Promissory Note and Security Agreement (2007)Full Document 

Start of Preview
                               PROMISSORY NOTE AND
                               SECURITY AGREEMENT

      DATE:        FEBRUARY 28, 2007

                   511 West 25th Street, Unit 503
                   New York, New York 10001

                   c/o Ira J. Gaines
                   1819 East Morten Ave.
                   Suite 180
                   Phoenix, AZ 85028

      OF NOTE:     ($725,000)

      FOR VALUE RECEIVED, Makers promise and agree to pay to Payee, or order, at
the  mailing  address  of Payee,  or at such  other  place as Payee or any other
holder hereof ("Holder") may from time-to-time  designate,  the principal sum of
Seven Hundred  Twenty-Five  Thousand Dollars and No/100 Dollars  ($725,000) with
Interest, as follows:


      a. Commencing on the date of this Note, and so long as no Event of Default
      (as defined herein)  exists,  the unpaid balance of this Note shall accrue
      interest  ("Interest)  at the nominal  rate of fifteen  percent  (15%) per

      b. During any Event of Default under this Note, the unpaid balance of this
      Note shall accrue  Interest at the rate of  twenty-five  percent (25%) per
      annum ("Default Rate"). Interest shall accrue at the Default Rate from the
      date of an Event of Default, without notice to Maker.

      c. The  interest  provided  herein shall be  calculated  on the basis of a
      360-day year/30 day month.

      d.The  minimum  amount of interest to be paid under the terms of this Note
      is  Twenty-one   Thousand  Seven  Hundred  Fifty  Dollar  and  Zero  cents
      ($21,750),  regardless of the timing of the  payments.  To the extent that
      the payments  are made under this Note prior to the maturity  date of this
      Note,  then to that extent,  the actual  interest rate may actually exceed
      the rate stated  above,  and such amount shall be treated as additional or
      minimum  interest.  Makers  have  agreed to pay a minimum  of  $21,750  in
      interest regardless of when payments on this Note are made.

      e.All payments  under this Note shall first be credited  against costs and
      expenses  provided  for in this  Note,  second to the  payment of any late
      charges,  third to the payment of accrued and unpaid Interest, if any, and
      the  remainder  shall be credited  against  principal.  All  payments  due
      hereunder  shall be  payable  in legal  tender  of the  United  States  of
      America,  and in same day funds  delivered to Holder by  cashier's  check,
      certified check, bank wire transfer or any other means of guaranteed funds
      to the mailing  address  provided  below, or at such other place as Holder
      shall  designate  in  writing  for such  purpose  from time to time.  If a
      payment  under  this Note  otherwise  would  become

                                                                    Page 1 of 13

      due and  payable on a  Saturday,  Sunday or legal  holiday  (any other day
      being a "Business  Day"), the due date of the payment shall be extended to
      the next succeeding  Business Day, and Interest,  if any, shall be payable
      thereon during such extension.

2. MATURITY DATE. If not sooner paid, all unpaid  principal and accrued Interest
shall be due and payable in full on MAY 28,  2007  ("Maturity  Date),  or on the
date Maker shall receive gross financing proceeds (before deduction of any costs
or expenses of the financing,  including commissions or similar expenses) of One
Million Five Hundred Thousand Dollars and 00/100 Dollars ($1,500,000).

3. LATE CHARGE.  Makers shall pay to Holder a late charge ("Late  Charge") equal
to five percent  (5%) of any payment not received by the Holder  within ten (10)
days after said payment is due.

4. REASONABLENESS OF CHARGES.  Makers acknowledge that upon the occurrence of an
Event of Default,  the damages to the Holder  would be  extremely  difficult  to
ascertain,  including  the  Holder's  lost  profit  and loss of use of the funds
evidenced hereby and expenses incurred in connection with such default, and that
the accrual of Interest at the Default  Rate and the Late Charge are  reasonable
estimates of the loss to the Holder incurred by virtue of an Event of Default.


            a. Makers agree to an effective  rate of interest  which is the rate
stated  herein plus any  additional  rate of interest  resulting  from any other
payments  in the nature of  interest,  including  without  limitation,  any late
charges to the extent that such charges may be deemed includable in interest for
any  purpose,  and the  existence of a minimum  dollar  amount of interest to be
charged  regardless  of any  payments  that Makers  deliver to Payee  before the
Maturity Date of this Note.

            b. All  agreements  between  Makers and Payee are  hereby  expressly
limited  so that in no event  whatsoever,  whether  by  reason of  deferment  in
accordance with this Note or under any agreement or by virtue of acceleration or
maturity of the  obligation  evidenced  by this Note,  or  otherwise,  shall the
amount paid or agreed to be paid to Payee for the advance,  use,  forbearance or
detention  of the  money  represented  by this Note or to  compensate  Payee for
damages to be suffered by reason of a late  payment or default  under this Note,
exceed the maximum  permissible under applicable law. If, from any circumstances
whatsoever,  fulfillment  of any  provision of this Note, or of any provision in
the security for this Note at the time  performance of such  provision  shall be
due, shall involve  exceeding the limit of validity  prescribed by law, from the
date of this Note, the obligations to be fulfilled shall be reduced to the limit
of such validity.  This provision  shall never be superseded or waived and shall
control every other provision of all agreements between Makers and Payee. Makers

End of Preview