CONVERTIBLE SECURED PROMISSORY NOTE
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$350,000
OCTOBER 8, 2004
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COSTA MESA, CALIFORNIA
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FOR VALUE RECEIVED, RAPIDTRON, INC., a Nevada corporation ("MAKER"),
hereby
promise to pay to the order of LDM Enterprises, LLC, a California
limited
liability company ("HOLDER"), at Holder's address for notice as set
forth in
Section 12 hereof or at such other address as Holder
may designate by written
notice delivered to Maker at any time and from time
to time, the principal sum
credited or disbursed to Maker from time to time, not to
exceed Three Hundred
Fifty Thousand and 00/100 Dollars
($350,000.00), plus interest on the principal
amount disbursed and other fees and costs due hereunder, as
set forth below.
1. Interest Rate. Interest upon the principal amount disbursed
under
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this Note plus any other fees and costs due
hereunder shall accrue at the rate
of ten percent (10%) per annum. NOTICE: Under no circumstances will the
interest rate of this Note be more than the
maximum rate allowed by applicable
law.
2. Payments/Maturity.
The entire indebtedness evidenced by this Note,
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including the entire
principal balance outstanding hereunder, any and all
unpaid
interest accrued thereon, and
any and all other amounts due and owing hereunder,
shall be due and payable in full on November 8, 2004 (the
"MATURITY DATE").
Maker may prepay the principal and interest due
hereunder at any time without
additional fee or penalty.
3. No Setoff. All payments made hereunder shall
be made in lawful money
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of the United States of
America without setoff, deduction or counterclaim of any
kind whatsoever.
4. Default and Acceleration. For purposes of this Note, Maker
shall be
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in "DEFAULT" under this Note if any one of the following events
occurs: (a)
Maker fails to make any
payment of interest, principal or other amount hereunder
on or before the Maturity
Date; (b) Maker admits in writing Maker's inability to
pay Maker's debts as such debts become due,
makes a general assignment for the
benefit of creditors, or files any petition or action for relief
under any
bankruptcy, reorganization, insolvency or
moratorium law or under any other law
for the relief of, or relating to,
debtors; (c) Maker commits any breach of or
default under this Note or
any instrument securing or otherwise assuring payment
of or performance under this
Note; (d) any involuntary petition is filed against
Maker under any bankruptcy, reorganization, insolvency or moratorium law
or
under any other law for the relief of, or relating
to, debtors; (e) a levy or
writ of attachment or garnishment or other like judicial
process is filed or
issued against or upon the Maker or any
of the "Collateral" (defined in Section
13 below); or (f) Holder deems itself
insecure, believing that the prospect of
payment under this Note is impaired or
fears the Collateral is at risk of being
compromised. Notwithstanding any other provision of this Note
to the contrary,
upon the occurrence of a Default, Holder may, at Holder's option but
with
written notice to Maker, the entire indebtedness evidenced by this Note,
including the entire
principal balance outstanding hereunder, any and all
unpaid
interest accrued thereon and any and all
other amounts due and owing under this
Note, shall immediately be due and payable.
5. Late Charge. If Maker fails to pay any amount due hereunder
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(including, without
limitation, any monthly installment or the final
installment
of principal and interest due on the Maturity
Date) on or before the due date,
Maker shall pay a late charge of five percent
(5%) of the amount past due (the
"LATE FEE"). Maker acknowledges and agrees that
it would be extremely difficult
or impracticable to fix the
actual damages resulting from Maker's failure to pay
amounts when due, and therefore, Maker shall pay such late charges
not as a
penalty, but for the purpose of defraying the
administrative expenses incident
to handling amounts past due. Such late charges represent the
reasonable
estimate of such expenses. The late charges shall be payable
by Maker without
prejudice to the rights of Holder to collect
any other amounts to be paid under
this Note or any Security Document
(including, without limitation, interest at
the Default Rate pursuant to Section 6, below
and other collection fees) or to
accelerate all sums due hereunder pursuant to Section 4, above.
1
<PAGE>
6. Default Rate. Notwithstanding anything in this
Note to the contrary,
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upon and after a Default, interest shall
accrue on the unpaid principal at the
interest rate of the greater
of (a) fourteen percent (14%) per annum, or (b) the
Prime Rate as published by U.S. Bank for its
U.S. customers, plus eight points
(the "DEFAULT RATE"'). The unpaid principal shall accrue interest at the
Default Rate only until the Default is cured. Maker acknowledges and
agrees
that it would be extremely difficult or
impractical to fix the actual damages
resulting from Maker's failure to pay the
principal, accrued interest and other
sums due on the Maturity Date, and therefore Maker
shall pay interest at the
Default Rate not as a penalty, but for purposes of
defraying the expenses and
losses incident to the loss of the past due principal, accrued
interest and
other sums due under this Note. Interest at the Default Rate
represents the
reasonable estimate of such expenses and losses.
Interest at the
Default Rate
shall be payable by Maker without prejudice
to the rights of Holder to collect
any other amounts to be paid under this Note or any Security Document
(including, without limitation, the Late Fee pursuant
to Section 5, above), or
to accelerate all sums due hereunder pursuant to Section 4, above.
7. Conversion. If Maker is in Default of this Note,
then Holder may, at
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any time prior to the cure of such
Default in its sole and absolute discretion,
convert the entire outstanding principal
balance of this Note into that number
of shares of common stock of the Corporation
as determined by dividing (i) the
outstanding principal amount
under this Note, by (ii) the "Conversion Price" (as
defined below). In connection with such conversion,
no fraction of a share of
common stock shall be issued. Such right to conversion shall terminate
immediately following the Maturity Date. The term "COMMON STOCK" means
the
common stock of Rapidtron,
Inc., a Nevada corporation (the "CORPORATION") issued
upon conversion of this Note. The term "CONVERSION PRICE" means
the lesser of
(a) $0.33 per share, or (b)
the average lowest closing bid price during the five
(5) trading days immediately prior to the "Conversion Date"
(defined below),
each as reported by Bloomberg, or if no report is provided by
Bloomberg, as
reported by Nasdaq's OTC Bulletin Board or other U.S.
national trading market
upon which the Corporation's common stock is traded. Holder shall have no
obligation to convert the Note pursuant to this Section 7, and any such
conversion shall not be deemed a waiver of any of Holder's
remedies for any
Default, including the collection of the Late Fee or Default Interest.
7.1 Effect
of Conversion. Immediately following tender of the
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original Note and other items
required by Section 7 and its related subsections,
this Note shall be deemed no longer
outstanding and all rights with respect to
this Note shall immediately cease and terminate,
except only the right of the
Holder to receive shares of Common Stock
in exchange therefor.
Upon conversion
but subject to the terms and conditions of the Corporation's
Shareholders
Agreement, Certificate of Incorporation and
related documents, the Holder shall
be admitted as a constituent shareholder of
the Corporation holding the Common
Stock.
7.2 Securities
Representations.
Upon conversion of this Note, the
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registered Holder shall
execute and deliver to the Corporation an instrument, in
form and substance
satisfactory to the Corporation, representing that either
(a)
Holder is an "Accredited Investor" within the meaning of the rules and
regulations promulgated under the Securities Act of 1933, as amended (the
"SECURITIES ACT"); and that the shares of Common Stock issued to
Holder are
being acquired for such
Holder's own account, for investment and not with a view
to sale, transfer, assignment or distribution within the meaning of the
Securities Act, or (b) Holder is not a "U.S. Person" within the
meaning of
Regulation S promulgated under the Securities
Act, the sale of the Common Stock
to Holder qualifies for an exemption from registration in accordance
with
Regulation S, and such other representations and warranties as may then
be
appropriate under Regulation S.
7.3 Delivery
of Documents. To convert th
