Current Report Filing (8-k)
July 11 2014 - 3:54PM
Edgar (US Regulatory)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 11, 2014
Red Giant Entertainment, Inc.
(Exact name of registrant as specified in its charter)
Nevada 000-53310 98-0471928
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
614 E. Hwy 50, Suite 235, Clermont, FL 34711
(Address of principal executive offices) (Zip Code)
(866) 926-6427
(Issuer's telephone/facsimile numbers, including area code)
Not Applicable
(former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (See: General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17CFR240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17CFR240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17CFR240.13e-4(c))
SECTION 1 - REGISTRANT'S BUSINESS AND OPERATIONS
ITEM 1.01 - ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
TRANSACTIONS WITH GEL PROPERTIES, LLC ("GEL")
On April 28, 2014, we issued a $40,000 8% Convertible Redeemable Note to GEL
(the "GEL Note") in exchange for a $40,000 Collateralized Secured Promissory
Note due December 27, 2014 (contingent on our continuing to meet current
information requirements of Rule 144 under the Securities Act) issued by GEL to
us (the "GEL Payment Note"), bearing interest at the rate of 8% per annum and
secured by a $75,000 8% convertible promissory note issued by BioNeutral, Inc.
to GEL. Provided, however, we agreed that to reimburse GEL $6,000 in legal fees
and due diligence fees paid by GEL.
The GEL Note is due and payable on April 28, 2015, with interest payable in
shares of common stock. If we fail to repay the GEL Note when due, or if other
events of default thereunder apply, a default interest rate of 24% per annum
will apply. In addition, if we fail to issue unrestricted stock to GEL within
three business days of receipt of a notice of conversion, we must pay a $250 per
day penalty, which fee increases to $500 per day beginning on the tenth day. We
may not prepay the GEL Note.
The GEL Note is convertible into shares of our common stock at a conversion
price equal to 62% of the lowest closing bid price of our common stock for the
five trading days on or prior to the date upon which notice of conversion is
received, subject to reduction to 55% if there is DTC Chill placed on our shares
of common stock.
The GEL Note was issued pursuant to the exemption from registration set forth in
Section 4(2) of the Securities Act of 1933 and regulations promulgated
thereunder. We believe that GEL is an accredited investor and had adequate
information about us as well as the opportunity to ask questions and receive
responses from our management.
The descriptions above of the GEL Note and the GEL Payment Note do not purport
to be complete and are qualified in their entirety by reference to the full text
of the GEL Note and the GEL Payment Note, a copy of which is filed as 4.1 and
99.1 hereto, respectively.
TRANSACTIONS WITH LG CAPITAL FUNDING, LLC ("LG")
On May 24, 2014, we entered into a Securities Purchase Agreement with LG (the
"LG SPA") under which we agreed to issue two 9% convertible notes in the
principal amount of $50,000 each for an aggregate principal amount of $100,000
(each a "LG Note") in exchange for (i) $50,000 in cash for the first LG Note;
and (ii) for the second LG Note, a $50,000 promissory note issued by LG to us
(the "LG Payment Note") due January 30, 2015 (contingent on our continuing to
meet current information requirements of Rule 144 under the Securities Act)
issued by GEL to us, bearing interest at the rate of 8% per annum and secured by
a pledge of the second LG Note; provided, however, that LG may substitute other
collateral with equivalent appraised value upon three days prior written notice
if we do not object. The second LG Note may not be converted until the LG
Payment Note is fully paid. Provided, however, that we have agreed to reimburse
$2,500 in legal fees to LG for each LG Note.
The LG Notes are due and payable on May 30, 2015, with interest payable in
shares of common stock. If we fail to repay the LG Notes when due, or if other
events of default thereunder apply, a default interest rate of 16% per annum
will apply. In addition, if we fail to issue unrestricted stock to LG within
three business days of receipt of a notice of conversion, we must pay a $250 per
day penalty, which fee increases to $500 per day beginning on the tenth day;
provided, however, that once each LG Note is cash funded, the penalty shall be
an increase of principal by 10%, 20%, or 50% for certain breaches of such LG
Note.
We may redeem the First LG Note within 180 days of issuance of such first LG
Note at 140% of the face value of the note plus any accrued interest. We may not
prepay the Second LG Note unless that first LG Note is redeemed as set forth
above.
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The LG Note is convertible into shares of our common stock at a conversion price
equal to 55% of the lowest closing bid price of our common stock for the ten
trading days on or prior to the date upon which notice of conversion is
received, subject to reduction to 45% if there is DTC Chill placed on our shares
of common stock.
The LG Notes were issued pursuant to the exemption from registration set forth
in Section 4(2) of the Securities Act of 1933 and regulations promulgated
thereunder. We believe that LG is an accredited investor and had adequate
information about us as well as the opportunity to ask questions and receive
responses from our management.
The descriptions above of the LG SPA, the first LG GEL Note, the Second LGA
Note, and the LG Payment Note do not purport to be complete and are qualified in
their entirety by reference to the full text of the LG SPA, the first LG GEL
Note, the Second LGA Note, and the LG Payment Note, a copy of which is filed as
4.2, 4.3, 4.4 and 99.2 hereto, respectively.
UNSECURED CONVERTIBLE NOTE TO JSJ INVESTMENTS, INC. ("JSJ")
On June 10, 2014, we issued a $50,000 12% Convertible Note (the "JSJ Note") to
JSJ. The JSJ Note is due and payable on demand at a premium of 150% of the
principal amount. If we fail to repay the JSJ Note on demand, a default interest
rate of 10% shall also apply from such date. We may not prepay this Note.
The JSJ Note is convertible into shares of our common stock at a conversion
price equal to the lower of 55% of the average of the three lowest trading
prices in (i) the 20 trading days prior to the date of conversion; or (ii) the
ten trading days prior to the execution of the JSJ Note. If we do not issue
shares to JSJ within three business days after receipt of a conversion notice,
we will be required to issue an additional 25% shares of the shares in the
conversion notice per day beginning on the fourth day following our receipt of a
conversion notice. This conversion price is subject to adjustment if we issue
any securities convertible into or exercisable for common stock where the
aggregate price of purchase and exercise per share is lower than the
then-existing conversion price.
In addition, if the aggregate price per share of any securities we issue that
are convertible into or exchangeable for, directly or indirectly, or exercisable
for common stock
The JSJ Note was issued to JSJ pursuant to the exemption from registration set
forth in Section 4(2) of the Securities Act of 1933 and regulations promulgated
thereunder. We believe that JSJ is an accredited investor and had adequate
information about us as well as the opportunity to ask questions and receive
responses from our management.
The description above of the JSJ Note does not purport to be complete and is
qualified in its entirety by reference to the full text of the JSJ Note, a copy
of which is filed as 4.5 hereto, respectively.
SECTION 2 - FINANCIAL INFORMATION
ITEM 2.03 - CREATION OF A DIRECT FINANCIAL OBLIGATION
See the descriptions of the GEL Note, the LG SPA, the LG Notes and the JSJ Note
in Item 1.01 above.
SECTION 3 - SECURITIES AND TRADING MARKETS
ITEM 3.02 - UNREGISTERED SALES OF EQUITY SECURITIES
See the descriptions of the GEL Note, the LG SPA, the LG Notes and the JSJ Note
in Item 1.01 above.
As of May 27, 2014, we have issued shares of common stock exceeding 5% of the
number of shares outstanding as of our last periodic report, as follows:
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On May 27, 2014, we issued 82,320,000 shares of common stock to WHC Capital LLC
to convert $45,276 in partial principal and interest due under the 12% Secured
Convertible Debenture filed as Exhibit 4.6 to our Annual Report on Form 10-K
filed with the SEC on December 5, 2013. The issuance was made pursuant to a May
23, 2014 notice of conversion.
Subsequent to May 27, 2014, we have issued shares of common stock as follows:
On June 4, 2014, we issued 54,685,981 shares of common stock to LG to convert
$32,811.59 in principal and interest due under the 9% Convertible Redeemable
Note dated October 2, 2013 (the "2013 LG Note") filed as Exhibit 4.8 to our
Annual Report on Form 10-K filed with the SEC on December 5, 2013. The issuance
was made pursuant to a May 27, 2014 notice of conversion and fully paid off the
2013 LG Note.
On June 6, 2014, we issued 38,197,717 shares of common stock to Iconic Holdings,
LLC to convert $22,918.63 of principal and interest due under the 9.9% Secured
Convertible Promissory Note dated April 15, 2013 filed as Exhibit 10.3 to our
Current Report on Form 8-K filed with the SEC on September 20, 2013. The
issuance was made pursuant to a June 3, 2014 notice of conversion. (Baker
Hostetler 144 opinion).
One June 13, 2014, we issued 30,000,000 to JMJ Financial to convert $15,000 of
partial principal and interest due under the Promissory Note filed as Exhibit
4.13 to our Amended Annual Report on Form 10-K/A filed with the SEC on February
20, 2014.The issuance was made pursuant to a June 10, 2014 notice of conversion.
One July 10, 2014, we issued 50,000,000 to JMJ Financial to convert $22,500 of
partial principal and interest due under the Promissory Note filed as Exhibit
4.13 to our Amended Annual Report on Form 10-K/A filed with the SEC on February
20, 2014. The issuance was made pursuant to a July 8, 2014 notice of conversion.
On July 10, 2014, we issued 86,644,000 shares of common stock to WHC Capital LLC
to convert $42,888.78 in principal and interest due under the 12% Secured
Convertible Debenture filed as Exhibit 4.6 to our Annual Report on Form 10-K
filed with the SEC on December 5, 2013. The issuance was made pursuant to a June
18, 2014 notice of conversion.
On July 11, 2014, we are issuing 11,111,698 shares of common stock to GEL
Properties, LLC to convert $12,445.12 in principal and interest due under 6%
Convertible Redeemable Secured Notes in the form filed as Exhibit 4.12 to our
Annual Report on Form 10-K filed with the SEC on February 20, 2014. The issuance
was made pursuant to a July 7, 2014 notice of conversion.
All of the above-described conversions, issuances and exercises were exempt from
registration pursuant to Section 4(2) and/or Regulation D of the Securities Act
as transactions not involving a public offering. The shares were issued as
unrestricted pursuant to Rule 144 since the each of the converting creditors
held their convertible securities for more than six months prior to conversion.
SECTION 8 - OTHER EVENTS
ITEM 8.01 - OTHER EVENTS
As a result of an OTCQB eligibility standard effective May 1, 2014 that requires
OTCQB companies to maintained a minimum bid price of $0.01 per share as of the
close of business for at least one of the previous 30 consecutive calendar days,
the Company was required to move from the OTCQB tier of the OTC Markets to the
OTC Pink tier as of May 7, 2014.
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SECTION 9 - EXHIBITS
ITEM 9.01 - EXHIBITS
Exhibit
Number Description
------ -----------
4.1 8% Convertible Redeemable Note dated April 28, 2014 between the
Registrant and GEL Properties, LLC
4.2 Securities Purchase Agreement dated May 30, 2014 between the
Registrant and LG Capital Funding, LLC
4.3 9% Convertible Note dated May 30, 2014 between the Registrant and LG
Capital Funding, LLC (first LG Note)
4.4 9% Convertible Note dated May 30, 2014 between the Registrant and LG
Capital Funding, LLC (second LG Note)
4.5 12% Convertible Note dated June 10, 2014 between the Registrant and
JSJ Investments, Inc.
99.1 Form of Collateralized Secured Promissory Note between GEL Properties,
LLC and the Registrant dated April 28, 2014
99.2 Collateralized Secured Promissory Note between LG Capital Funding, LLC
and the Registrant May 30, 2014
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Red Giant Entertainment, Inc.
Dated: July 11, 2014 /s/ Benny R. Powell
--------------------------------------
By: Benny R. Powell
Its: Chief Executive Officer, President,
Chief Financial Officer, and Secretary
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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)
2
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.
6
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
7
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: _______________________________________________________________________
8
Exhibit 4.2
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of May 30,
2014, by and between RED GIANT ENTERTAINMENT, INC, a Nevada corporation, with
headquarters located at 614 E. Highway 50, Suite 235, Clermont, FL 34711 (the
"Company"), and LG CAPITAL FUNDING, LLC, a New York limited liability company,
with its address at 1218 Union Street, Suite #2, Brooklyn, NY 11225 (the
"Buyer").
WHEREAS:
A. The Company and the Buyer are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the rules
and regulations as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act");
B. Buyer desires to purchase and the Company desires to issue and sell,
upon the terms and conditions set forth in this Agreement two 9% convertible
notes of the Company, in the forms attached hereto as Exhibit A and B in the
aggregate principal amount of $100,000.00 (with the first note being in the
amount of $50,000.00 and the second note being in the amount of $50,000.00
(together with any note(s) issued in replacement thereof, the "Note"),
convertible into shares of common stock, $0.001 par value per share, of the
Company (the "Common Stock"), upon the terms and subject to the limitations and
conditions set forth in such Note. The first of the two notes (the "First Note")
shall be paid for by the Buyer as set forth herein. The second note (the "Second
Note") shall initially be paid for by the issuance of an offsetting $50,000.00
secured note issued to the Company by the Buyer ("Buyer Note"), provided that
prior to conversion of the Second Note, the Buyer must have paid off the Buyer
Note in cash such that the Second Note may not be converted until it has been
paid for in cash.
C. The Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, such principal amount of Note as is set forth immediately below
its name on the signature pages hereto; and
NOW THEREFORE, the Company and the Buyer severally (and not jointly) hereby
agree as follows:
1. Purchase and Sale of Note.
a. Purchase of Note. On each Closing Date (as defined below), the Company
shall issue and sell to the Buyer and the Buyer agrees to purchase from the
Company such principal amount of Note as is set forth immediately below the
Buyer's name on the signature pages hereto.
b. Form of Payment. On the Closing Date (as defined below), (i) the Buyer
shall pay the purchase price for the Note to be issued and sold to it at the
Closing (as defined below) (the "Purchase Price") by wire transfer of
immediately available funds to the Company, in accordance with the Company's
written wiring instructions, against delivery of the Note in the principal
amount equal to the Purchase Price as is set forth immediately below the Buyer's
name on the signature pages hereto, and (ii) the Company shall deliver such duly
executed Note on behalf of the Company, to the Buyer, against delivery of such
Purchase Price.
c. Closing Date. The date and time of the first issuance and sale of the
Note pursuant to this Agreement (the "Closing Date") shall be on or about May
30, 2014, or such other mutually agreed upon time. The closing of the
transactions contemplated by this Agreement (the "Closing") shall occur on the
Closing Date at such location as may be agreed to by the parties. Subsequent
Closings shall occur when the Buyer Note is repaid. The Closing of the Second
Note shall be on or before the dates specified in the Buyer Note.
2. Buyer's Representations and Warranties. The Buyer represents and
warrants to the Company that:
a. Investment Purpose. As of the date hereof, the Buyer is purchasing the
Note and the shares of Common Stock issuable upon conversion of or otherwise
pursuant to the Note, such shares of Common Stock being collectively referred to
herein as the "Conversion Shares" and, collectively with the Note, the
"Securities") for its own account and not with a present view towards the public
sale or distribution thereof, except pursuant to sales registered or exempted
from registration under the 1933 Act; provided, however, that by making the
representations herein, the Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited Investor Status. The Buyer is an "accredited investor" as
that term is defined in Rule 501(a) of Regulation D (an "Accredited Investor").
c. Reliance on Exemptions. The Buyer 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 Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Securities.
d. Information. The Buyer and its advisors, if any, have been, and for so
long as the Note 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
requested by the Buyer or its advisors. The Buyer and its advisors, if any, have
been, and for so long as the Note remain outstanding will continue to be,
afforded the opportunity to ask questions of the Company. Notwithstanding the
foregoing, the Company has not disclosed to the Buyer any material nonpublic
2
information and will not disclose such information unless such information is
disclosed to the public prior to or promptly following such disclosure to the
Buyer. Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall modify, amend
or affect Buyer's right to rely on the Company's representations and warranties
contained in Section 3 below. The Buyer understands that its investment in the
Securities involves a significant degree of risk. The Buyer is not aware of any
facts that may constitute a breach of any of the Company's representations and
warranties made herein.
e. Governmental Review. The Buyer 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 Buyer 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 Buyer shall have delivered to the Company,
at the cost of the Buyer, 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 accepted
by 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 Buyer 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 under the 1933 Act (or a successor rule) ("Regulation
S"), and the Buyer shall have delivered to the Company, at the cost of the
Buyer, an opinion of counsel that shall be in form, substance and scope
customary for opinions of counsel in corporate transactions, which opinion shall
be accepted by the Company; (ii) any sale of such Securities made in reliance on
Rule 144 may be made only in accordance with the terms of said Rule and further,
if said 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 Buyer understands that the Note and, until such time as the
Conversion Shares have been registered under the 1933 Act may be sold pursuant
to Rule 144 or Regulation S without any restriction as to the number of
securities as of a particular date that can then be immediately sold, the
Conversion Shares may bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of the
certificates for such Securities):
3
"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."
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 date that can then be immediately sold, or (b) such holder provides
the Company with an opinion of counsel, in 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 accepted by the Company so that the sale or
transfer is effected. The Buyer 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. In the
event that the Company does not accept the opinion of counsel provided by the
Buyer with respect to the transfer of Securities pursuant to an exemption from
registration, such as Rule 144 or Regulation S, within 2 business days, it will
be considered an Event of Default under the Note.
h. Authorization; Enforcement. This Agreement has been duly and validly
authorized. This Agreement has been duly executed and delivered on behalf of the
Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer
enforceable in accordance with its terms.
i. Residency. The Buyer is a resident of the jurisdiction set forth
immediately below the Buyer's name on the signature pages hereto.
3. Representations and Warranties of the Company. The Company represents
and warrants to the Buyer that:
4
a. Organization and Qualification. The Company and each of its
subsidiaries, 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.
b. Authorization; Enforcement. (i) The Company has all requisite corporate
power and authority to enter into and perform this Agreement, 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, 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 or 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 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, 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. Issuance of Shares. The Conversion Shares are duly authorized and
reserved for issuance and, upon conversion of the Note in accordance with its
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.
d. Acknowledgment of Dilution. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock upon the issuance of the
Conversion Shares upon conversion of the Note. The Company further acknowledges
that its obligation to issue Conversion Shares upon conversion of the Note in
accordance with this Agreement, the Note is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other shareholders of the Company.
e. 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, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
5
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). 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 OTCQB marketplace (the "OTCQB") and does not
reasonably anticipate that the Common Stock will be delisted by the OTCQB in the
foreseeable future, nor are the Company's securities "chilled" by DTC. The
Company and its subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.
f. Absence of Litigation. Except as disclosed in the Company's public
filings, 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(f) 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.
g. Acknowledgment Regarding Buyer' Purchase of Securities. The Company
acknowledges and agrees that the Buyer is acting solely in the capacity of arm's
length purchasers with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that the Buyer 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 Buyer 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 Buyer' purchase of the Securities. The Company further represents to the
Buyer that the Company's decision to enter into this Agreement has been based
solely on the independent evaluation of the Company and its representatives.
h. No Integrated Offering. Neither the Company, nor any of its affiliates,
nor ay 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 Buyer. The issuance of the Securities to the
Buyer 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.
i. 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
6
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(i) 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.
j. Breach of Representations and Warranties by the Company. If the Company
breaches any of the representations or warranties set forth in this Section 3,
and in addition to any other remedies available to the Buyer pursuant to this
Agreement, it will be considered an Event of default under the Note.
4. COVENANTS.
a. Expenses. At the Closing, the Company shall reimburse Buyer for expenses
incurred by them in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement and the other agreements to be
executed in connection herewith ("Documents"), including, without limitation,
reasonable attorneys' and consultants' fees and expenses, transfer agent fees,
fees for stock quotation services, fees relating to any amendments or
modifications of the Documents or any consents or waivers of provisions in the
Documents, fees for the preparation of opinions of counsel, escrow fees, and
costs of restructuring the transactions contemplated by the Documents. When
possible, the Company must pay these fees directly, otherwise the Company must
make immediate payment for reimbursement to the Buyer for all fees and expenses
immediately upon written notice by the Buyer or the submission of an invoice by
the Buyer. The Company's obligation with respect to this transaction is to
reimburse Buyer's expenses shall be $2,500 in legal fees (and similar amounts
for the Second Note) which shall be deduced from each Note when cash funded.
b. Listing. The Company shall promptly secure the listing of the Conversion
Shares upon each national securities exchange or automated quotation system, if
any, upon which shares of Common Stock are then listed (subject to official
notice of issuance) and, so long as the Buyer owns any of the Securities, shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all Conversion Shares from time to time issuable upon conversion of
the Note. The Company will obtain and, so long as the Buyer owns any of the
Securities, maintain the listing and trading of its Common Stock on the OTCQB or
any equivalent replacement market, the Nasdaq stock market ("Nasdaq"), the New
York Stock Exchange ("NYSE"), or the 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 Buyer copies of any notices it receives from the OTCQB
and any other markets on which the Common Stock is then listed regarding the
continued eligibility of the Common Stock for listing on such markets.
c. Corporate Existence. So long as the Buyer beneficially owns any Note,
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
7
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 the OTCQB, Nasdaq, NYSE or AMEX.
d. 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.
e. Breach of Covenants. If the Company breaches any of the covenants set
forth in this Section 4, and in addition to any other remedies available to the
Buyer pursuant to this Agreement, it will be considered an event of default
under the Note.
5. 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. Any action brought by either party against the other
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 Company and Buyer 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 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 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. Counterparts; Signatures by Facsimile. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other
party. This Agreement, once executed by a party, may be delivered to the other
party hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
8
c. 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.
d. 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.
e. 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 Buyer 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 majority in interest of the Buyer.
f. 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, 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, with accurate confirmation generated by the transmitting facsimile
machine, at the address 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:
If to the Company, to:
Red Giant Entertainment, Inc.
614 E. Hwy 50 Suite 235
Clermont, FL 34711
Attn: Benny Powell, CEO
If to the Buyer:
LG CAPITAL FUNDING, LLC
1218 Union Street, Suite #2
Brooklyn, NY 11225
Attn: Joseph Lerman
9
Each party shall provide notice to the other party of any change in
address.
g. 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 Buyer shall assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other. Notwithstanding the
foregoing, the Buyer may assign its rights hereunder to any person that
purchases Securities in a private transaction from the Buyer or to any of its
"affiliates," as that term is defined under the 1934 Act, without the consent of
the Company.
h. 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.
i. 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 Buyer. The Company agrees to indemnify and hold harmless the Buyer
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.
j. 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.
k. 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.
l. Remedies. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyer 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
Buyer 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.
10
IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this
Agreement to be duly executed as of the date first above written.
RED GIANT ENTERTAINMENT, INC.
By: /s/ Benny Powell
--------------------------------------
Benny Powell
Chief Executive Officer
LG CAPITAL FUNDING, LLC.
By: /s/ Joseph Lerman
--------------------------------------
Name: Joseph Lerman
Title: Manager
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Note: $100,000.00
Aggregate Purchase Price:
Note 1: $50,000.00 less $2,500.00 in legal fees
Note 2: $50,000.00 less $2,500.00 in legal fees.
11
EXHIBIT A
144 NOTE - $50,000
12
EXHIBIT B
BACK END NOTE 1
$50,000
13
Exhibit 4.3
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 $50,000.00
RED GIANT ENTERTAINMENT, INC.
9% CONVERTIBLE REDEEMABLE NOTE
DUE MAY 30 2015
FOR VALUE RECEIVED, Red Giant Entertainment, Inc. (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 Fifty
Thousand Dollars exactly (U.S. $50,000.00) on May 30, 2015 ("Maturity Date") and
to pay interest on the principal amount outstanding hereunder at the rate of 9%
per annum commencing on May 30, 2014. 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 its option, at any time
after 180 days, 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 55% of the LOWEST
TRADING BID PRICE of the Common Stock as reported on the OTCQB marketplace which
the Company's shares are traded or any market upon which the Common Stock may be
traded in the future ("Exchange"), for the TEN 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 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. 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 45% INSTEAD OF 55% WHILE THAT "CHILL" IS IN EFFECT.
(b) Interest on any unpaid principal balance of this Note shall be paid at
the rate of 9% per annum. Interest shall be paid by the Company in Common Stock
("Interest Shares"). 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)
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.
2
(c) During the first 180 days the Note is in effect, it may be prepaid at
140% of the face amount plus any accrued interest. This Note may not be prepaid
after the 180th day. Such redemption must be closed and funded within 3 days of
giving notice of redemption of the right to redeem shall be null and void.
(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 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 (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.
3
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) 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) 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 a market
(including the OTCQB marketplace) or, if the Common Stock trades on an exchange,
then trading in the Common Stock shall be suspended for more than 10 consecutive
days;
4
(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 and a market
(including the OTCBB 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 16% 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 4th day after the conversion
notice was delivered to the Company. This penalty shall increase to $500 per day
beginning on the 10th 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%. 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.
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.
5
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- 3(a(9) opinion to allow for
salability of the conversion shares or (ii) accept such opinion from Holder's
counsel.
12. Within 90 days of the issuance date of this Note, the Company shall
issue irrevocable transfer agent instructions reserving 3x the numer of shares
of Common Stock necessary to effect all conversions under this Note (the "Share
Reserve"). The reserve shall be replenished as needed to allow for conversions
of this Note. 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.
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.
6
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by
an officer thereunto duly authorized.
Dated: May 30, 2014
RED GIANT ENTERTAINMENT, INC
By: /s/ Benny R. Powell
----------------------------------------
Chief Executive Officer
7
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: _______________________________________________________________________
8
Exhibit 4.4
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 UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER (THE "1933 ACT")
US $50,000.00
RED GIANT ENTERTAINMENT, INC.
9% CONVERTIBLE REDEEMABLE NOTE
DUE MAY 30, 2015
BACK END NOTE
FOR VALUE RECEIVED, Red Giant Entertainment, Inc. (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 Fifty
Thousand Dollars exactly (U.S. $50,000.00) on May 30, 2015 ("Maturity Date") and
to pay interest on the principal amount outstanding hereunder at the rate of 9%
per annum commencing on May 30, 2014. 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 its option, at any time
after 180 days, 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 55% of the LOWEST
TRADING BID PRICE of the Common Stock as reported on the OTCQB marketplace which
the Company's shares are traded or any market upon which the Common Stock may be
traded in the future ("Exchange"), for the TEN 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 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. 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 45% INSTEAD OF 55% WHILE THAT "CHILL" IS IN EFFECT.
(b) Interest on any unpaid principal balance of this Note shall be paid at
the rate of 9% 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)
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.
2
(c) This Note may not be prepaid, except that if the $50,000 Rule 144
convertible redeemable note issued by the Company of even date herewith is
redeemed by the Company within 6 months of the issuance date of such Note, all
obligations of the Company under this Note and all obligations of the Holder
under the Holder issued Back End Note will be automatically be deemed satisfied
and this Note and the Holder issued Back End Note will be automatically be
deemed cancelled and of no further force or effect.
(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 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 (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.
3
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 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 and not cure such breach
within 10 days; 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) One or more money judgments, writs or warrants of attachment, or
similar process, in excess of one hundred thousand dollars ($100,000) 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) 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 a market
(including the OTCQB marketplace) or, if the Common Stock trades on an exchange,
then trading in the Common Stock shall be suspended for more than 10 consecutive
days;
4
(j) Intentionally Deleted;
(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 5 business days of the request of the Holder ; or
(m) The Company's Common Stock has a closing bid price of less than $0.001
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 fifty thousand dollars ($50,000.00) in any 5 consecutive trading days;
or
(o) The Company shall cease to be "current" in its filings with the
Securities and Exchange Commission; or.
(p) The Company shall lose the "bid" price for its stock and a market
(including the OTCBB marketplace or other exchange)
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 both this Note and the Holder Issued Note, 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 16% 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. Once cash funded, the
penalty for a breach of Section 8(p) shall be an increase of the outstanding
principal amounts by 20%. Once cash funded, in the event of a breach of Section
8(i), the outstanding principal due under this Note shall increase by 50%. 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
5
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.
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- 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 3x 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) herewith. The reserve shall be
replenished as needed to allow for conversions of this Note. Upon full
conversion of this Note, the reserve representing this Note shall be cancelled.
The Company will pay all transfer agent costs associated with issuing and
delivering the shares.
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: May 30, 2014
RED GIANT ENTERTAINMENT, INC.
By: /s/ Benny R. Powell
----------------------------------------
Title: Chief Executive Officer
7
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: _______________________________________________________________________
8
Exhibit 4.5
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 December 10, 2014
$50,000.00 June 10, 2014 (the "Issuance Date")
FOR VALUE RECEIVED, Red Giant Entertainment, Inc., a Nevada Corporation
(the "Company") doing business in Clermont, FL 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 Thousand Dollars
($50,000.00), on demand of the Holder (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") from the date hereof (the "Issue Date") until the
same becomes due and payable, whether at maturity or upon acceleration or by
prepayment or otherwise; PROVIDED, that any amount of principal or interest on
this Note which is not paid when due shall bear interest at such rate on the
unpaid principal balance hereof plus the Default Amount (as defined in Article
7, INFRA) from the due date thereof until the same is paid in full. 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 quarterly
1. Payments of Principal and Interest.
(a) Payment of Principal. Upon the Maturity Date, this note has a cash
redemption premium of 150% of the principal amount only upon approval and
acceptance by JSJ Investments Inc. This provision only may be exercised if the
consent of the Note holder is obtained. The principal balance of this Note shall
be paid to the Holder hereof on demand.
(b) Default Interest. Any amount of principal on this Note which is not
paid when due shall bear twelve percent (12%) interest per annum from the date
thereof until the same is paid ("Default Interest") and the Holder, at the
Holder's sole discretion, may include any accrued but unpaid Default Interest in
the Conversion Amount.
(c) 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
Page 2 of 8
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.
2. Conversion of Note. At any time prior to the Maturity Date, this Note
shall be convertible into shares of the Company's common stock, share (the
"Common Stock"), on 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:
(1) "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, and
(B) Default Interest, if any, on unpaid interest and principal, if so included
at the Holder's sole discretion.
(2) "Conversion Price" means 45% discount to the average of the three
lowest trades on the previous twenty (20) trading days to the date of
Conversion, or 45% discount to the average of the three lowest trades on the
previous twenty (20) trading days that would be obtained if the conversion were
to be made on the date that this note was executed
(3) "Shares" means the Shares into which any balance on this Note may be
converted upon submission of a Conversion Notice.
(b) Holder's Conversion Right. 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
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.
(c) Conversion Amount. Loan 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
free-trading shares at the Conversion Price.
Page 3 of 8
(d) Mechanics of Conversion. The conversion of this Note shall be conducted
in the following manner:
(1) 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, a copy of a fully executed notice of conversion in the form attached
hereto as Exhibit 2(e)(1) (the "Conversion Notice") to the Company.
(2) 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 of the Conversion Confirmation, the Company shall have
issued and 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.
(3) 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.
(4) Timely Response by Company. Upon receipt by Company of a Conversion
Notice, Company shall respond in a timely manner to Holder by provision within
one business day of the Shares requested in the Conversion Notice.
(5) Penalty for Delinquent Response. If 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 and within three business days of the receipt thereof, there shall accrue
a penalty of Additional Shares due to Holder equal to 25% of the number stated
in the Conversion Notice beginning on the Fourth business day after the date of
the Notice. The Additional Shares shall be issued and the amount of the Note
retired will not be reduced beyond that stated in the Conversion Notice. Each
additional business day beyond the Fourth business day after the date of this
Notice shall accrue an additional 25% penalty for delinquency, without any
corresponding reduction in the amount due under the Note, for so long as Company
fails to provide the Shares so demanded.
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 assets with respect to or
in exchange for Common Stock is referred to herein as "Organic Change." Prior to
Page 4 of 8
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). All
provisions of this Note must be included to the satisfaction of Holder in any
new Note created pursuant to this section.
4. 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 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 adjusted as provided in the first
sentence of subsection (vi) of this Section 3.5(a) on the basis that (1) the
maximum number of Additional Shares of Common Stock issuable pursuant to all
such Common Stock Equivalents shall be deemed to have been issued (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
subsection (vii) upon the issuance of any Convertible Security which is issued
pursuant to the exercise of any warrants or other subscription or purchase
rights therefor, if any adjustment shall previously have been made to the
exercise price of such warrants then in effect upon the issuance of such
warrants or other rights pursuant to this subsection (vii). No adjustment shall
be made to the Conversion Price upon the issuance of Common Stock pursuant to
the exercise, conversion or exchange of any Convertible Security or Common Stock
Page 5 of 8
Equivalent where an adjustment to the Conversion Price was made as a result of
the issuance or purchase of any Convertible Security or Common Stock Equivalent.
5. 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; provided that the number of shares of Common Stock
so reserved shall at no time be less than two hundred (200%) of the number of
shares of Common Stock for which the principal amount of the Note are at any
time convertible. The initial number of shares of Common Stock reserved for
conversions of the Notes and each increase in the number of shares so reserved
shall be allocated pro rata among the Holders of the Note based on the principal
amount of the Notes held by each Holder at the time of issuance of the Notes or
increase in the number of reserved shares, as the case may be. In the event a
Holder shall sell or otherwise transfer any of such Holder's Note, each
transferee shall be allocated a pro rata portion of the number of reserved
shares of Common Stock reserved for such transferor. Any shares of Common Stock
reserved and allocated to any Person which ceases to hold any Note shall be
allocated to the remaining Holders, pro rata based on the principal amount of
the Note then held by such Holders.
6. Voting Rights. Holders of this Note shall have no voting rights, except
as required by law.
7. 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 in Section 1(e)(2).
8. Defaults and Remedies.
(a) Events 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) 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 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; or (vi) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that: (I) is for relief against the Company in an
involuntary case; (2) appoints a Custodian of the Company or for all or
substantially all of its property; or (3) orders the liquidation of the Company
or any subsidiary, and the order or decree remains unstayed and in effect for
thirty (30) days. 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.
Page 6 of 8
(b) Remedies. If an Event of Default occurs and is continuing, the Holder
of this Note may declare all of this Note, including any interest and Default
Interest and other amounts due, to be due and payable immediately.
9. 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.
10. 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.
11. 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.
12. Cancellation. After all principal and accrued interest 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.
13. 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.
14. 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 by 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
Page 7 of 8
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.
15. 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 a 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 each Holder of Notes 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).
16. 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 all Holders and shall not be construed against any person as the drafter
hereof.
17. 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 other or further exercise thereof or of
any other right, power or privilege.
IN WITNESS WHEREOF, the Company has caused this Note to be signed by its
CEO, on and as of the Issuance Date.
By: /s/ Benny Powell
-------------------------------------
Benny Powell
President
Red Giant Entertainment Inc.
Page 8 of 8
EXHIBIT 1
CONVERSION NOTICE
Reference is made to the Convertible Note issued by Red Giant Entertainment,
Inc. (the "Note").
In accordance with and pursuant to the Note, the undersigned hereby elects to
convert a portion (or all) of the principal balance of the Note, indicated below
into shares of Common Stock (the "Common Stock"), of the Company, by tendering
the Note specified below as of the date specified below.
Date of Conversion:
Principal Amount to be converted: $_____________________
Please confirm the following information:
Conversion Amount:
Conversion Price:
Number of shares of Common Stock to be issued:
Please issue the Common Stock into which the Note is being converted in the name
of the Holder of the Note and to the following address:
Authorization:
Holder:
By:
--------------------------------------------------
Sameer Hirji, President
JSJ Investments Inc.
Accepted by:
By:
--------------------------------------------------
Benny Powell
President
Red Giant Entertainment Inc.
Accepted as of:
Exhibit 99.1
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN
STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. LENDERS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER
OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS
IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
GEL PROPERTIES, LLC
COLLATERALIZED SECURED PROMISSORY NOTE
BACK END NOTE
$40,000.00 Lewes Delaware
April 28, 2014
1. Principal and Interest
FOR VALUE RECEIVED, Gel Properties, LLC, a Delaware Limited Liability
Company (the "Company") hereby absolutely and unconditionally promises to pay to
Red Giant Entertainment, Inc. (the "Lender"), or order, the principal amount of
Forty Thousand Dollars ($40,000) no later than December 27, 2014, unless the
Lender does not meet the "current information requirements" required under Rule
144 of the Securities Act of 1933, as amended, in which case the Company may
declare the offsetting note issued by the Lender on the same date herewith to be
in Default (as defined in that note) and cross cancel its payment obligations
under this Note as well as the Lenders payment obligations under the offsetting
note. This Full Recourse Note shall bear simple interest at the rate of 8%.
2. Repayments and Prepayments; Security.
a. All principal under this Note shall be due and payable no later than
December 27, 2014, unless the Lender does not meet the "current information
requirements" required under Rule 144 of the Securities Act of 1933, as amended,
in which case the Company may declare the offsetting note issued by the Lender
on the same date herewith to be in Default (as defined in that note) and cross
cancel its payment obligations under this Note as well as the Lenders payment
obligations under the offsetting note.
b. The Company may pay this Note at any time. This note may not be assigned
by the Lender, except by operation of law.
c. This Note shall initially be secured by the pledge of a $75,000 8%
convertible promissory note issued by BioNeutral, Inc by the Lender on even date
herewith (the "Lender Note"). The Company may exchange this collateral for other
collateral with an appraised value of at least $40,000.00, without prior notice
to the Lender. All collateral shall be retained by New Venture Attorneys, P.C.,
which shall act as the escrow agent for the collateral for the benefit of the
Lender. The Company may not effect any conversions under the Lender Note until
it has made full cash payment for the portion of the Lender Note being
converted.
3. Events of Default; Acceleration.
a. The principal amount of this Note is subject to prepayment in whole or
in part upon the occurrence and during the continuance of any of the following
events (each, an "Event of Default"): the initiation of any bankruptcy,
insolvency, moratorium, receivership or reorganization by or against the
Company, or a general assignment of assets by the Company for the benefit of
creditors. Upon the occurrence of any Event of Default, the entire unpaid
principal balance of this Note and all of the unpaid interest accrued thereon
shall be immediately due and payable. The Company may offset amounts due to the
Lender under this Note by similar amounts that may be due to the Company by the
Lender resulting from breaches under the Lender Note.
b. No remedy herein conferred upon the Lender is intended to be exclusive
of any other remedy and each and every remedy shall be cumulative and in
addition to every other remedy hereunder, now or hereafter existing at law or in
equity or otherwise. The Company accepts and agrees that this Note is a full
recourse note and that the Holder may exercise any and all remedies available to
it under law.
4. Notices.
a. All notices, reports and other communications required or permitted
hereunder shall be in writing and may be delivered in person, by telecopy with
written confirmation, overnight delivery service or U.S. mail, in which event it
may be mailed by first-class, certified or registered, postage prepaid,
addressed (i) if to a Lender, at such Lender's address as the Lender shall have
furnished the Company in writing and (ii) if to the Company at such address as
the Company shall have furnished the Lender(s) in writing.
b. Each such notice, report or other communication shall for all purposes
under this Note be treated as effective or having been given when delivered if
delivered personally or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid, or, if
sent by electronic communication with confirmation, upon the delivery of
electronic communication.
5. Miscellaneous.
a. Neither this Note nor any provisions hereof may be changed, waived,
discharged or terminated orally, but only by a signed statement in writing.
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b. No failure or delay by the Lender to exercise any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege preclude any other right, power or privilege. The
provisions of this Note are severable and if any one provision hereof shall be
held invalid or unenforceable in whole or in part in any jurisdiction, such
invalidity or unenforceability shall affect only such provision in such
jurisdiction. This Note expresses the entire understanding of the parties with
respect to the transactions contemplated hereby. The Company and every endorser
and guarantor of this Note regardless of the time, order or place of signing
hereby waives presentment, demand, protest and notice of every kind, and assents
to any extension or postponement of the time for payment or any other
indulgence, to any substitution, exchange or release of collateral, and to the
addition or release of any other party or person primarily or secondarily
liable.
c. If Lender retains an attorney for collection of this Note, or if any
suit or proceeding is brought for the recovery of all, or any part of, or for
protection of the indebtedness respected by this Note, then the Company agrees
to pay all costs and expenses of the suit or proceeding, or any appeal thereof,
incurred by the Lender, including without limitation, reasonable attorneys'
fees.
d. This Note shall for all purposes be governed by, and construed in
accordance with the laws of the State of New York (without reference to conflict
of laws).
e. This Note shall be binding upon the Company's successors and assigns,
and shall inure to the benefit of the Lender's successors and assigns.
IN WITNESS WHEREOF, the Company has caused this Note to be executed by its
duly authorized officer to take effect as of the date first hereinabove written.
GEL PROPERTIES, LLC
By: /s/ Samuel Eisenberg
----------------------------------------------
Title:
-------------------------------------------
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Exhibit 99.2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES
ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. LENDERS SHOULD
BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT
AND ANY APPLICABLE STATE SECURITIES LAWS.
LG CAPITAL FUNDING, LLC
COLLATERALIZED SECURED PROMISSORY NOTE
BACK END NOTE
$50,000.00 Brooklyn, NY
May 30, 2014
1. Principal and Interest
FOR VALUE RECEIVED, LG Capital Funding, LLC, a New York Limited Liability
Company (the "Company") hereby absolutely and unconditionally promises to pay to
Red Giant Entertainment, Inc (the "Lender"), or order, the principal amount of
Fifty Thousand Dollars ($50,000) no later than January 30, 2015, unless the
Lender does not meet the "current information requirements" required under Rule
144 of the Securities Act of 1933, as amended, in which case the Company may
declare the offsetting note issued by the Lender on the same date herewith to be
in Default (as defined in that note) and cross cancel its payment obligations
under this Note as well as the Lenders payment obligations under the offsetting
note. This Full Recourse Note shall bear simple interest at the rate of 8%.
2. Repayments and Prepayments; Security.
a. All principal under this Note shall be due and payable no later than
January 30, 2015, unless the Lender does not meet the "current information
requirements" required under Rule 144 of the Securities Act of 1933, as amended,
in which case the Company may declare the offsetting note issued by the Lender
on the same date herewith to be in Default (as defined in that note) and cross
cancel its payment obligations under this Note as well as the Lenders payment
obligations under the offsetting note.
b. The Company may pay this Note at any time. This note may not be assigned
by the Lender, except by operation of law.
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c. This Note shall initially be secured by the pledge of the $50,000.00 9%
convertible promissory note issued to the Company by the Lender on even date
herewith (the "Lender Note"). THE COMPANY MAY EXCHANGE THIS COLLATERAL FOR OTHER
COLLATERAL WITH AN APPRAISED VALUE OF AT LEAST $50,000.00, BY PROVIDING 3 DAYS
PRIOR WRITTEN NOTICE TO THE LENDER. IF THE LENDER DOES NOT OBJECT TO THE
SUBSTITUTION OF COLLATERAL IN THAT 3 DAY PERIOD, SUCH SUBSTITUTION OF COLLATERAL
SHALL BE DEEMED TO HAVE BEEN ACCEPTED BY THE LENDER. All collateral shall be
retained by New Venture Attorneys, P.C., which shall act as the escrow agent for
the collateral for the benefit of the Lender. The Company may not effect any
conversions under the Lender Note until it has made full cash payment for the
portion of the Lender Note being converted.
3. Events of Default; Acceleration.
a. The principal amount of this Note is subject to prepayment in whole or
in part upon the occurrence and during the continuance of any of the following
events (each, an "Event of Default"): the initiation of any bankruptcy,
insolvency, moratorium, receivership or reorganization by or against the
Company, or a general assignment of assets by the Company for the benefit of
creditors. Upon the occurrence of any Event of Default, the entire unpaid
principal balance of this Note and all of the unpaid interest accrued thereon
shall be immediately due and payable. The Company may offset amounts due to the
Lender under this Note by similar amounts that may be due to the Company by the
Lender resulting from breaches under the Lender Note.
b. No remedy herein conferred upon the Lender is intended to be exclusive
of any other remedy and each and every remedy shall be cumulative and in
addition to every other remedy hereunder, now or hereafter existing at law or in
equity or otherwise. The Company accepts and agrees that this Note is a full
recourse note and that the Holder may exercise any and all remedies available to
it under law.
4. Notices.
a. All notices, reports and other communications required or permitted
hereunder shall be in writing and may be delivered in person, by telecopy with
written confirmation, overnight delivery service or U.S. mail, in which event it
may be mailed by first-class, certified or registered, postage prepaid,
addressed (i) if to a Lender, at such Lender's address as the Lender shall have
furnished the Company in writing and (ii) if to the Company at such address as
the Company shall have furnished the Lender(s) in writing.
b. Each such notice, report or other communication shall for all purposes
under this Note be treated as effective or having been given when delivered if
delivered personally or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid, or, if
sent by electronic communication with confirmation, upon the delivery of
electronic communication.
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5. Miscellaneous.
a. Neither this Note nor any provisions hereof may be changed, waived,
discharged or terminated orally, but only by a signed statement in writing.
b. No failure or delay by the Lender to exercise any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege preclude any other right, power or privilege. The
provisions of this Note are severable and if any one provision hereof shall be
held invalid or unenforceable in whole or in part in any jurisdiction, such
invalidity or unenforceability shall affect only such provision in such
jurisdiction. This Note expresses the entire understanding of the parties with
respect to the transactions contemplated hereby. The Company and every endorser
and guarantor of this Note regardless of the time, order or place of signing
hereby waives presentment, demand, protest and notice of every kind, and assents
to any extension or postponement of the time for payment or any other
indulgence, to any substitution, exchange or release of collateral, and to the
addition or release of any other party or person primarily or secondarily
liable.
c. If Lender retains an attorney for collection of this Note, or if any
suit or proceeding is brought for the recovery of all, or any part of, or for
protection of the indebtedness respected by this Note, then the Company agrees
to pay all costs and expenses of the suit or proceeding, or any appeal thereof,
incurred by the Lender, including without limitation, reasonable attorneys'
fees.
d. This Note shall for all purposes be governed by, and construed in
accordance with the laws of the State of New York (without reference to conflict
of laws).
e. This Note shall be binding upon the Company's successors and assigns,
and shall inure to the benefit of the Lender's successors and assigns.
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IN WITNESS WHEREOF, the Company has caused this Note to be executed by its
duly authorized officer to take effect as of the date first hereinabove written.
LG CAPITAL FUNDING, LLC
By: /s/ Joseph Lerman
---------------------------------------
Title: Managing Member
-------------------------------------
APPROVED:
RED GIANT ENTERTAINMENT, INC.
By: /s/ Benny R. Powell
---------------------------------------
Title: CEO
-------------------------------------
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