Exhibit
10.4


 


PROMISSORY NOTE


 




	
  $150,000

  	
   

  	
  August 10, 2009     

  






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 One Hundred Fifty Thousand Dollars ($150,000) 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.


 


1.                                       Payment.  Payment of principal and accrued but unpaid
interest shall be due and payable in full on February 10, 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 


 


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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
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 


 


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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 fail to perform any of its covenants, agreements,
duties or obligations or otherwise commit any breach hereunder or in any Loan
Document.


 


(b)                                 Remedies Upon
Event of Default. If any Event of Default occurs (unless waived in
writing by the Lender), the full principal amount of this Note, together with
all accrued interest thereon, shall become, at the Lender’s election,
immediately due and payable in cash. Commencing 5 days after the occurrence of
any Event of Default that results in the acceleration of this Note, the
interest rate on this Note shall accrue at the rate of 18% per annum, or such
lower maximum amount of interest permitted to be charged under applicable
law.  The Lender need not provide and
Borrower hereby waives any presentment, demand, protest or other notice of any
kind, and the Lender may immediately and without expiration of any grace period
enforce any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Such declaration may be rescinded and
annulled by Lender at any time prior to payment hereunder. No such rescission
or annulment shall affect any subsequent Event of 


 


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Default
or impair any right consequent thereon. The Lender have the right, at its sole
option, to continue to accept interest and/or principal payments due under the
Loan Documents after any Event of Default, and such acceptance shall not
constitute a waiver of such Event of Default or an extension of the Maturity
Date unless Lender agree otherwise in writing. In the event of an Event of
Default, Borrower agrees to pay all costs incurred in connection with the
collection of this Note, or enforcement of the terms of this Note, including
Lender’s reasonable attorneys’ fees and related costs.


 


3.                                       Security
Interest. As an inducement for the Lender to make the loan
evidenced by this Note, and to secure the complete and timely payment,
performance and discharge in full, as the case may be, of all of the
obligations of the Borrower under this Note, the Borrower, for itself, and each
of its subsidiaries, unconditionally and irrevocably pledges, grants and
hypothecates to the Lender a continuing and perfected security interest in and
to, 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 assets
of the Borrower.  The Borrower
acknowledges and agrees that the obligations of the Borrower under this Note,
are subject to security interest granted by the Borrower pursuant to the
Security Agreement dated January 31, 2008, by and among the Borrower and
the secured parties thereto (the “Security Agreement”) and that such
obligations are “Obligations” under the Security Agreement.  The Borrower and each of its subsidiaries
shall take any and all actions requested by the Lender in order to grant the
Lender a first priority security interest in the assets of the Borrower and its
subsidiaries, including all UCC-1 filing receipts.


 


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


 


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


 


6.                                       Consent.   In accordance with the provisions of the
Loan Documents held by Lender, and solely with respect to this Note, Lender
waives its rights under those certain Loan Documents and grants its consent to
Borrower 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 and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each of
Borrower 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 and
federal courts sitting in the City of New York, Borough of Manhattan (the “New
York Courts”). Each of Borrower and Lender hereby irrevocably submit to the
exclusive jurisdiction of the New York Courts for the adjudication of any
dispute hereunder (including with respect to the enforcement of this Note), and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is improper. Each of
Borrower and Lender hereby irrevocably waive personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to the other at the address in effect for notices
to it under this Note and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. EACH OF BORROWER AND LENDER HEREBY IRREVOCABLY WAIVE, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE
TRANSACTIONS CONTEMPLATED HEREBY.


 


8.                                       Cumulative
Rights and Remedies; Usury.   The rights and remedies of Lender expressed
herein are cumulative and not exclusive of any rights and remedies otherwise
available under this Note or applicable law (including at equity). The election
of Lender to avail itself of any one or more remedies shall not be a bar to any
other available remedies, which Borrower agrees Lender may take from time to
time. If it shall be found that any interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall be reduced to the maximum permitted rate of interest under such law.


 


9.                                       Severability.   If any provision of this Note is declared by
a court of competent jurisdiction to be in any way invalid, illegal or
unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.


 


10.                                 Successors and
Assigns.   This Note shall be binding
upon Borrower and its successors and shall inure to the benefit of the Lender
and its successors and assigns. The term “Lender” as used herein, shall also
include any endorsee, assignee or other holder of this Note.


 


11.                                 Lost or Stolen
Promissory Note.   If this
Note is lost, stolen, mutilated or otherwise destroyed, Borrower shall execute
and deliver to the Lender a new promissory note containing the same terms, and
in the same form, as this Note. In such event, Borrower may require the Lender
to deliver to Borrower an affidavit of lost instrument and customary indemnity
in respect thereof as a condition to the delivery of any such new promissory
note.


 


12.                                 Due
Authorization.   This Note
has been duly authorized, executed and delivered by 


 


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Borrower
and is the legal obligation of Borrower, enforceable against Borrower in
accordance with its terms except as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general 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, any
governmental authority, bureau or agency is required in connection with the
execution, delivery or performance by the Borrower, or the validity or
enforceability of this Note other than such as have been met or obtained. The
execution, delivery and performance of this Note and all other agreements and
instruments executed and delivered or to be executed and delivered pursuant
hereto or thereto or the securities issuable upon conversion of this Note will
not violate any provision of any existing law or regulation or any order or
decree of any court, regulatory body or administrative agency or the
certificate of incorporation or by-laws of the Borrower or any mortgage,
indenture, contract or other agreement to which the Borrower is a party or by
which the Borrower or any property or assets of the Borrower may be bound.


 


13.                                 Notice.   Any and all notices or other communications
or deliveries to be provided by the Lender hereunder shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized overnight
courier service or sent by certified or registered mail, postage prepaid,
addressed to the Borrower, or such other address or facsimile number as the
Borrower may specify for such purposes by notice to the Lender delivered in
accordance with this paragraph.  Any and
all notices or other communications or deliveries to be provided by the
Borrower hereunder shall be in writing and delivered personally, by facsimile,
sent by a nationally recognized overnight courier service or sent by certified
or registered mail, postage prepaid, addressed to the Lender at the address of
the Lender appearing on the books of the Borrower, or if no such address
appears, at the principal place of business of the Lender.  Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i) the
date of transmission if delivered by hand or by telecopy that has been
confirmed as received by 5:00 P.M. on a business day, (ii) one
business day after being sent by nationally recognized overnight courier or
received by telecopy after 5:00 P.M. on any day, or (iii) five
business days after being sent by certified or registered mail, postage and
charges prepaid, return receipt requested.


 


14.                                 Time of the
Essence.  Time is of the essence of this
Note.


 


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


 


Prior
to signing this Note, Borrower has consulted with its counsel and has read and
understands all the provisions of this Note. 
Borrower agrees to the terms of the Note and acknowledges receipt of a
completed 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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