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Exhibit 10.2
THIS NOTE AND THE COMMON SHARES ISSUABLE
UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON
SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR
AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO TRIMEDIA ENTERTAINMENT
GROUP, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.
SECURED CONVERTIBLE TERM NOTE
FOR VALUE RECEIVED, TRIMEDIA ENTERTAINMENT GROUP, LLC, a
Delaware
corporation (the "BORROWER"), hereby
promises to pay to IL RESOURCES, LLC, a
Delaware limited liability company, (the
"HOLDER"), or its registered assigns or
successors in interest, on order, the sum
of One Million Five Hundred Ninety
Thousand Dollars ($1,590,000) (the
"Principal Amount"), together with any
accrued and unpaid interest hereon, on May
30, 2006 (the "MATURITY DATE") if not
sooner paid.
Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in that
certain Securities Purchase Agreement
dated as of the date hereof between the
Borrower and the Holder (as amended,
modified or supplemented from time to time,
the "PURCHASE AGREEMENT").
The following terms shall apply to this
Note:
ARTICLE I
INTEREST
1.1 Interest Rate. Interest on the Principal Amount outstanding
under
this Secured Convertible Term Note ("Note")
shall accrue at a rate per annum
(the "Interest Rate") equal to twelve
percent (12%). Interest shall be (i)
calculated on the basis of a 360 day year,
and (ii) payable in cash via wire
transfer monthly, in arrears, commencing on
June 1, 2005 and on the first
business day of each consecutive calendar
month thereafter until the Maturity
Date (and on the Maturity Date), whether by
acceleration or otherwise (each, a
"PAYMENT DATE") unless the Holder gives the
Borrower written notification that
it desires for a particular month's
interest payment to be paid in fully paid
and nonassessable shares of common stock,
$.001 par value, of the Borrower (the
"COMMON STOCK"), based on a per share stock
price equal to Conversion Price (as
defined in Section 4(a)) such price per
share being subject to adjustment at the
times, and in accordance with the
provisions as set forth in section 4(a).
Overdue principal and interest on the Note
shall, to the extent permitted by
applicable law, bear interest at the rate
of 21.00% per annum. All payments of
both principal and interest shall be made
at the address of the Holder hereof as
it appears in the books and records of the
Borrower or at such other place as
may be designated by the Holder hereof in
writing to Borrower.
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ARTICLE II
OPTIONAL REDEMPTION
2.1 Optional Redemption in Cash. The Borrower will have the option
of
prepaying this Note ("OPTIONAL REDEMPTION")
by paying to the Holder a sum of
money equal to one hundred percent (100%)
of the principal amount of this Note
together with accrued but unpaid interest
thereon and any and all other sums
due, accrued or payable to the Holder
arising under this Note, the Purchase
Agreement, or any Related Agreement (the
"REDEMPTION AMOUNT") outstanding on the
day written notice of redemption (the
"NOTICE OF REDEMPTION") is given to the
Holder. The Notice of Redemption shall
specify the date for such Optional
Redemption (the "REDEMPTION PAYMENT DATE")
which date shall be seven (7)
business days after the date of the Notice
of Redemption (the "REDEMPTION
PERIOD"). A Notice of Redemption shall not
be effective with respect to any
portion of this Note for which the Holder
has a pending election to convert
pursuant to Section 3.1, or for conversions
initiated or made by the Holder
pursuant to Section 3.1 during the
Redemption Period. The Redemption Amount
shall be determined as if such Holder's
conversion elections had been completed
immediately prior to the date of the Notice
of Redemption. On the Redemption
Payment Date, the Redemption Amount must be
paid in good funds to the Holder. In
the event the Borrower fails to pay the
Redemption Amount on the Redemption
Payment Date as set forth herein, then such
Redemption Notice will be null and
void.
ARTICLE III
CONVERSION RIGHTS
3.1. Holder's Conversion Rights. The Holder shall have the right,
but
not the obligation, to convert all or any
portion of the then aggregate
outstanding principal amount of this Note,
together with interest and fees due
hereon, into shares of Common Stock subject
to the terms and conditions set
forth in this Article III. The Holder may
exercise such right by delivery to the
Borrower of a written notice of conversion
not less than one (1) day prior to
the date upon which such conversion shall
occur.
3.2 Conversion Limitation. Notwithstanding anything contained
herein to
the contrary, the Holder shall not be
entitled to convert pursuant to the terms
of this Note an amount that would be
convertible into that number of Conversion
Shares which would exceed the difference
between the number of shares of Common
Stock beneficially owned by such Holder or
issuable upon exercise of warrants
held by such Holder and 9.99% of the
outstanding shares of Common Stock of the
Borrower. For the purposes of the
immediately preceding sentence, beneficial
ownership shall be determined in accordance
with Section 13(d) of the Exchange
Act and Regulation 13d-3 thereunder. The
Holder may void the Conversion Share
limitation described in this Section 3.2
upon 75 days prior notice to the
Borrower.
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3.3 Mechanics of Holder's Conversion. (a) In the event that the
Holder
elects to convert all or a portion of the
outstanding balance of this Note into
Common Stock, the Holder shall give notice
of such election by delivering an
executed and completed notice of conversion
("NOTICE OF CONVERSION") to the
Borrower and such Notice of Conversion
shall provide a breakdown in reasonable
detail of the Principal Amount, accrued
interest and fees being converted. On
each Conversion Date (as hereinafter
defined) and in accordance with its Notice
of Conversion, the Holder shall make the
appropriate reduction to the Principal
Amount, accrued interest and fees as
entered in its records and shall provide
written notice thereof to the Borrower
within two (2) business days after the
Conversion Date. Each date on which a
Notice of Conversion is delivered or
telecopied to the Borrower in accordance
with the provisions hereof shall be
deemed a Conversion Date (the "CONVERSION
DATE"). A form of Notice of Conversion
to be employed by the Holder is annexed
hereto as Exhibit A.
(b) Pursuant to the terms of the Notice of Conversion, the
Borrower
will issue instructions to the transfer
agent accompanied by an opinion of
counsel within one (1) business day of the
date of the delivery to Borrower of
the Notice of Conversion and shall cause
the transfer agent to transmit the
certificates representing the Conversion
Shares to the Holder. In the case of
the exercise of the conversion rights set
forth herein the conversion privilege
shall be deemed to have been exercised and
the Conversion Shares issuable upon
such conversion shall be deemed to have
been issued upon the date of receipt by
the Borrower of the Notice of Conversion.
The Holder shall be treated for all
purposes as the record holder of such
Common Stock, unless the Holder provides
the Borrower written instructions to the
contrary.
3.4 Conversion Mechanics.
(a) The number of shares of Common Stock to be issued upon each
conversion of this Note shall be determined
by dividing that portion of the
principal and interest and fees to be
converted, if any, by the then applicable
Conversion Price.
(b) On the issue date hereof and until such time as an adjustment
shall
occur, the Conversion Price shall be $.50
per share. The Conversion Price and
number and kind of shares or other
securities to be issued upon conversion is
subject to adjustment from time to time
upon the occurrence of certain events,
as follows:
A. Stock Splits, Combinations and Dividends. If the shares of
Common
Stock are subdivided or combined into a
greater or smaller number of shares of
Common Stock, or if a dividend is paid on
the Common Stock in shares of Common
Stock, the Conversion Price shall be
proportionately reduced in case of
subdivision of shares or stock dividend or
proportionately increased in the case
of combination of shares, in each such case
by the ratio which the total number
of shares of Common Stock outstanding
immediately after such event bears to the
total number of shares of Common Stock
outstanding immediately prior to such
event.
B. During the
period the conversion right exists, the Borrower will
reserve from its authorized and unissued
Common Stock a sufficient number of
shares to provide for the issuance of
Common Stock upon the full conversion of
this Note. The Borrower represents that
upon issuance, such shares will be duly
and validly issued, fully paid and
non-assessable. The Borrower agrees that its
issuance of this Note shall constitute full
authority to its officers, agents,
and transfer agents who are charged with
the duty of executing and issuing stock
certificates to execute and issue the
necessary certificates for shares of
Common Stock upon the conversion of this
Note.
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C. Share Issuances. Subject to the provisions of this Section 3.4,
if
the Borrower shall at any time prior to the
conversion or repayment in full of
the Principal Amount issue any shares of
Common Stock or securities convertible
into Common Stock to a person other than
the Holder (except (i) pursuant to
Subsections A or B above; (ii) pursuant to
options, warrants, or other
obligations to issue shares outstanding on
the date hereof as disclosed to
Holde
