THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").
SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR
OTHERWISE HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO SUCH SECURITIES UNDER THE SECURITIES ACT, OR DELIVERY OF
AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF SUCH
SECURITIES THAT REGISTRATION UNDER THE SECURITIES ACT IS NOT REQUIRED WITH
RESPECT TO SUCH SALE, OFFER FOR SALE, TRANSFER, PLEDGE OR OTHER HYPOTHECATION OF
SUCH SECURITIES. THIS NOTE MUST BE SURRENDERED TO THE ISSUER HEREOF OR ITS
TRANSFER AGENT AS A CONDITION PRECEDENT TO THE SALE, TRANSFER, PLEDGE OR OTHER
HYPOTHECATION OF ANY INTEREST HEREIN.
IQ BIOMETRIX, INC.,
SECURED CONVERTIBLE PROMISSORY NOTE
AMOUNT: $225,000 PAYMENT SCHEDULE: SEE EXHIBIT A
THIS CERTIFIES THAT, for value received, IQ BIOMETRIX, Inc., a Delaware
corporation and all subsidiaries, (collectively the "COMPANY"), promises to pay
to Investors (the "HOLDER"), or its registered assigns, the principal sum of up
to Two Hundred Twenty Five Thousand Dollars ($225,000) the payment amounts
("INSTALLMENTS") set forth on Exhibit A, together with simple interest accruing
at the rate of ten percent (10%) per annum (computed on the basis of a 365 day
year) commencing from the date of issuance of each installment and, at the sole
election of the Holder, will be payable in either: (i) shares of the Company's
Common Stock, or equivalent substitute equity securities of the Company, if any
(collectively referred to as the "COMMON STOCK") on the date of conversion as
provided herein or (ii) cash. Any Common Stock purchased by Holder will be
subject to the most favorable terms and conditions, including price, granted to
any other purchaser of Common Stock.
The following is a statement of the rights of the Holder and the
conditions to which this Note is subject, and to which the Holder, by the
acceptance of this Note, hereby agrees:
1. CONVERSION. At the sole option of the Holder, the outstanding principal
and accrued interest under this Note will be convertible into shares of the
Company's Common Stock as follows:
(A) OPTION TO CONVERT. If at any time the Company consummates a
financing for the sale of shares of Common Stock in which the gross offering
proceeds to the Company are equal to or greater than an aggregate of at least
One Million Five Hundred Thousand Dollars ($1,500,000) (including any conversion
of debt into equity in connection therewith) (a "QUALIFIED FINANCING"), then,
subject to the conditions set forth herein, at the election of the Holder, the
principal and interest due under this Note will convert into that number of
shares of the Common Stock (or the same class and series of any equivalent
substitute equity securities) sold by the Company in such Qualified Financing.
(B) CONVERSION UPON LIQUIDATING EVENT. Upon the occurrence of a
Liquidating Event prior to payment in full of all outstanding principal and
interest due hereunder in a Conversion Event or otherwise, then all such
outstanding principal and interest will, at the Holder's election, convert into
that number of shares of the Common Stock as is equal to the quotient obtained
by dividing: (i) the aggregate amount of principal and accrued interest due
under this Note as of the closing of such Liquidating Event, by (ii) fifty cents
($0.50) per share (any such event of conversion being referred to herein as a
"LIQUIDATING CONVERSION EVENT"). The conversion of this Note into shares of
Common Stock in connection with a Liquidating Event will be deemed to occur as
of the date of closing of a Liquidating Event, or the date of the first closing
in a series of closings constituting a Liquidating Event. For purposes of this
Section 1(b), a "LIQUIDATING EVENT" will mean: (i) a merger or consolidation of
the Company into or with another corporation; (ii) a sale, transfer or other
disposition of all or substantially all of the assets of the Company; or (iii)
the effectuation by the Company of a transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of the
Company is transferred within a three-month period.
(C) CONVERSION PROCEDURE. The Company will notify the Holder in
writing of the terms of any Qualified Financing or Liquidating Event at least
five (5) business days before the closing of such Qualified Financing or
Liquidating Event. Upon the occurrence of a Conversion Event or Liquidating
Conversion Event, the outstanding principal and interest due under this Note
will convert at Holder's option into that number of shares of Common Stock
issuable upon conversion of this Note pursuant to Section 1(a) or 1(b) hereof
provided that: (i) the Holder executes and delivers a definitive stock purchase
agreement, which will include customary investment representations, and which is
substantially identical in form and substance to the stock purchase agreement
executed and delivered by all other investors in such Qualified Financing or
Liquidating Event, and (ii) this Note is surrendered to the Company or its
transfer agent for cancellation upon the effectiveness of such conversion, or in
lieu thereof the Holder notifies the Company or its transfer agent that this
Note has been lost, stolen, or destroyed and executes an agreement, in form and
substance reasonably satisfactory to the Company, in which the Holder agrees to
indemnify the Company for, from and against any and all loss suffered or
incurred by the Company in connection with the conversion of this Note without
the surrender thereof. Upon the conversion of this Note in accordance with
Section 1(a) or 1(b) hereof and the surrender of this Note to the Company for
cancellation, the Company will, at its expense, issue and deliver to the Holder
a certificate or certificates evidencing that number of shares of Equity
Securities issuable upon conversion of this Note pursuant to Section 1(a) or
1(b) hereof to which the Holder is entitled upon such conversion (bearing such
legends as are required by applicable state and federal securities laws in the
opinion of counsel to the Company), together with a check payable to the Holder
for any cash amounts payable in accordance with Section 1(d) hereof.
2
(D) FRACTIONAL SHARES. No fractional shares will be issued upon
conversion of this Note. In lieu thereof, the Company will pay to the Holder an
amount in cash equal to the product obtained by multiplying the conversion price
applied to effect such conversion by the fraction of a share not issued pursuant
to the previous sentence.
(E) EFFECT OF CONVERSION. Upon conversion of this Note pursuant to
Section 1(a) hereof, delivery to the Company of this Note for cancellation,
delivery to the Holder of the certificate or certificates issuable upon
conversion of this Note pursuant to Section 1(b) hereof, and payment to the
Holder for fractional shares pursuant to Section 1(d) hereof, the Company will
be released automatically from any and all further obligations and liabilities
under this Note, and this Note will thereafter be void and of no further force
or effect.
2. CASH PAYMENT; OPTION TO PURCHASE COMMON STOCK. If the Holder elects to
be paid in Cash, the Company will pay all of the principal and accrued interest
due under this Note in strict accordance with Payment Schedule listed on Exhibit
A. If the outstanding principal and accrued interest hereunder is paid to the
Holder in the form of cash, then the Holder may elect to purchase shares of the
Company's Common Stock, subject to the terms set forth in Section 1(a) or 1(b)
above. Any Common Stock purchased by Holder will be subject to the most
favorable terms and conditions, including price, granted to any other purchaser
of Common Stock, respectively.
3. SECURITY INTEREST.
(A) GRANT. Company hereby grants to the Holder a first priority
security interest in all of the assets described in Exhibit B hereto (the
"ASSETS"), as amended from time to time to reflect changes in location of such
Assets (the "SECURITY INTEREST"). The Security Interest secures any amounts
owing by the Company to the Holder under this Note.
(B) PERFECTION OF SECURITY INTEREST. The Company will perfect the
Security Interest including, without limitation, aiding the Holder in executing
and filing a form UCC-1 Financing Statement with the Delaware Secretary of
State, and executing such supplemental security agreements, notes and any other
documents that the Holder deems reasonably necessary or appropriate for such
purpose. The Company will file the UCC-1 in less than 30 days and bear all
associated costs.
(C) TERM. The Security Interest shall terminate upon the payment in
full by the Company of all amounts due under this Note. At such time, the Holder
agrees to execute promptly all such documents as the Company requests to attest
that the Security Interest has terminated.
(D) APPOINTMENT AS ATTORNEY IN FACT. If the Holder is unable for any
reason, after reasonable effort, to secure the signature of an authorized
officer of the Company on any document needed in connection with the actions
specified in Section 3(b), the Company hereby irrevocably designates and
appoints the Holder and its duly authorized officers and agents as its agent and
attorney in fact, which appointment is coupled with an interest, to act for and
on his behalf to execute, verify and file any such documents and to do all other
lawfully permitted acts to further the purposes of Section 3(b) with the same
legal force and effect as if executed by an authorized officer of the Company.
3
(E) REMEDIES.
(I) Pursuant to Section 6(c), if an Event of Default (as
defined below) occurs:
(A) Holder may declare all obligations secured hereby to
be immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived.
(B) Holder may exercise and shall have any and all
rights and remedies accorded it by the Delaware Uniform Commercial Code or the
Uniform Commercial Code as adopted in such state whose laws govern the
disposition of the Assets. The requirement of reasonable notice shall be met, if
notice containing such information as may be required under applicable law is
mailed, postage prepaid, to the Company or other person entitled thereto at
least ten (10) days (including non-business days) before the time of sale or
disposition of the Assets. The Company shall pay to Holder on demand any and all
expenses, including reasonable legal expenses and reasonable attorney's fees,
incurred or paid by Xxxxxx in protecting or enforcing any rights of Holder
hereunder, including its right to take possession of the Assets, storing and
disposing of the same or in collecting the proceeds thereof.
(II) The Company understands and agrees Holder may exercise
its rights hereunder without affording the Company an opportunity for a
preseizure hearing before Holder, through judicial process or otherwise, takes
possession of the Assets upon the occurrence of an Event of Default, and the
Company expressly waives its constitutional right, if any, to such prior
hearing.
(III) No delay in accelerating the maturity of any obligation
as aforesaid or in taking any other action with respect to any Event of Default
or in exercising any rights with respect to the Assets such affect the rights of
Holder later to take such action with respect thereto, and no waiver as to one
Event of Default shall affect rights as to any other default.
4. INTEREST. This Note will bear interest at the rate of ten percent (10%)
per annum commencing from the date of issuance of each installment and
terminating upon the payment in full of all outstanding unpaid principal due
under this Note.
5. EVENTS OF DEFAULT.
(A) So long as this Note will remain unpaid in whole or in part as
to either principal or interest, each of the following will constitute an "EVENT
OF DEFAULT" under this Note:
4
(I) the commencement of an involuntary case or other
proceeding against the Company seeking liquidation, reorganization or other
relief with respect to it or its debts under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or seeking the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or for any substantial part of
the property of the Company or the winding up or liquidation of the affairs of
the Company, and such case or proceeding remains unstayed and undismissed for a
period of thirty (30) days, or an order for relief is entered against the
Company under the federal bankruptcy laws as now or hereafter in effect; or
(II) the commencement by the Company of a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consent to the entry of an order for relief in an involuntary case
under any such law, or consent to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Company or for any substantial part of the property of the
Company, or the Company makes any general assignment for the benefit of
creditors, or fails generally to pay its debts as they come due, or takes any
corporate action to authorize any of the foregoing; or
(III) failure on the part of the Company to observe or perform
any of the covenants contained in this Note and continuance of such failure for
a period of ten (10) days following receipt of notice from the Holder specifying
such covenant and the nature of the Company's non-performance.
(B) If an Event of Default will occur and be continuing, then so
long as the Event of Default will continue to exist the Holder may, by written
notice to the Company, declare the unpaid principal amount of this Note,
together with all interest accrued hereunder, to be forthwith due and payable
immediately in cash, without further presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Company, to
the fullest extent permitted by applicable law.
(C) If an Event of Default occurs, at Xxxxxx's sole discretion
Holder may (i) seize the Assets in accordance with Section 3; or (ii) authorize
its personnel to provide management advisory services to the Company with the
purpose of monitoring the Company's cash flow and attempting to assist the
company in curing the economic situation causing the event of default.
6. TRANSFER OF THIS NOTE OR SECURITIES ISSUABLE UPON CONVERSION HEREOF.
(A) The Holder will give written notice to the Company prior to any
offer, sale or other disposition of this Note or any securities issuable or
issued upon the conversion hereof, describing in each case the manner and
circumstances thereof, together with a written opinion of the Holder's counsel
in form and substance reasonably satisfactory to the Company, to the effect that
such offer, sale or other distribution may be effected without registration or
qualification under any federal or state securities or other laws then in
effect. Promptly upon receiving any such written notice and reasonably
satisfactory opinion, if so requested, as promptly as practicable the Company
will notify the Holder that the Holder may sell or otherwise dispose of this
Note or other such securities, all in accordance with the terms of the notice
delivered to the Company. If a determination has been made pursuant to this
Section 7 that the opinion of counsel for the Holder is not reasonably
satisfactory to the Company, the Company will so notify the Holder promptly
after such determination has been made and the proposed offer, sale or other
disposition of this Note will not occur, and any attempted transfer or other
disposition hereof will be null and void. Notwithstanding the foregoing, no such
registration statement or opinion of counsel will be necessary for a transfer by
the Holder to a partner or Member, retired partner, spouse, lineal descendant,
sibling or ancestor of such partner or Member, subsidiary or any other
affiliated company of the Holder, if the transferee agrees in writing to be
subject to the terms hereof to the same extent as the Holder.
5
(B) Each Note transferred in accordance with this Section 7 and each
article representing the securities transferred in accordance with this Section
7 will bear a legend as to the applicable restrictions on transferability in
order to ensure compliance with the Securities Act of 1933, as amended (the
"SECURITIES ACT"), unless in the opinion of counsel for the Company such legend
is not required in order to ensure compliance with the Securities Act. The
Company may issue stop transfer instructions to its transfer agent in connection
with such restrictions. Subject to the foregoing, transfers of this Note will be
registered upon registration books maintained for such purpose by, for or on
behalf of the Company. Prior to presentation of this Note for registration of
transfer, the Company will treat the registered holder thereof as the owner and
Holder of this Note for all purposes whatsoever.
7. PREPAYMENT WITHOUT PENALTY. The Company may make optional prepayments
of principal on this Note without penalty or premium at any time or from time to
time, provided that any such prepayment will be accompanied by the payment of
accrued and unpaid interest on the amount being prepaid through the date of the
prepayment. All prepayments on this Note, whether voluntary or mandatory, will
be credited first against accrued and unpaid interest and the balance will be
credited against unpaid principal.
8. REPRESENTATIONS OF THE COMPANY
(A) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, to issue and sell the Common Stock and the Common Stock issuable
upon conversion of the Common Stock and to carry out the provisions of this
Agreement and to carry on its business as presently conducted and as presently
proposed to be conducted. The Company is duly qualified and is authorized to do
business and is in good standing as a foreign corporation in all jurisdictions
in which the nature of its activities and of its properties (both owned and
leased) makes such qualification necessary, except for those jurisdictions in
which failure to do so would not have a material adverse effect on the Company
or its business.
6
(B) AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and shareholders necessary for the
authorization of this Note and the performance of all obligations of the Company
hereunder and the authorization, sale, issuance and delivery of the Common Stock
and the Common Stock issuable upon conversion of the Common Stock has been
taken. This Note, when executed and delivered, will be a valid and binding
obligation of the Company enforceable in accordance with its terms, except: (i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors' rights;
and (ii) general principles of equity that restrict the availability of
equitable remedies. The sale of the Common Stock and the Common Stock issuable
upon conversion of the Common Stock is not and will not be subject to any
preemptive rights or rights of first refusal that have not been properly waived
or complied with.
(C) COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery, and
performance of and compliance with this Note, and the issuance and sale of the
Common Stock and the Common Stock issuable upon conversion of the Common Stock,
will not, with or without the passage of time or giving of notice, result in any
such material violation, or be in conflict with or constitute a default under
any such term, or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company or the
suspension, revocation, impairment, forfeiture or nonrenewal of any permit
license, authorization or approval applicable to the Company, its business or
operations or any of its assets or properties.
(D) RESERVE OF STOCK. The Company will at all times keep reserved a
sufficient number of authorized shares of Common Stock and Common Stock, and
will make appropriate provision for their issuance, to comply with the terms of
this Note.
9. REPRESENTATIONS OF THE HOLDER. As a condition to the Company's sale and
delivery of this Note to the Holder, the Holder represents and warrants that:
(A) AUTHORIZATION. The Holder has full power and authority to
execute and accept delivery of this Note.
(B) PURCHASE ENTIRELY FOR OWN ACCOUNT. The Note, the Common Stock
issuable upon conversion of the Note and any Common Stock issuable upon
conversion of the Common Stock (collectively, the "SECURITIES") will be acquired
for investment for the Holder's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and the Holder
has no present intention of selling, granting any participation in, or otherwise
distributing the same. The Holder does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participation in any of the Securities to such person or to any third person.
The Holder has full power and authority to enter into this Agreement.
7
(C) DISCLOSURE OF INFORMATION. The Holder believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Note. The Holder has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
offering and sale of the Note.
(D) INVESTMENT EXPERIENCE. The Holder is an investor in securities
of companies in the development stage and acknowledges that it is able to fend
for itself and bear the economic risk of this investment, including the complete
loss thereof and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Note. The Holder has not been organized for the purpose of acquiring the
Securities.
(E) FINANCIAL RISK. The Holder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(F) ACCREDITED HOLDER. The Holder is an "accredited investor" within
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
(G) RESTRICTED SECURITIES. The Holder understands that the
Securities it is purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act only in certain limited circumstances. In this connection,
the Holder is familiar with Rule 144, as presently in effect, and understands
the resale limitations imposed thereby and by the Securities Act. The Holder
understands Rule 144 is not currently available for the sale of the Securities
and may never be so available.
(H) FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, the Holder further agrees not to make any
disposition of all or any portion of the Securities (other than the valid
exercise or conversion thereof in accordance with their respective terms) unless
and until:
(I) there is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement; or
(II) the Holder will have notified the Company of the proposed
disposition and will have furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and if requested by the
Company, the Holder will have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration of such shares under the Securities Act or registration or
qualification under any applicable state securities laws.
8
(III) Notwithstanding the foregoing, no investment
representation letter or opinion of counsel will be required for any transfer of
any Securities: (i) in compliance with Rule 144 or Rule 144A of the Securities
Act; or (ii) by gift, will or intestate succession by such holder to his or her
spouse or lineal descendants or ancestors or any trust for any of the foregoing;
provided that in each of the foregoing cases the transferee agrees in writing to
be subject to the terms of this Agreement. In addition, if the Holder of any
Securities delivers to the Company an unqualified opinion of counsel that no
subsequent transfer of such Securities will require registration under the
Securities Act, the Company will, upon such contemplated transfer, promptly
deliver new documents/certificates for such Securities that do not bear the
legend set forth in Section 8(i) hereof.
(I) LEGENDS. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:
(I) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
(II) Any legend required by the laws of the State of Delaware
or any other applicable state, including any legend required by the Delaware
Department of Corporations and sections 417 and 418 of the Delaware Corporations
Code.
10. MISCELLANEOUS.
(A) GOVERNING LAW. This Note and all actions arising out of or in
connection with this Note will be governed by and construed in accordance with
the laws of the State of Delaware.
(B) SUCCESSORS AND ASSIGNS. Subject to the restrictions on transfer
described in Section 7 hereof, the rights and obligations of the Company and the
Holder of this Note will be binding upon and benefit the successors, assigns,
heirs, administrators and transferees of the parties.
(C) WAIVER AND AMENDMENT. Any provision of this Note may be amended,
waived or modified upon the written consent of the Company and the Holder. In
case any provision of this Note is deemed to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions will not in any way be affected or impaired thereby.
9
(D) NOTICES. In the case of the Company, at its then-current address
and, in the case of the Holder, at the address indicated on the signature page
hereof. Any notice, request or other communication required or permitted
hereunder will be in writing and will be deemed to have been duly given if
personally delivered or mailed by registered or certified mail, postage prepaid,
or by recognized overnight courier or personal delivery. Any party hereto may by
notice so given change its address for future notice hereunder.
(E) SEVERABILITY. In case any provision of this Note is deemed to be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions will not in any way be affected or impaired thereby.
(F) LEGAL EXPENSES. The Company shall pay one investor's counsel
reasonable legal fees of $5,000 and its related expenses incurred in connection
with the preparation, negotiation, execution, delivery and performance of this
Agreement and the transactions contemplated by this Agreement.
[SIGNATURE PAGE FOLLOWS]
10
IN WITNESS WHEREOF, the Company has caused this Note to be issued as of
the date first written above.
IQ BIOMETRIX, INC.
By:
----------------------------------------------
Name: Xxxxxxx X Xxxxx
----------------------------------------
Title: CFO
---------------------------------------
Acknowledged and Accepted:
By:
----------------------------------------
Name:
--------------------------------------
Address:
-----------------------------------
-----------------------------------
11
EXHIBIT A
PAYMENT SCHEDULE
--------------------------------------------------------------------------------------------------
LOAN DATE DUE DATE HOLDER LOAN AMOUNT
--------------------------------------------------------------------------------------------------
May 2004 August 31, 2004 Forte' Capital Partners $50,000
--------------------------------------------------------------------------------------------------
July 2004 August 31, 2004 Xxxx Xxxxx Xx. $25,000
--------------------------------------------------------------------------------------------------
July 2004 August 31, 2004 Forte' Capital Partners $50,000
--------------------------------------------------------------------------------------------------
August 2004 August 31, 2004 Xxxx Xxxxx Xx. $50,000
--------------------------------------------------------------------------------------------------
August 2004 August 31, 2004 Forte' Capital Partners $50,000
--------------------------------------------------------------------------------------------------
EXHIBIT B
ASSETS
1. Security Interest.
(a) Grant of Security Interest. As security for any and all
obligations of the Company under this Note (the "OBLIGATIONS"), the Company
hereby grants to the Holder a security interest in the following property of the
Company (the "COLLATERAL"), superior to all other security interests, except
those security interests expressly subordinated by the Holder: all personal
property and fixtures of the Company, or in which the Company has an interest,
whether now owned or hereafter created, acquired or arising, and wherever
located, including without limitation:
(i) all accounts, accounts receivable, chattel paper, security
agreements and debts secured thereby, documents, notes, drafts, instruments,
contract rights, general intangibles, all guarantees and security therefor and
all returned goods (the "ACCOUNTS");
(ii) all inventory and goods wherever located, including, but
not limited to, raw materials, work in process and finished goods, goods held
for sale or lease, goods under lease or consignment held by others, and
materials used or consumed in the Company's business;
(iii) all deposit accounts;
(iv) all patents, patent applications, copyrights, service
marks, trade names, trademarks, trademark registrations, trade secrets,
know-how, general intangibles, maskwork rights and maskwork registrations of the
Company;
(v) all equipment, fixtures, and farm products;
(vi) all proceeds, products, additions, accessories,
substitutions and replacements of the foregoing, including, but not limited to,
money, goods, insurance proceeds, and other tangible or intangible property
received upon the sale or disposition of the foregoing.
