This is odd, if the note is "unsecured" then why would the lender have these rights?
We are actively seeking equity financing and intend to use proceeds
from equity sales for working capital and to repay the15% Unsecured Note. If we
are unable to secure equity financing, we will attempt to renegotiate the terms
of both of these notes with the lenders. There can be no guarantee that we will
be able to raise additional equity and/or renegotiate the terms of the notes
with the lenders. If we are able to renegotiate the terms of the notes we are
unable to determine what terms the lenders may demand. If we fail to raise
additional equity and/or refinance or renegotiate the terms of the notes the
holders of the notes may have the right to take possession of our intellectual
property and all of our assets or may have the right to operate our business and
have the right to assign, sell, lease or otherwise dispose of our intellectual
property and all of our assets.
Sure doesn't sound "unsecured" to me. Here's more on the note:
On December 11, 2002, we issued a 15% Unsecured Note for gross cash
proceeds of $750,000 to an individual. The 15% Unsecured Note, under the
original term, was scheduled to mature on February 11, 2004 and payable $50,000
each month, with a final payment of $35,801 on February 11, 2004. We entered
into a forbearance agreement with the noteholder through and including December
31, 2002. On December 30, 2002, we issued 137,273 shares of Common Stock in
consideration for all accrued and unpaid interest. On December 23, 2002, the
holder of the 15% Unsecured Note agreed to (i) extend the maturity date of the
15% Unsecured Note from February 11, 2004 to May 31, 2005; (ii) reduce the
monthly payments from $50,000 to $7,500 through December 31, 2003, representing
the monthly interest on the 15% Unsecured Note and (iii) $50,000 payments each
month, beginning January 31, 2004.
This note went into default soon after being given to the company and the lender entered into a forebearance agreement. Perhaps the company agreed to essentially give all of the assets of the company to this individual lender if they defaulted on the renegotiated loan.
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