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 LAW OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO TRIMEDIA ENTERTAINMENT GROUP, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.
THIS NOTE
AMENDS AND SUPERSEDES THAT CERTAIN SECOND AMENDED AND RESTATED
CONVERTIBLE TERM NOTE DATED AS OF SEPTEMBER 13, 2006 ISSUED TO IL
RESOURCES LLC BY TRIMEDIA ENTERTAINMENT GROUP, INC.
THIRD AMENDED AND RESTATED
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 Three Million Three Hundred
Sixty Seven Thousand Three Hundred Thirty-Eight Dollars and
Thirty-Eight Cents ($3,367,338.38) (the “Restated
Principal Amount”), together with any accrued and unpaid
interest hereon, on February 1, 2008 (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
May 5, 2005 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:
1.1 Interest
Rate . Interest on the Principal Amount outstanding under this
Third Amended and Restated 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 March 1, 2007 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 full 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 the Conversion Price (as defined in
Section 3.4) such price per share being subject to adjustment
at the times, and in accordance with the provisions as set forth in
section 3.4. Overdue principal and interest on the Note shall to
the extent permitted by applicable law, bear
interest at the
rate of 21% 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 the
Borrower.
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 of common
stock. 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
3
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.
C.
Share Issuances . Subject to the provisions of this
Section 3.4, if the Borrower shall at any
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