IN
ACCORDANCE WITH SECTION 2.5 OF THE ASSET PURCHASE AGREEMENT, DATED AS OF AUGUST
7, 2006, BY AND AMONG THE COMPANY, IPARTY CORP. (THE "PARENT"), AND THE
NOTEHOLDER (AS AMENDED AND IN EFFECT FROM TIME TO TIME, THE "PURCHASE
AGREEMENT").
CERTAIN TERMS ARE USED IN THIS NOTE AS SPECIFICALLY DEFINED HEREIN
AND THESE DEFINITIONS ARE SET FORTH OR REFERRED TO IN SECTION 5 HEREOF.
2.
INTEREST PROVISIONS.
SUBJECT TO THE PROVISIONS OF SECTION 4.3
HEREOF, THIS NOTE SHALL BEAR DAILY INTEREST (COMPUTED ON THE BASIS OF A 365-DAY
YEAR) FROM THE DATE HEREOF, ON THE PRINCIPAL AMOUNT HEREOF FROM TIME TO TIME
UNPAID, TO AND INCLUDING THE MATURITY HEREOF AND REPAYMENT OF ALL SUMS DUE
HEREUNDER, AT A RATE EQUAL TO 12.25% PER ANNUM.
INTEREST SHALL BE PAYABLE IN
CASH QUARTERLY IN ARREARS ON THE LAST DAY OF EACH OF SEPTEMBER, DECEMBER, MARCH,
AND JUNE (EACH, A "PAYMENT DATE") AND ON THE MATURITY DATE, COMMENCING ON
SEPTEMBER 30, 2006.
3.
PAYMENT PROVISIONS.
THE COMPANY COVENANTS THAT SO LONG AS THIS
NOTE IS OUTSTANDING:
3.1
PAYMENT AT MATURITY OF THE NOTE.
ON THE MATURITY DATE, A CHANGE
OF CONTROL, OR ANY ACCELERATED MATURITY OF THIS NOTE PERMITTED HEREBY, THE
COMPANY WILL PAY THE ENTIRE PRINCIPAL AMOUNT OF THIS NOTE THEN OUTSTANDING,
TOGETHER WITH ALL ACCRUED AND UNPAID INTEREST THEREON.
3.2
VOLUNTARY PREPAYMENTS.
THE COMPANY MAY AT ANY TIME AND FROM TIME
TO TIME PREPAY ALL OR PART OF THE PRINCIPAL AMOUNT OF THIS NOTE THEN OUTSTANDING
WITHOUT PENALTY OR PREMIUM.
3.3
NOTICE OF PREPAYMENTS.
NOTICE OF EACH VOLUNTARY PREPAYMENT OF
THIS NOTE PURSUANT TO SECTION 3.2 HEREOF SHALL BE GIVEN TO THE NOTEHOLDER IN
ACCORDANCE WITH SECTION 6.1 HEREOF NOT FEWER THAN THREE DAYS BEFORE THE
PREPAYMENT DATE, IN EACH CASE BY DELIVERING TO THE NOTEHOLDER A NOTICE OF
INTENTION TO PREPAY SPECIFYING THE DATE OF PREPAYMENT, THE AGGREGATE AMOUNT OF
THIS NOTE TO BE PREPAID ON SUCH DATE, AND THE ACCRUED INTEREST APPLICABLE TO
SUCH PREPAYMENT.
3.4
PAYMENT AND INTEREST CUT-OFF.
UPON EACH PREPAYMENT OF THIS NOTE,
IN WHOLE OR IN PART, THE COMPANY WILL PAY TO THE NOTEHOLDER THE AMOUNT OF THIS
NOTE TO BE PREPAID, AS SET FORTH IN THE NOTICE DELIVERED PURSUANT TO SECTION 3.3
HEREOF, TOGETHER WITH UNPAID INTEREST IN RESPECT THEREOF ACCRUED TO AND
INCLUDING THE PREPAYMENT DATE.
FROM AND AFTER THE DATE SUCH PREPAYMENT IS
ACTUALLY MADE, INTEREST ON THE AMOUNT OF THE NOTE SO PREPAID SHALL CEASE TO
ACCRUE.
3.5
NOTEHOLDER EXPENSES.
THE COMPANY SHALL PAY TO THE NOTEHOLDER,
UPON WRITTEN DEMAND, ALL COSTS OF COLLECTION AND REASONABLE ATTORNEYS' FEES AND
OTHER COSTS AND EXPENSES PAID OR INCURRED BY THE NOTEHOLDER IN ENFORCING THE
OBLIGATIONS OF THE COMPANY HEREUNDER AND/OR IN EXERCISING THE NOTEHOLDER'S
RIGHTS AND REMEDIES HEREUNDER (WHETHER SUCH COSTS AND EXPENSES ARE INCURRED IN
ANY WORK-OUT, BANKRUPTCY CASE OR PROCEEDING, OR OTHERWISE).
3.6
APPLICATION OF PAYMENTS.
ALL CASH PAYMENTS MADE BY THE COMPANY
HEREUNDER SHALL BE APPLIED:
(A) FIRST, TO THE PAYMENT OF ANY COSTS AND EXPENSES
FOR WHICH THE