Attached files
Exhibit 4.1
THE SECURITIES OFFERED HEREBY 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 BY
SECTION 3(B) OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933
ACT)
US $40,000.00
RED GIANT ENTERTAINMENT, INC
8% CONVERTIBLE REDEEMABLE NOTE
DUE APRIL 28, 2015
BACK END NOTE
FOR VALUE RECEIVED, Red Giant Entertainment, Inc (the "Company") promises
to pay to the order of GEL PROPERTIES, LLC and its authorized successors and
permitted assigns ("Holder"), the aggregate principal face amount of Forty
Thousand dollars exactly (U.S. $40,000.00) on April 28, 2015 ("Maturity Date")
and to pay interest on the principal amount outstanding hereunder at the rate of
8% per annum commencing on April 28, 2014. Upon cash funding of this Note, the
Company confirms it will receive the sum of $40,000 less $2,000 in legal fees
and $4,000 in fees owed to Direct Capital, Inc. for a total of $34,000.00. 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 16192 Coastal Highway,
Lewes, DE, 19958, 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 its option, at any time
after 180 days, and after full cash payment for the shares convertible
hereunder, 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") without restrictive legend of any nature, at a price ("Conversion
Price") for each share of Common Stock equal to 62% of the LOWEST CLOSING BID
PRICE of the Common Stock as reported on the National Quotations Bureau OTCQB
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 FIVE prior
trading days including the day upon which a Notice of Conversion is received by
the Company (provided such Notice of Conversion is delivered by fax or other
electronic method of communication to the Company after 4 P.M. Eastern Standard
or Daylight Savings Time if the Holder wishes to included 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. Once the Holder has
received such shares of Common Stock, the Holder shall surrender this Note to
the Company, executed by the Holder evidencing such Holder's intention to
convert this Note or a specified portion hereof, and accompanied by proper
assignment hereof in blank. 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. IN THE EVENT THE COMPANY EXPERIENCES A DTC "CHILL" ON
ITS SHARES, THE CONVERSION PRICE SHALL BE DECREASED TO 55% INSTEAD OF 62% WHILE
THAT "CHILL" IS IN EFFECT.
(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 Common Stock
("Interest Shares"). The Holder may, at any time, send in a Notice of Conversion
to the Company for Interest Shares based on the formula provided in Section 4(a)
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above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of
this Note to the date of such notice.
(c) This Note may not be prepaid.
(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, 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 150% 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 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:
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(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 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 thirty (30) 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) 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; or
(h) 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 OTCBB exchange) 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;
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(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's Common Stock has a closing bid price of less than $0.01
per share for at least 5 consecutive trading days; or
(n) The aggregate dollar trading volume of the Company's Common Stock is
less than forty thousand dollars ($40,000.00) in any 5 consecutive trading days;
or
(o) The Company shall cease to be "current" in its filings with the
Securities and Exchange Commission.
Then, or at any time thereafter, unless cured (except for 8(m) and 8(n) which
are incurable defaults the sole remedy of which is to allow the Holder to cancel
offsetting back end notes issued to the Company), 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 be
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. Further, if the Note becomes due and payable, the Holder may use the
outstanding principal and interest due under the Note to offset any payment
obligations it may have to the Company. In the event of a breach of 8(k) the
penalty shall be $250 per day the shares are not issued beginning on the 4th day
after the conversion notice was delivered to the Company. This penalty shall
increase to $500 per day beginning on the 10th day.
If the Holder shall commence an action or proceeding to enforce any provisions
of this Note, including without limitation engaging an attorney, then 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.
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.
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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- 3(a)(9) opinion to allow
for salability of the conversion shares or (ii) accept such opinion from
Holder's counsel.
12. Prior to cash funding of this Note, the Company will issue irrevocable
transfer agent instructions reserving 4x the number of shares of Common Stock
necessary to allow the holder to convert this note based on the discounted
conversion price set forth in Section 4(a). The Company shall bear all costs
(except the fees for legal opinions) for the issuing and delivery of the shares.
The reserve shall be replenished as needed to allow for conversions of this
Note. The Holder will initially submit a conversion notice/request for a tranche
of shares to be issued with an agreed to conversion price equal to $1000 (an
"Initial Tranche Request"). The shares that are the subject to the Initial
Trance Request may be subsequently reconverted and repriced as follows: (i) the
Holder shall immediately reduce the outstanding balance of the Note by $1,000
and simultaneously send to the Company a live" or "repriced" conversion notice
for the $1,000 priced using the conversion formula set forth in Section 4(a) of
this Note, (ii) As the balance of the shares in the Initial Tranche Request are
converted via the delivery of the "live" or "repriced" conversion notice, the
balance of the Note shall be reduced using the formula set forth in Section 4(a)
of this Note, as if such shares had originally been converted as set forth in
Section 4(a). By way of example, if the Tranche Conversion Request was for
1,000,000 shares and the face amount of the Note was $25,000 the Holder would
initially reduce $1,000 from the face amount leaving a balance of $24,000 and
send the Company a repriced conversion notice deducting that number of shares
from the Initial Tranche Request necessary to equal $1,000 using the formula set
forth in Section 4(a). Additionally, if, the following day, the Holder sent a
"live" or "repriced" conversion notice to the Company for 25,000 shares and,
using the formula set forth in Section 4(a) the true conversion price would have
been $6,000, then the Holder shall make an additional reduction of $6,000 on the
Note and shall indicate both the Note balance and the share reserve balance on
the "live" conversion notice. This process shall be repeated until there is no
balance remaining outstanding on the Note. Upon full conversion of this Note,
the any shares remaining in the Share Reserve shall be cancelled.
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.
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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by
an officer thereunto duly authorized.
Dated: April 28, 2014
RED GIANT ENTERTAINMENT, INC
By: /s/ Benny R. Powell
----------------------------------------
Title: CEO and Board Member
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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 Red Giant Entertainment,
Inc. ("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: _______________________________________________________________________
