Unassociated Document


     

    Exhibit
      10.3

    

      THIS
        NOTE
        HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. IT
        MAY NOT
        BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED
        EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
        ACT
        OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
        THE
        LENDER THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT
        TO RULE 144 UNDER SUCH ACT.

      


      SECURED
        PROMISSORY NOTE

      
        	 	 	 
	 	 	
                Date
                  of Issuance

              
	
                $1,375,000

              	 	
                November
                  17, 2008

              


      

      


       

      FOR
        VALUE
        RECEIVED, La Jolla Cove Investors, Inc., a California corporation (the
“Company”), hereby promises to pay CSMG
        Technologies, Inc.
        (the
“Lender”), the principal sum of One Million Three Hundred Seventy Five Thousand
        Dollars ($1,375,000) (the “Principal Amount”), plus interest calculated pursuant
        to Section 1 below. Unless earlier cancelled or paid under the terms hereof,
        the
        principal and accrued interest shall be due and payable by the Company on
        demand
        by the Lender at any time after November 30, 2011 (the “Maturity
        Date”).

       

      This
        Secured Promissory Note (the “Note”) is issued in connection with that certain
        Securities Purchase Agreement between the parties hereto, dated as of the
        date
        hereof (the “Purchase Agreement”), and capitalized terms not defined herein
        shall have the meaning set forth in the Purchase Agreement.

       

      1.  Interest. 
        The Company promises to pay interest to Lender at the rate of Six and
        One-Quarter Percent (6 1⁄4 %) per annum, simple interest (subject to adjustment as
        provided below) (the “Interest Rate”), on the outstanding principal amount of
        this Note, which interest shall be calculated from the date of this Note,
        until
        the date on which all amounts due and payable on this Note are paid in full
        or
        this Note is otherwise cancelled, (the “Payoff Date”). Interest
        hereunder shall be paid on a monthly basis, commencing on the 15th
        day of
        the month following the month of issuance of this Note. All
        accrued and unpaid interest shall be due and payable on the Payoff Date.
        All
        computations of interest shall be made on the basis of a year of 365 or 366
        days, as the case may be, for the actual number of days (including the first
        day
        but excluding the last day) occurring in the period for which such interest
        is
        payable. Nothing contained in this Note shall require the Company at any
        time to
        pay interest at a rate exceeding the maximum rate allowable under applicable
        law
        and any payments in excess of such maximum shall be refunded to the Company
        or
        credited to reduce the principal amount hereunder.
        Notwithstanding the foregoing, in the event that the Lender’s Common Stock (the
“Common Stock”) shall trade on the Trading Market (as defined in the Debenture)
        or the over the counter market via the “pink sheets” at a price per share that
        is $0.245 per share or lower at any time during the six month period commencing
        on the date hereof and ending on the six month anniversary of the date hereof
        (as
        adjusted for any stock splits, stock dividends, combinations, subdivisions,
        recapitalizations or the like),
        then
        the Interest Rate shall immediately be decreased to Four and Three-Quarters
        Percent (4 3⁄4 %) and shall remain at such level for the duration of this
        Note.

      

        
          	
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      2.  Payment. 
        All payments shall be made in lawful money of the United States of America
        at
        the principal office of the Company, or at such other place as the holder
        hereof
        may from time to time designate in writing to the Company. Payment shall
        be
        credited first to Costs (as defined below), if any, then to accrued interest
        due
        and payable and any remainder applied to principal. Prepayment of principal,
        in
        part or in full, together with accrued interest, may be made from time to
        time
        without penalty in the sole discretion of the Company without the Lender’s
        consent.

       

      3.  Prepayment
        Obligation. 
        Notwithstanding the option of the Company to prepay any portion of this Note,
        as
        set forth in Section 2 hereof, the Company shall prepay commencing six months
        after the date hereof, on a monthly basis, on any date(s) of such month during
        which this Note remains outstanding (each date referred to herein as the
        “Periodic Prepayment Date”), an amount equal to not less than $250,000 (or such
        lesser amount that equals the remaining outstanding principal and accrued
        and
        unpaid interest under this Note), with the amount, if any, in excess of such
        sum
        to be determined by and in the sole and absolute discretion of the Company,
        until all principal and accrued and unpaid interest under this Note has been
        paid, subject to the satisfaction of each of the following conditions on
        each
        Periodic Prepayment Date:

       

      3.1  No
        Event
        of Default (as defined in the Debenture) has occurred under the Debenture;
        and

       

      3.2  The
        average Volume Weighted Average Price (as defined in the Debenture) per share
        of
        the Lender’s Common Stock for every period of ten consecutive Trading Days (as
        defined in the Debenture) during the term of this Note shall not be less
        than
        $0.25 per share (as
        adjusted for any stock splits, stock dividends, combinations, subdivisions,
        recapitalizations or the like).

       

      The
        amount of any such prepayment made by the Company under the terms of this
        Section 3 (each such prepayment referred to herein as a “Periodic Prepayment”)
        shall be credited first to Costs, if any, then to accrued interest due and
        payable under this Note and the remainder applied to principal. Any prepayment
        made by the Company under this Note in excess of any otherwise required Periodic
        Prepayment may be applied to any future required Periodic Prepayment at the
        option of the Company, subject to the sole and absolute discretion of the
        Company. In the event that the Company fails to deliver any Periodic Prepayment
        that is otherwise required under the terms of this Section 3, the Lender’s sole
        and exclusive remedy shall be limited to the Interest Rate being increased
        by
        0.25 percentage points per Periodic Prepayment required under this Section
        3
        that is not paid by the Company to the Lender, provided however, that in
        no
        event shall the Interest Rate exceed an amount equal to twelve and one-half
        percent (12.5%). In no event shall any failure by the Company to pay any
        Periodic Prepayment required hereunder give any right to the Lender to collect
        upon the Collateral or otherwise collect any outstanding sums under this
        Note.

      
        

          
            	
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      4.  Recourse. 
        Each party hereto accepts and agrees that this Note is a full recourse
        promissory note and that subject to the terms of this Note, Lender may exercise
        any and all remedies available to it under law.

       

      5.  Security
        Interest. 

       

      5.1  To
        secure
        the payment and performance of the Company’s obligations under this Note,
        provided however that any obligations of the Company to prepay any amounts
        under
        this Note pursuant to Section 3 are not so secured, the Company hereby grants
        to
        Lender a security interest in the Company’s entire right, title, and interest in
        and to all of the following, wherever located and whether now existing or
        owned
        or hereafter acquired or arising (collectively, the “Collateral”):

       

      (a)  all
        accounts, accounts receivable, contract rights, rights to payment, letters
        of
        credit, documents, securities, promissory notes, debentures, money, and
        investment property, whether held directly or through a securities intermediary,
        and other obligations of any kind owed to the Company, however
        evidenced;

       

      (b)  all
        inventory, including, without limitation, all materials, components, work
        in
        progress, finished goods, merchandise, and all other goods which are held
        for
        sale, lease or other disposition or furnished under contracts of service
        or
        consumed in the Company’s business;

       

      (c)  all
        equipment, including, without limitation, all machinery, furniture, furnishings,
        fixtures, tools, parts, automobiles, trucks, and other vehicles, appliances,
        computer and other electronic data processing equipment and other office
        equipment, computer programs and related data processing software, and all
        additions, substitutions, replacements, parts, accessories, and accessions
        to
        and for the foregoing;

       

      (d)  all
        books, records and other written, electronic or other documentation in whatever
        form maintained by or for the Company in connection with the ownership of
        its
        assets or the conduct of its business; and

       

      (e)  all
        products and proceeds, including insurance proceeds, of any and all of the
        foregoing.

       

      Notwithstanding
        the foregoing, no security interest is granted in any contract rights if
        such
        grant causes a default enforceable under applicable law or if a third party
        has
        the right enforceable under applicable law to terminate the Company’s rights
        under or with respect to any such contract and such third party has exercised
        such right of termination.

       

      5.2  The
        security interest on the Collateral granted by this Note shall continue and
        remain in effect until terminated pursuant to subsection 5.4 below.

       

      5.3  The
        Company shall execute any further documents reasonably requested by Lender,
        which are necessary or appropriate to perfect Lender’s security interest in the
        Collateral.

      
        

          
            	
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      5.4  Upon
        the
        Payoff Date, the security interest granted pursuant to this Section 5 shall
        terminate, and Lender shall promptly execute and deliver to the Company such
        documents and instruments reasonably requested by the Company as shall be
        necessary to evidence termination of all security interests given by the
        Company
        to Lender hereunder.

       

      5.5  So
        long
        as an Event of Default is not continuing, the Company shall have the right
        to
        possess the Collateral, manage its property and sell its inventory in the
        ordinary course of business.

       

      6.  Event
        of Default. 
        An “Event of Default” shall exist under this Note upon the happening of a
        failure of the Company to pay the outstanding Principal Amount and all other
        outstanding sums under this Note, including accrued and unpaid interest thereon,
        on the Maturity Date, which failure is not cured within 30 days after the
        Company’s receipt of written notice thereof sent by Lender to the Company. Any
        failure by the Company to pay any Periodic Prepayment that may otherwise
        be due
        under this Note shall not be an Event of Default under this Note. Upon the
        occurrence and during the continuance of an Event of Default, Lender shall
        have
        all of the rights and remedies afforded by the Uniform Commercial Code as
        from
        time to time in effect in the State of California or afforded by other
        applicable law.

       

      7.  Subordination. 
        The indebtedness evidenced by this Note shall be subordinated to any Senior
        Indebtedness of the Company. For the purposes of this Note, “Senior
        Indebtedness” shall mean the principal of (and premium, if any) and unpaid
        interest on, indebtedness of the Company, or with respect to which the Company
        is a guarantor, to banks, insurance companies, lease financing institutions
        or
        other lending or financial institutions regularly engaged in the business
        of
        lending money, which is for money borrowed (or purchase or lease of equipment
        in
        the case of lease financing) by the Company, and which is approved by the
        Board
        of Directors of the Company, whether or not secured, and whether or not
        previously incurred or incurred in the future, provided however, that such
        Senior Indebtedness is not entered into an effort by the Company to avoid
        its
        obligations under this Note. Senior Indebtedness shall include all obligations
        of the Company pursuant to any modifications, renewals and extensions of
        such
        Senior Indebtedness. Lender acknowledges that the Company may incur additional
        Senior Indebtedness and that such Senior Indebtedness shall be senior in
        repayment preference to the Note. Upon written request of the Company, Lender
        agrees to execute a subordination agreement from any lender of Senior
        Indebtedness in order to give effect to this Section 7.

       

      8.  Amendments
        and Waivers; Cure Period. 
        This Note may not be amended without the prior written consent of each of
        the
        Company and the Lender. Any waiver by the Company or the Lender of a breach
        of
        any provision of this Note shall not operate as or be construed to be a waiver
        of any other breach of such provision or of any breach of any other provision
        of
        this Note. The failure of the Company or the Lender to insist upon strict
        adherence to any term of this Note on one or more occasions shall not be
        considered a waiver or deprive that party of the right thereafter to insist
        upon
        strict adherence to that term or any other term of this Note. Any waiver
        by the
        Company or the Lender must be in writing. Any amendment or waiver effected
        in
        accordance with this Section 8 shall be binding upon Lender and Lender’s
        successors and assigns. Any party to this Note shall have a cure period of
        not
        less than thirty (30) days after receipt of written notice of any alleged
        breach
        or default under the terms of this Note to cure such alleged breach or
        default.

      
        

          
            	
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      9.  Transmittal
        of Notices. 
        Any notices, consents, waivers, or other communications required or permitted
        to
        be given under the terms of this Agreement must be in writing and will be
        deemed
        to have been delivered (i) upon receipt, when delivered personally; (ii)
        upon
        confirmation of receipt, when sent by facsimile; (iii) three (3) days after
        being sent by U.S. certified mail, return receipt requested, or (iv) one
        (1) 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:

       

      

        
          	
                  (1)

                	
                  If
                    to the Lender, to:

                
	 	 
	 	
                  CSMG
                    Technologies, Inc.

                
	 	
                  Attn:
                    Donald S. Robbins, President and CEO

                
	 	
                  500
                    North Shoreline Drive, Suite 701 North

                
	 	
                  Corpus
                    Christi, Texas 78471

                
	 	
                  Telephone:
                    361-887-7546

                
	 	
                  Facsimile:
                    361-884-0792

                
	 	 
	
                  (2)

                	
                  If
                    to the Company, to:

                
	 	
                  La
                    Jolla Cove Investors, Inc.

                
	 	
                  1150
                    Silverado Street, Suite 220

                
	 	
                  La
                    Jolla, California 92037

                
	 	
                  Telephone:
                    858-551-8789

                
	 	
                  Facsimile:
                    858-551-8779

                


        

      

       

      Each
        of
        the Lender or the Company may change the foregoing address by notice given
        pursuant to this Section 9.

       

      10.  Successors
        and Assigns. 
        This Note applies to, inures to the benefit of, and binds the successors
        and
        assigns of the parties hereto. Neither the Lender nor the Company may assign
        its
        rights under this Note without the written consent of the other party to
        this
        Note, provided, however, that the Company may assign its obligations under
        this
        Note to any Affiliate of the Company in the sole and absolute discretion
        of the
        Company, without any prior consent by the Lender, provided that such transferee
        or assignee agrees in writing to be bound by and subject to the terms and
        conditions of this Note. Upon any such transfer of this Note by the Company
        or
        the Lender, the Lender shall, upon notice, surrender this Note to the Company
        for reissuance of a new note to the transferee. Any transfer of this Note
        may be
        effected only pursuant to the terms hereof and by surrender of this Note
        to the
        Company and reissuance of a new note to the transferee. The Lender and any
        subsequent holder of this Note receives this Note subject to the foregoing
        terms
        and conditions, and agrees to comply with the foregoing terms and conditions
        for
        the benefit of the Company and any other Lenders.

       

      11.  Officers
        and Directors Not Liable.
         In no event shall any officer or director of the Company be liable for any
        amounts due and payable pursuant to this Note.

       

      12.  Expenses. 
        Should any party hereto employ an attorney for the purpose of enforcing or
        construing this Note, or any judgment based on this Note, in any legal
        proceeding whatsoever, including insolvency, bankruptcy, arbitration,
        declaratory relief or other litigation, the prevailing party shall be entitled
        to receive from the other party or parties thereto reimbursement for all
        reasonable attorneys' fees and all reasonable costs, including but not limited
        to service of process, filing fees, court and court reporter costs,
        investigative costs, expert witness fees, and the cost of any bonds, whether
        taxable or not (collectively, “Costs”), and that such reimbursement shall be
        included in any judgment or final order issued in that proceeding. The
        "prevailing party" means the party determined by the court to most nearly
        prevail and not necessarily the one in whose favor a judgment is rendered.
        

      
        

          
            	
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      13.  Remedies
        Not Waived. 
        No course of dealing between the parties hereto or any delay in exercising
        any
        rights hereunder shall operate as a waiver by such party.

       

      14.  Governing
        Law. 
        This Note shall be governed by and construed under the laws of the State
        of
        California as applied to other instruments made by California residents to
        be
        performed entirely within the State of California. With respect to any suit,
        action or proceedings relating to this Note, each of the Lender and the Company
        irrevocably submits to the exclusive jurisdiction of the courts of the State
        of
        California sitting in San Diego and the United States District Court located
        in
        the City of San Diego and hereby waives, to the fullest extent permitted
        by
        applicable law, any claim that any such suit, action or proceeding has been
        brought in an inconvenient forum. Subject to applicable law, each of the
        Company
        and the Lender agrees that final judgment against it in any legal action
        or
        proceeding arising out of or relating to this Note shall be conclusive and
        may
        be enforced in any other jurisdiction within or outside the United States
        by
        suit on the judgment, a certified copy of which judgment shall be conclusive
        evidence thereof and the amount of the indebtedness, or by such other means
        provided by law.

       

      15.  Counterparts. 
        This Note may be executed in two or more counterparts, each of which shall
        be
        deemed an original, but all of which together shall constitute one and the
        same
        instrument. Facsimile executions of this Note shall be deemed
        original.

       

      IN
        WITNESS WHEREOF, the parties hereto have duly caused this Note to be executed
        and delivered on the date first above written.

      


      

        
          	 	LA
                  JOLLA COVE INVESTORS, INC.
	 	 	 
	 	By:	
                  /s/
                    Travis William Huff

                
	 	Name:	
                  Travis
                    William Huff

                
	 	Its:	
                  Portfolio
                    Manager/Vice President

                
	 	 	 
	 	 	 
	 	 	
                  CSMG
                    TECHNOLOGIES, INC.

                
	 	 	 
	 	By:	
                  
                    /s/
                      Donald S. Robbins

                  

                
	 	Name:	
                  Donald
                    S. Robbins 

                
	 	Its:	
                  President
                    and CEO

                


        

      

       

      
        

          
            	
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