Exhibit 10.4
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The Securities represented by this Convertible Note have not been registered
under the Securities Act of 1933, as amended ("Act"), or applicable state
securities laws ("State Acts") and shall not be sold, hypothecated, donated or
otherwise transferred unless the Borrower shall have received an opinion of
Legal Counsel for the Borrower, or such other evidence as may be satisfactory to
Legal Counsel for the Borrower, to the effect that any such transfer shall not
require registration under the Act and the State Acts.
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TRIMEDIA ENTERTAINMENT GROUP, INC.
14.00% SECURED CONVERTIBLE NOTE
$250,000 No: 1
DATE OF ISSUE: NOVEMBER 1, 2002
Trimedia Entertainment Group, Inc. (a Delaware corporation)
(hereinafter referred to as the "Borrower") is indebted and, for value received,
herewith promises to pay to:
GEMINI GROWTH FUND, LP
or to its order, (together with any assignee, jointly or severally, the "Holder"
or "Lender") on or before November 30, 2003 (the "Termination Date") (unless
this Convertible Note shall have been sooner called for redemption or presented
for conversion as herein provided), the sum of Two Hundred Fifty Thousand
Dollars ($250,000) (the "Principal Amount") and to pay interest on the Principal
Amount at the rate of fourteen percent (14.00%) per annum as provided herein. In
furtherance thereof, and in consideration of the premises, the Borrower
covenants, promises and agrees as follows:
1. Interest: Interest on the Principal Amount outstanding from time to
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time shall accrue at the rate of 14.00% per annum and be payable in cash via
wire transfer in monthly installments commencing November 30, 2002 and
subsequent payments shall be made on the last day of each month thereafter until
the Principal Amount and all accrued and unpaid interest shall have been paid in
full. Overdue principal and interest on the Convertible Note shall, to the
extent permitted by applicable law, bear interest at the rate of 18.00% per
annum. All payments of both principal and interest shall be made at the address
of the Holder hereof as it appears in the books and records of the Borrower, or
at such other place as may be designated by the Holder hereof in writing to
Borrower.
2. Maturity: If not sooner redeemed or converted, this Convertible Note
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shall mature on November 30, 2003 at which time all then remaining unpaid
principal, interest and any other charges then due under the Loan Agreement
shall be due and payable in full via wire transfer.
3. Optional Redemption: (a) On any interest payment date and after
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prior irrevocable notice as provided for below, the outstanding principal amount
of this Convertible Note is redeemable at the option of the Borrower, in whole
but not in part, at 100% of par.
(b) The Borrower may exercise its right to redeem prior to Termination
Date by giving notice (the "Redemption Notice") thereof to the Holder as such
name appears on the books of the Borrower, which notice shall specify the terms
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of redemption (including the place at which the Holder may obtain payment), the
total principal amount to be redeemed (such principal amount herein called the
"Redemption Amount") and the date for redemption (the "Redemption Date"), which
date shall not be less than 90 days nor more than 120 days after the date of the
Redemption Notice. On the Redemption Date, the Borrower shall pay all accrued
unpaid interest on the Convertible Note up to and including the Redemption Date,
and shall pay to the Holder a dollar amount equal to the Redemption Amount. In
the case of Convertible Notes called for redemption, the conversion rights will
expire at the close of business on the Redemption Date.
4. Conversion Right: The Holder of this Convertible Note shall have the
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right, at Holder`s option, at any time, to convert all, or, in multiples of
$50,000, any part of this Convertible Note into such number of fully paid and
nonassessable shares of Common Stock as shall be provided herein. The holder of
this Convertible Note may exercise the conversion right by giving written notice
(the "Conversion Notice") to the Borrower of the exercise of such right and
stating the name or names in which the stock certificate or stock certificates
for the shares of Common Stock are to be issued and the address to which such
certificates shall be delivered. The Conversion Notice shall be accompanied by
the Convertible Note. The number of shares of Common Stock that shall be
issuable upon conversion of the Convertible Note shall equal the face amount of
the Convertible Note divided by the Conversion Price as defined below and in
effect on the date the Conversion Notice is given; provided, however, that in
the event that this Convertible Note shall have been partially redeemed, shares
of Common Stock shall be issued pro rata, rounded to the nearest whole share.
Conversion shall be deemed to have been effected on the date the Conversion
Notice is received (the "Conversion Date"). Within 10 business days after
receipt of the Conversion Notice, Borrower shall issue and deliver by hand
against a signed receipt therefor or by United States registered mail, return
receipt requested, to the address designated in the Conversion Notice, a stock
certificate or stock certificates of the Borrower representing the number of
shares of Common Stock to which Holder is entitled and a check or cash in
payment of all interest accrued and unpaid on the Convertible Note being
converted up to and including the Conversion Date. The conversion rights will be
governed by the following provisions:
(a) Conversion Price: On the issue date hereof and until such time as
an adjustment shall occur, the Conversion price shall be $1.00 per share,
provided however, that the Conversion Price shall be subject to adjustment at
the times, and in accordance with the provisions, as follows:
(i) Adjustment for Issuance of Shares at less than the
Conversion Price: If and whenever any Additional Common Stock (as herein
defined) shares shall be issued by the Borrower (the "Stock Issue Date") for a
consideration per share less than the Conversion Price, then in each such case
the initial Conversion Price shall be reduced to a new Conversion Price in an
amount equal to the consideration per share received by the Borrower for the
additional shares of Common Stock then issued and the number of shares issuable
to Holder upon conversion shall be proportionately increased; and, in the case
of shares issued without consideration, the initial Conversion Price shall be
reduced in amount and the number of shares issued upon conversion shall be
increased in an amount so as to maintain for the Holder the right to convert the
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Issuer`s Initial _____
Convertible Note into shares equal in amount to the same percentage interest in
the Common Stock of the Borrower as existed for the Holder immediately preceding
the Stock Issue Date.
(ii) Sale of Shares: In case of the issuance of Additional
Common Stock for a consideration part or all of which shall be cash, the amount
of the cash consideration therefor shall be deemed to be the amount of the cash
received by Borrower for such shares, after any compensation or discount in the
sale, underwriting or purchase thereof by underwriters or dealers or others
performing similar services or for any expenses incurred in connection
therewith. In case of the issuance of any shares of Additional Common Stock for
a consideration part or all of which shall be other than cash, the amount of the
consideration therefor, other than cash, shall be deemed to be the then fair
market value of the property received as determined by an investment banking
firm selected by Lender.
(iii) Reclassification of Shares: In case of the
reclassification of securities into shares of Common Stock, the shares of Common
Stock issued in such reclassification shall be deemed to have been issued for a
consideration other than cash. Shares of Additional Common Stock issued by way
of dividend or other distribution on any class of stock of the Borrower shall be
deemed to have been issued without consideration.
(iv) Split up or Combination of Shares: In case issued and
outstanding shares of Common Stock shall be subdivided or split up into a
greater number of shares of the Common Stock, the Conversion Price shall be
proportionately decreased, and in case issued and outstanding shares of Common
Stock shall be combined into a smaller number of shares of Common Stock, the
Conversion Price shall be proportionately increased, such increase or decrease,
as the case may be, becoming effective at the time of record of the split-up or
combination, as the case may be.
(v) Exceptions: The term "Additional Common Stock" herein
shall mean in the most broadest sense all shares of Common Stock hereafter
issued by the Borrower (including, but not limited to Common Stock held in the
treasury of the Borrower and common stock purchasable via derivative security or
option on the date of such grant ), except Common Stock issued upon the
conversion of any of this Convertible Note or Warrant.
(b) Adjustment for Mergers, Consolidations, Etc.:
(i) In the event of distribution to all Common Stock holders
of any stock, indebtedness of the Borrower or assets (excluding cash dividends
or distributions from retained earnings) or other rights to purchase securities
or assets, then, after such event, the Convertible Notes will be convertible
into the kind and amount of securities, cash and other property which the holder
of the Convertible Notes would have been entitled to receive if the holder owned
the Common Stock issuable upon conversion of the Convertible Notes immediately
prior to the occurrence of such event.
(ii) In case of any capital reorganization, reclassification
of the stock of the Borrower (other than a change in par value or as a result of
a stock dividend, subdivision, split up or combination of shares), this
Convertible Note shall be convertible into the kind and number of shares of
stock or other securities or property of the Borrower to which the holder of the
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Issuer`s Initial _____
Convertible Note would have been entitled to receive if the holder owned the
Common Stock issuable upon conversion of the Convertible Note immediately prior
to the occurrence of such event. The provisions of these foregoing sentence
shall similarly apply to successive reorganizations, reclassifications,
consolidations, exchanges, leases, transfers or other dispositions or other
share exchanges.
(iii) Notice of Adjustment. (A) In the event the Borrower
shall propose to take any action which shall result in an adjustment in the
Conversion Price, the Borrower shall give notice to the holder of this
Convertible Note, which notice shall specify the record date, if any, with
respect to such action and the date on which such action is to take place. Such
notice shall be given on or before the earlier of 10 days before the record date
or the date which such action shall be taken. Such notice shall also set forth
all facts (to the extent known) material to the effect of such action on the
Conversion Price and the number, kind or class of shares or other securities or
property which shall be deliverable or purchasable upon the occurrence of such
action or deliverable upon conversion of this Convertible Note. (B) Following
completion of an event wherein the Conversion Price shall be adjusted, the
Borrower shall furnish to the holder of this Convertible Note a statement,
signed by an authorized officer of the Borrower of the facts creating such
adjustment and specifying the resultant adjusted Conversion Price then in
effect.
5. Reservation of Shares: Borrower warrants and agrees that it shall at
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all times reserve and keep available, free from preemptive rights, sufficient
authorized and unissued shares of Common Stock to effect conversion of this
Convertible Note.
6. Registration Rights: The Holder has certain rights with respect to
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the registration of shares of Common Stock issued upon the conversion of this
Convertible Note pursuant to the terms of the Loan Agreement. Borrower agrees
that a copy of the Loan Agreement with all amendments, additions or
substitutions therefor shall be available to the Holder at the offices of the
Borrower.
7. Taxes: The Borrower shall pay any documentary or other transactional
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taxes attributable to the issuance or delivery of this Convertible Note or the
shares of Common Stock issued upon conversion by the Holder (excluding any
federal, state or local income taxes and any franchise taxes or taxes imposed
upon the Holder by the jurisdiction, or any political subdivision thereof, under
which such Holder is organized or is qualified to do business.)
8. Default:
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(a) Event of Default: An "Event of Default" shall exist if any one or
more of the following events (herein collectively called "Events of Default")
shall occur and be continuing:
(i) Borrower shall fail to pay (or shall state in writing an
intention not to pay or its inability to pay), not later than 10 days after the
due date, any installment of interest on or principal of, any Convertible Note
or any fee, expense or other payment required hereunder;
(ii) Any of events stated in Section 7 of the Loan Agreement.
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Issuer`s Initial _____
(b) Remedies Upon Event of Default: If an Event of Default shall have
occurred and be continuing, then Lender may exercise any one or more of the
following rights and remedies, and any other remedies provided in any of the
Loan Documents, as Lender in its sole discretion, may deem necessary or
appropriate:
(i) declare the unpaid Principal Amount (after application of
any payments or installments received by Lender) of, and all interest then
accrued but unpaid on, the Convertible Notes and any other liabilities hereunder
to be forthwith due and payable, whereupon the same shall forthwith become due
and payable without presentment, demand, protest, notice of default, notice of
acceleration or of intention to accelerate or other notice of any kind, all of
which Borrower hereby expressly waives.
(ii) reduce any claim to judgment, and/or
(iii) without notice of default or demand, pursue and enforce
any of Lender`s rights and remedies under the Loan Documents, or otherwise
provided under or pursuant to any applicable law or agreement, all of which
rights may be specifically enforced.
(c) Remedies Nonexclusive: Each right, power or remedy of the holder
hereof upon the occurrence of any Event of Default as provided for in this
Convertible Note or now or hereafter existing at law or in equity or by statute
shall be cumulative and concurrent and shall be in addition to every other
right, power or remedy provided for in this Convertible Note or now or hereafter
existing at law or in equity or by statute, and the exercise or beginning of the
exercise by the holder or transferee hereof of any one or more of such rights,
powers or remedies shall not preclude the simultaneous or later exercise by the
holder of any or all such other rights, powers or remedies.
(d) Expenses: Upon the occurrence of a Default or an Event of Default,
which occurrence is not cured within the notice provisions, if any provided
therefore, Borrower agrees to pay and shall pay all costs and expenses
(including Lenders attorney`s fees and expenses) reasonably incurred by Lender
in connection with the preservation and enforcement of Lender`s rights under the
Loan Agreement, the Convertible Notes, or any other Loan Document.
9. Failure to Act and Waiver: No failure or delay by the holder hereof
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to require the performance of any term or terms of this Convertible Note or not
to exercise any right, or any remedy shall constitute a waiver of any such term
or of any right or of any default, nor shall such delay or failure preclude the
holder hereof from exercising any such right, power or remedy at any later time
or times. By accepting payment after the due date of any amount payable under
this Convertible Note, the holder hereof shall not be deemed to waive the right
either to require payment when due of all other amounts payable, or to later
declare a default for failure to effect such payment of any such other amount.
The failure of the holder of this Convertible Note to give notice of any failure
or breach of the Borrower under this Convertible Note shall not constitute a
waiver of any right or remedy in respect of such continuing failure or breach or
any subsequent failure or breach.
10. Consent to Jurisdiction: The Borrower hereby agrees and consents
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that any action, suit or proceeding arising out of this Convertible Note may be
brought in any appropriate court in the State of Texas including the United
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Issuer`s Initial _____
States District Court for the Northern District of Texas, or in any other court
having jurisdiction over the subject matter, all at the sole election of the
holder hereof, and by the issuance and execution of this Convertible Note the
Borrower irrevocably consents to the jurisdiction of each such court.
11. Holders Right to Request Multiple Convertible Notes: The Holder
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shall, upon written request and presentation of the Convertible Note, have the
right, at any interest payment date, to request division of this Convertible
Note into two or more units, each of such to be in such amounts as shall be
requested; provided however that no Convertible Notes shall be issued in
denominations of face amount less than $50,000.00.
12. Transfer: This Convertible Note may be transferred on the books of
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the Borrower by the registered Holder hereof, or by Holder`s attorney duly
authorized in writing, only upon (i) delivery to the Borrower of a duly executed
assignment of the Convertible Note, or part thereof, to the proposed new Holder,
along with a current notation of the amount of payments received and net
Principal Amount yet unfunded, and presentment of such Convertible Note to the
Borrower for issue of a replacement Convertible Note, or Convertible Notes, in
the name of the new Holder, (ii) the designation by the new Holder of the
Lender`s agent for notice, such agent to be the sole party to whom Borrower
shall be required to provide notice when notice to Lender is required hereunder
and who shall be the sole party authorized to represent Lender in regard to
modification or waivers under the Convertible Note, the Loan Agreement, or other
Loan Documents; and any action, consent or waiver, (other than a compromise of
principal and interest), when given or taken by Lender`s agent for notice, shall
be deemed to be the action of the holders of a majority in amount of the
Principal Amount of the Convertible Notes, as such holders are recorded on the
books of the Borrower, and (iii) in compliance with the legend to read "The
Securities represented by this Convertible Note have not been registered under
the Securities Act of 1933, as amended ("Act"), or applicable state securities
laws ("State Acts") and shall not be sold, hypothecated, donated or otherwise
transferred unless the Borrower shall have received an opinion of Legal Counsel
for the Borrower, or such other evidence as may be satisfactory to Legal Counsel
for the Borrower, to the effect that any such transfer shall not require
registration under the Act and the State Acts."
The Borrower shall be entitled to treat any holder of record of the Convertible
Note as the Holder in fact thereof and of the Convertible Note and shall not be
bound to recognize any equitable or other claim to or interest in this
Convertible Note in the name of any other person, whether or not it shall have
express or other notice thereof, save as expressly provided by the laws of
Texas.
13. Notices: All notices and communications under this Convertible Note
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shall be in writing and shall be either delivered in person or by overnight
delivery and accompanied by a signed receipt therefor; or mailed first-class
United States certified mail, return receipt requested, postage prepaid, and
addressed as follows: (i) if to the Borrower at its address for notice as stated
in the Loan Agreement; and, (ii) if to the holder of this Convertible Note, to
the address (a) of such holder as it appears on the books of the Borrower, or
(b) in the case of a partial assignment to one or more holders, to the Lender`s
agent for notice, as the case may be. Any notice of communication shall be
deemed given and received as of the date of such delivery if delivered; or if
mailed, then three days after the date of mailing.
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Issuer`s Initial _____
14. Maximum Interest Rate: Regardless of any provision contained in
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this Convertible Note, Lender shall never be entitled to receive, collect or
apply as interest on the Convertible Note any amount in excess of interest
calculated at the Maximum Rate, and, in the event that Lender ever receives,
collects or applies as interest any such excess, the amount which would be
excessive interest shall be deemed to be a partial prepayment of principal and
treated hereunder as such; and, if the principal amount of the Convertible Note
is paid in full, any remaining excess shall forthwith be paid to Borrower. In
determining whether or not the interest paid or payable under any specific
contingency exceeds interest calculated at the Maximum Rate, Borrower and Lender
shall, to the maximum extent permitted under applicable law, (i) characterize
any non principal payment as an expense, fee or premium rather than as interest;
(ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize,
pro rate, allocate and spread, in equal parts, the total amount of interest
throughout the entire contemplated term of the Convertible Note; provided that,
if the Convertible Note is paid and performed in full prior to the end of the
full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds interest calculated at the Maximum Rate,
Lender shall refund to Borrower the amount of such excess or credit the amount
of such excess against the principal amount of the Convertible Note and, in such
event, Lender shall not be subject to any penalties provided by any laws for
contracting for, charging, taking, reserving or receiving interest in excess of
interest calculated at the Maximum Rate.
"Maximum Rate" shall mean, on any day, the less of (i) 18% or (ii)
highest nonusurious rate of interest (if any) permitted by applicable law on
such day that at any time, or from time to time, may be contracted for, taken,
reserved, charged or received on the Indebtedness evidenced by the Convertible
Note under the laws which are presently in effect of the United States of
America and the State of Texas or by the laws of any other jurisdiction which
are or may be applicable to the holders of the Convertible Note and such
Indebtedness or, to the extent permitted by law, under such applicable laws of
the United States of America and the State of Texas or by the laws of any other
jurisdiction which are or may be applicable to the holder of the Convertible
Note and which may hereafter be in effect and which allow a higher maximum
nonusurious interest rate than applicable laws now allow.
15. Rights under Loan Agreement: This Convertible Note is issued
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pursuant to that certain Loan Agreement dated November __, 2002 by and between
the Lender and Borrower (the "Loan Agreement"), and the holder hereof is
entitled to all the rights and benefits, and is subject to all the obligations
of Lender under said agreement. Both Borrower and Lenders have participated in
the negotiation and preparation of the Loan Agreement and of this Convertible
Note. Borrower agrees that a copy of the Loan Agreement with all amendments,
additions and substitutions therefore shall be available to the Holder at the
offices of the Borrower. This Convertible Note is secured pursuant to a security
agreement dated November __, 2002
16. Governing Law: This Convertible Note shall be governed by and
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construed and enforced in accordance with the laws of the State of Texas, or,
where applicable, the laws of the United States. There are no unwritten oral
agreements between the parties.
[Signature page follows]
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Issuer`s Initial _____
IN WITNESS WHEREOF, the undersigned Borrower has caused this
Convertible Note to be duly issued and executed on the Date of Issue as stated
above.
Address for Notice: US Patriot Inc.
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Mr. Xxxxx Xxxxxxxx
TriMedia Entertainment Group, Inc. By:
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000 Xxxxxxx Xxxxx Xxxxx Xxxxxxxx
Xxxx Xxxx, Xx 00000 President
Ph. ____
Fax. ____ Attest
By:
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Name:
Secretary
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Issuer`s Initial _____
