ex1003.htm


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

    


    SECURED PROMISSORY
NOTE

    
      	 
      	 
      	 
      
	 
      	 
      	
              Date
      of Issuance

            
	
              $1,300,000

            	 
      	
              December
      13, 2007

            


    

    


    


    


    FOR VALUE
RECEIVED, Golden Gate Investors, Inc., a California corporation (the “Company”),
hereby promises to pay American Security Resources Corporation, a Nevada
corporation (the “Lender”), the principal sum of One Million Three Hundred
Thousand Dollars ($1,300,000.00) (the “Principal Amount”), plus interest
calculated pursuant to Section 1 below. Unless earlier paid under the terms
hereof, the principal and accrued interest shall be due and payable by the
Company on demand by the Lender at any time after February 1, 2011 (the
“Maturity Date”).

     

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

     

    1. Interest.  The
Company promises to pay interest to Lender at the rate of seven and
three-quarters percent (7 3⁄4 %) per annum, simple interest, on the outstanding
principal amount of this Note, which interest shall be calculated from the date
of this Note, until the date on which all amounts due and payable on this Note
are paid in full or this Note is otherwise cancelled, (the “Payoff
Date”).  Interest hereunder shall be paid on a monthly basis,
commencing on the 15th date of
the month following the month of issuance of this Note. All accrued and
unpaid interest shall be due and payable on the Payoff Date.  All
computations of interest shall be made on the basis of a year of 365 or 366
days, as the case may be, for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest is
payable.  Nothing contained in this Note shall require the Company at
any time to pay interest at a rate exceeding the maximum rate allowable under
California law and any payments in excess of such maximum shall be refunded to
the Company or credited to reduce the principal amount hereunder.

     

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

     

    3. Prepayment
Obligation.  Notwithstanding the option of the Company to
prepay any portion of this Note, as set forth in Section 2 hereof, the Company
shall prepay, on a monthly basis, on any date(s) of such month during which this
Note remains outstanding (each such date referred to herein as the “Periodic
Prepayment Date”), an amount equal to not less than Two Hundred Fifty Thousand
Dollars ($250,000.00) (or such lesser amount that equals the remaining
outstanding principal and accrued and unpaid interest under this Note), with the
amount, if any, in excess of such sum to be determined by and in the sole and
absolute discretion of the Company, until all principal and accrued and unpaid
interest under this Note has been paid, subject to the satisfaction of each of
the following conditions on each Periodic Prepayment Date:

     

    3.1 The
Company may immediately sell all of the Common Stock Issued at Conversion (as
defined in the Debenture) pursuant to Rule 144 promulgated by the SEC (as
defined in the Debenture) pursuant to the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC having substantially the same effect as such Rule;

     

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

     

    3.3 The
average Volume Weighted Average Price (as defined in the Debenture) for every
period of ten consecutive Trading Days (as defined in the Debenture) during the
term of this Note shall not be less than $0.01 per share (as adjusted for any
stock splits, stock dividends, combinations, subdivisions, recapitalizations or
the like); and

     

    3.4 The
Lender shall have honored all Conversion Notices (as defined in the Debenture)
submitted by the Holder (as defined in the Debenture) within the applicable time
period set forth in the Debenture.

     

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

     

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

     

    5. Security
Interest.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    9. Transmittal of
Notices.  Except as may be otherwise provided herein, any
notice or other communication or delivery required or permitted hereunder shall
be in writing and shall be delivered personally, or sent by telecopier machine
or by a nationally recognized overnight courier service, and shall be deemed
given when so delivered personally, or by telecopier machine or overnight
courier service as follows:

     

    
      (1)           If
to the Lender, to:

      


      American
Security Resources Corporation

      9601 Katy
Freeway, Suite 220

      Houston,
Texas 77024

      Telephone:
713-465-1001

      Facsimile:
713-465-1080

      


      (2)           If
to the Company, to:

      Golden
Gate Investors, Inc.

      7817
Herschel Avenue, Suite 200

      La Jolla,
California 92037

      Telephone:
858-551-8789

      Facsimile:
858-551-8779

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

    
      
        	 
      	
                GOLDEN
      GATE INVESTORS, INC.

                 

                 

              
	 
      	
                By:                                                             

              
	 
      	
                Name:                                                             

              
	 
      	
                Its:                                                             

              
	 
      	
                 

                AMERICAN
      SECURITY RESOURCES CORPORATION

                 

                 

              
	 
      	
                By:                                                             

              
	 
      	
                Name:
      Frank Neukomm

              
	 
      	
                Its:
      CEO