Exhibit 4.1
CONVERTIBLE PROMISSORY NOTE
DATED: SEPTEMBER 13, 2004
1. PRINCIPAL / BORROWERS PROMISE TO PAY
FOR VALUE RECEIVED, the undersigned, AGU ENTERTAINMENT CORP., A
COLORADO CORPORATION whose address is 11077 Biscayne Blvd, Miami, Florida 33161
("BORROWER"), promises to pay to Galt Financial Corporation, ("LENDER"), whose
address is 17 Larkspur Lane, Newtown, PA 18940, the principal sum of
$500,000.00, with annual interest thereon calculated in accordance with the
terms and provisions provided below. All sums owing under this Note are payable
in lawful money of the United States of America.
2. INTEREST
(a) Interest on this Note shall be due and payable within ten days
after the first day of each calendar quarter beginning with the first calendar
quarter after the date hereof. Thereafter, Interest shall accrued on this Note
and be payable at a fixed annual rate of 10.0%, until such time as this Note is
paid in full or converted into common stock.
(b) All amounts required to be paid under Lender's Note shall be
payable to the Lender at 17 Larkspur Lane, Newtown, PA 18940, or at another
place as Lender, from time to time, may designate in writing.
(c) Interest calculations shall be based on a 365-day year and charged
on the basis of actual days elapsed.
3. MATURITY DATE; CONVERSION
(a) The entire principal balance of this Note, together with all
accrued and unpaid interest and fees, shall be due and payable on September 13,
2006 ("Maturity Date"), unless otherwise prepaid in accordance with the terms of
this Note. Notwithstanding the foregoing, Lender may, in its discretion and at
its sole option, extend the Maturity date for successive one-year options,
without changing any of the terms contained herein.
(b) Notwithstanding anything to the contrary herein, the Lender will
have the right to convert the principal balance outstanding on the Note into
common stock of the Borrower, at any time, by notifying the Borrower of his
intent to convert all or a portion of the Note. The conversion price is $1.00
per share, subject to adjustment as set forth herein (the "Conversion Price").
In the event Lender elects to convert all or any portion of this Note, Lender
shall provide the Borrower with written notice at least two days prior to
conversion date. If the Lender is converting less than the maximum number of
shares it may convert under its Note, the Borrower shall reissue the Note with
the appropriate remaining principal amount as soon as practicable after the
completion of Lender's conversion. Borrower shall pay to Lender all unpaid
interest accruing on the Note, or any portion thereof that is converted, up
through the time of conversion within five calendar days of said conversion. The
shares acquired by Lender upon conversion hereunder may be repurchased by
Borrower on an "all-or-none" basis, at Borrower's sole election, at a price of
$5.00 cash per share (subject to the same adjustments applicable to the
conversion rate described above) up through and including September 9, 2005.
Lender, in its sole and absolute discretion, may agree to accept payment as
aforesaid for less than all of said shares acquired upon conversion. To the
extent that Borrower has not paid Lender the foregoing repurchase price for all
of said shares by September 9, 2005, said repurchase right shall lapse.
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(c) Adjustment of Conversion Rate. The conversion rate in effect at any
time shall be subject to adjustment as follows:
i) In the case the Company shall (a) declare a dividend on its
outstanding common stock in shares of its capital stock, (b) subdivide
its outstanding common stock, (c) combine its outstanding shares of
common stock into a smaller number of such shares, or (d) issue by
reclassification of its common stock (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation) any shares of any class of
stock, the conversion rate in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combination
or reclassification shall be proportionately adjusted so that the
Holder of this Note surrendered for conversion after such time shall be
entitle to receive the number and kind of shares which he would have
owned or would have been entitled to receive had this Note been
converted immediately prior to such time. Such adjustment shall be made
successively whenever any event listed above shall occur.
ii) All calculation under this Paragraph 3(c) shall be made to
the nearest cent or to the nearest one tenth (1/10) of a share, as the
case may be. Whenever the conversion rate is adjusted as herein
provided, the Borrower shall promptly give written notice to the Lender
and/or Holder showing the adjusted conversion rate determined as
provided herein, setting forth the conversion rate after such
adjustment and setting forth a brief statement of the facts requiring
such adjustment and a computation thereof.
iii) In the event:
A) The Borrower shall declare a dividend on its common stock;
or
B) Of any subdivision, combination or reclassification of the
Borrower's common stock, or of any consolidation or merger to which the
Borrower is a party and for which approval of any shareholders of the
Borrower is required, or of the sale or transfer of all or
substantially all of the assets of the Borrower; or
C) Of the voluntary or involuntary dissolution, liquidation or
winding up of the affairs or business of the Borrower; or
D) The Borrower proposes to take any other action which would
require an adjustment of the conversion rate pursuant to Section 3(c)
hereof, then the Borrower shall mail to the Lender and/or Holder at his
last known address, at least twenty (20) days prior to the applicable
record date hereinafter specified, a notice stating (1) the date of
which the holders of shares of common stock of record to be entitled to
receive any such dividend or distribution are to be determined; or (2)
the date on which any such subdivision, combination, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or
winding up is expected to become effective, and the date as of which it
is expected that holders of common stock for securities and other
property, if any, deliverable upon such subdivision, combination,
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reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up. The failure to give the notice required by
this Subsection 3(c)(iii) or any defect therein shall not affect the
legality or validity of any dividend, distribution, right, warrant,
subdivision, combination, reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding up, or the vote
upon any such action.
iv) The Borrower shall at all times reserve and keep
available, free from pre-emptive rights of those persons other than
Lender, out of its authorized but unissued common stock, for the
purpose of effecting the conversion of the Note, the full number of
shares of common stock then issuable upon the conversion of this Note.
If at any time the number of authorized and/or unissued shares of
common stock shall not be sufficient to effect the conversion of this
Note at the conversion rate then in effect, the Borrower shall take
such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of common
stock to such number of shares as shall be sufficient for such purpose.
No fractional shares of common stock shall be issued upon conversion of
this Note. In lieu of issuing any fractional interest of a share of
common stock, the Borrower shall purchase such fractional interest at
the publicly traded market price for its shares, rounded to the nearest
dollar.
v) The Borrower covenants that any and all shares of common
stock which may be issued upon conversion of the Note, upon issue, be
duly and validly issued, fully paid and non-assessable.
(d) The Shares offered with this Note will not be registered under the
Securities Act or under the securities laws of any state or other jurisdiction.
As a result, the Shares cannot be transferred or otherwise disposed of without
registration under the Securities Act or, if applicable, the securities laws of
any state or other jurisdiction, absent an otherwise applicable exemption there
from, if any.
(e) The Shares offered in with this Note involve a high degree of risk.
There is no public market for any of these Shares and the Borrower cannot assure
that a public market will be developed or be sustained if developed.
4. BORROWER'S RIGHT OF REDEMPTION.
Notwithstanding anything to the contrary in this Agreement, the
Borrower shall have the absolute right to redeem or prepay the principal amount
of this Note, then remaining upon 30 days advance written notice to Lender. The
Note may not be partially redeemed or prepaid. In the event of said redemption
or prepayment, Borrower shall pay to Lender an additional fee, which shall not
be deemed to be interest, equal to 10% of the sum redeemed or prepaid.
5. LATE CHARGE
If any required payment, including the final payment due on the
maturity date, is not paid within 15 days from and including the date upon which
it was due (whether by acceleration or otherwise), then, in each such event, all
past due amounts shall be subject to a late penalty of five (.05) cents on every
dollar owed (the "late penalty"). This late penalty shall be in addition to any
other interest due as provided for herein and in addition to all other rights
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and remedies provided herein or by law for the benefit of the holder on a
default. The acceptance of any payment by the holder of the Note shall not act
to restrict the holder at all in exercising any other rights under the Note or
the law, to waive or release Borrowers from any obligations contained herein, or
to extend the time for payments due under this Note.
6. DEFAULT AND REMEDIES
If Borrowers fail to pay principal and/or interest on the date on which
it falls due or to perform any of the agreements, conditions, covenants,
provisions, or stipulations contained in this Note, then Lender, at its option
and without notice to Borrowers, may declare immediately due and payable the
entire unpaid balance of principal with interest from the date of default and
all other sums due by Borrowers hereunder anything herein to the contrary
notwithstanding, at a default rate equal to the higher of 18% per annum or the
highest rate of interest permitted by applicable law. Payment of this sum may be
enforced and recovered in whole or in part at any time by one or more of the
remedies provided to Lender in this Note. In that case, Lender also may recover
a reasonable attorney's fee and/or all collection costs, including those that
may be incurred on appeal, as well as interest on any judgment obtained by
Lender at then prevailing rates.
The remedies of Lender provided in this Note shall be cumulative and
concurrent, and they may be pursued singly, successively, or together at the
sole discretion of Lender. They may be exercised as often as occasion shall
occur, and failing to exercise one shall in no event be construed as a waiver or
release of it.
As a material inducement for Lender to make the loan to Borrower that
is evidenced by this Note, Borrower has agreed to enter into a consulting
agreement (the "Consulting Agreement") with the principal of Lender
("Principal"), whereby Borrower is to issue to Principal or his assigns, upon
the execution of the Consulting Agreement, 500,000 restricted shares of
Borrower's common stock, which shall be deemed to be fully paid for and
non-assessable upon the execution of the Consulting Agreement. In the event
Borrower fails to execute said Consulting Agreement and/or provide instructions
to its Transfer Agent to deliver 500,000 of its restricted common shares to
Principal or his assigns within five calendar days of the date hereof, said
failure shall be deemed a default hereunder entitling Lender to the specific
remedy of reducing the conversion price set forth in this Note from $1.00 per
share to $0.50 per share.
As a material inducement for Lender to: i) make the loan to Borrower
that is evidenced by this Note; and ii) withdraw its demand for perpetual
pre-emptive rights, to insure that Lender's interest in Borrower is not diluted,
Borrower has agreed to grant to Lender a five-year warrant to purchase up to
500,000 shares of the Borrower's common stock at an exercise price equal to
$1.00 per share, subject to adjustment for splits, dividends, combinations,
mergers, reclassifications and the like, pursuant to the terms of a warrant
grant, the form of which is attached hereto as Exhibit "A". Borrower shall
deliver to Lender said Warrant within ten calendar days of the date of this
Note. In the event Borrower fails to deliver the foregoing Warrant Grant to
Lender and/or the form thereof is not acceptable to Lender, said failure shall
be deemed a default hereunder entitling Lender to the specific remedies of
reducing the conversion price set forth in the Note from $1.00 per share to
$0.50 per share and entitling Lender to pre-emptive rights with respect to all
shares of Borrower's common stock held by Lender. In exercising said pre-emptive
rights, the price paid by Lender shall be the lesser of $1.00 per share or the
share price paid by the purchaser whose acquisition gave rise to Lender's
pre-emptive right. If at any time the number of authorized and/or unissued
shares of common stock shall not be sufficient to effect the conversion of this
Note and/or issuance of shares to be issued upon the exercise of pre-emptive
rights, the Borrower shall take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized and/or unissued shares of
common stock to such number of shares as shall be sufficient for such purpose.
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7. ATTORNEYS' FEES AND COSTS
Borrowers shall pay all attorneys fees in connection with the
preparation of this Note. If Lender engages any attorney to enforce or construe
any provision of this Note, or as a consequence of any default whether or not
any legal action is filed, Borrowers immediately shall pay on demand all
reasonable attorneys' fees and other Lender's costs, together with interest from
the date of demand until paid at the highest rate of interest then applicable to
the unpaid principal, as if the unpaid attorneys' fees and costs had been added
to the principal.
8. WAIVERS
(a) Borrowers hereby waive and release all benefit that might accrue to
Borrowers by virtue of any present or future laws of exemption with regard to
real or personal property or any part of the proceeds arising from any sale of
that property, from attachment, levy, or sale under execution, or providing for
any stay of execution, exemption from civil process, or extension of time for
payment. Borrowers agree that any real estate that may be levied on under a
judgment obtained by virtue hereof, on any writ of execution issued thereon, may
be sold on any writ in whole or in part in any order desired by Lender.
(b) Borrowers and all endorsers, sureties, and guarantors jointly and
severally waive presentment for payment, demand, notice of demand, notice of
nonpayment or dishonor, protest, notice of protest of this Note, and all other
notices in connection with the delivery, acceptance, performance, default, or
enforcement of the payment of this Note. They agree that each shall have
unconditional liability without regard to the liability of any other party and
that they shall not be affected in any manner by any indulgence, extension of
time, renewal, waiver, or modification granted or consented to by Lender.
Borrowers and all endorsers, sureties, and guarantors consent to any and all
extensions of time, renewals, waivers, or modifications that may be granted by
Lender with respect to the payment or other provisions of this Note, and to the
release of any collateral or any part thereof, with or without substitution, and
they agree that additional borrowers, endorsers, guarantors, or sureties may
become parties hereto without notice to them or affecting their liability
hereunder.
(c) Lender shall not be considered by any act of omission or commission
to have waived any of its rights or remedies hereunder, unless such waiver is in
writing and signed by Lender, and then only to the extent specifically set forth
in writing. A waiver on one event shall not be construed as continuing or as a
bar to or waiver of any right or remedy to a subsequent event.
9. NOTICES
All notices required under or in connection with this Note shall be
delivered or sent by certified or registered mail, return receipt requested,
postage prepaid, to the addresses set forth in Paragraph 1 hereof, or to another
address that any party may designate from time to time by notice to the others
in the manner set forth herein. All notices shall be considered to have been
given or made either at the time of delivery thereof to an officer or employee
or on the third business day following the time of mailing in the aforesaid
manner.
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10. COSTS AND EXPENSES
Borrowers shall pay the cost of any revenue tax or other stamps now or
hereafter required by law at any time to be affixed to this Note.
11. NO PARTNERSHIP OR JOINT VENTURE
Nothing contained in this Note or elsewhere shall be construed as
creating a partnership or joint venture between Lender and Borrowers or between
Lender and any other person or as causing the holder of the Note to be
responsible in any way for the debts or obligations of Borrowers or any other
person.
12. INTEREST RATE LIMITATION
Notwithstanding anything contained herein to the contrary, the holder
hereof shall never be entitled to collect or apply as interest on this
obligation any amount in excess of the maximum rate of interest permitted to be
charged by applicable law. If the holder of this Note ever collects or applies
as interest any such excess, the excess amount shall be applied to reduce the
principal debt; and if the principal debt is paid in full, any remaining excess
shall be paid forthwith to Borrowers. In determining whether the interest paid
or payable in any specific case exceeds the highest lawful rate, the holder and
Borrowers shall to the maximum extent permitted under applicable law (a)
characterize any non-principal payment as an expense, fee, or premium rather
than as interest; (b) exclude voluntary prepayments and the effects of these;
and (c) spread the total amount of interest throughout the entire contemplated
term of the obligation so that the interest rate is uniform throughout the term.
Nothing in this paragraph shall be considered to increase the total dollar
amount of interest payable under this Note.
13. OBLIGATIONS OF THE PERSONS UNDER THIS NOTE
If more than one person signs this Note, each person is fully and
personally obligated to keep all of the promises made in this Note, including
the promise to pay the full amount owed. Any person who is a guarantor, surety
or endorser of this Note is also obligated to do these things. Any person who
takes over these obligations, including the obligations of a guarantor, surety
or endorser of this Note is also obligated to keep all of the promises made in
this Note. The Note Holder may enforce its rights under this Note against each
person individually or against all of us together. This means that any one of us
may be required to pay all of the amounts owed under this Note.
14. MODIFICATION
In the event this Note is pledged or collaterally assigned by Lender at
any time or from time to time before the maturity date, neither Borrowers nor
Lender shall permit any modification of this Note without the consent of the
pledgee/assignee.
15. NUMBER AND GENDER
In this Note the singular shall include the plural and the masculine
shall include the feminine and neuter gender, and vice versa, if the context so
requires.
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16. HEADINGS
Headings at the beginning of each numbered paragraph of this Note are
intended solely for convenience of reference and are not to be construed as
being a part of the Note.
17. TIME OF ESSENCE
Time is of the essence with respect to every provision of this Note.
18. GOVERNING LAW
This Note shall be construed and enforced in accordance with the laws
of the State of Florida, except to the extent that federal laws preempt the laws
of the State of Florida.
IN WITNESS WHEREOF, Borrowers have executed this Convertible Promissory
Note on the date set forth above.
Signed in the presence of: AGU Entertainment Corp
By: /s/ David C. Levy
--------------------------
David Levy, President
PREPARED BY: Blank Rome LLP
1200 N. Federal Highway
Suite 417
Boca Raton, FL 33432
Attn: Bruce C. Rosetto, Esq.
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