $0.01 per share and the conversion discount is 50% the Holder may elect to convert future conversions at $0.005 per share. If this Note is not paid at maturity, the outstanding principal due under this Note shall increase by 10%.


If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

Make-Whole for Failure to Deliver Loss.  At the Holder’s election, if the Company fails for any reason to deliver to the Holder the conversion shares by the by the 3rd business day following the delivery of a Notice of Conversion to the Company and if the Holder incurs a Failure to Deliver Loss, then at any time the Holder may provide the Company written notice indicating the amounts payable to the Holder in respect of the Failure to Deliver Loss and the Company must make the Holder whole as follows:

Failure to Deliver Loss = [(High trade price at any time on or after the day of exercise) x (Number of conversion shares)]


The Company must pay the Failure to Deliver Loss by cash payment, and any such cash payment must be made by the third business day from the time of the Holder’s written notice to the Company.

 

9.

In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.


10.

Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and the Holder.


11.

The Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information indicating it is no longer a “shell issuer.  Further. The Company will instruct its counsel to either (i) write a 144 opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.

12.

The Company shall issue irrevocable transfer agent instructions reserving 98,522 shares of its Common Stock for conversions under this Note (the “Share Reserve”). Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company shall pay all costs associated with issuing and delivering the shares. If such amounts are to be paid by the Holder, it may deduct such amounts from the Conversion Price. Conversion Notices may be sent to the Company or its transfer agent via electric mail. The company should at all times reserve a minimum of four times the amount of shares required if the note would be fully converted.  The Holder may reasonably request increases from time to time to reserve such amounts.


13.

The Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations etc.  This notice shall be given to the Holder as soon as possible under law.  


14.

This Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed within the State of New York and shall be binding upon the successors and assigns of each party hereto.  The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York.  This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original.











































IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.



Dated:

September 11, 2016


    

   

FORCE PROTECTION VIDEO EQUIPMENT CORP.  


By: /s/ Paul Feldman


Title: President



____

Initials



EXHIBIT A



NOTICE OF CONVERSION


 (To be Executed by the Registered Holder in order to Convert the Note)


The undersigned hereby irrevocably elects to convert $___________ of the above Note into _________ Shares of Common Stock of Force Protection Video Equipment Corp. (“Shares”) according to the conditions set forth in such Note, as of the date written below.


If Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.


Date of Conversion:

Applicable Conversion Price:

Signature:

[Print Name of Holder and Title of Signer]

Address:

   


SSN or EIN:

                                                                                                                  

Shares are to be registered in the following name:


Name:

                                                                                                                   

Address:

Tel:

               

Fax:

                                         

SSN or EIN:

                             


Shares are to be sent or delivered to the following account:


Account Name:

                                                                                                        

Address:

 





2


____

  Initials


Exhibit 3.1

[EXHIBIT31001.JPG]



1




[EXHIBIT31002.JPG]



2



Exhibit 3.2

[EXHIBIT32001.JPG]



1




[EXHIBIT32002.JPG]



2




[EXHIBIT32003.JPG]



3




[EXHIBIT32004.JPG]



4



Exhibit 3.3

[EXHIBIT33001.JPG]



Exhibit 3.4

[EXHIBIT34001.JPG]



Exhibit 3.5

[EXHIBIT35001.JPG]



BYLAWS

OF

M Street Gallery, Inc.

ARTICLE I OFFICES

SECTION l. PRINCIPAL PLACE OF BUSINESS

The initial location of the principal place of business of the corporation shall be as specified in the articles of incorporation and may be changed from time to time by resolution of the board of directors. It may be located at any place within or outside the State of Florida. [BCA Sec. 607.0202(b)] The principal place of business of the corporation shall also be known as the principal office of the corporation

SECTION 2. OTHER OFFICES

The corporation may also have offices at such other places as the board of directors may from time to time designate, or as the business of the corporation may require

ARTICLE II SHAREHOLDERS

SECTION 1. PLACE OF MEETINGS

All meetings of the shareholders shall be held at the principal place of business of the corporation or at such other place, within or outside the state of Florida, as may be determined by the board of directors. [BCA Secs. 607.0701(2) & 607.0702(2)]

SECTION 2. ANNUAL MEETINGS

The annual meeting of the shareholders shall be held on the 31 st  of the month of December in each year at 9 o'clock A.M., at which time the shareholders shall elect a board of directors and transact any other proper business. If this date falls on a legal holiday, then the meeting shall be held on the following business day at the same hour. [BCA Sec. 607.0701(1)]

SECTION 3. SPECIAL MEETINGS

Special meetings of the shareholders may be cal1ed by the board of directors or by the shareholders. In order for a special meeting to be called by the shareholders, 10 percent or more of all the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting shall sign, date and deliver to the secretary


one or more written demands for the meeting describing the purpose or purposes for which it is to be held. [BCA Sec. 607.0702] The secretary shall issue the call for special meetings unless the president, the board or directors or the shareholders designate another person to make the call.

SECTION 4. NOTICE OF MEETINGS

Notice of all shareholders meetings, whether annual or special, shall be given to each shareholder of record entitled to vote at such meeting no fewer than 10 or more than 60 days before the meeting date. The notice shall include the date, time and place of the meeting and in the case of a special meeting the purpose or purposes for which the meeting is called. Only the business within the purpose or purposes included in the notice of special meeting may be conducted at a special shareholders meeting. Notice of shareholders' meetings may be given orally or in writing, by or at the direction of the president, the secretary or the officer or persons calling the meeting Notice of meetings may be communicated in person; by telephone, telegraph, teletype, facsimile machine, or other form of electronic communication; or by mail. If mailed, notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at the shareholder's address as it appears on the stock transfer books of the corporation, with postage prepaid. When a meeting is adjourned to a different date, time or place, it shall not be necessary to give any notice of the adjourned meeting if the new date, time or place is announced at the meeting at which the adjournment is taken, and any business may be transacted at the adjourned meeting that might have been transacted on the original date of the meeting. If, however, after the adjournment, the board fixes a new record date for the adjourned meeting, notice of the adjourned meeting in accordance with the preceding paragraphs of this bylaw shall be given to each person who is a shareholder as of the new record date and is entitled to vote at such meeting. [BCA Secs. 607.0141 & 607.0705]

 

 

SECTION 5. WAIVER OF NOTICE

A shareholder may waive any notice required by the Business Corporation Act, the articles of incorporation or these bylaws before or after the date and time stated in the notice. The waiver must be in writing, be signed by the shareholder entitled to the notice, and be delivered to the corporation for inclusion in the minutes or filing with the corporate records. Neither the business to be transacted at nor the purpose of any annual or special meeting of the shareholders need be specified in any written waiver of notice. [BCA Sec. 607.0706(1)]


SECTION 6. ACTION WITHOUT MEETING

Any action which is required by law to be taken at an annual or special meeting of shareholders, or any action which may be taken at any annual or special meeting of shareholders, may be taken without a meeting, without prior notice, and without a vote if one or more written consents, setting forth the action so taken, shall be dated and signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Written consents shall not be effective to take corporate action unless, within 60 days of the date of the earliest written consent relating to the action, the signed written consents of the number of holders required to take the action are delivered to the corporation. Within 10 days after obtaining any such authorization by written consent, notice must be given to those shareholders who have not consented in writing or who are not entitled to vote on the action. The notice shall fairly summarize the material features of the authorized action. [BCA Sec. 607.0704]

SECTION 7. QUORUM AND SHAREHOLDER ACTION

A majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. Unless otherwise provided under law, the articles of incorporation or these bylaws, if a quorum is present, action on a matter, other than the election of directors, shall be approved if the votes cast by the holders of the shares represented at the meeting and entitled to vote favoring the action exceed the votes cast opposing the action. Directors shall be elected by a plurality of the votes cast by the shares entitled to Vote in the election at a meeting at which a quorum is present. After a quorum has been established at a shareholders' meeting, the subsequent withdrawal of shareholders, so as to reduce the number of shares entitled to Vote at the meeting below the number required for a quorum, shall not affect the validity of any action taken at the meeting or any adjournment thereof. [BCA Secs.607.0727 & 607.0728]

SECTION 8. VOTING OF SHARES

Each outstanding share shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders, except as may be provided under law or the articles of incorporation. A shareholder may vote either in person or by proxy executed in writing by the shareholder or the shareholder's duly authorized attorney-in-fact. At each election of directors, each shareholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by the shareholder, for as many persons as there are directors to be elected at that time and


for whose election the shareholder has a right to vote. [BCA Secs. 607.0721 & 607.0728]

SECTION 9. PROXIES

A shareholder, or the shareholder's attorney in fact, may appoint a proxy to vote or otherwise act for the shareholder. An executed telegram or cablegram appearing to have been transmitted by such person, or a photographic, photostatic, or equivalent reproduction of an appointment form, shall be a sufficient appointment form. An appointment of a proxy is effective when received by the secretary or other officer or agent authorized to tabulate votes. An appointment is valid for up to 11 months unless a longer period is specified in the appointment form. An appointment of a proxy is revocable by the shareholder unless the appointment form conspicuously states that it is revocable and the appointment is coupled with an interest as provided in Section 607.0722(5) of the Business Corporation Act. [BCA Sec. 607.0722]

SECTION 10. RECORD DATE FOR DETERMINING SHAREHOLDERS

The board of directors may fix in advance a date as the record date for the purpose of determining shareholders entitled to notice of a shareholders' meeting, to demand a special meeting, to vote, or to take any other action. In no event may a record date fixed by the board of directors be a date preceding the date upon which the resolution fixing the record date is adopted. A record date may not be specified to be more than 70 days before the meeting or action. Unless otherwise specified by resolution of the board of directors, the following record dates shall be operative:

1.

The record date for determining shareholders entitled to demand a special meeting is the date the first shareholder delivers the shareholder's demand to the corporation.

2.

If no prior action is required by the board of directors pursuant to the Business Corporation Act, the record date for determining shareholders entitled to take action without a meeting is the date the first signed written consent relating to the proposed action is delivered to the corporation.

3.

If prior action is required by the board of directors pursuant to the Business Corporation Act, the record date for determining shareholders entitled to take action without a meeting is at the close of business on the day on which the board of directors adopts the resolution taking such prior action.

4.

The record date for determining shareholders entitled to notice of and to vote at a meeting of shareholders is at the close of business on the day before the first notice is delivered to the shareholders. [BCA Sec. 6O7.0707]

SECTION 11. SHAREHOLDERS' LIST


After a record date is fixed or determined in accordance with these bylaws, the secretary shall prepare an alphabetical list of the names of all its shareholders who are entitled to notice of a shareholders' meeting. The list shall show the addresses of, and the number and class and series, if any, of shares held by, each person. The shareholders' list shall be available for inspection by any shareholder for a period of 10 days prior to the meeting, or such shorter time as exists between the record date and the meeting, and continuing through the meeting, at the corporation's principal place of business. [BCA Sec. 607.0720]

ARTTCLE III DIRECTORS

SECTION 1. POWERS

Except as may be otherwise provided by law or the articles of incorporation, all corporate powers shall be exercise6 by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, the board of directors [BCA Sec. 607.0801(2)] A director who is present at a meeting of the board of directors or a committee of the board of directors when corporate action is taken shall be deemed to have assented to the action taken unless:

1.

The director votes against or abstains from the action taken; or

2.

The director objects at the beginning of the meeting, or promptly upon the director's arrival, to holding the meeting or transacting specified business at the meeting. [BCA Sec. 607.0824(4)] The board of directors shall have the authority to fix the compensation of directors. [BCA Sec. 607.08101]

SECTION 2. QUALIFICATION AND NUMBER

Directors shall be individuals who are 18 years of age or older but need not be residents of Florida or shareholders of this corporation. [BCA Sec. 607.0802] The authorized number of directors shall be one (1). This number may be increased or decreased from time to time by amendment to these bylaws, but no decrease shall have the effect of shortening the term of any incumbent director. [BCA Secs. 607.0803 & 607.0805(3)]

SECTION 3. ELECTION AND TENURE OF OFFICE

The directors shall be elected at each annual meeting of the shareholders and each director shall hold office until the next annual meeting of shareholders and until the director's successor has been elected and qualified, or until the director's earlier resignation or removal from office. [BCA Secs. 607.0803(3) & BCA Sec. 607.0805]


SECTION 4. VACANCIES

Unless otherwise provided in the articles of incorporation, any vacancy occurring in the board of directors, including any vacancy created by reason of an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors, though less than a quorum of the board of directors, or by the shareholders. [BCA Sec. 607.0809(1)] A director elected to fill a vacancy shall hold office only until the next shareholders' meeting at which directors are elected. [BCA Secs. 607.0805(4)]

SECTION 5. REMOVAL

Unless the articles of incorporation provide that a director may only be removed for cause, at a meeting of shareholders called expressly for that purpose, one or more directors may be removed, with or without cause, if the number of votes cast to remove the director exceeds the number of votes cast not to remove the director. [BCA Sec. 607.0808]

SECTION 6. PLACE OF MEETINGS

Meetings 0f the board of directors shall be held at any place, within or without the State of Florida, which has been designated in the notice of the meeting or, if not stated in the notice or if there is no notice, at the principal place of business of the corporation or as may be designated from time to time by resolution of the board of directors. The board of directors may permit any or all directors to participate in meetings by, or conduct the meeting through the use of, any means of communication by which all directors participating can simultaneously hear each other during the meeting. [BCA Sec.607.0820]

SECTION 7. ANNUAL AND REGULAR MEETINGS

An annual meeting of the board of directors shall be held without call or notice immediately after and at the same place as the annual meeting of the shareholders. Other regular meetings of the board of directors shall be held at such times and places as may be fixed from time to time by the board of directors. Call and notice of these regular meetings shall not be required. [BCA Secs. 607.0820(1) & 607.0822(1)]

SECTION 8. SPECIAL MEETINGS AND NOTICE REQUIREMENTS

Special meetings of the board of directors may be called by the chairman of the board or by the president and shall be preceded by at least 14 days' notice of the


date, time, and place of the meeting. Unless otherwise required by law, the articles of incorporation or these bylaws, the notice need not specify the purpose of the special meeting. (SCA Sec. 607.0822(2)] Notice of directors' meetings may be given orally or in writing, by or at the direction of the president, the secretary or the officer or persons calling the meeting. Notice of meetings may be communicated in person; by telephone, telegraph, teletype, facsimile machine, or other form of electronic communication; or by mail. If mailed, notice shall be deemed to be delivered when deposited in the United States mail, addressed to the director at the director's current address on file with the corporation, with postage prepaid. [BCA Sec. 607.0141] If any meeting of directors is adjourned to another time or place, notice of any such adjourned meeting shall be given to the directors who were not present at the time of the adjournment and, unless the time and place of the adjourned meeting are announced at the time of the adjournment, to the other directors. [BCA Secs. 607.0820(2)]

SECTION 9. QUORUM

A majority of the authorized number of directors shall constitute a quorum for all meetings of the board of directors. [BCA Sec. 607.0824]

SECTION 10. VOTING

If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present at the meeting shall be the act of the board of directors. A director of the corporation who is present at a meeting of the board of directors when corporate action is taken shall be deemed to have assented to the action taken unless: 1. The director objects at the beginning of the meeting, or promptly upon arriving, to holding the meeting or transacting specified business at the meeting; or 2. The director votes against or abstains from the action taken. [BCA Sec. 607.0824]

SECTION 11. WAIVER OF NOTICE

Notice of a meeting of the board of directors need not be given to any director who signs a waiver of notice either before or after the meeting. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and a waiver of any and all objections to the place of the meeting, or the manner in which it has been called or convened, except when a director states, at the beginning at the meeting or promptly upon arrival at the meeting, any objection to the transaction of business because the meeting is not lawfully called or convened. [BCA Sec. 607.0823]


SECTION 12. ACTION WITHOUT MEETING

Any action required or permitted to be taken at a board of directors' meeting or committee meeting may be taken without a meeting if the action is taken by all members of the board of directors or of the committee. The action must be evidenced by one or more written consents describing the action taken and signed by each director or committee member. [BCA Sec. 607.0821]

ARTICLE IV OFFICERS

SECTION 1. OFFICERS

The officers of the corporation shall consist of a president, a secretary, a treasurer, and such other officers as the board of directors may appoint. A duly appointed officer 'nay appoint one or more officers or assistant officers if authorized by the board of directors . The same individual may simultaneously hold more than office in the corporation. Each officer shall have the authority and shall perform the duties set forth in these bylaws and, to the extent consistent with these bylaws, shall have such other duties and powers as may be determined by the board of directors or by direction of any officer authorized by the board of directors to prescribe the duties of other officers. (BCA Secs. 607.08401 & 607.0841]

SECTION 2. ELECTION

All officers of the corporation shall be elected or appointed by, and serve at the pleasure of, the board of directors. The election or appointment of an officer shall not itself create contract rights. [BCA Secs. 607.08401 & 607.0843]

SECTION 3. REMOVAL, RESIGNATION AND VACANCTES

An officer may resign at any time by delivering notice to the corporation. A resignation is effective when the notice is delivered unless the notice specifies a later effective date. If a resignation is made effective at a later date and the corporation accepts the future effective date, the board of directors may fill the pending vacancy before the effective date if the board provides that the successor does not take office until the effective date. The board of directors may remove any officer at any time with or without cause. Any officer or assistant officer, if appointed by another officer, may likewise be removed by such officer. An officer's removal shall not affect the officer's contract rights, if any, with the corporation. An officer's resignation shall not affect the corporation's contract rights, if any, with the officer. (BCA Secs. 607.0842 &


607.0843] Any vacancy occurring in any office may be filled by the board of directors.

SECTION 4. PRESIDENT

The president shall be the chief executive officer and general manager of the corporation and shall, subject to the direction and control of the board of directors, have general supervision, direction, and control of the business and affairs of the corporation. He shall preside at all meetings of the shareholders if present thereat and be an ex-officio member of all the standing committees, including the executive committee, if any, and shall have the general powers and duties of management usually vested in the office of president of a corporation. In the absence or disability of the president, the vice president, if any, shall perform all the duties of the president and, when so acting, shall have all the powers of, and be subject to all the restrictions imposed upon, the president.

SECTION 5. SECRETARY

a.

The secretary shall be responsible for preparing, or causing to be prepared, minutes of all meetings of directors and shareholders and for authenticating records of the corporation.[BCA Sec. 607.084Ol(3)]

b.

The secretary shall keep, or cause to be kept, at the principal place of business of the corporation, minutes of all meetings of the shareholders or the board of directors; a record of all actions taken by the shareholders or the board of directors without a meeting for the past three years; and a record of all actions taken by a committee of the board of directors in place of the board of directors on behalf of the corporation (BCA Sec. 607.l6Ol(l)]

c.

Minutes of meetings shall state the date, time and place of the meeting; whether regular or special; how called or authorized; the notice thereof given or the waivers of notice received; the names of those present at directors' meetings; the number of shares present or represented at shareholders' meetings; and an account of the proceedings thereof.

d.

The secretary shall maintain, at the principal place of business of the corporation, a record of its shareholders, showing the names of the shareholders and their addresses, the number, class, and series, if any, held by each, the number and date of certificates issued for shares, and the number and date of cancellation of every certificate surrendered for cancellation. [BCA Sec. 607.1601(1)]

e.

The secretary shall make sure that the following papers and reports are included in the secretary's records kept at the principal place of business of the corporation:


1.

The articles or restated articles of incorporation and all amendments to them currently in effect;

2.

The bylaws or restated bylaws and all amendments to them currently in effect;

3.

Resolutions adopted by the board of directors creating one or more classes or series of shares and fixing their relative rights, preferences, and limitations, if shares issued pursuant to those resolutions are outstanding;

4.

Minutes of all shareholders' meetings and records of all action taken by shareholders without a meeting for the past 3 years;

5.

Written communications to all shareholders generally of all shareholders of a class or series within the past 3 years, including the financial statements furnished for the past 3 years under Article VI, Section 2 of these bylaws and any reports furnished during the last 3 years under Article VI, Section 3 of these bylaws;

6.

A list of the names and business street addresses of current directors and officers; and

7.

The corporation's most recent annual report delivered to the Department of State under Article VI, Section 4 of these bylaws. [BCA Sec. 607.1601(5)]

The secretary shall give, or cause to be given, notice of all meetings of shareholders and directors required to be given by law or by the provisions of these bylaws. The secretary shall have charge of the seal of the corporation.

In the absence or disability of the secretary, the assistant secretary, or, if there is none or more than one, the assistant secretary designated by the board of directors, shall have all the powers of, and be subject to all the restrictions imposed upon, the secretary.

SECTION 6. TREASURER

The treasurer shall have custody of the funds and securities of the corporation and shall keep and maintain, or cause to be kept and maintained, at the principal business office of the corporation, adequate and correct books and records of accounts of the income, expenses, assets, liabilities, properties and business transactions of the corporation. {BCA Sec. 607.1601(2)] The treasurer shall prepare, or cause to be prepared, and shall furnish to shareholders, the annual financial statements and other reports required pursuant to Article VI, Sections 2 and 3 of these bylaws. The treasurer shall


deposit monies and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the board of directors. The treasurer shall disburse the funds of the corporation in payment of the lust demands against the corporation as authorized by the board of directors and shall render to the president and directors, whenever requested, an account of all his or her transactions as treasurer and of the financial condition of the corporation. In the absence or disability of the treasurer, the assistant treasurer, if any, shall perform all the duties of the treasurer and, when so acting, shall have all the powers of and be subject to all the restrictions imposed upon the treasurer.

SECTION 7. COMPENSATION

The officers of this corporation shall receive such compensation for their services as may be fixed by resolution of the board of directors.

ARTICLE V EXECUTIVE AND OTHER COMMITTEES

SECTION 1. EXECUTIVE AND OTHER COMMITTEES OF THE BOARD

The board of directors may, by resolution adopted by a majority of the authorized number of directors, designate from its members an executive committee and one or more other committees each of which, to the extant provided in such resolution, the articles of incorporation or these bylaws, shall have and may exercise the authority of the board of directors, except that no such committee shall have the authority to:

1.

Approve or recommend to shareholders actions or proposals required by law to be approved by shareholders

2.

Fill vacancies on the board of directors or any committee thereof.

3.

Adopt, amend, or repeal the bylaws.

4.

Authorize or approve the reacquisition of shares unless pursuant to a general formula or method specified by the board of directors.

5.

Authorize or approve the issuance or sale or contract for the sale of shares, or determine the designation and relative rights, preferences, and limitations of a voting group except that the board of directors may authorize a committee (or a senior executive officer of the corporation)


to do so within limits specifically prescribed by the board of directors. Each such committee shall have two or more members who serve at the pleasure of the board of directors. The board, by resolution adopted by a majority of the authorized number of directors, may designate one or more directors as alternate members of any such committee who may act in the place and stead of any absent member or members at any meeting or such committee. The provisions of law, the articles of incorporation and these bylaws that govern meetings, notice and waiver of notice, and quorum and voting requirements of the board of directors shall apply to such committees of the board and their members as well. Neither the designation of any such committee, the delegation thereto of authority, nor act-ion by such committee pursuant to such authority shall alone constitute compliance by any member of the hoard of directors not a member of the committee in question with the director's responsibility to act in good faith, in a manner the director reasonably believes to be in the best interests of the corporation, and with such care as an ordinarily prudent person in like position would use under similar circumstances. (BCA Sec. 607.0825]

ARTICLE VI CORPORATE BOOKS, RECORDS, AND REPORTS

SECTION 1. BOOKS, RECORDS AUD REPORTS

The corporation shall keep correct and complete books and records of account; minutes or the proceedings of its shareholders, board of directors, and committees of directors; a record of its shareholders; and such other records and reports as are further described in Article IV, sections 5 and 6 of these bylaws, at the principal place of business of the corporation. Any books, records, and minutes may be in written form or in another form capable of being converted into written form within a reasonable time. [BCA Sec. 607.1601(4)]

SECTION 2. ANNUAL FINANCIAL STATEMENTS FOR SHAREHOLDERS

Unless modified by resolution of the shareholders within 120 days of the close of each fiscal year, the corporation shall furnish its shareholders annual financial statements which may be consolidated or combined statements of the corporation and one or more of its subsidiaries, as appropriate, that include a balance sheet as of the end of the fiscal year, an income statement for that year, and a statement of cash flow for that year. If financial statements are prepared on the basis of generally accepted accounting principles, the annual financial statements must also be prepared on that basis. If the annual financial statements are reported upon by a public accountant, the accountant's report must accompany them. If not, the statements must be accompanied


by a statement of the president or the person responsible for the corporation's accounting records: 1. Stating the person's reasonable belief whether the statements were prepared on the basis of generally accepted accounting principles and, if not, describing the basis or preparation, and 2. Describing any respects in which the statements were not prepared on a basis of accounting consistent with the statements prepared for the preceding year. The corporation shall mail the annual financial statements to each shareholder within 120 days after the close of each fiscal year or within such additional time thereafter as is reasonably necessary to enable the corporation to prepare its financial statements if, for reasons beyond the corporation's control, it is unable to prepare its financial statements within the prescribed period. Thereafter, on written request from a shareholder who was not mailed the statements, the corporation shall mail the shareholder the latest financial statements. [BCA Sec. 6O7.l620] Copies of the annual financial statements shall be kept at the principal place of business of the corporation for at least 5 years, and shall be subject to inspection during business hours by any shareholder or holder of voting trust certificates, in person or by agent.

SECTION 3. OTHER REPORTS TO SHAREHOLDERS

If the corporation indemnities or advances expenses to any director, officer, employee, or agent, other than by court order or action by the shareholders or by an insurance carrier pursuant to insurance maintained by the corporation, the corporation shall report the indemnification or advance in writing to the shareholders with or before the notice of the next shareholders' meeting, or prior to such meeting if the indemnification or advance occurs after the giving of such notice but prior to the time that such meeting is held. The report shall include a statement specifying the persons paid, the amounts paid, and the nature and status at the time of such payment of the litigation or threatened litigation. (SCA Sec. 607.1621(1)] If the corporation issues or authorizes the issuance of shares for promises to render services in the future, the corporation shall report in writing to the shareholders the number of shares authorized or issued, and the consideration received by the corporation, with or before the notice of the next shareholders' meeting. [BCA Sec. 607.1621(2)]

 

 

SECTION 4. ANNUAL REPORT TO DEPARTMENT OF STATE

The corporation shall prepare and deliver an annual report form to the Department of State each year within the time limits imposed, and containing the information required, by section 607.1622 of the Business Corporation Act.


SECTION 5. INSPECTION BY SHAREHOLDERS

a.

A shareholder of the corporation is entitled to inspect and copy, during regular business hours at the corporation's principal office, the records of the corporation described in Article IV, Section 5(e) of these bylaws if the shareholder gives the secretary written notice of the shareholder's demand at least 5 business days before the date on which the shareholder wishes to inspect and copy.

b.

A shareholder of this corporation is entitled to inspect and Copy, during regular business hours at a reasonable location specified by the corporation, any of the following records of the corporation if the shareholder meets the requirements of subsection

c.

below and gives the corporation written notice of the shareholder's demand at least S business days before the date on which the shareholder wishes to inspect and copy:

1.

Excerpts from minutes of any meeting of the board of directors, records of any action of a committee at the board of directors while acting in place of the board of directors on behalf of the corporation, minutes of any meeting of the shareholders, and records of action taken by the shareholders or board of directors without a meeting, to the extent not subject to inspection under subsection (a) above;

2.

Accounting records of the corporation;

3.

The record of shareholders; and

4.

Any other books and records of the corporation.

d.

A shareholder may inspect and copy the records described in subsection

a.

above only if 1. The shareholder's demand is made in good faith and for a purpose reasonably related to the shareholder's interest as a shareholder; 2. The demand describes with reasonable particularity the shareholder's purpose and the records the shareholder desires to inspect; and 3. The records requested are directly connected with the shareholder's purpose. (d) This section of the bylaws does not affect: 1. The right of a shareholder to inspect and copy records under Article II, Section 11 of these bylaws; 2. The power of a court, independently of the Business Corporation Act, to compel the production of corporate records for examination. [BCA Sec. 607.1602]

SECTION 6. INSPECTION BY DIRECTORS

Every director shall have the absolute right at: any reasonable time to inspect and copy all books, record, and documents, of every kind of the corporation and to inspect the physical properties of the corporation. Such inspection by a director may be made


in person or by agent or attorney. The right of inspection includes the right to copy and make extracts.

ARTICLE VII INDEMNIFICATION AND INSURANCE

SECTION 1. INDEMNIFICATION UNDER BCA SECTION 607.0850

The corporation shall have the power to indemnify any director, officer, employee, or agent of the corporation as provided in Section 607.0850 of the Business Corporation Act.

SECTION 2. ADDITIONAL INDEMNIFICATION

The corporation may make any other or further indemnification or advancement of expenses of any of its directors, officers, employees, or agents, under any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in the person's official capacity and as to action in another capacity while holding such office. However, such further indemnification or advancement of expenses shall not be made in those instances specified in Section 607.0850 (7)(a-d) of the Business Corporation Act.

SECTION 3. COURT ORDERED INDEMNIFICATION

Unless otherwise provided by the articles of incorporation, notwithstanding the failure of the corporation to provide indemnification, and despite any contrary determination of the board or of the shareholders in the specific case, a director, officer, employee, or agent at the corporation who is or was a party to a proceeding may apply for indemnification or advancement of expenses, or both, to the court conducting the proceeding, to the circuit court, or to another court of competent jurisdiction in accordance with Section 607.0850(9) of the Business Corporation Act.

SECTION 4. INSURANCE

The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the corporation against any liability asserted against the person and incurred by the person in any such capacity or arising out of the person's status as such, whether or not the corporation would have the power to indemnify the person against such liability under provisions of law. [BCA Sec. 607.0850(12)]

ARTICLE VIII SHARES


SECTION 1. ISSUANCE OF SHARES

The board of directors may authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, promises to perform services evidenced by a written contract, or other securities of the corporation. Before the corporation issues shares, the board of directors shall determine that the consideration received or to be received for shares to be issued is adequate. That determination by the board of directors is conclusive insofar as the adequacy of consideration for the issuance of shares relates to whether the shares arc validly issued, fully paid, and nonassessable. When the corporation receives the consideration for which the board of directors authorized the issuance of shares, the shares issued therefore are fully paid and nonassessable. Consideration in the form of a promise to pay money or a promise to perform services is received by the corporation at the time of the making of the promise, unless the agreement specifically provides otherwise. The corporation may place in escrow shares issued for a contract for future services or benefits or a promissory note, or make other arrangements to restrict the transfer of the shares, and may credit distributions in respect of the shares against their purchase price, until the services are performed, the note is paid, or the benefits received. If the services are not performed, the shares escrowed or restricted and the distributions credited may be canceled in whole or part. [BCA Sec. 607.0621]

SECTION 2. CERTIFICATES

After shares in the corporation have been fully paid, the holder of the shares shall be given a certificate representing the shares. At a minimum, each share certificate shall state on its face the following information:

1.

the name of the corporation and that the corporation is organized under the laws of Florida;

2.

the name of the person to whom issued;

3.

the number and class of shares and the designation of the series, if any, the certificate represents. Each certificate shall be signed, either manually or in facsimile, by the president or a vice president and by the secretary or an assistant secretary of the corporation on and may bear the seal of the corporation. [BCA Sec. 607.0625]

ARTICLE IX DIVIDENDS

SECTION 1. PAYMENT OF DIVIDENDS


The board of directors may authorize, and the corporation may make, dividends on its shares in cash, property, or its own shares and other distributions to its shareholders, subject to any restrictions contained in the articles of incorporation, to the requirements of sections 607.0623 and 607.06401 of the Business Corporation Act, and to all applicable provisions of law. [BCA Secs. 607.01401(15), 607.0623(2) & 607.06401(3)]

ARTICLE X AMENDMENT OF ARTICLES AND BYLAWS

SECTION 1. AMENDMENT OF ARTICLES OF INCORPORATION

The board of directors may propose one or more amendments to the articles of incorporation for submission to the shareholders. For the amendment to be effective:

1.

The board of directors must recommend the amendment to the shareholders, unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders with the amendment; and

2.

The shareholders entitled to vote on the amendment must approve the amendment as provided below. The board of directors may condition its submission of the proposed amendment to the shareholders on any basis. The shareholders shall approve amendments to the articles of incorporation by the vote of a majority of the votes entitled to be cast on the amendment, except as may otherwise be provided by the articles of incorporation, Sections 607.1003 and 607.1004 of the Business Corporation Act and other applicable provisions of law, and these bylaws. The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholder' meeting to amend the articles of incorporation in accordance with Article II, section 4 of these bylaws. The notice of meeting must state that the purpose, or one of the purposes, of the meeting is to consider the proposed amendment and contain or be accompanied by a copy or summary of the amendment. Notwithstanding the above provisions of this section and unless otherwise provided in the articles of incorporation, if this corporation has 35 or fewer shareholders then, pursuant to section 607.1002(6) of the Business Corporation Act, the shareholders may amend the articles of incorporation without an act of the directors at a meeting of the shareholders for which the notice of the changes to be made is given. [BCA Secs 607.1002 - 607.1005]

SECTION 2. AMENDMENT OF BYLAWS

The board of directors may amend or repeal these bylaws unless:


1.

The articles of incorporation or the Business Corporation Act reserves the power to amend the bylaws generally or a particular bylaw provision exclusively to the shareholders; or

2.

The shareholders, in amending or repealing the bylaws generally or a particular bylaw provision, provide expressly that the board of directors may not amend or repeal the bylaws or that bylaw provision. The shareholders may amend or repeal these bylaws even though the bylaws may also be amended or repealed by the board of directors. [BCA Sec. 607.1020]

CERTIFICATE

This is to certify that the foregoing is a true and correct copy of the Bylaws of the corporation named in the title thereto and that such Bylaws were duly adopted by the board of directors of the corporation on the date set forth below. Dated: March 14, 2011.

/s/ Reinhold Mackenroth, President

Reinhold Mackenroth








SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of November 12, 2015, between Force Protection Video Equipment Corp. (the “Company”) and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

 

ARTICLE I.

DEFINITIONS

 

1.1   Definitions.  In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Notes (as defined herein), and (b) the following terms have the meanings set forth in this Section 1.1:

 

“Acquiring Person” shall have the meaning ascribed to such term in Section 4.7.

 

“Action” shall have the meaning ascribed to such term in Section 3.1(j).

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

“Board of Directors” means the board of directors of the Company.

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

“Closing Dates” means the Trading Day(s) on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto in connection with a Closing, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount as to such Closing and (ii) the Company’s obligations to deliver the Securities as to such Closing, in each case, have been satisfied or waived.







 

“Closing(s)” means the one or more closings of the purchase and sale of the Securities pursuant to Section 2.2.


“Closing Statement” means the Closing Statement in the form of Annex A attached hereto.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $0. 0001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

 

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

“Company Counsel” means Eric P. Littman, P.A.

“Conversion Price” shall have the meaning ascribed to such term in the Notes.

 

“Conversion Shares” shall have the meaning ascribed to such term in the Notes.

  

“Disclosure Schedules” shall have the meaning ascribed to such term in Section 3.1.

  

“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(q).


“Equity Conditions” means, during the period in question, (a) the Company shall have duly honored all conversions and redemptions scheduled to occur or occurring by virtue of one or more Notices of Conversion of the Holder, if any, (b) the Company shall have paid all liquidated damages and other amounts owing to the Holder in respect of this Note, (c)(i) there is an effective Registration Statement pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell all of the shares of Common Stock issuable pursuant to the Transaction Documents (and the Company believes, in good faith, that such effectiveness will continue uninterrupted for the foreseeable future) or (ii) all of the Conversion Shares issuable pursuant to the Transaction Documents (and shares issuable in lieu of cash payments of interest) may be resold pursuant to Rule 144 without volume or manner-of-sale restrictions as determined by the counsel to the Company as set forth in a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the Holder, (d) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction Documents are listed or quoted for trading on such Trading Market (and the Company believes, in good faith, that trading of the Common Stock on a Trading Market will continue uninterrupted for the foreseeable future), (e) there is a sufficient number of authorized but unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares then issuable







pursuant to the Transaction Documents, (f) there is no existing Event of Default and no existing event which, with the passage of time or the giving of notice, would constitute an Event of Default, (g) the issuance of the shares in question to the Holder would not violate the limitations set forth in Section 4(d) in the Note, (h) there has been no public announcement of a pending or proposed Fundamental Transaction or Change of Control Transaction that has not been consummated, (i) the applicable Holder is not in possession of any information provided by the Company that constitutes, or may constitute, material non-public information, (j) the Company has timely filed (or obtained extensions in respect thereof and filed within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act, (k) the average daily dollar volume of the Company’s common stock for the previous twenty (20) trading days must be greater than $50,000, (l) the Company shares of common stock must be DWAC Eligible and not subject to a “DTC chill” and (m) the Conversion Shares must be delivered via an “Automatic Conversion” of principal and/or interest.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Exempt Issuance” means the issuance of ( i) securities issued under the Company’s equity incentive plan existing on the date of this Agreement and any amendments thereto approved by the Board of Directors, including securities issuable upon conversion or exercise of such securities, (ii) securities issued for consideration other than cash pursuant to a strategic arrangement, joint venture, merger, consolidation, acquisition, or similar business combination approved by the Board of Directors and (iii) securities issued hereunder or upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities, (iv) securities issued for consideration other than cash pursuant to a merger, consolidation, acquisition, or similar business combination approved by the Board of Directors, or (v) securities issued pursuant to an equipment loan or leasing arrangement, real property leasing arrangement or debt financing from a bank or similar financial institution approved by the Board of Directors.  

 

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

 

“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Indebtedness” shall have the meaning ascribed to such term in Section 3.1(jj).

 

“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).

 

“Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).

 







“Liens” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).

 

“Material Permits” shall have the meaning ascribed to such term in Section 3.1(m).

 

“Maturity Date” means the maturity date of the Notes as set forth therein.


“Maximum Rate” shall have the meaning ascribed to such term in Section 5.17.

 

“Notes” means the 8% Convertible Promissory Notes due, subject to the terms therein, six (6) months from the date of issuance, issued by the Company to the Purchasers hereunder, in the form of Exhibit A attached hereto.


“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Pre-Notice” shall have the meaning ascribed to such term in Section 4.12(b).

 

“Principal Amount” means, as to each Purchaser, the amounts set forth below such Purchaser’s signature block on the signature pages hereto next to the heading “Principal Amount,” in United States Dollars.

 

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

“Public Information Failure” shall have the meaning ascribed to such term in Section 4.3(b).

 

“Public Information Failure Payments” shall have the meaning ascribed to such term in Section 4.3(b).

 

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.9.


“Registration Rights Agreement” means the Registration Rights Agreement, dated the date hereof, among the Company and the Purchasers, in the form of Exhibit B attached hereto.


“Registration Statement” means the registration statement that the Company is required to file pursuant to this Agreement to register the Underlying Shares. The Registration Statement shall register all Underlying Shares in connection with each Tranche.


“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).







 

“Required Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon conversion in full of all Notes (including Underlying Shares issuable as payment of interest on the Notes), ignoring any conversion or exercise limits set forth therein.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

 “SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Securities” means the Notes and the Underlying Shares.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act

 

“Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for Notes purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.

 

“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.


“Trading Day” means a day on which the principal Trading Market is open for trading.

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT; the Nasdaq Capital Market; the Nasdaq Global Market; the Nasdaq Global Select Market; the New York Stock Exchange; OTCQX, OTCQB, OTCBB or OTC Pink Sheets (or any successors to any of the foregoing).

 

“Transaction Documents” means this Agreement, the Registration Rights Agreement, the Notes, the Transfer Agent Instruction Letter, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

“Transfer Agent” means Interwest Transfer Co., Inc. the current transfer agent of the Company, with a mailing address of 1981 East 4800 South #100, Salt Lake City, UT 84117 , and any successor transfer agent of the Company.








“Transfer Agent Instruction Letter” means the letter from the Company to the Transfer Agent which instructs the Transfer Agent to issue Underlying Shares pursuant to the Transaction Documents, in the form of Exhibit C attached hereto.

 

“Underlying Shares” means the shares of Common Stock issued and issuable upon conversion or redemption of the Notes and issued and issuable in lieu of the cash payment of interest on the Notes in accordance with the terms of the Notes.

 

ARTICLE II.

PURCHASE AND SALE

 

2.1   Purchase.   The Purchaser will purchase an aggregate of up to $1,150,000 in Subscription Amount of Notes, corresponding to an aggregate of $1,207,500 in Principal Amount of Notes . The purchase will occur in two (2) tranches (each a “Tranche”), with the first Tranche of $150,000 being closed on upon execution of this Agreement. The second Tranche will be for $1,000,000 and will occur within five (5) Business Days after the effective date of the Registration Statement; provided that the Purchaser shall not be required to fund the second Tranche if the Company is in default of any Note or the Equity Conditions are not met on such Closing Date.  

 

2.2   Closing.  On each Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company shall sell, and each Purchaser, severally and not jointly, shall purchase, a Note in the Principal Amount and in consideration for such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser.  At each Closing, each Purchaser shall deliver to the Company, via wire transfer or a certified check, immediately available funds equal to such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser, and the Company shall deliver to each Purchaser its respective Note, as determined pursuant to Section 2.3(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.3 deliverable at the respective Closing.  Upon satisfaction of the covenants and conditions set forth in Sections 2.3 and 2.4 for each Closing, each Closing shall occur at the offices of the Purchaser’s counsel or such other location as the parties shall mutually agree.

 

2.3   Deliveries.

 

(a)   On or prior to each Closing Date (except as noted), the Company shall deliver or cause to be delivered to each Purchaser the following:

 

(i) this Agreement duly executed by the Company;

 

(ii) a Note with a principal amount equal to such Purchaser’s Principal Amount as to the applicable Closing, registered in the name of such Purchaser;


(iii) the Registration Rights Agreement, duly executed by the Company; and

 







(iv) the Transfer Agent Instruction Letter duly executed by the Company and the Transfer Agent.

 

(b)   On or prior to the applicable Closing Date, each Purchaser shall deliver or cause to be delivered to the Company, as applicable, the following:

 

(i)  this Agreement duly executed by such Purchaser;


(ii) the Registration Rights Agreement, duly executed by such Purchaser; and

 

(iii) such Purchaser’s Subscription Amount as to the applicable Closing by wire transfer to the account specified in writing by the Company.


2.4   Closing Conditions.

 

(a)   The obligations of the Company hereunder in connection with each Closing are subject to the following conditions being met:

 

(i)  the accuracy in all material respects on the applicable Closing Date of the representations and warranties of the Purchasers contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);

 

(ii)  all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the applicable Closing Date shall have been performed; and

 

(iii)  the delivery by each Purchaser of the items set forth in Section 2.3(b) of this Agreement.

 

(b)   The respective obligations of the Purchasers hereunder in connection with each Closing are subject to the following conditions being met:

 

(i)   the accuracy in all material respects when made and on the applicable Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein);

 

(ii)  all obligations, covenants and agreements of the Company required to be performed at or prior to the applicable Closing Date shall have been performed;

 

(iii)  the delivery by the Company of the items set forth in Section 2.3(a) of this Agreement;

 

(iv)   there is no existing Event of Default (as defined in the Notes) and no existing event which, with the passage of time or the giving of notice, would constitute an Event of Default;

 







(v)   there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and

  

(vi)   from the date hereof to the applicable Closing Date, trading in the Common Stock shall not have been suspended by the Commission  or the Company’s principal Trading Market and, at any time prior to the applicable Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Securities at the applicable Closing.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1   Representations and Warranties of the Company.  Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:

 

(a)   Subsidiaries.  All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a).  The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.  If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.

 

(b)   Organization and Qualification.  The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document; (ii) a material adverse effect on the results of operations,







assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole; or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

  

(c)   Authorization; Enforcement.  The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.  The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith or therewith other than in connection with the Required Approvals.  This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(d)   No Conflicts.  The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents; (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected; or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.







   

(e)   Filings, Consents and Approvals.  The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Section 4.14 of this Agreement, (ii) the notice and/or application(s) to each applicable Trading Market for the issuance and sale of the Securities and the listing of the Conversion Shares for trading thereon in the time and manner required thereby and (iii) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).

 

(f)   Issuance of the Securities.  The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents and applicable securities laws.  The Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents and applicable securities laws.

 

(g)   Capitalization.  The capitalization of the Company is as set forth on Schedule 3.1(g), which Schedule 3.1(g) shall also include the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of the date hereof. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act.    No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents.  Except as a result of the purchase and sale of the Securities, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents.  The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities.  No further







approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities.  There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

(h)   SEC Reports; Financial Statements.  Except as set forth on Schedule 3.1(g), the Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”).  As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  The Company is not now or has not in the last year been an issuer subject to Rule 144(i) under the Securities Act. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable or accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing.  Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

 (i)   Material Changes; Undisclosed Events, Liabilities or Developments.  Since the date of the latest financial statements included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof: (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect; (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission; (iii) the Company has not altered its method of accounting; (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock. The Company does not have pending before the Commission any request for confidential treatment of information; and (v) the Company has not issued any equity securities to any officer,







director or Affiliate, except pursuant to existing Company stock option plans.   Except for the issuance of the Securities contemplated by this Agreement or as set forth on Schedule 3.1(i), no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, properties, operations, assets or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least 1 Trading Day prior to the date that this representation is made.

 

(j)   Litigation.  Except as disclosed in Schedule 3.1(j), there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect.  Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.  There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company.  The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

 (k)   Labor Relations.  No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect.  None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good.  To the knowledge of the Company, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters.  The Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 







(l)   Compliance.  Except as disclosed in Schedule 3.1(l), neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.

   

(m)   Regulatory Permits.  The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

 

(n)   Title to Assets.  The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties.  Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.

 

(o)   Intellectual Property.  The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights as described in the SEC Reports as necessary or required for use in connection with their respective businesses and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).  None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement.  Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the SEC Reports, a written notice of a







claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to not have a Material Adverse Effect.  To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights.  The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(p)   Transactions with Affiliates and Employees.  Except as set forth in the SEC Reports, none of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from providing for the borrowing of money from or lending of money to, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case in excess of $100,000 other than for: (i) payment of salary or consulting fees for services rendered; (ii) reimbursement for expenses incurred on behalf of the Company; and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.

 

(q)   Sarbanes-Oxley; Internal Accounting Controls.  The Company and the Subsidiaries are in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are applicable to the Company and are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the applicable Closing Date.  The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.  The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the







“Evaluation Date”).  The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company and its Subsidiaries.

 

(r)   Certain Fees.  Other than as set forth on Schedule 3.1(r), no brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiaries to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents.  The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.

  

(s)   Private Placement.  Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.

 

(t)   Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.  The Company shall, while the Notes are outstanding, conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.

 

(u)   Registration Rights.  Except as set forth in the SEC Reports, no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company or any Subsidiaries.

 

(v)   Listing and Maintenance Requirements.  The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration.  The Company has not, in the twelve (12) months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.

 







(w)   Application of Takeover Protections.  The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.

 

(x)   Disclosure.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information.  The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company.  All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.   The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.


(y)   No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, except as set forth in the SEC Reports, or (ii) any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

 

(z)   No General Solicitation. Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising.  The Company has offered the Securities for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

 

(aa)   Foreign Corrupt Practices.  Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, has: (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign







or domestic political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds; (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is  in violation of law; or (iv) violated in any material respect any provision of FCPA.

 

(bb)   Accountants.  The Company’s accounting firm is set forth on Schedule 3.1(bb).  To the knowledge and belief of the Company, such accounting firm is a registered public accounting firm as required by the Exchange Act.

 

(cc)   No Disagreements with Accountants and Lawyers.  Except as set forth in Schedule 3.1(cc), there are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company which could affect the Company’s ability to perform any of its obligations under any of the Transaction Documents, and the Company is current with respect to any fees owed to its accountants and lawyers.

 

 (dd)   Acknowledgment Regarding Purchasers’ Purchase of Securities.  The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby.  The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities.  The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

  

(ee)   Regulation M Compliance.  The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Company’s placement agent in connection with the placement of the Securities.

 

(ff)   Stock Option Plans. Each stock option granted by the Company under the Company’s stock option plan was granted (i) in accordance with the terms of the Company’s stock option plan and (ii) with an exercise price at least equal to the fair market value of the Common Stock on the date such stock option would be considered







granted under GAAP and applicable law. No stock option granted under the Company’s stock option plan has been backdated.  The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects.

 

(gg)   Office of Foreign Assets Control.  Neither the Company nor any Subsidiary nor, to the Company's knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).

 

(hh)   U.S. Real Property Holding Corporation.  The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s request.

 

 (ii)   Bank Holding Company Act.  Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”).  Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.  Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.


(jj) Solvency.  The Company, at this time, has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the applicable Closing Date.


(kk) Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.








(ll) Seniority.  As of each Closing Date, no Indebtedness or other claim against the Company is senior to the Notes in right of payment, whether with respect to interest or upon liquidation or dissolution, or otherwise, other than indebtedness secured by purchase money security interests (which is senior only as to underlying assets covered thereby) and capital lease obligations (which is senior only as to the property covered thereby).



(mm) Money Laundering.  The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.

 

3.2   Representations and Warranties of the Purchasers.    Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):

 

(a)   Organization; Authority.  Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser.  Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(b)   Own Account.  Such Purchaser understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state







securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser’s right to sell the Securities in compliance with applicable federal and state securities laws).  Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.

 

(c)   Purchaser Status.  At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it converts any Notes it will be an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act.

 

(d)   Experience of Such Purchaser.  Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment.  Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

 

(e)   General Solicitation.  Such Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

 

(f)   Certain Transactions and Confidentiality.  Other than consummating the transactions contemplated hereunder, such Purchaser has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof.  Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.  Other than to other Persons party to this Agreement, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, but subject to Section 4.12 of this Agreement, for avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to the identification of the availability of, or securing of, available shares to borrow in order to effect Short Sales or similar transactions in the future.







 

The Company acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.

  

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1   Transfer Restrictions.

 

(a)   The Securities may only be disposed of in compliance with state and federal securities laws.  In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act.  As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of a Purchaser under this Agreement.

 

(b)   The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in substantially the following form:

 

[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [CONVERTIBLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.







 

The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties.  Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith.  Further, no notice shall be required of such pledge.  At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities.

 

(c)   Certificates evidencing the Underlying Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof):  (i) following any sale of such Underlying Shares pursuant to Rule 144, or (ii) if such Underlying Shares are eligible for sale under Rule 144 without the need for current public information or (iii) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). If all or any portion of a Note is converted at a time when there is an effective registration statement to cover the resale of the Underlying Shares, or if such Underlying Shares may be sold under Rule 144 without the need for current public information or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) then such Underlying Shares shall be, subject to the terms hereof, issued free of all legends.  The Company agrees that at such time as such legend is no longer required under this Section 4.1(c), it will, no later than three Trading Days following the delivery by a Purchaser to the Company or the Transfer Agent of a certificate representing Underlying Shares together with such seller and broker representation letter and an opinion of counsel to Purchaser, reasonably acceptable to the Company, and other documents and instruments as the Company may reasonably request, as applicable, issued with a restrictive legend (such third Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends.  The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4.  Certificates for Underlying Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by such Purchaser.


(d)   In addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, $1,000 per Trading Day for each Trading Day after the Legend Removal Date until such certificate is delivered without a legend.  Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Company’s failure to deliver certificates representing any







Securities as required by the Transaction Documents, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

 

4.2   Acknowledgment of Dilution.  The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions.  The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Underlying Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.

 

4.3   Furnishing of Information; Public Information.

 

(a)   Until the earliest of the time that no Purchaser owns Securities, the Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.

 

(b)    At any time during the period commencing from the six (6) month anniversary of the date hereof and ending at such time that all of the Securities may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if the Company shall fail for any reason to satisfy the current public information requirement under Rule 144(c) (a “Public Information Failure”) then, in addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to two percent (2.0%) of the aggregate Subscription Amount of such Purchaser’s Securities on the day of a Public Information Failure and on every thirtieth (30 th  day (pro rated for periods totaling less than thirty days) thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information is no longer required  for the Purchasers to transfer the Underlying Shares pursuant to Rule 144.  The payments to which a Purchaser shall be entitled pursuant to this Section 4.3(b) are referred to herein as “Public Information Failure Payments.”  Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are incurred and (ii) the third (3 rd  Business Day after the event or failure giving rise to the Public Information Failure Payments is cured.  In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Public Information Failure, and such Purchaser shall have the right







to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

 

4.4   Integration.  The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.

 

4.5   Conversion and Exercise Procedures.  The form of Notice of Conversion included in the Notes sets forth the totality of the procedures required of the Purchasers in order to convert the Notes.  Without limiting the preceding sentences, no ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required in order to convert the Note.  No additional legal opinion, other information or instructions shall be required of the Purchasers to convert their Notes.  The Company shall honor conversions of the Notes and shall deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.

 

4.6   Shareholder Rights Plan.  No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.

 

4.7   Non-Public Information.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company covenants and agrees that neither it, nor any other Person acting on its behalf, will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have entered into a written agreement with the Company regarding the confidentiality and use of such information.  The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.

 

4.8   Use of Proceeds.  The Company shall use the net proceeds hereunder at its sole discretion.

 

4.9   Indemnification of Purchasers.   Subject to the provisions of this Section 4.9, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such







titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach by the Company of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against the Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such  Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence, willful misconduct or malfeasance).  If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party.  Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel.  The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents.  The indemnification required by this Section 4.9 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred.  The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.

  

4.10   Reservation and Listing of Securities.

 

(a)   The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may then be required to fulfill its obligations in full under the Transaction Documents.

 

(b)   If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than 300% of the Required Minimum on such date, then the Board of Directors shall use commercially reasonable efforts to amend the Company’s







certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least 300% of the Required Minimum at such time, as soon as possible and in any event not later than the 90 th day after such date.

 

(c)   The Company shall, if applicable: (i) in the time and manner required by the principal Trading Market, prepare and file with such Trading Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Required Minimum on the date of such application; (ii) take all steps necessary to cause such shares of Common Stock to be approved for listing or quotation on such Trading Market as soon as possible thereafter; (iii) provide to the Purchasers evidence of such listing or quotation; and (iv) maintain the listing or quotation of such Common Stock on any date at least equal to the Required Minimum on such date on such Trading Market or another Trading Market.

 

4.11   Equal Treatment of Purchasers.  No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration is also offered to all of the parties to this Agreement. Further, the Company shall not make any payment of principal or interest on the Notes in amounts which are disproportionate to the respective principal amounts outstanding on the Notes at any applicable time.  For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

 

4.12   Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it, nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any Short Sales, of any of the Company’s securities during the period commencing with the execution of this Agreement and ending on the later of (i) the Maturity Date or (ii) the date that the Notes are no longer outstanding (provided that this provision shall not prohibit any sales made where a corresponding Notice of Conversion is tendered to the Company and the shares received upon such conversion or exercise are used to close out such sale). 


4.13 Right of First Refusal.

(a)    From the date hereof until the date that is the 6-month anniversary of the Closing, upon any issuance by the Company of Common Stock, Common Stock Equivalents or debt for cash consideration, Indebtedness or a combination of units thereof (a “Subsequent Financing”), the Purchasers on a pro rata basis shall have the right to participate in up to an amount of the Subsequent Financing equal to 100% of the Subsequent Financing on the same terms, conditions and price provided for in the Subsequent Financing.  


(b)   At least three (3) Trading Days prior to the closing of the Subsequent Financing, the Company shall deliver to the Purchasers a written notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask the Purchasers if they wants to review the details of such financing (such additional notice, a “Subsequent







Financing Notice”).  Upon the request of a Purchaser, and only upon a request by such Purchaser, for a Subsequent Financing Notice, the Company shall promptly, but no later than one (1) Trading Day after such request, deliver a Subsequent Financing Notice to such Purchaser.  The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder and the Person or Persons through or with whom such Subsequent Financing is proposed to be effected and shall include a term sheet or similar document relating thereto as an attachment.    


(c)   If such Purchaser desires to participate in such Subsequent Financing, such Purchaser must provide written notice to the Company that such Purchaser is willing to participate in the Subsequent Financing, the amount of such Purchaser’s participation, and representing and warranting that the Purchaser has such funds ready, willing, and available for investment on the terms set forth in the Subsequent Financing Notice.  


(d)    If notifications by the Purchasers of their willingness to participate in the Subsequent Financing (or to cause their designees to participate) is, in the aggregate, less than the total amount of the Subsequent Financing, then the Company may effect the remaining portion of such Subsequent Financing on the terms and with the Persons set forth in the Subsequent Financing Notice.  


(e)    The Company must provide the Purchasers with a second Subsequent Financing Notice, and the Purchasers will again have the right of participation set forth above in this Section 4.13, if the Subsequent Financing subject to the initial Subsequent Financing Notice is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within thirty (30) Trading Days after the date of the initial Subsequent Financing Notice.


(f)    The Company and the Purchasers agree that if a Purchaser elects to participate in the Subsequent Financing, the transaction documents related to the Subsequent Financing shall not include any term or provision whereby such Purchaser shall be required to agree to any restrictions on trading as to any of the Securities purchased hereunder or be required to consent to any amendment to or termination of, or grant any waiver, release or the like under or in connection with, this Agreement, without the prior written consent of such Purchaser.


(g)    Notwithstanding anything to the contrary in this Section 4.13 and unless otherwise agreed to by the Purchasers, the Company shall either confirm in writing to the Purchasers that the transaction with respect to the Subsequent Financing has been abandoned or shall publicly disclose its intention to issue the securities in the Subsequent Financing, in either case in such a manner such that such Purchaser will not be in possession of any material, non-public information, by the tenth (10 th ) Trading Day following delivery of the Subsequent Financing Notice.  If by such tenth (10 th ) Trading Day, no public disclosure regarding a transaction with respect to the Subsequent Financing has been made, and no notice regarding the abandonment of such transaction has been received by the Purchasers, such transaction shall be deemed to have been abandoned and the Purchasers







shall not be deemed to be in possession of any material, non-public information with respect to the Company or any of its Subsidiaries.  


(h)    Notwithstanding the foregoing, this Section 4.13 shall not apply in respect of an Exempt Issuance.


4.14 Securities Laws Disclosure; Publicity.  The Company shall (a) by 9:30 a.m. (New York City time) on the Trading Day immediately following the date hereof, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) file a Current Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the Commission within the time required by the Exchange Act.  From and after the issuance of such press release, the Company represents to the Purchasers that it shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction Documents. The Company and the Purchasers shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor the Purchasers shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of the Purchasers, or without the prior consent of the  Purchasers, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication.  Notwithstanding the foregoing, the Company shall not publicly disclose the name of the Purchaser, or include the name of the Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of the Purchaser, except: (a) as required by federal securities law in connection with any registration statement contemplated by this Agreement and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchaser with prior notice of such disclosure permitted under this clause (b).


4.15 Form D; Blue Sky Filings.  The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at the applicable Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of the Purchaser.


4.16  Additional Indebtedness.  From the date hereof until the date that is ninety (90) days after the date of the Closing , without the prior written consent of the Purchaser, the Company shall not issue any Indebtedness that is convertible for or exchangeable into Common Stock .


4.17  Further Financing Restrictions.  During the period commencing on the date hereof and for so long as any Principal Amount of the Notes remain outstanding, neither the Company nor any of its affiliates or Subsidiaries, nor any of its or their respective officers, employees, directors, agents or other representatives, will, without the prior written consent of the Purchasers holding a







majority of the then-outstanding principal amount of the Notes (which consent may be withheld, delayed or conditioned in the Purchasers’ sole discretion), directly or indirectly: (a) solicit, initiate, encourage or accept any other inquiries, proposals or offers from any Person (other than the Purchaser) relating to any exchange (i) of any security of the Company or any of its Subsidiaries for any other security of the Company or any of its Subsidiaries, except to the extent (x) consummated pursuant to an exchange registered under a registration statement of the Company filed pursuant to the Securities Act and declared effective by the Commission or (y) such exchange is exempt from registration pursuant to an exemption provided under the Securities Act (other than Section 3(a)(10) of the Securities Act) or (ii) of any indebtedness or other securities of, or claim against, the Company or any of its Subsidiaries relying on the exemption provided by Section 3(a)(10) of the Securities Act (any such transaction described in clauses (i) or (ii), an “Exchange Transaction”); (b) enter into, effect, alter, amend, announce or recommend to its stockholders any Exchange Transaction with any Person (other than the Purchaser); or (c) participate in any discussions, conversations, negotiations or other communications with any Person (other than the Purchaser) regarding any Exchange Transaction, or furnish to any Person (other than the Purchaser) any information with respect to any Exchange Transaction, or otherwise cooperate in any way, assist or participate in, facilitate or encourage any effort or attempt by any Person (other than the Purchaser) to seek an Exchange Transaction involving the Company or any of its Subsidiaries. Notwithstanding the foregoing or anything contained herein to the contrary, for so long as any principal on the Notes remains outstanding, neither the Company nor any of its affiliates or Subsidiaries, nor any of its or their respective officers, employees, directors, agents or other representatives, will, without the prior written consent of the Purchasers holding a majority of the then-outstanding principal amount of the Notes (which consent may be withheld, delayed or conditioned in the Purchasers’ sole discretion), directly or indirectly, cooperate in any way, assist or participate in, facilitate or encourage any effort or attempt by any Person (other than the Purchaser) to effect any acquisition of securities or indebtedness of, or claim against, the Company by such Person from an existing holder of such securities, indebtedness or claim in connection with a proposed exchange of such securities or indebtedness of, or claim against, the Company (whether pursuant to Section 3(a)(9) or 3(a)(10) of the Securities Act or otherwise) (a “Third Party Exchange Transfer”). The Company, its affiliates and Subsidiaries, and each of its and their respective officers, employees, directors, agents or other representatives shall immediately cease and cause to be terminated all existing discussions, conversations, negotiations and other communications with any Persons (other than the Purchasers) with respect to any of the foregoing. The Company shall promptly (and in no event later than 24 hours after receipt) notify (which notice shall be provided orally and in writing and shall identify the Person making the inquiry, request, proposal or offer and set forth the material terms thereof) the Purchasers after receipt of any inquiry, request, proposal or offer relating to any Exchange Transaction or Third Party Exchange Transfer, and shall promptly (and in no event later than 24 hours after receipt) provide copies to the Purchasers of any written inquiries, requests, proposals or offers relating thereto.  The Company agrees that it and its affiliates and Subsidiaries, and each of its and their respective officers, employees, directors, agents or other representatives Subsidiaries will not enter into any agreement with any Person subsequent to the date hereof which prohibits the Company from providing any information to the Purchasers in accordance with this provision.   For all purposes of this Agreement, violations of the restrictions set forth in this Section 4.17 by any Subsidiary or affiliate of the Company, or any officer, employee, director, agent or other representative of the







Company or any of its Subsidiaries or affiliates shall be deemed a direct breach of this Section 4.17 by the Company.


ARTICLE V.

MISCELLANEOUS

 

5.1   Termination.  This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before November 12, 2015; provided, however, that such termination will not affect the right of any party to sue for any breach by any other party (or parties).

 

5.2   Fees and Expenses.  The Company shall deliver to each Purchaser, prior to each Closing, a completed and executed copy of the Closing Statement, attached hereto as Annex A .  Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.  At the Closing, the Company shall pay the Purchasers an aggregate of $5,000 for their legal fees.  The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company and any conversion or exercise notice delivered by a Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.

 

5.3   Entire Agreement.  The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

5.4   Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto at or prior to 12:00 p.m. (New York City time) on a Trading Day; (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 12:00 p.m. (New York City time) on any Trading Day; (iii) the second (2 nd ) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service; or (iv) upon actual receipt by the party to whom such notice is required to be given.  The address for such notices and communications shall be as set forth on the signature pages attached hereto.

 

5.5   Amendments; Waivers.  No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers holding at least 67% in interest of the Securities then outstanding or, in the case of a waiver, by the party against whom enforcement of any such







waived provision is sought.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

 

5.6   Headings.  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

5.7   Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger or by similar reorganization or change in control transaction).  Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”

 

5.8   No Third-Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.9.

 

5.9   Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.   If either party shall commence an action, suit or proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.9, the prevailing party in such action,







suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

 

5.10   Survival.  The representations and warranties contained herein shall survive the Closings and the delivery of the Securities.

 

5.11   Execution.  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

5.12   Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

5.13   Rescission and Withdrawal Right.  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that in the case of a rescission of a conversion of a Note, the applicable Purchaser shall be required to return any shares of Common Stock subject to any such rescinded conversion notice concurrently with the return to such Purchaser of the aggregate exercise price paid to the Company for such shares.

 

5.14   Replacement of Securities.  If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction.  The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

 







5.15   Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

5.16   Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

5.17   Usury.  To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that may be brought by any Purchaser in order to enforce any right or remedy under any Transaction Document.  Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate.  It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective date thereof forward, unless such application is precluded by applicable law.  If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Purchaser’s election.

 

5.18   Independent Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document.  Nothing contained herein or in any other Transaction Document, and no action taken







by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.  Each Purchaser has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents.

 

5.19   Liquidated Damages.  The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

 

5.20   Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

5.21   Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

5.22   WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

 

(Signature Pages Follow)

 

 







 

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

FORCE PROTECTION VIDEO EQUIPMENT CORP.  



Address for Notice:

By: /s/ Paul Feldman

    Name:  Paul Feldman

    Title:  President


With a copy to (which shall not constitute notice):


Fax:


 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

  








[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]


IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

Name of Purchaser:      RDW Capital, LLC

Signature of Authorized Signatory of Purchaser:  /s/John DeNobile

  

Name of Authorized Signatory:  John DeNobile


Title of Authorized Signatory:  Manager

 

Email Address of Authorized Signatory: jdjrll@aol.com

Facsimile Number of Authorized Signatory: ____________________________________                                                                                                        

Address for Notice to Purchaser:

18650  Collins Avenue

       

Suite 112-341

Sunny Isles, FL 33160

.

 

 


Address for Delivery of Securities to Purchaser (if not same as address for notice):

 

 

 

Principal Amount:

   

Subscription Amount:




EIN Number:  47-1589513

  



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AMENDMENT TO SECURITIES PURCHASE AGREEMENT

This Amendment to Securities Purchase Agreement (this “ Amendment ”), dated November 12, 2015, by and between Force Protection Video Equipment Corp. (the “ Company ”), and RDW Capital, LLC (the “ Purchaser ”), hereby amends, effective as of the date hereof, that certain Securities Purchase Agreement, dated as of November 12, 2015 , by and among the Company and the Purchaser (the “ Securities Purchase Agreement ”).  Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to such terms in the Securities Purchase Agreement.

RECITALS

1)

Pursuant to Section 5.5 of the Securities Purchase Agreement, the Securities Purchase Agreement may be amended by a written agreement signed by the Company and the Purchasers holding at least 67% in interest of the Securities then outstanding.

2)

Purchaser holds at least 67% of the Securities outstanding as of the date hereof.

C.

The parties hereto desire to amend the Securities Purchase Agreement, as set forth in this Amendment.

AGREEMENT

The parties hereto, intending to be legally bound, agree as follows:

1.

Amendments .

(a)

Purchase .  Section 2.1 of the Securities Purchase Agreement is hereby amended and restated in its entirety to read as follows:

“Purchase.  The Purchaser will purchase an aggregate of up to $2,250,000 in Subscription Amount of Notes, corresponding to an aggregate of $2,362,500 in Principal Amount of Notes . The purchase will occur in three (3) tranches (each a “Tranche”), with the first Tranche of $150,000 being closed on upon execution of this Agreement. The second Tranche will be for $100,000 and will occur within five (5) Business Days after the filing date of the Registration Statement. The third Tranche will be for $1,000,000 and will occur within five (5) Business Days after the effective date of the Registration Statement. The fourth Tranche will be for $1,000,000 and will occur within seven (7) Business Days after the effective date of the Registration Statement. The Purchaser shall not be required to fund the second through fourth Tranches if the Company is in default of any Note or the Equity Conditions are not met on such Closing Date.”

2.

Effect of this Amendment .  Except as expressly provided in this Amendment, the Securities Purchase Agreement shall not be amended or otherwise modified.  In the event there is a conflict between the terms of the Securities Purchase Agreement and the terms of this Amendment, the terms provided in this Amendment shall control.  On and after the date hereof, each reference in the Securities Purchase Agreement to “this Agreement,” “hereunder,” “hereof,”



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“hereto,” “herein,” or words of like import referring to the Securities Purchase Agreement shall mean and be a reference to the Securities Purchase Agreement as amended by this Amendment.  

3.

Acknowledgment and Agreement .  Each party hereto hereby acknowledges and agrees that except as expressly provided in this Amendment, nothing in this Amendment shall be construed as a waiver of any provision of the Securities Purchase Agreement by any party hereto, nor shall it in any way affect the validity of, or the right of any party hereto to enforce the provisions of the Securities Purchase Agreement.  

4.

Full Force and Effect .  This Amendment is expressly made subject to the terms and conditions of the Securities Purchase Agreement as modified herein, and, except as expressly modified herein, the Securities Purchase Agreement shall continue in full force and effect without change.  

5.

Governing Law .  All questions concerning the construction, validity, enforcement and interpretation of this Amendment shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Amendment (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of this Amendment), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Amendment and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.   If either party shall commence an action, suit or proceeding to enforce any provisions of this Amendment, then the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

6.

Severability .  If any term, provision, covenant or restriction of this Amendment is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that



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they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

7.

No Interpretation Against Drafter .  This Amendment is the product of negotiations between the parties hereto represented by counsel and any rules of construction relating to interpretation against the drafter of an agreement shall not apply to this Amendment and are expressly waived.

8.

Counterparts .  This Amendment may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 [Signatures on the Following Page]

 



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IN WITNESS WHEREOF, the parties have executed and delivered this Amendment as of the date first written above.

Company:

FORCE PROTECTION VIDEO EQUIPMENT CORP.


By:  /s/Paul Feldman
Name: Paul Feldman
Title:  President

Purchaser:

RDW CAPITAL,, LLC

By: /s/ John DeNobile

Name: John DeNobile

Title: AMBR



{00762791.DOC;1 }

 

 






NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.


Original Issue Date: November 12, 2015


$157,500



8% CONVERTIBLE PROMISSORY NOTE

DUE APRIL 12, 2016


THIS 8% CONVERTIBLE PROMISSORY NOTE is one of a series of duly authorized and validly issued 8% Convertible Promissory Notes of Force Protection Video Equipment Corp. (the “ Company ”), having its principal place of business at 140 Iowa Lane, Suite 101, Cary, NC 27511 , designated as its 8% Convertible Notes due April 12, 2016 (this Note, the “ Note ” and, collectively with the other Notes of such series, the “ Notes ”).


FOR VALUE RECEIVED, the Company promises to pay, in cash, to RDW Capital, LLC or its registered assigns (the “ Holder ”), or shall have paid pursuant to the terms hereunder, the principal sum of $157,500 on April 12, 2016 (the “ Maturity Date ”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof. This Note is subject to the following additional provisions:


Section 1 .

Definitions .  For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:


Alternate Consideration ” shall have the meaning set forth in Section 5(d).



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Alternative Conversion Price ” means 50% of the lowest traded price of the Common Stock in the twenty (20) Trading Days prior to the Conversion Date.


 “ Bankruptcy Event ” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.


Base Conversion Price ” shall have the meaning set forth in Section 5(b).


Beneficial Ownership Limitation ” shall have the meaning set forth in Section 4(d).


Buy-In ” shall have the meaning set forth in Section 4(c)(v).


Change of Control Transaction ” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 50% of the voting securities of the Company (other than by means of conversion or exercise of the Notes and the Securities issued together with the Notes), (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction, (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction, , or (d) the execution by the Company of an



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agreement to which the Company  is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (c above.


Conversion ” shall have the meaning ascribed to such term in Section 4.


Conversion Date ” shall have the meaning set forth in Section 4(a).


Conversion Price ” shall have the meaning set forth in Section 4(b).


Conversion Schedule ” means the Conversion Schedule in the form of Schedule 1 attached hereto.


Conversion Shares ” means, collectively, the shares of Common Stock issuable upon conversion of this Note in accordance with the terms hereof.


Dilutive Issuance ” shall have the meaning set forth in Section 5(b).


Dilutive Issuance Notice ” shall have the meaning set forth in Section 5(b).


DTC ” means the Depository Trust Company.

 

DTC/FAST Program ” means the DTC’s Fast Automated Securities Transfer Program.


DWAC Eligible ” means that (a) the Common Stock is eligible at DTC for full services pursuant to DTC’s Operational Arrangements, (b) the Company has been approved (without revocation) by the DTC’s underwriting department, (c) the Transfer Agent is approved as an agent in the DTC/FAST Program, and (d) the Transfer Agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.


Event of Default ” shall have the meaning set forth in Section 6(a).


Fundamental Transaction ” shall have the meaning set forth in Section 5(d).


Late Fees ” shall have the meaning set forth in Section 2(c).


Mandatory Default Amount ” means the payment of 130% of the outstanding principal amount of this Note and accrued and unpaid interest hereon, in addition to the payment of all other amounts, costs, expenses and liquidated damages due in respect of this Note.


New York Courts ” shall have the meaning set forth in Section 7(d).


Note Register ” shall have the meaning set forth in Section 2(b).



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Notice of Conversion ” shall have the meaning set forth in Section 4(a).


Original Issue Date ” means the date of the first issuance of this Note, regardless of any transfers of any Note and regardless of the number of instruments which may be issued to evidence such Notes.


Purchase Agreement ” means the Securities Purchase Agreement, dated as of November 12, 2015 between the Company and the original Holder, as amended, modified or supplemented from time to time in accordance with its terms.


Registration Rights Agreement ” means the Registration Rights Agreement, dated as of the date of the Purchase Agreement, among the Company and the original Holders, in the form of Exhibit B attached to the Purchase Agreement.


Registration Statement ” means a registration statement covering the resale of the Underlying Shares by each Holder.


Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.


Share Delivery Date ” shall have the meaning set forth in Section 4(c)(ii).


Successor Entity ” shall have the meaning set forth in Section 5(d).


Section 2 .

Interest .


a)

Payment of Interest in Cash or Kind . The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note at the rate of 8% per annum, which interest amount shall be guaranteed. All interest payments hereunder will be payable in cash or Common Stock in the Holder’s discretion. Accrued and unpaid interest shall be due and payable on each Conversion Date and on the Maturity Date, or as otherwise set forth herein.  


b)

Interest Calculations . Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made.  Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note (the “ Note Register ”).


c)

Late Fee .  All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law (the “ Late Fees ”) which shall accrue daily



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from the date such interest is due hereunder through and including the date of actual payment in full.


d)

Prepayment .  At any time upon ten (10) days written notice to the Holder, the Company may prepay any portion of the principal amount of this Note and any accrued and unpaid interest. If the Company exercises its right to prepay the Note, the Company shall make payment to the Holder of an amount in cash equal to the sum of the then outstanding principal amount of this Note and interest multiplied by 130%.  The Holder may continue to convert the Note from the date notice of the prepayment is given until the date of the prepayment.


Section 3.

Registration of Transfers and Exchanges .

 

a)

Different Denominations . This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same.  No service charge will be payable for such registration of transfer or exchange.

 

b)

Investment Representations . This Note has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.  


c)

Reliance on Note Register . Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.


Section 4.

Conversion .

 

a)

Voluntary Conversion . This Note shall be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in Section 4(d) hereof).  The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “ Notice of Conversion ”), specifying therein the principal amount of this Note to be converted and the date on which such conversion shall be effected (such date, the “ Conversion Date ”).  If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder.  No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required.   To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to the Company unless the entire principal amount of this Note, plus all accrued and



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unpaid interest thereon, has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion.  The Holder and the Company shall maintain a Conversion Schedule showing the principal amount(s) converted and the date of such conversion(s).  The Company may deliver an objection to any Notice of Conversion within one (1) Business Day of delivery of such Notice of Conversion.  In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.

 

b)

Conversion Price .  The conversion price (the “ Conversion Price ”) in effect on any Conversion Date shall be equal to 60% of the lowest traded price of the Common Stock in the twenty (20) Trading Days prior to the Conversion Date.  Notwithstanding anything herein to the contrary, at any time after the occurrence of any Event of Default the Holder may require the Company to, at such Holder’s option and otherwise in accordance with the provisions for conversion herein, convert all or any part of this Note into Common Stock at the Alternative Conversion Price.  All such foregoing determinations will be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during such measuring period.  Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 6 hereof and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.  The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.  


c)

Mechanics of Conversion .

 

i.

Conversion Shares Issuable Upon Conversion of Principal Amount .  The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted and any accrued and unpaid interest to be converted by (y) the Conversion Price.


ii.

Delivery of Certificate Upon Conversion . Not later than three (3) Trading Days after each Conversion Date (the “ Share Delivery Date ”), the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or certificates representing the Conversion Shares which, on or after the date on which such Conversion Shares are eligible to be sold under Rule 144 without the need for current public information and the Company has received an opinion of counsel to such effect reasonably acceptable to the Company (which opinion the Company will be responsible for obtaining) shall be free of restrictive legends and



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trading restrictions (other than those which may then be required by the Purchase Agreement) representing the number of Conversion Shares being acquired upon the conversion of this Note, and (B) payment in the amount of accrued and unpaid interest (if the Company has elected or is required to pay accrued interest in cash). All certificate or certificates required to be delivered by the Company under this Section 4(d) shall be delivered electronically through the Depository Trust Company or another established clearing corporation performing similar functions. If the Conversion Date is prior to the date on which such Conversion Shares are eligible to be sold under Rule 144 without the need for current public information the Conversion Shares shall bear a restrictive legend in substantially the following form, as appropriate:


“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”


Notwithstanding the foregoing, commencing on such date that the Conversion Shares are eligible for sale under Rule 144 subject to current public information requirements, the Company, upon request of the Holder, shall obtain a legal opinion to allow for such sales under Rule 144.

 

iii.

Failure to Deliver Certificates .  If, in the case of any Notice of Conversion, such certificate or certificates are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event the Company shall promptly return to the Holder any original Note delivered to the Company and the Holder shall promptly return to the Company the Common Stock certificates issued to such Holder pursuant to the rescinded Conversion Notice.



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iv.

Obligation Absolute; Partial Liquidated Damages .  The Company’s obligations to issue and deliver the Conversion Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided , however , that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder.  In the event the Holder of this Note shall elect to convert any or all of the outstanding principal  or interest amount hereof, the Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Note shall have been sought and obtained, and the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the outstanding principal amount of this Note, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to the Holder to the extent it obtains judgment.  In the absence of such injunction, the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion.  If the Company fails for any reason to deliver to the Holder such certificate or certificates pursuant to Section 4(c)(ii) by the Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, $1,000 per Trading Day for each Trading Day after such Share Delivery Date until such certificates are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 6 hereof for the Company’s failure to deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.  The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

v.

Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion . In addition to any other rights available to the Holder, if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant to Section 4(c)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm



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otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “ Buy-In ”), then the Company shall (A) pay in cash to the Holder (in addition to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Note in a principal amount equal to the principal amount of the attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued if the Company had timely complied with its delivery requirements under Section 4(c)(ii).  For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this Note with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000.  The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon conversion of this Note as required pursuant to the terms hereof.

 

vi.

Reservation of Shares Issuable Upon Conversion . The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock a number of shares of Common Stock at least equal to 300% of the Required Minimum for the sole purpose of issuance upon conversion of this Note and payment of interest on this Note, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Notes), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the then outstanding principal amount of this Note and payment of interest hereunder.  The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.




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vii.

Fractional Shares . No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note.  As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.


viii.

Transfer Taxes and Expenses .  The issuance of certificates for shares of the Common Stock on conversion of this Note shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Note so converted and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.  The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion.


d)

Holder’s Conversion Limitations .  The Company shall not effect any conversion of principal and/or interest of this Note, and a Holder shall not have the right to convert any principal and/or interest of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other Notes) beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 4(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  To the extent that the limitation contained in this Section 4(d) applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure



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compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination.   In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder .   For purposes of this Section 4(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “ Beneficial Ownership Limitation ” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note held by the Holder.  The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 4(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note held by the Holder and the Beneficial Ownership Limitation provisions of this Section 4(e) shall continue to apply.  Any such increase or decrease will not be effective until the 61 st day after such notice is delivered to the Company.   The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note .

 

Section 5 .

Certain Adjustments .

 

a)

Stock Dividends and Stock Splits .  If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of, or payment of interest on, the Notes), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a



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reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b)

Subsequent Equity Sales .  If, at any time while this Note is outstanding,  the Company or any Subsidiary, as applicable, sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “ Base Conversion Price ” and such issuances, collectively, a “ Dilutive Issuance ”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price.  Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued.  Notwithstanding the foregoing, no adjustment will be made under this Section 5(b) in respect of an Exempt Issuance.  The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 5(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “ Dilutive Issuance Notice ”).  For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder will be entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.

c)

Subsequent Rights Offerings .  In addition to any adjustments pursuant to Section 5(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “ Purchase Rights ”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on exercise hereof, including without limitation,



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the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

d)

Fundamental Transaction . If, at any time while this Note is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) the Company , directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “ Fundamental Transaction ”), then, upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 4(e) on the conversion of this Note), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “ Alternate Consideration ”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Note is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(d) on the conversion of this Note).  For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among



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the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following such Fundamental Transaction.  The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “ Successor Entity ”) to assume in writing all of the obligations of the Company under this Note and the Purchase Agreement in accordance with the provisions of this Section 5(d) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Note, deliver to the Holder in exchange for this Note a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Note which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Note (without regard to any limitations on the conversion of this Note) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Note immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

e)

Calculations .  All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.  For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.


f)

Notice to the Holder .


i.

Adjustment to Conversion Price .  Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.  

 



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ii.

Notice to Allow Conversion by Holder .  If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Note Register, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice.  To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.  The Holder shall remain entitled to convert this Note during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

Section 6 .

Events of Default .  


a)

Event of Default ” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):




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i.

any default in the payment of (A) the principal amount of any Note or (B) interest, liquidated damages and other amounts owing to a Holder on any Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within 3 Trading Days;

 

ii.

the Company shall materially fail to observe or perform any other material covenant or material agreement contained in the Notes (other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (ix) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) 5 Trading Days after notice of such failure sent by the Holder or by any other Holde r to the Company and (B) 10 Trading Days after the Company has become or should have become aware of such failure;


iii.

a default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall occur under (A) any of the Transaction Documents or (B) any other material agreement, lease, document or instrument to which the Company or any Subsidiary is obligated (and not covered by clause (vi) below);


iv.

any repres entation or warranty made in this Note, any other Transaction Documents, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;


v.

the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X)  shall be subject to a Bankruptcy Event;

 

vi.

the Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater than $100,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;


vii.

the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume listing or quotation for trading thereon within five Trading Days or the transfer of shares of



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Common Stock through the Depository Trust Company System is no longer available or “chilled”;


viii.

the Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of all or in excess of 50% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);


ix.

the Company does not meet the current public information requirements under Rule 144 in respect of the Registrable Securities (as defined in the Registration Rights Agreement);


x.

if, during the Effectiveness Period (as defined in the Registration Rights Agreement), either (a) the effectiveness of the Registration Statement lapses for any reason or (b) the Holder shall not be permitted to resell Registrable Securities (as defined in the Registration Rights Agreement) under the Registration Statement for a period of more than 20 consecutive Trading Days or 30 non-consecutive Trading Days during any 12 month period; provided , however , that if the Company is negotiating a merger, consolidation, acquisition or sale of all or substantially all of its assets or a similar transaction and, in the written opinion of counsel to the Company, the Registration Statement would be required to be amended to include information concerning such pending transaction(s) or the parties thereto which information is not available or may not be publicly disclosed at the time, the Company shall be permitted an additional 10 consecutive Trading Days during any 12 month period pursuant to this Section 6(a)(x);


xi.

the Company shall fail for any reason to deliver certificates to a Holder on or prior to the third Trading Day after a Conversion Date pursuant to Section 4(c) or the Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s intention to not honor requests for conversions of any Notes in accordance with the terms hereof;


xii.

the Company fails to file with the Commission any required reports under Section 13 or 15(d) of the Exchange Act such that it is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable);


xiii.

if the Company or any Significant Subsidiary shall: (i) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of it or any of its properties, (ii) admit in writing its inability to pay its debts as they mature, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated bankrupt or insolvent or be the subject of an order for relief under Title 11 of the United States Code or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute of any other jurisdiction or foreign country, or (v) file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage or any bankruptcy, reorganization, insolvency, readjustment of



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debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law, or (vi) take or permit to be taken any action in furtherance of or for the purpose of effecting any of the foregoing;


xiv.

if any order, judgment or decree shall be entered, without the application, approval or consent of the Company or any Significant Subsidiary, by any court of competent jurisdiction, approving a petition seeking liquidation or reorganization of the Company or any Subsidiary, or appointing a receiver, trustee, custodian or liquidator of the Company or any Subsidiary, or of all or any substantial part of its assets, and such order, judgment or decree shall continue unstayed and in effect for any period of sixty (60) days;


xv.

the occurrence of any levy upon or seizure or attachment of, or any uninsured loss of or damage to, any property of the Company or any Subsidiary having an aggregate fair value or repair cost (as the case may be) in excess of $100,000 individually or in the aggregate, and any such levy, seizure or attachment shall not be set aside, bonded or discharged within thirty (30) days after the date thereof;


xvi.

the Company shall fail to maintain sufficient reserved shares pursuant to Section 4(c)(vi);


xvii.

any monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their respective property or other assets for more than $100,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days; or


xviii.

the Company has not filed a Schedule 14C with the Commission to increase the number of authorized shares of Common Stock to a number reasonably acceptable to the Holder within thirty (30) days after the first Closing Date and has not used its reasonable best efforts to cause such increase to become effective.


b)

Remedies Upon Event of Default . Subject to the Beneficial Ownership Limitation as set forth in Section 4(d), if any Event of Default occurs, then the outstanding principal amount of this Note, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount.  After the occurrence of any Event of Default that results in the eventual acceleration of this Note, the interest rate on this Note shall accrue at an additional interest rate equal to the lesser of 2% per month (24% per annum) or the maximum rate permitted under applicable law.  Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Note to or as directed by the Company.  In connection with such acceleration described herein, the



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Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law.  Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 6(b).  No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.


Section 7 .

Miscellaneous .  

 

a)

Notices .  Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 7(a).  Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of the Holder as set forth in the Purchase Agreement or as  appearing on the books of the Company, or such other facsimile number or address as the Holder may specify for such purposes by notice to the Company delivered in accordance with this Section 7(a). Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 12:00 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 12:00 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.

 

b)

Absolute Obligation . Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed.  This Note is a direct debt obligation of the Company.  This Note ranks pari passu with all other Notes now or hereafter issued under the terms set forth herein.   

 

c)

Lost or Mutilated Note .  If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost,



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stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.


d)

Governing Law .  All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof.  Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “ New York Courts ”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

e)

Waiver .  Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note.  The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion.  Any waiver by the Company or the Holder must be in writing.  

 

f)

Severability .  If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.  If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate



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of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

 

g)

Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief.   The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note.  The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note.


h)

Next Business Day .  Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.


i)

Headings .  The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.


*********************


(Signature Pages Follow)



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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.



FORCE PROTECTION VIDEO EQUIPMENT CORP.


By:/s/ Paul Feldman

     Name: Paul Feldman

     Title: President

Facsimile No. for delivery of Notices: _______________

 

 



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ANNEX A


NOTICE OF CONVERSION



The undersigned hereby elects to convert principal under the 8% Convertible Promissory Note due April 12, 2016 of Force Protection Video Equipment Corp. (the “ Company ”), into shares of common stock (the “ Common Stock ”), of the Company according to the conditions hereof, as of the date written below.  If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.  No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.


By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts specified under Section 4 of this Note, as determined in accordance with Section 13(d) of the Exchange Act.


The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.  


Conversion calculations:

Date to Effect Conversion:


Principal Amount of Note to be Converted:


Payment of Interest in Common Stock __ yes  __ no

If yes, $_____ of Interest Accrued on Account of Conversion at Issue.


Number of shares of Common Stock to be issued:



Signature:


Name:


Delivery Instructions:




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Schedule 1


CONVERSION SCHEDULE


This 8% Convertible Promissory Note due on April 12, 2016 in the original principal amount of $157,500 is issued by Force Protection Video Equipment Corp.  This Conversion Schedule reflects conversions made under Section 4 of the above referenced Note.


Dated:



Date of Conversion

(or for first entry, Original Issue Date)


Amount of Conversion


Aggregate Principal Amount Remaining Subsequent to Conversion

(or original Principal Amount)


Company Attest













 






































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REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “ Agreement ”) is made and entered into as of November 12 , 2015, between Force Protection Video Equipment Corp . , a Delaware corporation (the “ Company ”), and the purchaser signatory hereto (the “ Purchaser ”).

 

This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date hereof, between the Company and each Purchaser (the “ Purchase Agreement ”).


The Company and each Purchaser hereby agrees as follows:


1. Definitions .


Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement.


As used in this Agreement, the following terms shall have the following meanings:


Advice ” shall have the meaning set forth in Section 6(d).


Effectiveness Date ” means, with respect to the Initial Registration Statement required to be filed hereunder, the 90 th calendar day following the Filing Date, and with respect to any additional Registration Statements which may be required pursuant to Section 2(c) or Section 3(c), the 90 th calendar day following the date on which an additional Registration Statement is required to be filed hereunder; provided , however , that in the event the Company is notified by the Commission that one or more of the above Registration Statements will not be reviewed or is no longer subject to further review and comments, the Effectiveness Date as to such Registration Statement shall be the fifth Trading Day following the date on which the Company is so notified if such date precedes the dates otherwise required above, provided, further, if such Effectiveness Date falls on a day that is not a Trading Day, then the Effectiveness Date shall be the next succeeding Trading Day.


Effectiveness Period ” shall have the meaning set forth in Section 2(a).


Event ” shall have the meaning set forth in Section 2(d).


Event Date ” shall have the meaning set forth in Section 2(d).

 

Filing Date ” means, with respect to the Initial Registration Statement required hereunder, the 45 th calendar day after the initial Closing Date, and, with respect to any additional Registration Statements which may be required pursuant to Section 2(c) or Section 3(c), the earliest practical date on which the Company is permitted by SEC Guidance to file such additional Registration Statement related to the Registrable Securities.


Holder ” or “ Holders ” means the holder or holders, as the case may be, from time to time of Registrable Securities.



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Indemnified Party ” shall have the meaning set forth in Section 5(c).


Indemnifying Party ” shall have the meaning set forth in Section 5(c).


Initial Registration Statement ” means the initial Registration Statement filed pursuant to this Agreement.


Losses ” shall have the meaning set forth in Section 5(a).


Prospectus ” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated by the Commission pursuant to the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.


Registrable Securities ” means, as of any date of determination, (a) all of the shares of Common Stock then issued and issuable upon conversion in full of the Notes (assuming on such date the Notes are converted in full without regard to any conversion limitations therein), (b) all shares of Common Stock issued and issuable as interest or principal on the Notes assuming all permissible interest and principal payments are made in shares of Common Stock and the Notes are held until maturity, (c) any additional shares of Common Stock issued and issuable in connection with any anti-dilution provisions in the Notes (without giving effect to any limitations on conversion set forth in the Notes) and (d) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, however , that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) for so long as (a) a Registration Statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable Securities have been disposed of by the Holder in accordance with such effective Registration Statement, (b) such Registrable Securities have been previously sold in accordance with Rule 144, or (c) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Transfer Agent and the affected Holders (assuming that such securities and any securities issuable upon exercise, conversion or exchange of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held by any Affiliate of the Company), as reasonably determined by the Company, upon the advice of counsel to the Company.

 

  

  




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2





Registration Statement ” means any registration statement required to be filed hereunder pursuant to Section 2(a) and any additional registration statements contemplated by Section 2(c) or Section 3(c), including (in each case) the Prospectus, amendments and supplements to any such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in any such registration statement.


Rule 415 ” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.


Rule 424 ” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.


Selling Stockholder Questionnaire ” shall have the meaning set forth in Section 3(a).


SEC Guidance ” means (i) any publicly-available written or oral guidance of the Commission staff, or any comments, requirements or requests of the Commission staff and (ii) the Securities Act.


2. Registration .


(a)  Not later than the Filing Date, the Company shall file with the Commission a Registration Statement on Form S-1 relating to the resale by the Holders all (or such other number as the Commission will permit) of the Registrable Securities.  Subject to the terms of this Agreement, the Company shall use its best efforts to cause a Registration Statement filed under this Agreement (including, without limitation, under Section 3(c)) to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the applicable Effectiveness Date, and shall use its best efforts to keep such Registration Statement continuously effective under the Securities Act until all Registrable Securities covered by such Registration Statement (i) have been sold, thereunder or pursuant to Rule 144, or (ii) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the affected Holders (the “ Effectiveness Period ”).  


(b)  Notwithstanding the registration obligations set forth in Section 2(a), if the Commission informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to the Initial Registration Statement as required by the Commission, covering the maximum number of Registrable Securities permitted



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to be registered by the Commission, on Form S-1 or such other form available to register for resale the Registrable Securities as a secondary offering, subject to the provisions of Section 2(e); with respect to filing on Form S-1 or other appropriate form, and subject to the provisions of Section 2(d) with respect to the payment of liquidated damages; provided , however , that prior to filing such amendment, the Company shall be obligated to use diligent efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with the SEC Guidance, including without limitation, Compliance and Disclosure Interpretation 612.09.

 

(c) Notwithstanding any other provision of this Agreement and subject to the payment of liquidated damages pursuant to Section 2(d), if the Commission or any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater portion of Registrable Securities), unless otherwise directed in writing by a Holder as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will be reduced as follows:

 

a.  First, the Company shall reduce or eliminate any securities to be included by any Person other than a Holder;


c.  Second, the Company shall reduce Registrable Securities represented by Conversion Shares (applied, in the case that some Conversion Shares may be registered, to the Holders on a pro rata basis based on the total number of unregistered Conversion Shares held by such Holders).

 

In the event of a cutback hereunder, the Company shall give the Holder at least five (5) Trading Days prior written notice along with the calculations as to such Holder’s allotment. In the event the Company amends the Initial Registration Statement in accordance with the foregoing, the Company will use its best efforts to file with the Commission, as promptly as allowed by Commission or SEC Guidance provided to the Company or to registrants of securities in general, one or more registration statements on Form S-1 or such other form available to register for resale those Registrable Securities that were not registered for resale on the Initial Registration Statement, as amended.


 (d) If: (i) the Initial Registration Statement is not filed on or prior to the Filing Date (if the Company files the Initial Registration Statement without affording the Holders the opportunity to review and comment on the same as required by Section 3(a) herein, the Company shall be deemed to have not satisfied this clause (i)), or (ii) the Company fails to file with the Commission a request for acceleration of a Registration Statement in accordance with Rule 461 promulgated by the Commission pursuant to the Securities Act, within five Trading Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that such Registration Statement will not be “reviewed” or will not be subject to further review, or (iii) prior to the effective date of a Registration Statement, the Company fails to file a pre-effective amendment and otherwise respond in writing to comments made by the Commission in respect of such Registration Statement within ten (10) calendar days after the receipt of comments by or notice from the Commission that such amendment is required in order for such



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Registration Statement to be declared effective, or (iv) a Registration Statement registering for resale all of the Registrable Securities is not declared effective by the Commission by the Effectiveness Date of the Initial Registration Statement, or (v) after the effective date of a Registration Statement, such Registration Statement ceases for any reason to remain continuously effective as to all Registrable Securities included in such Registration Statement, or the Holders are otherwise not permitted to utilize the Prospectus therein to resell such Registrable Securities, for more than ten (10) consecutive calendar days or more than an aggregate of fifteen (15) calendar days (which need not be consecutive calendar days) during any 12-month period (any such failure or breach being referred to as an “ Event ”, and for purposes of clauses (i) and (iv), the date on which such Event occurs, and for purpose of clause (ii) the date on which such five (5) Trading Day period is exceeded, and for purpose of clause (iii) the date which such ten (10) calendar day period is exceeded, and for purpose of clause (v) the date on which such ten (10) or fifteen (15) calendar day period, as applicable, is exceeded being referred to as “ Event Date ”), then, in addition to any other rights the Holders may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as partial liquidated damages and not as a penalty, equal to the product of 1.0% multiplied by the aggregate Subscription Amount paid by such Holder pursuant to the Purchase Agreement. If the Company fails to pay any partial liquidated damages pursuant to this Section in full within seven days after the date payable, the Company will pay interest thereon at a rate of 18% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro rata basis for any portion of a month prior to the cure of an Event.

 

(e) If Form S-1 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on another appropriate form and (ii) undertake to register the Registrable Securities on Form S-1 as soon as such form is available, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-1 covering the Registrable Securities has been declared effective by the Commission.

   

3. Registration Procedures .

 

In connection with the Company’s registration obligations hereunder, the Company shall:


(a) Not less than five (5) Trading Days prior to the filing of each Registration Statement and not less than one (1) Trading Day prior to the filing of any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall (i) furnish to each Holder copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of such Holders, and (ii) cause its officers and directors, counsel and independent registered public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to each Holder, to conduct a reasonable investigation within the meaning of



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the Securities Act. Notwithstanding the above, the Company shall not be obligated to provide the Holders advance copies of any universal registration statement registering securities in addition to those required hereunder, or any Prospectus prepared thereto. The Company shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of a majority of the Registrable Securities shall reasonably object in good faith, provided that, the Company is notified of such objection in writing no later than five (5) Trading Days after the Holders have been so furnished copies of a Registration Statement or one (1) Trading Day after the Holders have been so furnished copies of any related Prospectus or amendments or supplements thereto. Each Holder agrees to furnish to the Company a completed questionnaire in the form attached to this Agreement as Annex B (a “ Selling Stockholder Questionnaire ”) on a date that is not less than two (2) Trading Days prior to the Filing Date or by the end of the fourth (4 th ) Trading Day following the date on which such Holder receives draft materials in accordance with this Section.


(b) (i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities, (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424, (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto and provide as promptly as reasonably possible to the Holders true and complete copies of all correspondence from and to the Commission relating to a Registration Statement (provided that, the Company shall excise any information contained therein which would constitute material non-public information regarding the Company or any of its Subsidiaries), and (iv) comply in all material respects with the applicable provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.

  

(c) If during the Effectiveness Period, the number of Registrable Securities at any time exceeds 100% of the number of shares of Common Stock then registered in a Registration Statement, then the Company shall file as soon as reasonably practicable, but in any case prior to the applicable Filing Date, an additional Registration Statement covering the resale by the Holders of not less than the number of such Registrable Securities.


(d) Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (and, in the case of (i)(A) below, not less than one (1) Trading Day prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective



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amendment to a Registration Statement is proposed to be filed, (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement, and (C) with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information, (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose, (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus, provided , however , in no event shall any such notice contain any information which would constitute material, non-public information regarding the Company or any of its Subsidiaries.


(e) Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

 

(f) Furnish to each Holder, without charge, at least one conformed copy of each such Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference to the extent requested by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission; provided, that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form.


(g) Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(d).




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(h)  The Company shall cooperate with any broker-dealer through which a Holder proposes to resell its Registrable Securities in effecting a filing with the FINRA Corporate Financing Department pursuant to FINRA Rule 5110, as requested by any such Holder, and the Company shall pay the filing fee required by such filing within two (2) Business Days of request therefor.


(i) Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided, that, the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.


(j) If requested by a Holder, cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request.


(k) Upon the occurrence of any event contemplated by Section 3(d), as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Holders in accordance with clauses (iii) through (vi) of Section 3(d) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company shall be entitled to exercise its right under this Section 3(k) to suspend the availability of a Registration Statement and Prospectus, subject to the payment of partial liquidated damages otherwise required pursuant to Section 2(d), for a period not to exceed sixty (60) calendar days (which need not be consecutive days) in any 12-month period.


(l) Comply with all applicable rules and regulations of the Commission.




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(m) The Company shall use its best efforts to maintain eligibility for use of Form S-1 (or any successor form thereto) for the registration of the resale of Registrable Securities.


(n) The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by such Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the shares. During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of the Registrable Securities solely because any Holder fails to furnish such information within three Trading Days of the Company’s request, any liquidated damages that are accruing at such time as to such Holder only shall be tolled and any Event that may otherwise occur solely because of such delay shall be suspended as to such Holder only, until such information is delivered to the Company.

 

4. Registration Expenses . All fees and expenses incident to the performance of or compliance with, this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the Commission, (B) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities) and (D) if not previously paid by the Company in connection with an Issuer Filing, with respect to any filing that may be required to be made by any broker through which a Holder intends to make sales of Registrable Securities with FINRA pursuant to FINRA Rule 5110, so long as the broker is receiving no more than a customary brokerage commission in connection with such sale, (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.

 

5. Indemnification .


(a)  Indemnification by the Company . The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities



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as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, stockholders, partners, agents and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “ Losses ”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement, such Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex A hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)-(vi), the use by such Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by such Holder and prior to the receipt by such Holder of the Advice contemplated in Section 6(d), but only if and to the extent that following the receipt of the Advice the misstatement or omission giving rise to such Loss would have been corrected. The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified person and shall survive the transfer of any Registrable Securities by any of the Holders in accordance with Section 6(h).

  

(b)  Indemnification by Holders . Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: (x) such Holder’s failure to comply with any applicable prospectus delivery requirements of the Securities Act through no fault of the Company or (y) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or in any amendment or supplement thereto or in any



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preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company expressly for inclusion in such Registration Statement or such Prospectus or (ii) to the extent, but only to the extent, that such information relates to such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), such Prospectus or in any amendment or supplement thereto or (iii) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)-(vi), to the extent, but only to the extent, related to the use by such Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by such Holder and prior to the receipt by such Holder of the Advice contemplated in Section 6(d), but only if and to the extent that following the receipt of the Advice the misstatement or omission giving rise to such Loss would have been corrected. In no event shall the liability of any selling Holder under this Section 5(b) be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.


(c)  Conduct of Indemnification Proceedings . If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “ Indemnified Party ”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “ Indemnifying Party ”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that, the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially and adversely prejudiced the Indemnifying Party.


 An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses, (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding, or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such



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Proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.


 Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written notice thereof to the Indemnifying Party; provided, that, the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) not to be entitled to indemnification hereunder.


(d)  Contribution . If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.

  

 The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute pursuant to this Section 5(d), in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.


The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.



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6. Miscellaneous .


(a)  Remedies . In the event of a breach by the Company or by a Holder of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. Each of the Company and each Holder agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.


(b)  No Piggyback on Registration Statement . Neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in the Registration Statement filed hereunder other than the Registrable Securities; provided that the Company and its security holders may include up to $200,000 of Common Stock held by parties other than the Holders in the Registration Statement filed hereunder.


(c)  Compliance . Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it (unless an exemption therefrom is available) in connection with sales of Registrable Securities pursuant to a Registration Statement.


(d)  Discontinued Disposition . By its acquisition of Registrable Securities, each Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(d)(iii) through (vi), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “ Advice ”) by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company agrees and acknowledges that any periods during which the Holder is required to discontinue the disposition of the Registrable Securities hereunder shall be subject to the provisions of Section 2(d).


(e)  Piggy-Back Registrations . If, at any time during the Effectiveness Period, there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Company’s stock option or other employee benefit plans, then the Company shall deliver to each Holder a written notice of such determination and, if within fifteen days after the date of the delivery of such notice, any such Holder shall so request in writing, the



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13





Company shall include in such registration statement all or any part of such Registrable Securities such Holder requests to be registered; provided , however , that the Company shall not be required to register any Registrable Securities pursuant to this Section 6(e) that are eligible for resale pursuant to Rule 144 (without volume restrictions or current public information requirements) promulgated by the Commission pursuant to the Securities Act or that are the subject of a then effective Registration Statement.


(f)  Amendments and Waivers . The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of 67% or more of the then outstanding Registrable Securities (for purposes of clarification, this includes any Registrable Securities issuable upon exercise or conversion of any Security). If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders and each Holder shall have the right to designate which of its Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of a Holder or some Holders and that does not directly or indirectly affect the rights of other Holders may be given only by such Holder or Holders of all of the Registrable Securities to which such waiver or consent relates; provided , however , that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the first sentence of this Section 6(f). No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.

 

(g)  Notices . Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement.


(h)  Successors and Assigns . This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign (except by merger) its rights or obligations hereunder without the prior written consent of all of the Holders of the then outstanding Registrable Securities. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under Section 5.7 of the Purchase Agreement.


(i)  No Inconsistent Agreements . Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Except as set forth on Schedule 6(i) , neither the Company nor any of its Subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person that have not been satisfied in full.




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(j)  Execution and Counterparts . This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.


(k)  Governing Law . All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the provisions of the Purchase Agreement.


(l)  Cumulative Remedies . The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.


(m)  Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

(n)  Headings . The headings in this Agreement are for convenience only, do not constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions hereof.


(o)  Independent Nature of Holders’ Obligations and Rights . The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Holders are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by this Agreement or any other matters, and the Company acknowledges that the Holders are not acting in concert or as a group, and the Company shall not asset any such claim, with respect to such obligations or transactions. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose. The use of a single agreement with respect to the obligations of the Company contained was solely in the control of the Company, not the action or decision of any Holder, and was done solely for the convenience of the Company and not because it was required or requested to do so by any



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Holder. It is expressly understood and agreed that each provision contained in this Agreement is between the Company and a Holder, solely, and not between the Company and the Holders collectively and not between and among Holders.


********************

 

(Signature Pages Follow)

 



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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

 

FORCE PROTECTION VIDEO
EQUIPMENT CORP .



BY: /s/ Paul Feldman

        Title: President

 

        Name: Paul Feldman












 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

  



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[SIGNATURE PAGE OF HOLDERS TO RRA]

 

Name of Holder:

RDW Capital LLC

  

  

Signature of Authorized

 

 

 

  Signatory of Holder :

  /s/ John DeNobile

Name of Authorized Signatory:

John DeNobile

  

  

Title of Authorized Signatory:

AMBR

 



{00757960.DOCX;3 }{00757960.DOCX;3 }

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ANNEX A


[See attached]



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ANNEX B


Selling Stockholder Questionnaire





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Exhibit 10.5

[EXHIBIT105001.JPG]



1




[EXHIBIT105002.JPG]



2




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3




[EXHIBIT105004.JPG]



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[EXHIBIT105006.JPG]



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[EXHIBIT105007.JPG]



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[EXHIBIT105008.JPG]



8



Exhibit 10.6

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[EXHIBIT106002.JPG]



2




[EXHIBIT106003.JPG]



3




[EXHIBIT106004.JPG]



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[EXHIBIT106013.JPG]



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[EXHIBIT106024.JPG]



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[EXHIBIT106025.JPG]



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[EXHIBIT106026.JPG]



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Exhibit 10.7

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[EXHIBIT107002.JPG]



2




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[EXHIBIT107016.JPG]



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[EXHIBIT107017.JPG]



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[EXHIBIT107020.JPG]



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[EXHIBIT107022.JPG]



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[EXHIBIT107023.JPG]



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[EXHIBIT107024.JPG]



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Exhibit 10.9

[EXHIBIT109001.JPG]



1




[EXHIBIT109002.JPG]



2




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3




[EXHIBIT109004.JPG]



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[EXHIBIT109010.JPG]



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[EXHIBIT109011.JPG]



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[EXHIBIT109012.JPG]



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[EXHIBIT109013.JPG]



13




[EXHIBIT109014.JPG]



14




[EXHIBIT109015.JPG]



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[EXHIBIT109016.JPG]



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[EXHIBIT109017.JPG]



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[EXHIBIT109018.JPG]



18




[EXHIBIT109019.JPG]



19




[EXHIBIT109020.JPG]



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[EXHIBIT109021.JPG]



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[EXHIBIT109022.JPG]



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[EXHIBIT109025.JPG]



25






      

NEITHER THIS NOTE NOR THE SECURITIES THAT MAY BE ISSUED BY THE BORROWER UPON CONVERSION HEREOF (COLLECTIVELY, THE “SECURITIES”) HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THE SECURITIES NOR ANY INTEREST OR PARTICIPATION THEREIN MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED: (I) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT, OR APPLICABLE STATE SECURITIES LAWS; OR (II) IN THE ABSENCE OF AN OPINION OF COUNSEL, IN A FORM ACCEPTABLE TO THE ISSUER, THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT OR; (III) UNLESS SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144 UNDER THE 1933 ACT.


12% CONVERTIBLE NOTE

MATURITY DATE OF APRIL 6, 2016  *THE “MATURITY DATE”

$56,000   OCTOBER 6, 2015  *THE “ISSUANCE DATE”

PRINCIPAL AMOUNT: $56,000

PURCHASE PRICE: $51,000

FOR VALUE RECEIVED, Force Protection Video Equipment Corp., a Florida Corporation (the “ Company ”) doing business in Cary, NC, hereby promises to pay to the order of JSJ Investments Inc., an accredited investor and Texas Corporation, or its assigns (the “ Holder ”), the principal amount of Fifty Six Thousand Dollars ($56,000), on demand of the Holder at any time on or after April 6, 2015 (the “ Maturity Date ”), and to pay interest on the unpaid principal balance hereof at the rate of Twelve Percent (12%) per annum (the Interest Rate ) commencing on the date hereof (the Issuance Date ).

The Principal Amount is Fifty Six Thousand Dollars ($56,000) and the consideration paid by the Holder is Fifty One Thousand Dollars ($51,000) (the “Consideration”); there exists an original issue discount of $5,000 (the “OID”)).

1.

Payments of Principal and Interest.

a.

Payment of Principal.  At any time before, on, or after the Maturity Date, this note has a cash redemption premium of 150% of the principal amount, in addition to outstanding interest, which may only be exercised upon approval and acceptance by JSJ Investments Inc. Without the Holder’s consent to repayment or demand of repayment, the Company may not repay the Note, in whole or in part, under any circumstance.

b.

Demand of Repayment.  The principal and interest balance of this Note shall be paid to the Holder hereof on demand by the Holder at any time on or after the Maturity Date.

c.

Interest .  This Note shall bear interest (“Interest”) at the rate of Twelve Percent (12%) per annum from the Issuance Date until the same is paid, or otherwise converted in accordance with Section 2 below, in full and the Holder, at the Holder’s sole discretion, may include any accrued but unpaid Interest in the Conversion Amount. Interest shall commence accruing on the Issuance Date, shall be computed on the basis of a 365-day year and the actual number of days elapsed and shall accrue daily and, after the Maturity Date, compound quarterly. Upon an Event of Default, as defined in Section 10 below, the Interest Rate shall increase to Eighteen Percent (18%) per annum for so long as the Event of Default is continuing (“Default Interest”), provided however, if Holder does not demand repayment on or after the Maturity Date the interest rate shall remain at Twelve Percent (12%).

d.

General Payment Provisions.  This Note shall be made in lawful money of the United States of America by check to such account as the Holder may from time to time designate by written notice to the Company in accordance with the provisions of this Note.  Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day (as defined below), the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. For purposes of this Note, “ Business Day ” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the State of Texas are authorized or required by law or executive order to remain closed.




1






2.

Conversion of Note. At any time prior to, upon, or after the Maturity Date, the Conversion Amount (see Paragraph 2(a)(i)) of this Note shall be convertible into shares of the Company’s common stock (the Common Stock ”) according to the terms and conditions set forth in this Paragraph 2.

a.

Certain Defined Terms. For purposes of this Note, the following terms shall have the following meanings:

i.

Conversion Amount ” means the sum of (a) the principal amount of this Note to be converted with respect to which this determination is being made, (b) Interest; and (c) Default Interest, if any, on unpaid interest and principal, if so included at the Holder’s sole discretion.

ii.

Conversion Price ” means a 40% discount to the lowest trading price during the previous twenty (20) trading days to the date of a Conversion Notice.

iii.

Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

iv.

Shares means the Shares of the Common Stock of the Company into which any balance on this Note may be converted upon submission of a “ Conversion Notice ” to the Company substantially in the form attached hereto as Exhibit 1.

b.

Holder’s Conversion Rights. At any time or times on or after the Issuance Date, the Holder shall be entitled to convert all of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common Stock in accordance with the stated Conversion Price. The Holder shall not be entitled to convert on a Conversion Date that amount of the Note in connection with that number of shares of Common Stock which would be in excess of the sum of the number of shares of Common Stock issuable upon the conversion of the Note with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on such Conversion Date.  For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.  Subject to the foregoing, the Holder shall not be limited to aggregate conversions of 4.99% (“Conversion Limitation 1”).  The Holder shall have the authority to determine whether the restriction contained in this Section 2(b) will limit any conversion hereunder.  The Holder may waive the conversion limitation described in this Section 2(b) , in whole or in part, upon and effective after 61 days prior written notice to the Borrower to increase such percentage to up to 9.99% (“Conversion Limitation 2”).

c.

Fractional Shares. The Company shall not issue any fraction of a share of Common Stock upon any conversion; if such issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share except in the event that rounding up would violate the conversion limitation set forth in section 2(b) above.

d.

Conversion Amount. The Conversion Amount shall be converted pursuant to Rule 144(b)(1)(ii) and Rule 144(d)(1)(ii) as promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended, into unrestricted shares at the Conversion Price.

e.

Mechanics of Conversion. The conversion of this Note shall be conducted in the following manner:

i.

Holder’s Conversion Requirements. To convert this Note into shares of Common Stock on any date set forth in the Conversion Notice by the Holder (the “ Conversion Date ”), the Holder hereof shall transmit by email, facsimile or otherwise deliver, for receipt on or prior to 11:59 p.m., Eastern Time, on such date or on the next business day, a copy of a fully executed notice of conversion in the form attached hereto as Exhibit 1 to the Company.

ii.

Company’s Response. Upon receipt by the Company of a copy of a Conversion Notice, the Company shall as soon as practicable, but in no event later than one (1) Business Day after receipt of such Conversion Notice, send, via email, facsimile or overnight courier, a confirmation of receipt of such Conversion Notice to such Holder indicating that the Company will process such Conversion Notice in accordance with the terms herein. Within two (2) Business Days after the date the Conversion Notice is delivered, the Company shall have issued and electronically transferred the shares to the Broker indicated in the Conversion Notice; should the Company be unable to transfer the shares electronically, it shall, within two (2) Business Days after the date the Conversion was delivered, have surrendered to an overnight courier for delivery the next day to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder, for the number of shares of Common Stock to which the Holder shall be entitled.



2






iii.

Record Holder. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.

iv.

Timely Response by Company. Upon receipt by Company of a Conversion Notice, Company shall respond within one business day to Holder confirming the details of the Conversion, and provide within two business days the Shares requested in the Conversion Notice.

v.

Liquidated Damages for Delinquent Response. If the Company fails to deliver for whatever reason (including any neglect or failure by, e.g., the Company, its counsel or the transfer agent) to Holder the Shares as requested in a Conversion Notice within three (3) business days of the Conversion Date, the Company shall be deemed in “ Default of Conversion .” Beginning on the fourth (4 th ) business day after the date of the Conversion Notice, after the Company is deemed in Default of Conversion, there shall accrue liquidated damages (the “ Conversion Damages ”) of Additional Shares due to Holder equal to Twenty-Five percent (25%) of the number stated in the Conversion Notice and for every five (5) Trading Days while a Default of Conversion is in effect and continuing the Company shall continue to incur a Conversion Penalty in the amount of Twenty-Five percent (25%) of the number of shares stated in the Conversion Notice issuable to Holder (the “ Additional Shares ”), which may be applied to the Conversion at the Holder’s election. The Additional Shares shall be issued and the amount of the Note retired will not be reduced beyond that stated in the Conversion Notice.  If the Additional Shares owed the Holder cause the Shares requested by the Conversion Notice to exceed Conversion Limitation 1 or Conversion Limitation 2, as applicable, the Holder may opt instead to have the Conversion Amount reduced by the value, as calculated using the Conversion Price, of the Additional Shares owing. At any time after a Default of Conversion the Holder may, at their sole discretion, rescind the Conversion The Parties agree that, at the time of drafting of this Note, the Holder’s damages as to the delinquent response are incapable or difficult to estimate and that the liquidated damages called for is a reasonable forecast of just compensation.  

vi.

Liquidated Damages for Inability to Issue Shares. If the Company fails to deliver Shares requested by a Conversion Notice due to an exhaustion of authorized and issuable common stock such that the Company must increase the number of authorized Common Stock before the Shares requested may be issued to the Holder, the discount set forth in the Conversion Price will be increased by 5% for the Conversion Notice in question and all future Conversion Notices until the outstanding principal and interest of the Note is converted or paid in full. These liquidated damages shall not render the penalties prescribed by Paragraph 2(e)(v) void, and may be applied in conjunction with Paragraph 2(e)(v) at the Holder’s election. The Parties agree that, at the time of drafting of this Note, the Holder’s damages as to the inability to issue shares are incapable or difficult to estimate and that the liquidated damages called for is a reasonable forecast of just compensation.  

vii.

Rescindment of Conversion Notice. If (i) the Company fails to respond to Holder within one business day from the date of Conversion confirming the details of Conversion, (ii) the Company fails to provide the Shares requested in the Conversion Notice within three business days from the date of Conversion, (iii) the Holder is unable to procure a legal opinion required to have the Shares issued unrestricted and/or deposited to sell for any reason related to the Company's standing, (iv) the Holder is unable to deposit the Shares requested in the Conversion Notice for any reason related to the Company's standing, (v) if the Holder is informed that the Company does not have the authorized and issuable Shares available to satisfy the Conversion, or (vi) if OTC Markets changes the Company's designation to 'Limited Information' (Yield), 'No Information' (Stop Sign), 'Caveat Emptor' (Skull and Crossbones), or 'OTC', 'Other OTC' or 'Grey Market' (Exclamation Mark Sign) on the day of or any day after the date of Conversion, the Holder maintains the option and sole discretion to rescind the Conversion Notice (" Rescindment ") with a " Notice of Rescindment .”

viii.

Transfer Agent Fees and Legal Fees. The issuance of the certificates shall be without charge or expense to the Holder. The Company shall pay any and all Transfer Agent fees, legal fees, and advisory fees required for execution of this Convertible Note and processing of any Notice of Conversion, including but not limited to the cost of obtaining a legal opinion with regard to the Conversion. The Holder will deduct $1,000 from the principal payment of the Convertible Note solely to cover the cost of obtaining any and all legal opinions required to obtain the Shares requested in any given Conversion Notice. These fees do not make provision for or suffice to defray any legal fees incurred in collection or enforcement of the Note as described in Paragraph 13.

ix.

Conversion Right Unconditional.   If the Holder shall provide a Notice of Conversion as provided herein, the Company’s obligations to deliver Common Stock shall be absolute and unconditional, irrespective of any claim of setoff, counterclaim, recoupment, or alleged breach by the Holder of any obligation to the Company.


3.

Other Rights of Holders: Reorganization, Reclassification, Consolidation, Merger or Sale. Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company’s assets to another Person or other transaction which is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or



3






assets with respect to or in exchange for Common Stock is referred to herein as Organic Change. Prior to the consummation of any (i) Organic Change or (ii) other Organic Change following which the Company is not a surviving entity, the Company will secure from the Person purchasing such assets or the successor resulting from such Organic Change (in each case, the Acquiring Entity ) a written agreement (in form and substance reasonably satisfactory to the Holder) to deliver to Holder in exchange for this Note, a security of the Acquiring Entity evidenced by a written instrument substantially similar in form and substance to this Note, and reasonably satisfactory to the Holder.  Prior to the consummation of any other Organic Change, the Company shall make appropriate provision (in form and substance reasonably satisfactory to the Holders of a majority of the Conversion Amount of the Notes then outstanding) to ensure that each of the Holders will thereafter have the right to acquire and receive in lieu of or in addition to (as the case may be) the shares of Common Stock immediately theretofore acquirable and receivable upon the conversion of such Holder’s Note, such shares of stock, securities or assets that would have been issued or payable in such Organic Change with respect to or in exchange for the number of shares of Common Stock which would have been acquirable and receivable upon the conversion of such Holder’s Note as of the date of such Organic Change (without taking into account any limitations or restrictions on the convertibility of the Note set forth in Section 2(b) or otherwise).  All provisions of this Note must be included to the satisfaction of Holder in any new Note created pursuant to this section.


4.

Representations and Warranties of the Company. In connection with the transactions provided for herein, the Company hereby represents and warrants to the Holders the following.

a.

Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted.  The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties.

b.

Authorization. All corporate action has been taken on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement.  The Company has taken all corporate action required to make all of the obligations of the Company reflected in the provisions of this Agreement, valid and enforceable obligations. The shares of capital stock issuable upon conversion of the Notes have been authorized or will be authorized prior to the issuance of such shares.

c.

Fiduciary Obligations. The Company hereby represents that it intends to use the proceeds of the Notes primarily for the operations of its business and not for any personal, family, or household purpose.  The Company hereby represents that its board of directors, in the exercise of its fiduciary duty, has approved the execution of this Agreement based upon a reasonable belief that the loan provided for herein is appropriate for the Company after reasonable inquiry concerning its financial objectives and financial situation.  


5.

Covenants of the Company. So long as the Company shall have any obligations under this Note, the Company shall not without the Holder’s prior written consent pay, declare or set apart for such payment any dividend or other distribution (whether in cash, property, or other securities) on share of capital stock solely in the form of additional shares of Common Stock.

a.

So long as the Company shall have any obligations under this Note, the Company shall not without the Holder’s prior written consent redeem, repurchase, or otherwise acquire (whether for cash or in exchange for property or other securities) in any one transaction or series of transactions any shares of capital stock of the Company or any warrants, rights, or options to acquire any such shares.

b.

So long as the Company shall have any obligations under this Note, the Company shall not without the Holder’s prior written consent incur any liability for borrowed money, except (a) borrowings in existence as of this date and of which the Company has informed the Holder in writing before the date hereof or (b) indebtedness to trade creditors or financial institutions incurred in the ordinary course of business.

c.

So long as the Company shall have any obligations under this Note, the Company shall not without the Holder’s prior written consent sell, lease, or otherwise dispose of a significant portion of its assets outside the ordinary course of business.  Any consent to the disposition of any assets may be conditioned upon a specified use of the proceeds thereof.


6.

Issuance of Common Stock Equivalents. If the Company, at any time after the Issuance Date, shall issue any securities convertible into or exchangeable for, directly or indirectly, Common Stock (“ Convertible Securities ”), other than the Note, or any rights or warrants or options to purchase any such Common Stock or Convertible Securities, shall be issued or sold (collectively, the “ Common Stock Equivalents ”) and the



4






aggregate of the price per share for which Additional Shares of Common Stock may be issuable thereafter pursuant to such Common Stock Equivalent, plus the consideration received by the Company for issuance of such Common Stock Equivalent divided by the number of shares of Common Stock issuable pursuant to such Common Stock Equivalent (the “ Aggregate Per Common Share Price ”) shall be less than the applicable Conversion Price then in effect, or if, after any such issuance of Common Stock Equivalents, the price per share for which Additional Shares of Common Stock may be issuable thereafter is amended or adjusted, and such price as so amended shall make the Aggregate Per Share Common Price be less than the applicable Conversion Price in effect at the time of such amendment or adjustment, then the applicable Conversion Price upon each such issuance or amendment shall be reduced to the lower of: (i) the Conversion Price; or (ii) a twenty-five percent (25%) discount to the lowest Aggregate Per Common Share Price (whether or not such Common Stock Equivalents are actually then exercisable, convertible or exchangeable in whole or in part) as of the earlier of (A) the date on which the Company shall enter into a firm contract for the issuance of such Common Stock Equivalent, or (B) the date of actual issuance of such Common Stock Equivalent. No adjustment of the applicable Conversion Price shall be made under this Section 6 upon the issuance of any Convertible Security which is outstanding on the day immediately preceding the Issuance Date.


7.

Reservation of Shares. The Company shall at all times, so long as any principal amount of the Note is outstanding, reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Note, such number of shares of Common Stock as shall at all times be sufficient to effect the conversion of all of the principal amount of the Note then outstanding. The initial number of shares of Common Stock reserved for conversions of the Notes shall be calculated as four times the number of shares necessary to convert the entire value of the Note on the day it was executed, unless the Holder stipulates otherwise in the “Irrevocable Letter of Instructions to the Transfer Agent.”

a.

Capitalization.  So long as this Note is outstanding, upon written request of the Holder or via telephonic communication, the Company’s Transfer Agent shall furnish to the Holder the then-current number of common shares issued and outstanding, the then-current number of common shares authorized, the then-current number of unrestricted shares, and the then-current number of shares reserved for third parties.


8.

Voting Rights. Holders of this Note shall have no voting rights, except as required by law.


9.

Reissuance of Note. In the event of a conversion or redemption pursuant to this Note of less than all of the Conversion Amount represented by this Note, the Company shall promptly cause to be issued and delivered to the Holder, upon tender by the Holder of the Note converted or redeemed, a new note of like tenor representing the remaining principal amount of this Note which has not been so converted or redeemed and which is in substantially the same form as this Note, as set forth above.


10.

Default and Remedies.

a.

Event of Default. An Event of Default is:

i.

default for ten (10) days in payment of interest or Default Interest on this Note;

ii.

default in payment of the principal amount of this Note when due;

iii.

failure by the Company for thirty (30) days after notice to it to comply with any other material provision of this Note;

iv.

breach of any covenants, warranties, or representations by the Company herein;

v.

cessation of operations by the Company or a material subsidiary;

vi.

if the Company pursuant to or within the meaning of any Bankruptcy Law; (a) commences a voluntary case; (b) consents to the entry of an order for relief against it in an involuntary case; (c) consents to the appointment of a Custodian of it or



5






for all or substantially all of its property; (d) makes a general assignment for the benefit of its creditors; or (e) admits in writing that it is generally unable to pay its debts as the same become due;

vii.

a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (a) is for relief against the Company in an involuntary case; (b) appoints a Custodian of the Company or for all or substantially all of its property; or (c) orders the liquidation of the Company or any subsidiary, and the order or decree remains unstayed and in effect for thirty (30) days;

viii.

the Company files a Form 15;

ix.

the Company’s failure to timely file all reports required to be filed by it with the Securities and Exchange Commission; or

x.

OTC Markets changes the Company's designation to 'No Information' (Stop Sign), 'Caveat Emptor' (Skull and Crossbones), or 'OTC', 'Other OTC' or 'Grey Market' (Exclamation Mark Sign).

The Term “ Bankruptcy Law ” means Title 11, U.S. Code, or any similar Federal or State Law for the relief of debtors. The term “ Custodian ” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.

b.

Remedies. If an Event of Default occurs, the Holder may in its sole discretion determine to request immediate repayment of all or any portion of the Note that remains outstanding; at such time the Company will be required to redeem all or any portion of the Note so demanded (including all accrued and unpaid interest), in cash, at a price equal to 150% of the outstanding balance, plus accrued Interest and Default Interest and any other amounts then due under this Note.


11.

Vote to Change the Terms of this Note. This Note and any provision hereof may only be amended by an instrument in writing signed by the Company and holders of a majority of the aggregate Conversion Amount of the Notes then outstanding.


12.

Lost or Stolen Note. Upon receipt by the Company of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of an indemnification undertaking by the Holder to the Company in a form reasonably acceptable to the Company and, in the case of mutilation, upon surrender and cancellation of the Notes, the Company shall execute and deliver a new Note of like tenor and date and in substantially the same form as this Note; provided, however, the Company shall not be obligated to re-issue a Note if the Holder contemporaneously requests the Company to convert such remaining principal amount into Common Stock.


13.

Payment of Collection, Enforcement and Other Costs. If: (i) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding; or (ii) an attorney is retained to represent the Holder of this Note in any bankruptcy, reorganization, receivership or other proceedings affecting creditors’ rights and involving a claim under this Note, then the Company shall pay to the Holder all reasonable attorneys’ fees, costs and expenses incurred in connection therewith, in addition to all other amounts due hereunder.


14.

Cancellation. After all principal, accrued Interest and Default Interest, if any, at any time owed on this Note has been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.


15.

Waiver of Notice. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note.




6






16.

Governing Law. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the laws of the State of Texas, without giving effect to provisions thereof regarding conflict of laws. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in Texas for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by sending, through certified mail or overnight courier, a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.


17.

Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity (including a decree of specific performance and/or other injunctive relief), and no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder’s right to pursue actual damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder thereof and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof).


18.

Specific Shall Not Limit General; Construction. No specific provision contained in this Note shall limit or modify any more general provision contained herein. This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any person as the drafter hereof.


19.

Failure or Indulgence Not Waiver. No failure or delay on the part of this Note in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude further exercise thereof or of any other right, power or privilege.


20.

Partial Payment. In the event of partial payment by the Holder, the principal sum due to the Holder shall be prorated based on the consideration actually paid by the Holder such that the Company is only required to repay the amount funded and the Company is not required to repay any unfunded portion of this Note, with the exception of any OID contemplated herein. 


21.

Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects herein.   None of the terms of this Agreement can be waived or modified, except by an express agreement signed by each Party hereto.


22.

Representations and Warranties. The Company expressly acknowledges that the Holder, including but not limited to its officer, directors, employees, agents, and affiliates, have not made any representation or warranty to it outside the terms of this Agreement.  The Company further acknowledges that there have been no representations or warranties about future financing or subsequent transactions between the parties.


23.

Notices. All notices and other communications given or made to the Company pursuant hereto shall be in writing (including facsimile or similar electronic transmissions) and shall be deemed effectively given:  (i) upon personal delivery, (ii) when sent by electronic mail or facsimile, as



7






deemed received by the close of business on the date sent, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery.  All communications shall be sent either by email, or fax, or to the address specified on the signature page. The physical address, email address, and phone number provided on the signature page shall be considered valid pursuant to the above stipulations; should the Company’s contact information change from that listed on the signature page, it is incumbent on the Company to inform the Holder.


24.

Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the rest of the Agreement shall be enforceable in accordance with its terms.


25.

Usury.  If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any law that would prohibit or forgive the Company from paying all or a portion of the principal or interest on this Note.  


26.

Successors and Assigns. This Agreement shall be binding upon successors and assigns.


SIGNATURE PAGE TO FOLLOW




8







IN WITNESS WHEREOF, the Company has caused this Note to be signed by its CEO, on and as of the Issuance Date.


COMPANY


Signature: /s/Paul Feldman

  




By:

Paul Feldman




Title:

President




Address:

                 140 Iowa Lane

      


             

Suite 101


Cary, NC 27511



Email:

Paul@Forcevideo.com




Phone:

 

(919) 439-2430




Facsimile:

 ___________________________________________________



JSJ Investments Inc.



Signature:



[EXHIBIT1010002.GIF]


Sameer Hirji, President
JSJ Investments Inc.

6060 North Central Expressway, Suite 500

Dallas TX 75206

888-503-2599




9







Exhibit 1

Conversion Notice

Reference is made to the 12% Convertible Note issued by Force Protection Video Equipment Corp. (the "Note"), dated October 6, 2015 in the principal amount of $56,000 with 12% interest. This note currently holds a principal balance of $56,000. The features of conversion stipulate a Conversion Price equal to a 40% discount to the lowest trading price during the previous twenty (20) trading days to the date of a Conversion Notice, pursuant to the provisions of Section 2(a)(ii) in the Note.

In accordance with and pursuant to the Note, the undersigned hereby elects to convert $______ of the principal/interest balance of the Note, indicated below into shares of Common Stock (the "Common Stock"), of the Company, by tendering the Note specified as of the date specified below.  

Date of Conversion: __________

Please confirm the following information:

Conversion Amount:  $ ____________________

Conversion Price: $ ____________________ ( ____ % discount from $ ____________________)

Number of Common Stock to be issued: _____________________________________________________________________

Current Issued/Outstanding: _______________________________________________________________________________

If the Issuer is DWAC eligible, please issue the Common Stock into which the Note is being converted in the name of the Holder of the Note and transfer the shares electronically to:

[BROKER INFORMATION]

Holder Authorization:

JSJ Investments Inc.
6060 North Central Expressway, Suite 500

* Do not send certificates to this address
Dallas, TX 75206
888-503-2599

Tax ID: 20-2122354        


Sameer Hirji, President

     


[DATE]

[CONTINUED ON NEXT PAGE]




10







PLEASE BE ADVISED, pursuant to Section 2(e)(2) of the Note, “Upon receipt by the Company of a copy of the Conversion Notice, the Company shall as soon as practicable, but in no event later than one (1) Business Day after receipt of such Conversion Notice, SEND, VIA EMAIL, FACSIMILE OR OVERNIGHT COURIER, A CONFIRMATION OF RECEIPT OF SUCH CONVERSION NOTICE TO SUCH HOLDER INDICATING THAT THE COMPANY WILL PROCESS SUCH CONVERSION NOTICE in accordance with the terms herein. Within two (2) Business Days after the date of the Conversion Confirmation, the Company shall have issued and electronically transferred the shares to the Broker indicated in the Conversion Notice; should the Company be unable to transfer the shares electronically, they shall, within two (2) Business Days after the date of the Conversion Confirmation, have surrendered to FedEx for delivery the next day to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder, for the number of shares of Common Stock to which the Holder shall be entitled.”


Signature:



___________________________

Paul Feldman

CEO

Force Protection Video Equipment Corp.







11



NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.


Principal Amount: $105,000.00

Issue Date: August 25, 2015



8% CONVERTIBLE NOTE

FOR VALUE RECEIVED FORCE PROTECTION VIDEO EQUIPMENT CORP., a Florida corporation (“Borrower” or “Company”), hereby promises to pay to the order of EMA FINANCIAL, LLC, a Delaware limited liability company, or its registered assigns (the “Holder”), on August 25, 2016, (subject to extension as set forth below, the “Maturity Date”), the sum of $105,000.00 as set forth herein, together with interest on the unpaid principal balance hereof at the rate of eight (8%) per annum (the “Interest Rate”) from the date of issuance hereof until this Note plus any and all amounts due hereunder are paid in full, and any additional amounts set forth herein, including without limitation any Additional Principal (as defined herein). Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty-four (24%) per annum from the due date thereof until the same is paid (“Default Interest”).  All payments due hereunder shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement entered into by and between the Company and Holder dated on or about the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).  The Holder may, by written notice to the Borrower at least five (5) days before the Maturity Date (as may have been previously extended), extend the Maturity Date to up to one (1) year following the date of the original Maturity Date hereunder.



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Convertible Note – FPVD, T1, 2015-08-25




This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

The following terms shall apply to this Note:

ARTICLE I. CONVERSION RIGHTS

1.1.

Conversion Right . The Holder shall have the right, in its sole and absolute discretion, at any time and from time to time to convert all or any part of the outstanding amount due under this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”);  provided however , that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.9% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulation 13D-G thereunder, except as otherwise provided in clause (1) of such proviso,  provided further however , that the limitations on conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver). The number of shares of Common Stock to be issued upon each Conversion of this Note (“Conversion Shares”) shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 11:59 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any Conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such Conversion,  plus  (2) accrued and unpaid interest, if any, on such principal amount being converted at the interest rates provided in this Note to the Conversion Date, plus  (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2),  plus   (4) any Additional Principal for such Conversion, plus  (5) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.2(c) and 1.4(g) hereof.



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Convertible Note – FPVD, T1, 2015-08-25




1.2.

Conversion Price .


a)

Calculation of Conversion Price . The conversion price hereunder (the “Conversion Price”) shall equal the lower of: (i) the closing sale price of the Common Stock on the Principal Market on the Trading Day immediately preceding the Closing Date, and (ii) 60% of the lowest sale price for the Common Stock on the Principal Market during the twenty (20) consecutive Trading Days immediately preceding the Conversion Date, provided, however , if the Company’s share price at any time loses the bid (ex: 0.0001 on the ask with zero market makers on the bid on level 2), then the Conversion Price may, in the Holder’s sole and absolute discretion, be reduced to a fixed conversion price of 0.00001 (if lower than the conversion price otherwise), and provided, further , that the Conversion Price shall be subject to Section 1.2(b) below.  If such Common Stock is not traded on the OTCBB, OTCQB, OTC Pink, NASDAQ, or NYSE, then such sale price shall be the sale price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no sale price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc. If such sale price cannot be calculated for such security on such date in the manner provided above, such price shall be the fair market value as mutually determined by the Borrower and the Holder. If the Borrower’s Common stock is chilled for deposit at DTC, becomes chilled at any point while this Note remains outstanding or deposit or other additional fees are payable due to a Yield Sign, Stop Sign or other trading restrictions, or if the closing sale price at any time falls below 1.74 then such 60% figure specified in clause 1.2(a)(ii) above shall be reduced to 45%. Additionally, the Borrower acknowledges that it will take all reasonable steps necessary or appropriate, including providing a board of directors resolution authorizing the issuance of common stock and an opinion of counsel confirming the rights of Holder to sell shares of Common Stock issuable or issued to Holder on conversion of this Note pursuant to Rule 144 as promulgated by the SEC (“Rule 144"), as such Rule may be in effect from time to time. If the Borrower does not promptly provide a board of directors’ resolution and an opinion from Company counsel, and so long as the requested sale may be made pursuant to Rule 144, the Company agrees to accept an opinion of counsel to the Holder which opinion will be issued at the Company’s expense and the conversion dollar amount will be reduced by $750.00 to cover the cost of such legal opinion.  “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTC Pink, or on the principal securities exchange or other securities market on which the Common Stock is then being traded. Additionally, if the Company ceases to be a reporting company pursuant to the 1934 Act or if the Note cannot be converted into free trading shares after 181 days from the issuance date, an additional 15% discount will be attributed to the Conversion Price.

b)

If at any time the Conversion Price as determined hereunder for any Conversion would be less than the par value of the Common Stock, then the Conversion Price hereunder shall equal such par value for such Conversion and the Conversion Amount for such Conversion shall be increased to include Additional Principal, where “Additional Principal” means such additional amount to be added to the Conversion Amount to the extent necessary to cause the number of Conversion Shares issuable upon such Conversion to equal the same number of Conversion Shares as would have been issued had the Conversion Price not been subject to the minimum price set forth in this Section 1.2(b).

c)

Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the



3

Convertible Note – FPVD, T1, 2015-08-25




Common Stock issuable upon conversion of this Note is not delivered by the Deadline (as defined below) the Borrower shall pay to the Holder $1,000.00 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder, shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert this Note is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, or interference with such conversion right are difficult if not impossible to quantify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section are justified.

1.3.

Authorized Shares . The Borrower covenants that the Borrower will at all times while this Note is outstanding reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note. The Borrower is required at all times to have authorized and reserved four (4) times the number of shares that is actually issuable upon full conversion of this Note (based on the Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”).  Initially, the Company will instruct the Transfer Agent to reserve three hundred and ninety thousand (390,000) shares of common stock in the name of the Holder for issuance upon conversion hereof.  The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which this Note shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of this Note in full. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

1.4.

Method of Conversion .

a)

Mechanics of Conversion . Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time and from time to time after the Issue Date, by submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 11:59 p.m., New York, New York time).

b)

Book Entry upon Conversion . Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use



4

Convertible Note – FPVD, T1, 2015-08-25




such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Borrower shall,  prima   facie,  be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

c)

Payment of Taxes . The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

d)

Delivery of Common Stock upon Conversion . Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement.

e)

Obligation of Borrower to Deliver Common Stock . Upon receipt by the Borrower of a duly and properly executed Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date specified



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in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 11:59 p.m., New York, New York time, on such date.

f)

Delivery of Common Stock by Electronic Transfer . In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

g)

Failure to Deliver Common Stock Prior to Deadline . Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline, the Borrower shall pay to the Holder $1,000.00 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock to the Holder. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder, shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, or interference with such conversion right are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.

h)

The Borrower acknowledges that it will take all reasonable steps necessary or appropriate, including providing an opinion of counsel confirming the rights of Holder to sell shares of Common Stock issued to Holder on conversion of the Note pursuant to Rule 144 as promulgated by the SEC (“Rule 144"), as such Rule may be in effect from time to time. If the Borrower does not promptly provide an opinion from Borrower counsel, and so long as the requested sale may be made pursuant to Rule 144, the Borrower agrees to accept an opinion of counsel to the Holder which opinion will be issued at the Borrower’s expense.

1.5.

Restricted Securities . The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement).  Any legend set forth on any stock certificate evidencing any Conversion Shares shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel   form,  substance  and  scope  customary  for opinions of counsel in  comparable transactions, to the effect that a  public sale or  transfer of such



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Common Stock may be made without registration under the Act, which opinion shall be reasonably acceptable to the  Company, or (ii) in the case of the Common Stock issued or issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold.

1.6.

Effect of Certain Events .

a)

Effect of Merger, Consolidation, Etc . At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

b)

Adjustment Due to Merger, Consolidation, Etc . If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time, for clarification, the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.



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c)

Adjustment Due to Distribution . If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.  Such assets shall be held in escrow by the Company pending any such conversion

d)

Purchase Rights . If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

e)

Stock Dividends and Stock Splits .  If the Company, at any time while this Note is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any securities convertible into or exercisable for Common Stock; (B) subdivides outstanding shares of Common Stock into a larger number of shares; (C) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares; or (D) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price (and each sale or bid price used in determining the Conversion Price) shall be multiplied by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

f)

Notice of Adjustments . Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.



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1.7.

Revocation . If any Conversion Shares are not received by the Deadline, the Holder may revoke the applicable Conversion pursuant to which such Conversion Shares were issuable.  This Note shall remain convertible after the Maturity Date hereof until this Note is repaid or converted in full.

1.8.

Prepayment . Notwithstanding anything to the contrary contained in this Note, subject to the terms of this Section, at any time during the period beginning on the Issue Date and ending on the date which is six (6) months following the Issue Date (“Prepayment Termination Date”), Borrower shall have the right, exercisable on not less than five (5) Trading Days prior written notice to the Holder of this Note, to prepay the outstanding balance on this Note (principal and accrued interest), in full, in accordance with this Section. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than ten (10) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date.  If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Optional Prepayment Amount”) equal to the Prepayment Factor (as defined below), multiplied by the sum of: (w) the then outstanding principal amount of this Note  plus  (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date  plus  (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x)  plus  (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.  If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section. After the Prepayment Termination Date, the Borrower shall have no right to prepay this Note. For purposes hereof, the “Prepayment Factor” shall equal one hundred and forty percent (140%), provided that such Prepayment factor shall equal one hundred and twenty five percent (125%) if the Optional Prepayment Date occurs on or before the date which is ninety (90) days following the Issue Date hereof.


ARTICLE II. CERTAIN COVENANTS

2.1.

Distributions on Capital Stock . So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.

2.2.

Restriction on Stock Repurchases . So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or



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otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.

2.3.

Borrowings; Liens . Notwithstanding section 4(m) of the Purchase Agreement, so long as the Borrower shall have any obligation under this Note, the Borrower shall not (i) create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, or (b) indebtedness to trade creditors or financial institutions incurred in the ordinary course of business, or (ii) enter into, create or incur any liens, claims or encumbrances of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom, securing any indebtedness occurring after the date hereof.

2.4.

Sale of Assets . So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

2.5.

Advances and Loans . So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof.

2.6.

Charter .  So long as the Borrower shall have any obligations under this Note, the Borrower shall not amend its charter documents, including without limitation its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder.

ARTICLE III. EVENTS OF DEFAULT

Any one or more of the following events which shall occur and/or be continuing shall constitute an event of default (each, an “Event of Default”):

3.1.

Failure to Pay Principal or Interest . The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise.

3.2.

Conversion and the Shares . The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so at any time following the execution hereof or) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for



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shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for five (5) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty eight (48) hours of a demand from the Holder.

3.3.

Breach of Covenants . The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of seven (7) days after written notice thereof to the Borrower from the Holder.

3.4.

Breach of Representations and Warranties . Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.5.

Receiver or Trustee . The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

3.6.

Judgments . Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $50,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

3.7.

Bankruptcy . Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

3.8.

Delisting of Common Stock . The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB, OTCQB, or OTC Pink or an equivalent replacement exchange, NASDAQ, the NYSE or AMEX.

3.9.

Failure to Comply with the Exchange Act . The Borrower shall fail to comply in any material respect with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.



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3.10.

Liquidation .  Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

3.11.

Cessation of Operations .  Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

3.12.

Maintenance of Assets .  The failure by Borrower, during the term of this Note, to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).

3.13.

Financial Statement Restatement .  The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.14.

Reverse Splits . The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

3.15.

Replacement of Transfer Agent . In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

3.16.

Cross-Default . Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO



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(2). Upon the occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an Event of Default specified in the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150%  times  the sum  of (w) the then outstanding principal amount of this Note  plus  (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”)  plus  (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x)  plus  (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment  plus  the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall be the Conversion Date),  multiplied by  (b) the highest Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.  The Holder may still convert any amounts due hereunder, including without limitation the Default Sum, until such time as this Note has been repaid in full.

ARTICLE IV. MISCELLANEOUS

4.1.

Failure or Indulgence Not Waiver . No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

4.2.

Notices . All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, email or facsimile, addressed as set forth below or to



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such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile or email, with accurate confirmation generated by the transmitting facsimile machine or computer, at the address, email or number designated in the Purchase Agreement (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.

4.3.

Amendments . This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

4.4.

Assignability . This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

4.5.

Cost of Collection . If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

4.6.

Governing Law . This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to conflicts of laws principles that would result in the application of the substantive laws of another jurisdiction.  Any action brought by either party against the other concerning the transactions contemplated by this Agreement must be brought only in the civil or state courts of New York or in the federal courts located in the State and county of New York.  Both parties and the individual signing this Agreement on behalf of the Borrower agree to submit to the jurisdiction of such courts.  The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.  In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other provision of this Note. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Borrower in any other jurisdiction to collect on the Borrower’s obligations to Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other decision in favor of the Holder.   This Note shall be deemed an unconditional obligation of Borrower for the payment of money and, without limitation to any other remedies of Holder, may be enforced against Borrower by summary proceeding pursuant to New York Civil Procedure Law and Rules Section 3213 or any similar rule or statute in the jurisdiction where enforcement is sought.  For purposes of such rule or statute, any other document or agreement to which Holder and Borrower are parties or which Borrower delivered to Holder, which may be convenient or necessary to determine Holder’s rights hereunder or Borrower’s obligations to Holder are deemed a part of this Note, whether



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or not such other document or agreement was delivered together herewith or was executed apart from this Note.

4.7.

Certain Amounts . Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

4.8.

Disclosure . Upon receipt or delivery by the Company of any notice in accordance with the terms of this Note, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, non-public information relating to the Company or any of its Subsidiaries, the Company shall within one (1) Trading Day after any such receipt or delivery, publicly disclose such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material, non-public information relating to the Company or any of its Subsidiaries, the Company so shall indicate to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume that all matters relating to such notice do not constitute material, non-public information relating to the Company or its Subsidiaries.

4.9.

Notice of Corporate Events . Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.

4.10.

Remedies . The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the



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transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

4.11.

Usury .  This Note shall be subject to the anti-usury limitations contained in the Purchase Agreement.



(Remainder of Page intentionally left blank)




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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer as of the Issue Date first set forth above.


FORCE PROTECTION VIDEO EQUIPMENT, CORP.

 

By:

 

 

 

Name: Paul Feldman

 

 

Title: President

 



























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EXHIBIT A


NOTICE OF CONVERSION


The undersigned hereby elects to convert principal under the 8% Convertible Note of Force Protection Video Equipment Corp, a Florida corporation (the Company ”), into shares of common stock (the “ Common Stock ”), of the Company according to the conditions hereof, as of the date written below.  If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.  No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.


By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts specified under Section 1.1 of this Note, as determined in accordance with Section 13(d) of the Exchange Act.


The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock pursuant to any prospectus.  


Conversion calculations:

Date to Effect Conversion:


Conversion Price:


Principal Amount of Note to be Converted:


Interest Accrued on Account

of Conversion at Issue:


Additional Principal on Account

of Conversion

Pursuant to Section 1.2(b) of the Note:


Number of shares of Common Stock to be issued:

  


Signature:


Name:


Address for Delivery of Common Stock Certificates:




Or


DWAC Instructions:

Broker No:

Account No:


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SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of         August 25, 2015, is entered into by and between Force Protection Video Equipment, Corp., a Florida corporation (the “Company”), and EMA Financial, LLC, a Delaware limited liability company (the “Purchaser”).

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act” or “1933 Act”), and Rule 506 promulgated thereunder by the United States Securities and Exchange Commission (the “SEC”), the Company desires to issue and sell to the Purchaser, and the Purchaser desires to purchase from the Company a 8% Convertible Note of the Company, in the form attached hereto as Exhibit A, in the principal amount of $105,000.00 (together with any note(s) issued in replacement thereof or as interest thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares (“Conversion Shares”) of common stock, $0.0001 par value per share (the “Common Stock”), of the Company, upon the terms and subject to the limitations and conditions set forth in such Note.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Purchaser agree as follows:

1.

Purchase and Sale of Note.

a)

Purchase of Note . On the Closing Date (as defined below), the Company shall issue and sell to the Purchaser, and the Purchaser agrees to purchase from the Company, the Note for an aggregate purchase price of $95,004.00 (“Purchase Price”).

b)

Form of Payment . On the Closing Date (i) the Purchaser shall pay the Purchase Price by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, simultaneously with delivery of the Note, and (ii) the Company shall deliver such Note duly executed on behalf of the Company to the Purchaser, simultaneously with delivery of such Purchase Price.

c)

Closing Date . Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below, the closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the first business day following the date hereof or such other mutually agreed upon time (the “Closing Date”) at the offices of Purchaser’s counsel.

2.

Purchaser’s Representations and Warranties.  The Purchaser represents and warrants to the Company that:

a)

Investment Purpose . Purchaser is acquiring the Securities for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof in violation of applicable securities laws; provided, however, by making the representations herein, Purchaser does not agree, or make any representation or warranty, to hold any of the Securities for any minimum or other specific term and reserves the right to



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dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.  The Purchaser is acquiring the Securities hereunder in the ordinary course of its business. The Purchaser does not presently have any agreement or understanding, directly or indirectly, with any person to distribute any of the Securities in violation of applicable securities laws.

b)

Accredited Investor Status . The Purchaser is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).

c)

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

d)

Information . The Purchaser and its advisors, if any, have been, and for so long as the Securities remain outstanding will continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been reasonably requested by the Purchaser or its advisors, provided that the Purchaser has not been furnished with, and the Company shall not in the future deliver to the Purchaser without its consent, any material non-public information concerning the Company. The Purchaser and its advisors, if any, have been, and for so long as the Securities remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other due diligence investigation conducted by Purchaser or any of its advisors or representatives shall modify, amend or affect Purchaser’s right to rely on the Company’s representations and warranties contained in Section 3 below.  The Purchaser understands that its investment in the Securities involves a significant degree of risk.

e)

Governmental Review . The Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.

f)

Transfer or Re-sale . The Purchaser understands that (i) the sale or re-sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Purchaser shall have delivered to the Company an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be reasonably acceptable to the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Purchaser who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S



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under the 1933 Act (or a successor rule) (“Regulation S”) and the Purchaser shall have delivered to the Company an opinion of counsel reasonably acceptable to the Company relating to such Regulation S; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of such Rule and further, if such Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

g)

Legends . The Purchaser understands that the Securities have been issued (or will be issued in the case of the Conversion Shares) pursuant to an exemption from registration or qualification under the 1933 Act and applicable state securities laws, and except as set forth below, the Securities shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):   

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular



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date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel at the Company’s expense, in the form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be reasonably accepted by the Company so that the sale or transfer is effected. The Purchaser agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any.

h)

Authorization; Enforcement . This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Purchaser, and this Agreement constitutes a valid and binding agreement of the Purchaser enforceable in accordance with its terms.

i)

Prohibition on Short Sales .  From and including the date of this Agreement, and for so long as the Purchaser holds any outstanding Notes due the Company, the Purchaser agrees that it will neither sell the Company’s stock short, nor direct, instruct or otherwise influence any of its affiliates, principals or advisors to sell the Company’s stock short.

3.

Representations and Warranties of the Company . The Company represents and warrants to the Purchaser, as of the date hereof and the Closing Date, that:

a)

Organization and Qualification . The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. Schedule 3(a) sets forth a list of all of the Subsidiaries of the Company and the jurisdiction in which each is incorporated. The Company and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith.  “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.

b)

Authorization; Enforcement . (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement and the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement and the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion and exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has



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been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note and each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

c)

Capitalization . As of the date hereof, the authorized capital stock of the Company, and number of shares issued and outstanding, is as set forth in the Company’s most recent periodic report filed with the SEC. Except as disclosed on Schedule 3(c) hereof, no shares are reserved for issuance pursuant to the Company’s stock option plans. Except as disclosed in the SEC Documents no shares are reserved for issuance pursuant to securities exercisable for, or convertible into or exchangeable for shares of Common Stock. All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. As of the effective date of this Agreement, and except as disclosed in the SEC Documents, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities, notes or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of any of the Securities. The Company has furnished to the Purchaser true and correct copies of the Company’s Certificate of Incorporation as in effect on the date hereof (“Certificate of Incorporation”), the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto.

d)

Issuance of Shares . The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note, as the case may be, in accordance with their respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

e)

Acknowledgment of Dilution . The Company’s executive officers and directors understand the nature of the Securities being sold hereby and recognize that the issuance of the Securities will have a potential dilutive effect on the equity holdings of other holders of the Company’s equity or rights to receive equity of the Company.  The board of directors of the Company has concluded, in its good faith business judgment that the issuance of the Securities is in the best interests of the Company.  The Company specifically acknowledges



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that its obligation to issue the Conversion Shares upon conversion of the Notes is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other stockholders of the Company or parties entitled to receive equity of the Company.

f)

No Conflicts . The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or 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 could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party and that is not filed as an SEC Document or other document filed with the SEC, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents and neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as the Purchaser owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement and the Note in accordance with the terms hereof or thereof or to issue and sell the Securities in accordance with the terms hereof and thereof and to issue the Conversion Shares. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the Over-the-Counter Bulletin Board (the “OTCBB”), OTCQB or OTC Pink and does not reasonably anticipate that the Common Stock will be delisted by the OTCBB or OTCQB, or OTC Pink in the foreseeable future. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.



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g)

SEC Documents; Financial Statements . The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”). Upon written request the Company will deliver to the Purchaser true and complete copies of the SEC Documents, except for such exhibits and incorporated documents. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Exchange Act of 1934, as amended (“1934 Act” or “Exchange Act”), and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the financial statements of the Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business, and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company. The Company is subject to the reporting requirements of the 1934 Act.

h)

Absence of Certain Changes . Since April 30, 2015, there has been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting status of the Company or any of its Subsidiaries.

i)

Absence of Litigation . There is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. Schedule 3(i) contains a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its Subsidiaries, without regard to whether it would have a Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.



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j)

Patents, Copyrights, etc . The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights (“Intellectual Property”) necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); there is no claim or action by any person pertaining to, or proceeding pending, or to the Company’s knowledge threatened, which challenges the right of the Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); to the best of the Company’s knowledge, the Company’s or its Subsidiaries’ current and intended products, services and processes do not infringe on any Intellectual Property or other rights held by any person and/or entity; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of their Intellectual Property.

k)

No Materially Adverse Contracts, Etc . Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material Adverse Effect.

l)

Tax Status . The Company and each of its Subsidiaries has made or filed all federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax. None of the Company’s tax returns is presently being audited by any taxing authority.

m)

Certain Transactions . Except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could obtain from third parties and other than the grant of any stock options disclosed on Schedule 3(c), none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the



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Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

n)

Disclosure . All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement and provided to the Purchaser pursuant to Section 2(d) hereof and otherwise in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed.

o)

Acknowledgment Regarding Purchaser’ Purchase of Securities . The Company acknowledges and agrees that the Purchaser is acting solely in the capacity of arm’s length purchaser with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that the Purchaser is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Purchaser or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Purchaser’s purchase of the Securities.

p)

No Integrated Offering . Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Purchaser. The issuance of the Securities to the Purchaser will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

q)

Brokers .  Except with respect to the Company’s retention of Almorli Advisors (the “Broker”) the Company hereby represents and warrants that it has not hired, retained or dealt with any broker, finder, consultant, person, firm or corporation in connection with the negotiation, execution or delivery of this Agreement or the transactions contemplated hereunder. The Company covenants and agrees that should any claim be made against Purchaser for any commission or other compensation by any broker, finder, person, firm or corporation, including without limitation, the Broker, based upon the Company’s engagement of such person in connection with this transaction, the Company shall indemnify, defend and hold Purchaser harmless from and against any and all damages, expenses (including attorneys’ fees and disbursements) and liability arising from such claim. The Company shall pay the commission of the Broker, to the attention of the Broker, pursuant to their separate agreement(s) between the Company and the Broker.

r)

Permits; Compliance . The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances,



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exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Since           April 30, 2015, neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.

s)

Environmental Matters .

i.

There are, to the Company’s knowledge, with respect to the Company or any of its Subsidiaries or any predecessor of the Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment, actions, activities, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar federal, state, local or foreign laws and neither the Company nor any of its Subsidiaries has received any notice with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in connection with any of the foregoing. The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

ii.

Other than those that are or were stored, used or disposed of in compliance with applicable law, no Hazardous Materials are contained on or about any real property currently owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous Materials were released on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries during the period the property was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course of the Company’s or any of its Subsidiaries’ business.

iii.

There are no underground storage tanks on or under any real property owned, leased or used by the Company or any of its Subsidiaries that are not in compliance with applicable law.



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t)

Title to Property . The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(t) or such as would not have a Material Adverse Effect. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.

u)

Insurance . The Company and its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such coverage amounts as are prudent and customary in the businesses in which the Company is engaged, including, but not limited to, directors and officers insurance coverage with coverage amounts that are at least equal to the aggregate Purchase Price.  Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

v)

Internal Accounting Controls . Except as disclosed in the SEC Documents, the Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

w)

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

x)

Solvency . Except as disclosed in the SEC Documents, the Company (after giving effect to the transactions contemplated by this Agreement) is solvent ( i.e. , its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured) and currently the Company has no information that would lead it to reasonably conclude that the Company would not, after giving effect to the transaction contemplated by this Agreement, have the ability to, nor does it intend to take any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature.



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y)

No Investment Company . The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be, an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The Company is not controlled by an Investment Company.

z)

No “Shell” .

The Company is not , and has not at any time previously been a Shell Company, as defined in Rule 144.


4.

COVENANTS .

a)

Best Efforts . The parties shall use their best efforts to satisfy timely each of the conditions described in Section 6 and 7 of this Agreement.

b)

Form D; Blue Sky Laws . The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof to the Purchaser promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Securities for sale to the Purchaser at the applicable closing pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Purchaser on or prior to the Closing Date.

c)

Use of Proceeds . The Company shall use the proceeds from the sale of the Securities for general corporate purposes, marketing and sales, product development, key personnel recruiting and business development purposes.

d)

Financial Information . Upon written request of the Purchaser, the Company agrees to send or make available the following reports to the Purchaser until the Purchaser transfers, assigns, or sells all of the Securities: (i) within ten (10) days after the filing (or the applicable deadline to so file) with the SEC or OTC Markets Group, a copy of its Annual Report and its Quarterly Reports and any Supplemental Reports; (ii) within one (1) day after release, copies of all press releases issued by the Company or any of its Subsidiaries; and (iii) contemporaneously with the making available or giving to the shareholders of the Company, copies of any notices or other information the Company makes available or gives to such shareholders. Notwithstanding the foregoing, the Company shall not disclose any material nonpublic information to the Purchaser without its consent unless such information is disclosed to the public prior to or promptly following such disclosure to the Purchaser.

e)

Listing . The Company will obtain and, so long as the Purchaser owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCBB, OTCQB, and OTC Pink,  or any equivalent replacement exchange, the NASDAQ Stock Market (“NASDAQ”), the New York Stock Exchange (“NYSE”), or the NYSE MKT, f/k/a American Stock Exchange (“AMEX”), and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company shall promptly provide to the Purchaser copies of any notices it receives from the SEC, OTC



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Markets Group and any other exchanges or quotation systems on which the Common Stock is then listed regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems, provided that it shall not provide any notices constituting material nonpublic information.

f)

Corporate Existence . So long as the Purchaser beneficially owns any Securities, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for trading on NASDAQ, NYSE or AMEX.

g)

No Integration . The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.

h)

Securities Laws Disclosure; Publicity .  The Company shall comply with applicable securities laws by filing a Current Report on Form 8-K, within four (4) Trading Days following the date hereof, disclosing all the material terms of the transactions contemplated hereby, if the Company deems the transactions contemplated hereby to constitute material non-public information. The Company and Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor Purchaser shall issue any such press release or otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of Purchaser, with respect to any press release of the Company, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication.


i)

Non-Public Information .  Except with respect to the material terms and conditions of the transactions contemplated by this Agreement, the Company covenants and agrees that neither it nor any other person acting on its behalf will provide the Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto the Purchaser shall have executed a written agreement regarding the confidentiality and use of such information.  The Company understands and confirms that the Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.


j)

Subsidiaries .  So long as the Note remains outstanding, the Company shall not transfer any assets or rights to any of its subsidiaries or permit any of its subsidiaries to engage in any significant business or operations, whether such subsidiaries are currently existing or hereafter created.


k)

Insurance .  So long as the Note remains outstanding, the Company and its Subsidiaries shall maintain in full force and effect insurance reasonably believed by the



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Company to be adequate coverage (a) on all assets and activities, covering property loss or damage and loss of income by fire or other hazards or casualty, and (b) against all liabilities, claims and risks for which it is customary for companies similarly situated to the Company to insure, including without limitation applicable product liability insurance, required workmen’s compensation insurance, and other insurance covering injury or damage to persons or property, but excluding directors and officers insurance coverage.  The Company shall promptly furnish or cause to be furnished evidence of such insurance to the Purchaser, in form and substance reasonably satisfactory to the Purchaser.


l)

Par Value .  If the closing bid price at any time the Note is outstanding falls below $0.0005 , the Company shall cause the par value of its Common Stock to be reduced to $0.00001 or less.


m)

[Intentionally Omitted] .



n)

Future Financings : From the date hereof until such time as the Purchaser      no longer holds any of the Securities, in the event the Company issues or sells any shares of Common Stock or securities directly or indirectly convertible into or exercisable for Common Stock (“Common Stock Equivalents”) or amends the transaction documents relating to any sale or issuance of Common Stock or Common Stock Equivalents, if a Purchaser reasonably believes that the terms and conditions thereunder are more favorable to such investors as the terms and conditions granted under the Transaction Documents, upon notice to the Company by such Purchaser the Company shall amend the terms of this transaction and the Transaction documents so as to give the Purchasers the benefit of such more favorable terms or conditions.



5.

Transfer Agent Instructions . Upon receipt of a duly executed Notice of Conversion, the Company shall issue irrevocable instructions to its transfer agent to issue certificates, registered in the name of the Purchaser or its nominee, for the Conversion Shares in such amounts as specified from time to time by the Purchaser to the Company upon conversion of the Note, or any part thereof, in accordance with the terms thereof (the “Irrevocable Transfer Agent Instructions”). In the event that the Company proposes to replace its transfer agent, the Company shall provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to this Agreement and the Securities (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount (as defined in the Note)) signed by the successor transfer agent to Company and the Company. Prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold, all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that: (i) no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop transfer instructions to give effect to Section 2(f) hereof (in the case of the Conversion Shares, prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction



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as to the number of Securities as of a particular date that can then be immediately sold), will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing)(electronically or in certificated form) any certificate for Conversion Shares to be issued to the Purchaser upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement; and (iii) it will not fail to remove (or direct its transfer agent not to remove or impair, delay, and/or hinder its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Purchaser upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement. Nothing in this Section shall affect in any way the Purchaser’s obligations and agreement set forth in Section 2(g) hereof to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities. If the Purchaser provides the Company with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act and such sale or transfer is effected or (ii) the Purchaser provides reasonable assurances that the Securities can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Purchaser. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Purchaser, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5 may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Purchaser shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.

6.

Injunction Posting of Bond .  In the event the Purchaser shall elect to convert the Note or any parts thereof, the Company may not refuse conversion or exercise based on any claim that Purchaser or anyone associated or affiliated with Purchaser has been engaged in any violation of law, or for any other reason.  In connection with any injunction sought or attempted by the Company, the Company shall be required to post a bond at least equal to the greater of either: (i) the outstanding principal amount of the Note; and (ii) the market value of the Conversion Shares sought to be converted, exercised or issued, based on the sale price per share of Common Stock on the principal market on which it is traded.

7.

Delivery of Unlegended Shares .

a)

Within three (3) business days (such third business day being the “ Unlegended Shares Delivery Date ”) after the business day on which the Company has received (i) a notice that Conversion Shares, or any other Common Stock held by the Purchaser has been sold pursuant to a registration statement or Rule 144 under the 1933 Act, (ii) a representation that the prospectus delivery requirements, or the requirements of Rule 144, as applicable and if required, have been satisfied, (iii) the original share certificates



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representing the shares of Common Stock that have been sold, and (iv) in the case of sales under Rule 144, customary representation letters of the Purchaser and, if required, Purchaser’s broker regarding compliance with the requirements of Rule 144, the Company at its expense, (y) shall deliver, and shall cause legal counsel selected by the Company to deliver to its transfer agent (with copies to Purchaser) an appropriate instruction and opinion of such counsel, directing the delivery of shares of Common Stock without any legends including the legend set forth in Section 4( h ) above (the “ Unlegended Shares ”); and (z) cause the transmission of the certificates representing the Unlegended Shares together with a legended certificate representing the balance of the submitted Common Stock certificate, if any, to the Purchaser at the address specified in the notice of sale, via express courier, by electronic transfer or otherwise on or before the Unlegended Shares Delivery Date.

b)

The Company understands that a delay in the delivery of the Unlegended Shares later than the Unlegended Shares Delivery Date could result in economic loss to the Purchaser.  As compensation to Purchaser for such loss, the Company agrees to pay late payment fees (as liquidated damages and not as a penalty) to the Purchaser for late delivery of Unlegended Shares in the amount of $1,000.00 per business day after the Unlegended Shares Delivery Date. If during any three hundred and sixty (360) day period, the Company fails to deliver Unlegended Shares as required by this Section for an aggregate of thirty (30) days, then Purchaser or assignee holding Securities subject to such default may, at its option, require the Company to redeem all or any portion of the shares subject to such default at a price per share equal to the greater of (i) 200% of the most recent closing price of the Common Stock or (ii) a fraction in which the numerator is the highest closing price of the Common Stock during the aforedescribed thirty (30) day period and the denominator of which is the lowest conversion price during such thirty (30) day period, multiplied by the conversion price or exercise price, as the case may be (“ Unlegended Redemption Amount ”).  The Company shall pay any payments incurred under this Section in immediately available funds upon demand.

8.

Conditions to the Company’s Obligation to Sell . The obligation of the Company hereunder to issue and sell the Note to the Purchaser at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

a)

The Purchaser shall have executed this Agreement and delivered the same to the Company.

b)

The Purchaser shall have delivered the Purchase Price to the Company.

c)

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



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d)

No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

9.

Conditions to The Purchaser’s Obligation to Purchase . The obligation of the Purchaser hereunder to purchase the Note at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Purchaser’s sole benefit and may be waived by the Purchaser at any time in its sole discretion:

a)

The Company shall have executed this Agreement and delivered the same to the Purchaser.

b)

The Company shall have delivered to the Purchaser the duly executed Note (in such denominations as the Purchaser shall request) in accordance with Section 1 above.

c)

The Irrevocable Transfer Agent Instructions, in form and substance satisfactory to the Purchaser, shall have been delivered to and acknowledged in writing by the Company’s Transfer Agent (a copy of which written acknowledgment shall be provided to Purchaser simultaneously with Closing).

d)

The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Purchaser shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Purchaser including, but not limited to certificates with respect to the Company’s Certificate of Incorporation, By-laws, incumbency, and Board of Directors’ resolutions relating to the transactions contemplated hereby.

e)

No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

f)

No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.



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g)

The Conversion Shares shall have been authorized for quotation on the OTCBB, OTCQB, and OTC Pink, and trading of the Common Stock on the OTCBB, OTCQB, and OTC Pink, shall not have been suspended by the SEC or the OTC Markets Group.

10.

Governing Law; Miscellaneous .

a)

Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws thereof or any other State.  Any action brought by any party against any other party hereto concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county of New York.  The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon  forum non conveniens .   The parties executing this Agreement and other agreements referred to herein or delivered in connection herewith on behalf of the Company agree to submit to the in personam jurisdiction of such courts and hereby irrevocably waive trial by jury.   The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.  In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.  Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other transaction document contemplated hereby by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

b)

Removal of Restrictive Legends .  In the event that Purchaser has any shares of the Company’s Common Stock bearing any restrictive legends, and Purchaser, through its counsel or other representatives, submits to the Transfer Agent any such shares for the removal of the restrictive legends thereon in connection with a sale of such shares pursuant to any exemption to the registration requirements under the Securities Act, and the Company and or its counsel refuses or fails for any reason (except to the extent that such refusal or failure is based solely on applicable law that would prevent the removal of such restrictive legends) to render an opinion of counsel or any other documents or certificates required for the removal of the restrictive legends, then the Company hereby agrees and acknowledges that the Purchaser is hereby irrevocably and expressly authorized to have counsel to the Purchaser render any and all opinions and other certificates or instruments which may be required for purposes of removing such restrictive legends, and the Company hereby irrevocably authorizes and directs the Transfer Agent to, without any further confirmation or instructions from the Company, issue any such shares without restrictive



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legends as instructed by the Purchaser, and surrender to a common carrier for overnight delivery to the address as specified by the Purchaser, certificates, registered in the name of the Purchaser or its designees, representing the shares of Common Stock to which the Purchaser is entitled, without any restrictive legends and otherwise freely transferable on the books and records of the Company.

c)

Filing Requirements .  From the date of this Agreement until the Notes are no longer outstanding, the Company will timely and voluntarily comply with all reporting requirements that are applicable to an issuer with a class of shares registered pursuant to Section 12(g) of the 1934 Act, whether or not the Company is then subject to such reporting requirements, and comply with all requirements related to any registration statement filed pursuant to this Agreement.  The Company will use reasonable efforts not to take any action or file any document (whether or not permitted by the 1933 Act or the 1934 Act or the rules thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under said acts until the Notes are no longer outstanding. The Company will maintain the quotation or listing of its Common Stock on the OTCBB, OTCQB, and OTC Pink, NYSE or NASDAQ Stock Market (whichever of the foregoing is at the time the principal trading exchange or market for the Common Stock (the “ Principal Market ”), and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Principal Market, as applicable. The Company will provide Purchaser with copies of all notices it receives notifying the Company of the threatened and actual delisting of the Common Stock from any Principal Market.  As of the date of this Agreement and the Closing Date, the OTC Pink, is the Principal Market. Until the Note is no longer outstanding, the Company will continue the listing or quotation of the Common Stock on a Principal Market and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Principal Market.

d)

144 Default .  In the event commencing twelve (12) months after the Closing Date and ending twenty-four (24) months thereafter, the Purchaser is not permitted to resell any of the Conversion Shares without any restrictive legend or if such sales are permitted but subject to volume limitations or further restrictions on resale as a result of the unavailability to Subscriber of Rule 144(b)(1)(i) under the 1933 Act or any successor rule (a “ 144 Default ”), for any reason except for Purchasers’ status as an Affiliate or “control person” of the Company, or as a result of a change in current applicable securities laws, then the Company shall pay such Purchaser as liquidated damages and not as a penalty an amount equal to two percent (2%) of the value of Conversion Shares (based on the closing sale of the Common Stock) subject to such 144 Default during the pendency of the 144 Default of each thirty day period thereafter (or portion thereof).

e)

Fees and Expenses .  On or prior to the Closing, the Company shall pay or reimburse to Purchaser a non-refundable, non-accountable sum equal to $5,000.00 as and for the fees, costs and expenses (including without limitation legal fees and disbursements and due diligence and administrative expenses) incurred by the Purchaser in connection with the Purchaser’s due diligence and negotiation, preparation and execution of the Transaction Documents and consummation of the Transactions.  The Purchaser may withhold and offset the balance of such amount from the payment of its Purchase Price otherwise payable hereunder at Closing, which offset shall constitute partial payment of such Purchase Price in



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SPA – FPVD, T1, 2015-08-25


an amount equal to such offset.  Except as expressly set forth in this Agreement or the Note to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.  The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchaser.

f)

Usury .  To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that may be brought by the Purchaser in order to enforce any right or remedy under the Note.  Notwithstanding any provision to the contrary contained in herein or under the Note, it is expressly agreed and provided that the total liability of the Company under the Note for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “ Maximum Rate ”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Note or herein exceed such Maximum Rate.  It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Note is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Note from the effective date forward, unless such application is precluded by applicable law.  If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to the Purchaser with respect to indebtedness evidenced by the Note, such excess shall be applied by the Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at the Purchaser’s election.


g)

Headings . The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

h)

Severability . In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

i)

Entire Agreement; Amendments . This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Purchaser makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the Purchaser.

j)

Notices . All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or



20

SPA – FPVD, T1, 2015-08-25


certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, email or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile or email, with accurate confirmation generated by the transmitting facsimile machine or computer, at the address, email or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

Purchaser:

EMA Financial, LLC
40 Wall Street, Suite 1700
New York, NY 10005

Attn: Felicia Preston
admin@emafin.com


Company:

Force Protection Video Equipment, Corp.

140 Iowa Lane, Suite 101

Cary, NC 27511

Attn: Paul Feldman, President

Email: paul@forceprovideo.com

Fax: ________________


            With a copy to:

Eric P. Littman, Esquire

7695 S.W. 104 th Street

Suite 210

Miami, FL 33156

Email: littmanlaw@gmail.com


Each party shall provide notice to the other party of any change in address.


k)

Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Purchaser shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, subject to Section 2(f), the Purchaser may assign its rights hereunder to any person that purchases Securities in a private transaction from the Purchaser or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.

l)

Third Party Beneficiaries . This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.



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SPA – FPVD, T1, 2015-08-25


m)

Survival . The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Purchaser. The Company agrees to indemnify and hold harmless the Purchaser and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

n)

Further Assurances . Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

o)

No Strict Construction . The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

p)

Remedies . The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Purchaser by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Purchaser shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.

q)

Counterparts .  This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which together shall be deemed to be one and the same agreement.

r)

Signatures .  Any signature transmitted by facsimile, e-mail, or other electronic means shall be deemed to be an original signature.


(Remainder of page intentionally left blank)







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SPA – FPVD, T1, 2015-08-25


IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this Agreement to be duly executed as of the date first above written.

FORCE PROTECTION VIDEO EQUIPMENT, CORP

 

By:

 

 

 

Name: Paul Feldman

 

 

Title: President

 

 


EMA FINANCIAL, LLC

 

By:

 

 

Name:

Felicia Preston

 

Title:

Director

 

 

 

 







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SPA – FPVD, T1, 2015-08-25




EMPLOYMENT AGREEMENT  

This Employment Agreement (the "Agreement"), is entered into this 24 th day of November, 2015 by and between FORCE PROTECTION VIDEO EQUIPMENT  CORPORATION, a Florida corporation (together with its successors and assigns permitted under this Agreement, the "Company"), and PAUL FELDMAN (the "Employee").

WHEREAS , the Company desires to employ the Employee as its President and Chief Executive Officer and to enter into an agreement embodying the terms of such employment (this "Agreement") and the Employee desires to enter into this Agreement and to accept such employment, subject to the terms and provisions of this Agreement; and

NOW, THEREFORE , in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and the Employee (individually a "Party" and together the "Parties") agree as follows:

1.

DEFINITIONS . The following definitions shall apply to this Agreement, including its exhibits:


a.

 "Affiliate" of a person or other entity shall mean a person or other entity that directly or indirectly controls, is controlled by, or is under common control with the person or other entity specified.


b.

"Base Salary" shall mean the salary provided for in Section 4 or any increased salary granted to the Employee pursuant to Section.


c.

"Board" shall mean the Board of Directors of the Company.


d.

"Cause" shall mean (i) a knowing and material violation of a material requirement of the Company's code of conduct that has consistently resulted in the termination of employment by employees who have committed similar breaches, (ii) conviction of (including a plea of guilty or nolo contendere to) a felony or any crime of theft or moral turpitude or (iii) gross omission or gross dereliction of any statutory or common law duty of loyalty to the Company.


e.

"Code" shall mean the Internal Revenue Code 4001, as amended from time to time.


f.

"Disability" shall mean the Employee's inability, due to physical or mental incapacity, to substantially perform his duties and responsibilities under this Agreement for a period of 180 consecutive days or for 270 non-



Employment Agreement Page 1




consecutive days in any 365-day period.




g.

"Effective Date" shall mean December 1, 2015.


h.

"Good Reason" shall mean a material violation of this Agreement by the Company that is not cured within 10 days of notice of such violation provided by the Employee in accordance with Section 24, including, without limitation, a material reduction in Employee's Base Salary, a material diminution of Employee's duties or responsibilities, a change in reporting structure so that Employee no longer reports to the Board, a failure to elect or re-elect the Employee as President, Chief Employee Officer and a member of the Board as set forth in Section 3, the Board's removal of the Employee as President, Chief Employee Officer or a member of the Board or a failure by the Company to have a successor to all or substantially all its assets and liabilities assume the Company's obligations hereunder, in each case without the Employee's consent.


i.

"Stock" shall mean the Common Stock of the Company.


j.

"Term of Employment" shall mean the period specified in Section 2.


2.

TERM OF EMPLOYMENT . The Term of Employment shall begin on the Effective Date and shall extend until the second anniversary of the Effective Date. Notwithstanding the foregoing, the Term of Employment may be earlier terminated by either Party in accordance with the provisions of Section 12.


3.

POSITION, DUTIES AND RESPONSIBILITIES.


The Employee shall be appointed as President and Chief Executive Officer of the Company on the Effective Date and after such date shall be responsible for the general management of the affairs of the Company. The Employee also shall be elected by the Board to be a member of the Board, effective as of the Effective Date. The Employee, in carrying out his duties under this Agreement, shall report to the Board. During the Term of Employment, the Employee shall devote substantially all his business time and attention to the business and affairs of the Company and shall use his best efforts, skills and abilities to promote its interests.


a.

Nothing herein shall preclude the Employee from (i) serving on the boards of directors of a reasonable number of other corporations subject to the approval of the Board in each case, (ii) serving on the boards of a



Employment Agreement Page 1






reasonable number of trade associations and/or charitable organizations, (iii) delivering lectures, fulfilling speaking engagements or teaching occasional courses or seminars at educational institutions, (iv) engaging in charitable activities and community affairs   and (v) managing his personal investments and affairs, provided that such activities set forth in this Section 3(b) do not materially interfere with the proper performance of his duties and responsibilities under Section 3(a).



4.

COMPENSATION . The Employee shall be paid an annualized Base Salary, payable in accordance with the regular payroll practices of the Company, of $100,000. The Base Salary shall not be decreased without the Employee's consent. It is expected that the Base Salary will remain at $100,000 until the second anniversary of the Effective Date, but thereafter shall be reviewed annually for increase in the discretion of the Board.


5.

BONUS . The Employee shall be entitled to a bonus or bonuses as shall be awarded from time to time as recommended by the Company’s Compensation Committee and approved by the Company’s Board of Directors.


6.

STOCK OPTIONS.

The Employee shall be entitled to stock options as shall be awarded from time to time as recommended by the Company’s Compensation Committee and approved by the Company’s Board of Directors.


7.

PERFORMANCE AWARDS . The Employee shall be eligible to participate in any future long-term incentive program of the Company in accordance with Company practices (taking into account that the Employee is the senior-most Employee) and taking into account competitive compensation practices generally.


8.

EMPLOYEE BENEFIT PROGRAMS. During the Term of Employment, the Employee shall be entitled to participate, on a basis at least as favorable as provided to other senior-level Employees, in all employee pension and welfare benefit plans and programs made available to the Company's senior-level Employees, as such plans or programs may be in effect from time to time, including, without limitation, pension, profit sharing, savings and other retirement plans or programs, 401(k), medical, dental, hospitalization, short-term and long-term disability and life insurance plans, accidental death and dismemberment protection, travel accident insurance and any other pension or retirement plans or programs and any other employee welfare benefit plans or programs that may be sponsored by the Company from time to time.







Feldman/FPVD Employment Agreement Page 2




9.

REIMBURSEMENT OF BUSINESS AND OTHER EXPENSES; PERQUISITES; VACATIONS .


a.

The Employee is authorized to incur reasonable expenses in carrying out his duties and responsibilities under this Agreement, and the Company shall promptly reimburse him for all business expenses incurred in connection with carrying out the business of the Company, subject to documentation.


b.

During the Term of Employment, the Employee shall be entitled to participate in each of the Company's perquisites in accordance with the terms and conditions of such arrangements as they are in effect from time to time for the Company's senior Employees.


c.

The Employee shall be entitled to four (4) weeks paid vacation per year of employment, which shall accrue and otherwise be subject to the Company's vacation policy for senior Employees.


d.

The Employee shall be entitled to a car allowance of $500 per month.



10.

TERMINATION OF EMPLOYMENT.


a.

Termination Due to Death or Disability . In the event the Employee's employment is terminated due to his death or disability, his estate or his beneficiaries, as the case may be, shall be entitled to the following benefits:


i.

Base Salary through the end of this Employment Agreement;


ii.

A pro rata portion of the Employee's annual incentive award  that would have been payable if the Employee had remained employed  through the end of the award year in which Employee's death occurs (i.e., based on actual performance for that award year), which shall be  paid at the time such awards are paid to other senior Employees of the Company;


iii.

All outstanding options, whether or not then exercisable,  shall become fully vested and exercisable upon the date of death and  shall remain exercisable until the end of their originally scheduled  terms;

iv.

All restricted stock awards shall vest and become  non-forfeitable upon the date of death;


v.

The applicable portion of the Incremental Pension, if any, described



Feldman/FPVD Employment Agreement Page 3




in Section 10(b); and


vi.

Any other benefits payable in accordance with the terms of this  Agreement or any other applicable Company benefit plan or program. Employee's employment shall immediately terminate upon his death, without the requirement to provide notice as provided below.



b.

Termination by the Company for Cause .  A termination for Cause shall not take effect unless the provisions of this paragraph are complied with. The Employee shall be given written notice by the Board of the intention to terminate him for Cause, such notice to state in detail the particular act or acts or failure or failures to act that constitute the grounds on which the proposed termination for Cause is based. The Employee shall have ten (10) calendar days after the date of such written notice in which to cure such conduct, to the extent such cure is possible. If he fails to cure such conduct, or if such cure is not possible, the Employee shall then be entitled to a hearing before the Board. Such hearing shall be held within twenty (20) calendar days of such notice to the Employee, provided he requests such hearing within fifteen (15) calendar days after the date the written notice from the Board of the intention to terminate him for Cause is sent in accordance with Section 23. If, within five (5) calendar days following such hearing, the Employee is furnished written notice by the Board confirming that, in its judgment, grounds for Cause on the basis of the original notice exist, he shall thereupon be terminated for Cause and in such event:


i.

He shall be entitled to Base Salary through the date of termination;


ii.

Any annual incentive plan awards with respect to award years that have not yet been completed shall be forfeited;


iii.

All outstanding options that are not exercisable shall be forfeited;


iv.

All restricted stock awards that have not vested shall be  forfeited; and

v.

He shall be eligible to receive other benefits in accordance with the terms of this Agreement or any other applicable Company benefit plan, program or agreement.


c.

Termination by the Company without Cause or by the Employee with Good Reason.  In the event the Employee's employment is terminated by the Company without Cause, other than due to Disability or death, or by the Employee with Good Reason, the Employee shall be entitled to the same



Feldman/FPVD Employment Agreement Page 4




benefits as if his employment had been terminated due to death.


d.

Termination of employment by the Employee on his own initiative , In the event the Employee’s employment is terminated by the Employee’s own initiative other than a termination due to death, Disability or Good Reason, shall have the same consequences as a termination for Cause.  A voluntary termination under this Section shall be effective 30 calendar days after prior written notice is received by the Company and shall not be deemed to be a breach of this Agreement.


e.

Consequences of a Change in Control . Upon or after a Change in Control which results in a change in control of the Board of Directors and a change in any of the Employees’ duties and responsibilities, the Employee shall be entitled to the same benefits as if his employment had been terminated due to death.


f.

Consequences of the Company Relocating. In the event the Company relocates its headquarters fifty (50) or more miles away from its present headquarters, and if the Employee did not participate and consent to such relocation, the Employee, at his option, shall be entitled to the same benefits as if his employment had been terminated due to death.


11.

COVENANT NOT TO COMPETE .  For a period of two years from the termination of this Agreement, the Employee will not directly or indirectly:  


a.

Enter into or attempt to enter into the "Restricted Business" as that term is defined below.


b.

Induce or attempt to persuade any former, current or future employee, agent, manager, consultant, director, or other participant in the Company’s business to terminate such employment or other relationship in order to enter into any relationship with the Employee, any business organization in which the Employee is a participant in any capacity whatsoever, or any other business organization in competition with the Company's business; or


c.

Use contracts, proprietary information, trade secrets, confidential information, customer lists, mailing lists, goodwill, or other intangible property used or useful in connection with the Company's business.  


d.

The term "indirectly," as used above, includes acting as a paid or unpaid director, officer, agent, representative, employee of, or consultant to any enterprise, or acting as a proprietor of an enterprise, or holding any direct or indirect participation in any enterprise as an owner, partner, limited partner, joint venturer, shareholder, or creditor.  



Feldman/FPVD Employment Agreement Page 5





e.

The term "Restricted Business" means business engaged in the sale of security or surveillance equipment, software or related accessories to any governmental agency, both nationally and internationally.


12.

CONFIDENTIALITY. The Employee agrees as follows:


a.

He will not, at any time during the Term of Employment or thereafter, disclose or use any trade secret, proprietary or confidential information of the Company or any subsidiary or affiliate of the Company, obtained during the course of his employment ("Confidential Information"), except (i) as required in the course of such employment or with the written permission of the Company or, as applicable, any subsidiary or Affiliate of the Company, (ii) when disclosure is required by law or by any court, arbitrator, mediator or administrative or legislative body (including any committee thereof) with jurisdiction to order the Employee to disclose or make accessible such information, (iii) to the extent necessary in connection with any other litigation, arbitration or mediation involving this Agreement, including, but not limited to, the enforcement of this Agreement or (iv) as to Confidential Information that becomes generally known to the public or within the relevant trade or industry other than due to the Employee's violation of this Section. The Employee agrees that, if the Employee receives legal process with regard to disclosure of Confidential Information, to the extent not prohibited by law he shall promptly notify the Company and cooperate with the Company in seeking

a protective order.

b.

The Employee agrees that at the time of the termination of his employment with the Company, whether at the instance of the Employee or the Company, and regardless of the reasons therefor, she will deliver to the Company, and not keep or deliver to anyone else, any and all notes, files, memoranda, papers and, in general, any and all physical matter containing information, including any and all documents significant to the conduct of the business of the Company or any subsidiary or Affiliate of the Company which are in his possession, except for any documents for which the Company or any subsidiary or Affiliate of the Company has given written consent to removal at the time of the termination of the Employee's employment. Anything herein to the contrary notwithstanding, the Employee shall be entitled to retain (I) papers and other materials of a personal nature, including, but not limited to, photographs, correspondence, personal diaries, calendars and Rolodexes, personal files and phone books, (ii) information exclusively showing his compensation or relating to reimbursement of expenses, (iii) information that she reasonably believes may be needed for tax purposes and (iv) copies of plans,



Feldman/FPVD Employment Agreement Page 6




programs and agreements relating to his employment, or termination thereof, with the Company.


c.

The Employee agrees that the Company's remedies at law would be inadequate in the event of a breach or threatened breach of this Section; accordingly, the Company shall be entitled, in addition to its rights at law, to an injunction and other equitable relief without the need to post a bond.


13.

RESOLUTION OF DISPUTES . Any controversy, dispute or claim arising under or in connection with this Agreement shall be resolved by third party mediation of the dispute and, failing that, by binding arbitration, to be held in North Carolina, in accordance with the Commercial Arbitration Rules (and not the National Rules for the Resolution of Employee Disputes) of the American Arbitration Association. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Each Party shall bear his or its own costs of the mediation, arbitration or litigation, except that the Company shall bear all such costs if the Employee prevails in such mediation, arbitration or litigation on any

material issue.

14.

INDEMNIFICATION.


a.

If the Employee is made a party, is threatened to be made a party or reasonably anticipates being made a party, to any formal or informal action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer, manager, trustee, representative, consultant or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee, manager, trustee, representative, consultant or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Employee's alleged action in an official capacity while serving as a director, officer, member, employee, manager, trustee, representative, consultant or agent, the Employee shall be promptly indemnified and held harmless by the Company to the fullest extent legally authorized by the Company's certificate of incorporation or bylaws or resolutions of the Board against all cost, expense, liability and loss (including, without limitation, attorney's fees and other professional fees and charges, judgments, fines, interest, expenses of investigation, ERISA  excise taxes or other liabilities or penalties and or other amounts paid or to be paid in settlement) reasonably incurred or suffered by the Employee in connection therewith, or in connection with seeking to enforce his rights under this Section and such indemnification shall continue as to the Employee even if he has ceased to be a officer, director, member, employee, manager, trustee, representative, consultant or agent of the



Feldman/FPVD Employment Agreement Page 7




Company or other entity and shall inure to the benefit of the Employee's heirs, executors and administrators. The Company shall advance to the Employee all reasonable costs and expenses incurred by him in connection with a Proceeding in accordance with the terms of the Company's applicable policy. Such request shall include an undertaking by the Employee to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses. Nothing in this Agreement shall operate to limit or extinguish any right to indemnification, advancement of expenses, or contribution that the Employee would otherwise have (including, but not limited to, by agreement with the Company or under applicable law).


b.

Neither the failure of the Company (including the Board, independent legal counsel or stockholders) to have made a determination prior to the commencement of any Proceeding concerning payment of amounts claimed by the Employee under Section 15(a) that indemnification of the Employee is proper because he has met the applicable standard of conduct, nor a determination by the Company (including the Board, independent legal counsel or stockholders) that the Employee has not met such applicable standard of conduct, shall create a presumption that the Employee has not met the applicable standard of conduct.


c.

During the Employee's employment with the Company and thereafter, the Company agrees to continue and maintain a directors' and officers' liability insurance policy covering the Employee on terms and conditions no less favorable to his in any respect (including, but not limited to, with respect to the period of coverage, scope, exclusions, amounts and deductibles) than the coverage then being provided to any other present or former director or senior Employee of the Company.


15.

ASSIGNABILITY; BINDING NATURE . This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of the Employee) and assigns. No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights or obligations may be assigned or transferred by the Company pursuant to a merger or consolidation in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all the assets of the Company, provided that the assignee or transferee is the successor to all or substantially all the assets of the Company and such assignee or transferee assumes the liabilities, obligations and duties of the Company contained in this Agreement, either contractually or as a matter of law. The Company further agrees that, in the event of a sale of assets or liquidation as described in the preceding sentence, it shall take whatever action it reasonably can in order to cause such assignee or transferee to expressly assume the liabilities, obligations



Feldman/FPVD Employment Agreement Page 8




and duties of the Company hereunder. No rights or obligations of the Employee under this Agreement may be assigned or transferred by the Employee other than his rights to compensation and benefits, which may be transferred only by will or operation of law.


16.

REPRESENTATIONS AND WARRANTIES .


a.

The Company represents and warrants that (i) the execution, delivery and performance of this Agreement by the Company has been fully and validly authorized by all necessary corporate action, (ii) the execution, delivery and performance of this Agreement does not violate any applicable law, regulation, order, judgment or decree or any agreement, plan or corporate governance document to which the Company is a party or by which it is bound and (iii) upon execution and delivery of this Agreement by the Parties, it shall be a valid and binding obligation of the Company enforceable against it in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally.

 

b.

The Employee represents and warrants that there is no agreement between him and any other person, corporation or organization that could substantially interfere with the performance of his duties and obligations hereunder. In the event the Employee's representation under this is not true and correct in all material respects, this Agreement shall terminate with no further obligations on the part of the Company and all outstanding equity awards granted pursuant hereto shall be immediately forfeited.


17.

ENTIRE AGREEMENT . This Agreement contains the entire understanding and agreement between the Parties concerning the subject matter hereof and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the Parties with respect thereto. In the event of any inconsistency between any provision of this Agreement and any provision of any plan, program, policy, arrangement, or agreement of the Company or any Affiliate, the  provisions of this Agreement shall control to the extent that they are more favorable to the Employee unless the Employee otherwise agrees. This Agreement supersedes the prior Employment and Co Chairman Agreement between the Company and the Employee and that agreement is hereby void and of no force and effect.


18.

AMENDMENT OR WAIVER . No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by the Employee and an authorized officer of the Company. No waiver by either Party of, or compliance with, any breach by the other Party of any condition or provision contained in this Agreement to be performed by such other Party shall be deemed a waiver of a



Feldman/FPVD Employment Agreement Page 9




similar or dissimilar condition or provision at the same or any prior or subsequent time. Any waiver must be in writing and signed by the Employee or an authorized officer of the Company, as the case may be.


19.

SEVERABILITY . In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law so as to achieve the purposes of this Agreement.


20.

SURVIVORSHIP . Except as otherwise expressly set forth in this Agreement, the respective rights and obligations of the Parties hereunder shall survive any termination of the Employee's employment. This Agreement itself (as distinguished from the Employee's employment) may not be terminated by either Party without the written consent of the other Party.


21.

GOVERNING LAW/JURISDICTION. This Agreement shall be governed by and construed and interpreted in accordance with the laws of Florida without reference to principles of conflict of laws.


22.

NOTICES . All notices and other communications required or permitted hereunder shall be in writing and shall be deemed given when (a) delivered personally, (b) sent by certified or registered mail, postage prepaid, return receipt requested or (c) delivered by overnight courier (provided that a written acknowledgment of receipt is obtained by the overnight courier) to the Party concerned at the address indicated below or to such changed address as such Party may subsequently give such notice of:


If to the Company:

Force Protection Video Equipment Corp.

 

          140 Iowa Lane

Suite 101

Cary, NC 27511

info@forcevideo.com


With a copy to:

Eric P. Littman

7695 S.W. 104 th Street

Miami, FL 33156

littmanlaw@gmail.com


If to the Employee:

Paul Feldman

103 Kingussie Court

Cary, NC 27511

paul@forcevideo.com




Feldman/FPVD Employment Agreement Page 10




23.

HEADINGS . The headings of the sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.



24.

COUNTERPARTS . This Agreement may be executed in two or more  counterparts and such counterparts executed and delivered shall constitute but one and the same instrument. Signatures delivered by facsimile shall be deemed effective for all purposes to the extent permitted under applicable law.    



IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above.  


FORCE PROTECTION VIDEO EQUIPMENT CORP.




By: /s/Paul Feldman

/s/Paul Feldman

    Paul Feldman, President

Paul Feldman





Feldman/FPVD Employment Agreement Page 11


Exhibit 10.14

[EXHIBIT1014001.JPG]



AMENDMENT NO. 2 TO SECURITIES PURCHASE AGREEMENT

 

This Amendment No. 2 to Securities Purchase Agreement (this  Amendment ), dated as of November 12, 2015, as amended, is entered into by and among Force Protection Video Equipment Corp., a Florida corporation (the  Company ), and RDW Capital, LLC (the “Purchaser”).

 

WITNESSETH:

 

WHEREAS, on November 12, 2015, the Company and the Purchaser entered into a Securities Purchase Agreement, and on November 12, 2015, the Company and the Purchaser entered into an amendment thereto (as amended, the “Securities Purchase Agreement”);

 

WHEREAS, the Company and the Purchaser desires to amend the Securities Purchase Agreement as more particularly set forth below;

 

NOW, THEREFORE, in consideration of the covenants and mutual promises contained herein and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged and intending to be legally bound hereby, the parties agree as follows:

 

1. Section 2.4(iv) of the Securities Purchase Agreement shall be deleted in its entirety and replaced by the following which shall be inserted in lieu thereof:


There is no existing Event of Default (as defined in the Notes).

 

2. Section 2.4(vi) of the Securities Purchase Agreement shall be deleted in its entirety and replaced by the following which shall be inserted in lieu thereof:


From the date hereof to the applicable Closing Date, trading in the Common Stock shall not have been suspended by the Commission  or the Company’s principal Trading Market and, at any time prior to the applicable Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities.

 

3. Except as modified herein, the terms of the Securities Purchase Agreement shall remain in full force and effect.

 

4. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and shall be binding upon all parties, their successors and assigns, and all of which taken together shall constitute one and the same Amendment.  A signature delivered by facsimile shall constitute an original.


IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date set forth above.



  FORCE PROTECTION VIDEO EQUIPMENT CORP.

 

By:  /s/ Paul Feldman

Name: Paul Feldman

Title: President


PURCHASER:

RDW CAPITAL, LLC

By:  /s/ John DeNobile

Name: John DeNobile

Title: Manager




Carter, Terry & Company.

3060 Peachtree Rd, Suite 1200,

Atlanta GA 30305

Phone: 404-364-3070-Member FINRA SIPC



September 30, 2015


Paul Feldman

Force Protection Video Equipment Corp.

103 Kingussie Court
Cary, NC 27511


Subject:  Private Placement Offering for Force Protection Video Equipment Corp. (FPVD - OTCPink)


It is our understanding that Force Protection Video Equipment Corp., the “Company”, desires to raise capital, as well as to fund the Company’s continuing general operations. Based on our discussions, our pre­liminary review of the financial information submitted to Carter, Terry & Company., referred heretofore as the (“AGENT”) and rep­resentations you and your associates have made to us with regard to the present and proposed business ac­tivities of the Company, its operations and financial condition, we would like to confirm our interest in acting as the Company’s exclusive Financial Advisor Investment Bank and Placement Agent, on a "best efforts" basis..  In such role we would assist the Company in one or more capital raises which might result in a private placement, merger, acquisition, sale of assets, sale of common stock, sale of ownership interest or any other financial transaction hereinafter referred to as a "Transaction" upon the basic terms and conditions set forth herein (the "Agree­ment"), as well as a full array of additional investment banking services.


Section I: Services to be rendered


“AGENT” services will include (but not be limited to) the following:


(i)

Arranging for one or more institutional investments of capital, as defined in iii, (an “Investment,” which could include any variation thereof, including common stock, preferred stock, mezzanine debt, senior secured debt, any other financial instrument or a combination of several financial instruments), on a best efforts basis (in a form and on terms satisfactory, in its sole judgment, to the Company) to raise capital for use by the Company;


(ii)

Any Investment will be placed in compliance with valid exemptions from registration or qualification under federal securities laws, state securities (“blue sky”) laws or foreign securities laws of each jurisdiction in which any offers of an Investment may be made;

 

(iii)

Utilizing appropriate investment information materials or modifying existing Company business plans and documents (collectively, the “Information Memorandum”) to be provided to potential sources of financing. “AGENT” will provide advice with respect to negotiating with all potential financing, merger or acquisition candidates introduced (as defined in Section II below) to the Company by “AGENT” (as defined below; any such identified and introduced candidates, along with their affiliates, associates, subsidiaries, divisions and related entities being hereinafter referred to as “Investor Candidates”) who might be interested or involved in making an Investment in the Company, including reviewing the preliminary and final documentation relating to any such financing.  As used



1



herein, “Investor Candidates” shall mean and include individual, strategic and institutional investors of all types, introduced (as defined in Section II below) to the Company by “AGENT” including individuals, trusts, estates, partnerships and associations, banks, thrifts, insurance companies and other financial institutions, investment companies and other pooled investment vehicles, all tax-exempt organizations such as those subject to ERISA and other public and private pension funds, endowments and foundations as well as corporations in similar lines of business to the Company’s, which might be candidates for acquisition by or merger with , together with their affiliates, divisions, subsidiaries and investment management consultants. All Investor Candidates, if not merger or acquisition candidates, shall be “accredited investors,” as that term is generally understood in the private equity business;


In performing services hereunder, “AGENT” shall be regarded as an independent contractor and marketing representative. “AGENT” shall not have any right or authority to create any obligations of any kind on behalf of the Company, shall make no representation to any third party to the contrary, and shall not make any representations about the Company, its operations or finances other than what the Company provides for inclusion in the Information Memorandum .   Nothing contained in this Agreement shall be deemed or construed to create a partnership or joint venture between Company and “AGENT” or between Company and any Investor Candidate.


Section II: Fees, Expenses and Term     


“AGENT” will be the exclusive financial advisor to and representative of the Company for an initial period of 60 days, and then reverting to a non-exclusive financial advisor for the next twelve consecutive (12) months commencing on the date of this Agreement, with an option to extend this Agreement an additional 6 months, provided however, that either party may withdraw from this Agreement at any time upon written notice to the other party.  Otherwise, this engagement and the terms hereunder will con­tinue, subject to the same right of either party to terminate on written notice to the other party, until a Transaction is successfully completed or until the Agreement is terminated. Within three business days after the effective date of any termination by the Company (the "Termination Date"), “AGENT”  shall deliver to Company a list of all introduced Investor Candidates, merger or acquisition candidates and Strategic Investors (the "Covered Par­ties") with which “AGENT”  can confirm that (a) the Company, at “AGENT’s” instigation or by “AGENTs” introduction, has had discussions concerning a Transaction during the term of this Agreement and prior to receipt of the notice of termination or (b) such Covered Parties have, prior to such notice of termination, expressed an interest in considering or pursuing a Transaction with Company.   On and after the Termination Date, “AGENT” shall also either destroy or return to Company any and all Information, Information Memoranda and any other confidential information of the Company (including extracts thereof), which are in “AGENT’s” possession or control. The provisions concerning confidentiality, indemnification, compensation and the Company's obligations to pay fees and reimburse expenses contained herein and the Company's obligations contained in the Indemnifica­tion Provisions (as hereinafter defined) will survive any such termination. “AGENT” agrees not to use any confidential information about the Company for any purposes other than in connection with a Transaction and directly related matters.

The Company will attach any investor candidate that is considered already engaged with them on APPENDIX A , following the signature page. The company agrees any investor candidate introduced by “AGENT” not on the list is considered the “AGENT’s” introduction.


“AGENT” agrees to introduce the Company to certain potential Investor Candidates.  Upon written request from the Company, “AGENT” may designate independent counsel to prepare the appropriate documents (including subscription and escrow agreement) with regard to the terms of any financial transactions and the closing thereof. The Company is responsible for any and all reasonable expenses



2



associated with the Offering and the closing documents, escrow and escrow agent. However incurrence of any such expenses over $2,500.00 shall require the prior written consent for those expenses from the Company.


If, within the two year period commencing on the date hereof, the Investor Candidate , singly or with others, purchases debt or equity securities of, or loans money to the Company, the Company will pay “AGENT” within three business days upon after any such transaction under the following terms below:

      


(i)

Cash Compensation Fees:

 A success fee for debt and/or equity capital raised by “AGENT” on behalf of Company shall be subject to the following fee structure:


a.

10% of the amount for any equity or hybrid equity capital raised up to $1,000,000

b.

8%    of the amount for any equity or hybrid equity capital raised up to $5,000,000

c.

6%   of the amount for any equity or hybrid equity capital raised over $5,000,000


(ii)

A success fee which shall be the identical terms as in Section II (i) above of the Aggregate Consideration (except as further defined in (iii) below) received by Company from any Transaction closed, including multiple successive Transactions, with an Investor Candidate or a Strategic Candidate (or upon closing a Transaction with a Covered Party, including multiple successive Transactions, within twelve months after the Termination Date), which amount will be paid when the Company receives the proceeds from the Transaction.

        

(iii)

Restricted Stock :

              

In connection with the compensation set forth above, the Company agrees to pay “AGENT” amount of restricted shares equal to 4% of capital raised divided by the closing price of the stock on the date of close. These shares shall have piggy back registration rights.  In the event the shares are not registered within 6 months of the anniversary of this executed engagement, the Company agrees to approve and pay for the opinion of sale under Rule 144.


For purposes of this Agreement, "introduced" means that “AGENT” shall have brought the Company to the attention of the prospective Investor Candidate, Strategic Investor or Transaction (“Investor Candidate”) and “AGENT” shall have been a procuring cause in its consummation of the matter.  “Procuring cause” shall mean that “AGENT” shall have identified the Company to Investor Candidate , the merger or acquisition candidate or the Strategic Investor and conducted initial qualifying discussions regarding an Investment in or other Transaction with Company, or caused the parties to have attended meetings for the purpose of considering a Transaction.


For purposes of this Agreement, “Aggregate Consideration” shall mean the total value of all cash, securities, other property and any other consideration, including, without limitation (as, if and when received), any contin­gent, earned or other assets or consideration, paid or payable, directly or indirectly, in connection with the Transaction, net of any indebtedness owed upon the same, it being the intention of this provision that the Aggregate Consideration shall mean the net equity value of any cash, tangible assets or measurable intangible assets acquired by, invested in, loaned to or transferred to the Company. If any non-cash consideration is a class of newly-is­sued, publicly-traded securities, then the fair market value thereof shall be the average of the closing prices for the twenty trading days subsequent to the fifth trading day after the consummation of the Transaction.  If no public market exists for any securities issued in the Transaction or a class of securities is not intended to be publicly traded or convertible into publicly-traded securities,



3



then the fair market value thereof shall be determined by the valuation placed upon these securities by the parties to the Transaction.


Section III: Indemnification


The Company agrees to indemnify and hold “AGENT”, which terms for the purposes of this Agreement include the partners, controlling persons, officers, employees and agents of “AGENT”, harmless from and against any and all losses, claims, damages, costs, liabilities or expenses (including reasonable attorney’s fees and expenses), joint or several, to which “AGENT” may become subject in connection with its performance of the services described herein resulting from Company’s material breach of this Agreement, gross negligence, willful misconduct or misfeasance, provided, however, that Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability, cost or expense is found in a final judgment by a court of law to have directly resulted from the gross negligence or willful misconduct of “AGENT” .


Likewise “AGENT” agrees to indemnify and hold Company, which terms for the purposes of this paragraph include the subsidiaries, partners, controlling persons, officers, stockholders and employees of Company, harmless from and against any and all losses, claims, damages, costs, liabilities or expenses (including reasonable attorney’s fees and expenses), joint or several, to which Company may become subject resulting from “AGENT’s” material breach of this Agreement, gross negligence, willful misconduct or misfeasance, provided however, that “AGENT” shall not be liable in any such case to the extent that any such loss, claim, damage, liability, cost or expense is found in a final judgment by a court of law to have directly resulted from the gross negligence or willful misconduct of Company.


Section IV: Other


Each party to this Agreement agrees to keep in strict confidence the proprietary and non-public information of the other party during the term of this Agreement and thereafter, provided however that the foregoing shall not prohibit disclosures (i) pursuant to the exercise of the parties' responsibilities under this Agreement; (ii) required by law or legal process (provided notice is given prior to such disclosure); or (iii) of matters which become public other than by the actions of the disclosing party hereunder.


If “AGENT” completes the Private Placement or any other Transaction pursuant to the Agreement, “AGENT” may, at its own expense, place an announcement, subject to Company’s prior consent and approval, in any newspapers and periodicals it may select stating that “AGENT” has acted as financial advisor, investment banker or placement agent for Company in the Transaction.

Carter, Terry & Company is a registered broker dealer, whose address is herein below for to this contemplated transaction.


Carter, Terry & Company.  

3060 Peachtree Rd

Suite 1200

Atlanta, GA 30305

Attention: Mr. Timothy J. Terry

Telephone: (404) 364-3070


This agreement shall be construed in accordance with the laws of the State of Georgia and the parties agree to submit themselves to the jurisdiction of the courts located in that state, which shall be the sole tribunals in which either party may institute and maintain a legal proceeding against the other party arising from any dispute hereunder.




4



If any agreement, covenant, warranty or other provision of this Agreement is invalid, illegal or incapable of being enforced by reason of any rule of law or public policy, all other agreements, covenants, warranties and other provisions of this Agreement shall, nevertheless, remain in full force and effect. No waiver by either party of a breach or non-performance of any provision or obligation of this Agreement shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision of this Agreement. This Agreement is the entire agreement of the parties with respect to the subject matter hereof, supersedes all prior agreements and understandings, oral or written, relating to the subject matter hereof, and may not be amended, supplemented, or modified except by written instrument executed by all parties hereto.  Neither party may assign any of its rights or obligations under this Agreement without the prior written consent of the other party.


All notices or other communications under this Agreement must be in writing and sent by prepaid, first class airmail, delivered by hand or transmitted by facsimile or email to the email address or facsimile number of the recipient set out below or such other address, email address or facsimile number as may be furnished in writing by the recipient to the other party.  The addresses, email addresses and facsimile numbers of the parties for purposes of this Agreement are:


Force Protection Video Equipment Corp.    

Carter, Terry & Company

103 Kingussie Court

            

3060 Peachtree Rd

Suite 1200     

Cary, NC 27511

Atlanta, GA 30305

                                                 

        

Phone:  919-780-7897

Phone:   404-364-3070


If the foregoing is acceptable to you, please indicate your approval by signing in the space provided and returning an executed copy of this Agreement to us.


We are very enthusiastic about working with your team toward the successful completion of this assignment.

Understood and agreed, this 30 th day of September, 2015.



Force Protection Video Equipment Corp.  

Carter, Terry & Company.




/s/Paul Feldman

/s/Timothy J. Terry

    

Paul Feldman  – CEO

Timothy J. Terry  -  CEO                                                 





5



Hamilton  &  Associates Law Group, P.A.

Attorneys    Counselors    Consultants

101 Plaza Real South, Suite 202N, Boca Raton, FL 33432

www.SecuritiesLawyer101.com

email:  info@securitieslawyer101.com
  Telephone: 561-416-8956           Facsimile: 561-416-2855


February 19, 2016

Force Protection Video Equipment Corp.

140 Iowa Lane

Suite 101

Cary, NC 27511


 

Re: Registration Statement on Form S-1

 

 Ladies and Gentlemen:

 

We have acted as counsel to Force Protection Video Equipment Corp., a Florida corporation (the “ Company ”) in the preparation of a Registration Statement on Form S-1 (the “ Registration Statement ”) filed with the Securities and Exchange Commission (the “ Commission ”) on February 19, 2016, as amended, in connection with the registration for resale from time to time, on a continuous or delayed basis, by certain of the Company’s security holder, of up to 2,415,000 shares (the “ Shares ”) of the Company’s common stock, par value $0.0001 per share, issued or issuable pursuant to the Securities Purchase Agreement, dated November 12, 2015, as amended, between the Company and RDW Capital, LLC, as amended to date (the “ Purchase Agreement ”), the selling security holder identified in the Registration Statement or its assigns.

 

For purposes of rendering this opinion, we have made such legal and factual examinations as we have deemed necessary under the circumstances and, as part of such examination, we have examined, among other things, originals and copies, certified or otherwise, identified to our satisfaction, of such documents, corporate records and other instruments as we have deemed necessary or appropriate. For the purposes of such examination, we have assumed the genuineness of all signatures on original documents and the conformity to original documents of all copies submitted to us. We have relied, without independent investigation, on certificates of public officials and, as to matters of fact material to the opinion set forth below, on certificates of officers of the Company.

 

On the basis of and in reliance upon the foregoing examination and assumptions, we are of the opinion that assuming the Registration Statement shall have become effective pursuant to the provisions of the Securities Act of 1933, as amended (the “ Act ”), the Shares, when issued by the Company against payment therefore (not less than par value) and in accordance with the Registration Statement and the provisions of the Purchase Agreement, and when duly registered on the books of the Company’s transfer agent and registrar therefor in the name or on behalf of RDW Capital, LLC, or its assigns, will be validly issued, fully paid and non-assessable.

 

We express no opinion as to the laws of any state or jurisdiction other than the laws of the State of Florida, as currently in effect.

 

We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to us under the caption “Legal Matters” in the prospectus constituting a part of the Registration Statement. This opinion is for your benefit in connection with the Registration Statement and may be relied upon by you and by persons entitled to rely upon it pursuant to the applicable provisions of the Act. In giving this consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission.

 

 Very truly yours,
/s/ Brenda Hamilton, Esq.

Principal of Hamilton & Associates Law Group, P.A.



EXHIBIT 10.17


AMENDMENT NO. 3 TO SECURITIES PURCHASE AGREEMENT


This Amendment No. 3 to Securities Purchase Agreement (this “Amendment”) dated as of February 17, 2016, as amended is entered into by and among Force Protection Video Equipment Corp., a Florida corporation (the “Company”) and RDW Capital, LLC (the “Purchaser”).


WITNESSETH:


WHEREAS on November 12, 2015, the Company and the Purchaser entered into a Securities Purchase Agreement and on November 12, 2015, and January 26, 2016, the Company and the Purchaser entered into amendments thereto (as amended, the “Securities Purchase Agreement”);


WHEREAS, the Company and the Purchaser desires to amend the Securities Purchase Agreement as more particularly set forth below;


AGREEMENT


The Parties hereto, intending to be legally bound, agree as follows:


1.

Amendments


(a) Definitions . Section 1.1 of the Securities Purchase Agreement is hereby amended and restated so that Equity Conditions is deleted in its entirety and replaced with the following:


“Equity Conditions” means, during the period in question, (a) the Company shall have duly honored all conversions and redemptions scheduled to occur or occurring by virtue of one or more Notices of Conversion of the Holder, if any, (b) the Company shall have paid all liquidated damages and other amounts owing to the Holder in respect of this Note, (c) (i) there is an effective Registration Statement pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell all of the shares of Common Stock issuable pursuant to the Transaction Documents (and the Company believes, in good faith, that such effectiveness will continue uninterrupted for the foreseeable future) or (ii) all of the Conversion Shares issuable pursuant to the Transaction Documents (and shares issuable in lieu of cash payments of interest) may be resold pursuant to Rule 144 without volume or manner-of-sale restrictions as determined by the counsel to the Company as set forth in a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the Holder, (d) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction Documents are listed or quoted for trading on such Trading Market (and the Company believes, in good faith, that trading of the Common Stock on a Trading Market will continue uninterrupted for the foreseeable future), (e) there is a sufficient number of authorized but unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares then issuable pursuant to the Transaction Documents, (f) the issuance of the shares in question to the Holder would not violate the limitations set forth in Section 4(d) in the Note, (g) there has been no public announcement of a pending or proposed Fundamental Transaction or Change of Control Transaction that has not been consummated, (h) the applicable Holder is not in possession of any information provided by the Company that constitutes, or may constitute, material non-public information, (i) the Company has timely filed (or obtained extensions in respect thereof and filed within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act, (j) the Company shares of common stock must be DWAC Eligible



and not subject to a “DTC chill” and (m) the Conversion Shares must be delivered via an “Automatic Conversion” of principal and/or interest.


(b) Purchase . Section 2.1 of the Securities Purchase Agreement is hereby amended and restated as follows:


Purchase .  The Purchaser will purchase an aggregate of up to $2,250,000 in Subscription Amount of Notes, corresponding to an aggregate of $2,362,500 in Principal Amount of Notes. The purchase will occur in six (6) tranches (each a “Tranche”), with the first Tranche of $150,000 being closed on upon execution of this Agreement. The second Tranche will be for $100,000 and will occur within five (5) Business Days after the filing date of the Registration Statement. The third Tranche will be for $500,000 and will occur within five (5) Business Days after the effective date of the Registration Statement. The fourth Tranche will be for $500,000 and will occur within five (5) Business Days after the effective date of a registration statement registering the shares of Common Stock underlying the Note related to such Tranche. The fifth Tranche will be for $500,000 and will occur within five (5) Business Days after the effective date of a registration statement registering the shares of Common Stock underlying the Note related to such Tranche. The sixth Tranche will be for $500,000 and will occur within five (5) Business Days after the effective date of a registration statement registering the shares of Common Stock underlying the Note related to such Tranche. The Purchaser shall not be required to fund the second through sixth Tranches if the Company is in default of any Note or this Agreement.

 

2.

Except as modified herein, the terms of the Securities Purchase Agreement shall remain in full force and effect.


3.

This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and shall be binding upon all parties, their successors and assigns, and all of which taken together shall constitute one and the same Amendment. A signature delivered by facsimile shall constitute an original.


IN WITNESS WHEREOF; the parties hereto have executed this Amendment as of the date set forth above.


FORCE PROTECTION VIDEO EQUIPMENT CORP.



By: /s/Paul Feldman

Name: Paul Feldman

Title: President


PURCHASER:

RDW CAPITAL, LLC



By: /s/John DeNobile

Name: John DeNobile

Title: Manager




Consent of Registered Auditor


Force Protection Video Equipment Corp.

140 Iowa Lane

Suite 101

Cary, NC 27511


Dear Sir/Madam



We hereby consent to the Prospectus constituting a part of this Registration Statement on Form S-1 of our report dated July 3, 2015, relating to the financial statements of Force Protection Video Equipment Corp which are contained in this prospectus.


We also consent to the reference to us under the caption “Experts” in the Prospectus.



/s/Baum & Company

Miami Beach, FL 33139

February 22, 2016