EXHIBIT 10.22
 
PETALS DECORATIVE ACCENTS, LLC
 
NONNEGOTIABLE UNSECURED PROMISSORY NOTE
 
$________________________
(Principal Amount at Maturity)
Dated: May __, 2006
Ridgefield, Connecticut
Issue No._____

 
Petals Decorative Accents, LLC, a limited liability company organized under the
laws of the State of Delaware (the “Company”), for value received, hereby
promises to pay to the order of __________________________ or registered assigns
(the “Holder”), the principal amount at maturity of [1.4 x PURCHASE PRICE]
dollars ($_________) (the “Redemption Amount”) on December 31, 2007 (the
“Maturity Date”), or such earlier date as this Note is required to be repaid as
provided hereunder. This Note is one of a series of subordinated nonnegotiable
unsecured promissory notes of like tenor issued by the Company pursuant to a
subscription offering dated April __, 2006. As used herein, the term “Notes”
shall mean all of the nonnegotiable unsecured promissory notes issued pursuant
to such subscription offering, and the term “Note” shall mean any one of said
Notes.
 
1.    Payment Obligations of the Company Prior to the Maturity Date. The Company
shall pre-pay this Note in quarterly installments on the fifteenth day of
January, April, July and October, commencing on January 15, 2007 (each a
“Payment Date”) and continuing until the earlier of the Note being paid in full
or the Maturity Date. On each Payment Date, the Company shall make a cash
payment to the Holder of an amount, if any, equal to the product of (x) $2.00
multiplied by the number of Orders (as defined below) shipped by the Company
during the previous calendar quarter, multiplied by (y) a fraction, the
numerator of which is equal to the unpaid Redemption Amount of this Note and the
denominator of which is equal to the aggregate unpaid Redemption Amount of all
outstanding Notes. On the Maturity Date, the Company will pay to the Holder in
cash an amount, if any, equal to the Redemption Amount, less the sum of all
payments therefore made by the Company to the Holder in respect of the Note. For
purposes of this Note, an “Order” shall be an individual consumer purchase of
one or more of our products made on a single occasion through our call-center or
our website. Shipment will be deemed to have occurred when one or more items
encompassed by an Order is placed in the hands of a common carrier for delivery
to the purchaser. An order encompassing multiple items will be considered a
single Order, and will be deemed to have been shipped on the earliest date when
any of the items included in the Order was shipped.
 
2.    Manner of Payment.
 
(a)    All payments by the Company under this Note shall be made by wire
transfer, or in such other manner, as the Holder shall reasonably direct.
Whenever any payment hereunder shall be stated to be due on a day other than a
day of the year on which banks are not
 
 
 

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required or authorized to close in Connecticut (any such other day being a
“Business Day”), such payment shall be made on the next succeeding Business Day.
 
(b)    The Company may prepay this Note at any time and from time to time in
full or in part. All payments received by the Holder hereunder will be applied
first to costs of collection, then to the balance of the Redemption Amount.
 
3.    No Security; Subordination.
 
(a)    The Notes are not secured and no mortgage, security or lien is or shall
be granted by the Company upon its assets as collateral security for the
obligations of the Company evidenced thereby.
 
(b)    The obligations of the Company evidenced by the Notes are expressly
junior and subordinate to the prior payment in full of all Senior Indebtedness
of the Company. “Senior Indebtedness” means the principal of, and premium, if
any, and interest on (i) all indebtedness of the Company for monies borrowed
from banks, trust companies, insurance companies and other financial
institutions, including commercial paper and accounts receivable sold or
assigned by the Company to such institutions (whether or not secured), (ii) all
indebtedness of the Company for monies borrowed by the Company from other
persons or entities, (iii) obligations of the Company as lessee under leases of
real or personal property, (iv) principal of, and premium, if any, and interest
on any indebtedness or obligations of others of the kinds described in (i), (ii)
and (iii) above assumed or guaranteed in any manner by the Company, (v)
deferrals, renewals, extensions and refundings of any such indebtedness or
obligations described in (i), (ii), (iii) and (iv) above, and (vi) any other
indebtedness of the Company which the Company and the Holders of more that sixty
seven percent (67%) of the aggregate outstanding principal amount of the Notes
(the “Requisite Majority”) hereafter from time to time expressly and
specifically agree in writing shall constitute Senior Indebtedness.
Notwithstanding the foregoing, “Senior Indebtedness” shall not include
indebtedness of the Company evidenced by the other Notes, which shall rank
equally and ratably with this Note.
 
(c)    Each registered owner of Notes agrees to execute from time to time any
subordination agreement(s) the Company and the holders of Senior Indebtedness
may request to better reflect the aforesaid subordination of the Notes to any
Senior Indebtedness incurred by the Company. In the event of any insolvency or
bankruptcy proceedings, or any receivership, liquidation, reorganization or
other similar proceedings in connection therewith, relative to the Company or to
its property, or, in the event of any proceedings for voluntary liquidation,
dissolution or other winding up of the Company or distribution or marshalling of
its assets or any composition with creditors of the Company, whether or not
involving insolvency or bankruptcy, then and in any such event all Senior
Indebtedness shall be paid in full before any payment or distribution of any
character shall be made on account of this Note.
 
(d)    The Holder, by accepting this Note, agrees that the subordination
effected hereby is for the benefit of the holders of Senior Indebtedness from
time to time, and that each holder of Senior Indebtedness, whether now
outstanding or hereafter created, incurred, assumed or guaranteed shall be
deemed to have acquired Senior Indebtedness in reliance upon the covenants and
provisions contained herein. The subordination effected hereby shall be
 
 
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enforceable by each holder of Senior Indebtedness from time to time. Subject to
the rights of the holders of Senior Indebtedness under this Section 0, nothing
contained in this Section 0 shall impair, as between the Company and the
Holders, the obligations of the Company, subject to the terms and conditions
hereof, to pay the Holder the principal hereof upon default hereunder, or shall
prevent the Holder of this Note, upon default hereunder, from exercising all
rights, powers and remedies otherwise provided herein or by applicable law.
 
4.    Events of Default and Right to Cure. Event of Default, whenever used
herein, means any one of the following (regardless of the reason or cause of
such Event of Default):
 
(a)    The failure to pay any amount when due which failure shall continue for
ten (10) Business Days after the Company shall receive written notice thereof
from the Holder;
 
(b)    The failure of the Company to perform any covenant or agreement set forth
in this Note, which failure shall continue un-remedied for a period of thirty
(30) days following the date on which any Holder gives the Company written
notice thereof;
 
(c)    The entry of any decree or order by a court having jurisdiction adjudging
the Company a debtor or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of the Company under the Bankruptcy Code or any other applicable federal or
state law, the appointment of a receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company, or of any substantial
part of the property of the Company, and the continuance of any such decree or
order unstayed, undischarged, or undismissed and in effect for more than ninety
(90) consecutive days;
 
(d)    Institution by the Company of proceedings, under the Bankruptcy Code or
any other applicable federal or state law, seeking an order for relief, or the
consent of the Company to the institution of bankruptcy or insolvency
proceedings against the Company, or the consent by the Company to the filing of
any such petition or to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator or other similar official of or for the Company or any
substantial part of the property of the Company, or the making by the Company of
any assignment for the benefit of creditors, or the admission by the Company of
the Company’s inability to pay its debts generally as they become due, or the
taking of any action by the Company in furtherance of any such action; or
 
(e)    Any default of the Company under any Senior Indebtedness that gives the
holder thereof the right to accelerate such Senior Indebtedness, if such Senior
Indebtedness is in fact accelerated by the Holder.
 
If any Event of Default occurs, the Requisite Majority, by written notice to the
Company, may:
 
(i)    declare the entire unpaid Redemption Amount of the Notes due and payable
and such amount shall thereupon become due and payable without presentment,
notice, protest or demand of any kind (all of which are expressly waived by the
Company);
 
 
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(ii)    take all actions available to them, at law or in equity, to collect and
otherwise enforce the Notes (subject to the terms of the subordination in favor
of the Senior Indebtedness as hereinbefore provided); and
 
(iii)    assess interest on any payments which have become due pursuant to
Section 0 of this Note and which have not yet been paid at an annual interest
rate equal to eighteen percent (18%).
 
Without the approval of the Requisite Majority, no Holder, upon the occurrence
of an Event of Default, shall have the right to undertake any of the types of
actions described in clauses (i), (ii) or (iii) hereof or any other enforcement
or collection action with respect to the Notes.
 
5.    Amendment. The terms of the Notes (and this Note) may be modified by the
Company and the Requisite Majority; provided that the Company and the Requisite
Majority may not authorize any amendment of the Notes that reduces the
Redemption Amount or that does not amend or affect each Note and each Holder in
the same manner.
 
6.    Assignment. Subject to the restrictions on transfer by the Holder, the
rights and obligations of the Company and the Holder of this Note shall be
binding upon and inure to the benefit of the successors, assigns, heirs,
administrators and transferees of the parties.
 
7.    Additional Terms and Conditions. The Company (i) waives presentment,
demand, notice of demand, protest, notice of protest, and notice of nonpayment
and any other notice required to be given under the law to the Company, in
connection with the delivery, acceptance, performance, default or enforcement of
the Notes, except for notice of proposed transfer of a Note in accordance with
the terms hereof; (ii) agrees that any failure to act or failure to exercise any
right or remedy, on the part of the registered owner shall not in any way affect
or impair the obligations of the Company or be construed as a waiver by the
owner of, or otherwise affect, any of its rights under the Notes; and (iii)
agrees to pay, on demand, all costs and expenses of collection of Notes and/or
the enforcement of the owner’s rights thereunder, including reasonable
attorney’s fees and disbursements.
 
8.    Invalidity. In the event any one or more of the provisions of the Notes
shall for any reason be held to be invalid, illegal or unenforceable, in whole
or in part or in any respect, or in the event that any one or more of the
provisions of the Notes operate or would prospectively operate to invalidate the
Notes, then and in either of those events, such provision or provisions only
shall be deemed null and void and shall not affect any other provision of the
Notes and the remaining provisions of the Notes shall remain operative and in
full force and effect and shall in no way be affected, prejudiced and disturbed
thereby.
 
9.    Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of Connecticut and the laws of the United States
applicable therein (without giving effect to any choice or conflict of laws
provision or rule that would cause the application of the laws of any other
jurisdiction) and shall be treated in all respects as a Connecticut contract.
 
 
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10.    Notices. Except as otherwise provided, all notices and other
communications required or permitted hereunder shall be in writing, shall be
effective when given, and shall in any event be deemed to be given upon receipt
or, if earlier, (i) five (5) days after deposit with the U.S. postal service or
other applicable postal service, if delivered by first class mail, postage
prepaid, (ii) upon delivery, if delivered by hand, (iii) one (1) business day
after the day of deposit with Federal Express or similar overnight courier,
freight prepaid, if delivered by overnight courier or (iv) one (1) business day
after the day of facsimile transmission, if delivered by facsimile transmission
with copy by first class mail, postage prepaid, and shall be addressed, (a) if
to the Holder, at ________________________________________, or at such other
address as such Holder shall have furnished the Company in writing, or (b) if to
the Company, at Executive Pavilion, 90 Grove Street, Ridgefield, Connecticut
06877, or at such other address as the Company shall have furnished to the
Holder in writing, with a copy to David A. Broadwin, Esq., Foley Hoag LLP,
Seaport World Trade Center West, 155 Seaport Boulevard, Boston, MA 02210; fax
(617) 832-7000.
 
 
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IN WITNESS WHEREOF, this Note has been duly executed and delivered by the
Company as of the date first written above.
 

 
HOLDER:
  COMPANY:                      PETALS DECORATIVE ACCENTS, LLC           By:
   
  By:
/s/ Christopher Topping
        Christopher Topping
Chief Executive Officer

 

 
 
 

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