Exhibit 10.3
PROMISSORY NOTE
San Francisco, California
FOR VALUE RECEIVED, receipt of which is hereby
acknowledged, Etelos, Inc., a Delaware Corporation with its
principal place of business at 26828 Maple Valley Highway, #297,
Maple Valley, WA 98038 (the “ Borrower ”)
promises to pay to the order of Enable Growth Partners LP located
at One Ferry Building, Suite 255, San Francisco, California or
at such other place as Lender may designate in writing (the “
Lender ”) in lawful money of the United States of
America, the principal sum of Two Hundred Fifty Thousand Dollars
($250,000) plus interest thereon from the date the proceeds of the
loan evidenced by this Note are disbursed from the Lender to the
Borrower until the Maturity Date (as defined below), whether
scheduled or accelerated, at a fixed interest rate equal to Ten
Percent (10%) per annum. In addition, contemporaneous with the
consummation of the loan evidenced by this Note, the Borrower will
issue the Lender a five-year warrant (the “ Warrant
”) exercisable for 500,000 shares of the Borrower’s
common stock, at an exercise price of $0.75 per share, subject to
adjustment therein.
1.
Payment . Payment of principal and accrued but unpaid
interest shall be due and payable in full on January 9, 2010
(the “ Maturity Date ”), unless due earlier in
accordance with the terms of this Note.
2.
Events of Default
.
(a)
“ Event of Default
”, wherever used herein, means any one of the following
events (whatever the reason for such event and whether such event
shall be voluntary or involuntary or effected by operation of law
or pursuant to any judgment, decree or order of any court, or any
order, rule or regulation of any administrative or
governmental body):
(i)
Any default in the payment of the
principal amount of, or the interest on, this Note, when due and
payable or any failure to pay any fees or other charges on this
Note when due and payable;
(ii)
The Borrower or any of its
subsidiaries or any other Person shall fail to provide the Lender
with, or to perform any obligation under this Note or any contract,
instrument, addenda, or document executed in connection with this
Note, including without limitation, any rate option agreement,
guaranty, pledge agreement, security agreement, or deed of trust
(all such documents, including this Note, each a “ Loan
Document ”);
(iii)
The Borrower or any of its
subsidiaries shall commence, or there shall be commenced against
Borrower or any subsidiary a case under any applicable bankruptcy
or insolvency laws as now or hereafter in effect or any
successor thereto, or the Borrower
or any subsidiary commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to
Borrower or any subsidiary, or there is commenced against Borrower
or any subsidiary any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 60 days; or
Borrower or any subsidiary is adjudicated insolvent or bankrupt; or
any order of relief or other order approving any such case or
proceeding is entered; or Borrower or any subsidiary suffers any
appointment of any custodian or the like for it or any substantial
part of its property which continues undischarged or unstayed for a
period of 60 days; or Borrower or any subsidiary makes a general
assignment for the benefit of creditors; or Borrower or any
subsidiary shall fail to pay, or shall state that it is unable to
pay, or shall be unable to pay, its debts generally as they become
due; or Borrower or any subsidiary shall call a meeting of its
creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or the Borrower shall die, become
incapacitated, dissolve or terminate the business of the Borrower;
or Borrower or any subsidiary shall by any act or failure to act
expressly indicate its consent to, approval of or acquiescence in
any of the foregoing; or any corporate or other action is taken by
Borrower or any subsidiary for the purpose of effecting any of the
foregoing;
(iv)
The Borrower or any of its
subsidiaries shall fail to perform under any other agreement
involving the borrowing of money, the purchase of property, the
advance of credit or any other monetary liability of any kind to
any Person, whether such indebtedness now exists or shall hereafter
be created and such default shall result in such indebtedness
becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable;
(v)
The Borrower shall (a) be a
party to any Change of Control Transaction (as defined below),
(b) agree to sell or dispose all or in excess of 33% of its
assets in one or more transactions (whether or not such sale would
constitute a Change of Control Transaction), (c) redeem or
repurchase more than a de minimis number of shares of Common Stock
or other equity securities of Borrower, or (d) make any
distribution or declare or pay any dividends (in cash or other
property, other than common stock) on, or purchase, acquire,
redeem, or retire any of Borrower’s capital stock, of any
class, whether now or hereafter outstanding. “Change of
Control Transaction” shall mean the occurrence after the date
hereof of any of: (i) an acquisition after the date hereof by
an individual or legal entity or “group” (as described
in Rule 13d-5(b)(1) promulgated under the Securities
Exchange Act of 1934, as amended) of effective control (whether
through legal or beneficial ownership of capital stock of Borrower,
by contract or otherwise) of in excess of 33% of the voting
securities of Borrower, (ii) a replacement at one time or over
time of more than one -half of the members of Borrower’s
board of directors which is not approved by a majority of
those
2
individuals who are members of the
board of directors on the date hereof (or by those individuals who
are serving as members of the board of directors on any date whose
nomination to the board of directors was approved by a majority of
the members of the board of directors who are members on the date
hereof), (iii) the merger of Borrower with or into another
entity that is not wholly-owned by Borrower, consolidation or sale
of 33% or more of the assets of Borrower in one or a series of
related transactions, or (iv) the execution by Borrower of an
agreement to which Borrower is a party or by which it is bound,
providing for any of the events set forth above in (i),
(ii) or (iii).
(vi)
Any judgment(s), writ or similar
final process shall be entered or filed against the Borrower or any
of its subsidiaries, or any involuntary lien(s) of any kind or
character shall attach to any assets or property of Borrower, any
of which, in the judgment of Lender, might have a material adverse
effect on the financial condition or business of
Borrower;
(vii)
Any governmental or regulatory
authority shall take any action, any defined benefit pension plan
maintained by Borrower shall have any unfunded liabilities, or any
other event shall occur, any of which, in the judgment of Lender,
might have a material adverse effect on the financial condition or
business of Borrower;
(viii)
The Lender reasonably determine, in
good faith, that its security interest in the Collateral (as
defined in the Security Agreement) or the prospect of payment or
performance under this Agreement or any Loan Document is materially
impaired;
(ix)
Without Lender’s prior written
consent, any change shall occur in the executive management of
Borrower or any of its subsidiaries or any change shall occur in
the corporate or legal structure of Borrower or any of its
subsidiaries;
(x)
The Borrower or any of its
subsidiaries shall fa
