**Exhibit10.4**

 

**PROMISSORY NOTE**

 

| $150,000 |   | August 10, 2009      |
|----------|--------|----------------------------------------------------|

SanFrancisco, California

 

FORVALUE RECEIVED, receipt of which is hereby acknowledged, Etelos, Inc., aDelaware Corporation with its principal place of business at 26828 Maple ValleyHighway, #297, Maple Valley, WA 98038 (the “Borrower”) promises to payto 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 inwriting (the “Lender”) in lawful money of the United States of America,the principal sum of One Hundred Fifty Thousand Dollars ($150,000) plusinterest thereon from the date the proceeds of the loan evidenced by this Noteare disbursed from the Lender to the Borrower until the Maturity Date (asdefined below), whether scheduled or accelerated, at a fixed interest rateequal to Ten Percent (10%) per annum.

 

1.                                       Payment.  Payment of principal and accrued but unpaidinterest shall be due and payable in full on February 10, 2010 (the “MaturityDate”), unless due earlier in accordance with the terms of this Note.

 

2.                                       Events ofDefault.

 

(a)                                  “Event ofDefault”, wherever used herein, means any one of the following events(whatever the reason for such event and whether such event shall be voluntary orinvoluntary or effected by operation of law or pursuant to any judgment, decreeor order of any court, or any order, rule or regulation of anyadministrative or governmental body):

 

(i)                                     Any default inthe payment of the principal amount of, or the interest on, this Note, when dueand payable or any failure to pay any fees or other charges on this Note whendue and payable;

 

(ii)                                  The Borrower orany of its subsidiaries or any other Person shall fail to provide the Lenderwith, or to perform any obligation under this Note or any contract, instrument,addenda, or document executed in connection with this Note, including withoutlimitation, any rate option agreement, guaranty, pledge agreement, securityagreement, or deed of trust (all such documents, including this Note, each a “LoanDocument”);

 

(iii)                               The Borrower orany of its subsidiaries shall commence, or there shall be commenced againstBorrower or any subsidiary a case under any applicable bankruptcy or insolvencylaws as now or hereafter in effect or any successor thereto, or the Borrower orany subsidiary commences any other proceeding under any reorganization,arrangement, adjustment of debt, relief of 

 

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debtors, dissolution, insolvency or liquidation or similar law of anyjurisdiction whether now or hereafter in effect relating to Borrower or anysubsidiary, or there is commenced against Borrower or any subsidiary any suchbankruptcy, insolvency or other proceeding which remains undismissed for a periodof 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 isentered; or Borrower or any subsidiary suffers any appointment of any custodianor the like for it or any substantial part of its property which continuesundischarged or unstayed for a period of 60 days; or Borrower or any subsidiarymakes a general assignment for the benefit of creditors; or Borrower or anysubsidiary shall fail to pay, or shall state that it is unable to pay, or shallbe unable to pay, its debts generally as they become due; or Borrower or anysubsidiary shall call a meeting of its creditors with a view to arranging acomposition, adjustment or restructuring of its debts; or the Borrower shalldie, become incapacitated, dissolve or terminate the business of the Borrower;or Borrower or any subsidiary shall by any act or failure to act expresslyindicate 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 thepurpose of effecting any of the foregoing;

 

(iv)                              The Borrower orany of its subsidiaries shall fail to perform under any other agreementinvolving the borrowing of money, the purchase of property, the advance ofcredit or any other monetary liability of any kind to any Person, whether suchindebtedness now exists or shall hereafter be created and such default shallresult in such indebtedness becoming or being declared due and payable prior tothe date on which it would otherwise become due and payable;

 

(v)                                 The Borrowershall (a) be a party to any Change of Control Transaction (as definedbelow), (b) agree to sell or dispose all or in excess of 33% of its assetsin one or more transactions (whether or not such sale would constitute a Changeof Control Transaction), (c) redeem or repurchase more than a de minimisnumber of shares of Common Stock or other equity securities of Borrower, or (d) makeany distribution or declare or pay any dividends (in cash or other property,other than common stock) on, or purchase, acquire, redeem, or retire any ofBorrower’s capital stock, of any class, whether now or hereafter outstanding. “Changeof Control Transaction” shall mean the occurrence after the date hereof of anyof: (i) an acquisition after the date hereof by an individual or legalentity or “group” (as described in Rule 13d-5(b)(1) promulgated underthe Securities Exchange Act of 1934, as amended) of effective control (whetherthrough legal or beneficial ownership of capital stock of Borrower, by contractor otherwise) of in excess of 33% of the voting securities of Borrower, (ii) areplacement at one time or over time of more than one-half of the members ofBorrower’s board of directors which is not approved by a majority of thoseindividuals who are members of the board of directors on the date hereof (or bythose individuals who are serving as members of the board of directors on any 

 

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date whose nomination to the board of directors was approved by amajority of the members of the board of directors who are members on the datehereof), (iii) the merger of Borrower with or into another entity that isnot wholly-owned by Borrower, consolidation or sale of 33% or more of theassets of Borrower in one or a series of related transactions, or (iv) theexecution by Borrower of an agreement to which Borrower is a party or by whichit is bound, providing for any of the events set forth above in (i), (ii) or(iii).

 

(vi)                              Anyjudgment(s), writ or similar final process shall be entered or filed againstthe Borrower or any of its subsidiaries, or any involuntary lien(s) of anykind or character shall attach to any assets or property of Borrower, any ofwhich, in the judgment of Lender, might have a material adverse effect on thefinancial condition or business of Borrower;

 

(vii)                           Anygovernmental or regulatory authority shall take any action, any defined benefitpension plan maintained by Borrower shall have any unfunded liabilities, or anyother event shall occur, any of which, in the judgment of Lender, might have amaterial adverse effect on the financial condition or business of Borrower;

 

(viii)                        The Lenderreasonably determine, in good faith, that its security interest in theCollateral (as defined in the Security Agreement) or the prospect of payment orperformance under this Agreement or any Loan Document is materially impaired;

 

(ix)                                Without Lender’sprior written consent, any change shall occur in the executive management ofBorrower or any of its subsidiaries or any change shall occur in the corporateor legal structure of Borrower or any of its subsidiaries;

 

(x)                                   The Borrower orany of its subsidiaries shall fail to perform any of its covenants, agreements,duties or obligations or otherwise commit any breach hereunder or in any LoanDocument.

 

(b)                                 Remedies UponEvent of Default. If any Event of Default occurs (unless waived inwriting by the Lender), the full principal amount of this Note, together withall accrued interest thereon, shall become, at the Lender’s election,immediately due and payable in cash. Commencing 5 days after the occurrence ofany Event of Default that results in the acceleration of this Note, theinterest rate on this Note shall accrue at the rate of 18% per annum, or suchlower maximum amount of interest permitted to be charged under applicablelaw.  The Lender need not provide andBorrower hereby waives any presentment, demand, protest or other notice of anykind, and the Lender may immediately and without expiration of any grace periodenforce any and all of its rights and remedies hereunder and all other remediesavailable to it under applicable law. Such declaration may be rescinded andannulled by Lender at any time prior to payment hereunder. No such rescissionor annulment shall affect any subsequent Event of 

 

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Defaultor impair any right consequent thereon. The Lender have the right, at its soleoption, to continue to accept interest and/or principal payments due under theLoan Documents after any Event of Default, and such acceptance shall notconstitute a waiver of such Event of Default or an extension of the MaturityDate unless Lender agree otherwise in writing. In the event of an Event ofDefault, Borrower agrees to pay all costs incurred in connection with thecollection of this Note, or enforcement of the terms of this Note, includingLender’s reasonable attorneys’ fees and related costs.

 

3.                                       SecurityInterest. As an inducement for the Lender to make the loanevidenced by this Note, and to secure the complete and timely payment,performance and discharge in full, as the case may be, of all of theobligations of the Borrower under this Note, the Borrower, for itself, and eachof its subsidiaries, unconditionally and irrevocably pledges, grants andhypothecates to the Lender a continuing and perfected security interest in andto, a lien upon and a right of set-off against all of their respective right,title and interest of whatsoever kind and nature in and to, all of the assetsof the Borrower.  The Borroweracknowledges and agrees that the obligations of the Borrower under this Note,are subject to security interest granted by the Borrower pursuant to theSecurity Agreement dated January 31, 2008, by and among the Borrower andthe secured parties thereto (the “Security Agreement”) and that suchobligations are “Obligations” under the Security Agreement.  The Borrower and each of its subsidiariesshall take any and all actions requested by the Lender in order to grant theLender a first priority security interest in the assets of the Borrower and itssubsidiaries, including all UCC-1 filing receipts.

 

4.                                       No Waiver ofLender’s Rights.   All payments of principal and interest shallbe made without setoff, deduction or counterclaim. No delay or failure on thepart of the Lender in exercising any of its options, powers or rights, nor anypartial or single exercise of its options, powers or rights shall constitute awaiver thereof or of any other option, power or right, and no waiver on thepart of the Lender of any of its options, powers or rights shall constitute awaiver of any other option, power or right. Borrower hereby waives presentmentof payment, protest, and all notices or demands in connection with thedelivery, acceptance, performance, default or endorsement of this Note.Acceptance by the Lender of less than the full amount due and payable hereundershall in no way limit the right of the Lender to require full payment of allsums due and payable hereunder in accordance with the terms hereof.

 

5.                                       Modifications.   No term or provision contained herein may bemodified, amended or waived except by written agreement or consent signed bythe party to be bound thereby.

 

6.                                       Consent.   In accordance with the provisions of theLoan Documents held by Lender, and solely with respect to this Note, Lenderwaives its rights under those certain Loan Documents and grants its consent toBorrower to enter into and perform the obligations in this Note.

 

7.                                       Choice of Law.   All questions concerning the construction,validity, enforcement and interpretation of this Note shall be governed by andconstrued and enforced in accordance with the internal laws of the State of NewYork, without regard to the principles of conflicts of law thereof. Each ofBorrower and Lender agree that all legal proceedings concerning the 

 

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interpretations,enforcement and defense of this Note shall be commenced in the state andfederal courts sitting in the City of New York, Borough of Manhattan (the “NewYork Courts”). Each of Borrower and Lender hereby irrevocably submit to theexclusive jurisdiction of the New York Courts for the adjudication of anydispute hereunder (including with respect to the enforcement of this Note), andhereby irrevocably waives, and agrees not to assert in any suit, action orproceeding, any claim that it is not personally subject to the jurisdiction ofany such court, that such suit, action or proceeding is improper. Each ofBorrower and Lender hereby irrevocably waive personal service of process andconsents to process being served in any such suit, action or proceeding bymailing a copy thereof via registered or certified mail or overnight delivery(with evidence of delivery) to the other at the address in effect for noticesto it under this Note and agrees that such service shall constitute good andsufficient service of process and notice thereof. Nothing contained hereinshall be deemed to limit in any way any right to serve process in any mannerpermitted by law. EACH OF BORROWER AND LENDER HEREBY IRREVOCABLY WAIVE, TO THEFULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURYIN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THETRANSACTIONS CONTEMPLATED HEREBY.

 

8.                                       CumulativeRights and Remedies; Usury.   The rights and remedies of Lender expressedherein are cumulative and not exclusive of any rights and remedies otherwiseavailable under this Note or applicable law (including at equity). The electionof Lender to avail itself of any one or more remedies shall not be a bar to anyother available remedies, which Borrower agrees Lender may take from time totime. If it shall be found that any interest due hereunder shall violateapplicable laws governing usury, the applicable rate of interest due hereundershall be reduced to the maximum permitted rate of interest under such law.

 

9.                                       Severability.   If any provision of this Note is declared bya court of competent jurisdiction to be in any way invalid, illegal orunenforceable, the balance of this Note shall remain in effect, and if anyprovision is inapplicable to any person or circumstance, it shall neverthelessremain applicable to all other persons and circumstances. If it shall be foundthat any interest or other amount deemed interest due hereunder shall violateapplicable laws governing usury, the applicable rate of interest due hereundershall automatically be lowered to equal the maximum permitted rate of interest.

 

10.                                 Successors andAssigns.   This Note shall be bindingupon Borrower and its successors and shall inure to the benefit of the Lenderand its successors and assigns. The term “Lender” as used herein, shall alsoinclude any endorsee, assignee or other holder of this Note.

 

11.                                 Lost or StolenPromissory Note.   If thisNote is lost, stolen, mutilated or otherwise destroyed, Borrower shall executeand deliver to the Lender a new promissory note containing the same terms, andin the same form, as this Note. In such event, Borrower may require the Lenderto deliver to Borrower an affidavit of lost instrument and customary indemnityin respect thereof as a condition to the delivery of any such new promissorynote.

 

12.                                 DueAuthorization.   This Notehas been duly authorized, executed and delivered by 

 

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Borrowerand is the legal obligation of Borrower, enforceable against Borrower inaccordance with its terms except as limited by general equitable principles andapplicable bankruptcy, insolvency, reorganization, moratorium and other laws ofgeneral application affecting enforcement of creditors’ rights generally.  No consent of any other party and no consent,license, approval or authorization of, or registration or declaration with, anygovernmental authority, bureau or agency is required in connection with theexecution, delivery or performance by the Borrower, or the validity orenforceability of this Note other than such as have been met or obtained. Theexecution, delivery and performance of this Note and all other agreements andinstruments executed and delivered or to be executed and delivered pursuanthereto or thereto or the securities issuable upon conversion of this Note willnot violate any provision of any existing law or regulation or any order ordecree of any court, regulatory body or administrative agency or thecertificate of incorporation or by-laws of the Borrower or any mortgage,indenture, contract or other agreement to which the Borrower is a party or bywhich the Borrower or any property or assets of the Borrower may be bound.

 

13.                                 Notice.   Any and all notices or other communicationsor deliveries to be provided by the Lender hereunder shall be in writing anddelivered personally, by facsimile, sent by a nationally recognized overnightcourier service or sent by certified or registered mail, postage prepaid,addressed to the Borrower, or such other address or facsimile number as theBorrower may specify for such purposes by notice to the Lender delivered inaccordance with this paragraph.  Any andall notices or other communications or deliveries to be provided by theBorrower hereunder shall be in writing and delivered personally, by facsimile,sent by a nationally recognized overnight courier service or sent by certifiedor registered mail, postage prepaid, addressed to the Lender at the address ofthe Lender appearing on the books of the Borrower, or if no such addressappears, at the principal place of business of the Lender.  Any notice or other communication ordeliveries hereunder shall be deemed given and effective on the earliest of (i) thedate of transmission if delivered by hand or by telecopy that has beenconfirmed as received by 5:00 P.M. on a business day, (ii) onebusiness day after being sent by nationally recognized overnight courier orreceived by telecopy after 5:00 P.M. on any day, or (iii) fivebusiness days after being sent by certified or registered mail, postage andcharges prepaid, return receipt requested.

 

14.                                 Time of theEssence.  Time is of the essence of thisNote.

 

15.                                 Current Report.  Within 2 business days from the date of this Note, theBorrower shall file a Current Report on Form 8-K with the Securities andExchange Commission, attaching this Note, and disclosing the material terms ofthis Note.

 

Priorto signing this Note, Borrower has consulted with its counsel and has read andunderstands all the provisions of this Note. Borrower agrees to the terms of the Note and acknowledges receipt of acompleted copy of the Note.

 

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The undersigned signs this Note as a maker and not as a surety or guarantor or in any other capacity.

 

 
|   | ETELOS,  INC.                                       |
|--------|-----------------------------------------------------|
|   |                                                |
|   |                                                |
|   | By:                                                 |   |
|   | Name:  Daniel J.A. Kolke                            |
|   | Title:  Chairman & Chief Executive Officer |

 

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