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EXHIBIT 4.09  

 
 

CELLEGY PHARMACEUTICALS, INC.    
    
    NOTICE OF ASSUMPTION OF BIOSYN OPTIONS    
    

Dear
«Name»: 

        As
you know, on October 22, 2004, Cellegy Pharmaceuticals, Inc. ("Cellegy") acquired all the outstanding shares of capital
stock of Biosyn, Inc. ("Biosyn") and assumed all outstanding options and warrants to purchase Biosyn common stock in an exchange transaction (the
"Exchange"). This letter confirms the information set forth in the Stock Option Assumption Agreement ("Option Assumption
Agreement") that was previously sent to you regarding one or more outstanding options to purchase Biosyn common stock ("Biosyn
Options") held by you prior to the Exchange. As a result of the Exchange, your Biosyn Options are no longer exercisable for Biosyn common stock. Instead, your Biosyn Options
are exercisable for shares of Cellegy common stock under the terms set forth in the Option Assumption Agreement. 

        The
tables below summarize your Biosyn Options immediately before and after the Exchange. These options may have been granted to you pursuant to Biosyn's 1999 Stock Option Plan (the
"Plan") or they may have been granted to you other than pursuant to the Plan. 

	BIOSYN PLAN OPTION
	 	ASSUMED BIOSYN OPTION

	Grant Date
 
	 	Option

Expiration Date
 
	 	No. of Shares of

Biosyn Common Stock
 
	 	Exercise Price

per share
 
	 	No. of Shares of Cellegy

Common Stock
 
	 	Exercise Price

Per Share
 

	«Grant Date»	 	«Expiration Date»	 	«Biosyn No.»	 	$«BiosynExPrice»	 	«Cellegy No.»	 	$«CellegyExPrice»
	«Grant Date»	 	«Expiration Date»	 	«Biosyn No.»	 	$«BiosynExPrice»	 	«Cellegy No.»	 	$«CellegyExPrice»
	«Grant Date»	 	«Expiration Date»	 	«Biosyn No.»	 	$«BiosynExPrice»	 	«Cellegy No.»	 	$«CellegyExPrice»

	

BIOSYN NON-PLAN OPTION
	 	

ASSUMED BIOSYN OPTION

	Grant Date
 
	 	Option

Expiration Date
 
	 	No. of Shares of

Biosyn Common Stock
 
	 	Exercise Price

per share
 
	 	No. of Shares of Cellegy

Common Stock
 
	 	Exercise Price

Per Share
 

	«Grant Date»	 	«Expiration Date»	 	«Biosyn No.»	 	$«BiosynExPrice»	 	«Cellegy No.»	 	$«CellegyExPrice»
	«Grant Date»	 	«Expiration Date»	 	«Biosyn No.»	 	$«BiosynExPrice»	 	«Cellegy No.»	 	$«CellegyExPrice»
	«Grant Date»	 	«Expiration Date»	 	«Biosyn No.»	 	$«BiosynExPrice»	 	«Cellegy No.»	 	$«CellegyExPrice»

        To exercise your assumed Biosyn Option(s), you must send to Cellegy at the address listed on the attached Exercise Notices (i) an executed
and completed Exercise Notice for each Biosyn Option that you intend to exercise and (ii) the full purchase price of the Cellegy common stock that you wish to acquire upon exercise of the
Biosyn Option in accordance with the Exercise Notice. 

        If
you are an employee of Cellegy, you should execute and deliver to Cellegy the Exercise Notice attached to this letter as  Exhibit A. If you are not an employee of Cellegy, you should execute and
deliver to Cellegy the Exercise Notice attached to this letter as  Exhibit B.
 

        Please note that pursuant to the terms of the Exchange, you will not be able to sell any shares of Cellegy common stock that you acquire upon exercise of your
assumed Biosyn Options until January 20, 2005.

        If
you have any questions about your assumed Biosyn Option(s), please call Virginia Alsup at Cellegy at 650-616-2200. 

	 	 	CELLEGY PHARMACEUTICALS, INC.
	

 	
 	

 A. Richard Juelis,

Chief Financial Officer

 
 

EXHIBIT A    
    
    NOTICE OF EXERCISE
  (For Employees of Cellegy Pharmaceuticals, Inc.)    
    

CELLEGY
PHARMACEUTICALS, INC. 

	Address:	 	349 Oyster Point Boulevard, Suite 200

South San Francisco, CA 94080

Attention:
Corporate Secretary 

I
hereby elect to purchase the number of shares of Common Stock of CELLEGY PHARMACEUTICALS, INC. (the "Company") as set forth below: 

	Option Holder:	 	
	 	Number of Shares Purchased:	 	

	Social Security Number:	 	
	 	Purchase Price per Share:	 	

	Address:	 	
	 	Aggregate Purchase Price:	 	

	 	 	
	 	Date of Option Agreement:	 	

Type
of Option: 

	o
	Incentive
Stock Option 
	o
	Non-qualified
Stock Option

	1.
	Delivery of Purchase Price. Option Holder hereby delivers to the Company the Aggregate Purchase Price, to the extent permitted in the
Stock Option Agreement (the "Option Agreement") as follows (check as applicable and complete):

	o
	in
cash (by check) in the amount of $                        , receipt of which is acknowledged by the Company;

	o
	through
a "same-day-sale" commitment, delivered herewith, from Option Holder and the NASD Dealer named therein, in
the amount of $                  .

	2.
	Lock-Up; Legend. Option Holder hereby agrees that the Shares are subject to a lock-up agreement between the
Company and Option Holder and that Option Holder may not sell or otherwise transfer, or enter into any agreement to sell or transfer, or enter into any other economic arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of the Shares (other than to donees of Option Holder who agree to be similarly bound) prior to January 20, 2005.
Option Holder hereby agrees that the Company may place appropriate restrictive legends on any stock certificates representing the Shares and may impose stop-transfer instructions with
respect to the Shares to effect the foregoing.

	3.
	Tax Consequences. OPTION HOLDER UNDERSTANDS THAT OPTION HOLDER MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF OPTION HOLDER'S
PURCHASE OR DISPOSITION OF THE SHARES. OPTION HOLDER REPRESENTS THAT OPTION HOLDER HAS CONSULTED WITH ANY TAX CONSULTANT(S) OPTION HOLDER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION
OF THE SHARES AND THAT OPTION HOLDER IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVISE.

	4.
	Entire Agreement. The Option Agreement and the Stock Option Assumption Agreement that was previously delivered to Option Holder in
connection with the Company's acquisition of Biosyn, Inc. ("Option Assumption Agreement") are incorporated herein by reference. This Exercise Notice, the Option Agreement and the Option
Assumption Agreement constitute the entire agreement and understanding of the parties and supersede in their entirety all prior understandings and agreements of the Company and Option Holder with
respect to the subject matter hereof. 

	
 Date	 	
 Signature of Option Holder

 
 

Spousal Consent    
    

        I acknowledge that I have read the foregoing Notice of Exercise (the "Notice") and that I know its contents. I
hereby consent to and approve all of the provisions of the Notice, and agree that the shares of the Common Stock of Cellegy Pharmaceuticals, Inc. purchased thereunder (the
"Shares") and any interest I may have in such Shares are subject to all the provisions of the Notice. I will take no action at any time to hinder
operation of the Agreement on these Shares or any interest I may have in or to them. 

	
 Date	 	
 Signature of Optionee's Spouse
	

 	
 	

 Spouse's Name typed or printed
	

 	
 	

 Optionee's Name typed or printed

 
 

EXHIBIT B    
    
    NOTICE OF EXERCISE
  (For Option Holders that are Not Employees of Cellegy Pharmaceuticals, Inc.)    
    

CELLEGY
PHARMACEUTICALS, INC. 

	Address:	 	349 Oyster Point Boulevard, Suite 200

South San Francisco, CA 94080

Attention:
Corporate Secretary 

        1.    Exercise of Option.    Effective as of today,
                        200            ,
            , the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase                        shares of the Common Stock
(the "Shares") of Cellegy Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), under and pursuant to the Stock Option Agreement dated                        ,
            (the "Option Agreement"). 

        2.    Delivery of Payment.    Optionee herewith delivers to the Company the full purchase price of the Shares, as set
forth in the Option Agreement, and any and all withholding taxes due in connection with the exercise of the Option. 

        3.    Representations of Optionee.    Optionee acknowledges that Optionee has received, read and understood the Option
Agreement and the Stock Option Assumption Agreement that was previously delivered to Optionee and agrees to abide by and be bound by their terms and conditions. 

        4.    Rights as Shareholder.    Until the issuance of the Shares (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Shares shall be issued to the Optionee as soon as practicable after the Option is exercised. 

        5.    Tax Consultation.    Optionee understands that Optionee may suffer adverse tax consequences as a result of
Optionee's purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of
the Shares and that Optionee is not relying on the Company for any tax advice. 

        6.    Representations of Optionee.    In connection with the purchase of the Shares, Optionee represents to the
Company the following: 

        6.1  Optionee
is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Shares. Optionee is acquiring these Shares for investment for Optionee's own account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). 

        6.2  Optionee
acknowledges and understands that the Shares constitute "restricted securities" under the Securities Act and have not been registered under the Securities Act
in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Optionee's representation was predicated solely upon a
present intention to hold these Shares for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Shares,
or for a period of one year or any other fixed period in the future. Optionee further understands that the Shares must be held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further acknowledges and understands that the Company is under no obligation to register the Shares unless Optionee becomes a party to
that certain Registration Rights Agreement dated as of October 22, 2004 

among
the Company and certain former shareholders of Biosyn, Inc. Optionee understands that the certificate evidencing the Shares will be imprinted with any legend required under applicable
state securities laws. 

        6.3  Optionee
is familiar with the provisions of 144 promulgated under the Securities Act, which, in substance, permit limited public resale of "restricted securities"
acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. The Shares may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than one year after the later of the date the Shares were sold by the Company or the date the
Shares were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Shares by an affiliate, or by a non-affiliate who
subsequently holds the Shares less than two years, the satisfaction of the following conditions: (1) the resale is made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); (2) the availability of certain public information about the Company;
(3) the amount of Shares being sold during any three month period not exceeding the limitations specified in Rule 144(e); and (4) the timely filing of a Form 144, if
applicable. 

        6.4  Optionee
further understands that in the event all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance
with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 is not exclusive, the Staff of the Securities and Exchange
Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 will have a
substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such
transactions do so at their own risk. Optionee understands that no assurances can be given that any such other registration exemption will be available in such event. 

        7.    Restrictive Legends and Stop-Transfer Orders.    

        7.1    Legends.    Optionee understands and agrees that the Company shall cause the legend set forth below or legends
substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal
securities laws: 

THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH. 

        7.2    Stop-Transfer Notices.    Optionee agrees that, in order to ensure compliance with the restrictions
referred to herein, the Company may issue appropriate "stop transfer" instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records. 

        7.3    Refusal to Transfer.    The Company shall not be required (i) to transfer on its books any Shares that
have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to
any purchaser or other transferee to whom such Shares shall have been so transferred. 

        8.    Successors and Assigns.    The Company may assign any of its rights under this Exercise Notice to single or
multiple assignees, and this Exercise Notice shall inure to the benefit of the successors and 

assigns
of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Optionee and his or her heirs, executors, administrators, successors and
assigns. 

        9.    Governing Law; Severability.    This Exercise Notice is governed by the internal substantive laws but not the
choice of law rules, of the Commonwealth of Pennsylvania. In the event that any provision hereof becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Option Agreement will continue in full force and effect. 

        10.    Lock-Up; Legend.    Option Holder hereby agrees that the Shares are subject to a
lock-up agreement between the Company and Option Holder and that Option Holder may not sell or otherwise transfer, or enter into any agreement to sell or transfer, or enter into any other
economic arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Shares (other than to donees or partners of Option Holder who agree to be similarly bound) prior to January 20, 2005. Option Holder hereby agrees that the
Company may place appropriate restrictive legends on any stock certificates representing the Shares and may impose stop-transfer instructions with respect to the Shares to effect the
foregoing. 

        11.    Entire Agreement.    The Option Agreement are incorporated herein by reference. This Exercise Notice, the Stock
Option Assumption Agreement that was previously delivered to Option Holder in connection with the Company's acquisition of Biosyn, Inc. ("Option Assumption Agreement"), and the Option Agreement
constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect
to the subject matter hereof, and may not be modified adversely to the Optionee's interest except by means of a writing signed by the Company and Optionee. 

	Submitted by:

OPTIONEE	 	Accepted by:

CELLEGY PHARMACEUTICALS, INC.
	

 Signature	
 	

 By
	

 Print Name	
 	

 Title
	

Address:	
 	

 
	

	
 	

 
	

	

 	

 
	

	

 	

 
	

 	
 	

 Date Received

 
 

Spousal Consent    
    

        I acknowledge that I have read the foregoing Notice of Exercise (the "Notice") and that I know its contents. I
hereby consent to and approve all of the provisions of the Notice, and agree that the shares of the Common Stock of Cellegy Pharmaceuticals, Inc. purchased thereunder (the
"Shares") and any interest I may have in such Shares are subject to all the provisions of the Notice. I will take no action at any time to hinder
operation of the Agreement on these Shares or any interest I may have in or to them. 

	
 Date	 	
 Signature of Optionee's Spouse
	

 	
 	

 Spouse's Name typed or printed
	

 	
 	

 Optionee's Name typed or printed

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CELLEGY PHARMACEUTICALS, INC. NOTICE OF ASSUMPTION OF BIOSYN OPTIONS

EXHIBIT A NOTICE OF EXERCISE (For Employees of Cellegy Pharmaceuticals, Inc.)

Spousal Consent

EXHIBIT B NOTICE OF EXERCISE (For Option Holders that are Not Employees of Cellegy Pharmaceuticals, Inc.)

Spousal ConsentSECURITIES AND EXCHANGE COMMISSION

Exhibit 4.7

THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT 

OF 1933, AS AMENDED. THE NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND 

MUST BE HELD INDEFINITELY AND MAY NOT BE SOLD, TRANSFERRED OR 

OTHERWISE DISPOSED OF UNLESS IT IS SUBSEQUENTLY REGISTERED UNDER SAID 

ACT OR, IN THE OPINION OF COUNSEL TO THE COMPANY, AN EXEMPTION FROM 

REGISTRATION UNDER SAID ACT IS AVAILABLE.

SECURED CONVERTIBLE PROMISSORY NOTE

CAD$500,000

December 23, 2004

FOR VALUE RECEIVED, Elgrande.com, Inc., a Nevada corporation ("Maker"), promises to pay to Thomas A. Simons ("Payee"),  in lawful money of the United States of America, the principal sum of Five Hundred Thousand Dollars (CAD$500,000), together with interest thereon accruing at an annual rate equal to 8%, in the manner provided below. Interest shall be calculated on the basis of a year of 365 or 366 days, as applicable, and charged for the actual number of days elapsed.  

The principal amount of this Note represents an advance of CAD$250,000 by Payee to Maker on the issue date hereof, and prior advances of CAD$250,000 by Payee to Maker.

1.  PAYMENTS

           1.1 Principal and interest.

Accrued interest shall be payable on July 1, 2005; December 31, 2005, and July 1, 2006.  All principal and accrued interest shall be paid in full on or before December 31, 2006 (the “Maturity Date”).

1.2 Manner of Payment

All payments of principal and interest on this Note shall be made by check to Payee at 1450 Kootenay Street, Vancouver, B.C. V5K 4R1, or at such other place in British Columbia as Payee shall designate to Maker in writing. If any payment of principal or interest on this Note is due on a day which is not a Business Day, such payment shall be due on the next succeeding Business Day. "Business Day" means any day other than a Saturday, Sunday or legal holiday in British Columbia.

1.3 Payment/Prepayment

(a)  Maker may, without premium or penalty, at any time and from time to time, prepay all or any portion of the outstanding principal balance due under this Note, provided that each such prepayment is accompanied by accrued interest on the amount of principal prepaid calculated to the date of such prepayment.

(b) Any partial prepayments will be applied first to accrued interest and then to principal.

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2.  DEFAULTS

2.1 Events of Default

The occurrence of any one or more of the following events with respect to Maker shall constitute an event of default hereunder ("Event of Default"):

(a)  If Maker shall fail to pay when due my payment of principal or interest on this Note.

(b)  If, pursuant to any federal or provincial law relating to insolvency or relief of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary case or proceeding; (ii) consent to the entry of an order for relief against it in an involuntary case; (iii) consent to the appointment of a trustee, receiver, assignee, liquidator or similar official; (iv) make an assignment for the benefit of its creditors; or (v) admit in writing its inability to pay its debts as they become due.

(c)  If a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (i) is for relief against Maker in an involuntary case; (ii) appoints of a trustee, receiver, assignee, liquidator or similar official for the Maker or substantially all of the Maker's properties; or (iii) orders the liquidation of the Maker, and in each case the order it not dismissed within 90 days.

2.2 Remedies

Upon the occurrence of an Event of Default hereunder (unless all Events of Default have been cured or waived by Payee), Payee may, at its option, (i) by written notice to Maker, declare the entire unpaid principal balance of this Note, together with all accrued interest thereon, immediately due and payable, and (ii) exercise all and any rights and remedies available to it under applicable law, including, without limitation, the right to collect from maker all sums due under this Note. Maker shall pay all reasonable costs and expenses incurred by or on behalf of Payee in connection with Payee’s exercise of any or all of its rights and remedies under this Note, including, without limitation, reasonable attorneys' fees and expenses. 

3. REPRESENTATIONS BY PAYEE

Payee represents and warrants to Maker as follows:

(a) Payee has received and examined all information, including financial statements, of or concerning Maker which Payee considers necessary to making an informed decision regarding this Note. In addition, Payee has had the opportunity to ask questions of, and receive answers from, the officers and agents of Maker concerning Maker and to obtain such information, to the extent such persons possessed the same or could acquire it without unreasonable effort or expense, as Payee deemed necessary to verify the accuracy of the information referred to herein.

(b) The Payee acknowledges and understands that (i) the proceeds of this Note will not be sufficient to provide Maker with the necessary funds to achieve its current business plan; (ii) the Maker does not have sufficient cash available to repay this Note; (iii) this Note will not be guaranteed, (iv) Payee bears the economic risk of never being repaid on this Note; and (v) the Maker may use the proceeds of this Note to satisfy past payables.

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(c) The Payee hereby certifies that Payee is an "Accredited Investor" (as that term is defined by Regulation D under the Securities Act of 1933, as amended) because at least one of the following statements is applicable to Payee:

(i) Payee is an Accredited Investor because the Payee had individual income of more than $200,000 in each of the two prior calendar years and reasonably expects to have individual income in excess of $200,000 during the current calendar year.

(ii) The Payee is an Accredited Investor because the Payee and his spouse together had income of more than $300,000 in each of the two prior calendar years and reasonably expect to have joint income in excess of $300,000 during the current calendar year.

(iii) The Payee is an Accredited Investor because the Payee has an individual net worth, or the Payee and his spouse have a joint net worth of more than $1,000,000.

(iv) The Payee is an Accredited Investor because the Payee has total assets in excess of $5,000,000.

(d) Payee is acquiring this Note for his own account, for investment purposes only, and not with a view to the resale or distribution of all or any part thereof.

(e) Payee acknowledges that this Note (i) has not been registered under applicable securities laws, (ii) will be a "restricted security" as defined in applicable securities laws, (iii) has been issued in reliance on the statutory exemptions from registration contemplated by applicable securities laws based (in part) on the accuracy of Payee's representations contained herein, and (iv) will not be transferable without registration under applicable securities laws, unless an exemption from such registration requirements is available.

(f) Payee has reviewed and understands Maker's (i) Annual Report on Form 10-KSB for the fiscal year ended May 31, 2004; (ii) the Quarterly Report on Form 10-QSB for the quarter ended August 31, 2004; and (iii) all Current Reports on Form 8-K filed since the filing of its last Form 10-KSB.

(g) Payee has had this Note and any other documents executed in connection herewith reviewed by his own counsel.  Payee acknowledges that Michael Paige, Counsel to Jackson & Campbell, P.C., and Jackson & Campbell, P.C. are representing the Maker in this transaction.

4. MISCELLANEOUS 

4.1 Waiver

The rights and remedies of Payee under this Note shall be cumulative and not alternative. No waiver by Payee of any right or remedy under this Note shall be effective unless it is in writing and signed by Payee. Neither the failure nor any delay in exercising any right, power or privilege under this Note will operate as a waiver of such right, power or privilege and no single or partial exercise of any such right, power or privilege by

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Payee will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum amount permitted by applicable law, (a) no claim or right of Payee arising out of this Note can be discharged by Payee, in whole or in part, by a waiver or renunciation of the claim or right unless in writing, signed by Payee; (b) no waiver that may be given by Payee will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on Maker will be deemed to be a waiver of any obligation of Maker or of the right of Payee to take further action without notice or demand as provided in this Note.

Maker acknowledges that this Note and Maker's obligations under this Note are, and shall at all times continue to be, absolute and unconditional in all respects, and shall at all times be valid and enforceable. To the extent permitted by applicable law, Maker hereby absolutely, unconditionally and irrevocably forever waives any and all right to assert any defense, set-off, off-set, counterclaim, cross-claim, or claim of any nature whatsoever with respect to this Note or Maker's obligations hereunder.

4.2 Security

This Note shall be secured by a first priority lien on Maker’s inventory and accounts receivable.  Maker shall not grant any other liens or security interests in its inventory or accounts receivable to any party.

4.3 Conversion

At any time on or after the date of issue, this Note shall be convertible (in whole or in part), at the option of the Payee, into such number of fully paid and non-assessable shares of common stock of Maker (the “Conversion Shares”) as is determined by dividing (x) that portion of the outstanding principal balance under this Note as of such date (the “Conversion Date”) that the Payee elects to convert by (y) a conversion price of US$.05, by a conversion notice faxed to Maker at (604) 689-0802 Attn.: Chief Financial Officer; provided, however, that the Conversion Price shall be subject to appropriate adjustment for stock dividends, stock splits and combination of shares affecting the common stock of Maker.  The Payee shall deliver this Note to the Maker at the address designated below at such time that this Note is fully converted.  With respect to partial conversions of this Note, the Maker shall keep written records of the amount of this Note converted as of each Conversion Date.

4.4 Registration Rights

If at any time or from time to time in the period one year following the date of issuance of this Note, Maker shall determine to register any of its securities for its own account or for the account of other security holders of Maker, Maker covenants and agrees that it shall promptly give to the Payee written notice thereof and to include in such registration statement (the “Registration Statement”) filed with the Securities and Exchange Commission (“SEC”) all Conversion Shares specified in a written request by Payee made within thirty (30) days after receipt of such written notice from Maker; provided, however, if the underwriter in an underwritten offering for Maker determines in good faith that marketing factors require a limitation of the number of shares to be underwritten or sold pursuant to the Registration Statement, the number of shares that may 

4

be included in the Registration statement shall be allocated, first, to Maker; and, second, to Payee. Maker will use its best efforts to comply with requests made by the SEC in connection with such Registration Statement, and make such amendments to such Registration Statement as shall be required by the SEC with the intent to cause the Registration Statement to become effective as soon as practicable following filing.  Maker shall use its best efforts to maintain the effectiveness of the Registration Statement until the earlier of (i) the date which is two years from the date of issue of this Note and (ii) the date on which all of the Conversion Shares have been sold under the Registration Statement.

4.5 Notices

Any notice or communication to be given hereunder by any party to the other party shall be in writing and shall be deemed to have been given when personally delivered, or one day after the date sent by recognized overnight courier or transmitted by facsimile, which transmission by facsimile has been confirmed or 3 (three) days after the date sent by registered or certified mail, postage prepaid, as follows:

If to Maker, addressed to:

Name: Elgrande.com, Inc.

Address: 

1450 Kootenay Street

Vancouver, British Columbia V5K 4R1

Attn:   Michael F. Holloran

Facsimile Number: 604-689-0802

If to Payee, addressed to:

Name: Thomas A. Simons

Address: 3685 Cameron Avenue

Vancouver, British Columbia V6R 1A1

Facsimile Number: 604-732-4099

Or persons or addresses as may be designated in writing by the party to receive such notice.

4.6 Severability

If any provision of this Note is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Note will remain in full force and effect. Any provision of this Note held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

4.7 Governing Law

This Note will be governed by the laws of the British Columbia, without regard to conflicts of laws principles.

4.8 Assignment; Parties in Interest

This Note shall bind Maker and its successors and assigns. This Note shall not be assigned or transferred by Maker, without the express prior written consent of Payee, and this Note will inure to the benefit of Payee and his heirs, estate, representatives, administrators, successors and assigns.

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4.9 Section Headings, Construction

The headings of Sections in this Note are provided for convenience only and will not affect its construction or interpretation. All references to "Section" or "Sections" refer to the corresponding Section or Sections of this Note unless otherwise specified.

All words used in this Note will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the words "hereof" and "hereunder" and similar references refer to this Note in its entirety and not to any specific section or subsection hereof.

4.10 Savings Clause

If, at any time, the rate of interest under this Note shall be deemed by any competent court of law, governmental agency or tribunal to exceed the maximum rate of interest permitted by the laws of any applicable jurisdiction or the rules or regulations of any regulatory authority or agency having jurisdiction, then during such time as such rate of interest would be deemed excessive, that portion of each interest payment attributable to that portion of such interest rate that exceeds the maximum rate of interest so permitted shall be deemed a voluntary prepayment of principal or, if all principal has been paid, that portion of each interest payment attributable to that portion of such interest rate that exceeds the maximum rate of interest so permitted shall be promptly refunded to Maker.

IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the date first stated above.

ELGRANDE.COM, INC.

By:  /s/ Michael F. Holloran

_____________________________________

Name:  Michael F. Holloran

Title: President

Accepted and agreed to:

__________________________

Payee:

Date: 

6

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