Exhibit 10.2

 

[FORM OF SENIOR NOTE]

 

THE ISSUANCE AND SALE OF THE SECURITY REPRESENTED BY THIS NOTE HAS 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 TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD OR ELIGIBLE TO BE 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.

 

THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT (“OID”). PURSUANT TO
TREASURY REGULATION §1.1275-3(b)(1), [      ], A REPRESENTATIVE OF THE COMPANY
HEREOF WILL, BEGINNING TEN DAYS AFTER THE ISSUANCE DATE OF THIS NOTE, PROMPTLY
MAKE AVAILABLE TO THE HOLDER UPON REQUEST THE INFORMATION DESCRIBED IN TREASURY
REGULATION §1.1275-3(b)(1)(i). [      ] MAY BE REACHED AT TELEPHONE NUMBER [(
)    -    ].

 

My Size, Inc.

 

Senior Note

 

Issuance Date:  [●] 20 Original Principal Amount: U.S. $[●]

 

FOR VALUE RECEIVED, My Size, Inc., a Delaware corporation (the “Company”),
hereby promises to pay to the order of [BUYER] or its registered assigns
(“Holder”) the amount set forth 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 a rate
per annum equal to the Interest Rate (as defined below), from the date set out
above as the 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 Note (including all Senior Notes issued in exchange,
transfer or replacement hereof, this “Note”) is one of an issue of Senior Notes
issued pursuant to the Securities Purchase Agreement, dated as of October __,
2017 (the “Subscription Date”), by and among the Company and the investors (the
“Buyers”) referred to therein, as amended from time to time (collectively, the
“Notes”, and such other Senior Notes, the “Other Notes”). Certain capitalized
terms used herein are defined in Section 24.

 

 

 

 

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 (as defined in Section
17(c)) on such Principal and Interest. 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)  This Note was issued with an OID. This Note shall not bear Interest except
upon the occurrence (and during the continuance) of an Event of Default (as
defined below), in which case this Note shall bear interest at a rate of ten
percent (10.0%) per annum (the “Interest Rate”). In the event that such Event of
Default is subsequently cured (and no other Event of Default then exists
(including, without limitation, for the Company’s failure to pay such Interest
on the applicable Interest Date)), Interest hereunder shall cease to accrue as
of the calendar day immediately following the date of such cure; provided that
the Interest as calculated and unpaid 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 such cure
of such Event of Default.

 

(b)  Interest on this Note shall commence accruing upon the occurrence of an
Event of Default and shall be computed on the basis of a 360-day year and twelve
30-day months and shall be payable in arrears on each Interest Date and shall
compound each calendar month and shall be payable in accordance with the terms
of this Note. Interest shall be payable on each Interest Date, to the record
holder of this Note on the applicable Interest Date, in cash.

 

3.  RIGHTS UPON EVENT OF DEFAULT.

 

(a)  Event of Default. Each of the following events shall constitute an “Event
of Default” and each of the events in clauses (vi), (vii) and (viii) shall
constitute a “Bankruptcy Event of Default”:

 

(i)   the Company’s or any Subsidiary’s failure to pay to the Holder any amount
of Principal, Interest, Late Charges or other amounts when and as due under this
Note (including, without limitation, the Company’s or any Subsidiary’s failure
to pay any redemption payments or amounts hereunder) or any other Transaction
Document (as defined in the Securities Purchase Agreement) or any other
agreement, document, certificate or other instrument delivered in connection
with the transactions contemplated hereby and thereby, except, in the case of a
failure to pay Interest and Late Charges when and as due, in which case only if
such failure remains uncured for a period of at least two (2) Trading Days;

 

(ii)  the Company’s (A) failure to cure a Delivery Failure (as defined in the
Warrants) by delivery of the required number of shares of Common Stock (as
defined in the Securities Purchase Agreement) within five (5) Trading Days after
the applicable exercise date or (B) notice, written or oral, to any holder of
the Warrants, including, without limitation, by way of public announcement or
through any of its agents, at any time, of its intention not to comply, as
required, with a request for exercise of any Warrants for shares of Common Stock
in accordance with the provisions of the Warrants (other than Section 1(f) of
the Warrants);

 

 

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(iii)  except to the extent the Company is in compliance with Section 1(g) of
the Warrants, at any time following the tenth (10th) consecutive day that the
Holder’s Authorized Share Allocation (as defined in the Warrants) is less than
the number of shares of Common Stock that the Holder would be entitled to
receive upon exercise in full of the Holder’s Warrants (without regard to any
limitations on exercise set forth in the Warrants);

 

(iv)  the Company fails to remove any restrictive legend on any certificate or
any shares of Common Stock issued to the Holder under the Securities Purchase
Agreement (including the Warrants) as and when required by the Securities
Purchase Agreement, unless otherwise then prohibited by applicable federal
securities laws, and any such failure remains uncured for at least five (5)
days;

 

(v)  the occurrence of any default under, redemption of or acceleration prior to
maturity of at least an aggregate of $100,000 of Indebtedness (as defined in the
Securities Purchase Agreement) of the Company or any of its Subsidiaries, other
than with respect to any Other Notes;

 

(vi)  bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings for the relief of debtors shall be instituted by or against the
Company or any Subsidiary and, if instituted against the Company or any
Subsidiary by a third party, shall not be dismissed within thirty (30) days of
their initiation;

 

(vii)  the commencement by the Company or any Subsidiary of a voluntary case or
proceeding under any applicable federal, state or foreign bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to
the entry of a decree, order, judgment or other similar document in respect of
the Company or any Subsidiary in an involuntary case or proceeding under any
applicable federal, state or foreign bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under any applicable federal, state or foreign
law, or the consent by it to the filing of such petition or to the appointment
of or taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Subsidiary or of
any substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the execution of a composition of debts, or the
occurrence of any other similar federal, state or foreign proceeding, or the
admission by it in writing of its inability to pay its debts generally as they
become due, the taking of corporate action by the Company or any Subsidiary in
furtherance of any such action or the taking of any action by any Person to
commence a Uniform Commercial Code foreclosure sale or any other similar action
under federal, state or foreign law;

 

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(viii) the entry by a court of (i) a decree, order, judgment or other similar
document in respect of the Company or any Subsidiary of a voluntary or
involuntary case or proceeding under any applicable federal, state or foreign
bankruptcy, insolvency, reorganization or other similar law or (ii) a decree,
order, judgment or other similar document adjudging the Company or any
Subsidiary as bankrupt or insolvent, or approving as properly filed a petition
seeking liquidation, reorganization, arrangement, adjustment or composition of
or in respect of the Company or any Subsidiary under any applicable federal,
state or foreign law or (iii) a decree, order, judgment or other similar
document appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Subsidiary or of
any substantial part of its property, or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree, order, judgment or other
similar document or any such other decree, order, judgment or other similar
document unstayed and in effect for a period of thirty (30) consecutive days;

 

(ix)  a final judgment or judgments for the payment of money aggregating in
excess of $100,000 are rendered against the Company and/or any of its
Subsidiaries and which judgments are not, within thirty (30) days after the
entry thereof, bonded, discharged, settled or stayed pending appeal, or are not
discharged within thirty (30) days after the expiration of such stay; provided,
however, any judgment which is covered by insurance or an indemnity from a
credit worthy party shall not be included in calculating the $100,000 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 the Company or such Subsidiary (as the case may
be) will receive the proceeds of such insurance or indemnity within thirty (30)
days of the issuance of such judgment;

 

(x)  the Company and/or any Subsidiary, individually or in the aggregate, either
(i) fails to pay, when due, or within any applicable grace period, any payment
with respect to any Indebtedness in excess of $100,000 due to any third party
(other than, with respect to unsecured Indebtedness only, payments contested by
the Company and/or such Subsidiary (as the case may be) in good faith by proper
proceedings and with respect to which adequate reserves have been set aside for
the payment thereof in accordance with GAAP) or is otherwise in breach or
violation of any agreement for monies owed or owing in an amount in excess of
$50,000, which breach or violation permits the other party thereto to declare a
default or otherwise accelerate amounts due thereunder, or (ii) suffer to exist
any other circumstance or event that would, with or without the passage of time
or the giving of notice, result in a default or event of default under any
agreement binding the Company or any Subsidiary, which default or event of
default would or is likely to have a material adverse effect on the business,
assets, operations (including results thereof), liabilities, properties,
condition (including financial condition) or prospects of the Company or any of
its Subsidiaries, individually or in the aggregate;

 

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(xi)  other than as specifically set forth in another clause of this Section
3(a), the Company or any Subsidiary breaches any representation, warranty,
covenant or other term or condition of any Transaction Document, except, in the
case of a breach of a covenant or other term or condition that is curable, only
if such breach remains uncured for a period of two (2) consecutive Trading Days;

 

(xii)  any breach or failure in any respect by the Company or any Subsidiary to
comply with any provision of Section 9 of this Note;

 

(xiii)  any Material Adverse Effect (as defined in the Securities Purchase
Agreement) occurs;

 

(xiv)  at any time after the six month anniversary of the Closing Date, any
Underlying Securities (as defined in the Securities Purchase Agreement) shall
fail to be eligible for resale pursuant to Rule 144 (as defined in the
Securities Purchase Agreement) (assuming, for such purpose, that the holders
thereof are not affiliates of the Company and disregarding any limitation on
exercise of the Warrants), but only if such failure remains uncured for a period
of ten (10) consecutive Trading Days;

 

(xv)  any Change of Control occurs; or

 

(xvi)  any Event of Default (as defined in the Other Notes) occurs with respect
to any Other Notes.

 

(b)  Notice of an Event of Default; Redemption Right. Upon the occurrence of an
Event of Default with respect to this Note or any Other 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
Holder becoming aware of an Event of Default, the Holder may require the Company
to redeem 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. Each portion of this Note subject to redemption by the
Company pursuant to this Section 3(b) shall be redeemed by the Company at a
price in cash equal to the product of (i) the Outstanding Amount multiplied by
(ii) the Redemption Premium (the “Event of Default Redemption Price”).
Redemptions required by this Section 3(b) shall be made in accordance with the
provisions of Section 7. To the extent redemptions required by this Section 3(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.

 

(c)  Mandatory Redemption upon Bankruptcy Event of Default. Notwithstanding
anything to the contrary herein, upon any Bankruptcy Event of Default, whether
occurring prior to or following the Maturity Date, the Company shall immediately
pay to the Holder an amount in cash equal to the Event of Default Redemption
Price, in addition to any and all other amounts due hereunder, without the
requirement for any notice or demand or other action by the Holder or any other
person or entity, provided that the Holder may, in its sole discretion, waive
such right to receive payment upon a Bankruptcy Event of Default, in whole or in
part, and any such waiver shall not affect any other rights of the Holder
hereunder, including any other rights in respect of such Bankruptcy Event of
Default, and any right to payment of the Event of Default Redemption Price or
any other Redemption Price, as applicable.

 

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4.  RIGHTS UPON FUNDAMENTAL TRANSACTION. 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
Transaction Documents (as defined in the Securities Purchase Agreement) in
accordance with the provisions of this Section 4 pursuant to written agreements
in form and substance satisfactory to the Required Holders (as defined in the
Securities Purchase Agreement) and approved by the Required Holders 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 Notes held by such holder
and having similar ranking to the Notes, and satisfactory to the Required
Holders. 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.

 

5.  REDEMPTIONS AT THE COMPANY’S ELECTION.

 

(a)  Company Optional Redemption. At any time prior to the 90th calendar day
after the Issuance Date, so long as no Event of Default has occurred or is
continuing the Company shall have the right to redeem all, but not less than
all, of the Outstanding Amount then remaining under this Note (the “Company
Optional Redemption Amount”) on the Company Optional Redemption Date (each as
defined below) (a “Company Optional Redemption”). The portion of this Note
subject to redemption pursuant to this Section 5(a) shall be redeemed by the
Company in cash at a price (the “Company Optional Redemption Price”) equal to
100% of the Outstanding Amount being redeemed as of the Company Optional
Redemption Date. The Company may exercise its right to require redemption under
this Section 5(a) by delivering a written notice thereof by facsimile or
electronic mail and overnight courier to all, but not less than all, of the
holders of Notes (the “Company Optional Redemption Notice” and the date all of
the holders of Notes received such notice is referred to as the “Company
Optional Redemption Notice Date”). The Company may deliver only one Company
Optional Redemption Notice hereunder and such Company Optional Redemption Notice
shall be irrevocable. The Company Optional Redemption Notice shall (x) state the
date on which the Company Optional Redemption shall occur (the “Company Optional
Redemption Date”) which date shall not be less than five (5) Trading Days nor
more than twenty (20) Trading Days following the Company Optional Redemption
Notice Date, (y) certify that no Event of Default has occurred or is continuing
and (z) state the aggregate Outstanding Amount of the Notes which is being
redeemed in such Company Optional Redemption from the Holder and all of the
other holders of the Notes pursuant to this Section 5(a) (and analogous
provisions under the Other Notes) on the Company Optional Redemption Date.
Notwithstanding anything herein to the contrary, (i) if no Event of Default has
occurred as of the Company Optional Redemption Notice Date but an Event of
Default occurs at any time prior to the Company Optional Redemption Date, (A)
the Company shall provide the Holder a subsequent notice to that effect and (B)
unless the Holder waives the Event of Default, the Company Optional Redemption
shall be cancelled and the applicable Company Optional Redemption Notice shall
be null and void.

 

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(b)  Pro Rata Redemption Requirement. If the Company elects to cause a Company
Optional Redemption of this Note pursuant to Section 5(a), then it must
simultaneously take the same action with respect to all of the Other Notes.

 

6.  NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company
will not, by amendment of its Certificate of Incorporation (as defined in the
Securities Purchase Agreement), Bylaws (as defined in the Securities Purchase
Agreement) 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.

 

7.  REDEMPTIONS.

 

(a)  Mechanics. The Company shall deliver the applicable Event of Default
Redemption Price to the Holder in cash within five (5) Business Days after the
Company’s receipt of the Holder’s Event of Default Redemption Notice. The
Company shall deliver the applicable Company Optional Redemption Price to the
Holder in cash on the applicable Company Optional Redemption Date.
Notwithstanding anything herein to the contrary, in connection with any
redemption hereunder at a time the Holder is entitled to receive a cash payment
under any of the other Transaction Documents, at the option of the Holder
delivered in writing to the Company, the applicable Redemption Price hereunder
shall be increased by the amount of such cash payment owed to the Holder under
such other Transaction Document and, upon payment in full in accordance
herewith, shall satisfy the Company’s payment obligation under such other
Transaction Document. In the event of a redemption of less than all of the
Outstanding Amount of this Note, the Company shall promptly cause to be issued
and delivered to the Holder a new Note (in accordance with Section 12(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 Outstanding 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 Outstanding Amount, and (y) the Company shall immediately return
this Note, or issue a new Note (in accordance with Section 12(d)), to the
Holder, and in each case the principal amount of this Note or such new Note (as
the case may be) shall be increased by an amount equal to the difference between
(1) the applicable Redemption Price (as the case may be, and as adjusted
pursuant to this Section 7, if applicable) minus (2) the Principal portion of
the Outstanding Amount submitted for redemption. 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
Outstanding Amount subject to such notice.

 

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(b)  Redemption by Other Holders. Upon the Company’s receipt of notice from any
of the holders of the Other Notes for redemption or repayment as a result of an
event or occurrence substantially similar to the events or occurrences described
in Section 3(c) or Section 4 (each, an “Other Redemption Notice”), the Company
shall immediately, but no later than one (1) Business Day of its receipt
thereof, forward to the Holder by facsimile or electronic mail a copy of such
notice. If the Company receives a Redemption Notice and one or more Other
Redemption Notices, during the seven (7) Business Day period beginning on and
including the date which is two (2) Business Days prior to the Company’s receipt
of the Holder’s applicable Redemption Notice and ending on and including the
date which is two (2) Business Days after the Company’s receipt of the Holder’s
applicable Redemption Notice and the Company is unable to redeem all principal,
interest and other amounts designated in such Redemption Notice and such Other
Redemption Notices received during such seven (7) Business Day period, then the
Company shall redeem a pro rata amount from each holder of the Notes (including
the Holder) based on the principal amount of the Notes submitted for redemption
pursuant to such Redemption Notice and such Other Redemption Notices received by
the Company during such seven (7) Business Day period.

 

8.  VOTING RIGHTS. The Holder shall have no voting rights as the holder of this
Note, except as required by law (including, without limitation, the Delaware
General Corporation Law) and as expressly provided in this Note.

 

9.  COVENANTS. Until all of the Notes have been prepaid, redeemed or otherwise
satisfied in accordance with their terms:

 

(a)  Rank. All payments due under this Note (a) shall rank pari passu with all
Other Notes and (b) shall be senior to all other Indebtedness of the Company and
its Subsidiaries.

 

(b)  Incurrence of Indebtedness. The Company shall not, and the Company shall
cause each of its Subsidiaries to not, directly or indirectly, incur or
guarantee, assume or suffer to exist any Indebtedness (other than (i) the
Indebtedness evidenced by this Note and the Other Notes and (ii) other Permitted
Indebtedness).

 

(c)  Existence of Liens. The Company shall not, and the Company shall cause each
of its Subsidiaries to not, 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.

 

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(d)  Restricted Payments. The Company shall not, and the Company shall cause
each of its Subsidiaries to not, 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 the Notes) 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, (i) an event constituting an Event of Default has occurred and is
continuing or (ii) an event 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 and Cash Dividends. The Company shall not, and
the Company shall cause each of its Subsidiaries to not, directly or indirectly,
redeem, repurchase or declare or pay any cash dividend or distribution on any of
its capital stock.

 

(f)  Restriction on Transfer of Assets. The Company shall not, and the Company
shall cause each of its Subsidiaries to not, directly or indirectly, sell,
lease, license, assign, transfer, spin-off, split-off, close, convey or
otherwise dispose of any assets or rights of the Company or any Subsidiary owned
or hereafter acquired whether in a single transaction or a series of related
transactions, other than (i) sales, leases, licenses, assignments, transfers,
conveyances and other dispositions of such assets or rights by the Company and
its Subsidiaries in the ordinary course of business consistent with its past
practice and (ii) sales of inventory and product in the ordinary course of
business.

 

(g)  Maturity of Indebtedness. The Company shall not, and the Company shall
cause each of its Subsidiaries to not, directly or indirectly, permit any
Indebtedness of the Company or any of its Subsidiaries to mature or accelerate
prior to the Maturity Date.

 

(h)  Change in Nature of Business. The Company shall not, and the Company shall
cause each of its Subsidiaries to not, directly or indirectly, engage in any
material line of business substantially different from those lines of business
conducted by or publicly contemplated to be conducted by the Company and each of
its Subsidiaries on the Subscription Date or any business substantially related
or incidental thereto. The Company shall not, and the Company shall cause each
of its Subsidiaries to not, directly or indirectly, modify its or their
corporate structure or purpose.

 

(i)   Preservation of Existence, Etc. The Company shall 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.

 

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(j)   Maintenance of Properties, Etc. The Company shall 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.

 

(k)  Maintenance of Intellectual Property. The Company will, and will cause each
of its Subsidiaries to, take all action necessary or advisable to maintain all
of the Intellectual Property Rights (as defined in the Securities Purchase
Agreement) of the Company and/or any of its Subsidiaries that are necessary or
material to the conduct of its business in full force and effect.

 

(l)   Maintenance of Insurance. The Company shall 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.

 

(m)  Transactions with Affiliates. The Company shall not, nor shall it permit
any of its Subsidiaries to, enter into, renew, extend or be a party to, any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease, transfer or exchange of property or assets of any
kind or the rendering of services of any kind) with any affiliate, except in the
ordinary course of business in a manner and to an extent consistent with past
practice and necessary or desirable for the prudent operation of its business,
for fair consideration and on terms no less favorable to it or its Subsidiaries
than would be obtainable in a comparable arm’s length transaction with a Person
that is not an affiliate thereof.

 

(n)  Restricted Issuances. The Company shall not, directly or indirectly,
without the prior written consent of the holders of a majority in aggregate
principal amount of the Notes then outstanding, (i) issue any Notes (other than
as contemplated by the Securities Purchase Agreement and the Notes) or (ii)
issue any other securities that would cause a breach or default under the Notes
or the Warrants.

 

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(o)  Independent Investigation. At the request of the Holder either (x) at any
time when an Event of Default has occurred and is continuing, (y) upon the
occurrence of an event that with the passage of time or giving of notice would
constitute an Event of Default or (z) at any time the Holder reasonably believes
an Event of Default may have occurred or be continuing, the Company shall hire
an independent, reputable investment bank selected by the Company and approved
by the Holder to investigate as to whether any breach of this Note has occurred
(the “Independent Investigator”). If the Independent Investigator determines
that such breach of this Note has occurred, the Independent Investigator shall
notify the Company of such breach and the Company shall deliver written notice
to each holder of a Note of such breach. In connection with such investigation,
the Independent Investigator may, during normal business hours, inspect all
contracts, books, records, personnel, offices and other facilities and
properties of the Company and its Subsidiaries and, to the extent available to
the Company after the Company uses reasonable efforts to obtain them, the
records of its legal advisors and accountants (including the accountants’ work
papers) and any books of account, records, reports and other papers not
contractually required of the Company to be confidential or secret, or subject
to attorney-client or other evidentiary privilege, and the Independent
Investigator may make such copies and inspections thereof as the Independent
Investigator may reasonably request. The Company shall furnish the Independent
Investigator with such financial and operating data and other information with
respect to the business and properties of the Company as the Independent
Investigator may reasonably request. The Company shall permit the Independent
Investigator to discuss the affairs, finances and accounts of the Company with,
and to make proposals and furnish advice with respect thereto to, the Company’s
officers, directors, key employees and independent public accountants or any of
them (and by this provision the Company authorizes said accountants to discuss
with such Independent Investigator the finances and affairs of the Company and
any Subsidiaries), all at such reasonable times, upon reasonable notice, and as
often as may be reasonably requested.

 

10.  AMENDING THE TERMS OF THIS NOTE. The prior written consent of the Holder
shall be required for any change, waiver or amendment to this Note.

 

11.  TRANSFER. This Note may be offered, sold, assigned or transferred by the
Holder without the consent of the Company, subject only to the provisions of
Section 2(g) of the Securities Purchase Agreement.

 

12.  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 12(d)),
registered as the Holder may request, representing the outstanding Principal
being transferred by the Holder and, if less than the entire outstanding
Principal is being transferred, a new Note (in accordance with Section 12(d)) to
the Holder representing the outstanding Principal not being transferred.

 

(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 (as to which a written certification and the
indemnification contemplated below shall suffice as such evidence), and, in the
case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary and reasonable 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 12(d))
representing the outstanding Principal.

 

 11 

 

 

(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 12(d) and in principal
amounts of at least $1,000) 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.

 

(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 12(a) or Section 12(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 on the Principal and Interest of this Note, from the
Issuance Date.

 

13.  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 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. The Company covenants to the Holder that there
shall be no characterization concerning this instrument other than as expressly
provided herein. Amounts set forth or provided for herein with respect to
payments, redemptions 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 specific performance and/or
temporary, preliminary and permanent injunctive or other equitable relief from
any court of competent jurisdiction in any such case without the necessity of
proving actual damages and without posting a bond or other security. The Company
shall provide all information and documentation to the Holder that is requested
by the Holder to enable the Holder to confirm the Company’s compliance with the
terms and conditions of this Note.

 

14.  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, without limitation,
attorneys’ fees and disbursements. The Company expressly acknowledges and agrees
that no amounts due under this Note shall be affected, or limited, by the fact
that the purchase price paid for this Note was less than the original Principal
amount hereof.

 

 12 

 

 

15.  CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by
the Company and the initial Holder and shall not be construed against any such
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. Unless the context clearly indicates otherwise, each pronoun herein shall
be deemed to include the masculine, feminine, neuter, singular and plural forms
thereof. The terms “including,” “includes,” “include” and words of like import
shall be construed broadly as if followed by the words “without limitation.” The
terms “herein,” “hereunder,” “hereof” and words of like import refer to this
entire Note instead of just the provision in which they are found. Unless
expressly indicated otherwise, all section references are to sections of this
Note. Terms used in this Note and not otherwise defined herein, but defined in
the other Transaction Documents, shall have the meanings ascribed to such terms
on the Closing Date in such other Transaction Documents unless otherwise
consented to in writing by the Holder.

 

16.  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. No waiver shall be effective unless it is in writing
and signed by an authorized representative of the waiving party.

 

17.  NOTICES; CURRENCY; PAYMENTS.

 

(a)  Notices. Whenever notice is required to be given under this Note, unless
otherwise provided herein, such notice shall be given in accordance with Section
9(f) of the Securities Purchase Agreement. 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.

 

(b)  Currency. All dollar amounts referred to in this Note are in United States
Dollars (“U.S. Dollars”), and all amounts owing under this Note shall be paid in
U.S. Dollars. All amounts denominated in other currencies (if any) shall be
converted into the U.S. Dollar equivalent amount in accordance with the Exchange
Rate on the date of calculation. “Exchange Rate” means, in relation to any
amount of currency to be converted into U.S. Dollars pursuant to this Note, the
U.S. Dollar exchange rate as published in the Wall Street Journal on the
relevant date of calculation (it being understood and agreed that where an
amount is calculated with reference to, or over, a period of time, the date of
calculation shall be the final date of such period of time).

 

(c)  Payments. Whenever any payment of cash is to be made by the Company to any
Person pursuant to this Note, unless otherwise expressly set forth herein, such
payment shall be made in lawful money of the United States of America by a
certified 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 (which address, in the case of each of the Buyers, shall
initially be as set forth on the Schedule of Buyers attached to the Securities
Purchase Agreement), 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. Any amount of
Principal or other amounts due under the 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 eight percent (8%)
per annum from the date such amount was due until the same is paid in full
(“Late Charge”).

 

 13 

 

 

18.  CANCELLATION. After all Principal, accrued Interest, Late Charges 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.

 

19.  WAIVER OF NOTICE. To the extent permitted by law, the Company hereby
irrevocably waives demand, notice, presentment, protest and all other demands
and notices in connection with the delivery, acceptance, performance, default or
enforcement of this Note and the Securities Purchase Agreement.

 

20.  GOVERNING LAW. 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 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. 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 to limit in any way any right to serve process in any manner permitted
by law. Nothing contained herein (i) 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 TO, 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.

 

21.  JUDGMENT CURRENCY.

 

(a)  If for the purpose of obtaining or enforcing judgment against the Company
in any court in any jurisdiction it becomes necessary to convert into any other
currency (such other currency being hereinafter in this Section 21 referred to
as the “Judgment Currency”) an amount due in U.S. dollars under this Note, the
conversion shall be made at the Exchange Rate prevailing on the Trading Day
immediately preceding:

 

(i)   the date actual payment of the amount due, in the case of any proceeding
in the courts of New York or in the courts of any other jurisdiction that will
give effect to such conversion being made on such date: or

 

 14 

 

 

(ii)  the date on which the foreign court determines, in the case of any
proceeding in the courts of any other jurisdiction (the date as of which such
conversion is made pursuant to this Section 21(a)(ii) being hereinafter referred
to as the “Judgment Conversion Date”).

 

(b)  If in the case of any proceeding in the court of any jurisdiction referred
to in Section 21(a)(ii) above, there is a change in the Exchange Rate prevailing
between the Judgment Conversion Date and the date of actual payment of the
amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.

 

(c)  Any amount due from the Company under this provision shall be due as a
separate debt and shall not be affected by judgment being obtained for any other
amounts due under or in respect of this Note.

 

22.  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).

 

23.  MAXIMUM PAYMENTS. Without limiting Section 9(d) of the Securities Purchase
Agreement, nothing contained herein shall be deemed to establish or require the
payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest required to
be paid or other charges hereunder exceed the maximum permitted by such law, any
payments in excess of such maximum shall be credited against amounts owed by the
Company to the Holder and thus refunded to the Company.

 

 15 

 

 

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

 

(a)  “1933 Act” means the Securities Act of 1933, as amended, and the rules and
regulations thereunder.

 

(b)  “1934 Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder.

 

(c)  “Affiliate” means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by, or is under common control
with, such Person, it being understood for purposes of this definition that
“control” of a Person means the power directly or indirectly either to vote 10%
or more of the stock having ordinary voting power for the election of directors
of such Person or direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.

 

(d)  “Bloomberg” means Bloomberg, L.P.

 

(e)  “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.

 

(f)  “Change of Control” means any Fundamental Transaction other than (i) any
merger of the Company or any of its, direct or indirect, wholly-owned
Subsidiaries with or into any of the foregoing Persons, (ii) any reorganization,
recapitalization or reclassification of the shares of 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 respects, 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 (iii) pursuant to a migratory merger
effected solely for the purpose of changing the jurisdiction of incorporation of
the Company or any of its Subsidiaries.

 

(g)  “Closing Date” shall have the meaning set forth in the Securities Purchase
Agreement, which date is the date the Company initially issued Notes pursuant to
the terms of the Securities Purchase Agreement.

 

 16 

 

 

(h)  “Fundamental Transaction” means (A) that the Company shall, directly or
indirectly, including through subsidiaries, Affiliates or otherwise, in one or
more related transactions, (i) consolidate or merge with or into (whether or not
the Company is the surviving corporation) another Subject Entity, or (ii) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company or any of its “significant subsidiaries” (as
defined in Rule 1-02 of Regulation S-X) to one or more Subject Entities, or
(iii) make, or allow one or more Subject Entities to make, or allow the Company
to be subject to or have its Common Stock be subject to or party to one or more
Subject Entities making, a purchase, tender or exchange offer that is accepted
by the holders of at least either (x) 50% of the outstanding shares of Common
Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any
shares of Common Stock held by all Subject Entities making or party to, or
Affiliated (as defined in the Securities Purchase Agreement) with any Subject
Entities making or party to, such purchase, tender or exchange offer were not
outstanding; or (z) such number of shares of Common Stock such that all Subject
Entities making or party to, or Affiliated with any Subject Entity making or
party to, such purchase, tender or exchange offer, become collectively the
beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50%
of the outstanding shares of Common Stock, or (iv) consummate a stock or share
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with one
or more Subject Entities whereby all such Subject Entities, individually or in
the aggregate, acquire, either (x) at least 50% of the outstanding shares of
Common Stock, (y) at least 50% of the outstanding shares of Common Stock
calculated as if any shares of Common Stock held by all the Subject Entities
making or party to, or Affiliated with any Subject Entity making or party to,
such stock purchase agreement or other business combination were not
outstanding; or (z) such number of shares of Common Stock such that the Subject
Entities become collectively the beneficial owners (as defined in Rule 13d-3
under the 1934 Act) of at least 50% of the outstanding shares of Common Stock,
or (v) reorganize, recapitalize or reclassify its Common Stock, (B) that the
Company shall, directly or indirectly, including through subsidiaries,
Affiliates or otherwise, in one or more related transactions, allow any Subject
Entity individually or the Subject Entities in the aggregate to be or become the
“beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or
indirectly, whether through acquisition, purchase, assignment, conveyance,
tender, tender offer, exchange, reduction in outstanding shares of Common Stock,
merger, consolidation, business combination, reorganization, recapitalization,
spin-off, scheme of arrangement, reorganization, recapitalization or
reclassification or otherwise in any manner whatsoever, of either (x) at least
50% of the aggregate ordinary voting power represented by issued and outstanding
Common Stock, (y) at least 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Stock not held by all such Subject
Entities as of the date of this Note calculated as if any shares of Common Stock
held by all such Subject Entities were not outstanding, or (z) a percentage of
the aggregate ordinary voting power represented by issued and outstanding shares
of Common Stock or other equity securities of the Company sufficient to allow
such Subject Entities to effect a statutory short form merger or other
transaction requiring other shareholders of the Company to surrender their
shares of Common Stock without approval of the shareholders of the Company or
(C) directly or indirectly, including through subsidiaries, Affiliates or
otherwise, in one or more related transactions, the issuance of or the entering
into any other instrument or transaction structured in a manner to circumvent,
or that circumvents, the intent of this definition in which case this definition
shall be construed and implemented in a manner otherwise than in strict
conformity with the terms of this definition to the extent necessary to correct
this definition or any portion of this definition which may be defective or
inconsistent with the intended treatment of such instrument or transaction.

 

(i)   “GAAP” means United States generally accepted accounting principles,
consistently applied.

 

(j)   “Group” means a “group” as that term is used in Section 13(d) of the 1934
Act and as defined in Rule 13d-5 thereunder.

 

 17 

 

 

(k)  “Indebtedness” shall have the meaning ascribed to such term in the
Securities Purchase Agreement.

 

(l)   “Interest Date” means, with respect to any given calendar month, the first
Trading Day of such calendar month.

 

(m)  “Maturity Date” shall mean the earliest to occur of (x) a Subsequent
Placement (as defined in the Securities Purchase Agreement) and (y) [      ]1;
provided, however, the Maturity Date may be extended at the option of the Holder
(i) in the event that, and for so long as, an Event of Default shall have
occurred and be continuing or any event shall have occurred and be continuing
that with the passage of time and the failure to cure would result in an Event
of Default or (ii) through the date that is the later of (x) twenty (20)
Business Days after the consummation of a Fundamental Transaction in the event
that a Fundamental Transaction is publicly announced prior to the consummation
of such Fundamental Transaction or (y) twenty (20) Business Days after the
announcement of a Fundamental Transaction in the event that a Fundamental
Transaction is not publicly announced prior to the consummation of such
Fundamental Transaction.

 

(n)  “Outstanding 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 Charges with respect to such Principal and Interest.

 

(o)  “Parent Entity” of a Person means an entity that, directly or indirectly,
controls the applicable Person and whose common stock or equivalent equity
security is quoted or listed on an Eligible Market (as defined in the Securities
Purchase Agreement), or, if there is more than one such Person or Parent Entity,
the Person or Parent Entity with the largest public market capitalization as of
the date of consummation of the Fundamental Transaction.

 

(p)  “Permitted Indebtedness” means (i) Indebtedness evidenced by this Note and
the Other Notes, (ii) Indebtedness set forth on Schedule 3(s) to the Securities
Purchase Agreement, as in effect as of the Subscription Date, (iii) Indebtedness
secured by Permitted Liens or unsecured but as described in clauses (iv) and (v)
of the definition of Permitted Liens, and (iv) Permitted Subordinated
Indebtedness.

 

(q)  “Permitted Subordinated Indebtedness” means any Indebtedness that: (i) is
made expressly subordinate in right of payment to the Indebtedness evidenced by
the Notes in form and substance satisfactory to the Required Holders, (ii) does
not provide at any time for the payment, prepayment, repayment, repurchase or
defeasance, directly or indirectly, of any principal or premium, if any, thereon
until at least ninety-one (91) days after the Maturity Date, and (iii) until
such time after the Issuance Date that the Company shall have consummated one or
more Subsequent Placements with aggregate gross proceeds of at least $1 million
(collectively, the “Initial Placements”), no proceeds of any Initial Placement
may be used to repay all, or any part, of such Indebtedness.

 

 

 

 

1     Insert four month anniversary of the Issuance Date.

 

 18 

 

 

(r)   “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 Company 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, in either case, with respect to Indebtedness in an aggregate amount
not to exceed $50,000, (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) 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 (vii) Liens arising from
judgments, decrees or attachments in circumstances not constituting an Event of
Default under Section 3(a)(ix).

 

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

 

(t)   “Redemption Notices” means, collectively, the Event of Default Redemption
Notices and the Company Optional Redemption Notices, and each of the foregoing,
individually, a “Redemption Notice.”

 

(u)  “Redemption Premium” means 125%.

 

(v)  “Redemption Prices” means, collectively, Event of Default Redemption
Prices, and the Company Optional Redemption Prices, and each of the foregoing,
individually, a “Redemption Price.”

 

(w)  “Securities Purchase Agreement” means that certain securities purchase
agreement, dated as of the Subscription Date, by and among the Company and the
initial holders of the Notes pursuant to which the Company issued the Notes, as
may be amended from time to time.

 

(x)  “Security Agreement” shall have the meaning as set forth in the Securities
Purchase Agreement.

 

(y)  “Subject Entity” means any Person, Persons or Group or any Affiliate or
associate of any such Person, Persons or Group.

 

 19 

 

 

(z)  “Subsidiaries” shall have the meaning as set forth in the Securities
Purchase Agreement.

  

(aa)  “Successor Entity” means the Person (or, if so elected by the Holder, the
Parent Entity) formed by, resulting from or surviving any Fundamental
Transaction or the Person (or, if so elected by the Holder, the Parent Entity)
with which such Fundamental Transaction shall have been entered into.

 

(bb)  “Trading Day” means, as applicable, (x) with respect to all price or
trading volume determinations relating to the Common Stock, any day on which the
Common Stock is traded on the Principal Market (as defined in the Securities
Purchase Agreement), or, if the Principal Market is not the principal trading
market for the Common Stock, then on the principal securities exchange or
securities market on which the Common Stock is then traded, provided that
“Trading Day” shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York time) unless such day is otherwise designated
as a Trading Day in writing by the Holder or (y) with respect to all
determinations other than price determinations relating to the Common Stock, any
day on which The New York Stock Exchange (or any successor thereto) is open for
trading of securities.

 

(cc)  “Warrants” has the meaning ascribed to such term in the Securities
Purchase Agreement, and shall include all warrants issued in exchange therefor
or replacement thereof.

 

25.  DISCLOSURE. At any time from and after the initial Issuance Date, upon
receipt or delivery by the Company of any notice in accordance with the terms of
this Note, unless the Company has in good faith determined that the matters
relating to such notice do not constitute material, non-public information
relating to the Company or any of its Subsidiaries, the Company shall within one
(1) Business Day after any such receipt or delivery publicly disclose such
material, non-public information on a Current Report on Form 8-K or otherwise.
In the event that the Company believes that a notice contains material,
non-public information relating to the Company or any of its Subsidiaries, the
Company so shall indicate to the 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,
non-public information relating to the Company or any of its Subsidiaries. If
the Company or any of its Subsidiaries provides material non-public information
to the Holder that is not simultaneously filed in a Current Report on Form 8-K
and the Holder has not agreed to receive such material non-public information,
the Company hereby covenants and agrees that the Holder shall not have any duty
of confidentiality to the Company, any of its Subsidiaries or any of their
respective officers, directors, employees, affiliates or agents with respect to,
or a duty to any of the foregoing not to trade on the basis of, such material
non-public information. Nothing contained in this Section 25 shall limit any
obligations of the Company, or any rights of the Holder, under the Securities
Purchase Agreement.

 

[signature page follows]

 

 20 

 

 

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

 

 

MY SIZE, INC.

        By:     Name:     Title: