Document:

fsb2a10807ex10xii_redrock.htm

    SECURED
      PROMISSORY NOTE

     

    Due
      June
      8, 2008

     

    RED
      ROCK PICTURES HOLDINGS, INC.

     

    
      
        	
                Issued:  June
                  8, 2007

              	
                $1,000,000

              

      

     

    FOR
      VALUE
      RECEIVED, the undersigned, Red Rock Pictures Holdings, Inc. (hereinafter,
      together with any successor, referred to as the “Company”),
      hereby promises to pay to N. Williams Family Investments, L.P.
      (hereinafter, together with any successor or assign, referred to as the
“Holder”), the principal sum of One Million Dollars
      ($1,000,000) together with interest thereon from the date hereof, payable on
      the
      terms set forth below.

     

    1.  Payments

     

    1.1  Interest
      Rate.  Interest on the unpaid principal balance outstanding from
      time to time shall accrue at the rate of seven percent (7%) per
      annum.  Notwithstanding any provision contained herein to the
      contrary, the interest rate hereunder shall include the applicable interest
      rate
      described herein plus any additional charges, costs and fees incident to the
      loan hereunder to the extent they are deemed to be interest under applicable
      California law.  Should the interest rate as calculated under this
      Secured Note at any time exceed that allowed by law, the interest rate will
      be
      the maximum rate of interest allowed by applicable California law.

     

    1.2  Interest
      Payment.  Interest shall be paid on the Maturity
      Date.

     

    1.3  Maturity.  The
      entire unpaid principal balance, all accrued and unpaid interest, and any other
      amounts payable hereunder and unpaid at such time, shall be paid in full on
      the
      earlier of the following dates (“Maturity
      Date”):  (A) June __, 2008 or (B) upon acceleration of the
      Maturity Date as provided in Section 6.2 of this Secured Note.

     

    1.4  Mandatory
      Prepayment.    In the event that the Company receives
      revenues from its Ratko/Bagboy projects such revenues after expenses shall
      be
      used to prepay the Note.  In addition, in the event that the Company
      raises additional funds from other equity transaction, the proceeds from such
      transaction shall be used to prepay the Note.

     

    1.5  Place
      of Payment.  The Company shall pay principal and interest in
      United States dollars to the Holder at the Holder’s address for notices or such
      other address at the Holder may designate in writing.

     

    2.  Successor
      Corporation

     

    2.1  When
      Company May Merge, Etc.  During the time that any amount is
      outstanding under the Note, the Company may not, in a single transaction or
      through a series of related transactions, consolidate with or merge with or
      into
      any other person, or, directly or indirectly, sell, lease, assign, transfer,
      license or convey (by way of liquidation, dissolution, winding up, or otherwise)
      all or substantially all of its properties and assets as an entirety or
      substantially as an entirety (computed on a consolidated basis) to another
      person or group or affiliated persons, unless the Company shall be the
      continuing person, or the person (if other than the Company) formed by such
      

     

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

       

       

      consolidation
        or into which the Company is merged or to which all or substantially all
        of the
        properties and assets of the Company are transferred as an entirety or
        substantially as an entirety (the Company or such other person being hereinafter
        referred to as the “Surviving Person”) shall be an entity
        organized and validly existing under the laws of the United States, any State
        thereof or the District of Columbia and shall expressly assume in writing
        all
        the obligations of the Company under this Secured Note; provided,
        however, that as a condition to any such transfer to a Surviving Person,
        the consolidated tangible net worth of such Surviving Person immediately
        following such transfer, determined on a pro forma basis in accordance with
        generally accepted accounting principles (“GAAP”), must equal
        or exceed the consolidated tangible net worth of the Company immediately
        prior
        to such transfer.

    

     

    2.2  Successor
      Corporation Substituted.  Upon any consolidation or merger, or any
      direct or indirect transfer or other disposition of assets in accordance with
      Section 2.1, the Surviving Person formed by such consolidation or into which
      the
      Company is merged or to which such transfer is made shall succeed to, and be
      substituted for, and may exercise every right and power of, the Company under
      this Secured Note with the same effect as if such Surviving Person had been
      named as the Company herein.

     

    3.  Security
      and Guaranty.  This Secured Note is secured by that certain
      Security Agreement of even date herewith (the “Security
      Agreement”) encumbering certain “Collateral” of the CompanyCompany, as
      such term is defined in the Security Agreement.    This
      Secured Note, together with the Security Agreement, the Registration Rights
      Agreement (as defined below) and any other documents, agreements or instruments
      relating to the loan evidenced by this Secured Note (including, without
      limitation, any related subordination agreement), or securing this Secured
      Note
      and the Collateral, shall be collectively referred to herein as the
“Obligations”.

     

    4.  Representations
      and Warranties.  The Company represents and warrants that the
      following statements are true and correct:

     

    4.1  The
      CompanyCompany is a corporation, partnership or limited liability company,
      as
      the case may be, duly and properly incorporated or organized, validly existing
      and in good standing under the laws of its jurisdiction of incorporation or
      formation and has all requisite authority to conduct its business in each
      jurisdiction in which its business is conducted, except where the failure to
      be
      so qualified does not and would not have a material adverse effect on the
      business, properties or assets of the CompanyCompany.

     

    4.2  The
      CompanyCompany has the power and authority and legal right to execute and
      deliver the Obligations to which it is a party and to perform its obligations
      thereunder.  The execution and delivery by the Company of the
      Obligations to which it is a party and the performance of its obligations
      hereunder and thereunder have been duly authorized by proper proceedings, and
      the Obligations to which the Company is a party constitute legal, valid and
      binding obligations of each the Company enforceable against each of them in
      accordance with their terms, except as enforceability may be limited by (i)
      bankruptcy, insolvency, fraudulent conveyances, reorganization or similar laws
      relating to or affecting the enforcement of creditors' rights generally; (ii)
      general equitable principles (whether considered in a proceeding in equity
      or at
      law); and (iii) requirements of reasonableness, good faith and fair
      dealing.

     

    
      
         

      

      
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    4.3  The
      August 31, 2006 audited consolidated financial statements and the
      February 28, 2007 unaudited consolidated financial statements of the
      Company and its subsidiaries heretofore delivered to the Holder were prepared
      in
      accordance with GAAP in effect on the date such statements were prepared and
      fairly present the consolidated financial condition and operations of the
      Company and its subsidiaries at such date and the consolidated results of their
      operations for the period then ended (subject to normal recurring year-end
      adjustments in the cause of the unaudited financial statements).  The
      Company and its subsidiaries have no material contingent obligations not
      provided for or disclosed in the financial statements referred to
      above.

     

    4.4  The
      Company and its subsidiaries have filed all United States federal tax returns
      and all other tax returns which are required to be filed and have paid all
      taxes
      due pursuant to said returns or pursuant to any assessment received by the
      Company or any of its subsidiaries, except in respect of such taxes, if any,
      as
      are being contested in good faith and as to which adequate reserves have been
      provided in accordance with GAAP.  No liens have been filed and no
      claims are being asserted with respect to such taxes.  The charges,
      accruals and reserves on the books of the Company and its subsidiaries in
      respect of any taxes or other governmental charges are adequate.

     

    4.5  There
      is
      no litigation, arbitration, governmental investigation, proceeding or inquiry
      pending or, to the knowledge of any of their officers, threatened against or
      affecting the Company or any of its subsidiaries which could reasonably be
      expected to have a material adverse effect on the Company or any of its
      subsidiaries or which seeks to prevent, enjoin or delay the making of the loan
      hereunder.

     

    4.6  The
      shares of Common Stock that are being issued to Holder hereunder pursuant to
      Section 8, when issued, sold and delivered in accordance with the terms of
      this
      Secured Note in consideration of the loan being made hereunder, will be duly
      and
      validly issued, fully paid, and nonassessable, and will be free and clear of
      all
      Liens, encumbrances, adverse claims, preemptive rights or restrictions on
      transfer other than restrictions on transfer under applicable state and federal
      securities laws.

     

    4.7  Assuming
      the filing of [(i)] UCC financing statements
      covering the Collateral in the Office of the Secretary of State of Nevadaand
      (ii) the Notice of Security Interest in Copyrights with the  United
      States Copyright Office, as applicable, the Security Agreement creates a valid
      security interest in all of the Collateral of the CompanyCompany and secures
      the
      Company’s performance of the Obligations; and no other action is necessary to
      perfect or maintain the perfection of such security interest in favor of the
      Holder except for the periodic filing of such UCC continuation statements as
      may
      be required by law.

     

    4.8  No
      authorization, approval or other action by, and no notice to or filing with,
      any
      governmental authority or regulatory body (including, without limitation, any
      court) is required, except (i) such authorization or approval as has already
      been obtained and (ii) the filing of the UCC financing statements and notices
      described in Section 4.7 above, either for the grant by the CompanyCompany
      of
      the security interest granted by the Security Agreement or for the execution,
      delivery or performance of this Secured Note by the Company (including, without
      limitation, the issuance of the Common Stock to Holder pursuant hereto), or
      for
      the perfection of, or the exercise by, the Holder of its rights and remedies
      hereunder.

     

    
      
         

      

      
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    4.9  Neither
      the execution and delivery by the CompanyCompany of the Obligations to which
      such person is a party, nor the consummation of the transactions herein or
      therein contemplated, nor compliance with the provisions hereof or thereof
      will
      violate (i) any law, rule, regulation, order, writ, judgment, injunction, decree
      or award binding on the Company or (ii) any Grantor’s articles or certificate of
      incorporation, by-laws, or other management agreement or governing document,
      as
      the case may be, or (iii) the provisions of any indenture, instrument or
      agreement to which any Grantor is a party or is subject, or by which it, or
      its
      property or assets, are bound, or conflict with, or constitute a default
      thereunder, or result in, or require, the creation or imposition of any lien
      in,
      of or on the property or assets of any Grantor pursuant to the terms of, any
      such indenture, instrument or agreement.

     

    4.10  The
      execution and delivery of this Secured Note, the filing of the financing
      statements provided for herein and the taking of any other action required
      or
      contemplated hereby shall not cause a default or event of default under any
      other agreement or commitment to which the Company or any other Grantor is
      a
      party or by which it is bound.

     

    5.  Covenants.

     

    5.1  The
      Company will, and will cause each of its subsidiaries to, carry on and conduct
      its business in substantially the same manner and in substantially the same
      fields of enterprise as it is presently conducted and do all things necessary
      to
      remain duly incorporated or organized, validly existing and (to the extent
      such
      concept applies to such entity) in good standing as a domestic corporation,
      partnership or limited liability company in its jurisdiction of incorporation
      or
      organization, as the case may be, as in effect on the date hereof, and maintain
      all requisite authority to conduct its business in each jurisdiction in which
      its business is conducted, except to the extent that the failure to maintain
      any
      of the foregoing would not reasonably be expected to have a material adverse
      effect on the Company or the rights of the Holder under the
      Obligations.

     

    5.2  The
      Company will, and will cause each of its subsidiaries to, timely file complete
      and correct United States federal and applicable foreign, state and local tax
      returns required by law and pay when due all taxes, assessments and governmental
      charges and levies upon it or its income, profits or property, except those
      which are being contested in good faith by appropriate proceedings and with
      respect to which adequate reserves have been set aside in accordance with
      generally accepted accounting principles.

     

    5.3  The
      Company will, and will cause each of its subsidiaries to, comply in all material
      respects with all laws, rules, regulations, orders, writs, judgments,
      injunctions, decrees or awards to which it may be subject.

     

    5.4  The
      Company shall, at its expense, promptly execute and deliver all further
      instruments and documents, and take all further action, that may be necessary
      or
      desirable, or that Holder may reasonably request, in order to perfect, protect
      and/or maintain the security interest granted or purported to be granted herein
      in the Collateral or to enable the Holder to exercise and enforce its rights
      and
      remedies hereunder with respect to any Collateral, including, without
      limitation, executing, delivering and/or filing, as the case may be, and
      obtaining the execution and delivery by third parties of, UCC financing or
      continuation statements or amendments thereto, and other agreements,
      instruments, bulk sales or other notices.

     

    
      
         

      

      
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    5.5  The
      Company shall, at its expense, perform all acts necessary to maintain, preserve,
      and protect the Collateral, and not encumber the Collateral in any way or grant
      or suffer to exist any security interest or Lien thereon, other than (a) Liens
      for current taxes not delinquent or taxes being contested in good faith and
      by
      appropriate proceedings and as to which such reserves or other appropriate
      provisions as may be required by GAAP are being maintained; (b) carriers’,
      warehousemen’s, mechanics’, materialmen’s, repairmen’s, and other like statutory
      Liens arising in the ordinary course of business securing obligations which
      are
      not overdue or which are being contested in good faith and by appropriate
      proceedings and as to which such reserves or other appropriate provisions as
      may
      be required by GAAP are being maintained; (c) pledges or deposits in connection
      with workers’ compensation, unemployment insurance and other social security
      legislation; (d) Liens in connection with the acquisition of property in the
      ordinary course of business after the date hereof by way of purchase money
      mortgage, conditional sale or other title retention agreement, capitalized
      lease
      or other deferred payment contract, and attaching only to the property being
      acquired, if the indebtedness secured thereby does not exceed the purchase
      price
      of the property financed; (e) Liens in favor of Holder; and (f) existing Liens
      set forth on Schedule 5.5 to this Secured Note.  The Company and its
      subsidiaries shall not incur any indebtedness for borrowed money (including
      any
      guaranty) (other than (i) Subordinated Debt, (ii) purchase money indebtedness
      arising in the ordinary course of business that, when incurred, does not exceed
      the purchase price of the asset(s) financed and (iii) existing indebtedness
      in
      the principal amounts set forth on Schedule 5.5 to this Secured
      Note).

     

    5.6  Neither
      the Company nor any of its subsidiaries shall make any Restricted
      Payments.

     

    5.7  For
      purposes of this Secured Note, the following terms shall have the following
      meanings:

     

    5.7.1  “Equity
      Interests” of any person means (1) any and all shares or other equity
      interests (including common stock, preferred stock, limited liability company
      interests and partnership interests) in such person, and (2) all rights to
      purchase, warrants or options (whether or not currently exercisable),
      participations or other equivalents of or interests in (however designated)
      such
      shares or other interests in such person.

     

    5.7.2  “Lien”
      means any mortgage, pledge, hypothecation, judgment lien or similar legal
      process, title retention lien, or other lien, encumbrance or security interest,
      including, without limitation, the interest of a vendor under any conditional
      sale or other title retention agreement and the interest of a lessor under
      any
      capitalized lease.

     

    5.7.3  “Restricted
      Payment” means any of the following:

     

    (a)  the
      declaration or payment of any dividend or any other distribution on Equity
      Interests of the Company or its subsidiaries or any payment made to the direct
      or indirect holders (in their capacities as such) of Equity Interests of the
      Company or its subsidiaries, but excluding, in the case of subsidiaries of
      the
      Company, dividends or distributions payable to the Company or its
      subsidiaries;

     

    (b)  the
      redemption of Equity Interests of the Company or its subsidiaries;
      or

     

    
      
         

      

      
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    (c)  any
      payment or redemption prior to scheduled maturity or prior to any scheduled
      repayment of principal or sinking fund payment, as the case may be, in respect
      of Subordinated Debt (other than Subordinated Debt owed to and held by the
      Company or any subsidiary).

     

    5.7.4  “Subordinated
      Debt” means that portion of any liabilities, obligations or
      indebtedness of the Company which contains terms satisfactory to Holder and
      is
      subordinated, in a manner satisfactory to Holder, as to right and time of
      payment of principal and interest thereon, to all of the
      Obligations.

     

    6.  Events
      of Default and Remedies

     

    6.1  Events
      of Default.  “Event of Default,” wherever used
      herein, means any one of the following events (whatever the reason for such
      Event of Default and whether it shall be caused voluntarily or involuntarily
      or
      effected, without limitation, by operation of law or pursuant to any judgment,
      decree or order of any court of any order, rule or regulation of any
      administrative or governmental body):

     

    6.1.1  default
      in the payment of any principal or interest upon this Secured Note as and when
      the same becomes due and payable;

     

    6.1.2  default
      by the Company under any of its covenants under this Secured Note, which default
      is not cured within fifteen (15) days after receipt of written notice of such
      default delivered to the Company by the Holder;

     

    6.1.3  any
      event
      of default occurs under any of the Obligations;

     

    6.1.4  the
      Company commences a case or other proceeding, or if an involuntary case or
      other
      proceeding shall be commenced against Company seeking liquidation,
      reorganization or other relief with respect to its debts under any bankruptcy,
      insolvency or other similar debtor relief law now or hereafter in effect or
      seeking the appointment of a trustee, receiver, liquidator, custodian or other
      similar official of it or any substantial part of its property, and any such
      involuntary case or other proceeding shall remain undismissed and unstayed
      for a
      period of sixty (60) days;

     

    6.1.5  the
      Company shall make an assignment for the benefit of creditors, or admit in
      writing its inability to pay its debts generally as they become
      due;

     

    6.1.6  a
      notice
      of lien, levy or assessment is filed of record or given to Company with respect
      to all or any of the Company’s assets by any federal, state, local department or
      agency, and such lien, levy or assessment is not released or paid within a
      reasonable period of time but in no event longer than twenty (20) days from
      the
      date such lien, levy or assessment is filed, or such longer period of time
      as is
      appropriate in the case of any such lien, levy or assessment that is being
      contested in good faith and by appropriate proceedings;

     

    6.1.7  Holder,
      in good faith, believes the prospect of payment or performance by Company under
      this Secured Note or any other Obligations is impaired and if Company is unable
      or unwilling to provide adequate written assurances to Holder of its ability
      to
      fully perform under this Secured Note within thirty (30) days following delivery
      of written notice; or

     

    
      
         

      

      
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    6.1.8  Any
      representation or warranty of Company in the Obligations is not materially
      true,
      correct and complete, or if any material statement, report or certificate made
      or delivered by Company or its officers, employees or agents is not true,
      correct and complete when made.

     

    6.2  Acceleration
      of Maturity Date; Rescission and Annulment.  If an Event of
      Default (other than an Event of Default specified in Section 6.1.5 or 6.1.6)
      occurs and is continuing, then, and in every such case, unless the principal
      of
      this Secured Note shall have already become due and payable, the Holder by
      a
      notice in writing to the Company (an “Acceleration Notice”),
      may declare all of the principal of this Secured Note, together with accrued
      interest thereon, to be due and payable immediately.  If an Event of
      Default specified in Section 6.1.5 or 6.1.6 occurs, all principal of and accrued
      interest on this Secured Note ipsofacto shall become and be
      immediately due and payable without any declaration or other act on the part
      of
      the Holder.

     

    6.3  Rights
      and Remedies Cumulative.  Except as otherwise provided with
      respect to the replacement or payment of mutilated, destroyed, lost or stolen
      note, no right or remedy herein conferred upon or reserved to the Holder is
      intended to be exclusive of any other right or remedy, and every right and
      remedy shall, to the extent permitted by law, be cumulative and in addition
      to
      every other right and remedy given hereunder or now or hereafter existing at
      law
      or in equity or otherwise.  The assertion or employment of any right
      or remedy hereunder, or otherwise, shall not prevent the concurrent assertion
      or
      employment of any other appropriate right or remedy.

     

    6.4  Waiver.  No
      delay or omission by the Holder to exercise any right or remedy arising upon
      any
      Event of Default shall impair the exercise of any such right or remedy or
      constitute a waiver of any such Event of Default.  Every right and
      remedy given by this Section 6 or by law to the Holder may be exercised from
      time to time, and as often as may be deemed expedient, by the
      Holder.  No provision of this Secured Note may be waived unless in
      writing signed by the Holder, and waiver of any one provision of this Secured
      Note shall not be deemed to be a waiver of any other provision.

     

    7.  Replacement
      Note.  If this Secured Note is mutilated and
      surrendered to the Company or if the Holder claims and submits an affidavit
      or
      other evidence, satisfactory to the Company to the effect that this Secured
      Note
      has been lost, destroyed or wrongfully taken, the Company shall issue a
      replacement note if the Company’s reasonable requirements are met, including, if
      required by the Company, provision by the Holder of indemnity, sufficient in
      the
      judgment of the Company, to protect the Company from any loss which it may
      suffer if this Secured Note is replaced.

     

    8.  Issuance
      of Common Stock; Contingent Transfer of Profit
      Participation.

     

    (a)           As
      a further inducement to the Holder to make the loan evidenced by this Secured
      Note, the Company shall issue to the Holder the following shares of the
      Company’s common stock, $0.001 par value (“Common Stock”), free
      and clear of any Liens, encumbrances, adverse claims, preemptive rights or
      restrictions on transfer other than restrictions on transfer under applicable
      state and federal securities laws:

     

    (i)           upon
      receipt of the proceeds of the loan hereunder, a number of shares
      of  equal to $500,000 based upon the average price of the stock during
      the five trading days prior to the Closing Date.  On the 6th month anniversary
      of the Closing, in the event the shares to do not equal at least $500,000 then
      the Company shall issue additional shares to the Holder to equal up to a total
      of $500,000 based upon the average price of the stock during the five trading
      days prior to the six month anniversary.

     

    
      
         

      

      
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    (c)           The
      Holder understands that, except as provided in the Registration Rights
      Agreement, the Common Stock shall not be registered or qualified under any
      federal or state securities laws and shall bear the following
      legend:

     

    These
      securities have not been registered with the Securities and Exchange Commission
      or the securities commission of any state in reliance upon an exemption from
      registration under the Securities Act of 1933, as amended (the
“Securities Act”), and, accordingly, may not be offered or sold
      except pursuant to an effective registration statement under the Securities
      Act
      or pursuant to an available exemption from, or in a transaction not subject
      to,
      the registration requirements of the Securities Act and in accordance with
      applicable state securities laws as evidenced by a legal opinion of counsel
      to
      the transferor to such effect, the substance of which shall be reasonably
      acceptable to the Company.

     

    (d)             The
      Company will receive twenty-five (25%) percent of the profits from Ratco project
      and, of such amount, the Holder will receive five (5%) percent of the net
      profits from the Ratco project.  As such the Company will provide the
      Holder a profit participation statement one a bi-annual basis. .

     

    9.  Miscellaneous

     

    9.1  Successors.  The
      terms and conditions of this Secured Note shall be binding upon and inure to
      the
      benefit of the parties to this Secured Note and their respective successors,
      heirs and personal representatives.

     

    9.2  Assignment.  The
      Company may not assign this Secured Note, and any attempted or purported
      assignment or any delegation of its duties or obligations arising under this
      Secured Note to any person shall be deemed to be null and void, and shall
      constitute a material breach by the Company of its duties and obligations under
      this Secured Note.

     

    9.3  Governing
      Law.  This Secured Note has been made and entered into in the
      State of [California] and shall be construed in accordance with
      the laws of the State of [California] without giving effect to
      the principles of conflicts of law thereof.

     

    9.4  Captions.  The
      various captions of this Secured Note are for reference only and shall not
      be
      considered or referred to in resolving questions of interpretation of this
      Secured Note.

     

    9.5  Notices.  Any
      notice, authorization, request or demand required or permitted to be given
      hereunder shall be in writing and shall be deemed to have been duly given when
      received by an overnight delivery service or when sent by facsimile addressed
      as
      follows:

     

     

    
      
         

      

      
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    To
      the Company:

     

    Red
      Rock Pictures Holdings,
      Inc.

    8228
      Sunset Blvd. 3rd
      Floor

    Los
      Angeles, California 90046Fax:

    Attn:  Robert
      Levy, CEO

     

    To
      the Holder:

     

    [N.
      Williams Family Investments, L.P.]

    c/o
      Lake
      City Bank

    P.
      O. Box
      11053

    Fort
      Wayne, Indiana 46855

    Fax:

    Attn:  Keith
      Davis, Trust Officer

    

    9.6  Severability.  Whenever
      possible each provision of this Secured Note shall be interpreted in such manner
      as to be effective and valid under applicable law, but if any provision of
      this
      Secured Note shall be or become prohibited or invalid under applicable law,
      such
      provision shall be ineffective to the extent of such prohibition or invalidity
      without invalidating the remainder of such provision or the remaining provisions
      of this Secured Note.

     

    9.7  Attorneys’
      Fees.  In the event the Holder utilizes the services of an
      attorney in attempting to collect the amounts due hereunder or to enforce the
      terms hereof or of any agreements related to this indebtedness or any other
      Obligation, or if any holder hereof (or any trustee or affiliate of any holder
      hereof) becomes party plaintiff or defendant in any action, suit, arbitration
      or
      other proceeding in relation to the property described in any instrument
      securing this Secured Note or for the recovery or protection of the indebtedness
      evidenced hereby or that otherwise arises out of or relates to this Secured
      Note
      or the transactions contemplated hereby, the Company, its successors and
      assigns, shall repay to such holder hereof, on demand, all costs and expenses
      so
      incurred, including those costs, expenses and reasonable attorneys’ fees
      incurred in any and all appeals or petitions from any such action, suit,
      arbitration or other proceeding or incurred after the filing by or against
      the  Company or any other Grantor of any proceeding under any chapter
      of the federal bankruptcy code, or similar federal or state statute, and whether
      incurred in connection with the involvement of the Holder as creditor in such
      proceedings or otherwise.  As used in this Section, reasonable
      attorneys’ fees shall be deemed to mean the full and actual costs of any legal
      services actually performed in connection with the matters involved calculated
      on the basis of the usual fee charged by the attorney performing such
      services.

     

    9.8  Noncircumvention.  The
      Company will not, by amendment of its charter or through reorganization,
      consolidation, merger, dissolution, sale or other disposition of assets or
      any
      other voluntary action, avoid or seek to avoid the observance or performance
      of
      any of the terms of this Secured Note, but will at all times in good faith
      assist in the carrying out of all such terms and in the taking of all such
      action as may be necessary or appropriate in order to protect the rights of
      the
      Holder of this Secured Note against impairment.

     

    9.9  Prepayment.  The
      Company shall have the right to prepay any portion of the principal without
      prepayment penalty or premium or discount.  Any optional prepayment
      pursuant to this Section 9.9 or mandatory prepayment pursuant to Section 1.4
      shall be applied first to accrued interest and then to principal.

     

    [SIGNATURES
      ON FOLLOWING PAGE]

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF, the Company has caused this Secured Note to be executed and
      issued on its behalf by the officer thereto duly authorized.

     

    RED
      ROCK
      PICTURES HOLDINGS, INC.

    
 

    By:      /s/
      David M. Kane        

    Name:David
      M. Kane

    Title:Chief
      Financial
      Officer

    

    Accepted
      and Agreed:

    

    N.
      WILLIAMS FAMILY INVESTMENTS, L.P.,

    an
      Indiana limited partnership

     

    
      By:  NEW
        INVESTMENT GROUP, LLC, an Indiana

    

    
            limited liability company, its general
        partner

    

     

    
             
        By:  LAKE CITY BANK, as Trustee of the Zimmer-N Trust,

                  its
        manager

    

     

                   
      By:  /s/ Peggy L. Michel    

           
      Name: Peggy L. Michel

           
      Title: Vice President

     

    -10-fsb2a10807ex10xiii_redrock.htm

    SECURED
      PROMISSORY NOTE

     

    Due
      June
      8, 2008

     

    RED
      ROCK PICTURES HOLDINGS, INC.

     

    
      	
              Issued:  June
                8, 2007

            	
              $1,000,000

            

    

    

     

    FOR
      VALUE
      RECEIVED, the undersigned, Red Rock Pictures Holdings, Inc. (hereinafter,
      together with any successor, referred to as the “Company”),
      hereby promises to pay to Dan Laikin (hereinafter, together with any successor
      or assign, referred to as the “Holder”), the principal sum of
      One Million Dollars ($1,000,000) together with interest thereon from the date
      hereof, payable on the terms set forth below.

     

    1.  Payments

     

    1.1  Interest
      Rate.  Interest on the unpaid principal balance outstanding from
      time to time shall accrue at the rate of seven percent (7%) per
      annum.  The Company acknowledges that the effect of this Default Rate
      provision could operate to compound some of the interest obligations due, and
      Company hereby expressly assents to such compounding should it
      occur.  Notwithstanding any provision contained herein to the
      contrary, the interest rate hereunder shall include the applicable interest
      rate
      described herein plus any additional charges, costs and fees incident to the
      loan hereunder to the extent they are deemed to be interest under applicable
      California law.  Should the interest rate as calculated under this
      Secured Note at any time exceed that allowed by law, the interest rate will
      be
      the maximum rate of interest allowed by applicable California law.

     

    1.2  Interest
      Payment.  Interest shall be paid on the Maturity
      Date.

     

    1.3  Maturity.  The
      entire unpaid principal balance, all accrued and unpaid interest, and any other
      amounts payable hereunder and unpaid at such time, shall be paid in full on
      the
      earlier of the following dates (“Maturity
      Date”):  (A) June 8, 2008 or (B) upon acceleration of the
      Maturity Date as provided in Section 6.2 of this Secured Note.

     

    1.4  Mandatory
      Prepayment.

     

    1.4.1  On
      the
      closing date of any Equity Offering consummated after the date hereof, the
      Company shall be required to make a mandatory prepayment under this Secured
      Note
      equal to the lesser of (i) the cash proceeds of such Equity Offering, net of
      underwriters’ or placement agents’ fees, discounts or commissions and (ii) the
      entire unpaid principal balance, all accrued and unpaid interest, and any other
      amounts payable hereunder and unpaid at such time.

     

    1.4.2  Promptly,
      but no later than five (5) business days, following the Company’s receipt of any
      profits, revenues or other remuneration in respect of its interest in the Bag
      Boy Project or the Ratko Project, the Company shall be required to make a
      mandatory prepayment under this Secured Note equal to the lesser of (i) the
      amount of any such profits, revenues or other remuneration received, and (ii)
      the entire unpaid principal balance, all accrued and unpaid interest, and any
      other amounts payable hereunder and unpaid at such time.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.4.3  As
      used
      herein, “Equity Offering” means an offering for cash by the
      Company of its capital stock or convertible securities or options, warrants
      or
      rights with respect to its capital stock or convertible securities, other than
      pursuant to the exercise of stock options granted to employees in the normal
      course of business; “Ratko Project” means the motion picture
      titled  Ratko, the Dictator’s Son; and “Bag Boy
      Project” means the motion picture titled “Bag Boy”.

     

    1.5  Place
      of Payment.  The Company shall pay principal and interest in
      United States dollars to the Holder at the Holder’s address for notices or such
      other address at the Holder may designate in writing.

     

    2.  Successor
      Corporation

     

    2.1  When
      Company May Merge, Etc.  For so long as any amount remains
      outstanding or unpaid under this Secured Note, the Company may not, in a single
      transaction or through a series of related transactions, consolidate with or
      merge with or into any other person, or, directly or indirectly, sell, lease,
      assign, transfer, license or convey (by way of liquidation, dissolution, winding
      up, or otherwise) all or substantially all of its properties and assets as
      an
      entirety or substantially as an entirety (computed on a consolidated basis)
      to
      another person or group or affiliated persons, unless the Company shall be
      the
      continuing person, or the person (if other than the Company) formed by such
      consolidation or into which the Company is merged or to which all or
      substantially all of the properties and assets of the Company are transferred
      as
      an entirety or substantially as an entirety (the Company or such other person
      being hereinafter referred to as the “Surviving Person”) shall
      be an entity organized and validly existing under the laws of the United States,
      any State thereof or the District of Columbia and shall expressly assume in
      writing all the obligations of the Company under this Secured Note;
provided, however, that as a condition to any such transfer to a
      Surviving Person, the consolidated tangible net worth of such Surviving Person
      immediately following such transfer, determined on a pro forma basis in
      accordance with generally accepted accounting principles
      (“GAAP”), must equal or exceed the consolidated tangible net
      worth of the Company immediately prior to such transfer.

     

    2.2  Successor
      Corporation Substituted.  Upon any consolidation or merger, or any
      direct or indirect transfer or other disposition of assets in accordance with
      Section 2.1, the Surviving Person formed by such consolidation or into which
      the
      Company is merged or to which such transfer is made shall succeed to, and be
      substituted for, and may exercise every right and power of, the Company under
      this Secured Note with the same effect as if such Surviving Person had been
      named as the Company herein.

     

    3.  Security
      and Guaranty.    This
      Secured Note is secured by that certain Security Agreement of even date herewith
      (the "Security
      Agreement") encumbering certain "Collateral" of the Grantors, as
      such terms are defined in the Security Agreement. This Secured Note is
      guaranteed by (i) that certain Guaranty of even date herewith (the "Repayment
      Guaranty") wherein Red Rock Pictures, Inc., a Nevada corporation
      is the guarantor. This Secured Note, together with the Security Agreement,
      the
      Repayment Guaranty, that certain Registration Rights Agreement of even date
      herewith (the "Registration
      Rights Agreement"), among the Company, Holder and N. Williams
      Family Investments, LP, the Partial Assignment (as defined below) and any other
      documents, agreements or instruments relating to the loan evidenced by this
      Secured Note (including, without limitation, any related subordination
      agreement), or securing this Secured Note and the Collateral, shall be
      collectively referred to herein as the "Obligations".

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    4.  Representations
      and Warranties.  The Company represents and warrants that the
      following statements are true and correct:

     

    4.1  Each
      of
      the Grantors is a corporation, partnership or limited liability company, as
      the
      case may be, duly and properly incorporated or organized, validly existing
      and
      in good standing under the laws of its jurisdiction of incorporation or
      formation and has all requisite authority to conduct its business in each
      jurisdiction in which its business is conducted, except where the failure to
      be
      so qualified does not and would not have a material adverse effect on the
      business, properties or assets of the Grantors.

     

    4.2  Each
      of
      the Grantors has the power and authority and legal right to execute and deliver
      the Obligations to which it is a party and to perform its obligations
      thereunder.  The execution and delivery by each Grantor of the
      Obligations to which it is a party and the performance of its obligations
      hereunder and thereunder have been duly authorized by proper proceedings, and
      the Obligations to which each Grantor is a party constitute legal, valid and
      binding obligations of each such Grantor enforceable against each of them in
      accordance with their terms, except as enforceability may be limited by (i)
      bankruptcy, insolvency, fraudulent conveyances, reorganization or similar laws
      relating to or affecting the enforcement of creditors’ rights generally; (ii)
      general equitable principles (whether considered in a proceeding in equity
      or at
      law); and (iii) requirements of reasonableness, good faith and fair
      dealing.

     

    4.3  The
      August 31, 2006 audited consolidated financial statements and the
      February 28, 2007 unaudited consolidated financial statements of the
      Company and its subsidiaries heretofore delivered to the Holder were prepared
      in
      accordance with GAAP in effect on the date such statements were prepared and
      fairly present the consolidated financial condition and operations of the
      Company and its subsidiaries at such date and the consolidated results of their
      operations for the period then ended (subject to normal recurring year-end
      adjustments in the cause of the unaudited financial statements).  The
      Company and its subsidiaries have no material contingent liabilities or
      obligations not provided for or disclosed in the financial statements referred
      to above.

     

    4.4  The
      Company and its subsidiaries have filed all United States federal tax returns
      and all other tax returns which are required to be filed and have paid all
      taxes
      due pursuant to said returns or pursuant to any assessment received by the
      Company or any of its subsidiaries, except in respect of such taxes, if any,
      as
      are being contested in good faith and as to which adequate reserves have been
      provided in accordance with GAAP.  No liens have been filed and no
      claims are being asserted with respect to such taxes.  The charges,
      accruals and reserves on the books of the Company and its subsidiaries in
      respect of any taxes or other governmental charges are adequate.

     

    4.5  There
      is
      no litigation, arbitration, governmental investigation, proceeding or inquiry
      pending or, to the knowledge of any of their officers, threatened against or
      affecting the Company or any of its subsidiaries which could reasonably be
      expected to have a material adverse effect on the Company or any of its
      subsidiaries or which seeks to prevent, enjoin or delay the making of the loan
      hereunder.

     

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    4.6  The
      shares of Common Stock that are issued or issuable to Holder hereunder pursuant
      to Section 8, when issued, sold and delivered in accordance with the terms
      of
      this Secured Note in consideration of the loan being made hereunder, will be
      duly and validly issued, fully paid, and nonassessable, and will be free and
      clear of all Liens, encumbrances, adverse claims, preemptive rights
      or
      restrictions on transfer other than restrictions on transfer under applicable
      state and federal securities laws. The authorized capital stock of the Company
      consists of 120,000,000 shares of Common Stock and 5,000,000 shares of Preferred
      Stock. There are no other shares of capital stock authorized. As of the date
      hereof, there are 62,462,495 shares of Common Stock issued and outstanding,
      and
      no shares of Preferred Stock outstanding. All of the issued and outstanding
      shares of Common Stock and Preferred Stock were duly authorized for issuance
      and
      are validly issued, fully paid and non-assessable. Except as disclosed in
      Schedule 4.6 to this Secured Note, there are no existing options, warrants,
      calls, rights, commitments or other agreements of any character to which the
      Company is a party requiring, and there are no securities of the Company
      outstanding that upon conversion or exchange would require, the issuance, sale
      or transfer of any additional shares of capital stock or other Equity Interests
      (as defined below) of the Company or other securities convertible into,
      exchangeable for or evidencing the right to subscribe for or purchase shares
      of
      capital stock or other equity securities of the Company. Except as disclosed
      in
      Schedule 4.6, the Company is not a party to any voting trust or other voting
      agreement with respect to any of the shares of Common Stock or to any agreement
      relating to the issuance, sale, redemption, transfer or other disposition of
      the
      capital stock or other Equity Interests of the Company.

     

    4.7  Assuming
      the filing of UCC financing statements covering the Collateral in the Office
      of
      the Secretary of State of Nevada, the Security Agreement creates a valid
      security interest in all of the Collateral of the Grantor and secures the
      Company's performance of the Obligations; and no other action is necessary
      to
      perfect or maintain the perfection of such security interest in favor of the
      Holder except for the periodic filing of such UCC continuation statements as
      may
      be required by law.

     

    4.8  No
      authorization, approval or other action by, and no notice to or filing with,
      any
      governmental authority or regulatory body (including, without limitation, any
      court) is required, except (i) such authorization or approval as has already
      been obtained and (ii) the filing of the UCC financing statements and notices
      described in Section 4.7 above, either for the grant by the Grantors of the
      security interest granted by the Security Agreement or for the execution,
      delivery or performance of this Secured Note or the Partial Assignment by the
      Company (including, without limitation, the issuance of the Common Stock to
      Holder pursuant hereto and the transfer of rights contemplated by the Partial
      Assignment), or for the perfection of, or the exercise by, the Holder of its
      rights and remedies hereunder.

     

    4.9  Neither
      the execution and delivery by the Grantors of the Obligations to which such
      person is a party, nor the consummation of the transactions herein or therein
      contemplated, nor compliance with the provisions hereof or thereof will violate
      (i) any law, rule, regulation, order, writ, judgment, injunction, decree or
      award binding on the Grantors or (ii) any Grantor’s articles or certificate of
      incorporation, by-laws, or other management agreement or governing document,
      as
      the case may be, or (iii) the provisions of any indenture, instrument or
      agreement to which any Grantor is a party or is subject, or by which it, or
      its
      property or assets, are bound, or conflict with, or constitute a default
      thereunder, or result in, or require, the creation or imposition of any lien
      in,
      of or on the property or assets of any Grantor pursuant to the terms of, any
      such indenture, instrument or agreement.

     

    4.10  The
      execution, delivery and performance of this Secured Note and the Partial
      Assignment (including, without limitation, the issuance of the Common Stock
      to
      Holder pursuant hereto and the transfer of rights contemplated by the Partial
      Assignment), the filing of the financing statements provided for herein and
      the
      taking of any other action required or contemplated hereby shall not cause
      a
      default or event of default, or require any third party consent, under any
      other
      agreement or commitment to which the Company or any other Grantor is a party
      or
      by which it is bound.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    4.11  The
      Company has no subsidiaries.  Except as set forth in Schedule 4.11,
      the Company does not, directly or indirectly, beneficially own any Equity
      Interests or similar interests of of any person or any interest in a partnership
      or joint venture of any kind.

     

    5.  Covenants.

     

    5.1  The
      Company will, and will cause each of its subsidiaries to, carry on and conduct
      its business in substantially the same manner and in substantially the same
      fields of enterprise as it is presently conducted and do all things necessary
      to
      remain duly incorporated or organized, validly existing and (to the extent
      such
      concept applies to such entity) in good standing as a domestic corporation,
      partnership or limited liability company in its jurisdiction of incorporation
      or
      organization, as the case may be, as in effect on the date hereof, and maintain
      all requisite authority to conduct its business in each jurisdiction in which
      its business is conducted, except to the extent that the failure to maintain
      any
      of the foregoing would not reasonably be expected to have a material adverse
      effect on the Company or the rights of the Holder under the
      Obligations.

     

    5.2  The
      Company will, and will cause each of its subsidiaries to, timely file complete
      and correct United States federal and applicable foreign, state and local tax
      returns required by law and pay when due all taxes, assessments and governmental
      charges and levies upon it or its income, profits or property, except those
      which are being contested in good faith by appropriate proceedings and with
      respect to which adequate reserves have been set aside in accordance with
      generally accepted accounting principles.

     

    5.3  The
      Company will, and will cause each of its subsidiaries to, comply in all material
      respects with all laws, rules, regulations, orders, writs, judgments,
      injunctions, decrees or awards to which it may be subject.

     

    5.4  The
      Company shall, at its expense, promptly execute and deliver all further
      instruments and documents, and take all further action, that may be necessary
      or
      desirable, or that Holder may reasonably request, in order to perfect, protect
      and/or maintain the security interest granted or purported to be granted herein
      in the Collateral or to enable the Holder to exercise and enforce its rights
      and
      remedies hereunder with respect to any Collateral, including, without
      limitation, executing, delivering and/or filing, as the case may be, and
      obtaining the execution and delivery by third parties of, UCC financing or
      continuation statements or amendments thereto, and other agreements,
      instruments, bulk sales or other notices.

     

    5.5  The
      Company shall, at its expense, perform all acts necessary to maintain, preserve,
      and protect the Collateral, and not encumber the Collateral in any way or grant
      or suffer to exist any security interest or Lien thereon, other than (a) Liens
      for current taxes not delinquent or taxes being contested in good faith and
      by
      appropriate proceedings and as to which such reserves or other appropriate
      provisions as may be required by GAAP are being maintained; 

     

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

       

       

      (b)
        carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, and other
        like statutory Liens arising in the ordinary course of business securing
        obligations which are not overdue or which are being contested in good faith
        and
        by appropriate proceedings and as to which such reserves or other appropriate
        provisions as may be required by GAAP are being maintained; (c) pledges or
        deposits in connection with workers’ compensation, unemployment insurance and
        other social security legislation; (d) Liens in connection with the acquisition
        of property in the ordinary course of business after the date hereof by way
        of
        purchase money mortgage, conditional sale or other title retention agreement,
        capitalized lease or other deferred payment contract, and attaching only
        to the
        property being acquired, if the indebtedness secured thereby does not exceed
        the
        purchase price of the property financed; (e) Liens in favor of Holder; and
        (f)
        existing Liens set forth on Schedule 5.5 to this Secured Note.  The
        Company and its subsidiaries shall not incur any indebtedness for borrowed
        money
        (including any guaranty) (other than (i) Subordinated Debt, (ii) purchase
        money
        indebtedness arising in the ordinary course of business that, when incurred,
        does not exceed the purchase price of the asset(s) financed and (iii) existing
        indebtedness in the principal amounts set forth on Schedule 5.5 to this Secured
        Note).

    

     

    5.6  Neither
      the Company nor any of its subsidiaries shall make any Restricted
      Payments.

     

    5.7  For
      purposes of this Secured Note, the following terms shall have the following
      meanings:

     

    5.7.1  “Equity
      Interests” of any person means (1) any and all shares or other equity
      interests (including common stock, preferred stock, limited liability company
      interests and partnership interests) in such person, and (2) all rights to
      purchase, warrants or options (whether or not currently exercisable),
      participations or other equivalents of or interests in (however designated)
      such
      shares or other interests in such person.

     

    5.7.2  “Lien”
      means any mortgage, pledge, hypothecation, judgment lien or similar legal
      process, title retention lien, or other lien, encumbrance or security interest,
      including, without limitation, the interest of a vendor under any conditional
      sale or other title retention agreement and the interest of a lessor under
      any
      capitalized lease.

     

    5.7.3  “Restricted
      Payment” means any of the following:

     

    (a)  the
      declaration or payment of any dividend or any other distribution on Equity
      Interests of the Company or its subsidiaries or any payment made to the direct
      or indirect holders (in their capacities as such) of Equity Interests of the
      Company or its subsidiaries, but excluding, in the case of subsidiaries of
      the
      Company, dividends or distributions payable to the Company or its
      subsidiaries;

     

    (b)  the
      redemption of Equity Interests of the Company or its subsidiaries;
      or

     

    (c)  any
      payment or redemption prior to scheduled maturity or prior to any scheduled
      repayment of principal or sinking fund payment, as the case may be, in respect
      of Subordinated Debt (other than Subordinated Debt owed to and held by the
      Company or any subsidiary).

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    5.7.4  “Subordinated
      Debt” means that portion of any liabilities, obligations or
      indebtedness of the Company which contains terms satisfactory to Holder and
      is
      subordinated, in a manner satisfactory to Holder, as to right and time of
      payment of principal and interest thereon, to all of the
      Obligations.

     

    6.  Events
      of Default and Remedies

     

    6.1  Events
      of Default.  “Event of Default,” wherever used
      herein, means any one of the following events (whatever the reason for such
      Event of Default and whether it shall be caused voluntarily or involuntarily
      or
      effected, without limitation, by operation of law or pursuant to any judgment,
      decree or order of any court of any order, rule or regulation of any
      administrative or governmental body):

     

    6.1.1  default
      in the payment of any principal or interest upon this Secured Note as and when
      the same becomes due and payable;

     

    6.1.2  default
      by the Company under any of its covenants under this Secured Note, which default
      is not cured within fifteen (15) days after receipt of written notice of such
      default delivered to the Company by the Holder;

     

    6.1.3  any
      event
      of default occurs under any of the Obligations;

     

    6.1.4  the
      Company commences a case or other proceeding, or if an involuntary case or
      other
      proceeding shall be commenced against Company seeking liquidation,
      reorganization or other relief with respect to its debts under any bankruptcy,
      insolvency or other similar debtor relief law now or hereafter in effect or
      seeking the appointment of a trustee, receiver, liquidator, custodian or other
      similar official of it or any substantial part of its property, and any such
      involuntary case or other proceeding shall remain undismissed and unstayed
      for a
      period of sixty (60) days;

     

    6.1.5  the
      Company shall make an assignment for the benefit of creditors, or admit in
      writing its inability to pay its debts generally as they become
      due;

     

    6.1.6  a
      notice
      of lien, levy or assessment is filed of record or given to Company with respect
      to all or any of the Company’s assets by any federal, state, local department or
      agency, and such lien, levy or assessment is not released or paid within a
      reasonable period of time but in no event longer than twenty (20) days from
      the
      date such lien, levy or assessment is filed, or such longer period of time
      as is
      appropriate in the case of any such lien, levy or assessment that is being
      contested in good faith and by appropriate proceedings;

     

    6.1.7  Holder,
      in good faith, believes the prospect of payment or performance by Company under
      this Secured Note or any other Obligations is impaired and if Company is unable
      or unwilling to provide adequate written assurances to Holder of its ability
      to
      fully perform under this Secured Note within thirty (30) days following delivery
      of written notice; or

     

    6.1.8  Any
      representation or warranty of Company in the Obligations is not materially
      true,
      correct and complete, or if any material statement, report or certificate made
      or delivered by Company or its officers, employees or agents is not true,
      correct and complete when made.

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

    6.2  Acceleration
      of Maturity Date.  If an Event of Default (other than an Event of
      Default specified in Section 6.1.5 or 6.1.6) occurs and is continuing, then,
      and
      in every such case, unless the principal of this Secured Note shall have already
      become due and payable, the Holder by a notice in writing to the Company (an
      “Acceleration Notice”), may declare all of the principal of
      this Secured Note, together with accrued interest thereon, to be due and payable
      immediately.  If an Event of Default specified in Section 6.1.5 or
      6.1.6 occurs, all principal of and accrued interest on this Secured Note
ipsofacto shall become and be immediately due and payable without
      any declaration or other act on the part of the Holder.

     

    6.3  Rights
      and Remedies Cumulative.  Except as otherwise provided with
      respect to the replacement or payment of mutilated, destroyed, lost or stolen
      note, no right or remedy herein conferred upon or reserved to the Holder is
      intended to be exclusive of any other right or remedy, and every right and
      remedy shall, to the extent permitted by law, be cumulative and in addition
      to
      every other right and remedy given hereunder or now or hereafter existing at
      law
      or in equity or otherwise.  The assertion or employment of any right
      or remedy hereunder, or otherwise, shall not prevent the concurrent assertion
      or
      employment of any other appropriate right or remedy.

     

    6.4  Waiver.  No
      delay or omission by the Holder to exercise any right or remedy arising upon
      any
      Event of Default shall impair the exercise of any such right or remedy or
      constitute a waiver of any such Event of Default.  Every right and
      remedy given by this Section 6 or by law to the Holder may be exercised from
      time to time, and as often as may be deemed expedient, by the
      Holder.  No provision of this Secured Note may be waived unless in
      writing signed by the Holder, and waiver of any one provision of this Secured
      Note shall not be deemed to be a waiver of any other provision.

     

    7.  Replacement
      Note.  If this Secured Note is mutilated and
      surrendered to the Company or if the Holder claims and submits an affidavit
      or
      other evidence, satisfactory to the Company to the effect that this Secured
      Note
      has been lost, destroyed or wrongfully taken, the Company shall issue a
      replacement note if the Company’s reasonable requirements are met, including, if
      required by the Company, provision by the Holder of indemnity, sufficient in
      the
      judgment of the Company, to protect the Company from any loss which it may
      suffer if this Secured Note is replaced.

     

    8.  Issuance
      of Common Stock; Partial Assignment of Profit
      Participation.

     

    8.1  As
      a
      further inducement to the Holder to make the loan evidenced by this Secured
      Note:

     

    8.1.1  the
      Company shall issue to the Holder the following shares of the Company’s common
      stock, $0.001 par value (“Common Stock”), free and clear of any
      Liens, encumbrances, adverse claims, preemptive rights or restrictions on
      transfer other than restrictions on transfer under applicable state and federal
      securities laws:

     

    (a)  upon
      receipt of the proceeds of the loan hereunder, a number of shares of Common
      Stock equal to the Initial Share Amount; and

     

    (b)  within
      three (3) business days following the expiration of the Additional Pricing
      Period (as defined below), irrespective of whether or not this Secured Note
      shall have been paid in full on or prior to such date, a number of shares of
      Common Stock equal to the Additional Share Amount, if any; and

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    8.1.2  upon
      receipt of the proceeds of the loan hereunder, the Company shall irrevocably
      assign, transfer and convey to Holder a five percent (5%) net profit
      participation in the Bag Boy Project, in accordance with the terms and
      conditions of that certain Partial Assignment of Profit Participation attached
      hereto as Exhibit A (the “Partial
      Assignment”).

     

    8.2  For
      purposes of this Secured Note, the following terms shall have the following
      meanings:

     

    8.2.1  “Additional
      Pricing Period” means the five (5) consecutive Trading Days ending on
      the last Trading Day immediately preceding December 8, 2007.

     

    8.2.2   “Additional
      Share Amount” means the excess, if any, of (x) the quotient obtained by
      dividing (A) $500,000 by (B) the Market Price for the Additional Pricing Period
      over (y) the Initial Share Amount.

     

    8.2.3  “Bid
      Price” shall mean, for any applicable Trading Day, the closing bid
      price (as reported by Bloomberg L.P.) of the Common Stock on the Principal
      Market or if the Common Stock is not traded on a Principal Market, the highest
      reported bid price for the Common Stock, as furnished by the NASD.

     

    8.2.4  “Daily
      VWAP” for the Common Stock means, for each of the five (5) consecutive
      Trading Days during the Initial Pricing Period or the Additional Pricing Period,
      as applicable, the per share volume-weighted average price (as reported by
      Bloomberg L.P.) in respect of the period from 9:30 a.m. to 4:00 p.m. (New York
      City time) on such Trading Day (or if such volume-weighted average price is
      unavailable on any such Trading Day, the Bid Price for such Trading
      Day).

     

    8.2.5  “Initial
      Pricing Period” means the five (5) consecutive Trading Days ending on
      the last Trading Day preceding the date hereof.

     

    8.2.6  “Initial
      Share Amount” means the quotient obtained by dividing (x) $500,000 by
      (y) the Market Price for the Initial Pricing Period.

     

    8.2.7  “Market
      Price” shall mean the lowest Daily VWAP of the Common Stock during the
      Initial Pricing Period in respect of the Initial Share Amount or the Additional
      Pricing Period in respect of the Additional Share Amount, as
      applicable.

     

    8.2.8  “NASD”
      shall mean the National Association of Securities Dealers, Inc.

     

    8.2.9   “Principal
      Market” shall mean the Nasdaq National Market, the Nasdaq Capital
      Market, the American Stock Exchange, the OTC Bulletin Board or the New York
      Stock Exchange, whichever is at the time the principal trading exchange or
      market for the Common Stock.

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    8.2.10  “Trading
      Day” shall mean any day during which the New York Stock Exchange shall
      be open for business.

     

    8.2.11  “VWAP”
      shall mean the volume weighted average price of the Company’s Common Stock as
      quoted by Bloomberg, LP.

     

    8.3  The
      shares of Common Stock to be issued to Holder pursuant to Sections 8.1.1(a)
      and
      8.1.1(b) of this Secured Note shall be deemed fully earned as of the date hereof
      upon funding of the loan contemplated hereby.

     

    8.4  The
      Holder understands that, except as provided in the Registration Rights
      Agreement, the Common Stock shall not be registered or qualified under any
      federal or state securities laws and shall bear the following
      legend:

     

    These
      securities have not been registered with the Securities and Exchange Commission
      or the securities commission of any state in reliance upon an exemption from
      registration under the Securities Act of 1933, as amended (the
“Securities Act”), and, accordingly, may not be offered or sold
      except pursuant to an effective registration statement under the Securities
      Act
      or pursuant to an available exemption from, or in a transaction not subject
      to,
      the registration requirements of the Securities Act and in accordance with
      applicable state securities laws as evidenced by a legal opinion of counsel
      to
      the transferor to such effect, the substance of which shall be reasonably
      acceptable to the Company.

     

    9.  Miscellaneous

     

    9.1  Successors.  The
      terms and conditions of this Secured Note shall be binding upon and inure to
      the
      benefit of the parties to this Secured Note and their respective successors,
      heirs and personal representatives.

     

    9.2  Assignment.  The
      Company may not assign this Secured Note, and any attempted or purported
      assignment or any delegation of its duties or obligations arising under this
      Secured Note to any person shall be deemed to be null and void, and shall
      constitute a material breach by the Company of its duties and obligations under
      this Secured Note.

     

    9.3  Governing
      Law.  This Secured Note has been made and entered into in the
      State of California and shall be construed in accordance with the laws of the
      State of California without giving effect to the principles of conflicts of
      law
      thereof.

     

    9.4  Captions.  The
      various captions of this Secured Note are for reference only and shall not
      be
      considered or referred to in resolving questions of interpretation of this
      Secured Note.

     

    9.5  Notices.  Any
      notice, authorization, request or demand required or permitted to be given
      hereunder shall be in writing and shall be deemed to have been duly given when
      received by an overnight delivery service or when sent by facsimile addressed
      as
      follows:

     

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

     

    To
      the Company:

     

    Red
      Rock Pictures Holdings,
      Inc.

    8228
      Sunset Boulevard, 3rd Floor

    Los
      Angeles, California 90046

    Fax: 
      (310)
      275-1266

    Attn:  Robert
      Levy, President and Chief Executive Officer

     

    To
      the Holder:

     

    Dan
      Laikin

    do
      National Lampoon, Inc.

    8228
      Sunset Blvd.

    
      Los
        Angeles, California 90069

      Attention:
        Daniel Laikin, Chief Executive Officer 

      Facsimile
        No.: 310-474-1219

    9.6  Severability.  Whenever
      possible each provision of this Secured Note shall be interpreted in such manner
      as to be effective and valid under applicable law, but if any provision of
      this
      Secured Note shall be or become prohibited or invalid under applicable law,
      such
      provision shall be ineffective to the extent of such prohibition or invalidity
      without invalidating the remainder of such provision or the remaining provisions
      of this Secured Note.

     

    9.7  Attorneys’
      Fees.  In the event the Holder utilizes the services of an
      attorney in attempting to collect the amounts due hereunder or to enforce the
      terms hereof or of any agreements related to this indebtedness or any other
      Obligation, or if any holder hereof (or any trustee or affiliate of any holder
      hereof) becomes party plaintiff or defendant in any action, suit, arbitration
      or
      other proceeding in relation to the property described in any instrument
      securing this Secured Note or for the recovery or protection of the indebtedness
      evidenced hereby or that otherwise arises out of or relates to this Secured
      Note
      or the transactions contemplated hereby, the Company, its successors and
      assigns, shall repay to such holder hereof, on demand, all costs and expenses
      so
      incurred, including those costs, expenses and reasonable attorneys’ fees
      incurred in any and all appeals or petitions from any such action, suit,
      arbitration or other proceeding or incurred after the filing by or against
      the
      Company or any other Grantor of any proceeding under any chapter of the federal
      bankruptcy code, or similar federal or state statute, and whether incurred
      in
      connection with the involvement of the Holder as creditor in such proceedings
      or
      otherwise.  As used in this Section, reasonable attorneys’ fees shall
      be deemed to mean the full and actual costs of any legal services actually
      performed in connection with the matters involved calculated on the basis of
      the
      usual fee charged by the attorney performing such services.

     

    9.8  Noncircumvention.  The
      Company will not, by amendment of its charter or through reorganization,
      consolidation, merger, dissolution, sale or other disposition of assets or
      any
      other voluntary action, avoid or seek to avoid the observance or performance
      of
      any of the terms of this Secured Note, but will at all times in good faith
      assist in the carrying out of all such terms and in the taking of all such
      action as may be necessary or appropriate in order to protect the rights of
      the
      Holder of this Secured Note against impairment.

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    9.9  Prepayment.  The
      Company shall have the right to prepay any portion of the principal without
      prepayment penalty or premium or discount.  Any optional prepayment
      pursuant to this Section 9.9 or mandatory prepayment pursuant to Section 1.4
      shall be applied first to accrued interest and then to principal.

     

    9.10  Survival.  The
      provisions of and undertakings and indemnification set out in Articles 4 and
      8
      hereof and this Article 9 shall survive satisfaction and payment of the amounts
      owed hereunder and termination of this Secured Note.

     

    [SIGNATURES
      ON FOLLOWING PAGE]

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

     

     

    IN
      WITNESS WHEREOF, the Company has caused this Secured Note to be executed and
      issued on its behalf by the officer thereto duly authorized.

     

    RED
      ROCK
      PICTURES HOLDINGS, INC.

    

    

    

    By:      /s/ 
      David M. Kane             

    Name:
      David M. Kane

    Title:
      Chief Financial
      Officer

    

    Accepted
      and Agreed:

    

     

    /s/ 
      Dan Laikin        

    Dan
      Laikin

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      SCHEDULE
        4.6

       

      OPTIONS,
        WARRANTS, CALLS, RIGHTS, COMMITMENTS, VOTING TRUSTS
        OR

       

      OTHER
        AGREEMENTS PERTAINING TO THE COMPANY'S CAPTIAL STOCK OR

       

      OTHER
        EQUITY INTERESTS

       

      None.

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    
      SCHEDULE
        4.11

       

      SUBSIDIARIES
        (OTHER THAN RED ROCK PICTURES, INC.), PARTNERSHIPS
        OR

       

      JOINT
        VENTURES

       

      None.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      
        

         

        SCHEDULE
          5.5  

        EXISTING
          LIENS

         

        None.

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