EXHIBIT 10.5

 

SENIOR SECURED DEMAND PROMISSORY NOTE

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND COMPLIANCE WITH SUCH STATE SECURITIES LAWS, IN
COMPLIANCE WITH RULE 144 UNDER THE SECURITIES ACT, OR AN OPINION OF COUNSEL OR
OTHER EVIDENCE SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND/OR
COMPLIANCE IS NOT REQUIRED.

See SCHEDULE A

September 6, 2006

Tampa, Florida

FOR VALUE RECEIVED, GLOBAL HOTLINE, INC. (the “Company”), promises to pay to the
order of IA GLOBAL, INC. (the “Lender”) or its registered assigns (the
“Holder”), the Principal Sum (as defined below) together with interest on the
outstanding portion of the Principal Sum from the date on which the first
portion of the Principal Sum was loaned to the Company until the date on which
the entire Principal Sum is paid in full at a rate equal to 1.5% per annum,
computed on the basis of the actual number of days elapsed and a year consisting
of 365 days. As used herein, “Principal Sum” means the aggregate amount loaned
to the Company by the Lender pursuant to this Note as reflected on Schedule A
hereto, as amended from time to time. Schedule A reflects all amounts loaned to
the Company by the Lender as of the date hereof. The Company shall amend
Schedule A to include any additional loans to the Company by the Lender made
after the date of this Note.

All unpaid principal, together with any accrued but unpaid interest and other
amounts payable hereunder, shall be due and payable upon demand given by the
Holder on or after July 15, 2006. Interest on this Note shall be payable in
arrears on each January 1, April 1, July 1, and October 1 after the date of
issuance of this Note by the issuance of an additional senior secured promissory
note identical in all respects to this Note except that it shall have a
principal amount equal to the amount of such interest payment. All other
Obligations payable under this Note shall be payable in lawful money of the
United States, unless otherwise provided herein.

The following is a statement of the rights of the Holder and the conditions to
which this Note is subject, and to which the Holder hereof, by the acceptance of
this Note, agrees:

1.            Definitions. The following capitalized terms used in this Note
have the following meanings:

(a)          “Company Note” means this Note or any note issued in payment of
interest on this Note.

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(b)          “Date of Original Issue” means May 26, 2006, the date on which the
first portion of the Principal Sum of this Note was loaned to the Company by the
Lender.

(c)          “Obligations” means the principal, interest and other amounts
payable under the Company Notes.

 

2.            Collateral. To secure the Company’s payment and performance of the
Obligations and to secure the Company’s prompt, full and faithful performance
and observance of all of the provisions under this Note and the other
Transaction Documents, the Company hereby grants the Holder a security interest
in all of the Company’s right, title and interest in and to the following,
whether now owned or hereafter acquired or existing and wherever located:

(a)           All inventory and equipment, and all parts thereof, attachments,
accessories and accessions thereto, products thereof and documents therefor;

(b)          All accounts, contract rights, chattel paper, instruments, deposit
accounts, general intangibles and other obligations of any kind, and all rights
now or hereafter existing in and to all mortgages, security agreements, leases
or other contracts securing or otherwise relating to any of the same;

(c)           All intellectual property and trade secrets, including, without
limitation,

(i)           all patents, patent applications and patentable inventions and (A)
the inventions and improvements described and claimed therein; (B) any
continuation, division, renewal, extension, substitute or reissue thereof or any
legal equivalent in a foreign country for the full term thereof or the terms for
which the same may be granted; (C) all rights to income, royalties, profits,
awards, damages and other rights relating to said patents, applications and
inventions, including the right to sue for past, present and future infringement
and (D) any other rights and benefits relating to said patents, applications and
inventions including any rights as a licensor or licensee of said patents,
applications and inventions (the “Patents”);

(ii)          all trademarks, trademark registrations, trademark applications,
service marks, service mark registrations and service mark applications, trade
names, fictitious business name, tradestyles, and the goodwill underlying those
trademarks and service marks and (A) any similar marks or amendments,
modifications and renewals thereof and the goodwill represented by those and any
legal equivalent in a foreign country for the full term or terms for which the
same may be granted; (B) all rights to income, royalties, profits, damages and
other rights relating to said trademarks and service marks including the right
to sue for past, present or future infringement and (C) any other rights and
benefits relating to said trademarks and service marks including any rights as a
licensor or licensee of said trademark and service mark (the “Trademarks”);

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(iii)         all copyrights, copyright registrations and copyright
applications, including without limitation those copyrights for computer
programs, computer databases, flow diagrams, maskworks, maskwork applications,
source codes and object codes, computer software, technical knowledge and
processes, trade secrets, know-how, customer lists, franchises, systems,
inventions, designs, blueprints, formal or informal licensing arrangements, and
all property embodying or incorporating such copyrights and (A) any similar
rights or amendments, modifications and renewals thereof and any legal
equivalent in a foreign country for the full term or terms for which the same
may be granted; (B) all rights to income, past, present and future infringement
and (C) any other rights and benefits relating to said copyrights (the
“Copyrights”);

(d)           all substitutions and replacements for, and all rights to exploit,
all of the foregoing;

(e)           all books and records pertaining to any of the foregoing; and

(f)            all proceeds of all of the foregoing and, to the extent not
otherwise included, all payments under insurance or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing.

All of the above assets are hereinafter collectively referred to as
“Collateral.”

The Company covenants and agrees with Holder that: (A) the security interest
granted under this Note is in addition to any other security interest from time
to time held by the Holder; (B) the Holder may realize upon all or part of any
Collateral in any order it desires and any realization by any means upon any
Collateral will not bar realization upon any other Collateral; and (C) the
security interest hereby created is a continuing security interest and will
cover and secure the payment of all Obligations both present and future of the
Company to Holder pursuant to this Note. The Company further covenants and
agrees to take all actions requested by the Holder to establish or perfect the
security interest granted under this Note.

3.            Prepayment. This Note may be prepaid as a whole or in part at any
time at the election of the Company. Any such prepayment amount shall be applied
first to the payment of expenses due under this Note, second to interest accrued
on the portion of this Note so prepaid and third, if the amount of prepayment
exceeds the amount of all such expenses and accrued interest, to the payment of
principal of this Note.

4.            Successors and Assigns. Subject to the restrictions on transfer
described in Sections 6 and 7 hereof, the rights and obligations of the Company
and the Holder of this Note shall be binding upon and benefit the successors,
assigns, heirs, administrators and transferees of the parties.

5.            Waiver and Amendment. Any provision of this Note may be amended,
waived or modified upon the written consent of the Company and the holder of
this Note.

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6.             Transfer of this Note. This Note may not be transferred in
violation of any restrictive legend set forth hereon. Each new Note issued upon
transfer of this Note shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with the Securities Act, unless in
the opinion of counsel for the Company such legend is not required in order to
ensure compliance with the Securities Act. The Company may issue stop transfer
instructions to its transfer agent in connection with such restrictions. Subject
to the foregoing, transfers of this Note shall be registered upon registration
books maintained for such purpose by or on behalf of the Company. Prior to
presentation of this Note for registration of transfer, the Company shall treat
the registered holder hereof as the owner and holder of this Note for the
purpose of receiving all payments of principal and interest hereon and for all
other purposes whatsoever, whether or not this Note shall be overdue and the
Company shall not be affected by notice to the contrary.

7.             Assignment by the Company. Neither this Note nor any of the
rights, interests or obligations hereunder may be assigned, by operation of law
or otherwise, in whole or in part, by the Company, without the prior written
consent of the Holder.

8.            Treatment of Note. To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report the Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.

9.            Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier, personal delivery or facsimile
transmission at the respective addresses or facsimile number of the parties as
designated by such party or as set forth on the register maintained by the
Company. Any party hereto may by notice so given change its address or facsimile
number for future notice hereunder. Notice shall conclusively be deemed to have
been given when received.

10.          Expenses; Waivers. If action is instituted to collect this Note,
the Company promises to pay all costs and expenses, including, without
limitation, reasonable attorneys’ fees and costs, incurred in connection with
such action. The Company hereby waives notice of default, presentment or demand
for payment, protest or notice of nonpayment or dishonor and all other notices
or demands relative to this instrument.

11.          Governing Law; Exclusive Jurisdiction; Jury Waiver. This Note and
all actions arising out of or in connection with this Note shall be governed by
and construed in accordance with the laws of the State of Delaware. IN THE EVENT
OF ANY DISPUTE AMONG OR BETWEEN ANY OF THE PARTIES TO THIS NOTE ARISING OUT OF
THE TERMS OF THIS NOTE, THE PARTIES HEREBY CONSENT TO THE EXCLUSIVE JURISDICTION
OF THE COURTS LOCATED IN THE STATE OF DELAWARE, OR THE UNITED STATES DISTRICT
COURT FOR THE EASTERN DISTRICT OF VIRGINIA, FOR RESOLUTION OF SUCH DISPUTE, AND
AGREE NOT TO CONTEST SUCH EXCLUSIVE JURISDICTION OR SEEK TO TRANSFER ANY ACTION
RELATING TO SUCH DISPUTE TO ANY OTHER JURISDICTION. THE COMPANY AND THE HOLDER
AGREE TO ACCEPT SERVICE OF PROCESS PURSUANT TO THE PROCEDURES SET FORTH IN
SECTION 9. THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS NOTE.

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IN WITNESS WHEREOF, the Company has caused this Note to be issued effective as
of September 6, 2006.

GLOBAL HOTLINE, INC.

 

By:

/s/ Hideki Anan

 

Name:

Hideki Anan

 

Title:

Chief Executive Officer

 

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SCHEDULE A

GLOBAL HOTLINE, INC.

SENIOR SECURED DEMAND PROMISSORY NOTE

as of SEPTEMBER 6, 2006

 

Date

Amount of Loan

05/26/2006

 40,000,000 Yen

06/05/2006

100,000,000 Yen

 

 

 

 

Total as of September 6, 2006

140,000,000 Yen

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