Exhibit 4.1
THIS NOTE AND THE SECURITIES ISSUABLE UPON THE
CONVERSION OF THIS NOTE HAVE BEEN ACQUIRED FOR INVESTMENT ONLY AND
NOT WITH THE INTENT OF FURTHER DISTRIBUTION, AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED, OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT THIS NOTE AND THE SECURITIES UNDER THAT ACT
UNLESS SOLD PURSUANT TO RULE 144 PROMULGATED UNDER THAT ACT OR
UNLESS THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER IS OTHERWISE
EXEMPT FROM REGISTRATION. GRAYMARK PRODUCTIONS, INC.
MAY REQUEST A WRITTEN OPINION FROM COUNSEL AND IN
FORM ACCEPTABLE TO GRAYMARK PRODUCTIONS, INC., TO THE EFFECT
THAT REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH SALE,
PLEDGE OR HYPOTHECATION, OR OTHER TRANSFER. THIS NOTE OR ANY
SECURITY ISSUABLE UPON THE CONVERSION OF THIS NOTE MUST BE
SURRENDERED TO GRAYMARK PRODUCTIONS, INC. AS A CONDITION PRECEDENT
TO THE SALE, PLEDGE, HYPOTHECATION OR ANY OTHER TRANSFER OF ANY
INTEREST IN THIS NOTE OR ANY SECURITY INTO WHICH THIS NOTE IS
CONVERTIBLE.
GRAYMARK PRODUCTIONS,
INC.
SENIOR PROMISSORY
NOTE
|
U.S. $750,000
|
|
October 25,
2005
|
FOR VALUE RECEIVED , the undersigned, GRAYMARK PRODUCTIONS, INC. an
Oklahoma corporation, and all of its existing subsidiaries and
subsidiaries created after the date hereof (hereinafter called the
“Company”), hereby promises to pay to the order of
or any future permitted holder of this Senior Promissory Note (the
“ Payee ”), at the principal office of the Payee
set forth herein, or at such other place as the holder may
designate in writing to the Company, the principal sum of SEVEN
HUNDRED FIFTY THOUSAND DOLLARS (U.S. $750,000), or such other
amount as may be outstanding hereunder, together with all accrued
but unpaid interest, in such coin or currency of the United States
of America as at the time shall be legal tender for the payment of
public and private debts and in immediately available funds, as
provided in this Senior Promissory Note (the “ Note
”).
Upon the date of issuance of this
Note the Company has no outstanding securities or other financial
instruments that rank senior or pari-passu to this Note.
The Company shall not issue any
securities or other financial instruments that rank senior or
pari-passu to this Note without the prior written consent of the
Payee.
1.
Principal and Interest
Payments .
(a)
The Company shall repay in full the
entire principal balance then outstanding under this Note in the
manner provided in Section 1(d) hereof on the first to
occur (the “ Maturity Date ”) of:
(i) October 25, 2007; (ii) the consummation of a
Qualified Financing (as defined in Section 1(d) hereof);
or (iii) the acceleration of the obligations as contemplated
by this Note. The Company may prepay all or any part of this
Note, in whole or in part at any time, as set forth in
Section 6(d) hereof.
(b)
Interest on the outstanding
principal balance of this Note shall accrue at a rate of eight
percent (8%) per annum. Interest on the outstanding principal
balance of the Note shall be computed on the basis of the actual
number of days elapsed and a year of three hundred and sixty (360)
days and shall be payable quarterly by the Company in cash or in
shares of the Company’s equity securities as contemplated in
Section 1(d) hereof. Furthermore, upon the
occurrence of an Event of Default that shall be continuing for more
than thirty (30) consecutive days following the Company’s
receipt of Payee’s notice describing in reasonable detail the
occurrence of an Event of Default, then to the extent permitted by
law, the Company will pay interest to the Payee, payable on demand,
on the outstanding principal balance of the Note from the date of
the Event of Default until payment in full at the rate of eighteen
percent (18%) per annum.
(c)
The outstanding principal amount of
this Note shall be secured by all assets of the Company including
but not limited to, all purchase agreements and any such options or
rights to acquire, all intellectual and real property, all assets
and properties of GrayMark Productions, Inc. and all of its
existing subsidiaries and subsidiaries created after the date
hereof.
(d)
At the Maturity Date, the
outstanding principal amount of this Note plus all accrued and
unpaid interest herein shall be due and payable in cash in the
absence of a Qualified Financing by the Company on or before the
Maturity Date or, in the event of a Qualified Financing by the
Company on or before Maturity Date, automatically converted into
equity securities of the Company which may be issued in connection
with the Qualified Financing by the Company of its equity
securities to certain investors; provided , however ,
the Company receives aggregate gross cash proceeds in connection
with a Qualified Financing of at least $2,000,000 (excluding the
conversion of this Note) occurring on or before October 25,
2007, the outstanding principal amount of this Note plus all
accrued and unpaid interest herein shall automatically be converted
into shares of equity securities of the Company (the “
Qualified Financing ”). The principal
amount of this Note plus all accrued and unpaid interest shall
convert into such number of shares of equity securities of the
Company equal to 120% of the principal amount of this Note and all
accrued interest outstanding divided by the price per share of the
equity securities sold in the Qualified Financing, the maximum
price or value of the Common Stock into which the indebtedness
evidenced by this Note converts shall not exceed the equivalent of
$1.10 per Common Stock share. Upon the conversion of this
Note, the outstanding principal amount of this Note, together with
accrued interest hereon, shall be deemed to be the consideration
for the Payee’s interest in the equity securities upon
consummation of the Qualified Financing. In consideration for
the loan evidenced by this Note, the Payee shall receive common
stock purchase warrants exercisable during a five-year period for
the purchase of (i) 250,000 shares of the Company’s
common stock, $.001 par value (the “Common Stock”) at
$2.00 per share, and (ii) 250,000 shares of Common Stock at
$3.00 per share (the “Common Stock Purchase Warrants”)
in the form attached to this Note as Exhibits A-1 and
A-2.
2.
Payment on Non-Business
Days . Whenever any
payment to be made shall be due on a Saturday, Sunday or a public
holiday under the laws of the United States of America or the State
of Michigan, such payment may be due on the next succeeding
business day and such next succeeding day shall be included in the
calculation of the amount of accrued interest payable on such
date.
3.
Representations, Warranties and
Covenants of the Company . The Company represents, warrants and
covenants to the Payee as follows:
(a)
The Company has been duly
incorporated and is validly existing and in good standing under the
laws of the state of Oklahoma, with full corporate power and
authority to own, lease and operate its properties and to conduct
its business as currently conducted.
(b)
This Note has been duly authorized,
validly executed and delivered on behalf of the Company and is a
valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, subject to limitations on
enforcement by general principles of equity and by bankruptcy or
other laws affecting the enforcement of creditors’ rights
generally, and the Company has full power and authority to execute
and deliver this Note and to perform its obligations
hereunder.
(c)
The execution, delivery and
performance of this Note will not (i) conflict with or result
in a breach of or a default under any of the terms or provisions
of, (A) the Company’s certificate of incorporation or
by-laws, or (B) any material provision of any indenture,
mortgage, deed of trust or other material agreement or instrument
to which the Company is a party or by which it or any of its
material properties or assets is bound, (ii) result in a
violation of any material provision of any law, statute, rule,
regulation, or any existing applicable decree, judgment or order by
any court, Federal or state regulatory body, administrative agency,
or other governmental body having jurisdiction over the Company,
or
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any of its material properties or assets or
(iii) result in the creation or imposition of any material
lien, charge or encumbrance upon any material property or assets of
the Company or any of its subsidiaries pursuant to the terms of any
agreement or instrument to which any of them is a party or by which
any of them may be bound or to which any of their property or any
of them is subject.
(d)
No consent, approval or
authorization of or designation, declaration or filing with any
governmental authority on the part of the Company is required in
connection with the valid execution and delivery of this
Note.
(e)
Upon the date of issuance of this
Note the Company has no outstanding securities or other financial
instruments that rank senior or pari-passu to this Note. The
Company shall not issue any securities or other financial
instruments that rank senior or pari-passu to this Note without the
prior written consent of the Payee.
(f)
Within ten (10) days following
the occurrence of a Material Adverse Change, the Company shall
provide Payee written notification describing in reasonable detail
the events and circumstances constituting the basis for the
Material Adverse Change. For purposes of this Note, “Material
Adverse Change” shall mean (a) a material adverse change
in the business, prospects, operations, results of operations,
assets, liabilities or condition (financial or otherwise) of the
Company taken as a whole, or (b) a material adverse change in
the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of the Company,
or (c) a material adverse change in the motion picture
industry as it relates to the Company.
4.
Events of Default
. The occurrence of any of the
following events shall be an “ Event of Default
” under this Note:
(a)
the Company shall fail to make the
payment of any amount of any principal outstanding for a period of
three (3) business days after the date such payment
shall
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become due and payable hereunder; or
(b)
the Company shall fail to make any
payment of interest for a period of three (3) business days
after the date such interest shall become due and payable
hereunder; or
(c)
any representation, warranty or
certification made by the Company herein or in any certificate or
financial statement shall prove to have been false or incorrect or
breached in a material respect on the date as of which made;
or
(d)
the holder of any indebtedness
(“ Indebtedness ”) of the Company or any of its
subsidiaries shall accelerate any payment of any amount or amounts
of principal or interest on any indebtedness (the “
Indebtedness ”) (other than the Indebtedness
hereunder) prior to its stated maturity or payment date the
aggregate principal amount of which Indebtedness of all such
persons is in excess of $500,000, whether such Indebtedness now
exists or shall hereinafter be created, and such accelerated
payment entitles the holder thereof to immediate payment of such
Indebtedness which is due and owing and such indebtedness has not
been discharged in full or such acceleration has not been stayed,
rescinded or annulled within ten (10) business days of such
acceleration; or
(e)
A judgment or order for the payment
of money shall be rendered against the Company or any of its
subsidiaries in excess of $500,000 in the aggregate (net of any
applicable insurance coverage) for all such judgments or orders
against all such persons (treating any deductibles, self insurance
or retention as not so covered) that shall not be discharged, and
all such judgments and orders remain outstanding, and there shall
be any period of sixty (60) consecutive days following entry of the
judgment or order in excess of $500,000 or the judgment or order
which causes the aggregate amount described above to exceed
$500,000 during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in
effect; or
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(f)
the Company shall (i) apply for
or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its property or assets, (ii) admit in
writing its inability to pay its debts as such debts become due,
(iii) make a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under the Bankruptcy
Code or under the comparable laws of any jurisdiction (foreign or
domestic), (v) file a petition seeking to take
advanta
