Exhibit 10.2

 

THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD
CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTION 13(a) HEREOF. THE
PRINCIPAL REPRESENTED BY THIS NOTE MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE
FACE HEREOF.

 

INNOVATE/PROTECT, INC.

 

AMENDED AND RESTATED SENIOR SECURED NOTE

 

Original Issuance Date: June 22, 2011 Original Principal Amount: U.S. $3,200,000
    Amendment and   Restatement Date: July 19, 2012  

  

FOR VALUE RECEIVED, INNOVATE/PROTECT, INC., a Delaware corporation (the
"Company"), hereby promises to pay to HUDSON BAY MASTER FUND LTD. or registered
assigns (the "Holder") the amount set out above as the Original Principal Amount
(as reduced pursuant to the terms hereof pursuant to redemption or otherwise,
the "Principal") when due, whether upon the Maturity Date (as defined below),
acceleration, redemption or otherwise (in each case in accordance with the terms
hereof) and to pay interest ("Interest") on any outstanding Principal at the
applicable Interest Rate from the date set out above as the Original Issuance
Date (the "Issuance Date") until the same becomes due and payable, whether upon
an Interest Date (as defined below), the Maturity Date, acceleration, redemption
or otherwise (in each case in accordance with the terms hereof). This Senior
Secured Note (including all Senior Secured Notes issued in exchange, transfer or
replacement hereof, this "Note") was issued pursuant to the Subscription
Agreement on June 22, 2011. Certain capitalized terms used herein are defined in
Section 25.

 

 

 

 

(1)         PAYMENTS OF PRINCIPAL. On the Maturity Date, the Company shall pay
to the Holder an amount in cash representing all outstanding Principal, accrued
and unpaid Interest and accrued and unpaid Late Charges on such Principal and
Interest. The "Maturity Date" shall be June 22, 2013, as may be extended at the
option of the Holder (i) in the event that, and for so long as, an Event of
Default (as defined in Section 4(a)) shall have occurred and be continuing on
the Maturity Date (as may be extended pursuant to this Section 1) or any event
shall have occurred and be continuing on the Maturity Date (as may be extended
pursuant to this Section 1) that with the passage of time and the failure to
cure would result in an Event of Default and (ii) through the date that is ten
(10) Business Days after the consummation of a Change of Control in the event
that a Change of Control is publicly announced or a Change of Control Notice (as
defined in Section 5(b)) is delivered prior to the Maturity Date. Other than as
specifically permitted by this Note, the Company may not prepay any portion of
the outstanding Principal, accrued and unpaid Interest or accrued and unpaid
Late Charges on Principal and Interest, if any.

 

(2)         INTEREST; INTEREST RATE. (a) Interest on this Note shall commence
accruing on the Issuance Date and shall be computed on the basis of a 360-day
year and twelve 30-day months and shall be payable in arrears on the first
calendar day of each Calendar Quarter after the Issuance Date (each, an
"Interest Date") with the first Interest Date being July 1, 2011. Interest shall
be payable in cash on each Interest Date, to the record holder of this Note on
the applicable Interest Date ("Interest"). It is understood and agreed that
Interest has been paid through July 1, 2012.

 

(b)          From and after the occurrence and during the continuance of an
Event of Default, the Interest Rate shall be increased to eighteen percent
(18%). In the event that such Event of Default is subsequently cured, the
adjustment referred to in the preceding sentence shall cease to be effective as
of the date of such cure; provided that the Interest as calculated and unpaid at
such increased rate during the continuance of such Event of Default shall
continue to apply to the extent relating to the days after the occurrence of
such Event of Default through and including the date of cure of such Event of
Default.

 

(3)         REGISTRATION; BOOK-ENTRY. The Company shall maintain a register (the
"Register") for the recordation of the names and addresses of the holders of
each Note and the principal amount of the Notes held by such holders (the
"Registered Notes"). The entries in the Register shall be conclusive and binding
for all purposes absent manifest error. The Company and the holders of the Notes
shall treat each Person whose name is recorded in the Register as the owner of a
Note for all purposes, including, without limitation, the right to receive
payments of Principal and Interest, if any, hereunder, notwithstanding notice to
the contrary. A Registered Note may be assigned or sold in whole or in part only
by registration of such assignment or sale on the Register. Upon its receipt of
a request to assign or sell all or part of any Registered Note by a Holder, the
Company shall record the information contained therein in the Register and issue
one or more new Registered Notes in the same aggregate principal amount as the
principal amount of the surrendered Registered Note to the designated assignee
or transferee pursuant to Section 13. Notwithstanding anything to the contrary
in this Section 3, the Holder may assign any Note or any portion thereof to an
Affiliate of such Holder or a related fund of such Holder without delivering a
request to assign or sell such Note to the Company and the recordation of such
assignment or sale in the Register (a "Related Party Assignment"); provided,
that (x) the Company may continue to deal solely with such assigning or selling
Holder unless and until such Holder has delivered a request to assign or sell
such Note or portion thereof to the Company for recordation in the Register; (y)
the failure of such assigning or selling Holder to deliver a request to assign
or sell such Note or portion thereof to the Company shall not affect the
legality, validity, or binding effect of such assignment or sale and (z) such
assigning or selling Holder shall, acting solely for this purpose as a
non-fiduciary agent of the Company, maintain a register (the "Related Party
Register") comparable to the Register on behalf of the Company, and any such
assignment or sale shall be effective upon recordation of such assignment or
sale in the Related Party Register.

 

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(4)         RIGHTS UPON EVENT OF DEFAULT.

 

(a)          Event of Default. Each of the following events shall constitute an
"Event of Default" upon receipt by the Company of a notice thereof by the
Holder:

 

(i)          the Company's failure to pay to the Holder any amount of Principal
(including, without limitation, any redemption payments), Interest, Late Charges
or other amounts when and as due under this Note or any other Note Transaction
Document (as defined below);

 

(ii)         any default under, redemption of or acceleration prior to maturity
of any Indebtedness of any Note Party or any of its Subsidiaries;

 

(iii)        any Note Party or any of its Subsidiaries, pursuant to or within
the meaning of Title 11, U.S. Code, or any similar Federal, foreign or state law
for the relief of debtors (collectively, "Bankruptcy Law"), (A) commences a
voluntary case, (B) consents to the entry of an order for relief against it in
an involuntary case, (C) consents to the appointment of a receiver, trustee,
assignee, liquidator or similar official (a "Custodian"), (D) makes a general
assignment for the benefit of its creditors or (E) admits in writing that it is
generally unable to pay its debts as they become due;

 

(iv)        a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that (A) is for relief against any Note Party or any of its
Subsidiaries in an involuntary case, (B) appoints a Custodian of any Note Party
or any of its Subsidiaries or (C) orders the liquidation of any Note Party or
any of its Subsidiaries;

 

(v)         a final judgment or judgments for the payment of money aggregating
in excess of $250,000 are rendered against any Note Party or any of its
Subsidiaries and which judgments are not, within sixty (60) days after the entry
thereof, bonded, discharged or stayed pending appeal, or are not discharged
within sixty (60) days after the expiration of such stay; provided, however,
that any judgment which is covered by insurance or an indemnity from a credit
worthy party shall not be included in calculating the $250,000 amount set forth
above so long as the Company provides the Holder a written statement from such
insurer or indemnity provider (which written statement shall be reasonably
satisfactory to the Holder) to the effect that such judgment is covered by
insurance or an indemnity and such Person will receive the proceeds of such
insurance or indemnity within thirty (30) days of the issuance of such judgment;

 

(vi)        any Note Party breaches any material representation, warranty,
covenant or other term or condition of any Note Transaction Document;

 

(vii)       any material breach or material failure in any respect to comply
with Section 10 of this Note;

 

- 3 -

 

 

(viii)      any Note Party or any of its Subsidiaries shall fail to perform or
comply in any material respect with any covenant or agreement contained in the
Security Documents to which it is a party;

 

(ix)         any material provision of any Security Document (as determined by
the Holder) shall at any time for any reason (other than pursuant to the express
terms thereof) cease to be valid and binding on or enforceable against any Note
Party or any Subsidiary intended to be a party thereto (except the guaranty
obligations of Vringo, Ltd. with respect to the Guaranty to which it is a
party), or the validity or enforceability thereof shall be contested by any
party thereto, or a proceeding shall be commenced by any Note Party or any
Subsidiary or any governmental authority having jurisdiction over any of them,
seeking to establish the invalidity or unenforceability thereof, or any Note
Party or any Subsidiary shall deny in writing that it has any liability or
obligation purported to be created under any Security Document;

 

(x)          any Security Document, after delivery thereof pursuant hereto,
shall for any reason fail or cease to create a valid and perfected (except as
otherwise provided by Section 5(n) of the Security Agreement) and, except to the
extent permitted by the terms hereof or thereof, first priority Lien in favor of
the Holder for the benefit of the holders of the Notes on any Collateral (as
defined in the Security Agreement) purported to be covered thereby;

 

(xi)         any material damage to, or loss, theft or destruction of, a
material amount of Collateral, whether or not insured, or any strike, lockout,
labor dispute, embargo, condemnation, act of God or public enemy, or other
casualty which causes, for more than fifteen (15) consecutive days, the
cessation or substantial curtailment of revenue producing activities at any
facility of any Note Party or any Subsidiary, if any such event or circumstance
could reasonably be expected to have a Material Adverse Effect.

 

(b)          Redemption Right. On and after a Default Date, with respect to this
Note, the Company shall within one (1) Business Day deliver written notice
thereof via facsimile and overnight courier (an "Event of Default Notice") to
the Holder. At any time after the earlier of the Holder's receipt of an Event of
Default Notice and the Default Date, the Holder may require the Company to
redeem (an "Event of Default Redemption") all or any portion of this Note by
delivering written notice thereof (the "Event of Default Redemption Notice") to
the Company, which Event of Default Redemption Notice shall indicate the portion
of this Note the Holder is electing to redeem; provided, that, an Event of
Default Redemption Notice may only be delivered so long as an Event of Default
is continuing. Each portion of this Note subject to redemption by the Company
pursuant to this Section 4(b) shall be redeemed by the Company in cash at a
price equal to 125% of the Redemption Amount to be redeemed (the "Event of
Default Redemption Price"). Redemptions required by this Section 4(b) shall be
made in accordance with the provisions of Section 8. To the extent redemptions
required by this Section 4(b) are deemed or determined by a court of competent
jurisdiction to be prepayments of the Note by the Company, such redemptions
shall be deemed to be voluntary prepayments. The parties hereto agree that in
the event of the Company's redemption of any portion of the Note under this
Section 4(b), the Holder's damages would be uncertain and difficult to estimate
because of the parties' inability to predict future interest rates and the
uncertainty of the availability of a suitable substitute investment opportunity
for the Holder. Accordingly, any Event of Default redemption premium due under
this Section 4(b) is intended by the parties to be, and shall be deemed, a
reasonable estimate of the Holder's actual loss of its investment opportunity
and not as a penalty.

 

- 4 -

 

 

(5)         RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

 

(a)          Assumption. The Company shall not enter into or be party to a
Fundamental Transaction unless the Successor Entity assumes in writing all of
the obligations of the Company under this Note and the other Note Transaction
Documents in accordance with the provisions of this Section 5(a) pursuant to
written agreements in form and substance reasonably satisfactory to the Holder
and approved by the Holder prior to such Fundamental Transaction, including
agreements to deliver to each holder of Notes in exchange for such Notes a
security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to the Notes, including, without limitation,
having a principal amount and interest rate equal to the principal amounts and
the interest rates of the Note then outstanding held by such holder, having
similar ranking and security to the Note, and satisfactory to the Holder. Upon
the occurrence of any Fundamental Transaction, the Successor Entity shall
succeed to, and be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Note referring to the "Company"
shall refer instead to the Successor Entity), and may exercise every right and
power of the Company and shall assume all of the obligations of the Company
under this Note with the same effect as if such Successor Entity had been named
as the Company herein. The provisions of this Section shall apply similarly and
equally to successive Fundamental Transactions and shall be applied without
regard to any limitations on the redemption of this Note.

 

(b)          Redemption Right. No sooner than fifteen (15) days nor later than
ten (10) days prior to the consummation of a Change of Control, but not prior to
the public announcement of such Change of Control, the Company shall deliver
written notice thereof via facsimile and overnight courier to the Holder (a
"Change of Control Notice"). At any time during the period beginning after the
Holder's receipt of a Change of Control Notice and ending twenty (20) Business
Days after the date of the consummation of such Change of Control, the Holder
may require the Company to redeem (a "Change of Control Redemption") all or any
portion of this Note by delivering written notice thereof ("Change of Control
Redemption Notice", and the date thereof, the "Change of Control Redemption
Notice Date") to the Company, which Change of Control Redemption Notice shall
indicate the Redemption Amount the Holder is electing to require the Company to
redeem. The portion of this Note subject to redemption pursuant to this Section
5(b) shall be redeemed by the Company in cash at a price equal to 125% of the
Redemption Amount to be redeemed. Redemptions required by this Section 5 shall
be made in accordance with the provisions of Section 8 and shall have priority
to payments to stockholders in connection with a Change of Control. To the
extent redemptions required by this Section 5(b) are deemed or determined by a
court of competent jurisdiction to be prepayments of the Note by the Company,
such redemptions shall be deemed to be voluntary prepayments. The parties hereto
agree that in the event of the Company's redemption of any portion of the Note
under this Section 5(b), the Holder's damages would be uncertain and difficult
to estimate because of the parties' inability to predict future interest rates
and the uncertainty of the availability of a suitable substitute investment
opportunity for the Holder. Accordingly, any Change of Control redemption
premium due under this Section 5(b) is intended by the parties to be, and shall
be deemed, a reasonable estimate of the Holder's actual loss of its investment
opportunity and not as a penalty.

 

- 5 -

 

 

(6)         OPTIONAL REDEMPTION RIGHT. From and after the date upon which (i)
the Company and its Subsidiaries has more than $15,000,000 in the aggregate of
cash and Cash Equivalents, the Holder may, within 10 days of receipt of the
Optional Redemption Notice, require the Company to redeem up to 50% of the
outstanding principal amount of this Note, (ii) the Company and its Subsidiaries
has more than $20,000,000 in the aggregate of cash and Cash Equivalents, the
Holder may, within 10 days of receipt of the Optional Redemption Notice, require
the Company to redeem up to 100% of the outstanding principal of this Note,
(iii) the Company and its Subsidiaries receives proceeds in excess of $500,000
in the aggregate (for all such transactions after the Amendment and Restatement
Date of this Note) from the issuance of any equity or indebtedness of the
Company or any of its Subsidiaries (excluding any proceeds received upon the
exercise of options or warrants which are outstanding on the day immediately
preceding the Amendment and Restatement Date, provided that the terms of such
options or warrants are not amended, modified or changed on or after the
Amendment and Restatement Date), the Holder may, within 10 days of receipt of
the Optional Redemption Notice, require the Company to redeem the outstanding
principal under this Note in an amount equal to up to 20% of the proceeds of the
issuance of any such equity or indebtedness (each such occurrence described in
clauses (i) through (iii) above, an "Optional Redemption"), in each case by
delivering written notice thereof (the "Optional Redemption Notice") to the
Company within the time periods set forth above, which Optional Redemption
Notice shall indicate the portion of this Note the Holder is electing to redeem.
Each portion of this Note subject to redemption by the Company pursuant to this
Section 6 shall be redeemed by the Company in cash at a price equal to 100% of
the Redemption Amount to be redeemed (the "Optional Redemption Price").
Redemptions required by this Section 6 shall be made in accordance with the
provisions of Section 8. To the extent redemptions required by this Section 6
are deemed or determined by a court of competent jurisdiction to be prepayments
of the Note by the Company, such redemptions shall be deemed to be voluntary
prepayments. The parties hereto agree that in the event of the Company's
redemption of any portion of the Note under this Section 6, the Holder's damages
would be uncertain and difficult to estimate because of the parties' inability
to predict future interest rates and the uncertainty of the availability of a
suitable substitute investment opportunity for the Holder.

 

(7)         NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Certificate of Incorporation, Bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Note, and will at all times in good faith carry out all of the
provisions of this Note and take all action as may be required to protect the
rights of the Holder of this Note.

 

- 6 -

 

 

(8)         REDEMPTIONS. The Company shall deliver the applicable Event of
Default Redemption Price to the Holder within five (5) Business Days after the
Company's receipt of the Holder's Event of Default Redemption Notice (the "Event
of Default Redemption Date"). If the Holder has submitted a Change of Control
Redemption Notice in accordance with Section 5(b), the Company shall deliver the
applicable Change of Control Redemption Price to the Holder (i) concurrently
with the consummation of such Change of Control if such notice is received prior
to the consummation of such Change of Control and (ii) within five (5) Business
Days after the Company's receipt of such notice otherwise (such date, the
"Change of Control Redemption Date"). The Company shall deliver the applicable
Optional Redemption Price to the Holder within five (5) Business Days after the
Company's receipt of the Holder's Optional Redemption Notice (the "Optional
Redemption Date"). In the event of a redemption of less than all of the
Redemption Amount of this Note, the Company shall promptly cause to be issued
and delivered to the Holder a new Note (in accordance with Section 13(d))
representing the outstanding Principal which has not been redeemed. In the event
that the Company does not pay the applicable Redemption Price to the Holder
within the time period required, at any time thereafter and until the Company
pays such unpaid Redemption Price in full, the Holder shall have the option, in
lieu of redemption, to require the Company to promptly return to the Holder all
or any portion of this Note representing the Redemption Amount that was
submitted for redemption and for which the applicable Redemption Price (together
with any Late Charges thereon) has not been paid. Upon the Company's receipt of
such notice, (x) the applicable Redemption Notice shall be null and void with
respect to such Redemption Amount, (y) the Company shall immediately return this
Note, or issue a new Note (in accordance with Section 13(d)) to the Holder
representing such Redemption Amount to be redeemed. The Holder's delivery of a
notice voiding a Redemption Notice and exercise of its rights following such
notice shall not affect the Company's obligations to make any payments of Late
Charges which have accrued prior to the date of such notice with respect to the
Redemption Amount subject to such notice.

 

(9)         VOTING RIGHTS. The Holder shall have no voting rights as the holder
of this Note, except as required by law, including, but not limited to, the laws
of the State of Delaware, and as expressly provided in this Note.

 

(10)        COVENANTS.

 

(a)          Rank.    All payments due under this Note shall be senior to all
other Indebtedness of the Company and its Subsidiaries other than Permitted
Senior Indebtedness.

 

(b)          Incurrence of Indebtedness. So long as this Note is outstanding,
the Company shall (and shall use its commercially reasonable efforts to cause
the Parent and the Parent's other Subsidiaries) not, and the Company shall not
permit any of its Subsidiaries to, directly or indirectly, incur or guarantee,
assume or suffer to exist any Indebtedness, other than Permitted Indebtedness.

 

(c)          Existence of Liens. So long as this Note is outstanding, the
Company shall (and shall use its commercially reasonable efforts to cause the
Parent and the Parent's other Subsidiaries) not, and the Company shall not
permit any of its Subsidiaries to, directly or indirectly, allow or suffer to
exist any mortgage, lien, pledge, charge, security interest or other encumbrance
upon or in any property or assets (including accounts and contract rights) owned
by the Company or any of its Subsidiaries (collectively, "Liens") other than
Permitted Liens.

 

- 7 -

 

 

(d)          Restricted Payments. The Company shall (and shall use its
commercially reasonable efforts to cause the Parent and the Parent's other
Subsidiaries) not, and the Company shall not permit any of its Subsidiaries to,
directly or indirectly, redeem, defease, repurchase, repay or make any payments
in respect of, by the payment of cash or Cash Equivalents (in whole or in part,
whether by way of open market purchases, tender offers, private transactions or
otherwise), all or any portion of any Indebtedness (other than this Note),
whether by way of payment in respect of principal of (or premium, if any) or
interest on, such Indebtedness if at the time such payment is due or is
otherwise made or, after giving effect to such payment, an event constituting,
or that with the passage of time and without being cured would constitute, an
Event of Default has occurred and is continuing.

 

(e)          Restriction on Redemption. Until this Note has been redeemed or
otherwise satisfied in accordance with its terms, the Company shall (and shall
use its commercially reasonable efforts to cause the Parent and the Parent's
other Subsidiaries) not, directly or indirectly, redeem or repurchase its
capital stock without the prior express written consent of the Holder.

 

(f)          [Intentionally Omitted]

 

(g)          Intellectual Property. The Company shall (and shall use its
commercially reasonable efforts to cause the Parent and the Parent's other
Subsidiaries) not, and the Company shall not permit any of its Subsidiaries,
directly or indirectly, to encumber or allow any Liens on, any of its copyright
rights, copyright applications, copyright registrations and like protections in
each work of authorship and derivative work, whether published or unpublished,
any patents, patent applications and like protections, including improvements,
divisions, continuations, renewals, reissues, extensions, and
continuations-in-part of the same, trademarks, service marks and, to the extent
permitted under applicable law, any applications therefor, whether registered or
not, and the goodwill of the business of the Company and its Subsidiaries and
the Parent and the Parent's other Subsidiaries connected with and symbolized
thereby, know-how, operating manuals, trade secret rights, rights to unpatented
inventions, and any claims for damage by way of any past, present, or future
infringement of any of the foregoing, other than Permitted Liens.

 

(h)          Preservation of Existence, Etc. The Company shall (and shall use
its commercially reasonable efforts to cause the Parent and the Parent's other
Subsidiaries to) maintain and preserve, and cause each of its Subsidiaries to
maintain and preserve, its existence, rights and privileges, and become or
remain, and cause each of its Subsidiaries to become or remain, duly qualified
and in good standing in each jurisdiction in which the character of the
properties owned or leased by it or in which the transaction of its business
makes such qualification necessary.

 

- 8 -

 

 

(i)          Maintenance of Properties, Etc. The Company shall (and shall use
its commercially reasonable efforts to cause the Parent and the Parent's other
Subsidiaries to) maintain and preserve, and cause each of its Subsidiaries to
maintain and preserve, all of its properties which are necessary or useful in
the proper conduct of its business in good working order and condition, ordinary
wear and tear excepted, and comply, and cause each of its Subsidiaries to
comply, at all times with the provisions of all leases to which it is a party as
lessee or under which it occupies property, so as to prevent any loss or
forfeiture thereof or thereunder.

 

(j)          Maintenance of Insurance. The Company shall (and shall use its
commercially reasonable efforts to cause the Parent and the Parent's other
Subsidiaries to) maintain, and cause each of its Subsidiaries to maintain,
insurance with responsible and reputable insurance companies or associations
(including, without limitation, comprehensive general liability, hazard, rent
and business interruption insurance) with respect to its properties (including
all real properties leased or owned by it) and business, in such amounts and
covering such risks as is required by any governmental authority having
jurisdiction with respect thereto or as is carried generally in accordance with
sound business practice by companies in similar businesses similarly situated.

 

(11)        VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The consent of the
Holder shall be required for any change or amendment to this Note.

 

(12)        TRANSFER. This Note may be offered, sold, assigned or transferred by
the Holder without the consent of the Company.

 

(13)        REISSUANCE OF THIS NOTE.

 

(a)          Transfer. If this Note is to be transferred, the Holder shall
surrender this Note to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Note (in accordance with Section
13(d)), registered as the Holder may request, representing the outstanding
Principal being transferred by the Holder and, if less then the entire
outstanding Principal is being transferred, a new Note (in accordance with
Section 13(d)) to the Holder representing the outstanding Principal not being
transferred. The Holder and any assignee, by acceptance of this Note,
acknowledge and agree that, following redemption of any portion of this Note,
the outstanding Principal represented by this Note may be less than the
Principal stated on the face of this Note.

 

(b)          Lost, Stolen or Mutilated Note. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Note, and, in the case of loss, theft or destruction, of
any indemnification undertaking by the Holder to the Company in customary form
and, in the case of mutilation, upon surrender and cancellation of this Note,
the Company shall execute and deliver to the Holder a new Note (in accordance
with Section 13(d)) representing the outstanding Principal.

 

(c)          Note Exchangeable for Different Denominations. This Note is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Note or Notes (in accordance with Section 13(d) and in
principal amounts of at least $100,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.

 

- 9 -

 

 

(d)          Issuance of New Notes. Whenever the Company is required to issue a
new Note pursuant to the terms of this Note, such new Note (i) shall be of like
tenor with this Note, (ii) shall represent, as indicated on the face of such new
Note, the Principal remaining outstanding (or in the case of a new Note being
issued pursuant to Section 13(a) or Section 13(c), the Principal designated by
the Holder which, when added to the principal represented by the other new Notes
issued in connection with such issuance, does not exceed the Principal remaining
outstanding under this Note immediately prior to such issuance of new Notes),
(iii) shall have an issuance date, as indicated on the face of such new Note,
which is the same as the Issuance Date of this Note, (iv) shall have the same
rights and conditions as this Note, and (v) shall represent accrued and unpaid
Interest and Late Charges, if any, on the Principal and Interest of this Note,
from the Issuance Date.

 

(14)                    TAXES.

 

(i)          Any and all payments made by the Corporation hereunder, including
any on account of Interest or Late Charges, must be made by it without any a
deduction or withholding for or on account of any tax, levy, impost, duty or
other charge or withholding of a similar nature (including any related penalty
or interest) from a payment under this Note (a "Tax Deduction"), unless a Tax
Deduction is required by law. If the Corporation is aware that it must make a
Tax Deduction (or that there is a change in the rate or the basis of a Tax
Deduction), it must notify the Holder promptly.

 

(ii)         If the Corporation is required to make a Tax Deduction from or in
respect to any sum payable hereunder to the Holder, (i) the sum payable shall be
increased by the amount by which the sum payable would otherwise have to be
increased (the "tax gross up amount") to ensure that after making all required
deductions (including deductions applicable to the tax gross-up amount) the
Holder would receive an amount equal to the sum it would have received had no
such Tax Deductions been made, (ii) the Company shall make such Tax Deductions
and (iii) the Company shall pay the full amount withheld or deducted to the
applicable governmental authority within the time required. As soon as
practicable after making a Tax Deduction or a payment required in connection
with a Tax Deduction, the Corporation must deliver to the Holder any official
receipt or form, if any, provided by or required by the taxing authority to whom
the Tax Deduction was paid.

 

(iii)        The obligations of the Corporation under this Section 14 shall
survive the termination of this Note and the payment of the Note and all other
amounts payable hereunder.

 

(15)        REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note and any of the other
Note Transaction Documents at law or in equity (including a decree of specific
performance and/or other injunctive relief), and nothing herein shall limit the
Holder's right to pursue actual and consequential damages for any failure by the
Company to comply with the terms of this Note. Amounts set forth or provided for
herein with respect to payments, redemption and the like (and the computation
thereof) shall be the amounts to be received by the Holder and shall not, except
as expressly provided herein, be subject to any other obligation of the Company
(or the performance thereof). The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.

 

- 10 -

 

 

(16)        PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note
is placed in the hands of an attorney for collection or enforcement or is
collected or enforced through any legal proceeding or the Holder otherwise takes
action to collect amounts due under this Note or to enforce the provisions of
this Note or (b) there occurs any bankruptcy, reorganization, receivership of
the Company or other proceedings affecting Company creditors' rights and
involving a claim under this Note, then the Company shall pay the costs incurred
by the Holder for such collection, enforcement or action or in connection with
such bankruptcy, reorganization, receivership or other proceeding, including,
but not limited to, attorneys' fees and disbursements.

 

(17)        CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly
drafted by the Company and the Holder and shall not be construed against any
person as the drafter hereof. The headings of this Note are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Note.

 

(18)        FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.

 

(19)        DISPUTE RESOLUTION. In the case of a dispute as to the determination
of any Redemption Price, the Company shall submit the disputed determinations or
arithmetic calculations via facsimile within one (1) Business Day of receipt, or
deemed receipt, of the Redemption Notice or other event giving rise to such
dispute, as the case may be, to the Holder. If the Holder and the Company are
unable to agree upon such determination or calculation within one (1) Business
Day of such disputed determination or arithmetic calculation being submitted to
the Holder, then the Company shall, within one (1) Business Day submit via
facsimile the disputed arithmetic calculation of the Redemption Price to an
independent, outside accountant, selected by the Holder and approved by the
Company, such approval not to be unreasonably withheld or delayed. The Company,
at the Company's expense, shall cause the accountant to perform the
determinations or calculations and notify the Company and the Holder of the
results no later than five (5) Business Days from the time it receives the
disputed determinations or calculations. Such accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.

 

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(20)        NOTICES; PAYMENTS.

 

(a)   Notices. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Note must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one (1) Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:

 

If to the Company:

 

  Innovate/Protect, Inc.   c/o Vringo, Inc.   44 West 28th Street   New York,
NY  10001   Telephone: (212) 571-1244   Facsimile: (646) 214-7946   E-mail:
aberger@smartsearchlabs.com   Attention: Chief Operating Officer

 

With a copy to:

 

  Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.   Chrysler Center   666
Third Avenue   New York, NY 10017   Telephone: (212) 935-3000   Facsimile: (212)
983-3115   E-mail: KRKoch@mintz.com   Attention: Kenneth R. Koch, Esq.

 

If to the Buyer:

 

  Hudson Bay Master Fund Ltd.   c/o Hudson Bay Capital Management LP   777 Third
Avenue, 30th Floor   New York, NY  10017   Telephone: (212) 571-1244  
Facsimile: (646) 214-7946   E-mail: investments@hudsonbaycapital.com    
operations@hudsonbaycapital.com   Attention: Yoav Roth

 

With a copy (for informational purposes only) to:

 

  Schulte Roth & Zabel LLP   919 Third Avenue   New York, New York  10022  
Telephone: (212) 756-2000   Facsimile: (212) 593-5955   Attention: Eleazer N.
Klein, Esq.   E-mail: eleazer.klein@srz.com

 

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or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively. The
Company shall provide the Holder with prompt written notice of all actions taken
pursuant to this Note, including in reasonable detail a description of such
action and the reason therefore. Without limiting the generality of the
foregoing, the Company will give written notice to the Holder at least twenty
(20) days prior to the date on which the Company closes its books or takes a
record for determining rights to vote with respect to any Fundamental
Transaction, dissolution or liquidation, provided in each case that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to the Holder.

 

(b)          Payments. Whenever any payment of cash is to be made by the Company
to any Person pursuant to this Note, such payment shall be made in lawful money
of the United States of America by a check drawn on the account of the Company
and sent via overnight courier service to such Person at such address as
previously provided to the Company in writing; provided that the Holder may
elect to receive a payment of cash via wire transfer of immediately available
funds by providing the Company with prior written notice setting out such
request and the Holder's wire transfer instructions. Whenever any amount
expressed to be due by the terms of this Note is due on any day which is not a
Business Day, the same shall instead be due on the next succeeding day which is
a Business Day and, in the case of any Interest Date which is not the date on
which this Note is paid in full, the extension of the due date thereof shall not
be taken into account for purposes of determining the amount of Interest due on
such date. Any amount of Principal or other amounts due under the Note
Transaction Documents which is not paid when due shall result in a late charge
being incurred and payable by the Company in an amount equal to interest on such
amount at the rate of twenty four percent (24%) per annum from the Default Date
due until the same is paid in full ("Late Charge").

 

(21)        CANCELLATION. After all Principal, accrued Interest and other
amounts at any time owed on this Note have been paid in full, this Note shall
automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.

 

(22)        WAIVER OF NOTICE. To the extent permitted by law, the Company hereby
waives demand, notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance, default or enforcement of this Note.

 

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(23)        GOVERNING LAW; JURISDICTION; JURY TRIAL. This Note shall be
construed and enforced in accordance with, and all questions concerning the
construction, validity, interpretation and performance of this Note shall be
governed by, the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Company hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Company hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address it set forth on the signature page hereto and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Nothing contained herein shall
be deemed or operate to preclude the Holder from bringing suit or taking other
legal action against the Company in any other jurisdiction to collect on the
Company's obligations to the Holder, to realize on any collateral or any other
security for such obligations, or to enforce a judgment or other court ruling in
favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY
TRANSACTION CONTEMPLATED HEREBY.

 

(24)        Severability. If any provision of this Note is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this Note
so long as this Note as so modified continues to express, without material
change, the original intentions of the parties as to the subject matter hereof
and the prohibited nature, invalidity or unenforceability of the provision(s) in
question does not substantially impair the respective expectations or reciprocal
obligations of the parties or the practical realization of the benefits that
would otherwise be conferred upon the parties. The parties will endeavor in good
faith negotiations to replace the prohibited, invalid or unenforceable
provision(s) with a valid provision(s), the effect of which comes as close as
possible to that of the prohibited, invalid or unenforceable provision(s).

 

(25)        CERTAIN DEFINITIONS. For purposes of this Note, the following terms
shall have the following meanings:

 

(a)          "Affiliate" has the meaning set forth in Rule 405 under the
Securities Act of 1933, as amended.

 

(b)          "Business Day" means any day other than Saturday, Sunday or other
day on which commercial banks in The City of New York are authorized or required
by law to remain closed.

 

- 14 -

 

 

(c)          "Change of Control" means any Fundamental Transaction other than
(i) any reorganization, recapitalization or reclassification of the Common Stock
in which holders of the Company's voting power immediately prior to such
reorganization, recapitalization or reclassification continue after such
reorganization, recapitalization or reclassification to hold publicly traded
securities and, directly or indirectly, are, in all material respect, the
holders of the voting power of the surviving entity (or entities with the
authority or voting power to elect the members of the board of directors (or
their equivalent if other than a corporation) of such entity or entities) after
such reorganization, recapitalization or reclassification or (ii) pursuant to a
migratory merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Company.

 

(d)          "Calendar Quarter" means each of: the period beginning on and
including January 1 and ending on and including March 31; the period beginning
on and including April 1 and ending on and including June 30; the period
beginning on and including July 1 and ending on and including September 30; and
the period beginning on and including October 1 and ending on and including
December 31.

 

(e)          "Cash Equivalents" means (a) marketable direct obligations issued
or unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case, maturing within six months from the date of acquisition thereof; (b)
commercial paper, maturing not more than 270 days after the date of issue rated
P 1 by Moody's or A 1 by Standard & Poor's; (c) certificates of deposit maturing
not more than 270 days after the date of issue, issued by commercial banking
institutions and money market or demand deposit accounts maintained at
commercial banking institutions, each of which is a member of the Federal
Reserve System and has a combined capital and surplus and undivided profits of
not less than $500,000,000; (d) repurchase agreements having maturities of not
more than 90 days from the date of acquisition which are entered into with major
money center banks included in the commercial banking institutions described in
clause (c) above and which are secured by readily marketable direct obligations
of the United States Government or any agency thereof; (e) money market accounts
maintained with mutual funds having assets in excess of $2,500,000,000; and (f)
marketable tax exempt securities rated A or higher by Moody's or A+ or higher by
Standard & Poor's, in each case, maturing within six months from the date of
acquisition thereof.

 

(f)          "Common Stock" means the Company's common stock, par value $0.0001
per share.

 

(g)          "Contingent Obligation" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
Indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto.

 

- 15 -

 

 

(h)          "Default Date" means the date that is four (4) days after the
Holder gives notice of the existence of an Event of Default that has occurred
and continued for at least eight (8) days.

 

(i)          "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

 

(j)          "Fundamental Transaction" means that (A) the Company shall,
directly or indirectly, in one or more related transactions, (i) consolidate or
merge with or into (whether or not the Company is the surviving corporation)
another Person or Persons, or (ii) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of the Company
to another Person, or (iii) allow another Person to make a purchase, tender or
exchange offer that is accepted by the holders of more than the 50% of the
outstanding shares of Voting Stock (not including any shares of Voting Stock
held by the Person or Persons making or party to, or associated or affiliated
with the Persons making or party to, such purchase, tender or exchange offer),
or (iv) consummate a stock purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person whereby such other Person acquires
more than the 50% of the outstanding shares of Voting Stock (not including any
shares of Voting Stock held by the other Person or other Persons making or party
to, or associated or affiliated with the other Persons making or party to, such
stock purchase agreement or other business combination), (v) reorganize,
recapitalize or reclassify its Common Stock or (B) any "person" or "group" (as
these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange
Act) is or shall become the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary
voting power represented by issued and outstanding Common Stock.

 

(k)          "GAAP" means United States generally accepted accounting
principles, consistently applied.

 

(l)          "Indebtedness" of any Person means, without duplication (i) all
indebtedness for borrowed money, (ii) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services, including
(without limitation) "capital leases" in accordance with GAAP (other than trade
payables entered into in the ordinary course of business), (iii) all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (iv) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses,
(v) all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case with respect
to any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (vi) all
monetary obligations under any leasing or similar arrangement which, in
connection with GAAP, consistently applied for the periods covered thereby, is
classified as a capital lease, (vii) all indebtedness referred to in clauses (i)
through (vi) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, and (viii) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (i) through (vii) above.

 

- 16 -

 

 

(m)          "Interest Rate" means 0.46% per annum, subject to adjustment as set
forth in Section 2.

 

(n)          "Material Adverse Effect" means any material adverse effect on the
business, properties, assets, operations, results of operations, condition
(financial or otherwise) or prospects of the Parent and its Subsidiaries,
individually or taken as a whole, or on the transactions contemplated hereby or
on the other Note Transaction Documents or by the agreements and instruments to
be entered into in connection herewith or therewith, or on the authority or
ability of the Company to perform its obligations under the Note Transaction
Documents.

 

(o)          "Note Party" means each of the Company, the Parent and each other
Subsidiary of the Parent party to any Note Transaction Document.

 

(p)          "Note Transaction Documents" means this Note and the Security
Documents.

 

(q)          "Parent" means Vringo, Inc., a Delaware corporation.

 

(r)          "Permitted Indebtedness" means (i) Indebtedness evidenced by this
Note, (ii) unsecured Indebtedness incurred by the Parent or any of its
Subsidiaries that is made expressly subordinate in right of payment to the
Indebtedness evidenced by this Note, as reflected in a written agreement
acceptable to the Holder and approved by the Holder in writing, and which
Indebtedness does not provide at any time for (A) the payment, prepayment,
repayment, repurchase or defeasance, directly or indirectly, of any principal or
premium, if any, thereon until ninety-one (91) days after the Maturity Date or
later and (B) total interest and fees at a rate in excess of 8% per annum, (iii)
Specified Indebtedness and (iv) Indebtedness secured by Permitted Liens
described in clauses (ii), (iii), (iv) and (v) of the definition of Permitted
Liens.

 

(s)          "Permitted Liens" means (i) any Lien for taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of law
with respect to a liability that is not yet due or delinquent, (iii) any Lien
created by operation of law, such as materialmen's liens, mechanics' liens and
other similar liens, arising in the ordinary course of business with respect to
a liability that is not yet due or delinquent or that are being contested in
good faith by appropriate proceedings, (iv) Liens (A) upon or in any equipment
acquired or held by the Parent or any of its Subsidiaries to secure the purchase
price of such equipment or indebtedness incurred solely for the purpose of
financing the acquisition or lease of such equipment, or (B) existing on such
equipment at the time of its acquisition, provided that the Lien is confined
solely to the property so acquired and improvements thereon, and the proceeds of
such equipment, (v) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in clause
(iv) above, provided that any extension, renewal or replacement Lien shall be
limited to the property encumbered by the existing Lien and the principal amount
of the Indebtedness being extended, renewed or refinanced does not increase,
(vi) leases or subleases and licenses and sublicenses granted to others in the
ordinary course of the Parent's business, not interfering in any material
respect with the business of the Parent and its Subsidiaries taken as a whole,
(vii) Liens in favor of customs and revenue authorities arising as a matter of
law to secure payments of custom duties in connection with the importation of
goods, and (viii) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 4(a)(v) and
(ix) Liens securing Specified Indebtedness as described in such definition.

 

- 17 -

 

 

(t)          "Permitted Senior Indebtedness" means the following Indebtedness
(with applicable lien priorities which may be senior or junior, as the case may
be and with payment priorities to the extent, but only to the extent, of any
proceeds from the collateral which the holders of Permitted Senior Indebtedness
have a lien on and which lien is senior to the liens by which this Note is
secured): (i) Indebtedness permitted under clause (iii) of the definition of
Permitted Indebtedness and (ii) Indebtedness permitted under clause (iv) of the
definition of Permitted Indebtedness.

 

(u)          "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.

 

(v)         "Public Company Date" means the date the shares of Common Stock of
the Company (or its successor by merger, recapitalization, reorganization, or
otherwise) are registered under the Exchange Act.

 

(w)          "Redemption Amount" means the sum of (A) the portion of the
Principal to be redeemed or otherwise with respect to which this determination
is being made, (B) accrued and unpaid Interest with respect to such Principal
and (C) accrued and unpaid Late Charged with respect to such Principal and
Interest.

 

(x)          "Redemption Notices" means, collectively, the Event of Default
Redemption Notices, the Change of Control Redemption Notices and the Optional
Redemption Notices, each of the foregoing, individually, a Redemption Notice.

 

(y)          "Redemption Prices" means, collectively, the Event of Default
Redemption Price, the Change of Control Redemption Price and the Optional
Redemption Prices, each of the foregoing, individually, a Redemption Price.

 

(z)          "Security Documents" means (i) that certain Amended and Restated
Pledge and Security Agreement, dated as of the date hereof, by and among Parent
and its Subsidiaries pursuant to which Parent and its Subsidiaries granted
security interests in and liens on their assets in favor of the Buyer (as
defined therein) to secure their respective obligations under the Note
Transaction Documents, (ii) that certain Amended and Restated Guaranty, dated as
of the date hereof, by and among Parent and certain of its Subsidiaries pursuant
to which Parent and such Subsidiaries guaranteed all of the obligations of the
Company under the Note Transaction Documents in favor of the Buyer, and (iii)
any ancillary agreements, instruments and other documents relating to the
enforcement or protection of the Collateral, including, agreements, instruments
and other documents to create or further the attachment, perfection or priority
of the liens on and security interests in the Collateral.

 

- 18 -

 

 

(aa)         "Specified Indebtedness" means, on or prior to the date that is 18
months after the first issuance of the Series A Preferred Stock (the “Series A
Preferred Stock”) of the Parent to the Holder, Indebtedness, to the extent such
Indebtedness (i) is issued or incurred with net proceeds to the Parent or (ii)
will have an outstanding principal amount incurred plus accrued interest, as
applicable, in an amount, individually or in the aggregate, up to $6,000,000
less the then outstanding principal amount of this Note; provided, that the
Parent and its Subsidiaries shall be permitted to incur Indebtedness, provided,
that the liens or other encumbrances, if any, on such Indebtedness cover only
assets acquired after the initial issuance date of the Series A Preferred Stock,
and the holder of such Indebtedness expressly subordinates to the holders of the
Series A Preferred Stock with respect to assets owned by the Parent on or prior
to such initial issuance date pursuant to a subordination agreement in form and
substance reasonably satisfactory to the Required Holders (as defined in the
instrument governing the Series A Preferred Stock).

 

(bb)         "Subscription Agreement" means that certain subscription agreement
dated as of June 22, 2011 by and among the Company and the Holder pursuant to
which the Company issued to the Holder this Note and certain shares of
convertible preferred stock, as the same may be amended, restated, supplemented
or otherwise modified from time to time.

 

(cc)         "Subsidiary" means any entity in which the Parent, directly or
indirectly, owns at least a majority of the voting stock or voting securities.

 

(dd)         "Successor Entity" means the Person, which may be the Company,
formed by, resulting from or surviving any Fundamental Transaction or the Person
with which such Fundamental Transaction shall have been made.

 

(ee)         "Voting Stock" of a Person means capital stock of such Person of
the class or classes pursuant to which the holders thereof have the general
voting power to elect, or the general power to appoint, at least a majority of
the board of directors, managers or trustees of such Person (irrespective of
whether or not at the time capital stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).

 

(26)        DISCLOSURE. Upon receipt or delivery by the Company of any notice in
accordance with the terms of this Note after the Public Company Date, unless the
Company has in good faith determined that the matters relating to such notice do
not constitute material, nonpublic information relating to the Company or its
Subsidiaries, the Company shall within one (1) Business Day after any such
receipt or delivery publicly disclose such material, nonpublic information on a
Current Report on Form 8-K or otherwise. In the event that the Company believes
that a notice contains material, nonpublic information relating to the Company
or its Subsidiaries, the Company so shall indicate to such Holder
contemporaneously with delivery of such notice, and in the absence of any such
indication, the Holder shall be allowed to presume that all matters relating to
such notice do not constitute material, nonpublic information relating to the
Company or its Subsidiaries. In addition, contemporaneously with the occurrence
of either event described in Sections 6(i) or 6(ii), the Company shall publicly
disclose the occurrence of such event (whether by press release or otherwise).

 

- 19 -

 

 

(27)        ASSUMPTION; AMENDMENT AND RESTATEMENT. This Note amends and restates
in its entirety the Senior Secured Note, dated June 22, 2011, as amended,
originally made by the Company (as successor to Labrador Search Corporation) to
the order of the Holder (the "Original Note"). This Note shall not in any way
constitute (i) an extinguishment of the indebtedness of the Company under the
Original Note, (ii) a release or other discharge of the Company from any of its
obligations and liabilities under the Original Note or any documents related
thereto, or (iii) a novation of the Original Note.

 

[Signature Page Follows]

 

- 20 -

 

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of
the Amendment and Restatement Date set out above.

 

  INNOVATE/PROTECT, INC.       By: /s/ Andrew Perlman      Name: Andrew Perlman
    Title: CEO