**Exhibit 4.12**

** **

**THE SECURITIES OFFEREDHEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSIONOF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF 1933, AS AMENDED, ANDTHE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT)**

 

 

**US $75,000.00**

RED GIANT ENTERTAINMENT, INC.

6% CONVERTIBLE REDEEMABLE SECURED NOTE

DUE MAY 24, 2015

BACK END NOTE [_] OF 4

 

FORVALUE RECEIVED, Red Giant Entertainment, Inc. (the “Company”) promises to pay to the order of GEL Properties, LLC andits authorized successors and permitted assigns ("Holder"), the aggregate principal face amount of Seventy FiveThousand dollars exactly (U.S. $75,000.00) on May 24, 2015 ("Maturity Date") and to pay interest on the principalamount outstanding hereunder at the rate of 6% per annum commencing on May 24, 2013 (the “Funding Date”) In repayingthis amount, the Company acknowledges that it has received a total of $75,000 from the Holder, less $3,750 in legal fees and $7,500in third party due diligence fees, all of which were paid by the Holder, for a total of $63,750.00. The interest will be paid tothe Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note.The principal of, and interest on, this Note are payable at 16192 Coastal Highway, Lewes, DE, 19958,initially,and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. TheCompany will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less anyamounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holderat the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a paymentof outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of thesum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph4(b) herein.

 

This Note is subjectto the following additional provisions:

 

1.	This Note is exchangeablefor an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrenderingthe same. No service charge will be made for such registration or transfer or exchange, except that Holder shall pay any tax orother governmental charges payable in connection therewith.

 

2.	The Company shallbe entitled to withhold from all payments any amounts required to be withheld under applicable laws.

 

3.	This Note maybe transferred or exchanged only in compliance with the Securities Act of 1933, as amended ("Act") and applicablestate securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentmentfor transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registeredon the Company's records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Companynor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the rightof conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prospectivetransferee of this Note, also is required to give the Company written confirmation that this Note is being converted ("Noticeof Conversion") in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) ofsuch Notice of Conversion shall be the Conversion Date.

 

4.	(a)	The Holderof this Note is entitled, at its option, at any time after the requisite rule 144 holding period, and after full cash payment forthe shares convertible hereunder,****to convert all or any amount of the principal face amount of this Note then outstandinginto shares of the Company's common stock (the "Common Stock") without restrictive legend of any nature, at aconversion price ("Conversion Price") for each share of Common Stock equal to 70% of the lowest closing bid priceof the Common Stock as reported on the National Quotations Bureau Pink Sheets on which the Company’s shares are traded orany exchange upon which the Common Stock may be traded in the future ("Exchange"), for any of the five tradingdays including the day upon which a Notice of Conversion is received by the Company (provided such Notice of Conversion is deliveredby fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if theHolder wishes to included the same day closing price). If the shares have not been delivered within 3 business days, the Noticeof Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to theHolder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder has received such shares ofCommon Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing such Holder's intention toconvert this Note or a specified portion hereof, and accompanied by proper assignment hereof in blank. Accrued but unpaid interestshall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, butthe number of shares issuable shall be rounded to the nearest whole share.

 

(b)	Interest on anyunpaid principal balance of this Note shall be paid at the rate of 6% per annum. Interest shall be paid by the Company in CommonStock ("Interest Shares"). The Holder may, at any time, send in a Notice of Conversion to the Company for Interest Sharesbased on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a portionof the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.

 

(c)	At any time theCompany shall have the option to redeem this Note and pay to the Holder 150% of the unpaid principal amount of this Note, in full.The Company shall give the Holder 5 days written notice and the Holder during such 5 days shall have the option to convert thisNote or any part thereof into shares of Common Stock at the Conversion Price set forth in paragraph 4(a) of this Note.

 

(d)	Upon (i) a transferof all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions,(ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock, or (iii)any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity(other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification,conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii)being referred to as a "Sale Event"), then, in each case, the Company shall, upon request of the Holder, redeem thisNote in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the electionof the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaidinterest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.

 

(e)	In case of anySale Event in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be madeso that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note intothe kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification,capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that couldhave been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to suchSale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holdersof Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor personor entity acting in good faith.

 

5.	No provision ofthis Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, andinterest on, this Note at the time, place, and rate, and in the form, herein prescribed.

 

6.	The Company herebyexpressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, noticeof acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall bedirectly and primarily liable for the payment of all sums owing and to be owing hereto.

 

7.	The Company agreesto pay all costs and expenses, including reasonable attorneys' fees and expenses, which may be incurred by the Holder in collectingany amount due under this Note.

 

8.	If one or moreof the following described "Events of Default" shall occur:

 

(a)	The Company shalldefault in the payment of principal or interest on this Note or any other note issued to the Holder by the Company; or

 

(b)	Any of the representationsor warranties made by the Company herein or in any certificate or financial or other written statements heretofore or hereafterfurnished by or on behalf of the Company in connection with the execution and delivery of this Note shall be false or misleadingin any respect; or

 

(c)	The Company shallfail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of the Company underthis Note; or

 

(d)	The Company shall(1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment forthe benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee,liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief,consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federalor state laws as applicable; or

 

(e)	A trustee, liquidatoror receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shallnot be discharged within thirty (30) days after such appointment; or

 

(f)	Any governmentalagency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of thewhole or any substantial portion of the properties or assets of the Company; or

 

(g)	One or more moneyjudgments, writs or warrants of attachment, or similar process, in excess of ten thousand dollars ($10,000) in the aggregate, shallbe entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded orunstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any proposed sale thereunder;or

 

(h)	Bankruptcy, reorganization,insolvency or liquidation proceedings, or other proceedings for relief under any bankruptcy law or any law for the relief of debtorsshall be instituted voluntarily by or involuntarily against the Company; or

 

(i)	The Company shallhave its Common Stock delisted from an exchange (including the OTCBB exchange) or, if the Common Stock trades on an exchange, thentrading in the Common Stock shall be suspended for more than 5 consecutive days;

 

(j)	If a majorityof the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board; or

 

(k)	The Company shallnot deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business days ofits receipt of a Notice of Conversion; or

 

(l)	The Company shallcease to be “current” in its filings with the Securities and Exchange Commission; or

 

(m)	The Company shallfail to replenish the transfer agent reserve set forth in Section 12; or

 

(n)	The Company’sCommon Stock has a closing bid price of less than $0.007 per share for at least 5 consecutive trading days; or

 

(o)	The dollar tradingvolume of the Company’s Common Stock is less than twenty five thousand dollars ($25,000.00) in any 5 consecutive tradingdays.

 

Then, or at any timethereafter, unless cured (except for 8(l) 8(m) and 8(n)) which are incurable defaults), and in each and every such case, unlesssuch Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequentdefault) at the option of the Holder and in the Holder's sole discretion, the Holder may consider this Note immediately due andpayable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of whichare hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, andthe Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder's rights and remediesprovided herein or any other rights or remedies afforded by law. Upon an Event of Default, interest shall be accrue at a defaultinterest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interestpermitted by law. Further, if the Note becomes due and payable, the Holder may use the outstanding principal and interest due underthe Note to offset any payment obligations it may have to the Company. In the event of a breach of 8(j) the penalty shall be $250per day the shares are not issued beginning on the 4th day after the conversion notice was delivered to the Company.This penalty shall increase to $500 per day beginning on the 10th day.

 

Specifically withrespect to an Event of Default occurring as a result of a breach of item 8(k), the Holder has the right (but not the obligation)to advance fees to the Company’s auditors and attorneys necessary to allow the Company to become “current” inits filings with the Securities and Exchange Commission. Such advances shall be advanced against other amounts due by the Company(e.g. other $20k notes etc), except that the discount shall be doubled.

 

If the Holder shallcommence an action or proceeding to enforce any provisions of this Note, including without limitation engaging an attorney, thenthe Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation,preparation and prosecution of such action or proceeding.

 

9.	In case any provisionof this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, suchprovision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and thevalidity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.

 

10.	Neither thisNote nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Companyand the Holder.

 

11.	The Company representsthat it is not a “shell” issuer and has never been a “shell” issuer or that if it previously has been a“shell” issuer that at least 12 months have passed since the Company has reported form 10 type information indicatingit is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a 144- 3(a)(9) opinionto allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.

 

12.	As a conditionof funding the Note, the Company will issue irrevocable transfer agent instructions reserving 21,500,000 shares of Common Stockfor conversion under this Note. The reserve shall be replenished as needed to allow for conversions of this Note. Upon full conversionof this Note, the reserve representing this Note shall be cancelled. From this reserve, the Holder may send a Conversion Noticeto the Company, and the Company will duly pass to its transfer agent, a conversion for a tranche of shares to be converted (TrancheConversion”) This/these Tranche Conversion(s) may be actually transferred by the transfer agent to the Holder, or via DWACto the Holder’s designated Broker-Dealer(s) to be held in street name FBO the Holder, yet unconverted on the books and recordsof the Company in a Creditor in Possession Escrow. (“CPE”) When the CPE is active, by having shares therein, the Holdermust submit daily transaction journals, on days that there were a sale, in the Company’s securities (“Runs”)to the Company to calculate the price of conversion (“Basis”) of any conversion and the amount and date thereunder.

 

13.	This Note shallbe governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed withinthe State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company herebymutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This Agreementmay be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be effectiveas an original.

 

14. The terms of the cashpayments to the Company by the Holder for the issuance of this Note, and the guarantee and collateralization of those payment obligationsis set forth in a $75,000 Secured Promissory Note issued to the Company by the Holder on even date herewith.

 

15.	The Company willgive the Holder direct notice of any corporate actions including but not limited to name changes, stock splits, recapitalizationsetc. This notice shall be given to the Holder as soon as possible under law. The Company will email such notices to Goldy@pisc.us.

 

 

 

IN WITNESS WHEREOF,the Company has caused this Note to be duly executed by an officer thereunto duly authorized.

 

 

Dated: 	5/24/13	

 

 

**	**

RED GIANT ENTERTAINMENT, INC.

 

By: /s/ Benny R. Powell	

 

Title: CEO	

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**EXHIBIT A**

 

** **

NOTICE OF CONVERSION

 

(To be Executed by the Registered Holderin order to Convert the Note)

 

The undersigned herebyirrevocably elects to convert $___________ of the above Note into _________ Shares of Common Stock of Red Giant Entertainment,Inc. (“Shares”) according to the conditions set forth in such Note, as of the date written below.

 

If Shares are to beissued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payablewith respect thereto.

 

Date of Conversion: 	                                                                                                            

Applicable Conversion Price: 	                                                                                              

Signature: 	                                                                                                                           

[Print Name of Holder and Title of Signer]

Address: 	                                                                                                                            

______________________________________________________________________

 

SSN or EIN: 	                                                 

Shares are to be registered in the following name: 	                                                                

 

Name: 	                                                                                                                                

Address:                                                                                                                             	

Tel: 	                                                              

Fax: 	                                                             

SSN or EIN: 	                                              ****

 

Shares are to be sent or delivered to the following account:

 

Account Name: 	                                                                                                                

Address: