Secured Promissory Note - Headliners Entertainment Group Inc. and Cornell Capital Partners LP
SECURED PROMISSORY NOTE
March 21, 2005
Jersey City, New Jersey
$3,000,000
FOR VALUE RECEIVED, the undersigned, HEADLINERS ENTERTAINMENT GROUP, INC., a
Delaware corporation (the "Company"), promises to pay CORNELL CAPITAL
PARTNERS, LP (the "Lender") at 101 Hudson Street, Suite 3700, Jersey City,
New Jersey 07302 or other address as the Lender shall specify in writing, the
principal sum of Three Million Dollars ($3,000,000) and interest at the
annual rate of twelve percent (12%) on the unpaid balance pursuant to the
following terms:
1. Principal and Interest. For value received, the Company hereby
promises to pay to the order of the Lender, in lawful money of the United
States of America and in immediately available funds the principal sum ,
together with interest on the unpaid principal of this note at the rate of
twelve percent (12%) per year (computed on the basis of a 365-day year and
the actual days elapsed) from the date of this Promissory Note (the "Note")
until paid.
2. Monthly Payments of the Note. The Company shall commence repaying the
outstanding principal of the Note plus interest accrued on the outstanding
principal amount on May 23, 2005 according to the payment schedule attached
hereto. All payment amounts shall be first applied to interest and the
balance to principal. Notwithstanding the foregoing the principal amount of
this Note plus accrues interest shall be due and payable November 21, 2007.
3. Acquisition . With two (2) business days of the funding of this
Note the Company shall have completed the acquisition of
_______________________.
4. Right of Prepayment. Notwithstanding the payment(s) pursuant to
Section 2, the Company at its option shall have the right to prepay, with
three (3) business days advance written notice, a portion or all outstanding
principal and interest of the Note.
5. Waiver and Consent. To the fullest extent permitted by law and except
as otherwise provided herein, the Company waives demand, presentment,
protest, notice of dishonor, suit against or joinder of any other person, and
all other requirements necessary to charge or hold the Company liable with
respect to this Note.
6. Fees. The Lender shall be entitled to a fee equal to ten percent (10%)
of the principal amount of this Note. Furthermore the Lender shall be
entitled to a structuring fee of Two Thousand Five Hundred Dollars ($2,500).
7. Costs, Indemnities and Expenses. In the event of default as described
herein, the Company agrees to pay all reasonable fees and costs incurred by
the Lender in collecting or securing or attempting to collect or secure this
Note, including reasonable attorneys' fees and expenses, whether or not
involving litigation, collecting upon any judgments and/or appellate or
bankruptcy proceedings. The Company agrees to pay any documentary stamp
taxes, intangible taxes or other taxes which may now or hereafter apply to
this Note or any payment made in respect of this Note, and the Company agrees
to indemnify and hold the Lender harmless from and against any liability,
costs, attorneys' fees, penalties, interest or expenses relating to any such
taxes, as and when the same may be incurred.
8. Event of Default. An "Event of Default" shall be deemed to have
occurred upon the occurrence of any of the following: (i) the Company should
fail for any reason or for no reason to make any payment of the principal,
interest, costs, indemnities, or expenses pursuant to this Note within five
(5) days of the date due as prescribed herein; (ii) failure by the Company
for ten (10) days after notice to it to satisfy any of its other obligations
or requirements or comply with any of its other agreements under this Note;
(iii) any proceedings under any bankruptcy laws of the United States of
America or under any insolvency, not disclosed to the Lender, reorganization,
receivership, readjustment of debt, dissolution, liquidation or any similar
law or statute of any jurisdiction now or hereinafter in effect (whether in
law or at equity) is filed by or against the Company or for all or any part
of its property; or (iv) a breach by the Company of its obligations under the
Security Agreement, Pledge Agreement (all as defined in the Security
Agreement) or any other related agreements hereunder between the Company and
the Lender of even date herewith which is not cured by the Company by any
applicable cure period therein. Upon an Event of Default (as defined above),
the entire principal balance and accrued interest outstanding under this
Note, and all other obligations of the Company under this Note, shall be
immediately due and payable without any action on the part of the Lender,
interest shall accrue on the unpaid principal balance at eighteen percent
(18%) per year or the highest rate permitted by applicable law, if lower and
the Lender shall be entitled to seek and institute any and all remedies
available to it.
9. Maximum Interest Rate. In no event shall any agreed to or actual
interest charged, reserved or taken by the Lender as consideration for this
Note exceed the limits imposed by New Jersey law. In the event that the
interest provisions of this Note shall result at any time or for any reason
in an effective rate of interest that exceeds the maximum interest rate
permitted by applicable law, then without further agreement or notice the
obligation to be fulfilled shall be automatically reduced to such limit and
all sums received by the Lender in excess of those lawfully collectible as
interest shall be applied against the principal of this Note immediately upon
the Lender's receipt thereof, with the same force and effect as though the
Company had specifically designated such extra sums to be so applied to
principal and the Lender had agreed to accept such extra payment(s) as a
premium-free prepayment or prepayments.
10. Secured Nature of the Note. This Note is secured by the Pledged Shares
as defined in the Pledge and Escrow Agreement as well as the Pledged Property
as defined in the Security Agreement both of even date herewith.
11. Issuance of Capital Stock. So long as any portion of this Note is
outstanding, the Company shall not, without the prior written consent of the
Lender, (i) issue or sell shares of common stock or preferred stock without
consideration or for a consideration per share less than the bid price of the
common stock determined immediately prior to its issuance, (ii) issue any
warrant, option, right, contract, call, or other security instrument granting
the holder thereof, the right to acquire common stock without consideration
or for a consideration less than such common stock's bid price value
determined immediately prior to it's issuance, (iii) enter into any security
instrument granting the holder a security interest in any and all assets of
the Company, or (iv) file any registration statement on Form S-8.
12. Cancellation of Note. Upon the repayment by the Company of all of its
obligations hereunder to the Lender, including, without limitation, the
principal amount of this Note, plus accrued but unpaid interest, the
indebtedness evidenced hereby shall be deemed canceled and paid in full.
Except as otherwise required by law or by the provisions of this Note,
payments received by the Lender hereunder shall be applied first against
expenses and indemnities, next against interest accrued on this Note, and
next in reduction of the outstanding principal balance of this Note.
13. Severability. If any provision of this Note is, for any reason,
invalid or unenforceable, the remaining provisions of this Note will
nevertheless be valid and enforceable and will remain in full force and
effect. Any provision of this Note that is held invalid or unenforceable by
a court of competent jurisdiction will be deemed modified to the extent
necessary to make it valid and enforceable and as so modified will remain in
full force and effect.
14. Amendment and Waiver. This Note may be amended, or any provision of
this Note may be waived, provided that any such amendment or waiver will be
binding on a party hereto only if such amendment or waiver is set forth in a
writing executed by the parties hereto. The waiver by any such party hereto
of a breach of any provision of this Note shall not operate or be construed
as a waiver of any other breach.
15. Successors. Except as otherwise provided herein, this Note shall bind
and inure to the benefit of and be enforceable by the parties hereto and
their permitted successors and assigns.
16. Assignment. This Note shall not be directly or indirectly assignable
or delegable by the Company. The Lender may assign this Note as long as such
assignment complies with the Securities Act of 1933, as amended.
17. No Strict Construction. The language used in this Note will be deemed
to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party.
18. Further Assurances. Each party hereto will execute all documents and
take such other actions as the other party may reasonably request in order to
consummate the transactions provided for herein and to accomplish the
purposes of this Note.
19. Notices, Consents, etc. Any notices, consents, waivers or other
communications required or permitted to be given under the terms hereof must be
in writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) trading day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:
If to the Company, to:
Headliners Entertainment Group, Inc.
501 Bloomfield Avenue
Montclair, NJ 07042
Attention: Ed Rodriguez, Chairman and CEO
Telephone: (973) 233-1233
Facsimile: (973) 233-1299
With a copy to:
Robert Brantl, Esq,
322 4th Street
Brooklyn, NY 11215
Telephone: (718) 768-6045
Facsimile: (718) 965-4042
If to the Investor(s):
Cornell Capital Partners, LP
101 Hudson Street -Suite 3700
Jersey City, NJ 07302
Attention: Mark Angelo
Portfolio Manager
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
With a Copy to:
David Gonzalez, Esq.
101 Hudson Street - Suite 3700
Jersey City, NJ 07302
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
or at such other address and/or facsimile number and/or to the attention of
such other person as the recipient party has specified by written notice
given to each other party three (3) trading days prior to the effectiveness
of such change. Written confirmation of receipt (A) given by the recipient
of such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the
time, date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service, shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service
in accordance with clause (i), (ii) or (iii) above, respectively.
20. Remedies, Other Obligations, Breaches and Injunctive Relief. The
Lender's remedies provided in this Note shall be cumulative and in addition
to all other remedies available to the Lender under this Note, at law or in
equity (including a decree of specific performance and/or other injunctive
relief), no remedy of the Lender contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit the Lender's right to pursue actual damages for any failure by
the Company to comply with the terms of this Note. No remedy conferred under
this Note upon the Lender is intended to be exclusive of any other remedy
available to the Lender, pursuant to the terms of this Note or otherwise. No
single or partial exercise by the Lender of any right, power or remedy
hereunder shall preclude any other or further exercise thereof. The failure
of the Lender to exercise any right or remedy under this Note or otherwise,
or delay in exercising such right or remedy, shall not operate as a waiver
thereof. Every right and remedy of the Lender under any document executed in
connection with this transaction may be exercised from time to time and as
often as may be deemed expedient by the Lender. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm
to the Lender and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Lender shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, and
specific performance without the necessity of showing economic loss and
without any bond or other security being required.
21. Governing Law; Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed
by the internal laws of the State of New Jersey, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
New Jersey or any other jurisdictions) that would cause the application of
the laws of any jurisdictions other than the State of New Jersey. Each party
hereby irrevocably submits to the exclusive jurisdiction of the Superior
Court of the State of New Jersey sitting in Hudson County, New Jersey and the
United States Federal District Court for the District of New Jersey sitting
in Newark, New Jersey, for the adjudication of any dispute hereunder or in
connection herewith or therewith, or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law.
22. No Inconsistent Agreements. None of the parties hereto will hereafter
enter into any agreement, which is inconsistent with the rights granted to the
parties in this Note.
23. Third Parties. Nothing herein expressed or implied is intended or shall
be construed to confer upon or give to any person or entity, other than the
parties to this Note and their respective permitted successor and assigns, any
rights or remedies under or by reason of this Note.
24. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR THE LENDER TO LOAN
TO THE COMPANY THE MONIES HEREUNDER, THE COMPANY HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT
AND/OR ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION.
25. Entire Agreement. This Note (including any recitals hereto) set forth
the entire understanding of the parties with respect to the subject matter
hereof, and shall not be modified or affected by any offer, proposal, statement
or representation, oral or written, made by or for any party in connection with
the negotiation of the terms hereof, and may be modified only by instruments
signed by all of the parties hereto.
IN WITNESS WHEREOF, this Promissory Note is executed by the undersigned
as of the date hereof.
HEADLINERS ENTERTAINMENT GROUP INC.
By: /s/ Ed Rodriguez
----------------------------------------
Name: Ed Rodriguez
Title: Chairman & Chief Executive Officer